Is the US the vanguard of capitalism for the world? Is the US even capitalist? For most media pundits the answer is obvious: Yes! Everyone knows that! After all, the U.S. has always ranked high on the indexes of economic freedom.
At least one conservative writer suggests that the US may not be the capitalist champion that people think it is. In The American Economy Is Already Too Far Left for Comfort — or Prosperity, Martin Hutchinson wrote, “Americans already are living in a socialist society.” As evidence, he points to the size of the government: “First, the state sector is unimaginably larger than in Marx’s day, around 40 percent of GDP in the United States, when federal, state, and local governments are included, even if that number is smaller than many other economies elsewhere in the West.”
Hutchinson doesn’t mention it, but the US tax system is more socialist than those of Europe because the US taxes the middle class and poor at lower rates than European nations. Economists tend to underestimate the financial benefits of not being taxed.
Then Hutchinson cites the Fed: “Second, even in the other 60 percent of the economy, the most important price, that of money, is set by government fiat.” In other words, the Fed exercises a great deal of control over much of the economy through credit expansion and buying or selling bonds (QE).
Finally, Hutchinson points to regulations: “But even beyond the huge government sector and the distortions caused by the Fed, there is a third factor preventing capitalism from working properly: excessive regulation.” Hutchinson doesn’t mention the fact that large corporations write many new regulations in order to force smaller competitors out of business. That practice has created cartels in most industries, known as oligopolies in economic texts. Cartels allow the dominating industries to charge higher prices, reap larger profits and keep wages lower than they would be in a free market.
I’m glad some people are waking up to the great lie that the mainstream media and historians have fooled Americans with. When I was earning a degree in economics in the late 1980s, few economists called the US capitalist. At best, it was a mixed economy. The media began claiming that the US had descended into wild west, no holds barred, ruthless, soul crushing capitalism after the election of Ronald Reagan as President. They called Reagan’s removal of federal price controls in a few sectors “deregulation,” as if no business regulations at all existed. They neglected to mention that Jimmy Carter launched “deregulation” when he was president.
Meanwhile, the Federal Register of only new regulations continued to grow at a rate of 75,000 pages every year and is still growing. Also, Reagan then Bush and Clinton in succession passed the largest tax increases in US history. And the US has implemented eight of the ten commandments of socialism by Marx.
Adding to the confusion is the popular notion that socialism requires the state to own most property. That wasn’t Marxism; it was Leninism and a late version of socialism. Lenin called his system “market socialism” because he understood, after causing thousands to starve to death, that socialism required a small space for markets. Even Lenin’s socialism didn’t require the elimination of markets, just their suppression and control by the state.
Socialism has taken many forms. Nazism, fascism, Fabian (British), Maoism, and communitarian (also called distributism) are the most common. Only Leninism and Maoism have required state ownership of property. The others require state control of property while leaving the “owner” with a worthless paper title. They understood that there was no need to disturb people by taking their paper titles as long as the state directed the use of their property. It fooled people into thinking they still owned something when they didn’t.
Property without control is not property. And control requires free markets so that the owner can transfer his property to others as he chooses or give it to charity or family. The US has free markets in nothing.
But what about the economic freedom indexes that show the US to be among the freest countries in the world? They do rank countries against each other, but they merely advertise which socialist countries are the freest among a world of socialist countries. They’re like the ranking of the prettiest truck in an ugly truck contest. Consider how the US would appear if the indexes compared its economic freedom today to that of the 1920s? The US would appear very socialist.
If Americans want to escape the wage stagnation that has plagued workers since 2000 and reduce poverty rates by creating better jobs, we must diagnose the illness properly. Calling our disease “capitalism” always leads to the wrong remedies. It’s like calling cancer a cold and treating it with vitamin C.
The real problem has been a century of creeping socialism. The cure is smaller government, fewer regulations, lower taxes. But first, we must recognize that we lost capitalism in the US over a century ago.