Is socialism’s “social policy” simply an attempt to compensate for poor
economics?
Socialism was primarily, of course, a system of economics. Marx and other
Marxians wanted first and foremost to eliminate the capitalists, the
exploitation of labor, and the property rights of the capitalist system. But, while
working on economic issues, socialists were never unwilling to eliminate all
the old, “reactionary” institutions of society. Thus Marxists made various attacks
on marriage, cultural mores, education, youth programs, and other long-standing
traditions that were more social than economic. Therefore, when economic
programs have failed to prove effective, agreeable, or even viable, socialists have
turned with even greater purpose to these other, more purely political
pursuits.
President Obama and environmental policy
President Obama’s greatest preoccupations seemed to lie in the realm of environmental policy. He was perfectly willing to watch the spread of unemployment that accompanied his anti-employment environmental efforts. It is fortunate for the United States that his preoccupation with environmental issues – his complete buy-in to an Al Gore or Michael More politicization of global warming – kept him from devoting his full presidential energy to economic change and the “complete transformation” of the American system. Golf may also have been of assistance to his being diverted from economic strategy, since online photos demonstrate he spent inordinate amounts of time pursuing the sport.
Of course he should receive kudos for his efforts to persuade China and
India that they should make contributions toward any worldwide effort to stem
global warming. If the leading developing countries do not make efforts to curb
the growth of carbon, anything the U.S. does will be far too little. If China,
India and Russia ignore climate change, any extant problems can only become
more urgent regardless of U.S. policies.
Here and in China, Russia, India and elsewhere
As a result of that fact, the reasonable approach to whatever man-made global warming there is would not be to behave as though the U.S. could solve any climate problem singlehandedly. It would make more sense for the U.S. simply to accommodate to climate change while undertaking gradualist initiatives promising greater benefits than costs. To let hundreds of thousands, or even millions of workers subsist in unemployment in an attempt to reduce global warming by half a degree Fahrenheit seems far from prudent policy.
What seems a little strange about climate change ideology is that it appears
more concerned about the home of the human race, the globe, than it
does with the humans involved. Whether or not the climate is warming, pollution
is rarely conducive to good health. It is a worthwhile goal for humans to
strive to achieve a clean environment in any case.
With or without global warming, people need to breathe.
But again, the costs and benefits associated with any given environmental
problem and of its prospective solutions would seem to be worthy of our
consideration. It seems surprising to me that the president alleged to be so
brilliant surrounded himself with numerous Marxist “czars” and advisors like Larry
Summers. Those expert advisers appeared never to have introduced President
Obama to the most casual form of cost/benefit analysis. He never seems to have
asked himself the question, “how much unemployment is justified by a policy
promising (probably without certainty) a 1̊ Fahrenheit reduction achieved over a ten year
period?”
Political Action (Corruption or Abuse of Power) as Opposed to
Political Policy.
Using the power of the IRS and other government agencies to attack individuals and organizations perceived to be President Obama’s political enemies was not, of course, social policy. But using the power of his office as a political weapon was apparently a commonplace in his presidency.
American liberals have long sensed the need to find the right label for
their political orientation. In their selection of labels they have,
incidentally, been rather unfair. In every other country in the world,
advocates of free markets and personal
liberty have called themselves (and have been called) “liberals.”
Early on in American history the leftists simply confiscated the beloved title
for themselves, so that “liberal” came to mean, only in this country, one who
did not favor markets and personal liberty. Some American
liberals would probably have preferred the more honest title “socialist,” but
the socialist rubric was found abhorrent in the United States. As a result,
leftists were happy to steal the more appealing “liberal” label.
After a while, however, the so-called liberals gained a negative reputation
for their obvious preference for big spending and big government. As a
result, “liberal” had now also become an unfavorable term, one to be avoided by
left-oriented politicians. In the tradition of American leftists, another
euphemism was sought; the new label turned out to be “progressive.”
The international symbol of socialism.
