Let's imagine a typical American town, let's call it "Mericaville".
Mericaville is pretty tiny, in-fact it has only about 300 residents.
The one major corporate and the only employer in town is "MericaCorp". Of the 300 people who live in Mericaville, almost all of them, some 250,
work at MericaCorp.
It doesn't matter what MericaCorp manufactures, cars, food, cell-phones, TVs...let's say MericaCorp makes "Blue Widgets".
In past times, all was fine and good. Mericavile was doing great because everyone had a job at MericaCorp. People made enough money to be able to
afford Blue Widgets when they needed them. The company was doing fine and work was plenty and everyone was happy.
One day the CEOs of MericaCorp sat down and thought about ways how to increase profit.
It turned out that they could outsource the manufacturing of Blue Widgets to China or Pakistan, or that they could just build a factory in China where
people would work at a 1/10th of what a worker from Mericaville was getting. The CEOs thought that was really a great idea which would drive up their
So it happened that the company laid off almost all of the people with the exception of only five remaining. All the Widgets were now made in China
for extremely cheap.
It didn't take long that Mericaville became a dump (similar to Detroit) because now everyone was unemployed and there was no other company to work
for. Because people didn't have work they didn't have money.
People stopped buying Blue Widgets since they couldn't afford them anymore.
MericaCorp now got into serious trouble because business literally came to a halt, there were no orders anymore due to the bad economy in Mericaville.
MericaCorp was now facing bankruptcy.
The government sat together and realized that something had to be done to save Mericaville and MericaCorp.
Some of the smartest politicians said that the only way to save Mericaville and MeriCorp was to give the people work again because only with steady
work and an income the economy would gradually become better again.
So politicians told MeriCorp that the best way to save the company would be if MeriCorp would simply hire all the 250 people again which they
previously laid off.
The CEO of MeriCorp was dumbfounded: "Are you kidding me? We have no orders! Even the five remaining workers here in the MericaVille factory are
often only sitting around with the finger up their a$$ because there is nothing to do! And you want us to hire 250 new workers? Not to mention we
don't have the money to PAY those people their wages. How should that work?"
The government sat down again and then they came up with a plan.
They told MericaCorp that they will pay MericaCorp the wages for the workers they hire, so the money would not come from MeriCorp, but from a
Obviously, a bunch of people got very angry and they shouted "SOCIALISM!! SOCIALISM!! You want the government and tax-payer pay the wages for the
employees? This is as bad as in Red China...the government should not and cannot ever interfere in such a way. I mean, it's our tax money you are
using there and we're already broke because we're unemployed! This is outrageous!"
Anyway....the government continued with their "socialist" plan regardless of the many nay-sayers. The plan was to pay MeriCorp the full wage for any
new employee they'd hire, until MeriCorp would have recovered so they would not require "socialist" government aid anymore and would be able to pay
their employees from their own pockets.
Of course, in the beginning...the scene was quite bizarre. The company hired all the people from MericaVilla again and they got their previous wages,
as earlier. It was bizarre because in the beginning there was actually nothing to do so the boss told them simply to continue making Blue Widgets and
just stock them in the warehouse for the time being.
However, after one month it became clear that the "socialist plan" was actually a good one because people all-of a sudden had money again. Pretty
much all of MericaVille got a nice paycheck after one month. Many wanted Blue Widgets and now they could afford them again, unlike previously. So
people started to buy MericaCorp's widgets again, something they were not able to do for a long time. Business took off again and MericaCorp within a
few months made profit again! MericaVille was saved, everyone had a job and everyone lived a happy life.
The CEOs of MericaCorp however realized how dumb their idea was trying to increase profits by outsourcing work. This was something they never
thought-of. The problem was that the big wigs at MericaCorp only looked at their profit and cost cutting - any consequences of what they did was not
really their concern as long as it meant less costs and more profit.
Ok, hope you enjoyed my story
Capitalism/Socialism: In this example there is capitalism since the well-being of everyone is indeed 100% dependent on the well-being of the company
"MericaVille", the company who gives the people work.
There is no question that the only way to recover the economy was that everyone would get work since WORK and a paycheck means people have money,
obviously. Only if people have money they can buy and only when people buy companies can survive, hire more people etc.
"Socialism" comes into play with the government paying MericaCorp all the wages for 250 new employees, even despite the fact that there was no work
in the beginning for those 250 people. (In fact in the first weeks and months workers could've just sit around idly or make "non existent fantasy
widgets", as long as they knew they will get paid at the end of the month).
People may say now the idea is entirely absurd that MericaCorp would hire 250 people via some government program where they produce "fantasy
widgets"...but does it really matter? What matters is that after one month everyone got paid and that the fact that people had money again also led
to MericaCorp making profit because they sold their goods again.
Even with a socialist "aid program" where employees got paid their wages via the government, the essence of capitalism is untouched: People get
money from working, employment is the most important factor for a stable economy. So what does it matter, it's a win-win situation for the company
AND the people.
And the example obviously also shows what happens when corporates have free reign to cut costs, eg. by outsourcing. Since the company got itself into
deep * on their own, obviously they could not hire 250 people since they were facing bankruptcy and could not even afford to pay those people. So that
the gvt pays them instead is the only logical consequence, who else would've paid them?
So...I realize that the example is VERY simplified, but if you're very "anti-socialist" and shudder at the idea of the gvt intervening and paying
MericaCorp the wages for the workers....tell me WHY it would be wrong?
Obviously, we could imagine an alternative scenario where all the 250 people WILL NOT get hired again but instead get direct government aid (welfare),
the same amount they made before when they worked for the company. (The idea is of course the same: People having money ----> More buying power --->
The problem with this scenario however is that people would get aid from the gvt but MericaCorp would CONTINUE to outsource, they will never create
new employment. The root problem would not be fixed!