If Obama is a Socialist, What’s Capitalism

The Republicans (remember that I label all elements of the right wing as Republican) see to believe that President Obama and the Democrats have a hidden agenda: to turn the United States of America to socialism. They imply that there needs to be a return to or at least a reassertion of a free market capitalist economy. Their screams and shouts make me wonder what they might mean by and fear about socialism and what they might mean by free market capitalism.

Rather than delve into the economic details (leaving that to Paul Krugman) I’ve decided to look into the philosophic distinctions between these economic systems. To do that I’ve been re-reading one of, if not the, preeminent moral philosophers of the twentieth century, Mortimer Adler.

What follows in a exegesis on capital and wealth and capital-intensive economies. I will then draw some, to me obvious conclusions and add some comment of my own on what I perceive as the extensive delusional view of the Republicans.

(Note: I’ve both quoted and paraphrased extensively from Dr. Adler’s book. Though I’ve tried to differentiate direct quotes from paraphrasing, I may not have succeeded in all instances. Where the lines blur it is often because I couldn’t present these arguments any more clearly than Dr. Adler had. For this I apologize.)

In A Vision of the Future, published in 1984, Doctor Adler defines four kinds of capitalist economies. He starts with defining capital as the property from which and the tools through which wealth is produced. He then states defines a Capitalist Economy as one in which wealth is mostly produced by capital-intensive work regardless of how capital is owned or controlled. Adler doesn’t differentiate between economies where capital is privately held by individuals, organizations or the state. To quote Dr. Adler:

The economies of all technologically advanced, industrialized societies with mechanized agriculture are capital-intensive. In that respect, considering only how wealth is produced, not how the capital instruments are owned and operated, all such economies can be called forms of capitalism.

He then goes on to state that this label applies to socialist and even communist economies as well as the most extreme forms of free-enterprise, private-ownership, laissez-faire economy. The forms of capitalist or capital-intensive economies are differentiated by how the capital instruments are owned and operated.

Adler then adds another dimension of differentiation: as a result of the 20th century’s technological advances, a capital-intensive economy may be highly flexible, easily changeable and also involves, “high degrees of skill in its work force, with efficiency augmented by the planned cooperation of all its’ members for top management down”. This is contrasted with an older type of economy, developed before 20th century technological innovations. This type of economy consists of a high-volume, standardized system of production (assembly lines) with much less skill in its work force and little or no cooperation among its members from top management down.

Four types of capitalism (capital-intensive economies) can be recognized by their labels. The first, predominated throughout the 19th into the early 20th century and is rapidly disappearing. Its remnants only exist in relatively under-developed economies. In nineteenth century capitalism, called by Karl Marx bourgeois capitalism, a relatively small portion of the population, less than 10%, owns all the capital, operates it to maximize profits and is able to do so because its operations are an extreme form of unregulated free enterprise. An aspect of this economy is the wide gap, Adler calls it a chasm, separating the very rich capitalists from the many very poor workers or proletariat. “Their only income consists of wages for their labor which, prior to the emergence of labor unions, the laborers must sell in the labor market at whatever price the capitalists are willing to pay.” The capitalists only have to pay enough to keep the laborers alive and reproducing.

Two forms of capitalism emerged from bourgeois capitalism almost simultaneously during the first third of the 20th century. Both new forms were motivated by the misery of the working class under bourgeois capitalism and by recognition of the economic injustice done. Any reader of Dickens will recognize the nature of the lives of these laborers and will recognize that people so afflicted cannot earn through their labor what is needed to lead a decent human life.

The first form, called a mixed economy, emerged in England, the dominions of the British Commonwealth, the United States and in the Scandinavian countries and the Netherlands among others. It is called a mixed economy because there is both a private and a public sector so far as ownership and operation of capital is concerned. This form can also be called socialized capitalism, because free enterprise is regulated so that labor is paid a living wage, one that is more than is needed for subsistence. These wages go part way toward providing the conditions for a decent human life and are augmented by a variety of welfare payments and government intervention in the fields of education, health care, recreation and so forth.

The second emergent form of capitalism began with the communist revolution in Russia and then spread throughout the nations behind the iron curtain and the Soviet Union’s satellites around the world. These communist economies are all capital-intensive as it is very difficult for a labor-intensive economy to adopt communism without rapidly changing to a capital-intensive economy. (A review of the early post tsarist history of Russia and the equivalent period in China demonstrates this.)