It’s time now for a little honesty, which thanks to Bernie Sanders we are
beginning to see. Many young people on the left are unabashed in
embracing the appropriate word “socialist.” But it’s not just a matter of
a new generation’s disregard for the political traditions of their parents and
grandparents. The ongoing, continual (one might say “progressive”) shift toward
the left of the democratic party thoroughly qualifies democrats and other
leftists for the socialist label. Let me make the case rather irrefutably by
showing some of the policies Europeans advocate while calling themselves
“socialists.”
French Socialism
In the midst of their 2017
presidential election, the French made clear in their socialist party platform what
French socialists advocate. As anyone can quickly discover on line, they pushed
for
1) the legalization of cannabis (marijuana),
2) for a basic income (a guaranteed, state-provided income for all citizens independent of employment) as a welfare state program,
3) lower taxes on the poor,
4) heavier national investments in green technologies,
5) plans to “revamp” Europe and strengthen the European Union,
6) heavier taxation of the wealth created by robots,
7) the repeal of the labor law passed last year that made it easier to hire and fire.
Socialists also maintain traditional positions on workers’ rights, the
redistribution of income, promotion of civil liberties and state measures to
protect the environment.
German Socialism
The Germans like to use the word
“social” as a code word for socialism of the non-totalitarian variety. Their
manipulation of the language shows an abhorrence for totalitarian central planning
of the Stalinist or Ulbricht/Honnecker type; it maintains that the socialist
market economy favored by the later Marxists should respectfully be labeled the
“social market economy.” Thus, the German socialist party is called the SPD, or
Sozialdemokratische Partei Deutschlands. Now, consider what their
party platform includes.
1) Social Democrats want to
position themselves as the “peace party.” That means “no” to new sanctions
against Russia, “no” to a heightened conflict
2) The SPD implemented a minimum
wage of 8.50 € (Euros), which was later raised to 8.84 €.
3) The coordinated social market
economy (“as much competition as possible, as much regulation as necessary”)
should be strengthened and incomes should be “fairly” distributed.
4) The European Union should be
extended and intensified, while national sovereignty should be yielded to the
EU.
5) The party intends to work
towards the complete equality of civil rights for the LGBT community.
6) It also advocates a
“climate-friendly” energy policy, minimizing the costs of such, which should be
justly borne by all.
These views, like those of
socialist parties in other European socialist countries, are basically the same
as those our leftists are advocating and the mentality is virtually identical
with that of the American socialist (Democrat). It is thus logical to
call a socialist a socialist, especially when it is no longer a term of
opprobrium.
The real problem with socialism, whether of the centrally planned or of the “democratic” type, is that it is not a market system. That statement gives me great pleasure and provides me with some appreciated entertainment. It gives me pleasure because it is true and provides entertainment for me because it requires explanation.
Socialists rarely have a solid understanding of the rather straightforward concepts of market economics. They are not the only ones, of course. By definition, socialists are hostile to the notion of free minds and free markets and hardly ever refer to “market economics”. Rather, they characterize the market system as “capitalism,” a term derived from the ideas of Marx’s das Kapital and one that they perceive to be an epithet rather than a simple descriptor. But the market system has some most beneficial characteristics that can be credited for much of the material abundance our planet has to offer.
We should all understand how markets work. Unfortunately, the economics profession has done too little to get the word out to the public on even the most basic aspects of the discipline. I can understand this, of course, since when I as a student learned the first principles of economics, I had no particular feeling for markets. Learning about how they functioned was like trying to get a grasp on the periodic table of elements for a chemistry class. I didn’t come really to perceive the positive characteristics of markets until some years later when I was living in a centrally planned economy and experiencing what happens when markets are not employed in the economic system. In hopes that people might be more perceptive than I was as a college student, I proceed on the conviction that a few lines on how the market system functions should be useful.
