Let's understand just what socialism means to us

I need to get this off my chest: I'm both upset and amazed that a wacko like Donald Trump is polling second to a mainstream candidate like Jeb Bush in the race for the Republican nomination for President. I'm equally upset and amazed that a wacko like Bernie Sanders is polling second to a mainstream candidate like Hillary Clinton in the Democratic race.

The difference between the two relates to discipline.  Trump says whatever is on his mind with no concern for the repercussions.  (I won’t bother to recount his comments as they are well covered by the press.) 

Sanders, on the other hand, has so far delivered his thoughts with a lot of “message discipline”. 

Sanders is not a Democrat.  First elected to Congress in 1990 and as Vermont’s Junior U.S. Senator in 2006, he has been an Independent who caucuses with Democrats.  He is a self-declared “democratic socialist”. 

We know what the ‘democratic’ part of this definition means.  It means that, unlike the dictatorship that governed the socialist system of the Soviet Union, the electorate chooses its government.  However, I wonder if we know what a socialist is. 

Socialism is an economic system whereby the government owns the means of production.  Citizens lose the right to private property.  Investors (if there are any left) do not have the right to a return on their capital.

Anyone who thinks that socialism would be preferable to free-market capitalism is either ignorant or stupid.  And yet, Sen. Sanders is gaining traction.  What’s happening to the United States?  Have we lost our bearings? 

What we once described as the “profit motive” has been recast as “corporate greed”.  Greed, as we all know, is one of the seven deadly sins.  So, we have redefined something with enormous positive effects as something that is sinful.  

Capitalism and the profit motive have driven innovation from the 1690s, when the invention of the steam engine and steel plows made farms more productive, to the1870s, when the invention of both the automobile engine and distribution of electricity began an era of rapidly improving lifestyles, to the 1990s when the Internet boom created an interconnected world.

The result of all this innovation…

Poverty has been reduced to one fifth of what it was in 1900.  Child labor has been reduced by half since 2000.  Number of hours worked per worker has been reduced by one third since the 19th Century.  Infant mortality is half of what it was in 1990. The store of nuclear weapons has been reduced fivefold since the end of the Cold War. Carbon emissions have been flat for the last four years. (Yes, government regulation played an important role in these improvements.)

All this is the result of innovation driven by free-market capitalism. It would not have happened if we lived in a socialist system.

As for those who contend that capitalism exploits workers, I offer this:  Other things being equal – culture, geography, education, etc. – workers always thrive in a capitalist system where socialism fails to deliver.  Think of North and South Korea, Taiwan and Mainland China, or East and West Germany.

To be clear, it is the free enterprise, capitalist system that has led to a better life for Americans.  In its absence, you wouldn't have time to play with your kids or enjoy a glass of wine with your friends on Saturday night; you wouldn't be able to access the Internet from an electronic device in your pocket; and, you wouldn't be living in a climate controlled home.  You would be working hard and not reaping the benefits.  The benefit of your labor would go to the government.

Free-market capitalism is the surest path to prosperity. To describe it as corporate greed is doing all of us a disservice.  To consider voting for a socialist is the height of folly.

WHO WILL LEAD?

Of Southern Churches and the Disenfranchised

On the day Dylann Storm Roof was arrested, CBS broadcast its evening news program from the streets of Charleston, South Carolina.  News anchor Scott Pelly stood across the street from the historic church in which nine people were murdered.  In the stories that followed, the news crew interviewed survivors and the families of those that had been murdered.

I'm old enough to remember the Civil Rights movement of the 1960s.  As reminiscent of that time as the contemporary scene is, there is a stark difference. The people being interviewed were not the Southern blacks of the 1960s who lived in shanties, didn't own shoes and were poorly educated. These were the modern middle-class blacks who are well-educated, well-dressed, articulate members of their community.  Equal opportunity for education and jobs has helped two generations of black Americans achieve middle class status. 

Yet, the events of the 1960s still resonate today.  The evening news closed with a recording of Martin Luther King’s speech following the death of 4 young black girls in an Alabama church in 1963.

“They say to each of us, black and white alike, that we must substitute courage for caution. They say to us that we must be concerned not merely about who murdered them, but about the system, the way of life, the philosophy which produced the murderers. Their death says to us that we must work passionately and unrelentingly for the realization of the American dream.”

