Defining Ideas

The Rise Of American Socialism

Tuesday, May 10, 2016
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Steve Jurvetson

Obama’s recent impromptu remarks to a Latin American audience provide a fleeting glimpse into how the American Left is preparing mainstream America for socialism.

In his unscripted talk in a town hall meeting in Argentina, Obama downplayed the “sharp division between left and right, between capitalist and communist or socialist.” Notably, Obama characterized such divisions as “of the past,” as if they do not exist anymore. Per Obama, we supposedly live in a post-modern ideology-free world. Although capitalist-socialist-communist divisions “are interesting intellectual arguments,” he advised the young people of Argentina: “You don't have to worry about whether it neatly fits into socialist theory or capitalist theory—you should just decide what works.” As an illustration, Obama praised Cuba’s universal health care system as a “huge achievement” while regretting that Cuba is “a very poor country.” Obama’s implication: If Cuba just picked and chose wisely, it could have both its medical care system and a prosperous growing economy—no changes in the political system necessary.

So what to do in such a post-ideology world? According to Obama, we must create “new forms that are adapted to the new conditions that we live in today.” Although economies “rooted in market-based systems” are the most successful, “a market does not work by itself. It has to have a social and moral and ethical and community basis, and there must be inclusion.” No system is perfect; so we must craft an economic system that uses market forces to produce results that are inclusive and socially, morally, and ethically correct. In Obama’s value-free world, practical judgments of what “works” should replace ideological considerations.

The Left’s Fundamental Misunderstanding

Obama appears not to understand that ideology is alive and well and shapes life in profound ways. Societies are based on core ideological principles that cannot be randomly combined according to “what works.”

Economic, political, and social systems are like three-legged stools. The three legs of the capitalist or free enterprise stool are democratic/pluralistic public choice, a non-interventionist state, and a rule of law that protects personal and economic liberty. The three legs of the socialist stool are a one-party state, pervasive intervention in economic affairs, and a lack of a rule of law to guard personal and economic freedom.

The capitalist stool stands higher and is more stable than its socialist counterpart. Centuries of history show that capitalist, free enterprise economies have been able to grow, provide rising living standards, and innovate new technologies, contrary to Karl Marx’s belief they would inevitably collapse. Consider Germany and Korea: At the time of separation, North and South Korea had the same per capita income. Today, the Communist North has the same subsistence income as 65 years earlier, while the capitalist South’s has increased ten-fold with a thriving middle class. When the Berlin wall fell in 1989, curious West German visitors to the elite Wandlitz housing compound were surprised that East Germany’s top leaders did not live much better than they. In fact, their greatest privilege was a store stocked with West German goods within the compound grounds. Even the countries cited by the Left as positive examples of “democratic socialism”—Sweden and Denmark—gained their affluence through a century of free-enterprise growth, and they revert back to first principles when they stray too far from the model.

What Obama fails to understand is that a society’s core values will constrain its policy landscape. A rule of law challenges the power of dictators, both communist and of other stripes, such as Russia’s Vladimir Putin. Limited government does not produce results that Obama and his ilk accept as moral, ethical, and inclusive. Capitalist welfare states that go overboard on redistribution and fairness lose the efficiency of the market economy. The freedom of entrepreneurs to start businesses and for corporations to work in the interests of shareholders conflict with a communist/socialist state’s control of the economy.

Why the Soviet System Rejected Transplants from Capitalism

The Soviet Union is another good example of how Obama is wrong. The Soviet experiment with state ownership, national economic planning, and Communist Party dictatorship was the greatest failure of the twentieth century. Communism burst on the world scene with the Bolshevik Revolution of 1917 and Stalin’s forced industrialization of the 1930s. The leaders of the Soviet Union vowed to bury capitalism. Their promise of rapid growth, victory over poverty, and a worker state captured one third of the world’s population at its peak. Today, it accounts for a fraction of one percent because its sixty-year experience revealed Soviet-style planning could not deliver its promises, and it could not be amended to do so.

