It’s too bad Sen. Bernie Sanders calls himself a “Democratic Socialist,” because the word socialism has a negative connotation for most voters. The term “Democratic Capitalist” would appeal to more voters and it means the same thing: a democratic government’s commitment to represent the balanced interests of both capital investors and those who work for them.
Unfortunately, Sanders is the only politician running for president who has the guts to level with voters that capitalism needs socialism if our middle class is to prosper or even survive.
Ideologues who claim pure capitalism is the best economic system because it created the greatest middle class and strongest country in the world are, to paraphrase a Yiddish proverb, half right and totally wrong. Ideologues who claim that capitalism is an evil system that leads to growing income and wealth inequality, and our country needs pure socialism, are also half right and totally wrong.
In both cases, they credit or blame economic systems instead of the government that creates the rules that manage them.
If the last hundred years of economic history taught us anything, it’s that it was a pluralistic government that blended both that made our country great. From 1933 to 1980, when the middle class was created, we had heavy doses of both, and the rich, poor and middle class all enjoyed better living standards.
During that time, we were a capitalist country. We created huge, powerful and innovative corporations, large and small private businesses, and stock and real estate markets.
The resulting job increases forced employers to raise workers’ wages. The 47 years of capitalist inspired “wage inflation” helped create the middle class.
But if high progressive corporate, income and estate taxes are socialism—we also were a socialist country. The same is true of the other government programs of the period that many people call socialism: Social Security, minimum wage standards adjusted for inflation, work condition requirements (time-and-a-half for overtime, safety standards, etc.), the rights of workers to organize, regulatory agencies that protected consumer and environmental rights, and so on. These also were indispensable causes of the increase in workers’ living standards.
We should view capitalism and socialism as complementary systems, not as contradictory, antagonistic systems. Indeed, each needs the other to correct its own inadequacies and failures, and vulnerabilities to abuse. For example, if an unsuccessful investor goes bankrupt because he tried to make a profit and create jobs in the process — he and his family shouldn’t have to spend the rest of their lives in abject poverty.
A nation needs to make sure it manages an economy in a way that those who contribute most to society can realize a greater share of a nation’s productivity and resources — but not so much that there isn’t enough for everyone else to have a decent, civilized standard of living.
In his seminal book “Capital,” Thomas Piketty demonstrated that incomes from capital continue and compound from one generation to another, and family dynasties keep getting richer. They not only inherit the ownership of income-generating capital like farms, businesses, bank accounts and securities of all kinds, but they also get the best educations available and contacts with influential politicians, and financial and business advisers.
On the other hand, worker incomes stop when work stops. They don’t continue or compound to the next generation.
Workers are especially disadvantaged when all they inherit is the ability to work — no home, no saving accounts, and sometimes debts associated with their parents’ deaths. And unless they have unions or similar organizations, they have zero political influence.
So, under pure capitalism and without a wise and just government, the rich get richer and the poor get poorer relative to inflation. Piketty noted America’s New Deal and its subsequent progressive policies — high progressive taxes on capital, and labor friendly policies — created its middle class.
Since 1980 our government has become dominated by politicians who insist on pure capitalism, a system that favors those whose incomes come from investments — and reject solutions to our nation’s problems they label “socialism” — programs that protect the rights of workers to have a decent standard of living. The result is a disintegrating middle class, a growing class of American aristocracy (wealth and political influence passes down from generation to generation) and an increasingly desperate poor.
Sen. Sanders is the only presidential candidate who has clearly described the disastrous consequences of these pro-capital, anti-labor policies, and the direction we now need to take.
Chuck Kelly lives in Burnsville and is author of “The Destructive Achiever; power and ethics in the American corporation,” and “Farewell Fantasyland; time for political and economic reality.” He can be reached at email@example.com.