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Friday, August 13, 2010

Who’s Afraid of Socialism?

Time to reassess our strategy.

I predict Thomas Geoghegan’s new book, Were You Born on the Wrong Continent?, will ignite a vigorous debate over which is better: American capitalism or German socialism. (If I’m wrong, who’ll remember?)

I further predict the debate will be largely worthless.

Let me disclose at the outset that I have not read the book yet. But I have read an excerpt and have seen Geoghegan interviewed on MSNBC. So I know what he’s getting at, even if I don’t have all the details.

Geoghegan’s website summarizes the book thus:

There’s been a lot of throwing around of the term “socialism” by critics of President Barack Obama, who has been maligned as a European socialist by conservatives even though his administration’s agenda isn’t close to that of a European social democracy. But if you really think about it, perhaps we would be happier in cozy Germany or France, where there is a socialist-type government to catch us, than in the wide-open, free-fall United States….

It’s not just that European social democracy is “nicer.” It’s not just that, under European-type socialism, many of us would perhaps be happier. It may be that only with some form of it can our own country, with its ballooning trade deficit, globally compete—or even just keep going without repeated financial crashes and crack-ups. High-wage Germany, which offers the most bottom-up worker control of any European country, nearly ties with China as the leading exporter in the world, well ahead of the United States. But in China and America we work until we drop while in Germany, they take six weeks off a year (with a shocking number of four-day weekends along the way). It’s not just that the Germans can outcompete us, but they seem to be doing it with one hand tied behind their backs.

And he writes in the book (excerpted in In These Times):

The bottom two-thirds of America would be better off in Europe. I mean the people who have not had a raise (an hourly raise in real dollars) in maybe 40 years, and who do not even have a 401(k), nothing but Social Security, and either have no health insurance or pay deductibles of $2,000 or more. Sure, they’d be better off in Europe. When unemployed, they’d certainly be better off in Europe. Over there, even single men can get on welfare. And in much of Europe, contrary to what we hear, unemployment is much lower than over here.

On MSNBC he said, “[I]n Germany and France the average work time per year is about 1500 hours. In the U.S. it’s closer to 2000. That leaves 500 hours of extra free time for Europeans. I mean you only have one life to live.”

You get the idea. He thinks that “European socialism” and “social democracy” would not be effective scare words in American politics if people understood that they mean “free education, free child care, free nursing home care, guaranteed vacation time, and generous unemployment payments — while their white-collar American counterparts struggle to pay for the same.”

The reason I expect the debate to be mostly worthless is that nearly everyone has a stake in portraying it as a debate between socialism and free enterprise, or “capitalism,” call it what you will. So conservatives and even many libertarians will feel impelled to defend the American system’s honor.

What’s in a Name?

But why? Because it’s called “capitalism” and “free enterprise”? That’s not a good reason. What counts is what the system really is. And it’s nothing like an open, competitive market void of government privilege. It’s a corporatist system in which the liberty and property of regular people are subordinated in myriad ways to the interests of a mainly business-oriented ruling elite. (Do we need further evidence than the “socialist” Barack Obama’s coziness with Wall Street — rhetoric notwithstanding — and his generous gift to the health insurance industry?) Yes, we have some degree of freedom, but it is freedom circumscribed by a system of rules and regulations aimed at producing certain broad economic outcomes for the well-connected. At the federal, state, and local level, money has always talked. Intervention is of course defended on moral grounds (say, protection of consumers and workers), but behind the scenes lurks an economic interest. “Baptists and bootleggers” are ubiquitous.

In reality the debate is not between socialism and free enterprise.  Rather it’s between two forms of corporatism, America-style and European-style.  I don’t want either, but it’s not obvious to me a priori that the American variant is superior in every respect to the European variant. (Nor is it obvious to Matt Welch, my counterpart at Reason.) One variant may indeed cushion the victims of political privilege-granting better than others. Considering who writes the rules over here, I see no grounds for thinking that we necessarily have it better than the Germans do in every possible way.

I’m not saying Geoghegan’s description of Germany is accurate or complete. But Germany is no basket case like Greece. Sure, Geoghegan overlooks the fact that education, child care, and such can’t really be free. I hope he realizes that he’s defending not free benefits but rather taxpayer-provided benefits, that is, a distribution of wealth by the political elite. But it’s not as though we have none of that here.

Questionable Logic

Geoghegan caught my attention because I’ve been wondering about the wisdom of the libertarian and conservative penchant for calling every objectionable thing – Social Security and Medicare, for example — “socialism.” The logic apparently is this:

People don’t like socialism. So if you convince them that Social Security is socialism, they will not like Social Security.

Well, maybe. But things just might work out this way:

People don’t like socialism. But if you convince them that Social Security is socialism, they might decide socialism isn’t so bad after all.

Wouldn’t it be better to explain what’s wrong with Social Security morally and economically and what the real alternatives are, rather than going for a short cut that might take you where you don’t want to go? Critics of Social Security have been calling it socialism since 1935. Just how long is this strategy supposed to take before it succeeds?

Maybe our strategy for talking people out of the welfare state is all wrong. We often imply that Americans are like scared children for wanting the security the welfare state promises. That’s ridiculous. When I lecture about mutual aid, I make the opposite point: The wish to create islands of relative certainty in life’s sea of uncertainty is perfectly rational, even reasonable. The entire mutual aid phenomenon, which flourished until the government crowded it out, can only be explained in those terms. Insurance too.

The problem with the welfare state, besides its foundation in forced subsidy, is that it’s bad at providing security – including income security — in the long run. It’s based on political whim and perverse incentives. On the other hand, mutual aid and the truly freed market — which would likely produce more worker control and a shorter work-year than Germany has — would actually deliver what the welfare state only promises.

  • Sheldon Richman is the former editor of The Freeman and a contributor to The Concise Encyclopedia of Economics. He is the author of Separating School and State: How to Liberate America's Families and thousands of articles.