Capitalism, Socialism, the Confusion Continues

One persistent argument from the Left and the Right seems to involve the merits of capitalism over socialism and vice versa.  The proponents of either philosophy seem to have slept through their high school civics class if indeed, it was offered.  Most recently, President Trump in his State Of The Union (SOTU) address vilified the Democratic Party and proclaimed they were drifting toward socialism.

"Here, in the United States, we are alarmed by new calls to adopt socialism in our country. ... Tonight, we renew our resolve that America will never be a socialist country,"  President Trump SOTU 2019

What the president forgot was the fact that our nation is already an example of socialism in a symbiotic relationship with capitalism.  The balance between these two ideals is where political differences lie.  Our nation was founded on basic freedoms, not on a financial principle.

"Democratic socialism means that if someone works forty hours a week, that person should not be living in poverty: that we must raise the minimum wage to a living wage” Bernie Sanders

By definition, capitalism sounds benign.  It is an economic and political system in which a country’s trade and industry are controlled by private owners for profit.  By this definition, the free market is a cherished cornerstone of the American way of life.

In contrast, socialism sounds like pie-in-the-sky utopianism that would be unsustainable.  Socialism is the political and economic theory whereby production, distribution, and commerce are regulated by the community.  Now that’s some scary communistic welfare-state B.S.  There is, however, a distinct difference between the socialist authoritarians like Stalin, Lenin, and Mao, and modern democratic socialism.

Franklin Delano Roosevelt
Presidential term:  March 4, 1933 – April 12, 1945 (died in office)

Either doctrine, however, is doomed to failure in its purest form.  A nation-state example of capitalism without some of the purviews of socialism doesn’t exist.  Both capitalism and socialism would be evil in their extremes.  Capitalism can’t survive without some form of socialism to support its structure.  This is not to say that America’s heavy-handed support of capitalism and its ideals hasn’t done its damage. 

From the late 1940s to the early 1970s the U.S. saw almost 30 years of broadly shared prosperity.  During this time, incomes roughly doubled up and down the various income classes.  Since the 70’s however, we have seen a severe swing in income inequality in favor of the wealthy.

More, More, Still More

Cartoon published in Puck on January 23, 1889

Keppler’s cartoon above reflected the phenomenal growth of the American industry in the 1880s, but also the disturbing trend toward concentration of industry to the point of monopoly, and its undue influence on politics.

Such a shift hadn’t been seen in almost 100 years.  You have to go back to the Roaring Twenties and its robber barons to find similar extremes.  Men like John Jacob Astor (real estate and fur), Andrew Carnegie (steel), Henry Flagler (Standard Oil & railroads), William Randolph Hearst (media), and J.P. Morgan (finance) made their wealth between the Gilded Age and the Roaring Twenties.  These men were described by historian T.J. Stiles as, “titanic monopolists who crushed competitors, rigged markets, and corrupted government.”  We all know how the Roaring Twenties ended, with the Stock Market Crash of 1929.  October 27^th of 1929 was to be forever known as Black Thursday.

Headline, Wall Street Crash 1929

We came close to this again on October 19, 1987, aka Black Monday where the market suffered a 31% decline.  We did it again in October of 2008 with the start of the Great Recession, which saw a 54% loss in just 17 months.  Here, capitalistic greed and a lowering of government regulations brought us ever closer to financial Armageddon.  A socialistic bailout of the U.S. financial system cost taxpayers $700 billion.  Without a socialistic solution to a capitalistic problem, our financial system was in danger of collapse.

On a global scale, the shortsighted capital gains derived by ignoring the impact on our environment have also been devastating.  In this century, over six million hectares of global primary forest have been lost each year.  To put this loss in perspective, that’s almost the equivalent of deforesting the entire state of West Virginia (24,000 square miles) every year.  Unchecked capitalism could eventually bring about an end to civilization on this planet.

