WASHINGTON: Suddenly, the term “socialism” is on the lips of men and women engaged in our political life. But what does Socialism and American Politics have in common?
In August, Sen. Bernie Sanders said that Socialism and American Politics has gone “mainstream,” and urged Democrats to embrace the term. Sanders is an avowed Democratic Socialist. As is Alexandria Ocasio-Cortez, who unseated 20-year incumbent Rep. Joe Crowley in a New York primary. Another self-proclaimed socialist, Rashida Tlaib, is the Democratic candidate for Congress in Detroit. Ocasiocssio-Cortez and Tlaib are almost certain winners.
The Economist notes that,
“SociaLism is having a moment in America unlike any since perhaps 1912 , when Eugene Debs, the socialist candidate won 6% of the national vote. A recent Gallup Poll showed that 57% of Democrats have positive views of socialism.”
The poll, however, never defined “socialism,” so exactly what people were expressing support for was not clear.
While Republicans immediately tried to tie Democrats identifying themselves as socialist with failed regimes in places like Venezuela and Cuba. Newt Gingrich declares that socialists are “demons.” The reality may be somewhat more complicated.
Under classical Marxism, the government ran the economy, owned the factories, and farms. The government is the decision maker as to what is to be grown or made. The decision as to who gets goods and services, like doctors appointments and food, is the government. The government also decides your paycheck,
This does not seem to be what today’s Democratic Socialists are promoting. Instead, the pro-free market Economist say:
“Even the platform of Bernie Sanders…left capitalism fundamentally intact, calling instead for a broader and more redistributive social safety net. His supporters seem enamored of Nordic-style social welfare policies. But those countries are not socialist, they are free market economies with huge rates of taxation that finance generous public services. Indeed, the ‘socialist’ part of those countries that (Democratic Socialists) support would be unaffordable without the dynamic capitalist part they dislike.”
While Republicans denounce “socialism,” the fact is that they endorse a form of government intervention in the economy, “crony capitalism,” which also challenges the idea of free market capitalism. Except it serves a different constituency than would Bernie Sanders and those who embrace his philosophy.
In an article entitled “Corporate Welfare Lives On and On” in The American Conservative, Doug Bandow, senior fellow at the Cato Institute, notes that,
“Fiscal responsibility is out of fashion. The latest federal budget,, drafted by a Republican president and Republican-controlled Congress, blew through the loose limits established by Democratic President Baracj Obama. The result is trillion-dollar deficits as far as the eye can see.”
In Bandow’s view,
“Any amount of corporate welfare is too much…Business plays a vital role in a free market. People should be able to invest and innovate, taking risks while accepting losses. In real capitalism, there are no guaranteed profits. But corporate welfare gives the well-connected protection from many of the normal risks of business. Business subsidies undermine both capitalism and democracy. Allowing politicians to channel economic resources toward their preferred ends distorts investments and trade. Turning government into an engine of illicit profit encourages what economists call rent-seeking. Well-organized special interests usually triumph over the broader public and national interest.”
Tad DeHaven, a Mercatus scholar at George Mason University, makes the case that,
“Corporate welfare often subsidizes failing and mismanaged businesses and induces firms to spend more time on lobbying rather than on making better products. Instead of correcting market failures, federal subsidies misallocate resources and introduce government failures into the marketplace.”
Government aid to businesses comes in many forms. That aid distributes through a variety of agencies, such as the Export-Import Bank and the Small Business Administration. We see spending, usually in grants, loans and loan guarantees. There are limits on competitors, such as tariffs and quotas. There are tax preferences attached to broader tax bills to benefit individual companies and industries.
All of these are a form of corporate welfare, ensuring corporate profits. Those corporations on the receiving end of such subsidies employ armies of lobbyists, and huge campaign contributions, to achieve their goal. They contribute to both parties, so they always a friend in power.
The Cato Institute argues that,
“Agriculture, in particular, has spawned a gaggle of sometimes bizarre subsidies, payments, loans, crop insurance, import quotas and more to underwrite farmers. When these distort the marketplace, further efforts are concocted to address these dislocations. A dairy program created milk surpluses, which in turn encouraged state price fixing that generated massive cheese stockpiles. The federal government killed off cows as it continued to subsidize milk. The Export-Import Bank is known as Boeing’s Bank. It provides cheap credit for foreign buyers of American products. This gives foreign firms, such as airlines that purchase Boeing airplanes, an advantage over U.S. carriers which must pay full fare. Ex-Im’s biggest beneficiary, in recent years, has been China.”
Those who believe in free markets have adversaries in both parties. The left’s advocacy of socialism and the right’s embrace of corporate welfare, both lead us in the direction of a government-managed economy. In the long run, basic freedoms are also challenged when government control of the economy increases.
In their initial consideration about what kind of government to establish, the Founding Fathers, when they turned their attention to questions of economic organization, asked themselves which economic form would best maintain the free society they were in the process of creating.
Clearly, the answer is free enterprise. For men suspicious of government power, this was an obvious choice.
Professor Milton Friedman explains that,
“The kind of economic organization that provides economic freedom directly, namely competitive capitalism, also promotes political freedom because it separates economic power from political power and in this way enables the one to offset the other. Political freedom means the absence of coercion of a man by his fellow men. The fundamental threat to freedom is power to coerce, be it in the hands of a monarch, a dictator, an oligarchy, or a momentary majority.”
In Friedman’s view,
“The preservation of freedom requires the elimination of such concentration of power to the fullest possible extent and the dispersal and distribution of whatever power cannot be eliminated —a system of checks and balances. By removing the organization of economic activity from the control of political authority, the market eliminates the source of coercive power. It enables economic strength to be a check to political power rather than a reinforcement.”
Political partisanship prevents Americans from understanding the forces which are at work in Washington. Republicans and Democrats regularly demonize each other, but regardless of which party holds office, government power grows and freedom declines. Whether it is bailing out Wall Street with taxpayer dollars or subsidizing failing businesses or keeping out competing for products with tariffs, the last thing either party seems to want is a genuinely free market.
Understanding that the political, parties are co-conspirators in the expansion of political power and the diminution of freedom is the beginning of political wisdom.