“It’s Socialism!” One thing that we can absolutely count on in the 2020 election is that this will be the blanket Republican response to any Democratic proposal that benefits average people. Have the audacity to suggest that the wealthiest nation on Earth should provide universal health coverage? It's socialism...even though every other developed nation has better coverage at lower cost than we do. Propose an aggressive response to climate change to protect our planet and provide good jobs for millions of Americans? It's socialism...despite the fact that both international insurance companies and even our own military consider it a life-changing threat. Or how about allowing workers who have seen their buying power decline for decades be allowed to negotiate on more equal footing with employers? Well, that's clearly socialism and must be stamped out immediately.
The list goes on and on. In fact, we can expect that pretty much every Democratic policy proposal related to the economy will be viciously painted with the dreaded scarlet “S.” And not just any flavor of socialism either. No, not the brand of social equality enjoyed by Germany, Australia, the Scandinavian countries, or even Canada, each of which provide higher overall qualities of life as measured by the 2018 World Happiness Report. Nor the many aspects of socialism that exist in the US today such as Social Security, roads and bridges, even our military which, like every other military in the world, embraces many shades of socialism.
No, those flavors of socialism would dilute their intended narrative. Instead, the Republican brand of socialism is the big, bad variety that strips people of basic civil rights and throws them in jail never to be heard from again. The socialism that forces people to labor away as virtual slaves in order to feed an insatiable state ever hungry for higher taxation, until these hard working citizens see their individual freedoms disappear. Or the old Soviet-style socialism where the central government forgoed constitutional rights, liberties, and representation - at least by Western standards - and implemented a police-state that owned all property and dictated economic and political activity.
This is the image Republicans want us to see, and fear, so even the slightest whiff of social equality can be manipulated to depict horrific, dystopian scenarios that harken back to the old USSR, the Cold War, and an era when Senator McCarthy was able to ruin countless American lives because we believed we'd be “better dead than red.”
But that was then, not now. And since then the world has changed a lot. Soviet-style socialism has all but disappeared from the political landscape. What mostly remains are moderate forms of democratic socialism where human rights and the foundations of capitalism are retained, but which embrace social programs that provide a more balanced, hopeful existence to society.
Yet in the Republican narrative there's no difference. Socialism is evil, period. Although that's conveniently simplistic, it's hardly realistic. Consider that every nation - including the US - has to some degree provided for the economic security of society, it's just a matter of how much and who benefits. In fact, for roughly 25 years following WWII many nations successfully expanded their economies in ways that benefited both employers and employees, both capitalists and consumers.
Then the oil crisis and inflation of the early 1970's provided a political opening to replace social priorities with economic ones. And in the nearly four decades since Reagan and Thatcher came to power western societies implemented policies that shifted resources from society to business, from consumers to capitalists. They did this under the pretense of Supply-Side Economics, the idea that economies are driven by suppliers and capitalists not consumers and employees.
This devalued the way we viewed the economic contribution of consumers and set off a shift toward unprecedented levels of economic inequality and social instability. In fact, according to research by economists Emmanuel Saez and Gabriel Zucman the concentration of US wealth in the top .1% has increased from about “7% in 1978 to 22% in 2012,” and according to the authors “almost all of this increase is due to the rise of the share of wealth owned by the 0.1% richest families.” This level of inequality has not been seen since the Great Recession.
Yet not only is inequality at historic levels, but personal incomes have not kept up with productivity. Consider how wage growth has fallen far short of productivity growth, meaning that more economic benefits have gone to suppliers and fewer to employees. In fact, according to the Economic Policy Institute, since 1973 productivity grew 77% versus just 12.4% for wages. And if you click through to the EPI chart you'll see that this divergence really exploded right around the time Reagan was elected, resulting in a slew of supply-side policies.
This was no coincidence. They rolled back regulations and consumer protections. They attacked unions and employee rights. They successfully pushed back on social programs. So in spite of the currently rosy low unemployment numbers and strong GDP growth, consumers are struggling.
Healthcare costs are spiraling out of control to the point where medical costs can exceed housing. Consumer debt marches ever higher. Job security and benefits are declining in the gig economy. And all the while capitalists and employers soak up greater chunks of income and wealth, leaving less and less for consumers and employees.
Long-term this is an unsustainable model, because at some point there won't be enough consumers to grow the economy. Then what? Simple, it'll mark the beginning of the end of a sustainable economy. At some point people will have such a small share of wealth and income that they'll become permanent economic slaves to the wealthy capitalists who intentionally created this these high leves of inquality.
So what happens to the wealthy elites? No need to worry about them, they'll be just fine as they're comfortably cocooned in mansions and on yachts. Meanwhile the rest of society will languish in economic hellholes as they scrape by on the scraps that their ultra-rich masters missed, or simply considered not worthwhile to exploit.
But we can't so much as even consider any other future, let alone actually act upon it. Oh no, that would be socialism, that evil form of social governance that will spell the end of economic freedom, or at least that's what we're told.
Funny thing is that this only applies to average working people and consumers. Because it turns out that socialism for the capitalists is alive and well, and Republicans don't want to upset that apple cart.
So while in one breath they contend socialism for average people is evil and must be prevented at all costs, they're perfectly willing to embrace socialism when it benefits them. Consider that estimates for corporate welfare, programs that directly benefit business interests, range from $90-$170 billion out of the US budget, and that excludes the massive Republican tax cuts, such as Trump’s huge tax cut to business that reduced business tax receipts by $90 Billion in 2018, much of which went to stock buy-backs and other means to enrich capitalists at the expense of everybody else.
But of course when it benefits wealthy capitalists it's not socialism. We're told that this corporate welfare, this Fat Cat Socialism, is necessary to grow the economy and create jobs.
