Archive for March, 2010

Capitalism, Socialism, Communism

March 29, 2010 at 10:33 am · Filed under Uncategorized ·Tagged , , , , , , , ,


My last post addressed the American Dream of “a land in which life should be better and richer and fuller for everyone, with opportunity for each according to ability or achievement.” Yet there is widespread fear in the land that the dream is fast fading.

The TEA party movement is testament to the dissatisfaction of Americans with the existing condition. In particular there is strong distrust of members of congress. A Rasmussen poll on March 28 found that 52% of U.S. citizens believe the average member of the Tea Party movement has a better understanding of the issues facing America today than the average member of Congress.

As one tries to understand the TEA party solution that would bring back the dream, one thing comes through – there is great fear that the country is moving toward socialism. Clearly most TEA partiers believe socialism would destroy the American Dream.

Yet there could be confusion about the three isms in the above title. I am therefore summarizing the definitions of each in an effort to help clarify the issue.

I urge the reader to make a special effort to look at the material in this post without any preconceived notions. Consider you have no knowledge about the subject.

Most Americans know what capitalism is and are convinced it is absolutely the best way to organize an economy. They also understand what communism means and have no doubt it doesn’t work, especially after the fall of the Soviet Union. But there is more uncertainty and confusion about socialism. That is probably because the term has been used to mean different things under different circumstances and in different places. It has also taken on highly emotional connotations over the years. In an effort to clarify the situation I will briefly consider each of the alternatives for organizing an economic system in more detail.

Capitalism is an “economic and political system in which a country’s trade and industry are controlled by private owners for profit, rather than by the state. American apologists for capitalism are aware that the word has taken on a certain negative connotation for many people; so they prefer the term “free market”. The use of “free” has a big advantage, especially in the USA because of the obsession we have with “freedom”, a term that is lauded constantly everywhere in the country. I’m not denigrating the term. Of course, we cherish our freedom, but I believe the concept is taken to an illogical extreme within the context of 20th century conditions. It meant one thing in colonial America where people could do just about anything they wished in the isolated rural places where most lived. For example, the right to own a weapon was essential to protect ones life and property in a lawless frontier. But it may not be very practical for every citizen to mete out his version of justice in a modern urban community. Many believe that has been a recipe for rampant lawlessness in the USA today.

Communism is a political theory derived from Karl Marx, advocating class warfare and leading to a society in which all property is publicly owned and each person works and is paid according to their abilities and needs. Karl Marx, seeing the inequalities of 19th century Europe, noted that capitalism always sets up a situation in which those who control capital will always accumulate wealth while those who do not have capital will live in poverty if not starvation. He saw capitalist society as divided into two social classes: the working class or proletariat and the bourgeoisie. Working class is made up of “those individuals who sell their labor and do not own the means of production” whom he believed were responsible for creating the wealth of a society (buildings, bridges and furniture, for example, are physically built by members of this class). The proletariat was further subdivided into the ordinary proletariat and the lumpenproletariat, those who are extremely poor and cannot find legal work on a regular basis. These may be prostitutes, beggars, or homeless people. The bourgeoisie are those who “own the means of production” and employ the proletariat. The bourgeoisie may be further subdivided into the very wealthy bourgeoisie and the petty bourgeoisie: those who employ labor, but also work themselves. These may be small proprietors, land-holding peasants, or trade workers.

Communism embraced a revolutionary ideology in which the state would wither away after the overthrow of the capitalist system. In practice, however, the state grew to control all aspects of communist society. Communism in eastern Europe collapsed in the late 1980s and early 1990s against a background of failure to meet people’s economic expectations, a shift to more democracy in political life, and increasing nationalism such as that which led to the breakup of the USSR. Chinese leaders came to realize the benefits of capitalism and began encouraging a type of controlled private enterprise, consequently achieving the highest rate of economic growth of any country over the past 20 years.

Socialism is not so easy to define because it is a relative term. Most Americans tend to equate socialism with communism. My Apple online dictionary defines socialism as “a political and economic theory of social organization that advocates that the means of production, distribution, and exchange should be owned or regulated by the community as a whole.” Socialism in Marxist theory is a transitional social state between the overthrow of capitalism and the realization of communism. The owners of businesses therefore essentially and perhaps justifiably fear socialism as an automatic precursor to communism.