Adam Smith, Father of the Discipline of Economics
It was Adam Smith who first perceived the significance of individuals engaging in informal commercial transactions that made it possible for them, their families and their societies to subsist in prosperity. Through time, a number of fairly complex institutions grew up around the efforts of individuals to engage successfully in “the ordinary business of life.” That expression was the definition of the great Victorian economist, Alfred Marshall, of his chosen discipline. That ordinary business is rendered fruitful through the specialization and division of labor that Smith found to be the core of market economics. But the reasons capitalism tends to produce economic growth and wealth also include the positive incentives that are an intrinsic part of the market system. Many people in a given society will be inclined to work hard, study hard, and be creative in order to achieve a secure and financially sound life. We tend to look with suspicion on “materialistic” motives (despite the fact that we all pursue them), but where they are nonexistent, poverty and want prevail. In the centrally planned economies, for example, highly-prized economic equality was achieved admirably. Managers of large business enterprises made scarcely more money than the janitor on the shop floor. So there was a high degree of equality in a society that otherwise produced little more than poverty. Lacking the general social response to the powerful incentives of markets, the economy never could function effectively. Where the government steps in to come down hard on avarice, it also comes down hard on productivity.
So a market economy is really just about producing to satisfy the acquisitive desires of productive people. Life is, of course, much more than just work and income. But once work has assured an acceptable income, we still have time in our lives to pursue the other activities that can make life truly rewarding. Those other things are what we do when we are not at work eliminating poverty. And in a healthy market society there is plenty of room for charitable endeavor, cultural expression, religious participation, civic participation, sports, educational pursuits, and on and on. When the socialist government steps in with its youth (indoctrination) program and other mandated programs, exerting control over all the aspects of life it can manage, society is quite sterile indeed. I have had many experiences, both alone and with my family, in the formerly communist countries of East Europe and the Soviet Union. Marxist socialism was a failure in economic terms and did little better in terms of the social and cultural effects it produced. I write of some of these in my book, Socialism, and can assure the reader that a free society is the only place you want to live.
Part II: But How Do Markets Work?
Adam Smith Statue by Alexander Stoddart
Seeking to improve their situation in life, many individuals are willing to work hard to produce and enjoy greater wealth. The pursuit of self-interest is to enhance the well-being of all. Smith wrote: “It is not from the benevolence of the butcher, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self love, and never talk to them of our own necessities but of their advantages. Nobody but a beggar chuses (sic) to depend chiefly upon the benevolence of his fellow-citizens.” This process is not limited to single communities or even to the nation state; it implies international trade and ultimately even economic integration in pursuit of the economic growth it makes possible.
It’s quite simple, really, why a free market works. Individuals must produce or purchase things essential for themselves and their families to subsist. As they discover that they can produce some commodity effectively, they realize that someone might be interested in an exchange of some other vital item for the commodity they are producing. Or someone else might willingly purchase that commodity, thus permitting the purchase of needed goods and services. If no outside parties interfere in the process, an individual offers to passing travelers, say, food for their journey.
The traveler will likely find the offer of a potential trading partner an auspicious one and will be pleased that he got what he purchased at a reasonable price. The seller will likewise probably find the transaction beneficial and agreeable. Neither is forced into the exchange – there is rarely both a big winner and an exploited loser in free transactions – since either buyer or seller is free to walk away if the deal is an unfair one.
Lenin, famed for his total conviction and commitment to Marxism, expressed the contrasting socialist view this way; the only question about each market transaction is “kto kogo?” The translation is “who whom?” a brief sentence equipped with everything but a verb. The question is “who exploits whom,” “who rips off whom?” “who cheats whom?” “who does a number on whom?” and so on. The verb didn’t need to be expressed, since all good Marxists understand exactly what is happening when a member of the bourgeoisie is dealing with someone from the proletariat. (At least the Russians get the who and whom correct grammatically, which is something that
Lenin the Grammarian.
would not likely happen in the United States. Here, journalists appear not to perceive when to use “who” and when “whom”. But enough of the terribly complex linguistics subtleties; my point is that Marx and Lenin were flat-out wrong. Commercial life is not as Marxian pessimism perceives it: there is not an exploited party in every transaction.
Part III: Benefits of Competitive Markets
A food market in Thailand
A great advantage of the market system is that it requires no external controls to function. No government is necessary to manage the day-by-day activities of buyers and sellers, but only to enforce contracts and maintain basic law and order in the production and sales of commodities and services. Markets function with an automaticity that is most beneficial to the social order. To demonstrate how markets function automatically when buyers and sellers transact a purchase, or sale, a chapter early in my book on socialism describes the nature of market supply and demand. Without the use of mathematics, or even of the inevitable supply and demand curves of an introductory college course in economics, the book describes markets in which expansion occurs in response to strong demand for a given good. Market expansion normally causes prices to rise and profits to appear.
