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Posted by Time for change in General Discussion (1/22-2007 thru 12/14/2010)
Sat May 05th 2007, 09:46 AM
A workable economic system should be based on an evaluation of how policies operate in the real world, rather than on ideological dogma. The ideal combination of policies varies from one culture to another and from one nation to another.
In the 20th Century arguments over the relative merits of capitalism and socialism routinely went way beyond stridency – they resulted in immeasurable amounts of violence and deaths, especially during the Cold War along with the numerous hot wars that it spawned. With the demise of the Soviet Union in 1989 the proponents of capitalism claimed complete and permanent victory for their preferred economic system, claiming further that that victory was inevitable and due to the inherent superiority of capitalism over all forms of socialism.

But there were several problems with that claim. The economic system that a country practices is only one of numerous traits that characterize the nations of the world. World history is full of examples of collapsing empires that are explained by factors other than Communism or socialism. Furthermore, the Soviet Union practiced one variant of socialism, and an extreme variant at that. Even if their economic system was the sole reason for their collapse, that wouldn’t prove that other, less extreme variants of a similar economic system are inherently unsustainable.

Arguing the relative merits of capitalism vs. socialism can be a very frustrating undertaking because of the extreme emotionalism frequently associated with both sides. Frequently, if not the good majority of the time, such arguments have an all or none quality that refuses to recognize solutions that involve a combination of the two systems. That’s a shame because – in my humble opinion – the argument should not be at all about which system is better, but rather, what combination of the two, in what circumstances, makes for a better system. For the fact of the matter is (I believe) both pure capitalism and pure socialism are myths that have not and cannot work in reality.

I do not intend in this post to argue for the superiority of one system over the other. Rather, my intention is to describe a framework for discussing the issue, along with some thoughts about the relative weaknesses and strengths of each. It could be that economists on both sides of the issue will consider my ideas to be too simple minded. Perhaps they are. But still, I think that they represent an improvement over the stridency with which this issue is often discussed.

Definitions and goals

For the purpose of this discussion, capitalism is a system whereby economic transactions are handled individually, without interference by government or any other entity. Socialism (Communism being the most extreme variant of socialism) is a system where economic transactions are governed instead by the community – which generally would mean the government. (How responsive the government is to the people that it represents is another issue, which I won’t go into at this time.) Those two definitions aren’t very different, as far as I can tell, from the definitions of socialism and capitalism provided by Wikipedia, though Wikipedia goes into considerably more detail to define them.

Before arguing about the relative benefits and detriments of a system people should define what they believe the system is supposed to accomplish. For example, if a person believes that the virtues of an economic system should be defined entirely by how that system benefits him, then obviously he is going to argue for a different kind of system than he would if he had a more altruistic attitude towards the subject.

My personal opinion, boiling it down to the bare essentials, is that an economic system should be judged on two goals: 1) Fairness – that is, the extent to which people receive relative benefits from the system according to what they deserve; and 2) Total wealth creation – that is, the total benefits (or wealth) that the system creates.

There is probably at least some tension between those two qualities, such that too much of an increase in one necessarily results in a decrease in the other. People vary in the relative importance that they attach to those two qualities. In discussing this issue I encountered one person, for example, who felt that fairness (or perhaps evenness is a better word in his case) was the only quality that was important. In other words, if benefits are measured on a scale of 1 to 10, he felt it would be better that everyone gets a value of “1” out of the system than that the benefits vary from 2 to 10. My opinion is that that is an extreme and unfortunate position to take on the matter, since that would cause everyone to suffer. Rather, I believe that if we can’t have a system that is completely fair and results in maximum productivity at the same time (which is obviously the case) it is best to strike some sort of reasonable balance between the two.

A few words on capitalism and fairness

I have in numerous different DU posts quoted the 431 to 1 income ratio between the average CEO in the United States today and the average employee, as a severe criticism of our economy and our country under Republican leadership. I quote that figure as a criticism because I very much doubt that such a wide disparity in income is morally right or deserved by CEOs relative to their employees. In other words, I very much doubt that the average CEO works or produces 431 times as much as his average worker.

Republicans will tell you, in order to justify the tremendous income disparities that we see in our country today, that I am wrong about that. They will claim, in other words, that such a system works to the benefit of all, because of the increased wealth that it produces, or that it is fair because CEOs provide an invaluable service that few others could provide. Or they will claim both. Since I pride myself in having an open mind and in being able to judge things without the aid of ideology, I try to have an open mind on this subject. But that’s hard to do because the Republican position on this seems rather absurd to me.