That brings us to another possibility for organizing the economic system, social democracy. According to the Merriam-Webster Dictionary social democracy (Date 1850) is: “(1) a political movement advocating a gradual and peaceful transition from capitalism to socialism by democratic means and (2) a welfare state that incorporates both capitalist and socialist practices. Several stable and strong European economies are social democracies.

Mixed economy is another way of describing a system that includes a variety of private and government control, or a mixture of capitalism and socialism. In addition the mixed economy has a higher degree of government regulation of businesses and markets. The United States in fact is considered to be a mixed economy with the following examples:

-A central United States bank.

-Many cities provide public transit as competition against private options, an indirect form of price control.

-The United States Postal Service is a public mail service that exists alongside private options such as FedEx or UPS.
Most road networks are government built and maintained, although private citizens and companies are allowed to “sponsor” a highway or road to ease some of the financial strain.

-Public and private schools are available for children.

-Waste collection and treatment are usually provided as a service by the local government, though most local governments pay private companies to perform the service.
State and local governments provide guaranteed police and firefighting support, though private security forces are available.

-Intercity passenger rail (Amtrak) is a nationalized industry, as are many local trains.

-American airports are government operated but all American airlines are private.

-The FDA must test and approve a drug or chemical before it is allowed to be sold on the market.

-State and Federal governments have minimum wage laws, though several occupations are exempt from the rules, such as wait-staff, who make up most of their income from tips.

-The government provides a social safety net through methods such as Social Security and unemployment benefits.

-All Americans over the age of 65 are eligible for Medicare, a public health insurance option.

-Most agriculture has been subsidized.
-The Federal government has the power to loan money to\ failing businesses, in the form of bailouts, as a means of keeping markets afloat and preventing sudden unemployment. These bailouts usually come with significant constraints to prevent the businesses from spending the money frivolously.

-The new Healthcare legislation guarantees healthcare for the majority of USA citizens with subsidies to pay if the citizen falls below a certain income.

Conservatives, neo-conservatives and libertarians maintain that is the USA has too much government involvement in the economy. Conventional wisdom holds that Republican legislators vehemently oppose socialization of the economy, while Democratic legislators tend to believe there is too little government intervention, resulting in large segments of the population suffering from poverty, restricted healthcare options, high crime rates and other social ills.

While that is partially true, in reality it is not that simple. Many lawmakers are neither driven by conservatism nor liberalism but by pragmatism. They are dependent for their political survival on contributions from vested interests (corporations and their executives, labor unions, farm groups, retirees, etc.). Consequently they legislate according to the predominant pressure from their benefactors. To some extent it is that issue which motivates the dissatisfaction of Americans with their congressional representatives. That dissatisfaction is reflected in a recent Rasmussen poll indicating that 65 percent of all Americans trust the wisdom of the crowd more than their political leaders and are skeptical of both big government and big business.

Consequentially many Americans are concerned that the country has been hijacked by wealthy corporate interests, resulting in a dramatically skewed distribution of income and wealth. The evidence of that distorted distribution of wealth is highlighted by Professor G. William Domhoff, Sociologist at the University of California at Santa Cruz. In 2007 the top 1 percent of wealth holders controlled 34.6 percent of USA wealth, with the next 19 percent holding 50.5 percent. The remaining 80 percent of USA citizens split just 15 percent of the wealth.

It is curious that many of the people in that 15 percent, for example those surviving on social security and medicare, those who have lost their jobs and have been living off unemployment payments and even those unemployed who are living off food stamps, are among those who are fearful of government programs that redistribute wealth. Many are strong TEA party supporters, motivated by fear that America is moving further and further away from capitalism toward communism.

In future posts I will attempt to provide an explanation for that strange phenomenon.

Kelly Harrison, PhD
Political Economist

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The American Dream

March 8, 2010 at 7:07 am · Filed under Uncategorized ·Tagged , , , ,


I recently read one of the numerous essays on current conditions in America on a financial advice website that I monitor. The author is highly critical of government and clearly believes its role should consist of little more than providing police and military protection for its citizens.

