Capitalism, socialism and democracy

Karl Marx predicted that under capitalism, wealth would become more and more concentrated, that the concentration of wealth would lead to concentration of political power, and that workers would become more and more powerless.

In my younger days, I thought Marx was outdated, but his predictions seem to be validated by what has been happening in the United States in the past 30 or so year.  Steven Greenhouse’s The Big Squeeze: Tough Times for the American Worker and Jacob Hacker’s and Paul Pierson’s Winner-Take-All Politics: How Washington Made the Rich Richer—and Turned Its Back on the Middle Class tell the story very well.

In spite of this, neither Greenhouse, Hacker nor Pierson are socialists.  What they advocate is a return to the rough balance of forces between labor, business and government as existed in the United States from the late 1940s through the early 1970s.  That is pretty much my own position.  I would like to preserve and restore the New Deal social safety nets and economic firewalls and the 1960s civil rights laws, update to meet current conditions, and I would like to see the United States adopt a universal health care system, based on best practices in other countries, but that is as far as I go.

The core value of socialism is egalitarianism.  I am not an egalitarian.  If I have enough for my own needs, I am not bothered by other people having more.  What I am against is exploitation.  By exploitation, I mean profiting at someone else’s expense, other than in a free and fair competition.

I am glad to see people whose achievements are valuable contributions to society be richly rewarded for those achievements.  I don’t mind that J.K. Rowling, the author of the Harry Potter books, has a net worth of $1 billion.  I am fine with the fact that Larry Page and Sergey Brin, the creators of Google, have a net worth of $14 billion each.

H. Ross Perot began his career as an IBM salesman.  IBM Corp. capped the commissions salesmen could receive because Perot was earning too much relative to the other salesmen. Perot’s response was to earn the maximum annual commission in a few weeks, quit IBM and founded Electronic Data Systems.  My sympathies are with Perot.

I reluctantly accept the necessity for differences in income based on differences in rank.  I have misgivings about economic privilege based on inheritance.  I am morally outraged by executives of organizations leveraging their authority to reward themselves at the expense of people below them in the hierarchy. And I am outraged at financiers who enrich themselves by manipulating prices and selling worthless securities.

The first form of exploitation is found in any society based on hierarchical organizations.  It existed in the old Soviet Union, and it exists in the so-called non-profit sector of the United States today.  The second is a form of exploitation specific to capitalist society.  Capitalism requires honest financial markets to function well, but does not automatically generate them.  When market abuses are unchecked, the result is what you see in the United States today.

I used to say that socialism is based on two incompatible ideas – the cry of suffering humanity for justice, and the belief in a planned society governed by a tiny group of masterminds.  I will always have sympathy for the first, and doubts about the second.

Thomas Geohegan, a Chicago labor lawyer, in his book Were You Born on the Wrong Continent? describes another type of socialism – what the late Michael Harrington called “socialist capitalism.”  In Germany, France and Scandinavia, business corporations continue to operate, but within the framework of strong labor unions, a strong social safety net and, in Germany’s case, a labor voice in corporate governance.

I find the German model  highly appealing, as Geohegan describes it.  But there are two potential problems.  One is that labor power and the welfare state will expand to the point where capitalist enterprise can’t function.  The other, which I think is the greater danger, is that at some point business will tear up the social contract and make the same kind of counterattack as U.S. business did.

Bertrand Russell advocated a version of what is called “guild socialism” – control of society by producer and consumer cooperatives, all democratically managed at the grass roots level.  I find this, too, to be highly appealing.  I wonder whether such cooperatives could accumulate investment capital sufficient to maintain economic growth.  But then, with peak oil and global warming on the horizon, economic growth may be a thing of the past.


I don’t think that the American electorate ever voted to increase inequality.  Bill Clinton promised to protect the hard-working middle class that played by the rules.  Barack Obama promised to support a public option for health care, protect homeowners from abusive foreclosures, rein in Wall Street speculators and allow the expiration of tax cuts on incomes above $250,000.  Ronald Reagan and the two George Bushes promised to lower taxes or keep them low, and to stand up to [Communists] [Muslim militants] [illegal immigrants] [liberal elitists] [etc.].  In the 2008 election, John McCain accused Barack Obama of being a redistributionist who wanted to “spread the wealth around,” but Obama won.

I don’t think the American electorate is to blame for the poor choices with which they are confronted.  Instead of having a choice between a liberal party and a conservative party, they have a choice between a conservative party and a Monster Raving Loony Party.  Ordinary working people don’t have access to good information.  They have Fox News which spreads disinformation (but which everybody treats as a legitimate source of information), the mainstream media which deal in trivia and fluff, and PBS and NPR which do provide solid reporting, but mostly within the framework of the Washington, D.C., consensus.

Tags: , , ,

4 Responses to “Capitalism, socialism and democracy”

  1. Joyce Ireland Says:

    A very good blog….


  2. philebersole Says:

    I e-mailed a version of this to the Bertrand Russell Society list-serve.
    John Lenz e-mailed me this comment in reply.

    I liked your notes on “Winner Take All.” This is a highly amateurish reply to your message with the interesting point that oppression, not inequality is the problem for you; you are for justified wealth. I like these remarks also. Some people deserve it by doing something exceptional.

    But what about this? The founders of Cablevision make billions, buy sports teams … who is paying for this? Aren’t cable TV bills too high? Same with pharmaceutical companies and, now, for-profit health care (that and the banks seem to be key culprits in the collapse). What I mean is: some gross inequalities are inherently oppressive (“the repression inherent in the system” — Monty Python).


