Talking about politics at the office a few weeks ago, I was surprised how few people understand the relationship between socialism and capitalism in modern states. As of the fall of the Soviet Union in 1991, the two most influential states left on the map are China, the most heavily capitalized socialist state, and the USA, the most heavily socialized capitalist state. As described in my previous article, the reason for this is the zero-sum relationship between pure cooperation (socialism) and pure competition (capitalism).
Both systems have merits and drawbacks, but the optimally influential state relies on both for success. In the United States, however, there is a flawed cultural assumption that every aspect of society is governed at some fundamental level by democratic capitalism. This article concentrates on the USA, and those aspects of its social, economic, political, and cultural climates that belie the assumption that free markets can handle everything.
One of the most prevalent misconceptions I encounter when interacting with Americans is that “capitalism” is equated with “democracy”, as if the two were indissoluble. Capitalism is an economic system, and Democracy a political one. The combination of the two served America well for the first few decades of its history, but as soon as the flaws in Smith’s theories became apparent, methods were put in place to control the shortcomings of the capitalist state. The misconception that capitalism is democracy, at least in America, comes from an observational bias. Americans are raised to believe that America is both capitalist and democratic, so many of the prussian-schooled generations use the terms interchangeably.
Capitalism is an economic theory based on the assumption that free market competition will always produce a better product than state-controlled markets. This implication is overwhelmingly true: those states which rely on free-market capitalism, in my observation produce higher-grade products than those who don’t. This theory functions well to build infrastructure, technology, leadership, medicine, and virtually every other buttress of the modern state, but at grave expense. Insider trading, depressions and recessions, unemployment, insecurity, and vast infringements on human rights are all direct functions of a capitalist state. The major flaws of capitalism have a common root: there is no direct free market function to protect a common good.
Democracy is a political theory based on the assumption that any governed population will at all times know its own best interest and wish its government to operate towards those interests. The obvious strong point of Democracy is that if a state is acing in a manner inconsistent with the wishes of the majority of the population, that population has a means to effect a change in the state. The downside, however, is the tyranny of the majority, and the flawed assumption that individuals know, ten times out of ten, the actions which are best for their society.
Another prevalent misconception is that socialism is the same thing as totalitarianism or oligarchy. Part of this is rooted in the common assumption that socialism is communism, or that totalitarianism is dictatorship. It appears much of this misconception is based in observations of Soviet and Chinese-style communisms. This is the same observation bias that leads Americans to believe that capitalism is democracy, with all of these equalities being patently false.
Socialism is an economic theory based on the assumption that private control of a population’s means of production is the best way to provide an egalitarian distribution of goods and services. This system of state-enforced cooperation serves these goals well, concentrating on the good of the gestalt over the good of the individuals. These systems, though, can squander the genius of its scientists, the creativity of its artists, and the general aptitudes of its population through centralized planning and control of production without market-driven feedback to the production process, and stifling of innovation through concentration on the status quo.
Oligarchy is a political theory based on the assumption that a governed population will never know its own best interest, and that a government should operate on the planned and controlled interests emergent from the cultures and mores of its governed. The obvious strong point of oligarchies is the ability to account for the well-being of all constituent populations in a whole – the minority, the majority, and the individual. The major downside, though, is the history of oligarchies to ignore their purpose, and perpetuate government by the government for the government.
Light can’t exist without darkness, neither can freedom without slavery or property without theft. Without the existence of each of these for a baseline of comparison, the other lacks fundamental definition. In fact, human understanding is fundamentally based on division. In a field of vision, a chair against a wall would be considered a chairwall (or some other word all-together) if not for the contours and borders between the forms in our field of vision. It is this nature of separation, along with effectual interaction with objects in our cognitive domain that give definition to sensation, and draw the lines between definition and description.
George Orwell famously described a society in his book 1984 embodying the ideals that “war is peace, freedom is slavery, and ignorance is strength.” This is a form of another word he coined, “doublespeak,” in which two cognitively dissonant meanings are held to be true. In fact, Proudhon famously stated “property is theft,” in just such an essay – cognitively dissonant, and self-contradictory by nature. These attributes of life are simultaneously mutually defining, and mutually exclusive. The analogy can me made that each pair represents “two sides of the same coin.” Just as you can’t know theft without knowing property, nor freedom without slavery, you can’t know socialism without knowing capitalism. Competition and cooperation are two basic behaviors of overwhelmingly sexually dimorphic species – including humans. Each is needed for survival, but no society can accept simply half of the coin.
