Socialism and Social Democracy

[KeithE]

I'm taking a class (Oshner Lifetime Learning at UAH) in Macroecnomics. The teacher has taught Economics at West Point and is a West Point graduate himself and describes himself as a conservative and life long Republican (he also plays bridge with me). Last Monday he explained the difference between “socialism” and what he called “Social Democracy". Yesterday at bridge I asked him what he thought of how Trump used the term “socialism” in the SOTU. He didn’t think much of that. He is reply was 'he’s just trying to associate the fall of Russia with democrats’ and 'the republicans should just say they are capitalistic without apology and without taking “potshots” at democrats’ (as close as i can remember). He said he would discuss that next Monday morning. He already had differentiated “socialism” and what he called “social democracy” last Monday.

I’m moving what I had posted on the Reaction to Abrams’s Speech topic to here because it deserves discussion outside that immediate context.

Recognize that true “socialism" is a quite different approach to governance than the market-based, socially-minded, representative democracy ("social democracy" for short) that Stacy and the Nordic countries represent. Markets have to be controlled when they go askew (e.g.:
(1) recessions require government stimulus,
(2) inflation require monetary control from the Fed,
(3) too high of income inequality (> about 1:100) requires taxes on the rich and/or setting min/max wages,
(4) price collusions among producers require anti-trust action,
(5) soak the desperate (e.g. over priced drugs way over legitimate production/development/testng costs) need price controls,
(6) needed programs that are simply too big/risky for private industries need government led / multiple private business contracted projects (e.g, DoD, the Interstate System under Eisenhower, the Internet (DARPA funded) ...),
(X) maybe more.

But the free market of businesses identifying products, producing them, distributing them is the baseline until (1)- (X) becomes apparent (and there will usually be one or more factors out of control). No responsible economist /politician I’ve heard of denies that government must step in frequently. Like any control system, the economy must be “managed” when it ends up going off the rails; but the underlying force is still free market driven.

True economic “socialism" is where the state dictates (by show of force) the means and sequence of all production from a central body - throwing away the baseline market based competition and democratic elections/legislations. That was tried in the USSR, early Castro’s Cuba, and Maduro in Venezuela. That central body has never been successful in providing food and goods in adequate numbers and availability for their citizenry.

The market-based, socially-minded, representative democracy like in the Nordic countries is working and working well with a far fairer distribution of wages to the populace than we have in the USA today. They are the happiest countries in the world. The 6 rating factors of overall well-being: income (GDP per capita), healthy life expectancy, social support, freedom, trust (absence of corruption) and generosity. USA was number 18 (not bad, but could be better).

Trump tried in the SOTU to conflate “socialism” with "social democracy” (yet curiously gave a small voice to universe health care and an infrastructure program). Do not be fooled and do not listen to Trump or the RW pundits that are funded by those currently receiving high income and have accumulated much wealth (the top 1% has more wealth than the bottom 90% of Americans). And they want to keep it.

The current crop of so-called left wing Democratic Presidential candidates are of the "social democrat" sort.

Financial transaction taxes (e.g 0.1%), one-time wealth tax (maybe 5%), greater income taxes on the rich (>50% on income over $1m/year), repatriation taxes (say 2/3 of what they should have been paying) can easily provide the revenue and reduce annual deficits. I’ll be looking for candidates that talk the revenue side of things that will fund the social programs they propose and will reduce the deficit. Bernie did that.

I may in time discuss other things I learn at this class.

[William Thornton]

Here's where you are missing this: it's political, bridge club high weeds explanations don't matter.

Sounds like an interesting class, though

[KeithE]

Here's where you are missing this: it's political, bridge club high weeds explanations don't matter.

Sounds like an interesting class, though

Well then talk about the political / economic points - instead of pointing out what I’m “missing”.

When do you believe “guv” should stand in to improve economic outcomes?

Do you believe that Julian Castro, Kamala Harris, Elizabeth Warren, Corey Booker, Kirsten Gillibrand, and others that may run are “socialists”? In what sense?

I hope you will listen and carefully consider their suggested social programs and not merely diss them as being in "angry resister dem socialist mode” as I believe Trump was calling his supporters to employ.

[William Thornton]

Politicians make (gasp!) political, not academic points...because that's where the votes are.

...dems have certainly squandered the bovine vote with all this about outlawing cow farting.

If I lived around you I'd go to the class with you.

[Dave Roberts]

Most of the political rhetoric I hear is sound-bite rhetoric with vague terminology that has frightening connotations (like "a massive caravan of Central Americans coming to overwhelm our borders"), undefined labels that again work by fright, not by careful use of all labels, and categorizations that assume untrue things (like all evangelicals are like Franklin Graham, Pat Robertson, and Jerry Falwell, Jr.). We Americans have lost the ability to do critical thinking because we do not expect to apply what little we do know to what we are hearing. The only news I hear that ever requires thought comes from NPR or the BBC. This is just one of many examples where "socialism and social democracy" are crossed in the popular mindset.

