Republicans have been clear about their enemy in the 2020 Election. Donald Trump promised in his State of the Union Address that “America will never be a socialist country.” He might also have also promised to eliminate rotary dial phones and the telegraph for all it matters. A leader and a party committed to taking America back to a mythical past just love their favorite ghost.
When you hear someone describe a present-day political stance as socialist or capitalist, it’s a reliable tell that they don’t know what either means. Both of these 19th century ideologies failed comprehensively in the 20th. Successful governments all over the world learned valuable lessons from both failures, incorporating elements from each that work for their circumstances while discarding the detritus.
Socialism, at least since Marx, has referred to a political and economic system in which the “means of production,” or “capital” is publicly owned for the benefit of everyone. By contrast, capitalism leaves the means of production in private hands. At the root of both systems is a disagreement over how value should be assigned in an economy. In capitalism, value is set in individualized market transactions. Everything is worth what someone will pay for it in a single, person-to-person transaction. In socialism, value is set through centralized mechanisms designed to incorporate wider social goals. Socialism replaces free markets with either price controls or with tools like vouchers, limited markets or other manipulations.
Capitalism was a bold challenge to Europe’s lingering attachment to feudal aristocracy and mercantilist superstition. Capitalism was progressive until it wasn’t. Socialism was a challenge to capitalism, seeking to restore some of the human, communal values capitalism had stripped away in its attack on older institutions. Socialism was progressive until it wasn’t.
Capitalists criticize socialism for concentrating too much economic and therefore political control in the hands of small cadre of bureaucrats. In the end, under socialism everyone owes their survival to insulated apparatchiks who become fat, clueless and corrupt. Socialists criticize capitalism for concentrating too much economic and therefore political control in the hands of a small cadre of capital owners. In the end, under capitalism everyone owes their survival to insulated wealthy families who become fat, clueless and corrupt. Both criticisms are valid. Both led to the collapse of each system in the real world. They are both gone.
Any American can recite the failures of the great 20th century socialist experiments. What they seldom understand is that capitalism collapsed much earlier. Its remnants were salvaged by a clever reconfiguration of concepts borrowed from socialism.
Capitalism, turned loose, quickly eats itself. This vulnerability was described by capitalism’s founding thinker, Adam Smith. Absent constraints from outside the marketplace, capitalism eventually concentrates monopoly power in too few hands. Those few hands can then strangle the market, reversing the dynamics of broad enrichment those markets originally set in motion. But that’s not the worst of it.
Capitalism, as a philosophy, assigns value to products and labor only on the basis of the price they receive in the market. Anything valuable, like parenthood, loyalty or even honesty, that fails to attract a premium in free market transactions is devalued, developing into a liability and eventually disappearing.
Likewise, concern for any negative impacts outside a transaction, like pollution, corruption, worker exploitation, or even theft, is not assigned any value in the market. Capitalism, being premised on prices struck in individual market transactions, fails entirely to provide anything of common social value. Infrastructure like roads, rail networks, ports or even crucial elements like education or healthcare systems, simply do not come into being absent intervention from outside the market.
In time, unregulated capitalism produces a broad selection of toothpaste at attractive prices for a population of people with no teeth. It produces a fabulous store of books for people who can’t read, because they have no schools. And eventually, the inevitable concentration of wealth shrinks the pool of consumers with money to spend until even the wealthy see their assets diminish.
After a brief, failed effort to contain the power of wealthy families under the first Roosevelt, those families drove the US to bankruptcy a few decades later. In 1929, our capitalist economic system collapsed nearly taking our democracy with it. The second Roosevelt seized the opportunity presented by the emergency to dismantle much of American capitalism.
He created a real Securities and Exchange Commission to curtail stock market fraud. He took a page from the socialist playbook to create direct-assistance programs for workers, including our first national pension system. Roosevelt placed real power in the hands of the Federal Reserve to keep some degree of public interest in the nation’s banking system. He set up a system by which the government could seize control of abusive banks before they took down the entire financial system. Through a very aggressive and complex system of interventions, Roosevelt managed to preserve functioning markets and private control of capital. Through a fairly severe tax regimen with top rates near 80%, he curtailed the concentration of wealth and began to create a stable middle class.
Roosevelt gave America a socialist-style central bureaucracy with a proto-welfare state while leaving capital in private hands, a hybrid system later repeated across Europe and the Far East after World War II. It was neither capitalist nor socialist and it worked extremely well for its time.
Under Roosevelt’s reforms and an aggressive anti-communist campaign, socialism quickly died out in the US. By the sixties, Western European leftist parties had abandoned socialism in all but name. Chinese Communists abandoned socialism in the 80’s. The Soviet bloc collapsed a few years later. Today, North Korea and Cuba are still ruled by a Kleptocratic aristocracy who call themselves communists, but socialism is gone. Capitalism is also dead, but Republicans won’t bury the corpse.
A few Democrats like to use the term “Democratic Socialist” to describe their agenda, but there are no socialists in positions of influence anywhere in American or European politics. No one is planning to seize control of the means of production, nationalize our oil fields, or make factory workers government employees. No one wants you to wear a gray jumpsuit. There are no socialists.
Similarly, there are political figures on the right who claim to love capitalism, but they don’t. They’re mostly fantasists, but they have a powerful following among aging white people worried that any form of government action in the economy will redistribute their wealth to the vengeful negroes who haunt their nightmares. Our Republican “capitalists” want a system of government that preserves socialism for white people while leaving everyone else to the mercy of markets. The MAGA contingent wants to clamp down on free trade, protect socialism for their aging voters dependent on Medicaid and Social Security, and maintain steep government interventions to prop up the fading market value of “traditional values,” religion, and discredited political ideologies. Today’s greatest defenders of “capitalism” are icons of inherited mediocrity whose wealth would be swept away by ten minutes of exposure to a free market.
Both ideologies taught us some helpful lessons. Life is happier and more secure when shared social values are protected from the rapine machinery of the marketplace. Markets work extremely well when their scope is limited and their potential abuses are contained. In fact, nothing sets a more honest price than a market, though it may not be a fair one. Concentrations of power are dangerous, whether that power is concentrated among government bureaucrats or wealthy capital owners. And most of all, we learned that ideology should never be taken seriously, treated as a religious substitute for reason.
The move toward industrialization that inspired both capitalism and socialism lies in our past. An economic phenomenon that invented the concept of jobs, the nuclear family, surplus, and progress has been replaced. An economy is emerging in which wealth rises from data and innovation rather than labor and natural resources. Concepts of class struggle, wealth creation, labor and capital defined by industrialization don’t make sense anymore, they no longer help us understand events unfolding around us. Capitalism and socialism are both irrelevant.
Governments that work best are the ones that make smart decisions for their time, with an eye toward the future and the interests of the governed at heart. Smart leaders produce good outcomes. Dumb, greedy, corrupt leaders wreak havoc, regardless of the color of their banners or the tune of their anthem. Booming Bolivia and seething Venezuela are both governed by leaders pretending to be socialist. Stable, healthy Singapore and a United States on the brink of chaos are both governed by leaders pretending to be capitalists.
There are no universally relevant ideologies. What works day might fail tomorrow. Leaders who cling to ideologies are usually hiding something dark and dangerous. They should be shunned.