CEOs determine their own salary to a very large extent today. Do they make that determination based on the value that they create, or do they make it based on how much money they want. Common sense tells me that the latter is the case. And when I look at people like Ken Lay or the elites of Exxon Mobile, who go to extra-ordinary lengths to prove that global warming is a myth, it is extremely difficult for me to look at the “value” that those CEOs produce a positive light.

Some problems with unfettered capitalism

The extreme proponents of capitalism claim that unfettered capitalism results in a distribution of wealth that maximizes total wealth and is almost completely fair at the same time. It seems evident to me that that claim is based much more on their ideological point of view than it is on actual evidence. Here are some facts and issues that I believe dispute their claim:

The need for government regulation
Pure capitalism presupposes the complete absence of government regulation on how people make their money. But we live in a world where industry has a great potential to impinge upon and harm the lives of other people. For example, industrial processes have the potential to degrade the quality of the water, air and soil that people need to live decent lives. Other assaults on our environment, while not affecting today’s inhabitants of our country, may have the potential to profoundly impair the quality of life for future generations. Why should an influential minority of our population have the right to do that at the expense of millions of other people?

Services that only government can (or should) provide
There are many services that people need that cannot (or should not) be provided by the private sector. It is so important that these kinds of activities be performed well, that making a profit from them should be either of no consideration at all, or at the very most it should pale in comparison to the need to do the job right. Take public health services, for example. Threats to the public health may affect whole populations. If government contracts out such services to the private sector, the corporations who get the contracts might be tempted to cut corners in order to make a larger profit. When government contracts out our elections to the private sector, those corporations may be tempted to manipulate the vote count in order to get their friends elected. Can we afford to risk our democracy in that manner? And consider our prison system. Lobbyists for the prison industry actually lobby Congress for laws that increase our prison population and provide them with a source of slave labor. All of these things border on turning our government from democracy to tyranny.

It has long been recognized that corporations have a tendency to form monopolies, which reduce competition and raise prices. When that happens, the “free-market” principles that purportedly work to give corporations the incentive to provide quality products or services at fair prices go out the window. Where is the fairness in that? The only entity that can prevent that from happening is government.

Situations where free markets can’t operate well because of lack of information
In the ideal “free-market” corporations are motivated to provide good quality products because people are willing to pay more for good quality. But there are many instances where the public doesn’t have the information to adequately judge crucial aspects of quality, so they must rely upon government to help them out. Examples include the Food and Drug Administration to ensure the safety of foods and drugs and the Consumer Product Safety Commission to ensure the safety of consumer products.

Scarce resources that are essential to people
One particular scarce resource that is essential to American democracy is the public airwaves. Essential information is transmitted through the public airways, and therefore their use is intimately tied up with our First Amendment rights to a free press, which is essential for the workings of democracy. This fact was recognized as early as 1934, with the enactment of the
Federal Communications Act and the Fairness Doctrine in 1949, which required that radio and television stations must act in the public interest in return for being granted free licenses to use the public airways. Given the fact that democracy itself depends upon the free flow of information, it should be obvious that control of the airways must remain open to public use and not allowed to be taken over by powerful corporations with no public obligations. Government should have an obligation to ensure that use of the public airwaves is conducted in the public interest.

Unemployment is a well known, common and tragic plague of capitalistic societies. How can unemployment improve the wealth of society? Worse yet, how can it be fair for a person (especially a child) to go hungry, lack education or medical care, or be homeless when that person is willing to work if given the chance?

Vast disparities in wealth lead to a situation where the wealthy have disproportionate political influence. Essentially, they pay money to our elected representatives, and in return those representatives enact laws that favor those who bribe them… I mean donate to their campaigns. It’s actually legal in our country to do that, as long as it isn’t too obvious. Perhaps this issue has more to do with politics than economics, since it is theoretically possible to have a system where disproportionate wealth does not translate into disproportionate political influence. But though that may be theoretically possible, it is not likely to transpire anytime soon. As it stands now in the United States, wide disparities in wealth create a vicious cycle whereby the wealthy buy political influence, which they then use to increase their wealth even further.

I’ve already touched on this issue. It is well known that children who come from poor families have bleaker futures, on average, than those whose parents are middle class or wealthy. Add that to the vicious cycle between wealth and political influence, and it’s difficult to see how wide disparities in income can routinely be justified as being fair.

The purported connection between capitalism and liberty

Another argument frequently used by proponents of capitalism is that capitalism is virtually synonymous with liberty. This philosophy suggests that intrusions by government into the economic affairs of its citizens constitute egregious violations of their basic freedoms.