The pressure by investors to expand profit margins drives corporate management to find creative ways to exploit our global resources both human and natural.  Pure capitalism has no social conscience when it comes to its goal of unlimited growth, even at the expense of the foreseeable demise of our planet and civilizations.  Just as it was in the tobacco industry’s interest to deny the medical evidence against its product, so is it in the best interest of some to deny things like climate change, industrial pollution, and income inequality.

Fast Facts:

• The richest 1% of the U.S. population possessed 38.6% of the nation's wealth in 2016, according to a 2017 Federal Reserve report

• The bottom 90% of America's population held just 22.8% of its wealth.

• The top 1% of families brought in a record 23.8% of all income.

The socialism of Marx and Lenin brought about the oppression of the peasants by the landlord class.  The unrestrained capitalism of today has seen the oppression of the “new peasants” by corporate greed.  Would corporations like Walmart even exist without the below-subsistence wages paid its employees and the cheap goods manufactured with cheap labor in China and elsewhere in the global marketplace?

Recently, the financial failure of the Venezuelan economy has been touted by the political right as a prime example of the risks of socialism.  While mismanagement and rampant corruption are ignored, these individuals also ignore the fact that many more capitalistic states have failed in Latin America than socialistic ones.  Venezuela was a one-trick-pony state that hitched its wagon to its vast oil wealth.  When they began living beyond their means and the price of oil dropped, the country was thrown into chaos.  Examples of democratic socialism that have been successful are often ignored as well.  People living in Denmark, Finland, Netherlands, Sweden, and Norway are left out of their analogies.

Taxes are unavoidable for any government to function.  A fair tax system that is equitable for all should be our goal.  A redistribution of wealth would not be necessary if everyone was given the same opportunity to achieve success.  Corporations and their investors enjoy huge profit windfalls because they are allowed to suppress the wages and benefits of their employees.  Wallmart's CEO, Doug McMillon, makes almost $11,000 an hour while his average employee earns just over $9 an hour. In Miami, rent, basic groceries, utilities, and transportation will cost you over $26,000 a year.  This figure includes no cable, no cellphone, no entertainment, just the basics.  Wallmart pays a median income of just $19,000 a year.  They are $7,000 a year short of providing even the basic human necessities for a Miami resident.

Doug McMillon's house in Bentonville, Arkansas
This 8,200 sq. ft. house sits on 41 acres

"A single Walmart Supercenter cost taxpayers between $904,542 and $1.75 million per year, or between $3,015 and $5,815 on average for each of 300 workers."  Forbes April 12, 2014 article "Wallmart Costs Taxpayers $6.2 Billion in Public Assistance"

In our great nation, no person should work a full-time job and not have the ability to pay for certain basic essentials for a good life.  Among these is decent housing, the ability to provide enough food for a family, access to an education system that provides them with proper job skills for advancement, the ability to save a portion of their income for the future, and have affordable health care.  Our latest government shutdown of 2019 provided us with many examples of government workers with full-time jobs who were financially insecure with the loss of one paycheck.  In the 21^st century America no full-time worker should be forced to live from paycheck to paycheck.

[Click on image to see the details of the chart]

From 1963 to 2016:

• The poorest 10% of Americans went from having zero assets to being $1,000 in debt.
• Families in the middle more than doubled their prior average wealth. 2X
• Families in the top 10% had more than five times the prior wealth.  5X
• Families in the top 1% had more than seven times their prior wealth.  7X

Five of the top 10 metro areas with the highest inequality are in Florida

Everyone needs at least one of these

We should not use our tendency to label everything in order to draw simplistic conclusions that color our decision process.  It is not now, nor should it ever be, an either-or proposition when it comes to our acceptance of capitalism or socialism.  They actually go hand in hand and one does not properly function without the other.  A careful balance among the factors of corporate financial growth, income equality, and a sustainable ecology that allows the human race to flourish, is in our long-term best interest.  Owning that third mega-yacht at the expense of civilization is not a laudable goal.

Maybe you need two or three