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“Socialism” vs. “capitalism” is a false dichotomy

We need go-go capitalism to afford a generous welfare state, and people won’t support go-go capitalism without a safety net. “Socialists” and Republicans forget different parts of this lesson.

The socialist of the moment: Alexandria Ocasio-Cortez in Detroit, July 28, 2018.
The socialist of the moment: Alexandria Ocasio-Cortez in Detroit on July 28, 2018.
Bill Pugliano/Getty Images

Suddenly there’s a lively debate on both the left and the right about the specter of socialism in America. According to Gallup, Democrats now view socialism in a more positive light than capitalism. And Alexandria Ocasio-Cortez, a card-carrying member of the Democratic Socialists of America, became an instant political star after she clinched the Democratic Party’s nomination for the New York 14th District’s House seat.

Some conservatives, brought up declaiming, “Better dead than red,” are understandably in a bit of a tizzy. In a fiery peroration on The View, Meghan McCain warned of the peril of going the way of socialist Venezuela, where, she says, people are “starving to death.”

In National Review, Kevin Williamson offers a rather more measured and illuminating conservative perspective. He argues that the vogue of “socialism,” embodied in the rise of Ocasio-Cortez, and the intemperate right-wing reaction to it, is mostly semantic — a matter of “words about words,” as he puts it, freighted with polarized sentiment and little definite meaning.

“All this talk about socialism isn’t about socialism,” Williamson writes. “It’s about the status quo.” The idea that “capitalism” has failed us and that “socialism” is the answer relies on a cartoonish oversimplification of reality. Current economic arrangements in the US, and throughout the developed world, involve a complex mix of “capitalist” market institutions and “socialist” regulatory and redistributive institutions.

If our mixed system is failing many of us, it’s highly unlikely that the blame can be assigned exclusively to either its “capitalist” or “socialist” components, or to the fact that the system is mixed rather than purely one thing or the other. The real debate, as Williamson goes on to suggest, concerns the structure, balance, and integration of the elements that make up our political economy.

This gets lost when the debate is framed as a binary choice between “capitalism” — which the left blames for all contemporary ills — and “socialism.”

The polarized ideological charge around these hazily conceived rival ideals leaves both left and right with a dangerous blind spot. As Williamson argues, the left needs to better appreciate the role of capitalism in producing abundance. For its part, he says, the right needs to square up to the unyielding fact of human “risk aversion” and the indispensable role safety nets in placating this deep-seated distaste for feelings of uncertainty and insecurity by insuring us against the turbulence of capitalist dynamism.

Even if “socialism” isn’t really “what anxious young Americans are looking for,” Williamson says, conservatives need to “be honest with the fact that they aren’t buying what we’re selling, and do the hard work of understanding why and what to do about it.”

He’s right on all counts. I’d like to lend a hand and help the right better grasp why it’s bleeding market share, and why the “socialist” brand has caught fire with the “anxious young American” demographic.

The free market welfare state: how to make capitalism and socialism friends

Williamson is right that the new democratic socialists running for office aren’t calling for nationalization of industry or the abolition of private property (though some of their cheerleaders are). They’re calling for an extravagantly beefed-up welfare state, and a shift toward stronger governmental regulation of various industries. These are questionable ideas, but they won’t turn America into Venezuela.

Still, there’s a big difference between real, existing social democracy — of the sort on display in Denmark or Sweden —and the Christmas list exorbitance of the DSA platform. (If you’re confused by the difference between “social democracy” and “democratic socialism,” Sheri Berman is indispensable.) As Williamson observes, progressives in the mold of Bernie Sanders and Ocasio-Cortez seem not to know or care that today’s model social democracies also boast model capitalist economies that are in many ways more economically laissez-faire than the wickedly capitalist American system.

According to the conservative Heritage Foundation’s Index of Economic Freedom, for instance, Denmark and Sweden — where taxes are high and welfare spending is lavish — outscore the United States in the security of property rights, ease of starting a business, openness to trade, and monetary freedom (a measure of inflation and price controls). Both narrowly beat the US in overall “capitalist” economic freedom, despite receiving a stiff penalty from Heritage for their big-spending ways.

Heritage Foundation 2018 Index of Economic Freedom

As I’ve argued ad nauseam, go-go capitalism is how you pay for safety-net soft socialism. Ocasio-Cortez has so far flailed pretty badly on the “how would you pay for all this stuff?” question. She seems not to grasp that you can’t do so just by reallocating the Navy’s budget (though that would help). In the real world, you finance soft-socialist guarantees with a level of tax revenue and borrowing you can only sustain through capitalist innovation, competition, efficiency, trade, and growth. That’s the lesson of the Nordic social democracies.

The other side of the equation, the part the right often misses, is that insuring folks against bad luck and the downside risks of capitalist disruption is how you maintain political support for “neoliberal” market dynamism — and mute democratic demand for reactionary economic nationalism. (It’s also how you ensure that prosperity is broadly shared.)