Indeed, social institutions are tantamount to slavery – but also are the lack thereof. For every measure of freedom enjoyed, a return measure of slavery is suffered. Humans are, by their very birth, free unto their world and slaves unto themselves. We can minimize our personal slavery by sharing it with the world to maximize personal freedom. This is the meaning of compassion; literally “com”, Latin for “with”, and “patior”, Latin for “suffering.” Compassion is suffering with someone else, sharing slaveries to share freedoms. We can also share our freedoms with the world to maximize personal slavery – giving all you have to the poor. Neither can be fully embraced nor escaped, however – both are woven into the fiber of our species. It is for these reasons that the amelioration of human need should be the aim of all well-functioning states.
Well, while I’m here I’ll
do the work-
and what’s the work?
to ease the pain of living.
Everything else, drunken
dumbshow.
— Allen Ginsberg, from “Memory Gardens”
With very few exceptions, most functions of the American state are socialist institutions. We don’t call them by this name, however, due to cold war-era prejudices. In many ways, too, this disconnect (employing socialism without calling it by name) is a product of our still living in the shadows of World War II. Some fundamentally socialist American systems are architected to protect the people from free market capitalism:
Furthermore, various other fundamentally socialist institutions exist to protect free markets from themselves:
Capitalist economies are among the best ways to optimize supply, price, and demand. Indeed, “all boats rise” within a capitalist economy through optimized use of inherently scarce resources. Some systems work better than others, though, commensurate with the sum of human understanding of the operation of those systems, and the skill of those in oversight. Socialist systems are needed to make sure the market’s invisible hand doesn’t push passengers off the rising (or falling) boats. Taking Adam Smith’s metaphor to its global conclusion, however, we see there is only one boat, on which we’re all passengers.
Social institutions protect the common good. These exist in areas of societies which, if left to the free market, would lead to the regard of human life or livelihood as a currency. It’s time to move away from the cold war fear of socialism and identify the traits we already have. We’re already the United (Socialist) States of America.
A handful of European cities have begun to model their traffic law after patterns observed in China – they’ve completely done away with street signs. Traffic control is, however, non-obvious in its effects. Through concentration on personal responsibility over militant ignorance of one’s surroundings, these experiments in removal of traffic control are showing “the number of accidents has declined dramatically” through concentration on social respect and consideration. What was intended originally to protect the public from itself ends up costing states the lives of their inhabitants. In the natural market for traffic, supply is the means, demand is the will, and over-regulation costs lives. When left to minimal social convention, described rather than prescribed by the state, loss of life and livelihood are minimized. The zero-sum games of traffic are the only areas which, in this theory, merit state description: on which side of the road to drive, to which side to yield, and where it is permitted to park.
In addition to mobility, human rights include food, water, shelter, relaxation and education, among others. These systems, in America, are variously socialized through welfare, Social Security, and the Federal Emergency Management Agency. Free markets are ruthless in their efficiency of allocating ideal prices between supplies and demands, but again, when the currency of that market is life itself, minimum state intervention is merited. While there are markets for the social exchange of food, water, shelter, relaxation and education, none of them guarantee a baseline personal existence. When the state chooses not to intervene, or chooses to intervene poorly (as we saw with Hurricane Katrina in 2005,) the life-currency of the market extinguishes, and the governed mourn their loss. When the state chooses to overcompensate for these markets, as we see in the traffic example, the same outcome occurs: loss of human life and livelihood. State intervention is consequently required for and should be restricted to the solution of zero-sum games with a social currency: those in which one person’s enjoyment of a human right irreducibly restricts another person’s enjoyment of the same.
Perhaps the most striking example of American socialism is national defense, and local police and fire protection. Again, these are social markets with life and livelihood as currencies. In fact, the USA couldn’t even be formed without the former: the Articles of Confederation overwhelmingly failed for lack of substantive support for the common defense. The United States’ Constitution addressed this, and was eventually adopted, forming the American union of states as we know it today. Without state intervention to provide for social or common defense, personal defense would be left to lifemarkets: we’d have thousands of Blackwaters and no Marines. We’d have an industry of soldiers with rogue allegiances only to those who give them coin. No union of any appreciable complexity can exist in these conditions. We’d have subsidized mob warfare – a war of most against most – in place of internal security and external defense.
