What is Socialism and Why Should We Fear It?


Barack Obama's opponents regularly charge him with being a socialist and of favoring socialistic measures. There is little or no discussion of what socialism entails. The mere use of the word is enough said. If it's socialistic, it must be bad – like calling someone an ogre. Even Obama has felt the need to try to deflect the criticism by making fun of it, as during the campaign when he parried the charge that he's a redistributionist by joking about sharing a sandwich in elementary school. Obama knows full well, though, that the United States already has more than a little socialism, that many of the most fundamental aspects of American life have been socialized to one degree or another. Evidently he fears that, due to the word's negative connotations, an open discussion of socialism would impede efforts to revitalize the economy, achieve universal health care, etc.

Why the negative connotation? Because those who oppose socialism don't care to have a frank discussion of its merits as compared with non-socialistic approaches, and because they have the power to bias the discourse and reduce it to meaningless and pejorative slogans. At this critical moment in the nation's history, it is positively harmful not to have a frank discussion. We are faced with an economic crisis whose proportions are as yet not fully known. At a minimum, we are in the midst of the most severe recession since the Great Depression. Although most economists seem to think that the risk of descending into another depression has passed, and that at least a modest economic recovery is in sight, the future is still highly uncertain. Prolonged stagnation, with low rates of growth and high unemployment, is one possibility. Another is an even more severe economic crisis some years hence, a crisis that the tools developed since the Great Depression to manage the periodic downturns seemingly endemic to a capitalist economy will be unable to prevent from becoming a depression.

Whatever the future holds in store, it is clear that socialistic measures of some type must and will part of the current recovery effort. They are here already. The bailout plan, the economic stimulus, universal health care – all have socialistic features. Indeed, it is hard even to conceive of a modern mass society without a generous dose of socialism. Consequently, the relevant question is never whether to socialize everything or nothing, nor whether a particular measure is or is not socialistic. Rather, decisions about the merits of the recovery efforts, and of all government programs, should turn on whether they serve society's well-being and are well suited to address the problem at hand. As long, however, as the merits of some proposal can be undermined simply by labeling it socialistic, it will be difficult rationally to evaluate it and wrong turns are more likely. To get past that, we need an instructive public discussion about socialism so as to clear up misconceptions.

At its most basic level, socialism entails collective control of some aspect of social life. To socialize a matter is to make it a public matter, a matter to be decided in a public forum of some type, a forum in which the people is ultimately the decider. To privatize a matter is to place the decision in the hands of parties free from collective control. Most matters have both public and private aspects, and are thus partly socialized and partly privatized. Marriage, for example, is privatized to the extent that the decision of whom to marry is up to the individuals involved, and socialized to the extent that society regulates the process – as when it bans children or close relatives from marrying. Similarly, the decisions of a private corporation are privatized to the extent it is accountable only to its shareholders and socialized to the extent that the public regulates the quality of what it produces, its relationship with workers, the disposal of its wastes, and so on.

Since socialism entails collective decision-making by the people, either directly or through representatives responsible to the people, socialism implies democracy. A society is not socialist or dominantly socialist, and a given decision is not made in a socialistic manner, when the decision-makers are not accountable to the people, since then decision-making is not collective but privatized. Thus, a society where the government owns the means of production but is run by a self-perpetuating dictatorship that disregards the will of the people is not socialist. On the other hand, a society where the means of production are owned by private entities whose decisions are to some extent controlled by a government accountable to the people is to that extent socialist.

How democratic a society is, is always an open question. The United States is clearly democratic to some, perhaps to a great, degree. The will of the American people clearly influences who gets elected, the decisions they make in office, and the actions of the officials they appoint. At the same time it is not uncommon for elected and appointed officials to ignore public sentiment, to refuse to dialogue with the public about the merits of their actions, and even to mislead the public in order to act in ways that serve their own private interests and undermine what a well informed and involved public might deem not to serve the public interest. Moreover, power imbalances resulting from wealth disparities and other factors often bias decisions in favor of the private interests of those with disproportionate power. When that happens society is not fully democratic because the will of the people implies a relatively equal distribution of the power to influence collective decisions.

Granting that the United States has a substantial degree of democracy, it follows that all of the collective controls that exist in the society are to some extent socialistic. To name some of the more obvious examples: Social Security, Medicare, welfare programs, and all the other components of the social safety net; public education, whether in formally public schools or formally private schools financed directly by the government or indirectly through vouchers; all services provided for free, i.e., paid for through taxation, by public employees or private concerns under government contract, including fire and police protection, trash collection, the court system, and so on; goods and services for which governmental entities, acting much like private entrepreneurs, charge a fee, like water and sewage, flood insurance, zoos, museums and other cultural events; all forms of government regulation of the private sector, including the private sector's legal framework such as the law of contracts.

It is also true that many aspects of social life in the United States are privatized. For the most part people rely primarily on the private market for basic necessities like food, clothing, shelter, employment and health care, and for many other consumer goods and services as well. This is certainly a highly privatized and dominantly capitalistic society, perhaps the most of any society in history. But given the pervasiveness of the socialistic aspects of American life, it is far from fully so. Consequently, the issue of whether to socialize or privatize should not be viewed as an ideological question, but as a pragmatic one. The question is not whether socialization or privatization is in principle and in the abstract a superior approach, but whether in particular contexts one or the other approach is more likely to promote society's well-being as determined thorough a democratic decision-making process.

