Excuse the long period of time of inactivity. I’ve just been busy with other activities; in addition, Iran’s election has been dominating the news. There’s not a lot of things I have to say about that which has not already been said by plenty of people (namely: Iranians should have the right to peacefully assemble and protest their government, be free from coercion and violence, and to freely voice their opinions; that the vote-counting process was suspect and that Iran should conduct a recount; and that the U.S. government should not interfere).
Instead, I want to talk about what many want to refer to as “socialism in America.” See, for example, this post by King Banaian, a professor and the chairman of the economics department at SCSU. In it, he argues that America’s economic policy is most accurately described as “interventionism” rather than flat-out “socialism,” as some people have suggested. I would not call it flat-out socialism either. People who simply throw around the word “socialism” use it as a scare word of sorts, to draw emotional responses from people wary of government intervention. If we try to use that loose definition of socialism, however, it would be impossible to name any country that exists or that has ever existed that wasn’t socialist. So that doesn’t seem correct (unless you want to call every country a socialist one).
I prefer to think of socialism that has varying degrees of intervention. Stalinism, for example, might be approximated at one of the spectrum where the state has total control over political and economic systems. Current-day America would be on the opposite end, where the state is moderately involved in economic matters, mostly through regulation. We could say it’s a weak form of socialism. This brand of socialism now includes the bailouts of Wall Street, Big Bank, and the automotive industry, highlighted in Bush’s final months in office and continued through Obama’s current presidency. It’s important to look at the characteristics of America’s socialism, which is sometimes referred to as “socialism for the rich and capitalism for the poor.”
This form of socialism has long been seen as a criticism of America’s “capitalist” system. It is sometimes also referred to as “privatizing profits and socializing costs”; “lemon socialism”; “crony capitalism”; “corporate welfare”; or, as I referred to it as during the Wall Street bailouts, “Wall Street socialism.” There are an equal amount of euphemism to defend this policy, such as “trickle down economics,” “too big to fail,” “lender of last resort,” etc.
There has been constant refrain all throughout, however, which is that the state ensures big business is being protected, often at the cost of others not a part of corporate America (sometimes referred to as “Main Street,” as opposed to Wall Street). Some use this to explain the “rich getting richer and the poor getting poorer,” i.e. wealth or economic inequality and disparities. One way this is achieved is through privatizing corporate profits and socializing their costs. We saw this, for example, with the bailouts of AIG et al. at the expense of tax payers. Such actions by the state create what are called moral hazards, meaning corporations such as these are being shielded from risk (of failure) and so act differently (more riskily).
One problem is that power is being concentrated in unaccountable and unresponsive institutions (both non-governmental and quasi-governmental) such as the Federal Reserve (see, e.g., this and this post by Dr. Banaian). These institutions are unwilling to sacrifice themselves or succumb to market forces. This is why, for example, President Bush came out and admitted he had to “abandoned free market principles to save the free market system.” (Remember the old arguments that we have to abandon freedom in order to be free?) Another problem, of course, is unresponsive and non-participatory democracy in America, which I have discussed here.
This has been going on for a long time, of course. But this trend was especially marked during the Reagan era—an era that spoke a lot about free trade and laissez-fair economics, but one that rarely practiced it. Take, for example, when then-Treasury Secretary James Baker boasted to business groups that the Reagan administration has offered more protection to American business than any post-war presidency. (In reality, it was more than all of them combined.) As it happens, President Clinton was also unusually popular with Corporate America for being a Democrat—the reason being his unwavering protection of big business (NAFTA being a big part of that). This is, of course, all while the benefits of free markets are being touted. Never mentioned is the fact that America’s prosperity has been a product of state intervention, trade interference, and market distortions on massive scales completely unnatural to a truly free and capitalistic market. This has continued into the present with the bank, insurance, airline, and auto bailouts seen under both Bush and Obama.
The dominate message being relayed to the American people is that in order for big business, and therefore the American economy, to survive, it must be subsidized, protected, and bailed out by the state. Incidentally, this is why a national health care system has finally entered the political discourse. For decades now, Americans have placed the health care system as a top domestic priority, with most wanting some sort of nationalized system. Prior to this campaign, such a thing was described as “politically impossible”—never mind that it was what most of the population wanted. In 2008, that was different; we saw Edwards, Clinton, and Obama bringing up the issue. What changed? It certainly wasn’t public opinion. What changed was that manufacturing industry in America was being crippled by the soaring costs and so began supporting such a system. It is only through the process of it becoming a problem for a major sector of American capital and corporate interests that it enters the political agenda of the leadership in this country. Naturally, what will happen is that the costs will be socialized but their profits will continue to remain privatized.
That’s American “capitalism” in practice.