The Myth That American Liberals Are Socialists

     

 

The most misused word in conservative discourse today is “socialism”. There are some extremist conservative public figures who are quick to argue that most of the programs espoused by left-wing democrats are socialist. TV ads run showing the face of Alexandria Ocasio-Cortez followed by pictures of dead people killed by Cambodia’s Pol Pot, because capitalism represents everything good, while “socialists” represent good people being slaughtered by communist despots. More moderate-seeming but equally inflammatory claims argue that the “socialist” policies of progressive democrats will destroy the capitalist economy and produce dramatic reductions in both economic growth and employment.
     

The capitalism/socialism rhetoric undercuts legitimate arguments about the effects of government regulation, taxation reform, or ecological policies. The individual programs of individual Democrats have their own particular strengths and weaknesses. However, they do not represent an undercutting of the capitalist economy, and they do not represent the imposition of socialism on America.
     

Before anyone starts calling anyone else “anti-capitalist” or “socialist”, lets look at some basic definitions.
     

The following definitions are straight out of the Merriam-Webster dictionary.

Capitalism

An economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market.

Socialism

1: Any of various economic and political theories advocating collective or governmental ownership and administration of the means of production and distribution of goods.
2a: A system of society or group living in which there is no private property.

2b: A system or condition of society in which the means of production are owned and controlled by the state.

     

If business owners or corporations own their own property, and make their own decisions about private investment, you have capitalism. As a sociologist, I often have to distinguish between capitalism and feudalism. In capitalism, there is a free labor market. In feudalism, workers are bound by law to one master, typically a noble lord. You can choose to keep or discard the free labor market clause if you like. The same argument holds whether you do things my way or the Merriam Webster way.
     

By all accounts, every major industrial economy in the world, the U.S. included, is unabashedly capitalist. Most businesses are privately owned. Their owners and managers decide how investments should be made. That’s capitalism.
     

And just for the record, in every major industrial economy in the world, workers are free to quit whatever job they want and look for work wherever they want. That is a free labor market which is another defining feature of capitalism.
     

Legal restrictions on what business people can do don’t represent socialism. In most economies, corporations may not use false weights and measures. Corporations may not commit fraud. Corporations may not hire thugs to beat up their business competitors. Corporations often have to register with the government, either to own property or to hire workers who receive some sort of legally mandated benefit such as social security or workmen’s compensation. There is no known industrial society on earth where businesses are not bound by some form of rule of law. Capitalism does not turn into socialism because businesses have to obey local regulations. This is the case even if those laws are anti-pollution laws, or anti-discrimination laws or left-wing laws that make corporations pay expensive taxes.
     

Capitalism is simply the most effective system for creating economic growth in the world. There are few known cases of all-out socialism. There are many cases of feudalism and forced labor. Free market capitalist economies completely outperform economies with coerced labor. Nearly all of the economic growth of the wealthy nations since the Industrial Revolution has occurred within a capitalist framework.
     

The meaning of socialism is more diffuse, because different leftists and rightists have used the term in different ways. In Marx’s original writings, socialism meant the complete absence of any sort of private property used for production. This did not mean the government owned all the production goods. It meant that everything was commonly owned – hippie style – so that anyone who needed a steam forge would be free to use one. That vision is so idyllic and so impractical that it has never appeared in any known society. Socialism in the extreme sense of all property being cooperatively and commonly owned has never existed at the national level. Individual cooperatives exist that share property for a while – but many co-ops are short lived.
     

Lots of other more oppressive forms have given themselves the name “socialist”. These are state bureaucracies that control the investment decisions of a society in various ways, shapes and forms. Marx himself called this system “communist”. He argued that after the worker revolution, armed forces controlled by workers would control all the property. They would naturally give up all that property and all that power to make a truly socialist no-ownership society. It was hopelessly naïve to think that once armies had seized property, they would give up the economic control of a society just out of the goodness of their idealistic hearts. In fact, no known revolutionary society has done this.
     

However, there are many societies where corporations and individual businesses own their businesses but the government regulates a lot of their decision making. Everyone knows about the societies that called themselves “Communist”: Russia, Eastern Europe, Cuba, China.

 

The “Communist” countries had dismal records running their economies. The government-runs-everything model espoused by the former Soviet Union has been largely abandoned – and for good reason. It didn’t work.
   

But there are less well known cases, where you have very, very active government planning bureaucracies. These bureaucracies essentially “regulate” investment decisions, by making capital cheap for businesses that follow the official plan and expensive for anyone who rebels against the plan. They also allow foreign trade for businesses that follow the official plan and make trade difficult for businesses that rebel. No American business would ever tolerate being treated that way.
     

What countries did this? 
     

Japan: the only major Asian economy to become fully industrialized. The huge government intervention rates were in the early twentieth century, and then after the war in mid-century. Japan had some of the highest economic growth rates of any country in that period and was an economic juggernaut after WWII. The government has scaled back recently, but not all the way. 
     

South Korea: Until the 1990’s it had the fastest rate of economic growth in all of capitalist history. Investment policies were set by various government agencies and enforced by a military dictator. He was a pro-American Western military dictator, but a military dictator nonetheless. South Korea became quite wealthy with this plan – although it has become more market-oriented of late.
     

China: The economic juggernaut that the world fears. China has the fastest rate of economic growth in recorded history. The Chinese still call themselves Communist. The government really does plan the Chinese economy, although to be fair, not all the plans are made in Beijing; regional mayors and governors do the lion’s share of the work, altering national plans to fit various local realities. Chinese society has many undesirable features. But you would be hard pressed to argue that Chinese governmental planning of investment has hurt the economy or produced low rates of economic growth.
   