[Sandy]

"Socialism" is a buzz word used by the right initially to attempt to frighten people into voting their way, but lately, to try and keep the base from defecting. Even some of the more extreme examples that they like to trot out, like Maxine Watters or Bernie Sanders, are not "socialists" by definition.

The Republicans have been on their heels with "social democracy" ever since Roosevelt succeeded by using it to jump start the economy and bring it out of the depression. I'm not surprised that Trump made some vague references to universal health care or the infrastructure. He sticks his finger up from time to time and reads the polling data too. Trump tried to take credit for a dip in prescription drug costs and a slowed pace of inflation of the price of medical services (both things due directly to the Affordable Care Act) because this issue does drive votes and the Democrats are beneficiaries of that. Economic stimuluses from government projects work well too, as the one did during the early part of the Obama administration. There's a lot of work that can be done on the infrastructure to sustain a large workforce for a long time. That's the kind of "socialism" Democrats advocate.

[Haruo]

And don't lose sight of Social Darwinism and the Social Gospel.

[Rvaughn]

I'm taking a class (Oshner Lifetime Learning at UAH) in Macroecnomics. The teacher has taught Economics at West Point and is a West Point graduate himself and describes himself as a conservative and life long Republican (he also plays bridge with me). Last Monday he explained the difference between “socialism” and what he called “Social Democracy".

What was his explanation of the difference?

It seemed that when I started looking into it, there are differences of opinion about what socialism itself is, as well as not always clear statements about it.EnOxfordDictionaries says socialism is "a political and economic theory of social organization which advocates that the means of production, distribution, and exchange should be owned or regulated by the community as a whole." 1.2 adds "(in Marxist theory) a transitional social state between the overthrow of capitalism and the realization of Communism." Beneath the definitions they give this explanation:

The term ‘socialism’ has been used to describe positions as far apart as anarchism, Soviet state Communism, and social democracy; however, it necessarily implies an opposition to the untrammelled workings of the economic market. The socialist parties that have arisen in most European countries from the late 19th century have generally tended towards social democracy.

Democratic Socialists of America say this about social ownership:

Social ownership could take many forms, such as worker-owned cooperatives or publicly owned enterprises managed by workers and consumer representatives. Democratic socialists favor as much decentralization as possible. While the large concentrations of capital in industries such as energy and steel may necessitate some form of state ownership, many consumer-goods industries might be best run as cooperatives.

[Sandy]

From a political perspective, attempting to use the term "socialism" or "socialist" as a negative term implying that it is the same thing as Marxist theory or communism is deceptive and misleading. Anyone with a computer and a high school student's knowledge of economics can figure this out, see what it does and decide for themselves.

Like anything else, there are a lot of variables, different models and no guarantees. In some cases, as mentioned in the quote that Rvaughn cited, state ownership or regulation is necessary to make it work. That seems somewhat Keynesian to me Obviously, the reason the American political right doesn't like it is that it spreads out the wealth, which is not to their advantage. For one thing, it means that labor increases in value as employees can own shares of their company and they get more of the profit. For another, if employees have more money, they are spending more money and that is where you have real economic growth. Theoretically, it neutralizes the effect of big money in politics because it increases the dollar amounts that numerous people can give.

There are some American examples of employee-owned businesses and companies, some that succeeded, a few that failed, but models that show this does work, including one steel company, one of the largest in the company, that was purchased by the labor union, saved 8,000 jobs and was actually competitive in the world market for years. Ultimately, because of the way the directorship of the company was structured, the competition was able to step in and buy pieces of the production plant. But you learn from mistakes.

[KeithE]

I'm taking a class (Oshner Lifetime Learning at UAH) in Macroecnomics. The teacher has taught Economics at West Point and is a West Point graduate himself and describes himself as a conservative and life long Republican (he also plays bridge with me). Last Monday he explained the difference between “socialism” and what he called “Social Democracy".

What was his explanation of the difference?

He described “socialism” pretty much as your Oxford Dictionary said where a central government controls the means and sequencing of production. What he specifically meant by “sequencing” I’m not sure but it was right after a video by Milton Freidman (which I found online: Pencil). So suspect he meant the specific sequencing of combining materials, processes by private means that comes naturally by “market forces”. Your definition mentioned the "means of production, distribution, and exchange should be owned or regulated by the community as a whole” which is a more complete definition.

