Who Wants to Be a Billionaire?

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“If a man is not a socialist by the time he is 20, he has no heart. If he is not a conservative by the time he is 40, he has no brain.”

– Winston Churchill

Move over, Barack Obama.

Alexandria Ocasio-Cortez – a 19-year-old college sophomore when Obama was first elected president in 2008 – is the shiny new face of the Democratic Party.

As a member of the Democratic Socialists of America, Ocasio-Cortez’s proposal to levy a 70% rate of income tax on the “very rich” is gaining steam.

What’s even more surprising…

Almost 6 in 10 Americans – including 45% of Republicans – approve of her effort.

If her movement to milk the rich remains more than a flash in the political pan, it will mark a seismic shift in American values.

And, if history is any guide, a sustained lurch to the left will have profoundly negative effects on the American economy.

Billionaires Out of Vogue

Ever since the dot-com boom of the late 1990s, every ambitious businessperson has dreamed of becoming a billionaire.

But almost overnight, being a billionaire in the United States became unfashionable.

Consider the case of Howard Schultz – the ex-CEO of Starbucks – boss, billionaire and now 2020 presidential hopeful.

In a recent television interview, Schultz rejected the moniker of “billionaire.”

Instead, he wants to be called a “person of means.”

Fellow billionaire investor Howard Marks confessed his concern about rising “anti-capitalist sentiment” in the U.S.

Marks argues that for the 60 years after World War II, the U.S. populace enjoyed a rising tide of prosperity that lifted all boats.

As a result, most Americans happily embraced capitalism and free markets.

But today, many Americans feel “the tide is no longer rising.”

This has rekindled the younger generation’s dangerous fascination with socialism.

Socialism vs. Capitalism: The Eternal Debate

Discussing the competing merits of capitalism and socialism has been a staple of late-night debates in college dorm rooms for generations.

Socialism is noble in its aspirations, the idealists argue.

Yes, but in practice it has led to political and economic disaster, retort the realists.

I come from a family who fled to the U.S. to escape the Soviet-imposed socialist experiment. So my anti-socialist biases could not be clearer.

I am keenly aware that the 20th century is littered with the horrific consequences of socialism. And that socialism came from both the extreme left (the Bolshevik revolutions in Russia and Eastern Europe) and the extreme right (National Socialism in Germany).

I’ll never forget when the eminent English historian Robert Conquest came to my dorm in college to speak about socialism. He had calculated that the forceful imposition of socialism had resulted in more than 100 million deaths in the 20th century. That’s roughly the population of the United Kingdom and Canada combined.

Who Wants to Be a (Venezuelan) Billionaire?

Today’s millennials will dismiss these historical examples as irrelevant.

After all, such disruption and death could not happen in today’s enlightened and globally connected world.

Yet they need look no further than today’s Venezuela.

Dictator Hugo Chávez came to power in Venezuela in 1999. His Bolivarian Revolution combined socialist economics with state-funded handouts and “anti-imperialist” nationalism.

Chávez promptly nationalized the oil industry. He introduced state subsidies for basic goods, as well as exchange and price controls. He funded lavish spending on social programs by plundering the country’s vast oil wealth.

After Chávez’s death in 2013, the revolution continued under Chávez’s hand-picked successor, Nicolás Maduro.

In the year after Maduro took office, oil prices fell by 50%. Suddenly, the wheels came off the socialist economic experiment. And Chávez’s Bolivarian Revolution turned out to be an economic and humanitarian catastrophe.

The subsequent economic collapse has been both sad and astonishing:

  • Venezuela’s economy has shrunk by half since 2014.
  • Annual inflation is running at 1.7 million percent. Savings in the local currency – the bolívar – worth $10,000 at the start of the year dwindled to $0.59 by the end. (And no, that is not a typo.)
  • The healthcare system has collapsed. Infant mortality has soared.
  • Three million citizens – or 10% of the population – have left the country over the past four years.
  • People joke grimly about the “Maduro diet” that has left 75% of the population with not enough food.

Here’s a sad irony…

Thanks to hyperinflation, Venezuela created more billionaires than any other nation since the German Weimar Republic in the 1920s.

Today, billions in bolívars are used as toilet paper. Wheelbarrows of cash will get you a loaf of bread.

Yet none of these failures will convince democratic socialists in the United States to veer off their idealistic path.

Consider Ocasio-Cortez’s “Green New Deal.” She promises to provide “economic security for all who are unable or unwilling to work.”

Contemplate that for a moment…

A promise to provide “economic security for those ‘unwilling to work.’”

Much like Chávez in Venezuela, Ocasio-Cortez promises something for nothing.

And nothing is an easier sell politically.

After all, when you rob Peter to pay Paul… you can always count on Paul’s vote.

So, if you’re a billionaire – or even just one of the 11 million American “millionaires next door” – should you be worried?

The answer is, sadly, probably yes.

The political tide in America is turning fast.

And Alexandria Ocasio-Cortez is working hard to make your life a lot more uncomfortable.

Good investing,

Nicholas

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