A conservative could argue, and he or she would be right, that Japan, South Korea and China, are in some ways, exceptions. The economic planners in those nations are very, very good. Countries with less qualified technocrats at the top have made a hash out of government planning. Libya and Syria get no awards for economic excellence. There are a whole host of sub-Saharan African economic planner wannabes who have been dismal failures (although Ethiopia and Ghana have been successful at this game recently.)
     

So to say government should never be involved in economic planning is not really a defensible position. If the government bureaucrats are competent, state intervention works well. If they are incompetent, God help us all.
     

But today’s left versus right squabbles about socialism are not about the sanctity of private investment decisions.
     

In fact, none of the major progressive democrats are talking about Japan/China style government intervention into the economy. They are talking about popular left wing issues such as:


Taxing the Rich
Limiting Risky Behaviors by Banks
Ecological Regulation

None of these are socialism using any meaningful definition of socialism.

 

They do represent some form of government regulation of industry or of rich people.
     

The real battle on these issues is not about the words “capitalism” or “socialism”. It is about the desirability of those policies themselves.
     

Three quick notes on the three policies.
     

Taxing the Rich. There is overwhelming statistical evidence that more egalitarian societies have a higher rate of economic growth than inegalitarian societies. A scholar named Cingano identified no fewer than 17 statistical studies, including some by himself, that ran the correlation between inequality indices and growth. The more inequality, the lower the rate of economic growth. Since his review, two more studies have come out confirming Cingano’s finding.
     

The rich may want to resist policies of taxing the rich because they would rather keep their money. If I were rich, I would do the same. However, for them to say taxing the rich will tank the economy is a scientifically unsustainable claim. Note that both Switzerland and Japan tax their wealthy far more than we do. Switzerland and Japan have generally had lower unemployment rates and poverty rates than ours.
     

Regulating the Banks. One purpose of laws is to prevent one person’s careless behavior from harming other people. We have speed limits on highways to prevent reckless drivers from hurting other innocent drivers. When banks make risky investments, they wipe out the people who put money in that bank. We don’t let surgeons drink before surgery. Why should we let banks gamble with our money?
     

(This argument holds double if the banks intend to be rescued with government bailouts if they fail. Why should we let banks gamble, with the managers of the banks getting huge private gains if they win and the taxpayer paying all the bills if they lose?)
     

Ecological Regulation. Why should one business have the right to destroy the livelihood of other businesses in other industries because that one business wishes to make a profit for itself? We have zoning laws to keep a big polluting chemical factory from locating next to tourist resorts. We have zoning laws to keep loud nightclubs from making life unbearable for the residents in the apartment buildings next door. Why should one fishing company be allowed to catch all the fish so no one else will ever have any fish for the next thirty years? Never mind the rights of individual members of society who would like to eat fish or would like to see fish swim in the ocean. Why does one company get the right to ruin the prospects for all the other companies in the economy? 
     

Protecting capitalism means protecting business as a whole. Sometimes protecting the long term future of business means preventing some short-term destructive activity by businesses in the present day.
     

Capitalism does not mean anarchy with no regulation of corporate life at all. It means a system that gives the dominant right of investment to corporations – while seeing that long term policies exist that protect the welfare of the business class as a whole. Regulation for the good of the business class is not socialism. It is a prudent defense of the long term viability of capitalism.
     

One last note. Strangely, conservatives who believe in the absolute right of businessmen to do whatever they want, never seem to object to laws preventing them from hiring illegal immigrants. The big hand of government is terrible if it means they can’t burn coal. The big hand of government is fine if it means they can’t hire Mexicans.
     

When Donald Trump becomes criticized as a socialist, because he is keeping businesses from hiring the foreign employees they want to hire, then we will know that socialist name-calling is fair and balanced. When government laws conservatives don’t like are called socialist, but government laws conservatives like are considered praiseworthy, then we know the real issue under debate is not about capitalism vs. socialism at all.
 

For More Information

For extremely simple explanations of Marx’s basic views on capitalism and socialism, nearly any introductory sociology textbook will do. One section of one chapter will do it all.

 

For a discussion of the more controversial factual points expressed here:

On effective state planning for superior economic growth in East Asia, see:

 

Wade, Robert. 1990. Governing the Market: Economic Theory and the Role of Government in East Asian Industrialization. Princeton, Princeton.

Walder, Andrew. 2005. “Local Governments as Industrial Firms: An Organizational Analysis of China's Transitional Economy Source.” American Journal of Sociology 101: 263-301.

 

On the relationship between social equality and economic growth see:

Cingano, Federico. (2014), “Trends in Income Inequality and its Impact on Economic Growth”, OECD Social, Employment and Migration Working Papers, No. 163, OECD Publishing. http://dx.doi.org/10.1787/5jxrjncwxv6j-en

Dabla-Norris, Era, Kalpana Kochhar, Nujin Suphaphiphat, Frantisek Rika, and Evridiki Tsounta. 2015. Causes and Consequences of Global Inequality: Global Perspective. IMF Staff Discussion Note SDN/15/13. Washington, International Monetary Fund. www.imf.org/external/pubs/ft/sdn/2015/sdn1513.pdf

 

Ostry, Jonathan, Andrew Berg and Charalambos Tsangarides. 2014. “Redistribution, Inequality and Growth”. International Monetary Fund. https://www.imf.org/external/pubs/ft/sdn/2014/sdn1402.pdf