He did not define specifically what he meant by “social democracy” but he gave examples of it: Interstate Highway system which never would have come about solely by a private industry (notwithstanding the railroad system), Social Security, and DoD. So I suspect the formal definition would be something like when democratically elected officials find ways to organize at a national level for collective social purposes (nothing about controlling the means of production).

He ended the class with a lead-in to next week when he discussed how how classical free market capitalism fails us - he specifically mentioned: the growing income / wealth inequality which is getting ridiculous not only in America but across the world, and the ridiculous cost some medication (monopolies). He used the term “ridiculous” and said we would discuss what should be meant by “equitable”.

I’ll try to take better notes next Monday - he will pass out his slides to the class (but only if we ask).

This week at bridge I told him I was a Keynesian and he offered that he was one too but only when unemployment is high (not needed now but Obama was absolutely right to stimulate the economy, but should have done more and directed it more towards alternative energy infrastructure). If I had known about the Green New Deal, I’d probably had asked him if he favored that bill.

Should be an interesting class.

[Sandy]

Sounds like a very interesting class.

He ended the class with a lead-in to next week when he discussed how how classical free market capitalism fails us - he specifically mentioned: the growing income / wealth inequality which is getting ridiculous not only in America but across the world, and the ridiculous cost some medication (monopolies). He used the term “ridiculous” and said we would discuss what should be meant by “equitable”.

If you look at the response of the population in general to things, you can see both of these perspectives starting to play out in society and in the electorate. I see social media posts from some conservative politicians in Congress trying to convince people they should be happy because they got a tax cut. But as people are beginning to fill out their 1040's, they are seeing that 1) they didn't really get much of a tax cut if they got one at all and 2) they are increasingly aware that the wealthy got a gigantic one. Medical costs and prescription drug costs have pushed public approval of the ACA to its highest levels, over 50%, and I'd be willing to bet that a majority of Americans would not be hard to convince to get behind some kind of socialized medicine.

There are a lot of examples of communal ownership of business now, mostly small stuff. One of the big things that is getting pushed among conservative Evangelical Christians these days, ironically, is an insurance substitute called a "Share plan." There are a few organizations who have opened up the market on this sort of thing. You pay a relatively low monthly premium and then when you have a claim, you go to the provider and pay for the service up front, then fill out the forms for a reimbursement. The reimbursement is funded by everyone's premiums. The plan is called a "cooperative" and there is an approved list of costs for procedures and care. The benefits come from the fact that the cooperative doesn't make a profit and operates at low cost and generally, when you are self-paying up front for medical services, the prices they charge are fractional compared to what insurance companies get billed for the same procedures. The drawback is that you need to have about $30-40,000 in personal savings to pay up front costs for services and you may have to wait a couple of months for the reimbursement because the fund has to have enough cash flow to pay for it. Also, they won't cover pre-existing conditions or prescription medication. That can be a drawback with some types of insulin now costing more than $1,000 for a 20-dose supply. I find it ironic that Evangelical Christians, who are still for the most part Trump flag wavers, are the main developers of a communal, socialized form of insurance. And the cooperative's literature that I've seen points out that such a way of doing things is "Biblical" and references the first seven chapters of the book of Acts as rationale.

[KeithE]

I'm taking a class (Oshner Lifetime Learning at UAH) in Macroecnomics. The teacher has taught Economics at West Point and is a West Point graduate himself and describes himself as a conservative and life long Republican (he also plays bridge with me). Last Monday he explained the difference between “socialism” and what he called “Social Democracy".

He ended the class with a lead-in to next week when he discussed how how classical free market capitalism fails us - he specifically mentioned: the growing income / wealth inequality which is getting ridiculous not only in America but across the world, and the ridiculous cost some medication (monopolies). He used the term “ridiculous” and said we would discuss what should be meant by “equitable”.

I’ll try to take better notes next Monday

He put off that discussion of what is “equitable" until next week (I think). Last Monday he discussed the fall of the USSR and the rise of China.

USSR - fell because the assigned “ministers” of the economy were not able to deliver products to the populace with too little attention applied to agriculture and light manufacturing and overspending on the military - better to have let the free market allocate that. More specific causes of collapse was 1) rising nationalisms in portions of their realm (Yugoslavia, Czeckoslovakia, Poland, Baltic states), 2) the arms race (most notable countering the Pershing II missiles in Europe with worthless anti-missile defenses*), 3) the Afghanistan war. The USSR experiment invalidates a Marxist economic approach and validates the fundamentally free market as seen in the US. But he said there are cautions to the US - too much on defense he said (and he ended his career as a defense contractor).

* Thursday at bridge I asked him what he thought about the Long Range Missile Defenses being developed right here in Huntsville (my main lifetime work). His answer - “does it work?”. I answered “I hope so” and it is “stands good chance against limited strikes”.