Of course, I see that solution as totally impractical and fundamentally wrong. But at the same time I try to understand what is at the root of that position. People everywhere in America are sensing that we are losing our way. We are departing from our highly cherished roots. That author offered the following as a viable summary of the American Dream:

“The American Dream is that dream of a land in which life should be better and richer and fuller for everyone, with opportunity for each according to ability or achievement. It is a difficult dream for the European upper classes to interpret adequately, and too many of us ourselves have grown weary and mistrustful of it. It is not a dream of motor cars and high wages merely, but a dream of social order in which each man and each woman shall be able to attain to the fullest stature of which they are innately capable, and be recognized by others for what they are, regardless of the fortuitous circumstances of birth or position. The freedom now desired by many is not freedom to do and dare but freedom from care and worry.”

James Truslow Adams, The Epic of America, 1931

Who could disagree with that and who would doubt that such a dream should be applied to all mankind. Furthermore few would doubt that America has drifted away from that dream in recent times.

So the issues before us are: Why did we drift away? What are the fundamental errors that seem to be creating that deterioration? What are the consequences of our aggressive pursuit of that dream in the ways we have behaved?

I think most Americans would like to see all our citizens live that dream. It is based on the idea of each citizen having a better, richer, and fuller life with opportunity for each according to ability. That sounds like the first phrase of the much maligned ideal expressed by Karl Marx, “From each according to his ability, to each according to his need.”

It is the second part that Americans detest: “to each according to his need”. And yet we all know that some of us have talents and abilities that make it easy to live a very full and rich life while others are simply deficient in one way or another so that we cannot fulfill the American dream in dog eat dog competition.

Howard Zinn in A Peoples History of the United States, cites historical fact after fact illustrating how, from the day Christopher Columbus set foot on Western Hemisphere soil until today, the pursuit of the “American Dream” has led to clashes between those who have the ability and opportunity to live a fuller life and those who don’t. Those who don’t have always come out on the short end and frequently were severely punished in the process. Here I am reminded of the quotation from Joe Stack’s last words: “From each according to his gullibility, to each according to his greed.”

Slowly and imperfectly our “democratic” government has sought to implement laws to compensate those who have not achieved the Dream. But most of us know those efforts have been only partially successful, leaving millions of families on the verge of starvation and millions homeless. And at the same time those “helpful” government measures have had dramatic side effects with potentially disastrous consequences not just for Americans but for all people everywhere.

Our “leadership” has resulted in a worldwide financial and economic system that is inherently unstable as demonstrated by the recent financial meltdown.

Our “growth mania” has made the United States the world’s worst polluter by far, emitting nearly 25 percent of all harmful greenhouse gases on the planet. Our economy produces more non-bio-degradable plastics that are choking the seas and spoiling our land and more chemicals that are poisoning our waters and food supplies.

If America is really serious about achieving the American Dream for all its people and leading the world to achieve the same (as we often claim), there will have to be a dramatic shift away from the ways we have pursued that objective throughout our history.

The overriding objective of this blog is to offer insight into the paths that might be pursued in that quest.

Kelly Harrison, PhD
Political Economist

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The Illusion of Perfection – Part III

March 6, 2010 at 3:01 pm · Filed under Uncategorized ·Tagged , , , , , , ,


People tell me that I have an unusual concern for the future; that I tend to look way ahead and to see today’s events in terms of their impact on the future. Others say I uselessly have my head in the clouds. I have to admit I have always been fascinated by and absorbed with activities that permit me to contemplate how to modify today’s events in a way that will produce benefits in the future. As a consequence I am by nature a progressive or some might say a flaming liberal, because I believe we cannot stop change. The very nature of the physical universe and the evolution of species on this planet is change. We humans resist change at our own peril.

I recognize that on the other extreme there are people who by nature find change to be scary and unnecessary. They cling to things as they were and believe any change can only bring negative results. This is the essence of politics. In all governments it is the ebb and flow of arguments between the two sides that determines what course a nation will take and the results of that outcome.

Many Americans are under the illusion that the United States, since its birth has been a great and magnanimous nation, a beacon of personal freedom and free market efficiency, a model democracy and a protector of human rights around the world. In reading Howard Zinn’s well documented A Peoples History of the United States, I have come to realize that, while I love my country and believe we have achieved a lot, there are many faults.

