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The False Dichotomy of ‘Capitalism VS Socialism’ and Why Mixed Economies are Best

The confluence of a free market economy and real social safety nets results in the best standards of living — somewhere in between unrestricted greed and authoritarian collectivism.

By Captain Semantics

Photo by Maria Oswalt

Criticize unfettered capitalism and people will accuse you of being a communist. Discuss the need for limitations on statist socialism and someone will describe you as a capitalist-pig. This is the unfortunate feedback look that 2020 America is locked in. No nuance, no complexity, and so very Americana. Our nation’s culture war has made economic systems as avatars for world-views often in contradiction to history and policy of those systems. Advocates for ‘socialism’ and ‘capitalism’ are seeking to swing the pendulum all the fucking way in one way or another and avoiding the sweet spot of balance. Politicians seeking to ingratiate themselves with their electorate have pushed this dilemma along; often with disastrous ramifications. After each economic catastrophe, each ‘team’ doubles down on their rigid ideology and prescribes new swings on the see-saw between unhinged greed and an endless nanny state.  

Yet there is another way – it’s what economists describe as a ‘mixed economy.’ This syncretic approach to economics should not seem alien to us; it is the economic system under which the U.S. has operated on since the New Deal. It is also the economic system of the Scandinavian countries Bernie Sanders referred to as models which best exemplified his self-avowed ‘Democratic Socialism.’ More on that later.

Simply said, a mixed economy is an economic system in which free-market, private enterprise occurs yet the government intervenes into the economy enough to provide for the general welfare of its citizens. Private industry fosters economic growth yet is taxed modestly enough to support essential services such as healthcare, social security, and education. This syncretic approach combines both socialist and capitalist philosophies into the marketplace and civil society. It works well for the U.S. Finland, China, France, and most other industrialized nations in albeit different ways.

“Impotence therefore faces both those who believe in what amounts to a pure, stateless, market capitalism, a sort of international bourgeois anarchism, and those who believe in a planned socialism uncontaminated by private profit-seeking. Both are bankrupt. The future, like the present and the past, belongs to mixed economies in which public and private are braided together in one way or another. But how? That is the problem for everybody today, but especially for people on the left.”

Eric Hobsbawm, life-long Marxist and British Historian

In a mixed economy, governments tend to have more resources than within completely state controlled economies. Free markets translate to higher incomes for central governments to provide services. This steady stream of revenues is critical to sustaining long term programs such as social security. The sweet spot between privatization and nationalization is what gives countries like Denmark, Sweden, and Norway enough state treasure to maintain its social services. 

The US economy can only be described as a mixed economy. Despite a drift in recent years towards deregulation and heavy handed ‘free market principles’, it relies on the government to regulate everything from education to the environment. The government also nurtures new industries and advances U.S. interests from competition abroad. One example of this is the heavily subsidized agriculture market. Comically enough, what Trump has done by subsidizing U.S. farmers is blatantly socialist policy. In a purely capitalist model, none of these state interventions exist. Milton Friedman surely rolled over in his grave in 2008 with the bail-outs and is doing so again with the most recent round of stimulus. Judging by purist capitalist standards, the U.S. fails miserably. 

What the general public is seeking now, along both sides of the political divide, is economic tokenism as part of the ever growing culture-war. This has made hypocrites of us all. The right claims to abhor ‘socialism’ yet doles out federal subsidies to any corporation that will take it. Your average Trumper will sprint to cash their stimulus check all the whole cursing Marx along the way. No thought at all is given to their Medicare, VA benefits, or Social Security as actual government social services. Conversely, the idea that it is only because we have the wealth created by the free-market that we can even consider social programs like free college is largely lost on the left. A truly socialist government could mandate that people give up cherished American values such as intellectual property, private property, and ability to unionize. Yes, socialist revolutions from the Bolsheviks to Mao shut down the unions. Further, there is this fantasy that if we could just tax the billionaires more, we could have an endless array of top-notch social services. The reality is a far cry from that fantasy. Universal healthcare is an absolute necessity but fucking expensive. Politifact rated ‘half-true’ a statement made by former Congressman Paul Ryan that a 100% tax on millionaires would only sustain the federal budget. He was wrong. It was 3 months. Universal healthcare and free college will take increased taxes on the middle class and poor. Again, even if we confiscated the wealth of all the millionaires and billionaires, there would still be a fiscal delta. The ambitious array of social programs Bernie Sanders proposed would have added an additional 44 trillion in new taxes. Sanders’ proposals, such as Medicare for All, Green New Deal, and free tuition at public universities would cost $50 trillion over 10 years. His announced tax increases to pay for the services leave a  $5 trillion gap. To give perspective, the entirety of the federal budget for the 2020 fiscal year is at $4.79 trillion. Now, I know what you are gonna say: “ cut the military budget and we can afford anything!” God, I wish that was true. But the U.S. spends 649 billion per year on the military, if you cut the entirety of the military budget, you still would not have enough to pay for universal healthcare, free college, and the Green New Deal. This is well complex shit. If you had the answer, you would be rich. 

Why are we suddenly having this national conversation about complex economic systems that otherwise were ignored and left to technocrats. Bernie Sanders has arguably been the great catalyst for young people to suddenly take up the banner of socialism. There are a few disparate and contradictory elements to this conversation that underscore the confusion within the American marketplace of ideas. Democratic Socialism differs from the Social Democrats of Scandinavia. The primary difference is the ‘ism.’ Within this ‘ism’ is the subtext of socialism as an ideology as opposed to a set of attitudes. What Bernie Sanders advocated, particularly with healthcare, is NOT Socialism. It is more akin to French ‘dirigism’ where a non-interventionist government pays private enterprise to provide healthcare. Somebody in his campaign made a serious strategic mistake by allowing the candidate to handcuff himself to the ‘socialist’ brand. It was both inaccurate and unnecessary. Contrary to popular narrative, none of the Scandinavian countries are truly socialist. Recently, the former Danish Prime Minister Lars Løkke Rasmussen went as far to publicly deny that his country is socialist. “I know that some people in the US associate the Nordic model with some sort of socialism. Therefore I would like to make one thing clear. Denmark is far from a socialist planned economy. Denmark is a market economy,” Rasmussen said. “The Nordic model is an expanded welfare state which provides a high level of security for its citizens, but it is also a successful market economy with much freedom to pursue your dreams and live your life as you wish,” he added. 

The flip side to this is that we have entered a period of creeping fascism. Trump wants to dive into corporate socialism while undermining all the effective regulations that smart people have devised over the last century. That said, there is plenty to be hopeful about. If Trump is the fascist we think he is, which he is, U.S. institutions have done a remarkable job of standing in his way. Trump has been unable to repeal Obamacare despite running on a promise to do so. There has been modest change in 4 years to major social programs. Besides, state governments run a bulk of them. Moreover, the federal government has been doling out dollars during the pandemic like a true socialist is running the country. But yeah, fuck him anyways. 

All of this contradiction and sanctimony can give one a headache. As a nation, our discussion on economic structures more closely resembles than any nuanced conversation. The reality is that we need to stay within the sweet spot of mixed economy while reconciling inequity in the system and providing universal healthcare to our compatriots. We need the federal government to get ambitious with clean energy technologies and faucet industries that will take us out of the 20th constructs we are stuck in. We need to stay the course with effective social programs like Social Security. We need to tax billionaires out of existence. What we do NOT need to do is listen to the emotional extremist on both sides of the ideological fault line’s advice to swing the pendulum all the way in the other direction. Mixed economy. Sweet-spot. Balance. Middle Path. 

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