Monday, June 24, 2019

“Fear Mongering” Socialism Is as Offensive as “Crony Capitalism” to Many Americans

The political equality that is required by democracy is always under threat from economic inequality, and the more extreme the economic inequality, the greater the threat to democracy.

Angus Deaton, 2015 Nobel Prize winner in Economics

 Vijay K. Mathur

The ideas of democratic socialism, popularized by Senator Bernie Sanders in 2016, have entered the current political thought of Democratic candidates for president in 2020 and in the media. President Trump and GOP political leaders have even started scare mongering the ideas of democratic socialism, without much understanding of the difference between socialism, democratic socialism and communism.  

Many GOP leaders, including President Trump and Utah’s Rep. Chris Stewart (founder of Anti-Socialism Caucus in the House) tend to paint socialism, communism and democratic socialism with the same brush. Perhaps their intent is to further aggravate the ideological divide between Americans and dissuade them from their major economic concerns about the crony capitalism that, with government assistance, is gradually subverting the private enterprise system. 

Socialism involves collective ownership of government, abolition of private property rights, private enterprise and competition in markets, and a centrally planned economy.  The central planning body decides what would be produced and consumed at regulated prices, and the distribution of income.  Communism is an extreme form of socialism, a tyrannical system where a small group/or groups control government and businesses. China under Mao Zedong and the former Soviet Union under Joseph Stalin had extreme forms of communism, close to totalitarianism. Now China and Russia are still communist states with limited individual freedom. 

Most Americans are not hankering for either socialism or communism.  However, they are concerned about the recent drift of capitalism and the free market system toward crony capitalism.  Crony capitalism, labeled as rent seeking behavior by economists, has some elements of communism.  A small group of wealthy people and corporations influence government policies and subvert the free market system with government assistance that benefits them more, at the cost of the rest of the Americans.

Nobel Laureate economist Joseph Stiglitz explains in Price of Inequality, “Rent seeking takes many forms: hidden and open transfers and subsidies from the government, laws that make the marketplace less competitive, lax enforcement of existing competition laws, and statutes that allow corporations to take advantage of others or pass costs on to the rest of the society.” Pharmaceutical industry spent  $280 million on lobbying in 2017 ( Purdue Pharmaceutical (owned by Sackler family) earned enormous profits by lobbying FDA in 2001 that allowed labeling OxyContin for long-term use without scientific evidence (“60 minutes”, CBS, February, 24, 2019). 

In the Utah legislature, bill HB267 failed to pass due to lobbying and legal threats by the pharmaceutical industry. Its goal was to control escalating drug prices by allowing competition from imports from Canada.  Also.  An Institute of Taxation and Economic Policy study (May 10, 2017) found that 240 Fortune 500 companies in Utah used state corporate tax loopholes to avoid paying $126 billion in taxes from 2008-15. Rent seeking behavior is as offensive as socialism to most Americans. Political influence peddling by wealthy people and/or corporations to enrich themselves is partly responsible for increasing political as well as income and wealth inequality. 

Democratic Socialists believe in democracy and the First Amendment. They want ordinary people, rather the wealthy people and corporations, to have power in the formulation of government policies. A Democratic Socialist Michael Harrington, who died in 1989, inspired President Lyndon Johnson’s poverty program.  Scandinavian countries such as Norway, Belgium, Sweden and Denmark are democratic socialist countries. After 1991 Sweden is less socialist than others. 

Polls indicate that most Americans like some elements of democratic socialism, such as universal health care, increase in minimum wage, reduced burden of education debt, affordability of higher education and more economic opportunities.  However they are not sure about the means to achieve those ends. Senator Bernie Sander’s answer, the Scandinavian countries can do it so we can do it as well, is not satisfactory in the American context.   It lacks substance.  Senator Elizabeth Warren’s proposal of a wealth tax to finance her agenda is also very tenuous.  

Nobel Laureate economist F.A. Hayek, an ardent critic of socialism, argued in The Road to Serfdomthat “The dispute about socialism has thus become largely a dispute about means and not about ends…” and about the impracticality of simultaneous attainment of all ends of socialism. Convincing most Americans of the ideals of democratic socialism requires rooting out crony capitalism, empowerment of all Americans in the enactment of government policies beneficial to all and promoting a vibrant and thriving competitive private enterprise system. 

Mathur is former chairman and professor of economics, Department of Economics, Cleveland State University, Cleveland, Ohio.  He blogs at mathursblogonomics.blogspot.cpm.

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