In my view the world is facing two major challenges that will determine whether humans enjoy social and economic progress or collapse into some kind of chaos. Those challenges are related to what I label free market growth mania on the one hand and the limits to growth imposed by ecological and resource scarcity on the other. They can also be seen as a momentous struggle between the progressive and the conservative. I see evidence that global free market growth mania is primarily responsible for air, water and land pollution that has already dramatically reduced the quality of life on earth; and it is steadily getting worse. I believe that unless there are dramatic modifications the resources that drive growth mania will be exploited creating natural limits to growth.

I believes that political action is necessary to put in place policies that will temper growth mania in order to reduce demands on natural resources and encourage the development of alternatives resources while permitting human progress, especially for the more disadvantaged on earth. In other words as a liberal I believe governments must intervene more in free markets with regulations, incentives and restrictions that will fend off the limits to growth.

Conservatives (the most extreme brand being libertarians) believe that free markets will right themselves. That is, when and if mankind’s thirst for higher incomes bumps up against resource scarcity or against truly harmful environmental degradation the free market will create restrictions that temper the use of resources and bring the environment back into balance. The conservative assumes that human beings who make the decisions driving free markets will alter their behavior as market forces create the danger signals and/or force them to alter their behavior. There is an underlying assumption that people are rational and free markets are therefore rational.

So it is useful to consider two important issues; (1) What makes a liberal or a conservative? and (2) How reasonable is it to expect that free markets are rational? I have recently seen several interesting articles addressing these question, giving some indication as to what we might see evolve in the years ahead.

Lets consider what makes a liberal or conservative and what is the likelihood of individuals changing their political orientation. There is an assumption that people tend to be liberal or conservative based on rational analysis of the issues facing humanity and the best ways to deal with those issues within the context of the knowledge one has. There is a tendency to expect or hope that an individual may cross over from liberal to conservative or vice versa as their knowledge expands or as political conditions change. Undoubtedly that is part of the equation, probably not nearly as important as commonly believed. Each political party in the United States is constantly struggling to capture the support of those who fall in the middle of the spectrum – the independents – always hoping to get a permanent crossover to their side.

Research seems to suggest that two phenomena are heavily involved in determining where one is likely to stand on the liberal to conservative scale. One is genetic and the other is cultural – nature and nurture. On the issue of nature there is neurological research that seems to suggest humans are in some way hard wired to react as we do. In a recent New York Times Op-ed article Nicholas D. Kristof observed that recent research “hints that the roots of political judgments may lie partly in fundamental personality types and even in the hard-wiring of our brains.” There is neurological research indicating that fear is often a driving motive for the more conservative individuals while liberals are genetically wired to be less driven by fears. Intuitively that conclusion seems reasonable, but should not be taken too far.

On the issue of nurture Kristof indicates that a book (Authoritarianism and Polarization in American Politics, by two political scientists, Marc J. Hetherington of Vanderbilt University and Jonathan D. Weiler of the University of North Carolina at Chapel Hill) cites research “showing a remarkably strong correlation between state attitudes toward spanking children and voting patterns. Essentially, spanking states go Republican, while those with more timeouts go Democratic.” I think we have to recognize that our religious values and views are another important factor in determining political orientations. As a boy I was heavily indoctrinated with conservative religious beliefs and pursued those aggressively for nearly 40 years before I began to question some of the beliefs I had absorbed. Only in later years have I departed from a belief that only Christians would be saved from hell and those who kill unborn babies whether Christian or not will suffer that fate in the afterlife.

Clearly political views are not easily modified by logical arguments. Nevertheless, I continue to believe that while humans may be driven by forces that are not consistently rational, there also remains a powerful instinct for self-preservation. It is that instinct that I believe we must invoke by alerting people to the dangers of “growth mania” and environmental degradation for humankind.

No doubt we would have a much better situation with truly democratic free markets, without the monopolistic structures we now have, without government policies that pander to vested interests; without the current political campaign finance system that permits those vested interests to essentially buy elected representatives, without the wasteful and distortional system of lobbying, without the monetary and financial system built on credit rather than savings. But there would still be an important role for local, state and federal governments, preferably with more emphasis on local and state governance and less on national government, as the founding fathers visualized.

However, we don’t have that kind of system and never have had it. We are therefore stuck with the need to modify the imperfections with regulations, incremental laws and government interventions that will move us somewhat closer to the perfection that has eluded the nation since its founding.

Kelly Harrison, PhD
Political Economist

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