This is election season, and as a result, of course we see a wide set of topics discussed in the public sphere, with quite a few of those discussed badly. Amongst these are economic topics.
Economics has been famously called the "dismal science" and not without good reason. For one thing, economist themselves, including academics, have a real knack for doing to economics what some academic historians amazingly managed to do to history, which is to make it boring. Economics differs from history, however, in that to some degree microeconomics is in fact boring to most people.
Macroeconomics isn't however, and people discuss it all the time without having any idea they're doing that. Indeed, not only do they have no idea that they're doing that, but to an increasing degree even when people cite to economic terms they are utterly ignorant of the topic they're actually addressing.
That's downright dangerous, frankly. People are always taking about income disparity, jobs, wages, prices and the like, and this sort of thing effects people daily. All of that is an economic topic.
Additionally, in recent years, particularly since Barack Obama was elected, people have started to throw around common economic terms in a political context, often while not really grasping at all what they mean. It taints the debate and really confuses it.
For example, it's been very common in some quarters to accuse President Obama of being a "Socialist". He isn't, and he's not even ballpark close to being a Socialist. On the other side of the coin, a lot of people are quick to brand themselves "Free Market Capitalist". They mostly aren't either, at least in a meaningful thoughtful sense. From the outside, say Europe, where there are real Socialist, and even Communist and Autarkist, the use of the term "Free Market Economist" and "Socialist" in American political debates must seem bizarre in the extreme, as the average European would be completely unable to distinguish the difference between what the average Democrat and average Republican espouse, as they're really basically different versions of the same thing.
And what that thing is, is actually Corporate Capitalism, not Free Market Capitalism. I'm not saying that this is good or bad, but I am saying that when people talk about the "glory of the American free market system", they don't really know what they are talking about.
What the US has, in economic terms, and what is generally the post 1990 case for most of the western world, is some version of the Corporate Capitalism, or what we'll just call Corporatism here for short. I've dealt with this here before, but because I'm seeing the debate so skewed in recent weeks, it's worth dealing with again.
In a truly free market system, individuals, without the sponsorship or aid of the state, or its hindrance, compete with one another in the open market place. Think Adam Smith, basically. This is the system most Americans solidly believe they have, but we actually have a system that's nowhere near that.
In Corporatism, the state takes a direct role in the economy by allowing the incorporation of what are actually partnerships. Partnerships are, of course, when one or more person combine in a business. Corporations are really the same thing. What makes corporations different, however, is that the state shields the individual members of the de facto partnership from liability and otherwise allows the corporate entity to act as if is a person. Indeed, as lawyers know, a corporation is, and has always been, a person in the eyes of the law.
That legal fiction creates a huge economic advantage to corporation. And that's not the only one. A shareholder in Walmart, for example, bears no personal liability should Walmart commit a tort. If Walmrat were a partnership in the classic sense, that wouldn't be true. And if that were not true, the advantage of holding an interest in a remote company like Walmart, or Ford, or General Electric, would be enormously reduced, to say the least.
The fact that this system, i.e., corporations, exists, creates numerous advantages to corporations in a quasi free market economy, with one of those being that such economies tremendously favor economy of scale. That is, such economies will necessarily favor the big over the small. Walmart over, for example, "Bob's Appliance Store".
Now, a person can argue this one way or another. Economist tend to argue that this is really a good thing, as the big entities create cheap goods, and that's good for the "consumer". Critics, and they tend to be much less heard, would argue that those consumers are people, and those people now have a greatly reduced ability to compete in the local market, which is also true. Honest proponents of Corporatism, and here they tend to be somewhat few, acknowledge that, but argue that's still a good thing as those people are now forced into sectors of the economy where their talents now serve a greater good for everyone, and its undoubtedly the case that the whole world is getting richer as a result. Critics of that few will argue that those people only live so long, and it's not much of a consolation to Bob that he has to leave his appliance store in Laramie Wyoming to work at Amalgamated Amalgamated, Inc, in Denver.
Still, as many honest critics of Corporatism as there are, there are more confused adherents to it who will proclaim themselves to be "strong advocates of the free market", but aren't. People will argue on one hand they're in support of the system but on the other they complaint about its effects and advocate that the government do this or that, or simply blind their eyes and complaint about injustice when, if the result they complaint of is not just, it may be a byproduct of the system they advocate.
Part of the oddity of all of this is that it seems to be simply assumed that the only other economic system on earth is Socialism, which many Americans equate with Communism for some reason. It's perfectly possible to be a democratic Socialist. Socialism is a system, as we explored earlier, which advocates that the government own the means of production. So, instead of Amalgamated Amalgamated owning the Consolidated Amalgamated Works, the government does. The government is then supposed to run CAW for the benefit of all, and be fair to the workers.
The problem with that idea is that it doesn't work for a plethora of reasons. And the fact that it doesn't work is the reason why Socialism is dead as a doornail, remaining only in a very few localities. When people accuse some American politician of being a Socialist, they don't have this system in mind at all.
Rather, what they have in mind is any action in which the government plays in the economy directly, or even obliquely. That's not usually actually Socialism, however, but some sort of statism. As the U.S. has had a managed economy to some extent ever since the 1930s, that isn't really a new development however, and both political parties have participated in that since that time.
