Socialism, Capitalism, and Talking Past One Another

I've been seeing a lot social media posts recently about socialism. Often, they take the following form: "How can anyone today seriously think socialism is a good idea? Are they too young to remember the Soviet Union and its collapse? And too out-of-touch to have followed the news about Venezuela?" 

The problem, more often than not, is that the advocates of socialism and the critics of socialism are talking about different things--using the  term "socialism" in different ways. They are talking past each other. And it seems to me quite possible that if they understood what the other was saying, they might actually agree with each other. Or at least be able to have a productive dialogue about their real points of disagreement.

I also think that there are forces at work in our society that are committed to stopping such mutual understanding and dialogue from happening, because they benefit from polarization--whether it comes from miscommunication or from substantive dissent.

So this is a short post aimed at, hopefully, countering some of those forces of polarization by clarifying concepts. 

Strictly speaking, "capitalism" refers to a system in which the means of production are privately owned and the goods produced are made available in free markets to those who can afford to buy them. "Socialism" refers to a system in which the means of production are publicly owned and the goods produced are distributed to the public in accord with existing laws (created in whatever way the political system creates laws).

Most actual economies are a mix of these things. In the US most goods and services are privately produced and sold at market. But K-12 education, fire and police departments, the military, infrastructure such as roads, etc., follow a socialist model.

In such countries, it is perhaps better to speak of certain areas of the economy being capitalist or socialist than to speak of the country as socialist or capitalist. So we can say that in the US, the beer industry is capitalist and the military is socialist. But we usually don't. We usually talk about countries being socialist or capitalist.

So when is a country "socialist"? Here we see a diversity of uses.

Countries like the former USSR, which attempted to follow Marx's communist philosophy but got stuck in dictatorship, have been called "socialist".

Democratic countries like Norway with mixed economies are sometimes called "socialist" when their mix has more areas of public ownership than in the US.

The Nazis, during their rise to power, were competing with Marxist-communist groups for the support of disaffected working class Germans and so put "socialist" in the name of their party and adopted a few token socialist proposals as a rhetorical ploy to win support. Because of this self-labeling, some people want to call Nazi Germany socialist.

But the USSR, Norway, and Nazi Germany are all very different from each other. If someone says they'd like to see the US become like Norway (at least in certain ways), it would be a mistake to take this to mean they want the US to become like the USSR or Nazi Germany.

And if someone is talking about socialism in the sense of a country like Norway (as many younger generation Americans do), it would be a mistake to interpret them as talking about socialism in the sense of a country like the USSR (which is the sense that may older generation Americans appear to have).

Many of the criticisms that are right on target when one is talking about the USSR will miss the mark if one is talking about Norway. And so we can easily get a situation where one person is advocating socialism in the sense of "a country like Norway, with more socialized elements than the US but also with privately-owned businesses, free markets, representative democracy, etc." And someone else, hearing the term "socialism," imagines the USSR, with a command system and five-year plans and a dictatorial regime. The ensuing argument goes nowhere because the parties to the dispute are talking about different things.

Put simply, the term "socialism" has come to be used in different ways. Make sure, therefore, that when this term comes up in conversations about public policy, everyone is clear about how the term is being used. There are those who will try to prevent such clarity and mutual understanding because it serves their interests for people to be (metaphorically or literally) shouting uselessly at each other rather than having productive conversations.

For what it's worth, my own view is that the real disagreement in our society--and as such the real conversation we should be having--is about what mix of capitalist and socialist elements is the optimal one at this particular time and place (and I do believe that the optimal mix changes from time to time and place to place based on social and environmental conditions). The US is a mixed economy, like Norway. The Norwegian mix is probably not the best mix for the US today--but is there a mix that is better than the mix we have now? That is the conversation we need to be having, and it is a conversation that is derailed by those who encourage us not to understand what other people mean.

Resist them by asking clarifying questions. Here's one to try: "When you use the term 'socialism,' what do you mean?"

Is Social Democracy About the Poor Being Greedy?

This morning, the following meme passed through my Facebook newsfeed:

It takes some unpacking to figure out exactly what Thomas Sowell is talking about here. Who in the world says that taking other people's money isn't greedy but keeping your own money, the money you've earned through your own efforts, is?

No one. No one says this.