A Contemporary Market Hall
The existence of net revenues is a signal for new firms to enter the market and share the profits. The growth in numbers of firms will increase the supply and cause the price to fall to a level where only enough profit is earned, i.e., a “normal” profit, to cover all costs, including a market rate of return to the manager and the owner or stockholder. This market groping for the truly just price is an automatic feature of free entry into the growing market. Symmetrically, an automatic adjustment occurs when the overall market demand is declining.
Where losses in an industry occur, perhaps because demand and the market price are declining, firms will begin to exit the industry. The resultant reduction in supply will cause the price to stabilize; although it could ultimately rise again, no more than a normal profit can be expected in the long term. All this occurs to the general well-being of the firm, its workers, and its consumers.
Market activity is expressive of personal freedom, creative productivity in response to perceived wants, and exchange that benefits both buyer and seller. A successful seller and natural entrepreneur will inevitably organize a few of his neighbors as workers in a firm. Large-scale production and specialization and division of labor may enhance the productivity of the group substantially. And what motivates the members of this fledgling firm? If they are productive and can keep costs down, through greater sales they can generate significant revenues which can become a source of general well-being for all involved.
Part IV: Socialist Pessimism Regarding Markets
At this point the socialist mind perceives only the potential for great evil. What if the capitalist manager can find in his heart no good will for his neighbors as they become his hired helpers? Surely, he will be so money-hungry and money-grabbing that he will pay them only an unjust fraction of the earnings their products or services produce. Surely, in the haste to build an industrial empire he will force his laborers to work long hours in hazardous and environmentally detrimental conditions! When a gay couple enters the establishment to order a wedding cake, this blossoming robber baron will decline on the basis of prejudice to provide the cake. Consumers who get a wedding cake, other bakery goods, or any other commodity will be forced to pay exorbitant amounts. Once established, the producer will obviously form a monopoly by reducing his prices just long enough to drive all of his competitors out of business. Then, of course, the prices will go back up higher than ever to enrich the monopolist. Karl Marx proved, so the Marxists suppose, that all these things are inevitable and must irrevocably persist until the starving workers end the evil in a revolutionary bloodbath. Where Marx went wrong is explained at length on the basis of the analysis of numerous great minds who have rejected Marxism root and branch. Marx went wrong historically in that his predictions never came to pass. And his view of history has helped historians neither reach a realistic understanding of how the world should work nor to make successful predictions about how societies actually function.
But What about Evil Markets and Evil Capitalists?
Socialists will still worry that the conditions mentioned in the previous paragraph will ultimately be realized. They will then attempt to convince all voters that it is time for government to step in and put a stop to the abuses of the capitalists. (“Communists” would, of course, prefer a revolution to a ballot-box victory.) It is true, of course, that some capitalists really are greedy and dishonest. For them, we must have a government to enforce contracts and police efforts to thwart cheating. At the same time, history taught the capitalists over the past century or so that profits can be made without underpaying workers and overcharging consumers. Scholarly and prescient observers (although such cannot be said, perhaps, either of socialists or of governments) gradually discovered that the saving grace of market activity is competition. If monopoly (which is characterized by a single seller) is avoided through good policy, and if monopsony (a market characterized by a single buyer, such as a firm that is the only buyer of labor in a given area) is likewise avoided, workers and buyers will have choices so that their business cannot be monopolized.
If there are free choices, the gay couple seeking a wedding cake can simply purchase elsewhere. In spite of the politically correct views of so many contemporaries, the freedom of the bigoted cake baker to choose his transactions partners should be honored as a traditional freedom of the market system. A free society values the freedom of all citizens, both the saints and the bigots. If the prejudiced producer wants to lose the business of the gay cake consumers, his business will be less profitable and his disappointing bottom line will be sufficient punishment. (My book on socialism reviews much of the discussion on liberty that has gone on through the course of the history of socialism’s failure.) Of course, if society’s hatred for haters becomes sufficiently intense, the socialist solution may be preferable. Society will then punish the hater by dispatching him to the guillotine, which will make the world a more loving place. (I discussed the loving and loathing of socialism in a previous blog.)
