Avoiding the Abyss of Socialism

Xark posts today that perhaps it is time to consider socialism in some form as a cure to the excesses of the capitalist marketplace. He writes:

But here’s the question that struck me this summer: Why NOT consider socialism in some form?

was back before the subprime crisis broke the levy and the markets
freaked out, back when the size of the problem was coming into focus
and the flaws in the system were being discussed openly. And the more I
thought about it, the more convinced I became that we were witnessing a
transfer of wealth from the middle class to the upper class.

That’s a destabilizing development. As I wrote in the Xarker Manifesto (Section IV, Item 3),
America’s success is predicated upon a government that creates a stable
business environment by finding a balance between the needs of the
people and the dynamics of the market. Xarker Manifesto IV.4:

The  ideal government in such a system keeps competition fair,
protects the credibility of its institutions and prevents the natural
anti-democratic tendencies of each segment of society from gaining
advantages on each other. It counterbalances capitalism’s tendency
toward fascism and democracy’s tendency toward socialism.

simply leaving important matters up to the free market is not really an
honest answer to every problem (because the markets here and overseas
are not truly free), and letting corporate lobbyists have the run of
Washington is bad for business (because it destabilizes the country and
leads to upheaval).

Good stuff, if you believe that the root cause of our present dilemma is a failure of capitalism. But it’s not.  What’s really happening is that our free-market ideals have, over time, been subtly subverted by a political class that cannot prevent itself from promising more and more to more and more, without regard to economic and social costs. Social Security, Medicare, Education, and health insurance have been batted around the halls of Congress like political beach balls at an Indigo Girls concert for years; yes, both sides have used the issues as fulcrums for wedge politics, and we the people are suffering from the effects of political gamesmanship.

As an alternative to Xark’s call to arms, let me direct your attention to a providential post in today’s Wall Street Journal. Judy Shelton writes:

Where are the champions of free-market capitalism? Someone needs to
remind us all that two great works were published in 1776, both
representing game-changing advances in human freedom: The Declaration
of Independence, authored by future American president, Thomas
Jefferson, and "The Wealth of Nations" by Scottish economist Adam
Smith. Both embrace the social wisdom of individual liberty; both extol
the importance of personal responsibility.

These days, it seems difficult to defend the efficacy, let alone the
morality, of an economic approach to human interaction that is now
blamed for having put the entire global economy at risk.
But that is
exactly what we need — most importantly, from America’s next leader…

Sometimes it takes an outsider to help us gain perspective. Deep within
the condemning speeches delivered by Mr. Sarkozy, both in New York and
Toulon, are the grains of a new approach to capitalism that should give
Americans reason to hope, not only for economic salvation but for a
sense of redemption on a deeper level. France’s president held out the
possibility that all is not lost, that we can fix what is broken. "The
financial crisis is not the crisis of capitalism," according to Mr.
Sarkozy. "It is the crisis of a system that has distanced itself from
the most fundamental values of capitalism, which betrayed the spirit of

Give credit to Mr. Sarkozy for demonstrating leadership in attempting
to salvage what we know is true — that democratic capitalism is the
best hope for mankind — while jettisoning the abuses and fraudulent
practices that have distorted the outcomes of free-market competition.
(Emphases mine – Ag.)

Ms. Shelton then offers some suggestions for a re-jiggering of the Capitalist model:

  • Free-market clarity. Consumers must be able to properly judge
    the inherent value of goods brought to the marketplace if markets are
    to function properly; this applies to financial instruments as wholly
    as it does to products and services.
  • Monetary integrity. Monetary-policy decisions that "stimulate"
    the economy by issuing too many claims to real production, or
    "constrict" the economy by reducing the amount of available purchasing
    power or capital investment, utterly confound the notion of stable
  • Financial validity. What turns the reputable practice of
    granting credits to deserving borrowers into a high-stakes casino game
    where the biggest stacks of chips are held by speculators working for
    the world’s largest banks and investment houses?
  • Regulatory responsibility. Rule of law is a core requirement
    for civil society; without it, anarchy reigns. Government regulation
    does not create wealth, but it is a necessary condition to provide the
    stable and predictable environment that permits buyers and sellers to
    carry out economic and financial transactions with confidence. Trust is
    achieved through transparency, first and foremost. And while government
    regulation, at its best, merely functions as the incorruptible referee
    — it will never dream up the breakthrough projects that become
    capitalism’s greatest success stories, nor have the discernment of the
    venture capitalist who recognizes an entrepreneur with a brilliant idea
    — it nevertheless plays a key role. Governments should view economic
    freedom as a basic human right, to be respected and protected by
    ensuring that markets function smoothly and openly.
  • Entrepreneurial opportunity. Much of the resentment felt by
    citizens toward the massive investment companies who peddled bad
    government paper, and the craven politicians who promoted the practice,
    stems from the perception that capitalism is rigged toward the most
    When the owner of a small retail outlet or medium-sized
    service firm gets into financial trouble — who steps in to help? Why
    are the rules to start a business so onerous, why is the bureaucratic
    process so lengthy, why are the requirements for hiring employees so
    burdensome? When does the entrepreneur receive the respect and
    cooperation he deserves for making a genuine contribution to the
    productive capacity of the economy? Equal access to credit is
    sacrificed to the overwhelming appetite of big business — especially
    when government skews the terms in favor of its friends. It is time to
    pay deference to the real economic heroes of capitalism: the self-made
    entrepreneurs who have the courage to start a business from scratch,
    the fidelity to pay their taxes, and the dedication to provide real
    goods and services to their fellow man.
    (Emp. mine – Ag.)

These ideas are the prescription for the sickness. Giving back to the middle class the opportunity to grow and to thrive, like it was before Uncle Sugar decided to start ladling favors to favorites, is a vastly more desirable alternative to tossing our hands in the air and saying collectively: "We give up, it’s not fair, we don’t know what to do……you decide everything for us."

Giving up our individual rights and freedoms is not worth the pain that we must endure to correct the ills of the greatest engine of freedom the world has ever known.



One Reply to “Avoiding the Abyss of Socialism”

  1. I think I’d be more inclined to agree with you if I still believed absolutely that the free market (and I don’t just mean the stock market), in anything but the idealized sense, was independently capable of resolving things wisely and fairly. I think of it now like I do other ideals: Instructive and valuable, but not necessarily practical.

    I suspect that sustainability is going to be an important factor in 21st century economics, and that life-cycle pricing will be part of that. I don’t think the free market, left to its own devices will evolve a solution to that problem, but in the same sense that technology is evolution by non-biological means, perhaps there’s an analogy to markets and government.

    Federal deposit insurance, public education, Medicare, environmental regulation, the 40-hour work week: I think most Americans are happy to have these things. And while they are criticized as socialistic (which, on our continuum, they are), I argue that these things actual serve our economy by providing a stable environment for business.

    So what I’m hoping for is a discussion that looks at how the total set of laws, regulations, treaties and trade agreements functions to provide for prosperity in this century. I’m not interested in solutions that downplay the value of market freedoms, but I think there’s a practical side to setting up rules that do the most good for the most people. And I think my fellow liberals are scared to death to talk about some of these things openly, because they’re scared of being called socialists.

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