From now until November 2020 we’ll hear a lot of noise from politicians and pundits on socialism and the evils thereof. Trump and his Republicans have already made clear they will make this election “a referendum on socialism.”
Republicans are banking on the proposition that “socialism” is a loaded word. With the aid of the chattering class to dumb down debate, Republicans will label as “socialism,” any proposal for government to address problems of income inequality, health care, regulations for health and safety or anything else.
With the aid of these same pundits, Trump’s Republicans will portray capitalism as under siege, casting political debate as “socialism vs. capitalism.”
“Socialism vs. Capitalism” is a false choice. Economists refer to the American economy and successful economies of the world as “mixed systems.” These economies have a mix of capitalism — a system of markets, prices, and private enterprise — along with government involvement in providing public goods and services, and regulations designed to promote health, safety and the broader public good.
The broad objective of government involvement in the economy is not to replace or eliminate private enterprise, but to make capitalism work for the broader public good. While the broad objective is easy enough to agree on, as usual, the devil is in the details. Thus, the legitimate debate is not on “capitalism vs. socialism,” but on the role of government under capitalism.
The relative mix of private enterprise and government in the economy varies among nations and varies over time within nations. American conservatives habitually complain about “excessive government regulation,” and urge a return to smaller government and the nostalgic days of what they hold was characterized by “greater freedom.”
While readily acknowledging that American style democracy is “messy,” slow moving, and that government often does not act in the best interests of everyday citizens, we must recognize that government action has been, and is, necessary for the arduous task of making capitalism work for all.
In pre-19th century days, poor children were routinely indentured in colonial New England. By the end of the 19th century, American children still worked in large numbers in mines, glass factories, canneries and other dangerous places. It wasn’t until 1892 that reformers adopted planks in political platforms to ban factory employment of children less than 15 years of age.
Early American history is characterized by exploitation of labor. There was no safety net for workers injured in dangerous occupations such as railroading and mining. With no laws enabling labor to organize and demand more humane working conditions, captains of industry were free to exploit labor to the max. It wasn’t until the 1930s through reforms enabled by government that the playing field was more leveled.
A celebrated reformer of the early 20th century, Upton Sinclair, in his novel, “The Jungle,” exposed the ugly labor and sanitary conditions in the U.S. meat packing industry. The novel had not much effect on improving labor conditions, but caused a public uproar that led to the 1906 Pure Food and Drug Act, and the Meat Inspection Act.
Sinclair was a self-described Socialist, and ran unsuccessfully as a Congressional nominee of the Socialist Party. But would anybody today insist legislation regarding meat inspection that we take for granted is “socialism?” Yes, it involves government regulation, with all its limitations, but would we do without such regulation? And even if we would call this “socialistic,” is it necessarily a bad thing?
Sinclair is credited with the line, “It is difficult to get a man to understand something when his salary depends upon his not understanding it.”
During the Great Depression of the 1930s, capitalism was seen by many as not working. John Steinbeck’s novel, “The Grapes of Wrath,” chronicled the hardships of a family leaving the Great Plains and heading for California. During that era of bank failures, FDR and Congress enacted banking reforms to protect depositors. Other measures enacted in FDR’s New Deal included labor reforms, public works programs, Social Security fashioned by economists from the University of Wisconsin-Madison’s Economics Department.
Conservatives frequently disparage FDR as “leading us down the road to socialism.” I recall a line from a history professor in one of my classes at UW-Madison: “A lot of people wanted more than a New Deal; they wanted a “New Deck of Cards.”
That “New Deck of Cards” likely would have been a lot more “radical” than FDR’s New Deal measures designed to make capitalism work. Rather than “leading us down the road to socialism,” it is more accurate to praise FDR and the New Deal for having saved capitalism.
Even though FDR’s New Deal got the nation on the road to economic recovery, it was the Keynesian fiscal pull of wartime production that propelled the nation to full recovery. Even with rationing that was necessary to divert resources to wartime production, American civilians lived better during the war than before.
With fears that the end of WWII would bring us back to pre-war economic conditions, Congress enacted, and President Truman signed, the Full Employment Act of 1946. This historic act held government responsible for policies to promote full employment.
Economists consider the period from 1946 to about 1970 as the “Golden Age of Capitalism.” That period saw an expanding economy, fueled by an expanding middle class. Not all was peaches and cream, as discrimination of minorities and women in the workforce existed. But income equality was such that many people, including those of modest education, could achieve middle class status.
Fast forward to the present: Income inequality has regressed to alarming, even dangerous, levels. Politicians from opposite ends of the political spectrum, Bernie Sanders and Donald Trump, highlighted this deplorable condition in their campaigns of 2016.
People left behind saw that capitalism was not working for them. In desperation, they were willing to risk blowing up the system by electing Donald Trump as president.
Next week: Making capitalism work for all.
— John Waelti of Monroe, a retired professor of economics, can be reached at jjwaelti1@tds.net. His column appears Saturdays in the Monroe Times.