That argument ignores some basic facts concerning the way that capitalism operates in our society. The U.S. government establishes, through its monetary system, infrastructure, laws and institutions (not to mention subsidies), a system that safeguards private property, facilitates business transactions, and enables corporations to make their profits. In the absence of those laws, infrastructure and institutions, chaos would reign and the conducting of business would be next to impossible. Under such circumstances, the contempt shown by the wealthy and powerful towards any attempt of government to help out its less fortunate citizens should be seen as highly hypocritical. And as noted above, the absence of corporate regulation often means that corporations are thereby granted license to destroy the environment or the quality of life of less influential Americans in their quest for profit.

In any event, in a democracy, ideally the people create a government to provide for their needs and wants. Typically that involves empowering government to intervene, at least to some extent, in the economic life of the nation for the benefit of its citizens. Why shouldn’t people have the right to create such a government? Why should a wealthy and powerful minority claim the right to do whatever they want, regardless of the effects on other people, in the name of what they claim to be “liberty”?

Some problems with excessive socialism or Communism

Despite all the problems that I’ve attributed to capitalism, it does have some major virtues. Most important, if properly modulated it can provide major incentives for people to produce goods and services that benefit society at the same time that they add to their own wealth. Excessive socialism can destroy those incentives, thereby inhibiting the production of needed products and services, to the detriment of all society.

We also know that some Communistic societies, the Soviet Union being the major example in the 20th Century, have been associated with very repressive and dictatorial governments. What the causal relationship is between Communism or excessive socialism and repressive government is not a question that I’m prepared to answer. There are plenty of examples of non-Communist dictatorships as well, most notably Germany under the Nazis. It could be that extreme economic systems of either the right or the left tend to lead to repressive dictatorships.

Well, I guess I had a lot more to say about the defects of capitalism than I had to say about the defects of socialism. That doesn’t necessarily mean that I believe socialism to be superior to capitalism – rather it simply means that I see the defects of capitalism as more complex and thereby requiring more words to describe adequately. Or, maybe it’s simply because I’ve lived in a capitalistic society all my life and therefore am better able to describe its defects.

The ideal economic system

The ideal economic system would provide economic rewards (incentives) sufficient to motivate people to produce the products and services that society needs and wants. But at the same time it would have safeguards to ensure that the wealthy and powerful couldn’t walk all over ordinary citizens in their quest for profits. It would ensure that corporations are prohibited from destroying our environment; it would provide government protection to consumers against the risks of dangerous products; it would ensure that all citizens had the opportunity to create a decent and healthy life for themselves; it would actively protect vulnerable population groups against discrimination; it would actively guard against disparities in wealth that are so great that they endanger democracy; and it would ensure that government provided the goods and services that its citizens need and could obtain in no other way.

I’ve spoken in generalities here, without delving into the specific policies needed to accomplish these things. I will just briefly note here that a recent article in The American Prospect, by Mark Greenberg, called “Making Poverty History”, talks about this in more specific terms. It mentions things such as federal minimum wage laws, progressive tax laws, health care, education, child care assistance, promotion of full employment, and labor laws that put workers on a more equal footing with their more wealthy and powerful employers. Greenberg’s article is part of a much larger series of articles in this month’s issue of The American Prospect, titled “Ending Poverty in America”.

What is the precise combination of capitalistic and socialistic policies that is required for the best economic system is a question that has not been answered yet, and over which tremendous controversy remains today. I do however have three things to say about that question: 1) It would certainly make use of a combination of capitalistic and socialistic principles, rather than either one in pure form; 2) It should be based on an evaluation of how these policies operate in the real world, rather than on ideological dogma; and 3) The ideal combination of policies varies from one culture to another and from one nation to another. What works in one society may be unworkable in another.

And lastly I want to note that, among the Democratic candidates for President, John Edwards and Dennis Kucinich have discussed in detail plans for dealing with some of these issues, as I extensively discuss in this post.
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The Unfulfilled Promise
The Unfulfilled Promise of the American Dream: The Widening Gap between the Reality of the United States and its Highest Ideals

Time for change

Notwithstanding the lofty sentiments and purpose of the U.S. Declaration of Independence, the reality of the United States of America did not then – and never has – lived up to its ideal. Our nation remains today a long way from fulfilling the promise implied by those ideals. Yet, our Declaration was a great start, and it has long shone as a beacon of hope for people all over the world.

