Blending capitalism and socialism

Why can't we detach personal income from industry so that we can all make rational decisions about what is good and bad for society?


We had a very interesting discussion at our Friday philosophy group. As usual it became a political philosophy discussion. I think most of  us agreed that the major advantage of the capitalist system—so long as it isn’t monopolistic—is that it gives people an opportunity to develop new ideas and increase productivity.  But the disadvantage is that as time goes on a smaller and smaller group owns the wealth of the society. We discussed the way our society operated in the good years (1945-1979), when tax rates were high, and when anti-trust laws worked well. Since those days, income inequality has taken over, and that has destroyed any advantage the system might have.

We discussed the socialist system of the Russians and Chinese, which on the one hand promised social fairness, but on the other hand led to corruption, in which those controlling the system took riches out of it.

Finally, we discussed the system being espoused by Bernie Sanders and Elizabeth Warren, which basically builds FDR’s Second Bill of Rights on top of the capitalist system, so that income inequality becomes less important because fundamental rights for citizens are provided by the government, basically by taxing the wealthy. The Sanders-Warren view would make the American society into something more like the Scandinavian countries. Personally, I would like that.

The main problems with the American system are not only income inequality but the growing corruption of its government. Cast your mind back to 1944, when Harry S. Truman became president. He was part of “Boss” Tom Pendergast’s political machine when he was a county politician in Missouri. But he left the White House with little money and is considered the most impoverished president in our history. It would certainly seem, therefore, that he personally was not corrupt. On the other hand, Barack Obama entered the White House with 1.3 million dollars in assets and, two years after leaving office, had $40 million. It has been said that he made his money out of speaking engagements and writing books. But speaking engagements for as much as $400,000 each sounds more like bribery than anything else. And Obama, who gained office by saying that he wanted Hope and Change, has turned out to be a corporatist.

The system which favors corporations and money is the system which is failing to come to grips with climate change. One problem is that the fossil fuel companies lay a heavy hand on the political system, causing stagnation and a failure to come to grips with a problem which is likely to be disastrous. The owners of the fossil fuel industry are driven to protect the product, no matter how bad it is for society, because it is the source of their power and wealth. Therefore, they cannot afford to give it up. What we need instead of our capitalist system is one that recognizes that hard work for the society deserves protection and a sharing of what the society has to offer.

Let’s take a look at the automobile industry and the fossil fuel industry. At the beginning of the 20th century, these were the industries that drove the expansion of the society. Indeed, at the time of the Second World War, the auto industry stopped making cars in favor of making tanks and other weapons for our army. But today, the addition of more cars means more pollution and more danger from climate change. Instead, we need more transportation in common and more electric vehicles.

More electric vehicles (instead of fossil fuel vehicles) and more transportation in common means a declining use of fossil fuels. The fossil fuel companies have invested in petroleum wells and related equipment, plus they have paid for the right to extract petroleum. They therefore fight against any solution which puts their investments in danger.

If the society owned the fossil fuel industry, it would have to choose whether and how to shut it down, maintaining whatever profits were possible without endangering the planet. And if the economic and social systems were such that everyone had a stake in every enterprise, the same would be true.

The average household income for 2018 was $63,179. In other words, half the households received more than this and half less. If you can image a society in which all households received this same amount, and no one personally owned any large business like fossil fuels, then each would have a stake in a decision to wind down that business in favor of other solutions.

There are certain expenses which no individual should bear from personal income, because too much depends on luck. Medical and accident costs are among those. These costs should be borne collectively and paid by social insurance policies. The cost of the insurance policies should be taken from the household income. There are other expenses which are really necessary, like education, and everyone should have that benefit and should pay a share of the cost annually. In effect, payment of the costs of such expenses would be guaranteed by the society.

In such a society no one would be really rich or really poor, and everyone would know that he or she had a stake in the society and every large-scale decision.

Such a system would eliminate corruption. Politicians would earn the same as everyone else. If they should suddenly have riches beyond the average, that would trigger an investigation. You can’t get sudden wealth unless you have income well above the average, and why should that be unless someone is paying you under the table?

The common assumption is that people won’t work hard unless they have a chance of earning income beyond the norm. But is that true? Don’t people work hard because others work hard? Don’t they feel that they are part of a team which is working together?

Under the present system, fossil fuel owners get more than other members of the society. But if there is a need to stop using fossil fuels, then the loss suffered falls on the owners and the employees of that industry. As a result, they cannot take into account the effect of the use of fossil fuels. And then you get situations like the one in the tobacco industry, where the owners for years hid the risk of cancer from the consumers of tobacco, in order to maintain their own profits.

And consider the situation which an individual company’s bankruptcy causes to its owners and its employees. Sometimes a bankruptcy is totally necessary, because the industry in which the company is engaged has become unprofitable, or where the company itself engages in an unprofitable strategy. And, in the reverse sense, the industry can become unexpectedly profitable or the company can follow a good strategy. Or, like the fossil fuel industry, it can be profitable at the beginning but become harmful to the society later. The negative risks and positive gains should be borne by the society as a whole, and that way the society can decide in a rational way if the industry is beneficial or not.


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