When the Soviet leaders realized in the mid-1960s that the internal weaknesses of their communist system were sending them into a death spiral, they did what Obama recently advised his Argentinian audience. They decided to take over what “worked” in capitalist systems—the profit motive and managerial freedom—only to have vested interests reject these capitalist reforms, much as a living organism rejects a foreign transplant.

Twenty years later, reform communist leader Michael Gorbachev decided to restructure the Soviet economy into a new form of “socialism with a human face.” He allowed political dissent, destroyed the central planning system, and freed up enterprises, while continuing to set prices, refusing to give market forces free rein, and failing to establish a rule of law. The result was a huge black hole, which sucked the remnants of the Soviet planned economy into a world of chaos that plagued Russia for decades. Notably, Gorbachev, like Sanders today, cited Sweden and Denmark as his model.

Why China Rejects the Rule of Law

China’s unprecedented growth after 1978 was due to its opening to the world market, free enterprise zones, and the mobility of migrant workers. Despite its monumental growth, China remains a poor country. As China struggles to escape the middle income trap, it must increasingly introduce to its economy what “works” from the capitalist experience.

The features of the Chinese economy that do not work are well known: Foreign companies complain of arbitrary treatment and the lack of protection afforded by the rule of law. Instead of relying on courts to adjudicate claims, they must seek powerful patrons to protect them from capricious behavior. Chinese entrepreneurs face expropriation, arbitrary claims against their assets, or even arrest for corruption. Instead of growing their business, they move themselves and their families abroad to live in a more protected environment. Corruption emanating from the Communist Party must be tamed, freedom of information must be assured, and a true rule of law and protection of property rights must be introduced if China is to reach the next level.

Such necessary changes are not so simple to enact given the fundamental ideological building block on which “socialism with Chinese features” is based: the dictatorship of the Communist Party. As amended in 2002, the Chinese Constitution states that:

The Communist Party of China is the vanguard both of the Chinese working class and of the Chinese people and the Chinese nation. It is the core of leadership for the cause of socialism with Chinese characteristics and represents the development trend of China's advanced productive forces, the orientation of China's advanced culture and the fundamental interests of the overwhelming majority of the Chinese people. The realization of communism is the highest ideal and ultimate goal of the Party.

The Communist Party dictatorship is China’s ideological core. Any capitalist ideas that challenge the Party’s leading role will be rejected just as they were in the USSR.

If the rule of law were to trump the dominance of the Chinese Communist Party, the law becomes more powerful than the Party. If citizens are allowed to express their views openly and publicly, they could question why the Party, and not the people, is granted the leading role in society.

Why Cuba Cannot Introduce a Market Economy

Cuba is much like the USSR and China. The Cuban Communist Party is its core ideological institution. Article 5 of the Cuban Constitution states:

The Communist Party of Cuba…. the organized vanguard of the Cuban nation, is the superior leading force of the society and the State, organizing and guiding the common efforts aimed at the highest goals of the construction of socialism and advancement toward the communist society.

If the Castro brothers were to follow Obama’s advice, they would replace their Communist planned economy with private enterprise. The Cuban state economy, however, is run as a military corporation by the 60,000-person army—the backbone of the Castros’ power. The military is purported to control 60 percent of the economy and receive 40 percent of Cuba’s foreign exchange. According to Obama’s logic, the Castros should introduce, along with free enterprise, a rule of law, property rights, legal protections, attractive conditions for foreign investment, and allow a flourishing business class. These changes, though, would eventually spell the end of the primacy of the Communist regime and therefore will not happen.

The Cuban leaders instead focus their extremely limited resources on universal health care to divert the attention of visiting heads of state (like Obama) and provide ammunition for idealistic supporters in U.S. college dorms. One-party dictatorships concentrate on priority projects to gain world acclaim. East Germany had its drug-induced Olympic champions. Impoverished North Korea has its primitive nuclear bomb and missile programs. And the USSR had its space program and a defense establishment that challenged the United States.  Impoverished Cuba devotes eleven percent of its GDP to public health compared to the Caribbean and Latin American average of four percent. It also should be noted that Cuba’s doctors-abroad program is its major export earner. Cuba’s health care system is not only good for the image. It is good business.

