Economic Inequality (Part One): Why We Hate Socialism but Use It Everyday

It’s safe to say, based on our political dialogue, the terms our candidates throw around with no explanation (or understanding) of their meaning, and Americans’ thirty-plus year record of voting against their own best interests, that we have forgotten Junior High-level social studies class. Let’s review.

What We Talk About When We Talk About Economics

Every country has choices to make based on allocating resources. As a country, we have certain natural resources within our borders--oil, gas, minerals, metals, lumber, water, etc. In order to use these, and service-based, resources in a way that benefits our country, we have to decide three things: 

1) What to produce with these resources? 
2) How to produce using these resources? 
3) For whom to produce with these resources?

How a country chooses to answer these questions is a reflection of that country’s values and places it somewhere on the economic spectrum between Laissez-faire Capitalism and Absolute Communism. The main choice to be made is who will own the means of producing goods and carrying out services.

In a Communist Economic System (also called a Planned Economic System or a Command Economic System) a public body, usually the federal government, owns all means of producing goods and providing services and decides based on the needs of the country, who will work in which industries and what goods they will produce, and who will get these goods. In Communism, all industries are nationalized, but here’s the catch. Karl Marx, who conceived Communism, envisioned a Utopian society in which people of higher thinking and high moral character created systems to share all necessary work and provide equal resources for everyone in the country. Such a society, in theory, would eliminate the need for currency and dissolve caste systems and social classes, making all people equal on a social and economic level. He laid out a progression to get to this point, which started with Socialism (which we'll get to) and led into a vanguard "government" that would basically keep things organized until they could dissolve completely. This, of course, has never occurred, though variations on Communism have been tried. Most of the industrialized world uses some form of Socialist Economic System (usually market socialism or democratic socialism, which combine principles of Communism and Capitalism).

The problems with Communism (Collectivism)

Here's the thing: Communism has never been practiced as it was envisioned by Marx. Rather, it has always been imposed by a dictator as a means of isolating power, which is why Communism is often associated with dictatorships and tyranny. In an absolute Communist society citizens must give-up nearly all personal freedoms in exchange (theoretically) for getting all of their needs met. Communism is often referred to as the belief that each person gives according to his ability and receives according to his needs. It is a very idealistic economic system based on the idea of putting the greater good before oneself, which is hard to argue isn't a very American value. We all know Kennedy's famous, "Ask not what your country can do for you, but what you can do for your country." 

However, it is not difficult to see where human nature causes problems in such a system. A highly intelligent, hard-working individual doing a time-consuming and laborsome job is not going to be happy with receiving the same financial and social payoff as a person putting in the minimum effort to receive the same financial and social rewards; i.e. Communism removes incentives to work harder and innovate for the betterment of society. It's hard to say what all the issues would be in a Communist society because we have yet to witness a true Communist Economic System in practice, though one would never know it based on how often this term is thrown around in American politics.

Now, let’s look at the opposite extreme: Laissez-faire (unregulated) Capitalism. In this economic system all means of production--everything from mining to creating social media websites--are owned and operated by private individuals and businesses. Unlike Communism, Capitalism cannot function as an Economic System under a dictator. Though, like Communism, in theory, centralized government does not exist in a truly free enterprise; rather, the needs of society are met and regulated by the market. That is, if a need arises in society, say, garbage is piling up everywhere, theoretically, an individual starts a business to fulfill this demand and charges customers accordingly. If a business charges too much for a service or product people refuse to buy the product and thus the company must lower its prices or go out of business. The market sets its own prices based on what people are willing to pay. This creates innovation and competition. If one business fulfills a need and another company can create a faster or cheaper or more effective way of fulfilling that need then customers will naturally gravitate to that company. In theory, when individuals and companies have a financial incentive to compete, society benefits, goods and services improve, and people work harder to create new ways to fill societal needs.

The problem with Capitalism is that personal freedoms are valued over financial and social equality. Such a system gives boundless incentives, but does not provide equal means to citizens to compete for resources. Thus, resources are allocated unfairly, a problem that, if unresolved, may lead to class warfare.

A less ominous, but equally troubling problem with Capitalism is that some needs of society, say, monitoring and regulating chemicals in our drinking water, are not marketable. In fact, they aren't even possible. One company cannot tell another company, “You must stop polluting our drinking water.” Such a command can only be given and enforced by a central agency of some kind, ideally, a government of elected officials. One may argue that customers would stop buying a product from a company who is polluting and thus the market would again solve this problem. However, if no one is making a company disclose this information, the people will never know who not to support.

