Capitalism and Socialism in America

Here is a fact: every country in the developed world possesses an economy that combines capitalist and socialist forms of organization. It seems to me that this fact is something that used to be more widely understood and accepted. The economies of the mid-to-late 20th century emerged from long processes of contentious struggle between classical liberal, socialist and traditionalist ideas, and had all arrived at different combinations of those various elements. We used to call these economies “mixed economies”, and almost all educated people understood that we all lived in such economies. We debated which ones were better than others: which produced more prosperity, or more happiness, or more justice.

People disagreed, frequently intensely, but often understood at the same time that these disagreements were mostly practical disagreements about getting the right mix, and that the pure textbook forms of capitalism, socialism, communism, or whatnotism were abstract, purifying ideals that each left out various important aspects of human nature, and were thus too high for humanity.

Most people who pushed in a socialist direction understood that you can’t plan everything all the way down to the smallest pizza shop, and that you shouldn’t eliminate all of the confidence, personal pride and creativity that come from accepting some measure of individual control over private property. Most people who pushed in a capitalist direction didn’t really want private firms running all the law courts, militaries, schools, parks and highways, and recognized that a civilized and harmonious human society shouldn’t be based on the bestial norms of wilderness competition, with its cruel, Sisyphean struggles for dominance and survival. And most traditionalists understood that the kingdom of heaven is not of this earth.

Mixed economies all contain some combination of private enterprise and public enterprise; some combination of private ownership and public ownership; some combination of market distribution and ordered distribution. Mature people in such economies, while disagreeing on many very important points of institutional organization, all recognize that incentives and individual creativity and initiative can’t be entirely ignored; they all recognize a foundation of basic security is important; and they all recognize the need for various kinds of regulations on enterprise and markets, because they all understand that completely untrammeled commerce tends toward self-destructive barbarism, and that respect for human dignity requires the insistence that not everything is a tool and not everything should be for sale. And while working out their differences about how to organize things, mature people in our mixed economies can remember from time to time that we are all brothers and sisters who are temporary sojourners on the Earth, who see what we are given to see as if through a glass darkly, and who share the same mortal fate.

My personal feeling is that in the United States we have tilted too extremely toward the capitalist or classical liberal pole of this long trilateral discussion, and should begin to push back toward both the socialist and traditionalist directions, and draw some renewed wisdom from those other two cultural legacies. We should revive socialist aspirations for democratic equality, cooperation, mutual obligation and solidarity, and mix in a traditionalist respect for the rule of law, the accumulated lessons of culture and history, the special dignity of humankind and high mutual expectations among ourselves for adherence to the norms and virtues of civilized behavior. We should place somewhat less emphasis on the desires of the individual pleasure seeker and the potentially boundless cravings of these seekers for freedom and self-sufficiency, even when such cravings become isolating and self-destructive. We should place more emphasis than we have been doing recently on our connections and mutual responsibilities, and remember that great human societies and cultures don’t just emerge from the random flux, but have to be built and preserved. We should recall the importance of intelligence, reason and thoughtful planning in human history, and remember that it has not all been a matter of impulsive will and sybaritic drives.

It is my sense that there are already very many people in our country who would prefer to live in a more equal society, and who have a longing for more social solidarity and cooperative sharing, but who have been beaten down intellectually over the years by those who are always trying to convince them that egalitarian institutions, formal arrangements for sharing, and deliberate, long-term planning interfere with the efficient functioning of some ungraspably miraculous network of commercially transacting individual atoms: a providential super-capitalist super-mind of which we are all part, and in whose inscrutable workings we dare not interfere by trying to plan and create the life we actually want to lead. These extravagant intellectual conceits of harmony through avarice, and the panicked terror about deliberate social organization and non-commercial cooperation they tend to occasion, are quite overwrought. But they still intellectually oppress many moral instincts that would otherwise prevail. If my feeling about the zeitgeist is correct, then the best strategy for moving the country in a more socialist direction is not to war incessantly on abstract moral and philosophical grounds, but to envision and propose concrete institutional innovations and transformations, think through the details and challenges of their implementation, and make the public case for these changes with a combination of patient, practical specificity and higher-level sketching-out. The case should be made that a more equal society will work better: we’ll be happier; there will be less bitterness, less loneliness, less fear and less struggle. There will be more camaraderie and unity. It can work, and it is needed.