Where monopoly power threatens the happy outcomes of competitive markets, wise policies can discourage monopoly power. It can do so, for example, by opening markets to new entrants from other geographic regions. Moreover, even anti-trust activities might be helpful in some cases.
If government activism and market interventionism persist long enough, however, markets may reflect anything but the benefits of competitive performance. The U.S. health care system, which is somewhere between Obama and Trump at this writing, is a clear example of the harm that increasing encroachment by bureaucratic forces can wield over time against public welfare.
Karl Marx has been the hero of socialists and the deity of communists. My book, Socialism, addresses the life, the writings and theories of Marx in some detail, since his thinking is basically the foundation of socialism. Even the socialist who claims he is not a follower of Marx generally follows the same principles and evinces the same preferences as other socialists who do follow Marx. I introduce this topic here with a synopsis of a chapter on Marx from the book.
To understand why the spirit of Marxist socialism is bitter and negative, one should know a little bit about Marx’s life. Somewhat surprisingly, it was founded upon a secure childhood. Since he never held a job, Marx was never an exploited worker. As a student he studied philosophy and religion, but thought very little of religion. He married Jenny von Westphalen, the daughter of Baron von Westphalen, but there was little class struggle in the marriage. For political reasons, he was not able to become a professor, so he went into journalism. Because of the opposition engendered by his radical views, he spent time being expelled from various places in Germany, France and England. For quite some time, Marx’s unwilling parents supported him and his family. As a library researcher, writing radical tracts and tomes on economic theory, he also received help from his friend and colleague, Friedrich Engels, thanks to the Engels’s textile factory and its exploited workers. From them Marx received a pittance, which, tragically, was insufficient for all his family to survive.
Marx’s most famous writings were The Communist Manifesto and Das Kapital, the latter being a three-volume critique of capitalism. The first volume of Kapital took him ten years to complete and the next two volumes were published posthumously by Engels. Critics tend to believe the publication postponement beyond Marx’s death was a result of the author’s dissatisfaction with his own attempt to resolve the incongruities in his theory of value. He never could free the theory of contradiction.
Marx wrote about a large number of philosophical and political issues, presenting theories he mostly borrowed from other scholars. He always found flaws in the theories others had developed, but he generally modified or embellished such theories rather than develop many of his own. He came to economics a little later and that topic became the foundation of his multi-volumed work on capitalism, Kapital. He ultimately devoted the bulk of his time studying economics trying to resolve inconsistencies from his theory of value, which was outdated from its inception. He focused on Ricardo’s labor theory of value, emphasizing that labor created value and that the capitalist stole that value from the workers from the time they entered into a contract to work a given (large) number of hours at a wage that would give them no more than a subsistence living. Meanwhile the capitalist pocketed all of the surplus value produced by the workers beyond the subsistence level.
Marx’s writings and actions were filled with the spirit of hatred for the capitalist. He considered the writings of previous socialists as “utopian socialism,” based on optimistic hopes that things would go better for workers if they voluntarily joined communitarian organizations. His own writings he considered “scientific socialism,” and they were based on the theoretical necessity of working men uniting in revolutionary action to exterminate the entire bourgeois class, thus eliminating the class struggle and opening the way for a future communistic society. Marx’s most striking achievement was to transform the utopians’ movement of love into a movement of hate.
What is Democratic Socialism? When one examines the vagaries of the website of the Democratic Socialists of America,* one can only conclude that Democratic Socialism is nonsense. Unfortunately, given the
Two key players in American socialism.
tendency of the young and inexperienced to respond to impulse, it can be rather dangerous nonsense. It is my pleasure to document this statement by showing why their grand platitudes are meaningless, yet their conclusions are anything but harmless.
