I read your articles and I have also studied economics in school. Besides several years of classical economics, I took economic courses on economics and public policy, which explained how socialistic and capitalistic policies are reflected in the “safety nets” entitlement systems of countries with advanced economies. Have you taken any such courses?
Part of the social safety net argument from a “capitalist” perspective is that it provides “risk” takers “insurance” against downside risk encouraging them to take risk a key part of how capitalist economies thrive and grow. Given the failure rate of new enterprises, the backstop the social safety net, helps these risk takers to regroup, save, and try again. While the “risk taker” stands to lose the most and gain the most based on outcome, the rest of us share some of the loss by funding entitlements and some of the gain through income taxes. The thorny question is “how much”?
The social safety net also “cushions” the impact of what Schumpeter calls “creative destruction”. Without the social safety net, the citizens in a society would resist change. The less people fear change the faster society can re-invent itself without destabilizing that society. Destabilization leads to enormous wealth destruction through revolution or riots and should be avoided. Again “entitlements” operate as a form of societal insurance, since we need creative destruction to move a society forward and so we need to address the barriers to it in our government policies. Both FDR and Bismark claimed they saved their nations from autocratic socialism by introducing socialistic entitlements to their countries.
But many people who vote for entitlements are not acting on economic theory but on a sense of altruism. They simply believe a wealthy society should provide some minimum standard of care for its poor. They embrace to some degree the socialist motto of from each according to their abilities (income) to each according to their needs (entitlements). This concept is seen even in primitive societies and the concept is not new. Today those thoughts are expressed in concepts like progressive taxation and minimum standards of living. Let’s move off of theory and look at real life…
Simple question for you… which democracy with a wealthy economy does not have entitlements? Singapore, Japan, Australia, countries in Europe?
So whether you embrace entitlements and rationalize them as a rational operating expense of a successful capitalist economy or you embrace them as an extension of the natural “kinship” humans feel to their fellow humans really does not matter. In the end, progressive taxes combined with entitlements act as a way to spread income earned by individuals to those in need.
Your book is from 1951. But the definition of socialism in that book is no longer the definition of socialism today… I quote from Merriam-Webster thoughts on the definition of the word today as expressed on their website… so your issue is with Merriam-Webster… not me…
In the many years since socialism entered English around 1830, it has acquired several different meanings. It refers to a system of social organization in which private property and the distribution of income are subject to social control, but the conception of that control has varied, and the term has been interpreted in widely diverging ways, ranging from statist to libertarian, from Marxist to liberal. In the modern era, “pure” socialism has been seen only rarely and usually briefly in a few Communist regimes. Far more common are systems of social democracy, now often referred to as democratic socialism, in which extensive state regulation, with limited state ownership, has been employed by democratically elected governments (as in Sweden and Denmark) in the belief that it produces a fair distribution of income without impairing economic growth.”
Here is another description…
“The thing to remember here is that different forms of socialism are extremely diverse and only a few (mainly Leninism and its derivatives) at all resemble the cliché of an all-powerful central planning committee barking out orders.
To achieve socialism, two main camps formed: the revolutionary socialists and the reformist socialists. Revolutionary socialists thought that capitalists would never relinquish power voluntarily and would beat down any attempts to take their power through reform. Therefore, they held that a revolution completely overturning current institutions was necessary, though this revolution did not necessarily have to be violent. Reformists, on the other hand, believed that reforms from within existing institutions, like increased wages, increased pensions, and limits on hours of labor would be sufficient to spark a transition from capitalism. These reformists were the original social democrats.
As time went on, however, new actors began to advocate for reforms the social democrats had endorsed, but for anti-socialist reasons. Otto von Bismarck and FDR created welfare states precisely to defend capitalism and cut the legs out from growing socialist movements. This was only possible because fundamentally, those reforms change nothing about how a capitalist economy operates.”
So I understand you grew up under a particular form of socialism, but again that was not the point of my article to contrast that form of socialism with traditional capitalism. My point was simple… modern societies have elements of both socialism (entitlement systems) and capitalism.
Those societies are only sustainable to the degree a society’s altruism translates into tax revenues that support the underlying entitlement systems. In that sense Republicans and Democrats are not capitalists vs socialists as portrayed by the media, but people who disagree over what share of GDP should be distributed to the creators of goods and services (capitalism) and what share should be distributed to the people at large (socialism). It should be noted that virtually all entitlements are administered by “central government planning” agencies.
