Bennett Group Financial

Dawn Bennett, Host of Financial Myth Busting, Interviews Tom DiLorenzo, Economics Professor and Author


Washington, DC -- (ReleaseWire) -- 08/02/2016 --DAWN BENNETT: Tom DiLorenzo is the author of the book The Problem with Socialism. What is the problem with socialism? According to DiLorenzo, socialism inevitably makes inequality worse, socialism was behind the worst government sponsored mass murders in history, and, if you you want to increase unemployment and poverty, riots in schools and so many other social ills, socialism is a good place to start. Tom, welcome to Financial Myth Busting.

TOM DILORENZO: Pleased to be with you.

BENNETT: Your new book The Problem with Socialism is now a bestseller. Congratulations.

DILORENZO: Thank you.

BENNETT: In it you make an argument that shouldn't even need to be made, in my mind. What does it say about modern America that we even need to be reminded of why socialism doesn't work?

DILORENZO: The motivation for the book was there was, for example, a Pew Foundation poll that found that 69 percent of voters under the age of 30 said they could vote for a socialist for president. I think what we're seeing is the PC generation. We've got a whole generation of political correctness in the schools, higher education and lower education. I think the young people haven't learned about socialism, they certainly didn't live through it. Also, there's a lot of demonization of markets and capitalism that goes on in the educational system at the same time. So there are some politicians, like Bernie Sanders especially, who take advantage of that because they see votes in it.

BENNETT: So you think the schools are to blame?

DILORENZO: Yes. I think the main problem is the educational system. I've been a college professor for many years, and so I wrote this book up in plain language that explains all the various types of socialism, and why it's destructive of your economic future. Yes, we have all the young people, large numbers, 43 percent of them according to one poll said they would prefer socialism over capitalism at market, so it definitely is the educational system. My experiences just talking to my own students a little bit, starts to get them thinking about it, and turning around and thinking well this isn't a good idea after all. I usually start by reminding them that nothing is free. In the era of politicians saying we want to give you free healthcare, free education, and free food, and so forth. They look at me like oh gee, I've never thought of that, nothing is free.

BENNETT: It's so funny to think that younger people are so clueless here in America. I saw that Pew study, that almost 70 percent of the millennials view socialism favorably. Then you wonder when they look at Venezuela, why aren't they putting two and two together that that country is starving, and the wealthiest people there are the corrupt beneficiaries, like Hugo Chavez's daughter, who is worth a few billion dollars. It's just incredible to me that the teachers aren't pointing that out.

DILORENZO: There has been almost a media blackout of Venezuela, even though you can go on the web, and you can find articles in the New York Times, or Wall Street Journal about Venezuela. We have Bernie Sanders touting democratic socialism as the answer. Venezuela is democratic. You have middle class people there today who used to have very good jobs, in a country that has more oil than Saudi Arabia, and yet they are rooting through garbage in the streets looking for food to eat. Because of hyper inflation a hamburger in Caracas today costs the equivalent of $170. This is something that young people need to know when they call themselves Bernie Sanders followers, or Hillary Clinton for that matter. I don't really distinguish the two of them that much in terms of policy. Bernie just uses the S word, and she doesn't.

BENNETT: Let's talk about that. This week the Democratic National Convention wrapped up, and Hillary made a point of reaching out to the Bernie supporters, telling them she "hears them", in a bid, of course for their support. She even adopted Bernie's free college proposal, despite having earlier mocked it as unrealistic. I don't think anybody in America has a memory anymore. But is the answer to soaring college cost more government price guarantees?

DILORENZO: The main cause of soaring college costs is government funding in low interest guaranteed loans. As far as that goes it's a vicious cycle. The government says we'll subsidize college so more people go. The university administrators say the cost to the parents is lower now because they've got an increase in the grant level, or the loan level, and so they raise the tuition. Then the government raises the limits again on how much funding you can get for college. The colleges respond, yet again, by raising tuition. So it's a bubble. We've got a higher education bubble, and more government will just create an even bigger bubble.

BENNETT: You're an Austrian School economist, which means you know a thing or two about central banks, like the Federal Reserve. Would you agree with me that The Fed itself is a tool of socialism, and that it prints money to monetize the debt, which ostensibly helps the government share the wealth, but actually just ends up spreading misery as our currency becomes debased?