Another problem is that resources are allocated based on who wins this free enterprise competition. He who comes up with the best/ cheapest way to fulfill a societal demand, gets more money, a more enjoyable lifestyle, and a higher social status. Thus, social classes form and the system creates a resource snowball effect. If one’s great-grandfather comes up with a brilliant idea for a product and makes a fortune from this product, not only is his company then able to draw all the best workers and innovators to continue dominating their industry, but the original creator will be able to pass his personal wealth, and his company, down to his children. Those children will then be able to afford the best education (remember, in a true Capitalist system, public education does not exist), the best healthcare, the best food, housing, etc and receive connections and assistance that people born to poorer families cannot access. After a couple generations, resources become isolated in the hands of a few families creating a large gap between those with the resources and those without. Many problems can arise from this division. One being that the economy will fail if customers cannot afford even the lowest prices available; and, two, the lower classes become, essentially, indentured servants to the higher class. Those with the means of production can work the lower class employees endless hours, pay them unlivable wages, abuse them, discriminate in their hiring processes based on societal biases, etc.

Many problems can and have arisen from unchecked Capitalism. To deal with these problems, the U.S. and other wealthy countries have adopted a third, and as of yet, more functional and fair economic system: Socialism.

I can hear the outrage exuding from my American readers: “We absolutely are not Socialists!” The problem is, we are Socialists. The reason we think we’re not (and why this term gets thrown around on the same level with sonofabitch) is because Hitler, Stalin, and Mussolini called their political parties Socialist. What they actually practiced was some bastardized version of a Communist dictatorship. Regardless, Socialism, Communism, and Tyranny became interchangeable synonyms in the American political discourse. 

Socialism and Communism are different economic systems, especially with regard to how Socialism is practiced today. Socialism allows a central government to take control of some essential industries, such as education, healthcare, banking, energy, etc, while allowing other less essential industries to function on the free market system. While it is true that the United States has resisted nationalizing certain essential industries, like healthcare, that literally every other wealthy nation in the world has nationalized, the federal government does control a fair number of industries and competes in and/ or regulates nearly every industry in the U.S. Transportation (airports, roads, railways), education, social services, police, fire departments, EMTs, public health clinics, the postal service, etc are all nationalized industries. Thus, we practice Socialism in the U.S. everyday. Do we also practice Capitalism? Of course. In fact, we fall much closer to the Laissez-faire Capitalism end of the spectrum than we do to the Collectivism end. As a result, we both reap the financial benefits of free enterprise and suffer the consequences of an ever-widening economic gap and dearth of public benefits.

What we seem to have forgotten--or arguably have been bullied into not believing--is that we have a choice. Regardless of where we fall on the economic system spectrum, we are a democracy. The public gets to decide how we will allocate resources in this country and demand these allocations from our leaders. If they do not abide, we can vote them out. However, be it because of tradition, or lack of information, or fear of change, misinformation, or a collective idealistic hope that one day we too will be billionaires, we continue to vote in favor of allowing resources to be allocated to a handful of individuals. Most of these people inherited their wealth and are not using it to innovate or fulfill new societal needs, or provide more affordable options in essential areas of society. A significant majority of the wealthy are using their wealth to assure that the people in government are their people. They spend billions every election cycle making sure their taxes stay historically low and that funding of regulating agencies remains scant. They inject misinformation into our discourse through their privately owned media sources and they pay seven figure salaries to lobbyists to push laws that will make it even easier for them to make even more money. 

Meanwhile, for the lower classes, quality education is becoming more unaffordable; healthcare is either unattainable or unaffordable for tens of millions; it’s becoming more difficult to get a loan for a house, or a car, or a college education…And these are just the problems affecting the middle-class.

The problems we have are present because wealthy business owners use our federal government as an extension of their power as industry leaders. They have no problem with greater governmental control so long as it is benefiting their bottom line. They do not fear bigger government; we do. They are using the government to protect their resources from the people, rather than the people using the government to reallocate those resources to the middle-class in the form of healthcare, education, affordable housing, paid maternity/ paternity leave, etc. We have a choice. We should use it. A fear of the word Socialism is destroying our country. We’re already a Socialist Democracy. We already give up certain personal freedoms to gain certain essential resources. We give up many more to the wealthy when we let them play the role our government is meant to play.