The crises currently facing the financial system and automobile industry are illustrative. These institutions have historically been dominantly privatized, and it is apparent that in pursuing their private interests they have contributed to the crises. Consequently, there seems to be little choice but to intervene collectively in some manner in the financial and automotive sectors. It is difficult to be sure what measures will work, and some trial and error experimentation may be necessary. The one measure that is not on the table, although it should be, is to nationalize some or all of these institutions.

The political power of the financial sector helped engineer the dismantling of much of the former government oversight of its operations. The lure of enormous profits then led these institutions to make highly risky, and in some instances illegal, investments that turned out to be highly detrimental to the stability of the overall economy. Their actions were a major factor in bringing the country to the brink of a depression.

The initial collective response consisted of pumping money into private financial institutions with the expectation that they would lend it out and unfreeze the credit system. Instead, they hoarded much of the money for fear that the economic crisis might worsen, or used it to strengthen their competitive positions by buying out or consolidating with former competitors. It now appears that the upshot of the economic crisis and the government's response to it may be the domination of the financial sector by a few gigantic institutions able with the help of public funds to ride out the crisis, virtually monopolize the financial sector, and emerge even more powerful than before. A second collective measure will likely be some re-regulation of the financial institutions' investment practices. Re-regulation may work for a while, although the financial institutions are already lobbying to minimize its extensiveness. And if and when the economy recovers, the lure of profits will likely lead to a renewed push to deregulate, and somewhere down the line we may find ourselves again in the same or an even worse pickle.

Perhaps a nationalized banking system would have been able to put money into circulation more rapidly than private institutions concerned with solidifying their positions in the marketplace. Perhaps a nationalized system could avoid the economic downturns resulting from a regulation-deregulation cycle that seems endemic to a privatized system. Perhaps, if the financial sector becomes increasingly monopolized, less governed by marketplace competition and more able to exercise its political power to undermine regulatory efforts, a nationalized banking system accountable to the political process would better serve the general welfare. This is an important discussion, but because socialism is a bad word we are not having it.

Turning to the automobile industry, since it comprises so large a segment of the overall economy, the fear was that its collapse would undermine the recovery and trigger a depression. The response has been to partially socialize the industry with the government becoming a major stakeholder in General Motors and Chrysler. Initially, the government lent money to the companies to keep them afloat while they attempted to reorganize. When that failed, the companies reorganized through bankruptcy. The government is now the majority shareholder of General Motors and has a substantial interest in Chrysler. Without government financing both companies would likely have gone under, and hundreds of thousands of workers would have lost their jobs and retirement benefits over night and possibly millions more over time as the ripple effects spread. While tens of thousands will still lose their jobs, the government's intervention may well have saved the industry and staved off a full-blown depression. However, once the crisis is over and if the companies become viable, the intention is to reprivatize them. Because socialism is a bad word, the merits of fully nationalizing the auto companies is not part of the discussion. It should be.

The causes of the near collapse of the automobile industry are yet to be fully analyzed. It may be that American companies were simply out-competed by foreign companies, or that their managers exercised bad judgment, or both. Perhaps the government could better manage an industry so central to the nation's economy. Perhaps the industry's primary focus on maximizing profits caused it to neglect innovations that benefit society's well-being, like pollution control devices and alternative energy vehicles, for fear that they would be unable to recoup the costs. Perhaps nationalizing the automobile industry, and others whose business decisions have such a dramatic public impact, would lead to a decision-making process that better takes their impacts into account.

Moreover, it is not a foregone conclusion that the cars Americans use should be manufactured by American companies. It may be that foreign companies are simply able to produce better cars for less money, and that the resources this society now expends in producing cars would be better spent on other needs. Nor is it a foregone conclusion that that the automobile should remain the principal source of transportation in this society. It may be that public transportation is a more efficient way than the automobile to get where people want to go, and that the savings could be used to provide other goods and services whose benefits outweigh whatever benefits people derive from owning their own cars.

But continued reliance on a privatized automobile industry makes it difficult to consider such options, in part because its untimely demise would cause extreme economic hardship and in part because it would likely use all its political power to maintain its existence even if the public interest would be better served by its demise. On the other hand, government ownership might facilitate a balanced evaluation of the merits of maintaining the automobile industry versus shifting resources elsewhere. And government ownership might facilitate the management of the industry's closure, if that were deemed appropriate, by enabling the government more readily to control the timing, retrain workers for other jobs, and prepare for the transition.

This is not to say that the nationalization of the financial system and the automobile industry is necessarily the best move. Nationalization too may have its drawbacks if those who tout capitalism are correct that the profit incentive is the best way to promote productivity and supply people's demands and that government tends to be less efficient than private industry – both of which are contestable points. Rather, my contention is that an anti-socialist bias, based on a lack of understanding of what socialism entails, prejudices the public debate, takes potentially viable options off the table, and risks making unwise moves.

Another arguable risk of nationalization is that it concentrates power in the hands of the government, and that concentrated power can be abused. But the abuse of concentrated power can be problematic in the private sector as well, as the problems confronting our society as a result of the financial meltdown and the automobile industry's near collapse show. In both instances, in order to prevent the abuse of power, the power of the people is the safeguard we need. We need not fear socialism as long as we remain a democratic society. Indeed, it may be that with more socialism the power of the people will be enhanced, and that we will thereby become even more democratic.