by Svetozar Pejovich
It is arguable that the average American does not understand neither the theoretical basis of socialism nor the actual history of socialism. The purpose of this article is to identify two issues that should help to inform the median voter about some important differences between capitalism and socialism as well as between different types of socialism that are advocated for the United States.
The Efficiency of Capitalism Vs Equality of Socialism
The major features of capitalism are the rule of law, credible private property rights and the freedom of individuals to voluntarily interact with each other in the pursuit of their own ends. These features of capitalism create incentives that link rewards to performance in competitive markets. This link, in turn, produces wealth at much higher rate than other economic systems. Numerous economic indexes and, most importantly, people voting with their feet are the best evidence of the economic efficiency of capitalism relative to other systems.
Individuals differ with respect to their talents, preferences, work ethics, attitudes toward risk, and the ability to perceive opportunities. In competitive markets, those variables lead to different performance. Given the link between performance and rewards in capitalism, those differences produce income inequalities. Income inequalities, in turn, raise the question of the morality of capitalism. Raising the issue of the morality of capitalism creates room in political markets for socialist programs.
Socialist programs require a major expansion in the role of government in the economy. By implication, socialist programs disconnect performance from rewards. Abundant evidence shows that disconnecting performance from rewards slows down entrepreneurship and retards economic growth. The critical issue facing the American median voter is then whether the perceived justice of reducing income inequalities via socialist programs justifies slowing down the economic efficiency of capitalism.
What Are Some Likely Paths of American Socialism?
Socialism comes in many flavors with one common denominator that sets them apart from capitalism. While capitalism prioritizes the rule of law over government policy and the individual over the collective, socialism prioritizes government policy over the rule of law and the collective common good (as defined by the ruling elite) over the rights of individuals to pursue their private end. Some types of socialism are more likely than others to be embraced by various pro-socialist groups in the United States. Let us briefly discuss a few of those:
Marxism. Marxism is the best-known and most widely practiced type of socialism. It ruined Eastern Europe and is impoverishing North Korea and Cuba. Comparing East with West Berlin, and Mao’s China with post-Mao’s China reveals the consequences of Marxism. In the United States, writings by Professors Paul Sweeze (Harvard) and John Gurley (Stanford) gave Marxism academic legitimacy. Angela Davis and Herbert Marcuse moved Marxism from academia into social activism. Individuals like Carl Oglesby and Jane Fonda, and groups like SDS and Weathermen replaced social activism with street protests, destruction of property and calls for a revolution.
Fabian Socialism. British scholars Sidney and Beatrice Webb founded Fabian socialism in England toward the end of nineteenth century. They advocated gradual replacement of private property and competitive markets with public ownership and centralized economic planning. Among main practitioners of Fabian socialism were Nehru in India, and the leaders of former British colonies in Africa. Eventually, India abandoned Fabianism and has slowly been developing a healthy capitalist economy. The African countries have achieved no positive economic results. Slowly, the term Fabian Socialism fell out of favor but not its doctrine of gradual or evolutionary socialism. In fact, the latter-day socialist in the U.S. seek gradual changes in the economy via tuition-free education, universal national health policy and massive environmental regulations, without any reference to Fabianism. Moreover, they keep mum about the opportunity costs of resources required to produce and deliver promised goods.
The latest addition to the likes of Bernie Sanders and Elizabeth Warren, Alexandria Ocasio-Cortez, added an even more extreme flavor to the market for socialist promises. She demands nothing less than government guaranteed jobs, which is reminiscient of Article 12 of the Soviet Constitution of 1936, which said: “In the U.S.S.R. work is a duty and a matter of honor for every able-bodied citizen, in accordance with the principle: He who does not work, neither shall he eat.”
Democratic Socialism. Democratic socialism seeks the systemic transformation of capitalism into socialism, and, especially, the transfer of capital assets into collective ownership. Rosa Luxemburg in Europe and Eugene Debs in America were among the early supporters of democratic socialism. In modern times, Robert Reich (UC at Berkeley), Cornel West (Yale) and the late Jaroslav Vanek provided academic legitimacy to democratic socialism. The key concepts that set them apart from other types of socialism, are industrial democracy, social justice, workers’ self-management, and ‘market-planned’ economy. It is arguable that the direction of research as well as academic standards of scholars like West and Reich might easily have more influence on the median voter than other types of socialism.
Finally, democratic socialism should not be confused with social democracy, which advocates reforming rather than replacing capitalism. Democratic socialism is also not synonymous with welfare programs in Scandinavian countries. Upon finding that their grave-to-cradle benefits are not sustainable, those countries are electing center-right governments and cutting back on welfare programs.
There is no doubt that socialism has made significant inroads into the American politics. Each type of socialism mentioned above competes for the median voter by suggesting alternatives to the private property, free market economy.
Svetozar Pejovich is Professor of Economics Emeritus at Texas A&M University.