On this score, Williamson insightfully chalks up the current appeal of both socialism and Trump’s mercantilism to the urgent human desire to be insulated from the anxiety of uncertainty, and suggests that the libertarian idea that “The free market will take care of it, or private charity will” is the right-wing analogue to socialist wishcasting about bottomless budgets and technocratic omnicompetence. It is a fantasy vision incapable of answering deep-seated anxieties about dislocation and loss that inevitably shape democratic politics. I wholly agree.

Instability and uncertainty are nerve-racking. The market competition that drives innovation and efficiency is a wrecking ball that leaves some among us sifting through the rubble, all the time. For those of us living paycheck to paycheck, and that’s most of us, it’s scary. Capitalism creates wealth by setting up a contest for profits that necessarily creates a steady stream of losers.

The fact that capitalism also creates a steady stream of opportunities does not, by itself, make the risk of losing tolerable. If rough seas keep tossing folks overboard, and people are barely keeping their heads above water (“Just keep paddling, Aunt Andrea!”), it’s not enough to be told that there’s usually a boat to swim to. We’re more willing to risk storm-tossed seas when the ship of state is bristling with lifeboats and manned by a competent crew.

That’s a key insight of “the free market welfare state.” Call it “lifeboat laissez-faire.” I’m glad to see Williamson sticking up for lifeboats. But I also don’t think risk aversion is the whole story behind the recent attraction to social democracy.

Rigged American capitalism is a big part of the problem

I disagree with Elizabeth Warren on a slew of policy particulars — on the minimum wage, single-payer health care, and the Trans-Pacific Partnership, for example — but I think her recent affirmation of the progressive power of capitalist dynamism gets the bigger picture basically right:

I am a capitalist. ... I believe in markets. What I don’t believe in is theft, what I don’t believe in is cheating. That’s where the difference is. I love what markets can do, I love what functioning economies can do. They are what make us rich, they are what create opportunity. But only fair markets, markets with rules. Markets without rules is about the rich take it all, it’s about the powerful get all of it. And that’s what’s gone wrong in America.

She’s right. We need markets to make us richer. But we also need them to make all of us richer, and that’s not just about making sure that we’re indemnified against the risks of wrecking-ball competition. It’s also about making sure the basic rules of the game aren’t rigged to favor people who already won, locking the rest of us into a lower tier of possibility. Warren is a free-market social democrat in the Nordic mold. Her vision is a far cry from the anti-capitalist agenda of the Ocasia-Cortez and the DSA.

Now, the problem isn’t exactly “markets without rules.” The problem is that markets are defined by an incomprehensible jumble of regulatory kludges — an accumulation of individually reasonable but cumulatively stifling technocratic fixes — that strangle economic freedom for ordinary people, allowing the powerful to capture the economy by writing and selectively enforcing the rules to their advantage.

Warren pretty clearly gets this too. For example, she led the charge to deregulate the over-the-counter sale of hearing aids, against the objections of state-licensed audiologists and incumbent medical device manufacturers, promoting market competition that raises the quality and reduces the cost of a critical life-enhancing technology.

Ocasio-Cortez should take a page from Warren and learn to love markets. As should Republicans, who might come to grasp the appeal of combining sturdier safety nets with freer, fairer markets.

The GOP’s market rigging and rejection of the social safety net drives voters toward “socialism”

No less a classical liberal than F.A. Hayek supported a robust safety net capable of “providing for those common hazards of life against which few can make adequate provision.” It’s true, as Williamson says, that “There isn’t any obvious and non-arbitrary place to draw the line on those common hazards of life.” But he’s wrong that “the fundamental difference between Right and Left is where to draw that line (or those lines) and how to go about helping those we decide to help.”

A Republican Party that remains doggedly devoted to Grover Norquist’s goal of shrinking government until it’s small enough to drown in a bathtub isn’t pro-lifeboat. It’s pro-drowning. Moreover, cannibalizing Obamacare, setting public assistance ever further out of reach, and exploding the deficit with massive tax cuts doesn’t make the ruling political right a friend of free markets. Trump’s tariff-hiking, winner-picking economic nationalism, which looks to communist China as a model, is an immiserating morass of rank corruption. But that’s what the GOP currently stands for, whether conservative thinkers like it or not.

The right’s Pavlovian reaction to Ocasio-Cortez’s budget-busting democratic socialism has trapped it in a comforting haze of commie-fighting nostalgia. It leaves Republicans blind to the electoral threat posed by Warren’s Nordic-style social democracy, because they can’t see the difference; they can only see reds. Warren’s coalescing vision of the market-friendly welfare state doesn’t exactly amount to the second coming of Milton Friedman, but it’s far more intellectually sound and politically attractive than anything Republicans currently have on offer.

If the governing GOP is unable to hear what Hayekian conservatives like Williamson are saying and just keep on smashing the lifeboats, and fail to offer a compelling alternative to Warren’s vision for unrigging the economy, not only will they be totally overwhelmed on their left flank on social insurance, they might also find themselves outflanked on the issue of fair, open, competitive markets. They’ll get routed by the left on capitalism, still screeching about Venezuelan bread lines.

Will Wilkinson is the vice president for research at the Niskanen Center, and a Vox columnist.

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