This is the first thing to be absolutely clear about. What Sowell is offering here is  a version of what philosophers calls the straw man fallacy. The strategy is this. Some people are saying "Y." You disagree with Y. But instead of actually criticizing Y itself, what you do is this. You mischaracterize Y as X, where X is totally nutters. And then you say, "This view, X, is a crazy view. I don't understand why anyone could possibly believe it"--while looking pointedly at the people who say "Y." And since X is a crazy view, you are able to walk away having conveyed the impression that Y is nuts and the people who believe it are crazy--even though you've not done a single thing to show that.

So what is the view that Sowell is here mischaracterizing? Sowell is a conservative economist who self-identifies as libertarian. He appears to be an advocate of free market capitalism in the spirit of Milton Friedman--that is, someone who strongly believes in the idea of the laissez faire ecomony: if we just privatize the whole economy and let businesses pursue profit-maximization, not only will we do the most to respect individual liberty rights, but market forces will channel self-interested agents in ways that promote the general welfare.

Opposed to this philosophy is the view that government ought to be more involved in the economy than someone like Milton Friedman favors.While socialism represents one version of this view, one could favor more government involvement in the economy without being a socialist in a robust sense.

The key difference between socialism and capitalism has to do with who owns the means of production--private entities, or the state? And on this question, we're all at least partially socialist. After all, our military is not privately owned. Strictly speaking, the military is a service-provider--offering national security services--that is wholly owned and run by the government and paid for through tax dollars (or through federal deficit spending). And I have yet to hear a thoughtful and serious objection to this "socialized" military. Furthermore, most people think that some form of public education should continue, even if the form is a matter of dispute. Likewise with police and fire departments. And then, of course, there are the public libraries and public parks and public roads. These are not privately owned but publicly owned providers of human goods and services.

I believe in free markets. But I also think that some goods and services are provided more effectively and/or efficiently through collective or public cooperation. The idea with all of these public goods and services is that we all as a society contribute our share of the burden of paying for them, collectively oversee the operations via elected representatives who are beholden to us (and can be "fired" by us--that is, not re-elected--if we don't like how they manage the public goods), and all share in the benefits.

Beyond this, I take very seriously an idea expressed by one of the philosophical fathers of economies  like ours, that prioritize private ownership. John Locke believed that we acquire a right to private property through our personal labor: The resources of nature belong to all of us in common, but if I mix the resources of nature with my labor, I've added something that is mine alone. Hence, it becomes mine.

But Locke offered the following caveat: we should leave "as much and as good" for others. In other words, even if I work hard throughout the night to chop down every single tree in the woods and drag it to my plot of land, when the rest of the villagers wake up in the morning to find the entire forest gone and every log piled on my front lawn, they have a right to complain.

And if they call me greedy, that is legitimate even though I worked hard to take more than my fair share. "Lazy" might not be warranted, but "greedy" certainly is. And they are not being greedy when they take back a portion of the lumber. They are asserting their rights. I took more than I had a legitimate claim on.

Now, the society we live in is one in which pretty much all the resources of nature have been divided up. Private owners have claimed much of it. What remains falls largely under the control of the government, which at least in theory operates as the representative of the public in managing what is collectively owned.

But here's the thing. We live in a world where some people are filthy rich while many others do not have "as much and as good." Many people are so cut off from resources that they have nothing to mix their labor with--unless the sell their labor to the rich private owners. But in that case, the products of their labor belong to the owners and all the workers get in return is a paycheck. And many worry that the private owners are exploiting the workers: giving them far less than their labor is worth and pocketing the difference, getting richer and richer by riding on the backs of the less fortunate.

If this is right, then we might consider fixing the problem in something like the following way: take some of those exploited riches back from the exploiters and put those riches into public resources that the industrious poor can use to make something of themselves if they're willing to work hard--something like, say, free college education. Or maybe a federal jobs program offering competitive wages to anyone willing to work on building public infrastructure.

Aside from the issue of exploitation and correcting for it, some services and goods just make sense to provide by pooling our collective resources--through, say, taxation--and then making the goods and services available to all (the security that comes from the military, the roads that come from public infrastructure development, etc.).

When we pursue this collective strategy for meeting our needs, there is the question of what is fair in terms of paying for it. Should everyone contribute equally?

