competitiveness

From the Perspective of Quality Management: Is Socialism So Bad?

I saw an article today entitled “Barack Obama’s Stealth Socialism”, syndicated by many blogs including this one. It seems that many are concerned that our nation’s foundations of capitalism might crumble and be replaced by socialism, including John McCain, who called his opponent a socialist at a Saturday, October 18 rally.

Proponents of socialism say that disparity in incomes leads to the exploitation of workers, oppression of minorities, and imperialism. Instead of maximizing profit for a minority, there is a blueprint for the economy so that profits are routed to meet the needs of the people – health care, childcare, housing subsidies, transportation, and so on. There are many socialist elements in place in the U.S. right now, including welfare and public schools.

This led me to ask: why is socialism bad? The campaign promises that resemble socialist aims – and they exist on both sides of the ticket – might seem pretty good to some people. So what’s the catch? Before you read any further, note that I’m not attempting to advocate one position over another – just to ask a difficult question that others might be asking, and see if concepts from technology management and quality management can provide some insight. With this in mind, we consider that “government”, from the perspective of technology management, is all about two things:

  • setting and enforcing standards (which includes laws, regulations and policies), and
  • providing a structure for decision making.

Both of these aspects play a fundamental role in setting up and operating quality systems, which are a form of government (on a smaller scale)! Government is different than a production system like capitalism, socialism or communism though. There are, however, often links between the two: for example, government can set the standards that influence both the means of production and how a country interacts with other countries through its economy. The difference between government and the production system is, loosely, analogous to the difference between strategy and tactics.

  • Government: Democracy is government by the people where decision-making occurs on the basis of a vote. The voting majority wins. A republic is a government in which the people delegate representatives to represent them – and make the decisions for them. The U.S. is a republic, not a democracy (ie. your vote doesn’t really count if the electoral votes that come from your state ultimately go to “the other guy”.) Democracies and republics are both systems for decision making. Fascism is also a system for decision making – but all of the decisions are unilateral, and made by a dictator (or under some sort of dictatorial control). The process of reaching a decision depends in a large part on the standards you are using to judge the context of a problem – and the opportunities available for a solution!
  • Production: Capitalism is characterized by an economy where investment and ownership in the production and distribution of goods is primarily private – through individuals and corporations. In a capitalist economy, you can start your own business and have the potential to grow without bounds. In a socialist economy, you can’t grow too much, or your excess profit is siphoned off to support social causes. Some feel this isn’t fair, and that it hinders achievement, leads to low quality products and services, and higher levels of unemployment. (The socialist agenda could be considered a reaction to inequalities in income distribution, such as those observed by Pareto’s study of the wealth distribution in Italy, from which the famous 80/20 principle was first observed – for a summary, see Levy 2001.

So why are people scared of socialism? In addition to taking the “powerball” potential out of capitalism, it also seems to be perceived as a “gateway drug” to communism (and then on to dictatorial decision-making) for the ruling parties. Previous nations that have attempted to blend socialism with dictatorships (e.g. Cuba, Russia) are held up as examples of certain doom. Other examples, such as the European socialism that’s in place today, are criticized because tax rates are oppressive at 50-60%, even though those countries blend socialism with democratic decision making. No one has “gotten socialism right,” balancing public services with reasonable costs, and doing so without eventually losing sight of fundamental human rights.

Does this mean that socialism can’t be an effective production system? No; it just means that there are no historical examples of resounding success to draw from, and the risks are palpable – which can be frightening to people. (Maybe the design of socialism in our country is just suboptimal.)


Levy, M. (2001). Market efficiency, the Pareto wealth distribution, and the Levy distribution of stock returns. Unpublished manuscript, Jerusalem School of Business Administration, Hebrew University of Jerusalem. Available here.

4 replies »

  1. Like you, I used to be pro-socialism. I was raised in the very left-leaning Madison Wisconsin. But what I discovered I disliked about socialism included:

    a) Violence – you have to threaten people to give up their property, for the benefit of the poor and downtroden, or else they go to jail.

    b) Effectiveness – Comparing relatively free-market, and no-safety-net Hong Kong with Western Europe shows radically unhealthy aspects to socialism, including Western Europe’s unemployment rate; and lack of creating new jobs. Hong Kong has a vibrant, adaptive economy with little unemployment. People need jobs for their self-efficacy, and their sustenance, and the stifiling, suffocatin governments only hinder the creation of new ventures and wealth.

    c) Private Charities Wither & Die – I’m not so naiive as to think the for-profit world will naturally help the desperately poor, sick, and otherwise needy. But I also point to the current amounts of suffering with government programs and would much prefer that I’m able to switch my choice of charity when they’re not performing. I’d rather give most of my current tax money to TrickleUp (http://www.trickleup.org), but that’s not legal. If they every failed to help the desperately poor, I can always switch to the United Way, or start my own charity. With the government, voting rarely works (it’s basically a form of socially acceptable gang violence), but private charities are accountable to donors.

    This reminds me of Ben Franklin’s quote – “Democracy is two Wolves and a Sheep deciding what’s for dinner…Liberty is a well armed Sheep”.

    From the Perspective of Quality Management, yes, I think Socialism inhibits the ability of the natural social order from creating wealth for people that we need to survive and reproduce. It makes a “one size fits all” mentality when we know customers have different wants and needs. Remember that the Malcolm Baldrige award winners who went out of business shortly after they got the Government award? I remember when I worked for Motorola, the President of the Division that won the Baldrige a second time was shortly fired because his financials were poor. Do you think Hurricane Katrina could have been better managed through private insurance companies and United Way Charities, using Quality Management methods instead of politics?

    Matt

  2. Hi Matt – I’m actually better characterized as a “lowercase-L libertarian”. I advocate a limited government that promotes unlimited opportunity, and find that the main limitation of as-is socialism or libertarianism is that they both assume everyone has “pure intent”. This is far too idealistic to work out in practice, as your three points reflect very well.

    My position is also reflected well by the “progressive agenda” described at http://www.americanprogress.org/aboutus: “As progressives, we believe America is a land of boundless opportunity, where people can better themselves, their children, their families, and their communities through education, hard work, and the freedom to climb the ladder of economic mobility. We believe an open and effective government can champion the common good over narrow self-interest, harness the strength of our diversity, and secure the rights and safety of its people. And we believe our nation must always be a beacon of hope and strength to the rest of the world. Progressives are often described as idealistic enough to believe change is possible and practical enough to make it happen.”

    So with that as background, my response to your Katrina question is that the most effective solution would have involved mobilizing small groups who could find problems, formulate solutions, and respond quickly – like teams of fire fighters. These groups need to be “trusted” (e.g. with a record of effective problem solving) and provided with effective access to the resources needed to solve their problems. Private insurance and institutional charities don’t fit this mold, but we don’t have higher performance systems yet to take the place of those structures. I think one of the best things the incoming administration could do would be to convene teams to brainstorm more effective solutions for these sorts of issues. We really need to start envisioning new systems and structures for large-scale problem solving, and this is going to take the collective knowledge and courage of many.

    Thanks for commenting Matt, excellent thoughts!

  3. I know it’s kinda late to reply, but I’ll go ahead and say what’s on my mind. I was a business major at my university. All my business professors, from Accounting to Statistics, and everything in between, stated it like this. Imagine a Bell Curve. That represents Libertarianism. Here, you have a lot of innovation but little security. Now imagine your hands pushing the ends of the Bell Curve toward the middle. This represents increasing government. The higher middle part symbolizes better security, but the vanishing ends mean innovation slowly vanishing.

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