The False Socialism-Capitalism Dichotomy

Socialism vs Capitalism / Getty

If you watch any debate about economics on cable news or social media, you will likely hear references to “socialism” or “collectivism” in loud and furious contrast to “capitalism” and “the free market”.

Such simplistic, zero-sum framing is harmful to any left-of-center arguments. We should fear words like “socialism”, the argument goes, because they are antithetical to the free-enterprise roots that built our power and prosperity.

A simple version of history is told: capitalism triumphed over collectivism in the Cold War, and a new global consensus reigned. The younger, progressive generation is simply ignorant of the empirical evidence from past societies.

Now, it seems any proposal to limit the scope of private industry is described as a foolish lurch towards the failed systems of Marx and Lenin. Our economic discourse has been stuck in this same false choice since the 1980s.

Every modern industrialized country — including the United States — has a mix of privatized and socialized elements. While corporations employ the bulk of America’s workforce, we also have Social Security, Medicare, a public highway system, public K-12 schools, national parks, the National Weather Service, and the U.S. Postal Service. These collectivist programs are instrumental to our daily life and are broadly popular.

Although America has uniquely strong entrepreneurship, we also have important regulations. Employers are not allowed to use child labor. Manufacturers of automobiles, food, and drugs must abide by safety standards. If a company creates a monopoly, federal courts can forcibly break it up, as occurred with Standard Oil in the 1910s and AT&T in the 1980s.

For generations, we have been neither a fully capitalist nor fully socialist economy but rather a mixed-market system. In our mixed economy, the only debate is about where to draw the line.

Unfortunately, many labor standards — like the minimum wage, overtime pay, and unionization — were gradually weakened in the late 20th century. Since the 1970s, the real value of the minimum wage has fallen by 31%, the share of workers receiving overtime has dropped from 65% to 7%, and union membership has been cut in half.

Corporate profits are at a record high, while companies pay a historically low share of the federal tax burden. Inequality has soared to the point where three families own more wealth than the bottom 50% of Americans.

The last time our economy attained this level of wealth distribution was prior to the Great Depression. Franklin Delano Roosevelt responded with the New Deal. He sought to save capitalism from itself through public works, financial reform, and new regulatory agencies. FDR’s policies, I would argue, were wholeheartedly American. He won four consecutive national elections, each time with over 400 electoral votes.

All that we on the American left are advocating is moving the needle again, returning some degree of economic power to the working class, and adding a few more public goods into the system like four-year college and healthcare, which nearly every other developed country has done.

I admit that Bernie Sanders did not do us any favors when he wore the label “democratic socialist” in a national campaign. The door was opened for fear-mongering about the elimination of capitalism. Combine that with the narrative about the left’s “cancel culture”, and a picture is painted of a radical Stalinist movement intent on censorship of free speech and sabotage of free markets.

The truth is that very few leftists advocate banning private enterprise and creating an authoritarian socialist state. Sanders is far closer to an FDR-style social democrat than a Hugo Chavez-style revolutionary.

I would argue that increasing taxes on corporations, capital gains, and inheritances in the current system is not a radical position, but a common-sense one.

Still, those of us on the left should be clear that we seek not to demonize all private innovation or wealth creation, lest we fall into the dichotomous trap laid before us. We should acknowledge that private businesses created most of the appliances we use each day.

Equally, those on the American right should acknowledge the irreducible number of public (“socialized”) goods and basic marketplace regulations that are necessary to keep us safe each time we eat, drink, breathe, or drive.

I realize that nuance is not a hallmark of our political discourse. Yet I feel that the “choice” between socialism and capitalism is one narrative we should be able to move past.

Georgetown grad, avid educator. Writing clear, well-sourced political takes from a liberal perspective.

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