Let us imagine that divorce were such a disaster that it broke up families, put vulnerable children at risk for severe emotional problems, put mothers and children at risk from deadbeat husbands who predictably failed to meet their alimony obligations, and on and on. Those of us who have a social conscience would have to organize to solve the problem. Because married couples are not sufficiently responsible to manage the marriage institution successfully, our advocacy group, possibly with an eye to becoming a political party later, would manage the problem for them.
The decision to cancel a marriage has social implications, so we would advocate for an end to the practice of permitting individual couples to choose whether or not to continue their marriage. That decision would be made democratically to meet public needs, not to cater to the preferences and desires of the few. We would radically transform the marital system through greater social democracy so that ordinary Americans can participate in the many decisions that affect our lives. We will not explain to the public how we intend to implement our democratic procedures for ending or forbidding an end to the social abuse of private marital arrangements. But the public may be aware that the key marital decisions will be made democratically (publicly) rather than privately.
The above kind of reasoning is at the core of the advocacy of the Democratic Socialists of America. But let us consider the specific argumentation of the DSA website as applied to private property rather than private marital arrangements. We begin with the DSA’s answer to the question “What is Democratic Socialism”? I now quote directly from the website:
_______________________
“What is Democratic Socialism?
“Democratic socialists believe that both the economy and society should be run democratically—to meet public needs, not to make profits for a few. To achieve a more just society, many structures of our government and economy must be radically transformed through greater economic and social democracy so that ordinary Americans can participate in the many decisions that affect our lives.”
____________________
She: “You’ll get free stuff! He: But will you ever pay!
It is no less ridiculous to posit that society could “democratically” solve the problems of private firms and corporations than to assert that it could democratically solve the problems of the marriages of private individuals. But let us look carefully at some of the specifics of the problem. Quoting again from the DSA website we learn from the first point of DSA advocacy the following:
__________________________________
Doesn’t socialism mean that the government will own and run everything?
“Democratic socialists do not want to create an all-powerful government bureaucracy. But we do not want big corporate bureaucracies to control our society either. Rather, we believe that social and economic decisions should be made by those whom they most affect.
“Today, corporate executives who answer only to themselves and a few wealthy stockholders make basic economic decisions affecting millions of people. Resources are used to make money for capitalists rather than to meet human needs. We believe that the workers and consumers who are affected by economic institutions should own and control them.
“Social ownership could take many forms, such as worker-owned cooperatives or publicly owned enterprises managed by workers and consumer representatives. Democratic socialists favor as much decentralization as possible. While the large concentrations of capital in industries such as energy and steel may necessitate some form of state ownership, many consumer-goods industries might be best run as cooperatives.”
“Democratic socialists have long rejected the belief that the whole economy should be centrally planned. While we believe that democratic planning can shape major social investments like mass transit, housing, and energy, market mechanisms are needed to determine the demand for many consumer goods.”
__________________________________
Let us think for just a moment about the grandiloquent assertions of this first section of the DSA website and observe what they can or cannot mean. Consider the first two statements: “Democratic socialists do not want to create an all-powerful government bureaucracy. But we do not want big corporate bureaucracies to control our society either.”
The paper war of industrial regulations.
The first one simply avoids an obvious truth. Socialists and even all democrats are believers in the virtue, the importance, and the necessity of big government. The more you want to regulate the “multis”, which socialists love to hate, the more you build up government bureaucracies to design and implement government regulations. The larger the organizations and the economy you want to regulate and control (democratically, of course), the more you are dependent on the agencies of government we call “bureaucracy.” The second sentence says “we do not want big corporate bureaucracies to control our society either.” Corporate bureaucracies are not big in any sense of the word compared to government bureaucracies. Moreover, what is said here about corporations is absolutely irresponsible; corporate bureaucracies do not control our society. They are subject to governmental taxation which can take any portion of the resources with which corporations can control anything at all. They are subject to the laws of congress and the regulations of the governmental bureaucracy. The only response a corporation can have to governmental power is to leave the country and take its jobs with it. There may be hundreds of “multis”, but there are many thousands of smaller corporations and small businesses which have no ability to break the laws or defy the regulations of the federal and state governments. Even the multis are
Multinational corporation soldiers controlling our society
seldom armed with military tanks, machine guns, fighter planes, or nuclear weapons which can be mobilized to control society. The government is somewhat better equipped to enforce its will. The assertion that corporations “control” our society is really a meaningless, ideological platitude.