A communist economy, defined as a form of capitalism because it needs to be capital-intensive, can also be called State Capitalism. All major forms of capital are owned and operated by the state, the private ownership of capital is non-existent or negligible. There is little or no free enterprise and the unequal distribution of wealth is determined by the government.

According to Adler “State capitalism is also a form of socialism. Like the mixed economies that are forms of socialized capitalism, state capitalism seeks, in principle at least, to see that all individuals and families participate in the general welfare.”

Doctor Adler differentiates between socialism and communism as follows: A socialist economy is one that has the economic welfare of all it’s people as its end. A mixed economy is socialist without abolishing private ownership and operation of capital and retaining a free though regulated market. The means employed by a mixed economy differ from communism in that communism abolishes private ownership and operation of capital, transferring both to the state.

The fourth form of capitalism has emerged more recently and is not yet fully in existence (both today and in 1984 when A Vision of the Future was published). It too is socialist in aim, but it is not communist as it includes the private ownership of capital, private corporations and a regulated market. It differs from the mixed economy by seeking to enlarge the private sector of the economy and reduce the public sector as far as possible. Unlike bourgeois capitalism where private ownership of capital was in the hands of the very few this form, called universal capitalism, seeks to achieve the aims of socialism by approaching the private ownership of capital by all members of the population. Most people would earn their livings through a combination of wages for their labor and from the profits of capitalism. (George W. Bush misunderstood and misrepresented this as the Ownership Society.)

All three of the capital-intensive economies just described as, “socialist in their aims (only one of which is communist as to means) try to embody two principles of economic justice. They try to secure the basic economic rights of every individual by seeing that they possess, through the incomes they earn and the goods or benefits they receive through social welfare, the wealth that any human being needs to lead a decent human life. So far as that minimum amount of wealth is concerned, these three capitalist economies try to establish an equality of economic conditions.”

All three of these economies also aim to distribute wealth unequally according to the principle to each according to his contribution, ignoring “for the moment the question of how the degree of contribution is determined and by whom.”

This principle is, “subordinate to the principle which is to all according to their common human needs, the minimum of wealth that everyone needs to lead a decent human life, to which all humans have a natural right.”

These two principles, working together, “bring into existence a non-egalitarian socialism – a society that has established an equality of economic conditions according to the first principle and an inequality of incomes according to the second.”

Only the earliest form of capitalism is nonsocialistic. Under bourgeois capitalism a wide gulf of “unequal conditions separate the the few capital owning rich from the vast multitude of the laboring class. There neither of the two principles of justice were in operation for most human beings.”

As can be seen, all the capitalist systems of today are socialist in aim. Communism, or State Capitalism, is a failing form, only existing in a vestigial state in China and Cuba with a few feeble attempts in such places as Venezuela to force it into being. In Venezuela and the like, Communism is being used as both a means, ostensibly of forcing a mixed economy onto a bourgeois one but actually as a means to disguise the takeover of the ownership and operation of capital by a new elite from an old one.

The recent worldwide economic collapse and the well documented failure of the free market economy could be said to be based upon an extreme view of Milton Freidman’s writings filtered through the imagination Ayn Rand and exemplified by the admitted failures of Alan Greenspan and others. It has called into question the efficacy of what Adler called Universal Capitalism. I’m not sure whether the collapse negates the concept of Universal Capitalism, but it does point to the need for strong regulation if universality is to be real and not a stalking horse for the concentration of wealth into a new form of bourgeois capitalism.

So, if the US economy is in some transitional period between a mixed capitalist economy and a universal capitalist economy, both of which are socialist in intent, and communism has all but ceased to exist to what form of socialism are Barack Obama and the Democrats trying to turn the country? Or, perhaps better stated: To what form of economy are the Republicans hoping to see a return?

As we’ve seen, a mixed economy is socialist. A universal economy is socialist. A communist economy is socialist. Only a nineteenth century bourgeois economy is nonsocialist.

Do the Republicans want to return to this dark Dickensian world?

You betcha!

Update: Since posting this, I've made several edits for both greater clarity and better English.