Suppose we wake up one morning and find that the woods are gone and those who are willing to work hard have no resources to work with, while some villagers are sitting pretty with huge piles of logs on their lawns, mostly inherited from their parents who were the ones who did the work of clear-cutting the forest. There is not "as much and as good" for everyone, but there ought to be. And suppose there are ways to use lumber to make public resources that benefit everyone, including industrious people without private resources. The majority thinks developing these resources is a great plan. Given the duty to leave as much and as good, don't the beneficiaries of those who paid no attention to this duty have more of an obligation to give back than those who aren't such beneficiaries?

So, consider the following activities:

A. Taking back what exploiters have unjustly snagged and putting it back into the public domain, so that the exploited can succeed through their hard work rather than have their labor greedily exploited.

B. Making sure that everyone contributes their fair share when we collectively pool our resources to produce public goods available to all.

In either of these cases, if some people resist paying up, we are justified in calling them greedy. But we aren't calling them greedy for keeping the money they've earned. We're calling them greedy for either taking more than they've earned or for being, essentially, freeloaders.

The disagreement between people on the right like Sowell and people on the left (like, say, Bernie Sanders) isn't about whether it is greedy for people to keep what is rightfully theirs. The disagreement lies elsewhere. It's about where and whether exploitation is going on, where and whether some people have come to enjoy an unfair share of the common resources of the planet, and where and whether people are benefiting from public goods without doing their fair share to maintain them.

So let's honestly debate those issues, rather than hide behind straw men. We all agree that it's not greedy to keep what you've earned. But when have people rightly earned the money in their bank accounts? And when they haven't done so, what is the best public policy response?

The 5 Best Sentences? Um, no.

So, not long ago the following facebook meme crossed my newsfeed (not sure of the original source):

 

The 5 best sentences I'll ever read?

I think not.

The best sentences I've ever read probably include "Do unto others as you would have them do unto you" and "But I tell you, love your enemies and pray for those who persecute you, that you may be children of your Father in heaven." I think this one is pretty challenging: "Jesus answered, 'If you want to be perfect, go, sell your possessions and give to the poor, and you will have treasure in heaven.'" I like this one from Aristotle: "Now virtue is a mean between two vices, that which depends on excess and that which depends on deficiency." And I like this one from Mahatma Gandhi: "Democracy disciplined and enlightened is the finest thing in the world. A democracy prejudiced, ignorant, superstitious will land itself in chaos and may be self-destroying." (Okay, so technically that's two sentences.)

But these five? They'd hardly be worth my attention, except that yesterday was Labor Day, and taking the time to explain why I don't find these sentences...impressive...actually gives me the chance to say some things about labor. So here goes:

Number 1: "You cannot legislate the poor into prosperity, by legislating the wealth out of prosperity."

Huh?

Although that's all the response this sentence really deserves, let me generously expound a bit: The claim here seems to be that you can't make the life prospects of the poor better through legislation that taxes the wealthy (although I could be wrong about that...who the #$%@! really knows what this sentence is saying?).

But let's assume my translation is on track. If that's what's being said here, then, to put the point as plainly as I can: Bull.

Here's the thing. There are people who have found ways to leverage small advantages in our economy into progressively large ones by exploiting the power they gain over others. Doing so takes work--I'm not talking about lazy bums here. I'm talking about hard-working opportunists who are ruthless about maximizing their own wealth, even if it undermines the life prospects of others.

How does this work? The answer isn't simple, but here is one way: In any large business, the profits made are the result of collective effort. But the distribution of those profits is often in the hands of a few decision-makers. And those decision-makers have an incentive to reward themselves more highly. Some will act on this incentive. Some won't. Some will act on it to an extent. And some will be ruthless about it--perhaps by exploiting the desperate circumstances of the poorest in  society, leveraging their desperation into labor agreements which basically have them contributing far more to the collective entrerprise than they're getting out of it. And the decision-makers pocket the difference.

The more widespread such opportunistic practices are, the greater the poverty. Social, political, and economic realities can influence how widespread these practices are. One way to fight such practices is through labor unions. Collective bargaining can help prevent exploitation, since workers who are united are harder to exploit--but only if there isn't a sufficiently large pool of laborers outside the unions (perhaps waiting in Bangladesh) that can be turned to without much trouble.

A lot has been accomplished over the years by the efforts of workers' unions. Lives have improved. More people in the developed world have more hope of making a decent living by working hard. But beyond what laborers can do for themselves, there are things governments can do. Minimum wage laws, for example.

And taxes.