  3. philebersole Says:

    This was my reply

    Hi, John:

    I think drugs cost too much and health insurance costs too much because the incentives for pharmaceutical companies and for-profit health insurance companies are skewed.

    A pharmaceutical company maximizes profit by developing treatments, not cures – something you have to take every day rather than a shot that makes you immune forever. If and when a cure for a disease is developed, they would have to charge enormous prices to recoup their costs of research, including the research that didn’t pan out.

    Dr. Jonas Salk’s research on the Salk vaccine was funded by the National Foundation for Infantile Paralysis, and he declined to patent his discovery (unlike Ayn Rand’s John Galt, who withheld his great free energy discovery until the world paid him tribute). If Dr. Salk had worked for a for-profit publicly-held company, he would not have been allowed to do this. The company would have been violating its fiduciary duty to its stockholders.

    I think there has to be drug research that is funded by the government and by non-profit organizations, and that is made available on some other basis than charging what the traffic would bear. Another possibility would be for the government to award prizes for cures for certain diseases, and for bringing possible cures to the stage of clinical trials. Then the government could pay the drug company for its trouble and make the drug available on a generic basis. I think drug companies should be required to make public the results of all clinical trials, not just the ones that give favorable results.

    Drug prices are lower in Europe and Canada than in the United States. That is because the health care providers do a more aggressive job of negotiating prices. One way or another, Americans are being exploited – either by being overcharged by the drug companies or by having Europeans and Canadians get lower drug prices at our expense.

    For-profit health insurance companies also have skewed incentives. The amount they pay out to patients is called the “loss ratio” – the higher the loss ratio, the lower the profit. Germany, France, Britain and Canada provide lower-cost health care partly because their insurance is provided through government or non-profit organizations which have lower overhead (because they don’t have to assess individual risk) and no profit margin.

    The Affordable Care Act requires that 80 to 85 percent of insurance premiums go to cover medical care of the insured. It will be interesting to see how this is enforced and interpreted.

    I don’t have an opinion on whether cable TV bills are too high. I only get basic cable myself.


    Here is an afterthought.

    I think a public option as an alternative to for-profit health insurance would have been a better solution. Instead of having the federal government try to supervise private insurers, let the government set up its own alternative on a break-even basis. Either the government option would fail (proving me wrong) or the government competition would force the private companies to mend their ways or the public option would crowd out the private companies and we would get a single-payer system.


  4. philebersole Says:

    Another member of the BRS list-serve had this to say.

    In an article in the latest issue of The Texas Monthly, Paul Burka says that the recent elections in Texas have marginalized the Texas Democratic Party for at least the next ten years. I agree. I can’t supply page numbers or even issue dates, but I think that either Time or Newsweek reported on the percentages of voters voting Democratic or Republican, and in many of the so-called “Red” states the Republicans carried the ballot by more than seventy percent. I interpret this to mean that the Democratic Party in those states has been marginalized for the foreseeable future.

    Phil says he doesn’t think the American electorate ever voted to increase inequality, but they have certainly voted to elect candidates who will work to increase inequality, and the effect is the same.

    I see liberal, progressive causes being demonized by the right wing in this country, and the agency of that demonization is the media. Despite the continuing canard about “the liberal media,” the media in the United States today has become essentially right-wing and conservative. The American people are listening to the vitriol on conservative talk radio, they are watching Fox News, and they are buying into what they hear. If you still read newspapers, you can easily see that most of the columnists are right wing conservatives. Right wing money has bought most of the news outlets in the United States.

    Phil says he doesn’t think the American electorate is to blame for the poor choices with which they are confronted. I think if the choices are poor the electorate is responsible for demanding better choices. When the Bush administration was gearing up to go to war with Iraq, I asked everyone I knew to tell me where we would get the money to pay for the war. No one answered, no one cared. My little town down here in South Texas was awash in cars bearing cheap metallic stickers that blared Support the Troops. No one questioned the pretexts for going to war.

    I see the American electorate failing in its perceptions of the needs of the country. We need to recognize the limitations of our own resources, we need to stay out of resource wars that bleed us financially and morally, and we need to show more compassion to others within and beyond our borders. No, we are not all responsible for what is happening, but in our system a simple majority of the voters will do much to determine the direction of the country. I am so distressed by our failure to fund national health care that I’d try to emigrate to Canada if I weren’t so old and the weather so cold.

    Why don’t we have affordable health care for all Americans? There are a number of reasons, but at bottom it’s the insensitivity of a majority of the American electorate to those who can’t afford the cost. A majority have it, and they’re just not that concerned about the poor black covered with painful American electorate to those who can’t afford the cost. A majority have it, and they’re just not that concerned about the poor black covered with painful blisters getting turned away at the emergency room because the hospital board put a registered nurse in charge of admissions with the purpose of limiting indigent care. And if an Iraqi mother and father fail to heed warnings to stop at a checkpost in the middle of the night and are shot dead and their children traumatized and orphaned, that’s just collateral damage. After all, these are only human beings, and what they amount to in the context of American exceptionalism?

    Phil noted the looming resource shortages and crises. If we are to survive the future that is looming before us, we are going to have to be visionary. Somewhere in his book, Job says where there is no vision the people perish. Whatever the reasons, the choices being made by the American people and our leaders are lacking in vision, and that doesn’t bode well for our future.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: