On Socialism

Che_Guevara_01It is not productive to label the president and his policies “socialist.”  It is better to identify which ideas we think are socialist, and why we think these ideas are bad for America.  The label, on its own, adds nothing to the debate.  Political parties in Europe openly espouse socialist policies, and mainstream voters support them.  These are modern democracies and our allies, like France.

Of course, few Americans would accept socialism as an organizing principle.  America is the “land of opportunity,” because we are organized around the principle of free enterprise.  But we would like our capitalism leavened with a little bit of compassion.

Social Security is a good example of a popular socialist program.  Working Americans pay into the fund and retired Americans draw from it.  We pay according to our abilities, and we receive according to our needs.  This is the textbook statement of how wealth is redistributed under a socialist program.  As long as the redistribution seems equitable, most Americans won’t complain.

The obvious problem with such a program is the potential for a moral hazard, wherein the beneficiaries are freeloaders and the taxpayers are getting soaked.  Attention to this hazard is what led to welfare reform during the Clinton administration.

A less-obvious problem is simple inefficiency.  Here, too, Social Security is a good example.  Dollars paid in by working Americans do not sit and earn interest until those workers retire, as they would in an IRA.  Instead, these dollars are paid out immediately to current retirees.  Plus, taxpayers must support a huge government agency to run the program.

So, when a program is condemned as “socialist,” the real question is whether this is something we need the federal government to do – rather than individuals, free enterprise, or the fifty states.  Running a program at the federal level is almost always more costly.

An American would be shocked to wake up in a country where the government runs the communications industry, for instance, along with the airlines, steel, and power.  This is what England looked like in the 1970s, before Margaret Thatcher liberated the economy – stagnant, poor and unemployed.  They were in serious financial trouble, and the IMF had to step in.  Mrs. Thatcher said of her predecessors:

I think they’ve made the biggest financial mess that any government has ever made in this country for a very long time, and Socialist governments traditionally do make a financial mess. They always run out of other people’s money.

Thatcher was committed to reducing big government – and reducing taxes.  Privatization was the only way out of the mess.  She did, however, leave the National Health Service intact.

On the other hand, we would be equally surprised if Medicare and Medicaid disappeared.  These are just two of the programs created under Lyndon Johnson’s “Great Society” initiative.  He said:

In your time we have the opportunity to move not only toward the rich society and the powerful society, but upward to the Great Society.  The Great Society rests on abundance and liberty for all.

Johnson believed that the federal government could end poverty, end racism, support the arts, fund public education, welfare, housing and health programs, and protect the environment.  All of the Great Society programs have since run into financial problems.  Johnson’s most durable achievements are from improved regulation, not expensive programs.

It is interesting to note that the cycle of socialist policy and conservative backlash in America was roughly synchronized with the one in England.  The socialists begin with noble intentions, and end with financial disaster.

Many writers, especially critics of President Obama, decry socialism as un-American, because of its intent to redistribute wealth – but this distracts from the real danger.  Indeed, many people support redistribution, and this carries the debate into the realm of moral philosophy.

The real danger is that every socialist policy carries within it the seeds of financial disaster.  It’s easy to see, and it makes a better argument than name-calling does.

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