DILORENZO: Sure. Now that we totally have lost any constitutional moorings that we once had, we have a live in regime of almost unlimited government. The Fed is an important financing vehicle of all of this; the welfare state, the warfare state, and everything else. So that's why the Communist Manifesto called for a nationalization of the money supply, so did the early 20th century fascists, which were a variety of socialism. One of the chapters in my book is called the socialist roots of fascism. Socialists always wanted a government monopoly of the money supply so that they could fund themselves like that. That's why they eventually bailed themselves out with their central banks, like Venezuela is doing, that's why they have hyper inflation.

The Swede's welfare state started to implode about 25 years ago, and so they printed money like mad to bail themselves out, and they ended up creating 500 percent interest rates in Sweden. That led to a bit of a Margaret Thatcher style of revolution where they privatized some industries, and deregulated, and cut marginal tax rates. But Sweden today still has a per capita income lower than Mississippi, which is our poorest state. So that's another lesson for the millennials that democratic socialism should not be their future.

BENNETT: Your book also deals with the popular argument that the Scandinavian countries are proof that socialism can work. Bernie Sanders, if you remember, made this point in one of the earlier Democratic debates. What should these millennials really understand about Scandinavia?

DILORENZO: Well Sweden is a prime example. Sweden was one of the most prosperous countries in the world from the late 19th century, until about the 1940s, and had the highest per capita income growth of any country during that period. But then they started nationalizing some of their industries, they adopted a very large welfare state, and a heavily progressive income tax. That was their version of socialism. As a result, Sweden did not create one single net new job from 1950 until 2005, according to the Swedish Economic Association. They destroyed job growth. So Bernie Sanders had got it all wrong. The only reason why Sweden was once prosperous is capitalism, and not socialism. Socialism killed prosperity in Sweden.

BENNETT: You also debunked another popular myth about socialism in your book, and that is that it's better for the environment than a loosely regulated free market economy. This argument never seems to die. So for those listening at home please bust that myth for us, please Todd.

DILORENZO: Yes. One of the chapters in my book is called how socialism causes pollution. The basic theory of the cause of pollution is that it's unregulated free markets, and the pursuit of profit leads to pollution. Well, the socialist countries of the Soviet empire outlawed profit seeking for 70 years. So when we had the collapse of socialism all around the world in the late 80s, early 90s, and people were finally able to go and look around these formerly closed societies, they found that they had the worst ecological catastrophes in the whole planet, far worse than anything we've ever seen here. There was even a book written called Ecocide in the USSR, ecological suicide. We heard about things such as boats on the Volga River having signs on them saying don't throw cigarettes overboard, the river may catch on fire, because there were so many chemicals floating down the river. The problem was the absence of property rights. When nobody owns property they tend not to take really good care of it. To relate to that idea ask yourself who takes better care of cars; people who rent cars, or people who own their own cars? If the society has an absence of property rights then you really have a lot more ecological damage than you do in a capitalist society. Besides that, the wealthier countries are always healthier and cleaner.

BENNETT: You recently wrote a very provocative piece about Hank Paulson, who of course was the former head of Goldman Sachs, and who became the point man on TARP. Now he's a sworn enemy of capitalism, and a socialist when it comes to capital market. For those who say how could he be a socialist if he was appointed by a Republican president, how do you reply to that?

DILORENZO: Well he was appointed by a Republican president who obviously knew next to nothing about economics, and had no interest in economics. He was the war president, Bush, that's what he was all about. I wrote that article because he endorsed Hillary Clinton. I called them birds of a feather, the two of them, two crony capitalists. Although I called Hillary a crony socialist. Some of her ideas, what she's most known for is Hillary care, or that Soviet style essential planning of the healthcare system that she tried to impose on us in the Clinton administration. So yes, he orchestrated the bailout. Capitalism is a profit and loss system. It's not an I keep the profits, you keep my losses system. So he did tremendous damage to our capitalist system by orchestrating those bailouts. It was all based on greed and corruption on top of that. Because when he bailed out AIG for 100 billion dollars, Goldman Sachs had 18 billion dollars in claims on the AIG. So he basically bailed out his own company with government money.

