Tag Archives: socialism

It Isn’t That Simple

We Americans tend to be “either/or” people. A policy is right or wrong; a system is good or bad, “those people” are all sterling characters or (more frequently) worthless bums.

Things aren’t going well, and need to change? We throw the baby out with the bathwater.

Speaking of throwing, the election of Donald Trump has thrown a number of the problems with American governance into stark relief;  it’s hard to deny the influence of money, or the venality of certain lawmakers. But rather than resolutions to correct the laws and political processes that have led to the current mess, I am increasingly reading diatribes from people who have decided that it is all capitalism’s fault, and want to replace the country’s system of market economics with socialism.

As the kids might say, let’s get real.

First of all, the worst aspects of our current, deeply dysfunctional economy aren’t capitalism. A genuinely capitalist system is regulated by an impartial “umpire” (the government) to ensure that enterprises compete on that all-important level playing field. What we have today is corporatism: Corporatism has been described as what you have when you lose the laws and regulations that have kept businesses from being able to buy politicians– a system where government is effectively “owned” by special interests.

Market capitalism encourages transactions between willing buyers and sellers, both of whom are in possession of all information relevant to those transactions. Socialism is a system for the collective provision of goods and services that don’t meet that criterion–goods and services that the market cannot supply efficiently or fairly.  We “socialize” things like infrastructure, police and fire protection, and protection of clean air and water.

A healthy, growing economy requires both. Virtually all western industrialized countries have mixed economies, meaning that the government socializes certain areas of the economy and leaves other areas to the market. The challenge is to get the mix right.

Both capitalism and socialism can be manipulated by greedy or unethical offiicials–that’s why electing people who demonstrate respect for ethics and the rule of law is so critical. Unregulated capitalism becomes corporatism, allowing the “big guys” to prey on smaller businesses and consumers. Socializing too much of the economy depresses innovation,  invites stagnation and encourages petty bureaucrats to abuse their authority.

If we want to fix our broken economic system–and not so incidentally, our broken government–there is no substitute for doing the hard work of re-regulating markets in those sectors where markets work well, and carefully socializing areas (like health care) where the evidence overwhelmingly demonstrates that markets do not and cannot work.

We can and should argue about the level of regulation we impose on market enterprises–what is too much, what is not enough?–and we can and should require hard evidence before moving to socialize additional areas of the economy. What we shouldn’t do is apply  bumper-sticker solutions to problems requiring careful analysis and measured policymaking.

We don’t need to throw the baby out–just the dirty bathwater.

The Words We Use…

Last night, I spoke to the student Economic Club at Ball State. Since numbers aren’t my thing, I focused on theory….Here (slightly condensed)are my remarks.

_______________________________________

Terms like conservative, liberal, socialist, progressive get used these days as accusations and insults rather than ways of defining a political or economic philosophy.

On today’s political spectrum, I consider myself liberal, but given the state of current discourse,  it might be worth explaining what I mean by that term—and why my kind of liberalism is compatible with genuine market capitalism, although not necessarily with what passes for capitalism in today’s America.

I am basically an 18th Century liberal, by which I mean a product of Enlightenment values like empirical inquiry, science, and the importance of facts—including facts I may find inconvenient.

It also means I place a high value on both individual autonomy and the common good. And that means I tend to analyze government’s activities through the hypothetical of Locke’s Social Contract.

The United States’ Constitution was crafted by men heavily influenced by Enlightenment ideas. Their belief in protecting a marketplace of ideas owed a debt to Adam Smith’s description of economic markets, a description supported by the experience of the colonists, many of whom were small merchants. Good ideas would win out over bad, in much the same way as that better mousetrap would win market share.

I believe market principles remain sound, but they have to be applied to “facts on the ground” that the Founders could never have anticipated.

There were around 4 million people scattered along the east coast when America won independence; there are now over 300 million. Technology, diversity, and globalization have changed the national landscape. Our job is to craft policies that protect the essential values of the Constitution and Bill Of Rights in new and very different environments. People of good will can disagree about how to do that –but I would argue that in order to disagree productively and civilly, we have to begin with a common basis in fact and history, and we have to agree on the definitions of the words we use.

For example, I consider myself a capitalist; I believe in markets—in those areas where markets can work properly.

Economists often define a free trade as a transaction between a willing buyer and a willing seller, both of whom are in possession of all information relevant to that transaction.