That's right. Taxes. To put it simply, if those inclined to exploit desperate workers for personal gain would have the gains of exploitation taken away in taxes, they'd lose the incentive to exploit. Why circumvent the labor unions in the US and build a factory in Bangladesh if the tax penalty is so high it will take decades to recover the moving and building costs? Why, for the sake of lining your own pocket, would you be grossly unfair in the distribution of wages in your company if, beyond a certain very healthy income of the sort you'd have to work hard to achieve, the taxes become so high that you'd just be handing money to the government that could better be spent making your workers happier with their jobs and with you?

This is part of what a progressive tax structure can do--not by itself of course, but as part of an overall government strategy aimed at erasing the incentives which lead to opportunistic exploitation and the poverty it can produce.

Taxation used in this way isn't about taking money from the rich people who earned it and giving it to the lazy bums who didn't. Rather, it's a piece of an overall plan for discouraging the inequitable distribution of wealth within a business, when that wealth was made through collective effort but decision-makers are inclined to disproportionately reward themselves.

Number 2: "What one person receives without working for, another person works for without receiving."

Well, in many cases I suppose this is true. My children receive food without working for it. I worked for it. I didn't receive it, since it went in my kids' bellies.

This, of course, is as it should be.

And I suppose that if you have hunter-gatherers living in an area of bountiful natural resources, they're "working" for what they receive in the minimal sense of reaching out and pulling the fruit from the trees. But then you compare them with another tribe of hunter-gatherers who live in a desert working far more than the first tribe has ever dreamed of working...and for their labors end up with far less. When you make that comparison, it begins to look like the first tribe has received something neither they nor anyone else worked for. And it looks like the second tribe is working hard without receiving much--but not because some other tribe is living off their labors.

Sometimes, one person receives something by good luck rather than anyone's work. Sometimes, another person's work has nothing to show for it because of bad luck, not because someone else ended up receiving the benefits.

So, what is this sentence getting at? I have a job. I get paid. The rickshaw puller in Calcutta has a job and gets paid. I work hard, but the rickshaw puller works orders of magnitude harder than I have ever dreamed of working. And the rickshaw puller gets a fraction of a fraction of what I make. There are probably investment bankers who spend as many hours at work, raising their blood pressure and shortening their life expentancy, as the rickshaw puller spends at work hauling more privileged people from one part of Calcutta to another. But the rickshaw puller, for that same amount of labor, is making a million times less.

The difference is a matter of luck, an accident of birth. Some people can't pull themselves up by their bootstraps, no matter how hard they struggle, because they have no boots. Others have closets full of boots they don't know what to do with--bought with their own money, to be sure, money they earned by working; but their work was rewarded 100,000 times more highly than the poor rickshaw puller's work. Do they deserve all those boots in a way that the rickshaw puller doesn't?

So: Who is working without receiving, and who is receiving without working? If two are working just as hard but one is getting a lot more, is the excess enjoyed by the one something that he or she is receiving without working for? Is the point that we should always receive an income in proportion to how hard we work? I suppose we could pull that off by having a world government taking income from those in the richest countries and giving it to the struggling poor laborers in the impoverished regions of the world...but I doubt that's what the fans of this sentence have in mind.

So what do they have in mind? Unless I miss my guess, it's supposed to be about government programs aimed at providing a social safety net for the poorest among us. You know, the programs that make sure the children of the unemployed single mother don't go to bed too hungry. True enough, that food those kids eat wasn't food they grew themselves. Their mother didn't grow it, either. Farmers did that.

Of course, most of the profits didn't go to the farmers--or to the poor kids. It went to Monsanto stockholders. And maybe to the lawyers Monsanto hires to sue the pants off farmers who inadvertently grew some genetically modified Monsanto crops because seeds drifted over from a neighboring farm.

Those making the big profits here probably worked hard, too--maybe as hard or harder than the farmers. Who knows? And I suspect that the mother of the hungry kids might be willing to work hard, too--assuming she could find a job, and assuming the cost of child care didn't all but erase her income ( maybe a job that earned her 3% of what that Monsanto lawyer makes in a year), and assuming she got to keep the job after the second time she missed work to tend to a sick child.

One single mother might be able to pull it off because she has an aunt or mother in town who can watch the kids so she can work three jobs to pay for rent and put food on the table for the children she never gets to see. But another single mother might be in a city far from relatives--because she ran away from the home in which she was being sexually molested and beaten, and became a prostitute to survive, and got pregnant. And now she has next to nothing and a baby to boot, and doesn't want to go back to prostitution on account of the child, but has no skills, no support network. No bootstraps.