Additionally, where there are direct government roles in the economy, people actually tend to support it without realizing what it is. Again, I'm not arguing for or against this, but a person should be honest about it. Most people like the government paving the roads. Most people like the government running the airports. These are species of Socialism. There's no existential reason we need the FAA, for example, but most of us would not deregulate the skies, fire the air traffic controllers, and hope for the best.
Indeed, while people whine about it, the dirty little secret of Socialism is that there are limited areas in a Corporatist or Capitalist economy where a little bit of it always exists, and perhaps even more should exist. North Dakota Mill, for example, is a North Dakota owed flour mill that assures that North Dakota wheat continues to get processed in lean times. Is this an economic evil? Well, its been operating since 1922 and they seem to like it, probably for good reasons. South Dakota Cement is a state owned cement plant. Is that because there are red hordes in Rapid City? No, it just exists for the same reason that North Dakota Mills does. Wyoming, which always claims that it wants to boost economic development outside of the oil and gas industry might take a page from that book and consider a state wool mill, really, to help boost the sheep industry. If it makes a profit, why not?
And Wyoming has taken a page from that book in terms of Workers Compensation. Workers Compensation in Wyoming is a state controlled and captive insurance system. It was modeled on the German system that existed pre World War One, and is 100% government operated and controlled. It is a Socialist system. Is that because the Reds are in the State Capitol singing The Internationale? No, it just recognized a need very early on, and has been operating for nearly a century now effectively. There's no suggestion that we privatize it, even though most other states have a mixed state owned and controlled, private carrier, system.
Which suggest that in reality, people might actually go for practicality over economic theory, which brings me back to economic theory. Everyone seems ignorant of the fact that there's other economic systems, and one significant modern system that just doesn't get looked at all, that being Distributism.
Distributism is an economic theory that advocates for "Subsidiarity", which is a confusing word based upon Catholic social teaching. Basically, it means go small. Subsidiarity advocates the opposite of Socialism, in that it advocates that to the maximum extent possible, economic means should be vested at the lowest possible level, that being the family or the individual.
Wait just a freaking moment, you may be saying. That's what the Capitalist advocate! Why just the other day I heard Politician Moe declare he was for motherhood, apple pie, the family farm, and the small businessman daggnabit! Are you saying Moe isn't advocating that?
He probably isn't. Moe probably says he's for all those things, and may believe that he is, but he probably also feels that it's consistent with his views is Amalgamated Consolidated Giant Big Box Inc. puts the bullet in Larry's Hardware, as that's just he way it is (and he's probably also okay with the FAA and State Highway Department too). That's okay, but it means that he doesn't really grasp what he's saying.
The reason for that would be that if you were really a true Capitalist, you'd have to be a Distributist, not a Corporatist. The reason for that is simple, it's actually Distributism that advocates a free market, made up of competing people where possible, and competing companies where necessary, not Corporatism.
We don't have a Distributist economy in the US, we have a Corporatist economy, and that isn't a truly free market economy. If we had a true free market economy, it'd have to be Distributist. In that economy, for example, Walmart wouldn't be state sponsored, and therefore it would be a partnership. It'd probably be a small regional partnership. You'd have to buy your stuff from a collection of local family owned stores that competed with each other. Like it or not, and efficient or not, that's a free market economy, not the one we have.
Okay, what' the point of all of this? Well the point is several fold.
1. This is the election season, and a bunch of people are running around throwing words like "Socialist" and "Free Market" around, and its almost 100% inaccurate. There are something less than 0% of politicians locally in most localities who are Socialist, and Socialist are so rare, that if they are Socialist, they'll actually claim to be Socialist. And almost 100% of the people who claim to be "Capitalist" or in favor of the "Free Market' actually aren't. They're in favor of the post Reagan,. lightly managed, Corporatist economy.
2. Economic systems are economic systems, and when a person begins to get to be such an adherent to one that it passes from a philosophical belief into a quasi religious belief, a person ought to at least pause and ponder the nature of them.
3. When a person mixes the words "Our Founding Fathers" and "Free Market", they're espousing a world view, not a historical view. The founders had grown up in a mercantile system and were living in a system that is much, much, much, much closer to Distributism than what we have today.
4. There are systems other that the Corporatist and Socialist ones, and perhaps that should be considered. When people claim they're for "small business", the "family farm" and "entrepreneurs" they're suggesting a system that's more akin to Distributism than it is to Corporatism. If they mean that, they should ponder Distributist policies. If they don't like Distributist philosophy, they ought to quit pretending that they do.
5. Systems can be mixed, and that's not evil. Everyone likes a little dose of Socialism, whether they'll admit it or not (if you don't, next time you are at the airport demand that the tower be privatized, and write your state about the horror of the socialist department of transportation). We aren't mixing in any Distributism right now, but our rhetoric suggests that we'd like to. Indeed, if we don't want to mix in a little Distributism, that would mean that we're 100% okay with state support of the economy, as that's what corporate laws provide for, and ought to admit it.
6. Most people, or at least most politicians, are somewhat okay with "distribution of wealth", whether they'll admit it or not. Any time there's a government body, the department of transportation, the Federal Aviation Administration, the Fire Department, or whatever, occupying a role that could be contracted for instead, some wealth is being redistributed. And our corporate system is a massive redistribution of wealth from the small to the large. It seems that most politicians are okay with that, but if they are, they ought to admit it. If people actually aren't okay with it, they should ponder that, as most of these systems aren't written into stone are capable of being changed. Sometimes the change doesn't actually require all that much.
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