Victims of Alabama church bombing in 1963

I was reminded of the French expression “plus ca change, plus c’est la meme chose”.   (The more things change, the more they remain the same.)

We are being subjected to myriad explanations of why this has happened and how to fix it.  Personally, I don’t buy any of the simplistic solutions I have heard.  On guns, for example, neither gun control nor more citizens carrying guns would have prevented this tragedy.  Advocates of gun control should remember that the Alabama church was bombed in 1963.  There were no guns involved.  Those who think the solution is more people carrying guns should recall that President Reagan was shot while surrounded by the best trained body guards in the world, the U.S. Secret Service. 

Dylann Storm Roof was disaffected and felt disenfranchised.  His like have taken their revenge in movie theaters, at political gatherings, on campuses and in our public schools. Where the disenfranchised find like-minded people, they sometimes become organized. The white supremacist movement took shape in the form of the Ku Klux Klan.  When the majority feels disenfranchised, an entire nation can organize around those emotions as happened in Nazi Germany in the 1930s. ISIS is a contemporary example in the Middle East. 

The Southern Poverty Law Center reports 935 hate groups in the US, up from 888 when America’s first black president was inaugurated.

I don't know how to stop it. I don't know what should be done. I am hopeful that a more egalitarian generation of Americans – Millennials -- will find solutions.

Are you up to the challenge?  If you are, you have my blessing. You have my support.  How can I help?

WHO WILL LEAD?

The New World Disorder: What's Next?

As a young naval officer, we (my fellow officers and I) spent a lot of time sitting around the Wardroom table talking about world affairs.  It was the height of the Cold War and we all had strong opinions about the Defense Budget, weapon systems, the Soviet threat and the direction of our military and civilian leadership. 

These days, you don’t have to be a military officer to have world affairs on your mind.  Our world has become more complex since the Cold War ended. The rise of ISIS, the Russian incursion into Ukraine and Chinese expansionism in the S. China Sea have heightened our awareness.

So, what should we do now?  What should America’s foreign policy be?

Ian Bremmer has some ideas.  A geopolitical consultant and a Stanford Ph.D., Bremmer has just published a new book titled “Superpower: Three Choices for America’s Role in the World”. In it, he asserts that America is not in decline, as some would tell us.  Rather, our markets, employment levels and economic model are still the envy of the world. 

On the other hand, Bremmer says, “our foreign policy is in decline.”  Americans are war weary following a decade of “ill-conceived wars” and we now face an identity crisis.  We are clear that we don’t want to “play global policeman” or rebuild the Middle East.  But, we do we want?

Bremmer offers three distinct ideas.  The first is “Indispensable America”.  We can no longer afford to ignore threats in faraway places.  So, in this scenario, America must lead.  It is based on the premise that if we don’t, no one else will. America must promote its values – personal freedom, economic freedom and equal opportunity. In our interconnected world, the U.S. should provide a positive alternative to alliances with China, Russia and Iran.

“Moneyball America” suggests that we focus our attention and resources on Asia with a view toward establishing a firm alternative to Chinese influence in the “world’s most dynamic region”.  Spend no time, energy or financial capital on fruitless efforts like the so-called peace process between Israel and Palestine.  Develop a more pragmatic relationship with Iran, “a country that offers future opportunities that others in the region cannot”. 

The payoff to playing Moneyball is more robust economic growth by pursuing strategic alliances and trading relationships across the Pacific.

Bremmer’s last alternative may appeal to many voters who are sick and tired of our involvement on the other side of the world.  “Independent America” would provide a policy framework that would let the Middle East, Europe, Russia, China and China’s neighbors figure things out for themselves.  Terrorism is more a threat to them than to us.  We should invest our capital in infrastructure and our energy in taking advantage of our geographic position and our thriving economy. 

 

Samuel Huntington

Samuel Huntington was the director of Harvard’s Center for International Affairs and served on the National Security Council during the Carter administration. In 1993, he published a seminal white paper, “The Clash of Civilizations”, predicting how the post-Cold War battle lines would be drawn. According to Huntington, friction would develop along “the cultural faults lines separating … civilizations from one another”.  He identifies “Western, Confucian, Japanese, Islamic, Hindu, Slavic, Latin American and possibly African” as distinct civilizations and suggests that nation states would no longer be the principal actors in global affairs.