Similarly, if only those citizens of a state who could pay for it out of pocket could enjoy fire protection, the social good of edifice (as shelter) would be sacrificed to the hand of the market. This externality (specifically, the freeloader problem) would sacrifice the human rights-associated common good to the invisible hand of the market. For good or for ill, this lends itself inherently to instability of amelioration of basic human need, and should be (and typically is) protected by various levels of the state. In Rome, fire protection was left only to those who could pay for it out of their own purses. We can’t allow ourselves to fiddle over money, though, while our cities burn.
Many aspects of capitalist economics are self-correcting, while some are self-destructive. Most, but not all of the latter circulate through the trade of information as a monetized personal, non-social instrument. These effects include illegal forms of insider trading, securities and exchange abuse (such as self-dealing practices or accounting fraud), and corporate espionage. When physical capital is the means of production, these sorts of behaviors are difficult, if not undefined. When information capital is the means, however, the ends of production are encouraged in a capitalist economy to be creatively controlled and traded. When this trade becomes intentionally disadvantageous to the body of the corporation not directly involved in the trade, however, it’s typically (and rightfully) regulated.
Likewise, centralized control of a state’s currency and interest rates protects the greater market from the effects of the constituent and emergent or gestalt markets, respectively. Without these forms of state control, volatility would emerge in the same form as that which would come from lack of national defense. The difference here is that the mobs would be the banks, rather than private security firms. Banks and private security firms are pushed to mob-like action in a capitalist democracy, and socialist intervention is needed (and frequently provided) to protect the free market’s common good – financial currency – from the free market itself.
Monopolies, the control of a category of commodity by a single entity, are the natural equilibrium state of both pure capitalism and pure socialism, however. Many view monopolies as a problem of capitalist economies – maximizing profit through exclusive control of a commodity, if left to the free market, leads to maximization of price and decreased availability of that commodity to the end consumer. The root cause of this dilemma, however, isn’t in the monopoly itself – it’s in the construction of corporations which must, by law, maximize and conserve profit within the entity itself. Capitalist markets encourage monopolies through the economies of scale (it’s typically cheaper per unit to make more of something than it is to make less), whereas socialist systems enforce them through centralized control of the means of production. If the personified for-profit corporation is done away with, however, monopolies cease to be an economic externality.
Corporate profit is exploitation. Every dollar that enters the pocket of a corporate entity is a dollar that wasn’t required for cost of production, human, physical, and intellectual capital investment, or a dollar that came from the end consumer through the market-driven difference between price and cost. This profit ultimately comes from two sources: the laborer and the consumer, and ultimately ends up in the same places: the pockets of the micro-states who control the means of production with no goals other than the further increase in their profits and economic control. Consequently, three things must take place to bring the exploitation of profit into balance with the needs and rights of the worker and market:
End corporate personhood, including taxation, maximization of profit, and politico-economic representation (lobbying). When all corporations are non-profit, tax-free agencies, the exploitation of the worker and consumer is minimized, and the growing gulf will shift towards closure between the (often arbitrarily) inordinately wealthy and those in abject poverty.
Enforce transparency and democracy within corporations. Corporations should be measured by the same standards used for state societies: transparency, personal freedom, and human rights. This isn’t to say that corporations shouldn’t be able to protect against the dissemination of trade secrets – they should – but the pay and benefits which flow to the worker don’t qualify as “corporate security data,” in my mind. As soon as the entire corporation is a single union with an internally democratic structure, the micro-oligarchies of American industry will cease to operate against the interests of the constituent population. All democracies are simply oligarchies of those who vote, just like all anarchies are simply meritocracies of those who act. These democracies will promote closure of the social, political, and economic structures which cause the most visible of the pains of life. When workers set each others pay, approve each others promotion, and cooperate to meet mutually agreed-upon goals, ideal products are made with ideal distribution of recompense to the constituent workers. This effect is clearly seen in the workings of the General Electric plant in Durham, North Carolina.
End corporate anti-trust law, encouraging centralization of control over the means of production. This is kept in balance by both the aforementioned lack of profit-goals through personification, and by transparency through the democratic process into accounts, costs, overheads, and all forms of capital investments and returns.
I was asked a few months back the question “how many types of toothpaste should there be?”. The pure laissez-faire opinion is, of course, “as many brands and types as people will buy.” This opinion, however, leads to waste of human, intellectually, and physically capitalized resources through redundant research and development efforts, redundant factories and overheads, and neglect of the economics of scale through maintenance of multiple corporate brands. My approach is that there should be one brand, selling as many types of toothpaste as address identified human needs: two perhaps, maybe three.
Both ends of the economic spectrum end here. We’re long overdue to start embracing it.
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