But it is very hard to make progress if clear thinking and speaking are warped by double-think and doubletalk. People who already share some of the instincts I just described need to embrace those aspects of the socialist tradition that are worthy of respect, do so without shame or embarrassment, and start calling them “socialism” out loud. Of course, the fact that someone wants to do some socialist things doesn’t make them a pure, adamantine socialist; any more than the fact that someone wants to implement liberalizing reforms makes them an iron-solid capitalist. But if you know you are pushing in a socialist direction, it is might be best to call yourself a “socialist” of some kind, at least from time to time. Let’s inject that concept back into acceptable debate. We need more real world, out-of-the-closet neo-socialists in our polity, and fewer conflicted souls with bad faith and a guilty secret. It is very hard to make headway in an honest, frank debate without calling things what they are. One ends up smothering one’s own best ideas under a pillow.

Franklin Roosevelt and the New Deal clearly pushed America in a more socialist direction, by comparison with the failed, highly capitalist system FDR inherited. That was a good thing, and it should be celebrated, not denied. The US economic system in the second part of the twentieth century was a far better system than the pre-war version, and the socialist modifications were a major part of the reason. The improved system had a large and growing middle class; and it did much more to protect the security, prosperity and dignity of working people. It also turned out that protecting those who had been most vulnerable benefited almost everybody. We possessed in those years a more vigorous tax code that prevented people at the top from creating large and ungovernable capital empires that could purchase the political system and dictate the conditions of economic life to everyone else. The gap between the best off and least well off was much smaller than it is today. Millions and millions of people received state-subsidized educations, people who would otherwise have been denied those blessings under the older system. As a result, many Americans were able to build their own minds and sense of self-respect as they helped build the country. And we moved forward for many years, through ups and downs, without a major financial crackup.

Was FDR a socialist? No, not entirely; but he and his administration had absorbed a number of very good and innovative ideas from the socialist tradition, and they put a number of these ideas into effect. Was he a capitalist? No, not entirely; but he and his administration retained a number of important features of capitalism, including reliance on private enterprise and markets for supplying the consumption needs and desires of daily life.

I expect neo-socialist thinking to emerge into the mainstream in the coming years and to help open up a broader and healthier national debate, one with less confusion and less furtive dissembling, and with more open discussion of creative social alternatives. Yes there are always a few people who are simply rooted lovers of separateness and social aggression, addicts of hatred who can’t be moved. Apart from any concern with economic efficiency and prosperity, these kinds of people like to establish and police hierarchies for the sake of hierarchy, while kicking down at those below them in that hierarchy. Many of these people are at the top of the current order, but some are stuck lower down. They feel weak and insignificant, and lash out at the even weaker, just to have an outlet for their frustrations in some area where they still have a sense of power and control. Arguments for practical social improvements based on aspirations for social equality, or even enlightened self-interest, won’t have much effect on them – at least not initially. The arguments might instead induce panic and paranoia. But I don’t think these people are in the majority.

America, despite all obstreperous ideological insistence and culturally mandated self-deception to the contrary, has an important and estimable socialist tradition, a tradition that needs to be recovered and extolled.

10 thoughts on “Capitalism and Socialism in America

  1. While I agree with the substance of your approach, I do have some hesitations with your language.

    I may be wrong, but I don’t think the systems and approach you advocate meet the traditional definition of socialism which, as I understand the term, refers to the state or public sector owning the means of production. If I understand you, you advocate greater public ownership and provision of what you (and I) see as properly being communal facilities and services, and broader public regulation of private commercial activities, insofar as they affect the common welfare. That’s an approach that many of the Founding Fathers and others, such as Abraham Lincoln, Teddy Roosevelt, Franklin Roosevelt, Dwight Eisenhower and even Richard Nixon advocated, to one degree or another — using government as the people’s instrument to promote the “general welfare.” More to the point, I think they and most people today would see the use of the term socialism, in the context you suggest, as confusing the issue. Each of them was clear in seeing the private sector and private property as incorporating the freedom, motivation, power and dynamism to create great prosperity, but each also saw the need for the public sector to create and define a context that ensured that the energy of the private was directed toward positive results for society as a whole, and did not benefit the few at the expense of the many. Further, they each saw a need for the public sector to deliver certain products, facilities and services that only it would deliver in such a way as to benefit the broad interests of society as a whole.

