Socialism, Capitalism, Or …?

Can we create socialism within capitalism, or capitalism within socialism?


I don’t like Victor Davis Hanson, but a friend of mine insisted that I read this article by him. Naturally, Hanson came out against socialism, as he always does.  He found it an utter failure. He even said this about the Swedish-Danish-Norwegian-Finnish version: “The soft-socialist European Union countries are stagnant and mostly dependent on the U.S. military for their protection. . . . In contrast, current American deregulation, tax cuts and incentives, and record energy production have given the United States the strongest economy in the world.”

Sorry, VDH, but you’re dead wrong. The U.S. doesn’t have the strongest economy in the world.  It has the largest GDP, but it ranks eighth as the “best” country. (Switzerland, Japan and Canada are the top three in this list).  As far as per capita GDP is concerned, it ranks seventh (the top three are Luxembourg, Norway and Switzerland. The projections for 2022 put Luxembourg, Norway and Ireland on top. Ireland! Can you believe it?) And the “soft-socialist” countries in the EU are hardly “stagnant” according to most of the lists. The biggest claim that the U.S. can make is that it has the strongest military, which had better be true, since it spends so much money on it. (But military spending has little to do with whether a country is capitalist, socialist, or some other type).

Is the U.S. really a capitalist economy? Yes, but it doesn’t rank in the top ten of capitalist economies. “The United States is one of the countries that has a capitalist economy, which many citizens see as an important part of democracy and building the “American Dream.” However, despite being one of the most well-known capitalist countries, the United States is not even in the top 10 list of most capitalistic countries, according to reports from The Heritage Foundation and Global Finance Magazine.” In “economic freedom” it is behind Canada, Australia, New Zealand, and the U.K., among others.

Capitalist countries are generally “mixed economies.” But so are many socialist countries. If we were going to try to formulate the best economic system what could they be?

Communism has been tried in the Soviet Union, China, and other countries, and has failed. I think that the major problem with that system is that it leads to corruption in the leaders, who gain far too much control of the economy and the political system. But the same thing is happening in the U.S. We have learned from the way communism was used, and we are learning from our American type of capitalism, that too much control in the elites of the system can lead to corruption, and control of the economy leads to control of politics.

At one point in the U.S., we had a strong anti-trust system, and this prevented a small group of individuals from controlling key parts of the economy. As has been pointed out many times, in 1983 50 companies controlled 90 percent of the media, while in 2012 only six corporations controlled 90 percent of the American media. Once you get concentrations of power like this, those in control can regulate the prices and supply of certain goods and services without competition. This sort of economic power leads to political power. A good example being the fact that in 2016 Bernie Sanders got only a third of the media coverage that Hillary Clinton got. Why? Because the media was against him).

The corrupting factor in the U.S. system is money. With money comes ownership and control of the means of production. But suppose we ended that? Corporations could be owned and controlled only by those individuals who worked there, with each individual having one vote. Money could be used only to loan to corporations, without any attempt to control how the corporation operated. Profits, if any, would go to the owners, who would be the workers. Individual ownership of real estate, machinery, boats, airplanes, and the like would be restricted, since the intent would be that corporations would own them. Individuals could not hire other individuals to engage in business, and anyone hired by a corporation would have a vote with respect to corporate business. There would be strong anti-trust rules to keep corporations in competition with one another. If businesses became too concentrated, the government would loan money out to start-up companies in order to create competition. Rules would be established so that even unemployed workers would have a right to vote and be heard.

There would also be a strong social system, including low cost insurance, free education, free Medicare for All, improved transportation in common, and a strong retirement system. Salaries would be regulated, so that executives in corporations could earn no more than 10 times the salaries of the lowest paid workers.  

I think this sort of system would keep the good part of the capitalist system intact while controlling the bad part. I’m sure that many people would label this a socialist system because workers controlled the corporations. But the important idea here is that there is a “sharing” system coupled with maintenance of competition as a means of encouraging innovation. Similar systems have been tried successfully. For example, in Spain, there is the Mondragon corporation, which relies on worker cooperatives and is quite successful. 

“I know what you’re against, but what are you for?” That’s a question that socialists often hear. Capitalism, in the words of the Marxist economist Richard Wolff, is a system characterized by “endlessly repeated cycles, costly bailouts for financiers and now austerity for most people,” with “recurring tendencies toward extreme and deepening inequalities of income, wealth, and political and cultural power.” “Any such system needs to be replaced, but what is the alternative?” Wolff says that an economic system based on the success of Mondragon is an important idea.

“Economic democracy and workers’ self-management is absolutely central to any genuine socialist society, but they can only be permanently established by adopting a strategy aimed at dismantling the power of the capitalist state and expropriating the expropriators. In other words a political strategy, not one focused primarily on attempting to create alternative economic models within existing capitalist society.” 

Having workers control the economy, plus eliminating money as a means of corruption, would be a way of directing the economy at the betterment of the society instead of the enrichment of a small class intent on control. It would also avoid the error of the state-directed economy, which likewise leads to corruption. At the same time, it allows the workers to choose the managers of businesses and prevent management from creating income inequality. It also eliminates unneeded bureaucracy, which would stifle creativity.


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