Aside from taking the role that God designed for the individual, family and church, socialism retards personal initiative, creativity, productivity and prosperity for all classes.
Capitalism is often criticized for relying on individual desires to fuel the economy. The problem is that critics fail to distinguish between proper desires and improper desires. The Bible agrees with critics that greed (Luke 12:15) and the desire to get rich(1 Timothy 6:10), especially at the expense of the poor (Proverbs 22:22), are bad motivations for gaining money. However, the Bible affirms certain reasons to work for gain such as feeding one's self and family and being able to give to the poor in need (Ephesians 4:28).
The key verse in my mind is "The laborer's appetite works for him; his hunger drives him on." (Proverbs 16:26) God designed our desires to be used for good ends. Our desire for sexual intimacy is properly fulfilled in marriage, which brings us into a loving relationship and produces offspring to give God glory on the earth. Our desire for food and desire to care for our families is properly fulfilled through work, which allows us to provides for our needs. The Creator gave humankind free will (Genesis 2:17) to see what was in their hearts. Sin caused a break in man's relationship with God and passed on a sin nature to future generations (just like we have a physical nature passed on to us by our parents). However, man's original drives remain as neutral motivators that can be harnessed for good or evil purposes.
Unfortunately, socialism, while sincerely (I think) seeking to remedy the ills caused by evil, actually only superficially corrects them and ultimately ends up detroying the good foundations. Socialism's weakness is that it can not change the heart. Greed will still be present. Greed is greed whether it is in the upper or lower classes. It is easier to see in others' lives than our own. Capitalism can not change the heart either, but it allows humans to individually choose what their fate will be. Christ offers a person the freedom to leave greed behind and work for the right reasons (John 8:36). Even the unregenerate can work for the right reasons. The foundation that needs to be maintained is that people should have consequences to their actions. The proverbs say the lazy will go hungry (20:4) and God wants to use that catalyst to drive the lazy to work. Subsidizing the lazy only encourages more laziness. Unemployment payments only delay a person from feeling the need to find a new job. Public health care only discourages savings and encourages other spending. I believe it was Aristotle who said, "that which is public is least taken care of." Pooling the means and results of production only retards the individual will to work and thus retards the economy.
I am able to think of many examples in my own life of these principles. In addition, I have observed and heard of others who have experienced these truths.
For example, welfare programs are awarded based on income and savings, etc. When researching these programs it was apparent to me that they would fail to discern those really in need and thus hurt everyone by wasting public money. Someone may be making little but saving a lot by living frugally. This person may be denied assistance. Thus saving is discouraged.
I know a man who saved for retirement. That meant he recieved less social security money. Is it fair to penalize him for saving while others who may have had more money than him were less responsible with their own money? Is it right to tax a person extra to pay for the lazy or to subsidize the foolish and wasteful?
Another example is minimum wage. Minimum wage superfically raises the wages of the least desireable employees and thereby lowers the wages of better employees. Why should I work harder then my peer when we will be in the same collective barginning contract anyway? Why seek to excel when those not seeking to excel will still be rewarded?
The graduated income tax is a major component of the socialist system. Why work harder to earn more just to have a higher percentage of tax taken out? Why not just be a taker instead of a giver? If a politician takes from Peter and gives to Paul, Paul will always give the politician his vote. Thus corruption, inefficiency, and ultimately poverty for all classes will result from the socialist system.