Socialist governments eventually run out of other people's money.
Margaret Thatcher said in a 1976 television interview that socialist governments traditionally make a financial mess and always run out of other people's money. The line has been quoted ever since, often shortened to a claim about the trouble with socialism.
In practice
- A government that funds rising pensions by borrowing finds lenders unwilling to lend at any tolerable rate.
- A shared flat that pays every bill from one member's account finds that member moving out.
- Possible explanations
- One explanation is fiscal: spending financed from a narrow tax base or by borrowing cannot grow indefinitely. Another is incentive: high taxation may reduce the activity it taxes.
- In its favour
- Consistent with fiscal crises in heavily state-directed economies, such as Venezuela's in the 2010s.
- Against it
- Many high-spending social democracies have remained solvent for decades, and fiscal crises have occurred under governments of every political colour. The quip does not distinguish socialism from the welfare state.
- Standing
- Compare the Laffer curve and starve the beast.
- Subject
- Economics & Incentives
- Essay
- Rules for choosing, and the paradoxes that humbled the theory