    Arguments over semantics can quickly devolve into nitpicking, and I certainly don’t want to do that, but I think the progress you advocate would best be promoted by avoiding old, misunderstood and tarnished terms like socialism altogether, and seizing the opportunity to initiate and define a new debate. In this regard, I’ve been working for a couple of years on a book on the subject, and after doing extensive research, have chosen the term Communitarianism as most appropriate. While it may be too close to the word communism, it does capture the broader principles of mutual interdependence and responsibility that you so eloquently put forth in the above piece, while also accommodating a dynamic and regulated private sector with the freedom to advance and grow in a manner that promotes the general welfare in addition to rewarding the entrepreneur and innovator.

    Just my two cents…


    • Chris, I would agree that socialism consists in public ownership and operation of the means of production. It also refers, I believe, to forms of government-organized distribution that aim at the achievement of specific social goals, and are not conducted by markets. Capitalism consists, on the other hand, in private ownership and operation of the means of production and distribution via the distribution of market exchange. If these accounts of socialism and capitalism are correct, then there it is clearly possible for a single economic system to contain both socialist and capitalists sub-systems, since it clearly possible for a single system to include both some public ownership of the means of production and some private ownership of the means of production, and to include both government-organized distribution and market organized distribution.

      So that’s my point. The US economic system, as well as every other economy in the developed world, is a mixture of both socialism and capitalism. As I said, there used to be a fairly standard name for this: a “mixed economy”. Different systems have evolved that employ different proportions in the mixture, but they all contain some mixture of socialist and capitalist elements.

      In the US, we are in deep denial about the socialist components of the mixture, because the term “socialism” has become associated with intellect-deadening taboo. A lot of our biggest national discussions are about which sub-systems in our national life should be organized in socialist ways, and which should be organized in capitalist ways. My argument is that if we could undo the taboo on the word “socialism”, so that we could discuss these questions in these standard terms without the irrational baggage of fear, prohibition and double-think, we could have a clearer and more productive national discussion.


      • Dan, your wish for a more objective and enlightened dialogue with respect to those things that are most appropriately handled by the public sphere and those best handled by the private sphere is laudable; however it presupposes that the other side is desirous of such a dialogue. Unfortunately, I’m afraid that’s not the case, as evidenced by their very demonization of the term “socialist.” Those who’re directing the neoliberal side refuse to accept that there’s any value in the public sector or in communal activities or property. This is at the core of what prevents a useful dialogue, not a disagreement over terminology.


  2. There is one more important ‘dimension’ of government: how much of the governance and enforcement of rules is left to trusted government officials, who are allowed some leeway to let sense prevail, but with the risk of bad officials. Versus the system where governance and enforcement of rules is privatised to lawyers. Lawyers tend to work for the clients that pay, and search the boundaries of the law for those clients. This forces everybody into evasive action to avoid law suits. A system that can be very sub-optimal, and expensive. It may look like ‘government’ is small, but if you count lawyers as part of a privatised government they can become a significant part of the governance system. In a privatised but very inefficient way.


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  4. I agree with you on the taboo surrounding “socialism.” But it seems to me that, at its core, liberalism IS about the balance between the public and private sectors–a balanced mixed economy in which the distance between the rich and poor and the middle are kept within bounds. It’s become reduced to discussions about specific programs, e.g., SS, but philosophically its more about creating and maintaining a balance between the public sphere (which takes care of certain things) and the private sphere (which takes care of other things). The right has branded this balanced approach “socialism,” but don’t have to.


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  6. Pingback: A Neo-Socialist Look at Taxation | Samma Vaca

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