Capitalism and socialism coexists

On more than one occasion, I have seen letters to the editor speak of setting up beachheads in the coming election around capitalism vs. socialism. To me, this is a name-calling gimmick to persuade a voter who does not do much homework. Voters that are prone to listen to name-calling as debate will buy into this logic time and again. The irony in this debate is the United States’ economy is a blend of “fettered” capitalism with socialistic underpinnings. So, both co-exist here.

For readers in the either camp, this observation probably surprises them, especially those who are gung-ho capitalists. But, the word in quotes is also important as we do not have unfettered capitalism. If we did, the US President would have run out of money long ago with his many bankruptcies. I believe in capitalism as well, but we need to understand why we ventured down the path of the socialistic underpinnings.

These underpinnings spoke to a nation that was in a great depression and who seemingly got lost in poverty later on. Social security is a low-income weighted pension, disability and survivor benefit program that is funded equally by employers and individuals. To determine the base level benefit, 90% of average wages are used for the earlier wages then added to 32% of the next tier of wages which are added to 15% of the highest wages up to a limit.

In the 1960s, LBJ’s “War on Poverty” added Medicare and Medicaid to the mix, with Medicare helping retirees and Medicaid focusing on people in poverty. Then, we can mix equal measures of unemployment benefits, workers’ compensation and food stamps which are now called SNAP benefits. Each of these programs are forms of “social insurance” benefits. That is socialism designed to keep people fed, housed and protected.

Taking this a step further, utilities are so needed to our communities, they are either co-ops or fettered capitalistic models where rate increases must get approved by a state governing board. Companies like Duke Energy and Con-Ed must get permission before they change their rates. For the co-op model, the customers own the business.

But, the word “fettered” enters into the mix on other businesses as well. To prevent monopolies, insider trading, interlocking boards, collusion, the misuse of insider knowledge by investors, etc. rules are set up to provide governors on capitalism. Then, there is that bankruptcy thing, where a business or person can claim bankruptcy to pay debtors what they can and restart. I use the President as an example, but his experience is a good one, as he filed for bankruptcy six times on various investments.

I want people to think about our country in this context. We want people to earn their keep and be fully functioning tax paying citizens. Yet, we have programs in place to keep them out of the ditch. As we considering changes to programs, we should consider what they are accomplishing and how changes could make them more effective. And, we must understand that things must be paid for, so how do we get the best return on the investment into those stated goals?

For those that have followed my blog for some time, you know I have been involved for many years in helping homeless working families find a path back to self-sustainability. We help the homeless climb a ladder, but they climb it. Yet, we are also successful in keeping people housed on their own after two years of leaving our program because we measure things and make improvements. The ultimate goal is self-sustainability, so we measure how we can be the best financial stewards toward helping people achieve that purpose.

We need social underpinnings to help people be fed, housed and protected. Some need to be temporary in nature, while others are longer term like Medicare and Social Security. There is a cost-benefit to these equations, but we should understand that we have poverty problem in our country. We must also understand technology advances will continue to change the paradigm on employment as it has throughout the industrial age placing additional pressures to even more wage earners. Not providing ladders out of poverty or ways to avoid it would be a bad path to follow for our country.

 

20 thoughts on “Capitalism and socialism coexists

  1. I try explaining this to my conservative friends and family members when they talk about “big” government. It’s like, if the NFL on Sundays didn’t have a referee, what kind of game do you think we would have? Chaos. Which of course is exactly what we would have if corporations were left “unfettered.” Capitalism would not and could not exist without government. Yes, maybe the rules go too far from time to time but you have to have rules of the road. Laws and regulations exist for a reason. It seems now days the pendulum is reversing at an alarming rate however. They will do anything and everything to weaken the rules…weaken the regulations….I just don’t think the founders could have envisioned such a corporatization of America.

    • Well said, especially with the NFL example. Too often, people confuse bureaucracy with regulation. Too often, they want to throw out all regulation, but as you point out, not all or bad, some just need to be improved. The mindset has led to some poor posturing and change. People have forgotten the Robber Barons and more recently, Enron, Health South, Tyco and Adelphia to name only a few bad apples who cheated and got caught.

      • The short attention spans of the American people are a problem. That’s why you and I are here … Someone needs to remind them!!

      • True. If it is not entertainment, then people are not paying attention. I know folks that watch sports and entertainment news and that is about it.

    • Hugh, very true. Too many equate communism and socialism when they are different things. Too many politicians and pseudo news folks take advantage of that ignorance. Thanks, Keith

    • Linda, many thanks. This is one reason people decide early on who they will get information from. Often, these choices are made without much fact-finding. So, they will believe that person no matter what. The signal we need to give to everyone is if someone uses labels and name-calls, that means the person is not a good source of information.

      Just look at the President. He is trying to dissuade people from paying attention to both the Op-ed piece in the NY Times and Bob Woodward’s book. He is name-calling the informant, he is calling that person “probably failing” without knowing who it is, he is calling the NY Times “failing” and he is saying Woodward is making up “fiction.”

