(11:30 AM) | Adam Kotsko:

Socialism and Capitalism

This is a cross-posting that is also found on the CRI discussion board. It is an attempt to regroup after a singularly uninformed discussion of "the effects of socialism on the church."

We have bandied about these terms down below, with a considerable lack of clarity. I want to attempt to clarify. First, I reject the simplistic idea that capitalism is about economic freedom, whereas socialism is about state control. That is not a helpful or accurate way of stating the problem. There is always going to be some degree of state control in any economy -- if the state never intervened, then there would be economic chaos.

Part of the issue in thinking about these problems in an American context is that we tend to view the primary antagonism in society as individual vs. state. Thus capitalism becomes individual control over economic resources, as opposed to socialism's state control. The very term capitalism, however, derives from Marx, who views the primary antagonism in society as the owners (capitalists, bourgeoisie) vs. the workers (proletariat).

We might dismiss this as "class warfare," but our American dichotomy is also based on a class warfare -- the aristocratic hereditary rulers vs. the emerging capitalist class. Much of our rhetoric against "the state" is rhetoric against kings who presume the right to all a nation's wealth, whereas the capitalist class wishes to set up more or less independent centers of wealth and power, dispersed throughout society. Now that the aristocrats are effectively gone in America, it doesn't make much sense to have this anti-state rhetoric -- the state is explicitly the people's creation and should serve our needs. The problem is: whose needs take precedence?

I think that a capitalist system would say that the needs of the capitalists (the owners) take precedence. Although the vast majority of people will always be employed by someone else, a capitalist system will ensure that the state's economic interventions are calculated to make sure the space always remains open for owners to prosper. In an unregulated environment, workers could unionize as much as they want, and effectively shut down the system at their caprice; in a capitalist system (such as ours), the government intervenes to temper the power of the unions. Similarly, it could intervene to make sure that the majority of the tax burden is not on the most wealthy people, out of the belief that those wealthy people are the engine of society and should be allowed more or less unfettered freedom.

In a socialist system, rather than intervening on behalf of the owners, the government customarily intervenes on behalf of the workers. For instance, the right to unionize is obviously a greater benefit to the workers than to the owners -- it cuts into the owners profits, but it's simplistic to assume that profit always equals prosperity (at least prosperity for the whole of society). A good socialist plan is to create state-subsidized public schools, health care, etc., to give the workers more freedom vis-a-vis the owners -- a worker will feel a lot more freedom to stand up to an unjust boss if they know that they will still have health coverage and their children will still be able to stay in school even if they get fired. (Obviously this means taking away some of the potential wealth of the owners and using it for the workers' benefit, but in the capitalist system, the workers would have their share of the tax burden going toward a government that routinely went against their interests. To some degree, this might be a zero-sum game.)

Since the US is such an emphatically capitalist society, the government as potential advocate for the worker is still the enemy, just like in the revolutionary days, only for different reasons. It will be taken as self-evident that inequality is to be not only tolerated but encouraged for the good of society, and that the true measure of prosperity will be the chance that individuals have of gaining extravagent wealth. In a socialist setting, obviously there won't be as many ostentatiously wealthy people, but that doesn't mean that everyone will have a horrible standard of living -- people's basic needs will be met, although they will most likely have to do without that boat.

In addition, we might note that the supposed proof of the superiority of the capitalist way of intervening in the economy is not iron-clad. For instance, although admittedly people are poor in Cuba, a big part of that has to do with the fact that they aren't allowed to trade with the US. If not for the embargo, they would be a very prosperous country. The same is true of "socialist" Iraq -- before the Kuwait thing, they had a very high standard of living in a basically socialist environment. The problem is that the capitalist countries are already so overwhelmingly powerful and entrenched that they can stack the deck against socialist countries, then use that as "proof" of the failure of socialism. In addition, even where capitalist countries aren't stacking the deck, as in the comparison between the US and Europe -- yes, it is true that European economies are struggling, but have you taken a look at our economic indicators lately? Under one of the most unabashedly capitalistic administrations in our nation's history, we are decidedly not prospering.

So the basic tenets of this view is as follows:
1. The main economic antagonism in society is between the workers and the owners.
2. The government is always intervening in the economy on behalf of one or the other.

There ends the cross-posting. Mike Schaefer, with his economic expertise, may wish to intervene here (hint, hint).

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