Throughout our history, while many have striven to close the gap between our highest ideals and the reality of our nation, others have focused on the accumulation of private wealth and power, at the expense of everyone else. In recent decades the latter have gained much ground, leading to increasing imperialism abroad and deteriorating democracy at home, characterized by routine (and legal) bribery of our public officials, the fusion of government and private corporate interests (corporatocracy), a corrupt election system largely in the hands of private corporations, a corporate controlled communications media, and the widespread acceptance of Executive Branch secrecy, routinely justified with little if any questioning, by the magic words “national security”. All of this is rapidly turning our country from the democracy proclaimed at our founding into a plutocracy (government by the wealthy and for the wealthy). The result is the most obscene wealth gap our country has ever known, the highest imprisonment rate in the world, rampant militarism, routine flaunting of international law, the least efficient health care system in the developed world, a pending environmental catastrophe that threatens to destroy the life sustaining forces of our planet, and myriad other problems that threaten to destroy our nation and tyrannize our people.

My new book, The Unfulfilled Promise of the American Dream – The Widening Gap between the Reality of the United States and its Highest Ideals, explores the roots and consequences of the demise of our democracy, and why most Americans have been unable to understand this process or even become aware of it. A good understanding of why and how we have deviated so greatly from the ideals of our nation is the first and necessary step towards getting back on the right track and revitalizing our society.

The book is currently being sold in electronic PDF format and can be purchased at for $3.99. It will also soon be available in Amazon Kindle format. DU members who cannot afford to buy the book but would like to read it can pm me with your e-mail address, and I will send you a free PDF copy.

I’ve previously posted on DU a slightly earlier version of the introduction to the book, which is also posted at my site. Here is the Table of Contents, followed by a brief description of the three parts of the book:


Prologue – What is Wrong with the United States of America?

Part I – Root Causes of the Impending Demise of American Democracy
Chapter 1 – Legalized Bribery
Chapter 2 – Human Psychological Factors
Chapter 3 – Corporatocracy
Chapter 4 – Corporate Control of Media
Chapter 5 – Corrupt Election System
Chapter 6 – Government Secrecy
Chapter 7 – American Exceptionalism

Part II – A Sampling of Imperialist Actions
Chapter 8 – Slavery and its Legacy
Chapter 9 – Early U.S. Imperialism
Chapter 10 – U.S. Imperialism in Cold War
Chapter 11 – Iraq War and Occupation
Chapter 12 – Afghanistan War

Part III – Consequences
Chapter 13 – Election of George W. Bush
Chapter 14 – War and Imperialism
Chapter 15 – Class Warfare
Chapter 16 – Predator Financial Class
Chapter 17 – Shock Therapy
Chapter 18 – Contempt for Int. Law
Chapter 19 – The “War on Drugs”
Chapter 20 – Climate Change
Chapter 21 – “War on Terror”
Chapter 22 – Health Care
Chapter 23 – Unaccountable government
Chapter 24 – Response to 9/11 Attacks

PART I – Root Causes of the Impending Demise of American Democracy

It is somewhat difficult to separate the causes of our problems from their consequences, since they combine to form a long chain of cause leading to consequence, leading to more consequences, etcetera. Nevertheless, it seems worth while to identify the root causes of our problems, those that occur early in the chain and lead to so many of the tragic consequences we see today. The only chance we have of reversing the demise of our democracy is through addressing and attacking its root causes.

At the top of the list is the systematic bribery of public officials by the powerful corporations (Chapter 1) whom our government is charged with regulating in the public interest. Instead of calling it bribery, we call it “campaign contributions”, but what we call it isn’t as important as what it is. It is hard to fathom how democracy can survive when such a practice is legal and condoned.

Working in tandem with our system of legalized bribery is the nature of the people who inhabit our country. That is not to say that Americans are inherently substantially different than any other people. Human beings are imperfect, and that is probably a major reason why in a world where civilization began more than five millennia ago, the oldest written national framework of government in the world today – the Constitution of the United States of America – is only a little more than two and a quarter centuries old. Chapter 2 explores the roles of basic human needs, authoritarianism, psychological defense mechanisms used to prevent us from perceiving reality as it is rather than as we’d like it to be, and corrupted ideologies in causing us to passively accept the accumulation of power in the hands of ambitious and ruthless individuals who care about little else than expanding their own wealth and power.

When bribery of public officials is tolerated as an inevitable aspect of public life, government inevitably grows close to the wealthy interests that shower it with money in return for legislative and other favors. A malevolent symbiosis grows between the state and corporate power, resulting in rule by an oligarchy that is highly detrimental to the lives of ordinary people (Chapter 3). Using their accumulated wealth and power to manipulate our legislative process, the oligarchy grabs for more and more control of the communications media (Chapter 4) that are used to control the information available to and shape the attitudes of our nation’s people, in pursuit of their own narrow interests.

