Talking about socialism has never made most Americans comfortable. Equating it with communism has rendered socialism a “dangerous”, even unamerican idea. This taboo was broken in 2016 when Bernie Sanders openly campaigned as a Democratic Socialist. In the 2018 mid-term elections, other candidates campaigned and won under the mantle of democratic socialism. And by a slight majority, millennials have a more positive perception of socialism than capitalism. It’s time, therefore, we talked about socialism like mature and informed citizens and not like cynical politicians.
I have written before that ours is not a pure capitalist system. It hasn’t been for a long time. Elements of socialism are all around. More importantly, our capitalist system is not exactly the type we read about in textbooks. Beyond any impurity brought about by socialist programs, our capitalist system suffers from afflictions of its own doing. Consider, for example, cronyism (the corruptible influence of lobbyists and the revolving doors from business to regulatory agencies and back to business) plus plutocracy, and kleptocracy. (About the last two, I refer you to “How Kleptocracy Came to America” in the March issue of Atlantic – link below)
https://www.theatlantic.com/magazine/archive/2019/03/how-kleptocracy-came-to-america/580471/
That doesn’t mean American capitalism is deep across the board in any of the above maladies. The fact is, however, that despite a well-functioning justice system, laws and regulations, economic interests (corporate and personal) often distort the playing field at the expense of most of us. Here is a sobering statistic. In 2018, the US ranked only 22nd in the Corruption Perception Index compiled by Transparency International. Greater infusion of socialism may not necessarily improve the US standing, since corruption can occur in any system, but we should take note of the fact that #1 in the rankings was socialist Denmark.
So, how would we appraise our economic system? American capitalism does a very good job in creating wealth. Our economy usually exits recessions faster than other economies and often grows faster despite its mature state of development and size. American capitalism also has an unique ability in inventing new products and services. However, it is in the distribution of wealth and incomes that our economy has taken a less fair path over the last 40 plus years. Indeed, average real wages (wages measured in purchasing power) have remained the same since 1972 (Pew Research Center). As surprising as it may sound there is not one intervening year in that period when average real wages surpassed the 1972 level! Income growth has been the privilege of the top 20-25% of Americans, while the proverbial 1% has hogged the lion’s share. Whereas from the 1940s to the early 1970s wage growth matched the gains in labor productivity (output per work hour), in contrast, between 1973 and 2013 wages grew by a total of 9.2% while productivity grew by 74.4% (Economic Policy Institute).
Undeniably, something happened after the 1970s that depressed the growth of wages and accelerated the growth of capital and business profits. One culprit is the declining bargaining power of labor unions. Thus, income inequality certainly originates at the point where wages and profits are produced. But then it becomes worse through a tax system that in many ways favors high earners and the wealthy.
These developments are not unrelated to the distinctly different stands the two main American parties have taken with regard to the production and distribution of income and wealth.
Republicans tend to emphasize the importance of production whereas Democrats tend to emphasize the importance of distribution. The productive capacity of an economy is important because unless gross domestic product (GDP) rises at the same or higher rate than the population living standards will decline. To Republicans it is expansion of the pie (GDP) that matters, not how we split the pie. To this effect, they favor lower taxes for incomes from capital and business and policies that allow less restrained utilization of labor and natural resources. Republicans defend the 2017 generous tax relief to wealthier Americans because the expansion of GDP has given more people (many of them minorities) jobs and incomes. That is, working class people as a whole are earning more than before. This argument, of course, ignores the fact that in nominal and relative terms the top earners and wealthier Americans are even greater winners. Republicans also believe that each one of us creates his or her opportunities and success or failure. (Though the recently revealed college admissions scandal shows that opportunities can be also bought.)
Democrats care more about how we split the pie. To Democrats, income distribution is equally important because uneven reward of labor and capital prevents some segments of the population from enjoying their fair share of the economic output and can breed social unrest. Democrats see the strength of the country in a social contract that balances the interests of labor and business and safeguards the sustainability of the environment. They also believe that the state has a duty to improve the opportunities and, hence, chances for success of those who may not be lucky enough to be endowed with the conditions for either.
Beyond any appeal to fairness and social peace, the data show that unfair income distribution and lack of an adequate safety net can cause serious social ills. Despite the fact the US is the richest country, its standing in critical social indicators lags that of other countries. Consider, for example, that in poverty, infant mortality, life expectancy, reading and math skills, health insurance coverage our rankings are far from stellar. These poor results are directly related to income inequality and inadequate protection of the weaker and less lucky among us.
It is this gap between our capacity to produce wealth and our commitment to use it properly in the interest of the common good and welfare that the socialist talk of Democrats is all about. It is a discussion well having. And as for those who want to disparage it, they should then have the moral courage to do away with the socialist benefits they enjoy: Social Security, Medicare, Medicaid, lower than otherwise home mortgage interest rates and so many more.
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