For the workers to own the firm, the government would of course raise tax revenues from those who pay taxes and use that money to purchase the firms from their current (stockholder) owners. One would confiscate the funds from private owners with which one would purchase their property. And one wonders whether those thus plundered would become adoring socialists?
No wonder socialism has always depended on a “dictatorship of the proletariat” to prevent a counter-revolution.
Part 2
Ocasio-Cortez, College Graduate and Millennial.
To those impressed with the assertions of the socialists that government will manage the economy with “democratic” methods (rather than central economic planning), one should refer to a large literature on the subject of bureaucracy (for an extensive review of that literature, see my book, Socialism). Beyond the ownership question is that of controlling the producing firms, be they publicly or privately owned. It inevitably comes down to a large, state bureaucracy to organize and guide the economy. But bureaucracies have lives of their own and their realm of activity ultimately ends up beyond the control of the forces that created them. For a single, readable book on the tendencies of bureaucracy and “democratic planning,” the reader might refer to Hayek’s classic work, The Road to Serfdom.
Bernie Sanders: Moscovian Marxist and Independent Democrat
Moving on to the next sentence, we see that democratic socialists “believe that social and economic decisions should be made by those whom they most affect.” The core value of our free enterprise society, as designed by the founding fathers, is private property. Since socialists don’t like what a corporation or small business might do, as a single example, to our environment, they stipulate that, rather than pass laws about what can be dumped into our air or our water, we tell the corporation that decisions about the disposition of industrial effluents will be made at the ballot box!? That’s a lot of decisions to take over socially. Would the DSA take over the decision processes of all the private firms – multis, corporations, and small businesses – democratically? How? Through the ballot box? Last year the IRS received about 32 million non-farm business tax returns. About 30% of these returns represent legal entities, and of course we must control farm businesses as well, since some of them are manned by capitalist farmers.
Trying to have any significant direct impact on private firms would require large government agencies, just as it did in the Soviet Union and the other communist countries. Naturally, you don’t have to own and control all firms. You can try to control all of them indirectly by controlling the key corporations directly. This was the idea in democratic West Europe where, for 100 odd years Marxists hoped to implement a democratic form of socialism by having the parliament of the country be in charge of the nationalization of some share of each country’s businesses.
How did it work? It worked so well that they abandoned the whole theory of socialism. They learned through disappointing experience that it was impossible that some subcommittee of the democratically elected parliament in charge of steel or aluminum production could really manage the governance tasks of whole industries. Governments are managed by politicians, of course, who typically know little of business. And if the politicians hired professional managers, they functioned just like Soviet managers: their salaries were not dependent on performance (profits), but on following the party line. And with the incentives built into socialism, productivity was so low that the citizen consumers were served by empty government department stores stocked only with empty shelves. In democratic Western Europe, however, they gave up on the whole system before the age of scarcity (empty shelves in stores) really ever arrived. Real socialism (not just the modern version of free government “goodies” and income redistribution) disappeared in the last century. Socialists did not become extinct, but the world became bereft of real socialism. The modern version includes only subsidization, heavy industrial regulation and “modern” social policy. All of these I have addressed in other blogs on this website.
The rest of the material cited from the DSA website includes only two propositions that merit serious discussion. As we saw above, socialists argue as follows: “Resources are used to make money for capitalists rather than to meet human needs. We believe that the workers and consumers who are affected by economic institutions should own and control them.”
Corporations do indeed make money, and they do indeed pay taxes. They, along with small businesses, pay a lot of money in wages and salaries. The managers work for a salary (sometimes large, but also taxed) and corporate revenues flow out to many investors who from their stock market investments receive dividends and capital gains. Many Americans who own 401K retirement plans can count on them to finance their retirement. As part of the country’s financial system, corporations thus provide for many human needs.
