America’s Fear of Socialism
September 7, 2020
Among the reasons why Joe Biden might lose the presidential election eight weeks from now despite his current lead in opinion polls is the suspicion that America would become a socialist country with any Democratic president. Although its meaning is often misunderstood, the very term socialism evokes widespread pejorative feelings in all but the youngest generations. One misconception is that private capitalism performs just about all tasks more efficiently than government, and another is that capitalism and socialism present an either-or choice. A related fear that socialism could mark an evolution toward communism and the loss of democracy and personal freedom mistakenly compartmentalizes political dictatorship and socialism as one choice and democracy and capitalism as the other. Those pairing can be found. But look around the 21st century world, and one also finds combinations for political oppression with broad elements of capitalism.
The most distinguishing feature of socialism is government ownership of most productive resources. After Francois Mitterrand, leader of the French Socialist Party, was elected president there in 1981, several key industries were nationalized. Coinciding with global stagflation, the timing of this experiment was bad, and it wasn’t long before many of the governments innovations were either rolled back or greatly modified. Much of Europe including France currently employs a system of social democracy, with heavy reliance upon market forces to make basic economic decisions such as what and how much to produce, how things are to be built, and the distribution of produced goods and services among the citizenry. In the absence of nationalization, that’s not socialism.
Private enterprise coexists with an amply-sized public sector that handles things that capitalism cannot or will not do and that also keeps other parts of the economy operating efficiently, effectively and in the best national interests. Public goods like national defense benefit everyone, not just fee-paying customers. In other situations, where benefits (profits) and costs do not match up exactly, (e.g., when air or water pollution results), public ownership isn’t required, but it’s in the national interest for government to play a supervisory role handling unwanted social consequences. The proverbial invisible hand of market mechanisms performs the miraculous task of finding the prices that exactly match buyers and sellers, but this assumes the presence of competition. However, in many productive situations barriers to market entry evolve instead, and antitrust laws are needed to minimize monopolistic dynamics that yield excessive profits and price levels that fail the public interest.
The United States has a mixed economy, too, with elements of capitalism but other activities provided by or regulated by government. America’s social safety net is generally less comprehensive than what can be found in most other countries. The changes that a Biden Presidency wants to implement address some goals not touched above. The United States has a more skewed distribution of income and wealth than found in other economies, which is worrisome in light of studies showing a negative correlation between growth and extreme income/wealth inequality. Insurance against poverty is another broad goal. Social security, which people pay into during their working years, provides an easier transition into retirement. Medicaid is directly targeted to help the country’s neediest, many of whom are children. Compulsory primary education was identified as a national goal over 150 years ago and has been funded through the public sector. Available healthcare falls under the unalienable right of “life” enshrined in the Declaration of Independence and set out in the Constitution’s preamble that pledges to “promote the general welfare” of “we the people.”
Capitalism alone doesn’t manage national crises well such as the Covid-19 pandemic. Countries that have taken a more centralized approach to containing coronavirus cases and deaths have done a much better job than the United States. The pandemic exposed the unique sin of American healthcare, which was to let employers provide insurance coverage for their workers and families. This quirk of U.S. healthcare developed by force of circumstances rather than design. In WW2 when wages were frozen to reallocate resources to the war effort, companies looked to non-wage compensation, in particular health insurance, to attract workers and that tradition stuck. In the pandemic, however, as millions of workers lost jobs, they lost healthcare too, right at the time that public health is best served by incentives for everyone to stay as well as possible.
Macroeconomic policy is yet another rightful public sector function in times of disequilibrium. The Federal Reserve is charged with maximizing employment and preserving price stability, and the end of summer finds monetary policy close to having exhausted its scope to promote quicker economic recovery. Looking ahead through the next few years, the United States is at much greater risk of jobs and GDP not expanding as fast as desired than of inflation becoming excessive, and the adverse consequences of the likelier risk are graver and will be harder to counteract than the alternative scenario of too much inflation. Biden offers more activist fiscal support than the Republicans advocate.
The greatest irony in political fence sitters reluctant to support Biden out of fear of socialism concerns the implications for democracy. A variation on their fear is that Biden, although a political centrist himself, would be a puppet of the progressive wing of the Democratic Party. It is a great fallacy that political leaders implementing radical policies are often controlled by others. President Trump is an example. While his views as a candidate often went against Republican Party norms, it was felt that once in office, he would be held in check by the party leaders. Trump’s leadership style is authoritarian, and like other authoritarians including Xi of China and Putin of Russia, he has in fact consolidated power and aligned Republican Party beliefs to be indistinguishable from his own.
Just as capitalism works properly only in the presence of perfect or near-perfect competition, healthy democracy requires checks and balances. The White House wars against the press and U.S. intelligence services, the stuffing of federal courts with ideological conservative judges, and the compliant Republican senate have put America well down the exit ramp of the democracy highway. The feared loss of liberty and freedom under Biden as a corollary to “socialism” is a danger that has already begun under President Trump and will undoubtedly intensify in a second term.
Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
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