Understanding how markets work is important, because it defines the proper role of government in a capitalist system—as an “umpire” or referee, ensuring that everyone plays by the rules.

Teddy Roosevelt reminded us that monopolies distort markets; if one company can dominate a market, that company can dictate prices and other terms with the result that  transactions will no longer be truly voluntary. There are other behaviors that undermine markets: If Manufacturer A can avoid the cost of disposing of the waste produced by his factory by dumping it into the nearest river, he will be able to compete unfairly with Manufacturer B, who is following the rules governing proper waste disposal. If Chicken Farmer A is able to control his costs and gain market share by failing to keep his coops clean and his chickens free of disease, unwary consumers will become ill.

Most economists agree that in order for markets to operate properly, government must act as an “umpire,” assuring a level playing field.

Government also responds to what economists call “market failure.” There are three situations in which Adam Smith’s “invisible hand” simply doesn’t work: when monopolies or corrupt practices replace competition; when so-called “externalities” like pollution harm people who aren’t party to the transaction (who are neither buyer nor seller); and when there are “information asymmetries,” that is, when buyers don’t have access to information they need to bargain in their own interest. (Health care is an example.)

Since markets don’t have built-in mechanisms for dealing with these situations, most economists argue that regulation is needed.

Economists and policymakers can and do disagree about the need for particular regulations, but they agree that the absence of appropriate regulatory activity undermines capitalism. Unregulated markets lead to corporatism, where special interests can “buy” government regulations favoring them. You might think of it as a football game where one side has paid the umpire to make calls favorable to that team.

Socialism refers to the collective provision of goods and services, usually through government. There are some goods that free markets cannot or will not produce. Economists call them public goods, and define them as both “non-excludable” –meaning that individuals who haven’t paid for them cannot be effectively kept from using them—and “non-rivalrous,” meaning that use by one person does not reduce the availability of that good to others. Examples of public goods include fresh air, knowledge, lighthouses, national defense, flood control systems and street lighting. If we are to have these things, they must be supplied or protected by the whole society, usually through government.

Obviously, not all goods and services that we socialize meet the definition of public goods.  We socialize police and fire protection because doing so is generally more efficient and cost-effective, and because most of us believe that limiting such services to people who can afford to pay for them would be immoral. We socialize garbage collection in more densely populated urban areas in order to enhance the livability of our cities and to prevent disease transmission.

Getting the “mix” right between goods that we provide collectively and those we leave to the free market is important, because too much socialism hampers economic health. Just as unrestrained capitalism can turn into corporatism, socializing the provision of goods that the market can supply can reduce innovation and incentives to produce. During the 20th Century, many countries experimented with efforts to socialize major areas of their economies, and even implement  socialism’s extreme, communism, with uniformly poor results. Not only did economic productivity suffer, so did political freedom. (When governments have too much control over the means of production and distribution, they tend to become authoritarian.)

Virtually all countries today have mixed economies. The challenge is getting the right balance between socialized and free market provision of goods and services.

There’s lots of room for disagreement about things like how much regulation is too much, what level of national debt slows economic growth, what the tax burden should be and who should pay what. But in today’s America, these discussions tend to be all ideology and no understanding—all heat, no light. I wish I had a dollar for every TV pundit who clearly did not understand the difference between the deficit and the debt, or the difference between marginal and effective tax rates. We have people in Congress who quite obviously don’t understand what the debt ceiling is and isn’t.

It’s actually a good thing that Americans disagree—thoughtful disagreements often lead to better results. But it is really, really important that parties to a debate know what they are talking about. That is a lot harder today, thanks to the Internet and the collapse of that quaint exercise we used to call journalism. We live in an era of cherry-picking and confirmation bias—and our preferred realities are only a click away.

At the end of the day, policies based on ideology or wishful thinking just make things worse. And arguing about economics without agreeing on the meanings of the words we use is worse than useless.

 

 

Defining Our Terms

Bernie Sanders says he’s a Democratic Socialist, and that doesn’t seem to bother the young folks who support him–although it certainly scandalizes a lot of older Americans. Of course, as a friend of mine recently noted, no one–young or old– seems to know what a “Democratic Socialist” or just a garden-variety socialist is–or how socialism differs from either capitalism or communism, for that matter.

Why am I not surprised? After all, Americans long since stopped using labels to communicate information; we just throw them at each other as insults.