      Not once has he commented on the substance. To me, the substance is validated from other sources on and off the record and just listening to him and reading his tweets. He has a hard time articulating what things mean, even stuff he has bragged about knowing like tariffs and trade.

      Keith

      • It’s much easier to grasp at bold, flowery language, than to investigate the truth. Which is why you and I and our friends wring our hands in despair. #45 may be right about the Times in one regard. When he says they wouldn’t be around without him to kick around….well, I suspect his presence has boosted their bottom line, just as his administration has jump-started lots of private environmental causes and fund-raising. I must confess, that I had never subscribed to the NYT till 2016.

      • Linda, good point. What Trump does realize is this stuff affects those on the periphery, not his followers. Three things have happened – more people have left the GOP, more have added NYT subscriptions and good people are getting involved thanks to Trump.

        And, the one thing he hangs his hat on – the economy – would be doing just fine without him since we are in month 112 of consecutive months of growth. Keith

  2. Excellent post, my friend. One thing that I have discovered in the last few years is that the average citizen does not actually have a good understanding of either of those two words, “capitalism” or “socialism”. They have some vague idea, based on what they have been told, but they don’t have a true understanding. And the current crop of politicians don’t do anything to clear it up, but merely add more rhetoric. You did a good job with this … the two are not mutually exclusive.

    • Jill, when I was younger, I used to believe legislators knew a lot more than they do. With rhetoric such a big part of their knowledge base, more than a few don’t know near as much as I gave them credit for. So, I don’t believe the subtlety defined above is top of mind to many.

      This is a key reason that I am look forward to more qualified candidates running for office, especially women. Men tend to be more tribal, although that is a generalization. I feel our Congress should represent the demographics of the country.

      Keith

      • I absolutely agree with you there, and would like to see both more women and African-Americans in Congress. But something else that bothers me is the wealth in Congress. How can these people possibly understand the needs, the viewpoints of we who struggle to pay the bills and put food on the table, when they have never had such worries?

      • Quite true. It should be noted many who leave Congress have more than when they came in. Insider trading tips is part of it, but….

  3. Note to Readers: One of the more quiet things that has happened beneath the negative news about and created by the President, is the movement of the pendulum more toward corporations and the wealthy. The tax law was obvious, but the regulations to free up polluters, eliminate safety requirements, attack public service unions, attack the role of the CFPB and ACA, etc. make it difficult for those in need and working hard to make a go of it. Again, I am all for capitalism, but things need to be fair and we need to be mindful of our environment, safety and protection.

  4. Dear Keith,

    Unfettered capitalism is just away to let more companies defraud consumers like Wells Fargo, Enron, etc. Corporations already have the advantage with access to politicians and the court system. Somewhere there have to be checks with the minimum amount of cumbersome bureaucracy as possible.

    We here in the USA have socialism which many republicans resent like, social security, medicare and unemployment insurance. These are safety nets which in many cases make up for the lack of pensions, etc. by corporations in the race to find the bottom, in that bottom line.

    In too many cases, the average Joe worker has been left behind while corporate profits, CEO/ top executive pay scales, productivity, and the stock market keep setting new record highs.

    What’s wrong with this picture?

    Hugs, Gronda

    • Gronda, Enron, HealthSouth, Arthur Andersen’s travails led to some tighter laws. Just as the housing crisis was created by too few people asking questions of their leaders as they risked way too much on bad loans, which led to the Dodd-Frank rules and the creation of the CFPB.

      While Dodd Frank needed improvements, it is still needed as is a robust CFPB. Wells Fargo, Bank of America, American Express and pay day lenders are prime examples of why we need governance. Keith

      • PS – I saw today where the White House Council on Economics did not like the Bureau of Labor Statistics results that wages have been flat this year. The Council said they are not counting bonuses and benefits, which they don’t usually. So, will the Council use the same measurement next year when the one time bonuses fall off? The other thing is these $1,000 bonuses after that Tax Bill are actually an insult to workers – it was more for optics than impact.

  5. Reblogged this on Scotties Toy Box and commented:
    Hello Keith. Thank you for your explanation of these parts of our economic situation. As your other commenters mentioned there is a fear in the word socialism / socialist with out the person realizing we are already a mixture. The fact is most successful country’s are a mixture. Even China realized that and moved in that direction just from the other side than we did. We need to understand that runaway capitalism with no checks will kill the goose that lays the golden eggs in the pursuit of getting more of the eggs. What is the saying moderation in all things? I have recently been engaged with a young person who has been mislead about all of this and is sure that any thing that benefits the lower incomes will lead to the destruction of the country. He has been indoctrinated by far right media to fear anything but our status quo and the movement of money from the lower incomes up to the highest levels. I am so hopeful he reads your post.

    To my Toy Box viewers. This is a blog I enjoy, from someone who can speak to both sides of the political argument as he has lived them. I will be reblogging more of his posts as he was good enough to send me the links I asked for. Best wishes, hugs

    • Scottie, many thanks for the reblog. The key to vibrance in any economy is a robust middle class and safety nets on the bottom end. The more people buy has a huge echo effect. Keith

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