Since the 1980s an orchestrated campaign has been underway to demonize “big government”, thereby paving the way for private corporate control over more and more functions that were previously deemed intrinsic functions of government. Among those functions is the running of public elections (Chapter 5) – the function that symbolizes democracy perhaps more than any other single function. Consequently, the purging of selected registered voters from our computerized voter rolls has become a routine recurring event throughout much of our country, and without a doubt determined the results of the 2000 – and probably 2004 as well – presidential election. Just as bad, more and more of the counting of votes in our public elections have been turned over to private corporations, which count our votes using electronic machines using secret software to produce vote counts that cannot be verified by anyone.

Bribery, the fusion of government and private interest, fake and biased news, and corrupt elections are not things that government and its corporate allies want us to know about. Consequently, they construct walls of secrecy (Chapter 6) to keep us from obtaining information that sheds light on their activities. The perfect phrase for facilitating this is “national security”. When our government tells us that the “national security” requires that certain things be kept secret from us, the understanding is that to question such a pronouncement is unpatriotic, and to actually attempt to obtain the “secret” information may be treasonous.

But indefinitely maintaining secrets from the American people can be very difficult, because at least some people want to know what their government is up to. So in addition to the formal mechanisms of secrecy, informal mechanisms are constructed (Chapter 7) to keep vital information away from us. One of the primary methods for doing this is to make certain sensitive subjects taboo – that is, to create the widespread belief that discussion of these topics is so outside the bounds of acceptable human discourse that anyone who discusses them should be shunned by society, or worse. The most common issue that falls into this category is any discussion that sheds light on the disparity between American ideals and the reality of life in our country today.

PART II – A Sampling of Imperialist Actions in U.S. History

Notwithstanding the fact that our founding document says that “all men are created equal” and speaks of the inalienable rights of humankind, the United States has throughout its history partaken of massive exploitation of other peoples.

It is estimated that at the time of our birth, 18% of our population was black slaves. In our expansion westwards during the late 18th and 19th centuries, we decimated the original inhabitants of our continent, and often treated them with great cruelty. In 1846 we manufactured an excuse for war with our neighbor Mexico, in which we continued to expand our country westwards and southwards. In 1893 we began our overseas imperialism with the conquest of Hawaii. Our overseas expansion was greatly accelerated in 1898 with our participation in the Spanish-American War, which led to our conquest of Cuba, Puerto Rico, and the Philippines. With our arrival at world superpower status at the end of World War II, we began the Cold War, which led to and served as a rationalization for covert and/or direct military actions against myriad foreign nations over the next 46 years. With the September 11, 2001 attacks on our country, we declared a perpetual “War on Terror”, which served and continues to serve as an excuse to invade and occupy Iraq and Afghanistan, nations that posed no threat to us. We do not know when or if this perpetual war will ever end. We don’t know how many additional imperial conquests it will lead to.

Most Americans don’t think much about all this. Many of these actions are done in secrecy, and the American people don’t find out about them until many years later – or we never find out about them at all. Those that we do know about are spun into the most favorable light, to make them seem benign or even noble.

But these actions come at great costs: in the lives of our soldiers; in the ruined lives of the peoples of the victim countries; in trillions of dollars cost to our people and their future generations; in our international reputation; in anti-American hatred leading to terrorism; and, to our democracy itself. For how can a nation claim to believe in the inalienable rights of humankind specified in its founding document, while making a mockery of that belief in the way it treats other peoples? For that reason alone it is worth while to take a brief look at our long history of imperialist actions.

PART III – Consequences

In the Prologue I give a brief account of what I see as some of the worst and tragic consequences of the root causes that I discuss in Part I – to enable the reader to see where this book is heading. When elections of our public officials are for sale to the highest bidder… when our public officials are so addicted to the “campaign contributions” of their wealthiest constituents that they develop a symbiotic relationship with them… when our communications media are owned and controlled by an oligarchy of wealthy elites… when our citizenry lack the ability to differentiate propaganda from reality… when we allow machines provided by private corporations to count our votes using secret electronic software… then we should expect that the consequences will not be pretty or comfortable for the vast majority of our citizens.

In Part III, I explore those consequences in much greater detail, in the hope that the reader will agree with me that these are very serious problems, and that they must be successfully addressed if our country is ever to fulfill the promise of its ideals, or even make progress in that direction. When enough Americans recognize our problems as problems, stripped of the gloss and spin put on them by our oligarchy, they will rise up and do something about them. Until then there will be no progress, and we are very likely to head in the direction of all the former empires of our planet, ending in chaos, widespread catastrophe, suffering, and ignominy.

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