Economic terminology is yet another part of those civic literacy deficits I keep talking about–deficits I addressed in my ebook Talking Politics? What You Need to Know Before You Open Your Mouth. (Shameless plug: it’s cheap–under $5 from Georgetown University Press.) I promised my friend that I’d share what I wrote there:

Socialism is the collective provision of goods and services. The decision whether to pay for certain services collectively rather than leaving their production and consumption to the free market can be based upon a number of factors. First, there are some goods that free markets cannot or will not produce. Economists call them public goods, and define them as both “non-excludable” –meaning that individuals who haven’t paid for them cannot be effectively kept from using them—and “non-rivalrous,” meaning that use by one person does not reduce the availability of that good to others. Examples of public goods include fresh air, knowledge, lighthouses, national defense, flood control systems and street lighting. If we are to have these goods, they must be supplied by the whole society, usually through government, and paid for with tax dollars.

Not all goods and services that we provide collectively are public goods. Policymakers have often based decisions to socialize services on other considerations: we socialize police and fire protection because doing so is generally more efficient and cost-effective, and because most of us believe that limiting such services only to people who can afford to pay for them would be immoral. We socialize garbage collection in more densely populated urban areas in order to enhance the livability of our cities and to prevent disease transmission.

Getting the “mix” right between goods that we provide collectively and those we leave to the free market is important, because too much socialism hampers economic health. Just as unrestrained capitalism can become corporatism, socializing the provision of goods that the market can supply reduces innovation and incentives to produce. During the 20th Century, many countries experimented with efforts to socialize major areas of their economies, and even implement socialism’s extreme, communism, with uniformly poor results. Not only did economic productivity suffer, so did political freedom. (When governments have too much control over the means of production and distribution, they can easily become authoritarian.)

Virtually all countries today have mixed economies. The challenge is getting the right balance between socialized and free market provision of goods and services.

In our highly polarized politics today, words like Socialism, Fascism and Communism are used more as insults than descriptions. There are numerous disagreements about the essential characteristics of these systems, probably because the theories underlying them were so different from the actual experiences of those who tried them.

Socialism may be the least precise of these terms. It is generally applied to mixed economies where the social safety net is much broader and the tax burden is correspondingly higher than in the U.S.—Scandinavian countries are an example.

Communism begins with the belief that equality is defined by equal results; this is summed up in the well-known adage “From each according to his ability; to each according to his needs.” All property is owned communally, by everyone (hence the term “communism”). In practice, this meant that all property was owned by the government, ostensibly on behalf of the people. In theory, communism erases all class distinctions, and wealth is redistributed so that everyone gets the same share. In practice, the government controls the means of production and most individual decisions are made by the state. Since the quality and quantity of work is divorced from reward, there is less incentive to innovate or produce, and ultimately, countries that have tried to create a communist system have collapsed (the USSR) or moved toward a more mixed economy (China).

Fascism is sometimes called “national Socialism,” but it differs significantly from socialism. The most striking aspect of fascist systems is the elevation of the nation—a fervent nationalism is central to fascist philosophy. There is a union between business and the state; although there is nominally private property, government controls business decisions. Fascist regimes tend to be focused upon a (glorious) past, and to uphold traditional class structures and gender roles as necessary to maintain the social order.

Three elements commonly identified with Fascism are 1) a national identity fused with racial/ethnic identity and concepts of racial superiority; 2) rejection of civil liberties and democracy in favor of authoritarian government; and 3) aggressive militarism. Fascism has been defined by this radical authoritarian nationalism, with fascists seeking to unify the nation through the elevation of the state over the individual, and the mass mobilization of the national community through discipline, indoctrination, and physical training. Nazi Germany and Mussolini’s Italy are the most notable examples of Fascist regimes.

Hope that helps.

The Socialists are Coming! The Socialists are Coming!

Okay–consider this my Sunday Sermon….

We know that America has an equality problem. We also have a language problem that makes issues of equality more difficult to discuss rationally.

Pundits across the political spectrum, the so-called “chattering classes,” increasingly use words as epithets, rather than as a way to describe reality. Terms like “liberal”—which used to mean “open minded,” “generous,” or a follower of the philosophy of John Locke—have become a content-free insult to be hurled at anyone favoring a marginally more activist government or slightly more robust social safety net.

When “liberal” gradually lost its sting, partisans moved on to “socialist.”

The problem is, few people using the term these days seem to know what socialism is, and even fewer recognize that socializing the solution to a problem can often be very good for capitalism (another system which few can define with any precision), by ameliorating more savage inequalities and thereby avoiding social instability.