The shining baubles of military power, athletic success, and low infant mortality distract from the few accomplishments and many failures of the one-party state directed economies.

Can Capitalism Learn From Socialism

As a Leftist transformative president, Obama believes that a big and intrusive state “works” for the United States. Under Obama, the federal government has used its coercive power to: require citizens to purchase products they may not want (Obamacare), harass citizen groups like the Tea Party, and direct regulatory agencies to deliberately kill whole branches of the economy, like coal, while promoting industries that cannot survive in a market setting, such as green energy.

Beyond these examples of coercion, most Americans do not understand that their government has and exercises vast coercive power through taxation and regulation. Rather, they associate coercion with Communist rulers, such as Stalin, Mao, the Castros, and the Kim family dynasty. Americans rarely consider the coercive and punitive power that the state holds over them.

The constitutional principle of limited government has been attacked, most intensely during the Obama, Johnson, and Roosevelt administrations. The Federal Registry of bills and regulations went from 14,500 pages in 1960 to a record 82,000 in 2015. Non-defense federal government spending rose from 8 percent of GDP in 1960 to 18 percent in 2016. A count of federal agencies yields more than 700 departments, and the federal government does not seem to know the exact number. The federal tax code is 75,000 pages. April 15, 2016 marks the first year Americans must declare whether they have purchased health-care insurance. If not, they must pay a penalty.

Unlike Communist systems that reject foreign transplants, affluent capitalist countries, such as the United States and some European nations, do not automatically reject governments that have grown too large, too intrusive, and too coercive. Vested interests play the system for special interest legislation on both sides of the aisle. Elected officials promise limited government but deliver the opposite. Costly legislation that yields narrow benefits can be packaged as essential for the public good. The behind-the-doors machinations of the executive and legislative branches have grown too complicated for voters to understand. Rather they are left with the uneasy feeling that the government is run for insiders and not for the people. Small wonder that this system has in 2016 spurred the presidential candidacies of outsiders who pledge to turn the establishment on its head.

Free Enterprise Lacks Safeguards

Whereas, communist/socialist systems have built-in alarms to protect themselves from private-enterprise institutions, limited government appears at times defenseless. Indeed, the Frasier Institute Economic Freedom Index shows that the U.S. has fallen from the sixth freest economy in the world, when President Barack Obama took office, to eleventh place in 2016. America’s declining score is related to rapidly rising government spending, subsidies, and bailouts. America’s declining score, especially prominent in property rights and rule of law, should be taken seriously. Countries that have higher scores enjoy wealth and prosperity. As remarks one analyst: “Since economic freedom is not about the privileges of the few but the opportunities of the many, incomes of the very poorest are much higher in freer countries than in those less free.”

Voters fall for the Obama/Sanders Leftist promise of a system that combines high living standards, innovation, and efficiency with state coercion to ensure that the “community” (Obama’s code word for society’s have-nots) gets a fair social, moral and ethical shake. But such a system has never existed in history and never will. Our Leftist professors apparently do not teach this fact to the ardent young followers of Bernie Sanders on college campuses.

The elite media and liberal college campuses associate “capitalism” or “private enterprise” with heartless corporations, greedy businessmen, and inequality. They promote the Leftist cause through political correctness, which is designed to crush individualism and promote uniformity of thinking to achieve its goals of equal results. These ideologies are not only incompatible with the best economic results for all citizens, but at their extremes are incompatible with an educated and enlightened population. How can an educational system that teaches that Mao’s People’s Liberation Army defeated Japan (not the U.S.), that China’s invasions of Vietnam and Tibet were defensive, and that ignores the thirty million famine deaths of the Great Leap Forward produce an educated population?

Obama’s subtle message with “pick and choose what works” is that socialism is as good as capitalism or, better put, that state coercion is just as good as individual freedom. Pragmatism, evidence, and basic logic are, of course, contrary to this view.

Editor’s note: The author is grateful to Thomas Mayor and to Richard Mayor for their comments on this essay.