Except that it never seems to work out way. The jobs are never as plentiful or as good as we're led to believe, and personal incomes never grow as fast as those of the rich. In fact, too many people see their incomes stagnate, even decline.
On top of this, personal wealth for average people is drying up as well, with much of it going to the ultra-rich. This further exacerbates inequality. Consider that concentrations of wealth at the top have reached levels not seen since just prior to the Great Depression. As a result, for many people the American Dream, the idea that future generations will be as good or better off than prior ones, is becoming just that, a dream.
But we can't have socialism, or anything that even resembles it. Oh No! Heck, we can't even talk about it if it benefits anyone other than the rich. And so we keep passing policies like big tax cuts that favor the rich while we reduce spending on policies that benefit average working people.
The predictable result is that the rich keep getting richer - a lot richer - while everyone else does not. This upside-down political reality is not only manifestly unfair to average people, but it's economically unsustainable.
So how did we get here? Well, the claim that society is best off when it supports business interests over social ones is an idea that's been peddled for a long time. But it really picked up steam in 1970's and 1980's with such ideas as the Friedman Doctrine, which suggested that the only role of business is to maximize shareholder value, and the misappropriation of the Laffer Curve, which suggested that at some point higher taxes will reduce economic activity (for additional insight into why I think Friedman was wrong, you can read my blog post.).
From here it was a quick jump to make the unsupported claim that business interests occupy the center of the economic universe. This is exemplified by the notion of businesses as “job creators,” an idea which implies that society should support whatever business wants or risk not having jobs. It's an idea which, to the extent it's believed, is effectively economic blackmail as it suggests voters must support business priorities first or else risk losing their jobs. And for the most part people have bought into this idea, as have virtually all Republican politicians and way too many Democrats.
The result has been public policies, at both the federal and state levels, that inordinately favor business interests at the expense of consumers and employees. Consider the response to regulations. For example, take pro-consumer regulations that seek to level the economic playing field so consumers, employees and small businesses can better participate in the economy. These might include pro-labor laws, financial disclosure and fair trade practices. In this case big businesses and the politicians who pander to them will tell us these are bad regulations that kill jobs, and will fight hard to prevent them from becoming law.
Alternatively there might be anti-consumer laws that allow businesses to exploit unfair exceptions to free market behavior, such as restrictions on trade that keep product prices high or drive labor compensation down. Predictably, the same business-beholden politicians will label these as job-creating legislation and overwhelmingly vote to enact them. And they will do this under the pretense that businesses are at the center of the economic universe and create the jobs people require to live.
Except there's one big problem with this idea...it's wrong. What's more, the reason why it's wrong is ridiculously obvious.
You see the claim of businesses as job creators is based on the false premise that jobs are created at the point people are hired. This may seem reasonable on the surface, especially as businesses write the paychecks people need to live. However, filling an open position - hiring - and creating that job, meaning the point it becomes necessary, are two very different things. It's a distinction that may seem trivial at first, but is in fact of critical importance.
To understand this one need only ask the question: “why do employers hire employees?” This too may seem stupidly obvious...they need them of course. Which is true, but why? After all, employees are expensive, often costing many tens of thousands of dollars each year. So if employers could get by with fewer employees they would. Doing so would allow them to keep more money for themselves. This too is obvious.
So employers hire for one reason and one reason only. They hire because without new employees they'd lose business and make less money, business that is driven by customer demand. And this is the crux of the issue.
For although businesses do in fact hire employees, they only do so when the jobs are necessitated by their customers. In other words, jobs are created by consumers, not the businesses who hire. So contrary to what businesses want us to believe, in actuality jobs are “created at the moment of consumption.” And that's why the idea of business-as-job-creators is a myth, a myth perpetrated for the sole purpose of convincing voters to support business interests over their own.
The implications of this are enormous. First, as jobs are created by consumers, and personal consumption drives nearly 70% of GDP, then the proper model of the economy is one where consumers are at the center of the economic universe, not businesses. And if consumers are the primary force driving economic activity, then it's only logical that public policy should reflect their role more so than the interests of business whose fortunes are determined by the behavior of consumer markets. In fact, not only are consumers job creators, but they create the markets that allow businesses to exist in the first place.
This means that contrary to the claim that pro-consumer policies represent socialism which is bad for business, polices that strengthen consumers and their ability to consume are actually highly pro-business. Furthermore, public policies that strengthen consumer demand, especially for those with the most immediate need to spend such as the unemployed, will cause money to pulse through the economy faster. This effect increases the flow of money, something economists give the wonkish term Velocity of Money.
This is in contrast to a policy of tax cuts which would have to produce far more economic growth to pay for them than is likely even under the most optimistic scenarios. Worse yet, tax cuts that favor the wealthy strip money from the consumers whose consumption propels economies and creates jobs. And on top of this, policies that weaken the consumer classes for the sake of the rich - which defines our current form of supplier capitalism - are ultimately unsustainable as consumer consumption will at some point decline to the point it is unable to grow the economy. Long-term this represents a massive existential threat, to both consumers and businesses alike.
So pro-consumer policies, the ones being viciously painted as evil socialism, are anything but, and in fact are more pro-business and economically-sustainable than what Republicans are fighting so hard to perpetuate, which they continue doing even though it risks the long-term demise of society, the economy and their own interests.In fact, what they're calling socialism is actually a superior form of capitalism, one that not only benefits many more people, but is sustainable for both consumers and business. What such pro-consumer policies do is create a social environment that’s conductive to long-term, sustainable consumption, the fuel of any economy.
So maybe it's time to shed the word socialism altogether and call pro-consumer policies what they really are...Sustainable Capitalism. Because Sustainable Capitalism is not socialism...it's better.