Certainly, we have seen Huntington’s predictions borne out in the disintegration of the former Yugoslavia, the continuing India/Pakistan conflict, Islamic terrorist attacks on Western targets and the crisis in the Ukraine.  However, even he failed to predict that most wars would be fought within civilizations.  Sunni vs. Shia, civil war in the Sudan and the ongoing Boko Haram attacks in Nigeria and Kenya come to mind. 

Predicting the future is difficult if not impossible.  It’s difficult to know what new direction America should set for itself.

World affairs and our role in it are likely to be a major issue in next year’s selection of a president.  Candidates will have to outline policy choices.  However, few presidents have the opportunity to govern according to their campaign promises.  Bush didn’t anticipate 9/11 and Obama didn’t expect the financial crisis to be the preeminent issue of his first term. 

In a prior post (Reagan, Thatcher, Gorbachev, Machiavelli… Where are they now?), I wrote “it was not the policies on which Bush and Obama campaigned that mattered.  It was their character and their ability to make a decision in moments of crisis and stick with them…. character is more important than policies.”

WHO WILL LEAD?

When Economists Write, It's Not About Economics

I read a lot of articles written by economists.  I know.  Boring, right?  But fun for geeks like me.  Lately, I have come to a conclusion about their writings.  For the most part, they don’t write about economics.  They write about their political views.

Many who have done break-through work have become celebrities of a sort, at least among the business press.  Robert Shiller predicted the dot.com bust while most were smoking cigars and drinking Champaign.  He also won the Nobel Prize for Economics in2013.  He recently wrote about FDR’s coining of the phrase “The only thing we have to fear is fear itself”.  He would have us believe that the main reason that consumers and businesses are not spending enough to boost economic growth is fear manifesting itself as “performance anxiety”. His follow up point is that such anxiety becomes a self-fulfilling prophecy. 

Fair enough. 

He extends this metaphor to our government’s failure to invest in infrastructure at a time when interest rates are at historic lows.  Is that the result of fear? I think not.  It’s the result of political dysfunction.

Shiller’s political views are not as much in evidence as some of his colleagues.  Fellow Nobel winner Joseph Stiglitz is a former chair of the President’s Council of Economic Advisors.  In a 27-page whitepaper, he lays out his prescriptions for reforming the tax code.

There is little doubt that the “hollowing out” of the middle class, as he puts it, affects the performance of the economy.  However, he connects this factor to the presumption that “one of the reasons that our economy is not performing is the high level of inequality”.  The middle class has suffered as a result of other macroeconomic factors, globalization and technology for example.  Inequality didn’t cause those things.

Stiglitz goes on to propose more complexity for our already onerous tax code.  He proposes higher tax rates on the rich “who save a large fraction of their income” having an effect on aggregate demand.  He fails to mention that, in economic terms, savings equal investment and investment creates jobs. 

Stiglitz also decries the schemes that corporations use to legally avoid taxation and lobby for preferential treatment in the tax code.  I quite agree with him on that point.  However, his prescription is to raise the corporate tax rate without regard to the impact on investment capital.  The high marginal tax rates we endured in the 1950’s had a terrible long-term effect on capital investment.  We paid the price in the 60’s and 70’s when we couldn’t compete with German and Japanese manufacturers and their newer plants and equipment. 

Robert Reich, another liberal economist, does a great job of presenting his views in short YouTube videos.  Generally, he supports the perspective of Democrats in Washington even when he contradicts himself.  Recently he argued in favor of the President’s proposal on corporate taxes despite having suggested doing away with them in his 2009 book, Supercapitalism: the Transformation ofBusiness, Democracy and Everyday Life.

Then, he argued that eliminating the corporate income tax would make corporate profits subject to a progressive personal tax and create greater equality for middle class investors.  It’s a sound argument.

Everyone has a bias.  However, learned economists who become thought leaders have an obligation to raise the level of political dialog above the petty, partisan politics we endure daily.  Presenting your political opinion as though it is derived from analysis is simply punditry.  Do we really need more punditry?

WHO WILL LEAD?