Capitalist corporations
Finally, the statement that workers and consumers should own and control firms because “they are affected” by them is as silly as saying that society should make the decisions about marriages because people outside marriage partnerships are affected by them. We are financial stakeholders because when a marriage ends and a deadbeat fails to pay alimony, we taxpayers must provide the safety net for the wives and children. Corporations are owned by private parties who purchase ownership (stocks) in them, and small businesses are owned by their proprietors. Society has plenty of weapons to control corporations so that they do not impose social costs on their fellow citizens. Abuses against society can be addressed by laws, regulations, taxes, policemen, government agencies, fines and financial penalties, jails for corporate abusers, taxes, and groups who belittle and demean corporations. To say that the people should own and control corporations is like tipping the phrase of Proudohn on its head. He said “Property is Theft.” No, theft is what socialists wish to do to acquire property.
Socialists may try to do some of the things discussed above to control the activities of private firms. All those efforts have failed in multiple countries. More
East German “Trabant”, product of socialist planning.
realistically, socialists may try to do only what they have been attempting in recent years. On the one hand, they move forward with the regulation of industry (an effort President Trump is valiantly trying to reverse), the outcome of which is not foreseeable for individual sectors of the economy, but which can very well be predicted in general terms. Through excessive regulation the fettered economy loses responsiveness and resilience. Costs of compliance for individual firms of all types increase dramatically so that prices rise, profitability declines, employment is reduced, entrepreneurship and technical innovation wane, and industry begins to remind us of Soviet industry.
East European type socialist housing
It isn’t really necessary to hogtie industry, although socialists, who have been trained to hate firms, profits, economic efficiency, and individual success, may desire to punish the general population by punishing its productivity. Of course there must be some regulation to avoid any abuses by the more devious managers, and
Socialist life in Cuba
contracts must be enforced. But excessive regulation, designed by imprudent bureaucrats oblivious to efficiency and motivated by ideological considerations, must be curbed and undone. If one were to assume away such irrationality, there would still remain as the final weapon in the socialist arsenal, the core of socialist belief and passion – income redistribution. Even without further controls on industry, one may always tax private earnings, incomes, expenditures, etc. We ignore that one may pursue such a tax and spend course until many of the firms are driven out of the country seeking a home under the jurisdiction of less greedy governments. Taxpayers as well become mobile when state governments continually increase their taxes. Thus, we observe the exodus from Maine to Florida and from California to Texas. If the tax take from corporations and citizens is high enough, the socialists can still attempt to subsidize the individual from cradle to grave.
That leaves only the worry that socialists generally lack the facility for counting. The results of the midterm elections of 2018 gave us the youngest female member of congress in history, Alexandria Ocasio-Cortez, a Democratic Socialist. Ms. Ocasio-Cortez exemplifies an inability to conceive of financial constraints in budgeting at the federal level. Socialists in general tend to legislate fiscal programs that will ultimately lead to the collapse of the budget. In advocating “Medicare for all”, Bernie Sanders and Ocasio-Cortez refer to a working paper, “The Costs of a National Single-Payer Healthcare System,” published by the Mercatus Center at George Mason University. The top line of the paper’s abstract says that the bill “would, under conservative estimates, increase federal budget commitments by approximately $32.6 trillion during its first 10 years of full implementation.” According to the paper, even doubling all “currently projected federal individual and corporate income tax collections would be insufficient to finance the added federal costs of the plan.” When asked how we could afford such a plan, Ocasio-Cortez said we should “just pay for it.”*
contemporaries, the freedom of the bigoted cake baker to choose his transactions partners should be honored as a traditional freedom of the market system. A free society values the freedom of all citizens, both the saints and the bigots. If the prejudiced producer wants to lose the business of the gay cake consumers, his business will be less profitable and his disappointing bottom line will be sufficient punishment. (My book on socialism reviews much of the discussion on liberty that has gone on through the course of the history of socialism’s failure.) Of course, if society’s hatred for haters becomes sufficiently intense, the socialist solution may be preferable. Society will then punish the hater by dispatching him to the guillotine, which will make the world a more loving place. (I discussed the loving and loathing of socialism in a previous blog.)