The Affordable Care Act—aka “Obamacare”—is unremittingly attacked for being “socialism.” And it is absolutely true that it’s an effort to socialize access to health insurance. But what does “socialism” in this context really mean?

Rhetoric to the contrary, the ACA is hardly an unprecedented departure from a purely market-based system. (Prior to its passage, governments at all levels were paying nearly 70% of America’s healthcare costs, albeit through a grossly inefficient patchwork of programs.) More to the point, ours is a mixed economy, meaning that over the years policymakers have determined that some services are more appropriately or efficiently provided communally–“socialized” through units of government–while others are best left to the market.

We socialize police and fire protection. Most cities have socialized garbage collection. Federal and state highways and city streets are public goods provided by governments and paid for through (largely redistributive) taxes—that is, socialized. Add publicly-financed parks and museums and public schools. Medicare, Medicaid and Social Security all offer “social insurance.” After some 100 years of policy debate, we have finally added health insurance to the list.

The ACA is far from perfect. Many Americans would prefer a single-payer system similar to those that operate in many European countries. Others fault the law’s complexity. Interest groups that stand to lose profits under the new accounting rules argue about the fairness of those provisions. Such complaints are to be expected when any major new program is introduced. Much as we saw with the evolution of Medicare, we can expect significant modifications going forward.

Policy debates are to be expected. What is much harder to understand is the level of hostility aroused by the suggestion that struggling Americans should be provided with access to affordable health insurance. Opponents of the ACA call it “socialized medicine” (it isn’t; at most, it is “socialized insurance”) as though the very label should be evidence that it is anti-American to use tax dollars to subsidize coverage for those who cannot afford it. People who live on their Social Security benefits and love their Medicare positively froth at the mouth at the notion that America has any obligation to extend the reach of such programs to less fortunate folks.

The irony here is that the very people who are fighting tooth and nail to bring down the ACA—bringing lawsuits, supporting candidates who vow to repeal it—are already among the Act’s beneficiaries. America’s previous non-system—the most expensive in the world by far—was widely acknowledged to be unsustainable. The cost of health insurance was a major impediment to job creation, and a drag on the whole economy. In the wake of the ACA’s passage, the indicators have all improved, benefitting all of us.

The ACA hasn’t just improved our economic health. It has also improved our moral health.

There is something very wrong with a society that rations healthcare on the basis of one’s ability to pay—a society willing to tell its most vulnerable members that they are expendable, that they do not deserve even the most basic medical care. Whatever we call this decision to even the playing field just a bit, to mend this major hole in the social safety net, it brings us closer to that elusive thing called civilization.

If that requires a bit of socialism, so be it.

 

 

 

 

 

Just Think How Happy They’d Be if the Weather Were Better….

Or maybe not. I had a Canadian colleague who insisted that cold weather encourages development of social cooperation and interdependence, and that’s why places like Canada develop better social safety nets.

Recently, Denmark–a cold country with high taxes and one of those “socialist, nanny-state” governments– was ranked the happiest nation on earth.

Of course, being prosperous (not to mention healthy and virtuous) didn’t hurt.

The six factors for a happy nation split evenly between concerns on a government- and on a human-scale. The happiest countries have in common a large GDP per capita, healthy life expectancy at birth and a lack of corruption in leadership. But also essential were three things over which individual citizens have a bit more control: A sense of social support, freedom to make life choices and a culture of generosity.

There’s a fair amount of evidence that strong social safety nets correlate with socially healthier societies–less gun violence, lower divorce rates, less discord, etc. (In all fairness, there’s also evidence suggesting that feelings of mutual obligation/collective responsibility also correlate with high levels of homogeneity. It’s easier to care about the elderly when they all look like grandma…)

The report notes that Danes have “a sense of stewardship” and are massively engaged in political and civil life. During the last election, in 2011,  87.7 voted. Over 40% volunteer in NGOs, social and political organizations, etc.

Denmark may not be everyone’s idea of the ideal society, but life there sure beats the “vision” espoused by Paul Ryan and the Tea Party–a dog eat dog society in which the privileged deny any obligation to the less fortunate, where basic health care is a consumer good available to those who can afford it, and social security is “charity.”

And if we’re talking about happiness, folks in states like Mississippi and Texas–where Tea Party principles are the order of the day and efforts to create a “culture of generosity” would bring catcalls and derision– don’t look all that happy to me.