BENNETT: And he knew that. Talking about Hillary, I actually find it amusing how upset Bernie supporters are with Hillary as their nominee. I mean I understand how it has been shown that the DNC tried rigging the primary process. But it does seem shortsighted for anyone to complain she isn't sufficiently left wing, don't you think?

DILORENZO: Yes, I think so. Like I said, the only difference I see between the two of them is she doesn't use the S word. She even had an interview with Chris Matthews a few weeks ago. He asked her, what's the difference between a democrat and a socialist? She refused to answer. He asked her twice. So a lot of people watching I'm sure must have concluded well she probably thinks there is no difference between the two. She came out also with, not only just government funded higher education, but the proposal of giving every baby born $5,000 to accumulate with interest, and to be received when the baby reaches voting age of 18. That's similar to what George McGovern was laughed out of town in 1972. He called it a grant giving everybody, I think it was, $2,000 I think it was back in '72.

BENNETT: We can't even pay for social security, and yet they're promising more money out there. You also wrote a piece about why Trump is the clear choice for this precarious time. Not all libertarian or free market types agree that he'll be much of an improvement. What gives you the optimism that he actually might deliver?

DILORENZO: I had a piece that was in The Daily Caller. Well he's just a man who has spent his entire adult life creating economic value, and creating hundreds of thousands of jobs, and wealth, and prosperity. He also understands being a real estate developer. He understands the crookedness and corruption of the system. Every developer in the country knows that you have to pay to play, and the payees are the politicians. So I think he resents the heck out of them. I believe him when he says 'I understand this system that Hillary has evolved in, this corrupt political crony capitalist system,' and he wants to do something about it. As a capitalist I think he'll be more susceptible to ideas about limiting government, cutting taxes, and growing the economy. As opposed to hair-brained ideas like Soviet style essential planning of healthcare, or anything else, which is what Hillary Clinton has been for. I think she has already proposed a trillion dollars in new taxes.

BENNETT: Oh, I didn't pick up on that one.

DILORENZO: Yes. I think the National Taxpayers Union has a publication out that I read through, going down all of her proposed tax increases. Limiting mortgage interest deductions from that, to raising her capital gains tax. It all adds up to over ten years of a trillion dollars, according to the National Taxpayers Union.

BENNETT: Do you really think that Trump has a chance to win? The problem is he does come off as a bit of a carnival barker, and he looks like one. Do you really think he has a chance to win Tom?

DILORENZO: Yes I do. Because look at his record. Nobody thought he had a chance to win the Republican primary. I remember all of the media, CNN and everybody, almost a week after he started running saying well, what's his exit strategy, how is he going to save face, and go home. Of course they were all wrong about that. I think Hillary also has a cartoon face. Her signature expression is to have her mouth wide open, and pretend that she's ecstatic, and happy about something.

BENNETT: And listening.

DILORENZO: She reminds of that famous painting, The Scream with the different expressions of her face, talking wide open mouth.

BENNETT: Tom DiLorenzo, The Problem with Socialism. Thanks.

For over a quarter century, Dawn Bennett has been successfully guiding clients through the complexities of wealth management. Her unique vision and insight into market trends makes Bennett a much sought after expert resource with regular appearances on Fox News Channel, CNBC, Bloomberg TV, and MSNBC as well as being featured in Business Week, Fortune, The NY Times, The NY Sun, Washington Business Journal in addition to her highly regarded weekly talk radio program - Financial Mythbusting. Through prudent and thoughtful advice, Dawn Bennett has strived to consistently provide the highest quality of guidance.

About Dawn Bennett
Dawn Bennett is CEO and Founder of Bennett Group Financial Services. She hosts a national radio program called Financial Myth Busting

She discusses educational topics and events in the financial news, along with her thoughts on the economy, financial markets, investments, and more with her live guests, who have included rock legend Ted Nugent, as well as Steve Forbes and Grover Norquist. Listeners can call 855-884-DAWN a as well as take podcasts on the road and forums for interaction.

She can be reached on Twitter @DawnBennettFMB or on Facebook Financial Myth Busting with Dawn Bennett.