After the USSR fell, many oligarchs gradually bought off shares (often by force) that were given to people in various production centers as they were transitioning. Those oligarchs (mostly from state police/KGB backgrounds) are the only benefactors (Putin being #1). Russia is a mess today economically. East Germany has integrated well with West Germany. Russia’s taking of Crimea is to have a “warm water port” and “covets Ukraine’s agriculture”.

China has done very well in the last 20 years, because they became "oriented towards their citizens needs” - not businesses or the military. They have fine tuned that development by well conceived “5-year” plans (13 of them so far). It has resulted in great urbanization with farming around the periphery and good transportation (e.g. high speed rail). Their last ten years has seen a quiet but consistent foreign action in the South China Sea extending to South Asia (though India is not cooperating) and Eastern Africa with the “Belt and Road” Initiative (I added this link, not referenced by the teacher). China is paying for construction of ports/roads to enhance trade. That’s how China succeeded and is succeeding.

He ended by saying if was wearing his "China Hat" he would applaud their approaches, but his "US hat” says China is an economic threat to "US hegemony". A lady asked about the TPP (Trans Pacific Pact) - He thought is was ashame that the TPP failed (which was an Obama’s attempt to have a check on China). I begin to ask about the various appendices in the TPP, and he broke in to say they were written by large multinational with their motives in mind; so he favors the main “trade” portion of the TPP but not to the appendices - my thinking exactly. He ended by saying the US would do much better if we “paid heed to our citizenry’s need” more than the corporate lobbying we are seeing.

We will see what he talks about next Monday.

[Haruo]

China's approach is, I think, at least as "Marxist" as the USSR's was. So I'm not sure how the failure of the USSR "invalidates" a Marxist approach.

[KeithE]

China's approach is, I think, at least as "Marxist" as the USSR's was. So I'm not sure how the failure of the USSR "invalidates" a Marxist approach.

China’s approach still is a “command economy” but they do not attempt to micro-manage the means of production (except for a few key state-owned enterprises (SOEs)) as much as the USSR did (or they use to do under Mao). The teacher said is was a “mixed economy”, no longer Marxist; they are charting a new course.

Here is some descriptions from my own searches just now:

Barry Rosser's article calls it a "socialist market economy” .

China's The Most Viciously Free Market Economy On The Planet Right Now - one opinion from Tim Worstall.

Barkley Rosser has an interesting piece on how we might describe the Chinese economy at the moment. It is rather different from the organisational structure everyone else uses. There's large areas of it which are quite clearly capitalist and similarly large areas of it which are socialist, as in with the State Owned Enterprises. And there's a myriad of forms of not quite collective and not quite entirely private ownership in between as well. And his descriptions and the undoubted success of that Chinese economy in producing growth simply bolster my own long standing thought about the fact (OK, perhaps "my prejudice" is better there) that it is markets or not markets which is a vastly more important determinant of an economy's success than capitalist or socialist. For in my reading China is the most viciously free market economy on the planet right now.

State-Owned Enterprises Are a Hard Habit China Doesn't Want to Break

While China's SOEs remain strong, decades of market reform have dramatically reduced their role in China's economy. Their share of the gross domestic product fell from more than 50 percent to 25 percent in just 15 years; and they account for only 5 percent of industrial enterprises today, compared with 18 percent in 2003. Nonetheless, the significance of the state sector has strengthened.

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Pure Marxism is not working - witness the USSR, Cuba and currently even the oil-rich Venezuela. That is not saying the citizens-centric economic approaches won’t work - China is showing that it does - even if it is a “command economy.”, it is centering on the common good. Go Kamala, Warren, or Bernie and listen to the polls about what the citizenry wants:

80% want the new green deal
70% want Medicare-for-All,
64% want a large government funded infrastructure program
60% want stricter gun control.

Of course we must pay for these and that can happen with a <0.1% financial transaction tax, one time wealth tax, a larger gas tax, and returning the incredibly large tax cut given to the top 1 percent who got a 14.2% tax cut.

Trump’s approach is said to be “America First” but is really a Trump first, loudest fact-free demagogue approach.

[Haruo]

I just don't think the USSR was a Marxist economy. It tried before Stalin came to power, but thereafter I don't think Marx had much input. Cuba and Venezuela don't look particularly Marxist to me, either. That's not to say they don't adulate him. I don't think either major US party is particularly Jeffersonian, for that matter. Trump is a lot like Putin, and the Dems aren't as devoted to the common good, at the oligarchy level anyhow, as they are in their corporate sponsors. And trying to juggle a more heterogeneous "base" than Trump has.