We live in a world where opportunity and talent are not fairly distributed, where effort does not always translate into prosperity, and where there are no simple solutions. Some people are handed opportunity on a plate, and with a little bit of effort can turn it into a cornucopia. Others are handed a turd.

In such a world sentence 2 is staggeringly naive.

Number 3: "The government cannot give to anybody anything that the government does not first take from somebody else."

First of all, I should point out that we left the gold standard for currency a few years ago--by which I mean in the 19th Century--and the economic realities of today aren't adequately represented by a statement as naive as #3 (for more details on the complexities of the issues in play, see here).

Second, the government is able to provide goods through organized collective action that a bunch of individuals, acting on their own, couldn't provide for themselves. The members of society benefit from the fruits of such collective action: national security, domestic peace, transportation and energy infrastructure, a basic social safety net (to help make sure that, even when catastrophic illnesses or natural disasters or financially devastating layoffs occur, we'll still have bootstraps we can pull ourselves up by).

I enjoy a relatively secure daily life in part because of a criminal justice system provided me by the government. I get to work driving on roads and over bridges built by the government. My children are being educated by the public schools. I help pay for these things through taxes. Others help pay for them too. But since we'd all be poorer without the opportunities these public goods provide, should I think of the taxes I pay as the government taking something away from me? Or is it better to think of it as being part of a society that, through collective effort, is providing me and those around me with someting none of us could have produced acting on our own?

My paying taxes, in that case, is the difference between me actually being a part of that collective action and me being a freeloader.

Number 4: "You cannot multiply wealth by dividing it."

Huh?

Number 5: "When half of the people get the idea that they do not have to work because the other half is going to take care of them; and when the other half gets the idea that it does no good to work, because somebody else is going to get what they work for, that is the beginning of the end of any nation."

Yeah, and if half the people in a nation fly to the moon in order to get away from the other half, and the other half fly to the moon to get away from the first half, then everyone in the nation will asphyxiate together on the moon.

Here's the thing: This statement is true enough, but so what? The statement matters--is something we should care about--if it's about something that's in danger of really happening.

I think those who find this sentence to be one of the best ones they've heard think of it as a warning about what will happen if we allow too much "socialism" into our society. But if so it's based on an Ayn Rand-inspired dystopian fantasy, not on any kind of socialism that has even the remotest chance of being vaguely approximated by the American government, regardless of which political party is in power.

I don't mean to say that there aren't serious problems with how we deal with poverty in America. While it is clearly false that half of Americans do not think they need to work because the other half is going to take care of them (and false that any policy proposals on the horizon would move us towards such a situation), it is true that there are some Americans who do not think that they have much hope of crawling out of poverty by working hard. They see living on welfare as the fairly miserable existence that it is, but don't believe that their effort and struggle will lead them to anything better. What results isn't laziness but hopelessness--not the optimistic idea that others will take care of them if they kick back, but the pessimistic idea that the social system won't reward them if they work hard.

If you want to change that, you have to change the way wealth is distributed. Somehow a higher proportion of the wealth generated by labor has to get into the pockets of the lowest level laborers, which in turn will likely mean that someone who is currently raking in the big bucks will have to see a smaller share of that wealth than they do now. There may be different ways to achieve this result, but one thing is clear: We can't rely on business decision-makers to fix the problem, since they tend to be beneficiaries of the current system. Chances are, if it's left to them, the problems will remain or only get worse.

Policies in Norway--a socialist country--have helped to ensure that the unemployment rate is among the lowest in the world--this despite having an ample social safety net. What's happened here? How dare the Norwegians be gainfully employed, in defiance of the Ayn-Randian narrative that socialism leads to a nation of people waiting for handouts? Maybe the answer is this: What encourages people to get to work is the presence of job options that promise a decent life, not the absence of a basic social safety net.

Is it foolish for a government to say, "If you don't bother to work we'll take care of you, and if you do bother to work we'll take your earnings away to take care of those who don't"? Absolutely. Has any presidential contender for either major political party in the US States ever seriously proposed such blasted idiocy? No. Have some people caricatured and distorted more left-leaning American politicians as if they were saying such a fool thing? Yes. Is a sentence that gestures to such a caricature one of the "best sentences I'll ever read"?

No.