Socialism Can Only Exist As A Parasite

If the goal is human flourishing, it is not capitalism that needs to justify itself. It is socialism, which has survived only by clinging to the very system it claims to supersede...

Photo by Egor Myznik on Unsplash

Far from an alternative to capitalism, socialism can only truly exist as a parasite to a free market – either domestic or foreign. Every success story of socialism is subsidised by a capitalist engine.

Be it Ford Motors helping to establish the Soviet automotive industry and providing engines for tanks during World War 2, the tax money generated by capitalist industry funding a welfare state in Europe, or the fact that China’s technological development relies on duplicating the innovations of the capitalist world.

Capitalism produces; socialism redistributes. It does not matter whether the redistribution is done through a Soviet planning bureau, a Scandinavian welfare department, or a Beijing ministry with Party slogans on the wall. The mechanism is the same. Someone must generate wealth before the state can claim it.

This is why every model held up as proof of socialism’s success rests on a capitalist foundation. Sweden did not become rich after building its welfare state. It became rich under a lean and liberalised market economy. The decades of high-tax social democracy that followed nearly bankrupted it. Only when Sweden began deregulating, privatising, and cutting taxes in the 1990s did its economy stabilise. The Swedish “miracle” is not a socialist miracle. It is a capitalist recovery wearing a social democratic badge.

Germany is similar. The strength of the German social market is not found in its bureaucracy, but in its factories. Its prosperity comes from privately owned businesses, relentless export competitiveness, and a culture of technical excellence. The welfare state exists because the private sector is powerful. Whenever Berlin has tried to expand redistribution faster than production, growth has sagged. Welfare cannot outgrow its host indefinitely.

The Nordic nations, often brandished by Western socialists, understand this better than do their admirers abroad. Denmark, Norway, Finland, and Sweden protect property rights, encourage private investment, embrace free trade, and foster flexible labour markets. They do not attack capital, they milk it. Their social programmes are expensive and bureaucratic, but they are funded by the same wealth socialists claim to despise. Without the corporate taxes, investment income, innovation, and high employment generated by markets, the Nordic model collapses into arithmetic. There is nothing to redistribute.

The same pattern emerges on the international stage. The People’s Republic of China is often hailed as proof that “planned” or state-directed economies can outperform capitalist ones. Reality is far less romantic. Maoist socialism nearly starved the country to death. Only after Deng Xiaoping tore down collectivisation, opened the economy to foreign investment, and built export markets did growth begin. China integrated itself into global capitalism. It became the workshop of the world by selling to Western consumers, attracting Western capital, and importing Western technology.

Even today, despite nationalist rhetoric, the Chinese model is parasitic. It steals intellectual property through espionage and coerced joint ventures. It subsidises state champions by starving private competitors. It treats innovation as something to be harvested, not created. The Party relies on capitalist nations to invent the things it later manufactures cheaply. Strip away Western markets, Western technology, and Western investment, and China’s engine sputters.

Look at regimes that try to cut themselves off entirely. Venezuela destroyed private enterprise, fixed prices, seized factories, and demonised business. For a while, the Chavez government lived comfortably off a commodity boom. Oil revenue kept the socialist fantasy afloat. When prices collapsed, so did the state. Remittances, smuggling, and foreign buyers became its only oxygen. Cuba has done the same for decades. Tourism from wealthy foreigners and remittances from expatriates substitute for an economy the state cannot generate on its own. The rhetoric is revolutionary, but the substance is parasitic.

Socialism is a scavenger. It does not build engines. It feeds on the surplus generated by others. When that surplus is abundant, it declares victory. When the supply tightens, it blames markets, speculators, saboteurs, anyone except itself.

The truth is simple. Prosperity comes from production, entrepreneurship, investment, risk, and competition. That is capitalism. Redistribution comes later. That is socialism. Without the host, the parasite dies. The debate is not about morality or compassion. It is about physics. A redistributive system that attacks its own producers eventually consumes them. A state that believes it can replace markets eventually impoverishes its people. The historical record is not ambiguous.

If the goal is human flourishing, it is not capitalism that needs to justify itself. It is socialism, which has survived only by clinging to the very system it claims to supersede – while leading to untold misery wherever it has tried to dominate.

Nicholas Woode-Smith is the managing editor of the Rational Standard and a senior associate of the Free Market Foundation. He writes in his personal capacity.