Friday, March 6, 2009

A civil debate over policy

I do not personally advocate Socialism one bit. In fact, I would say that it is a system that is both morally defunct and internally flawed because of the extreme lack of individual incentives it implies. I also believe in markets, and in the idea of capitalism. However, there are a lot of folks out there making wild assertions about what constitutes "socialism" that are just flat wrong. When a politician or other "pundit" says "income redistribution (or public health care) is socialism" they may be trying to somehow voice an opinion that these things are bad and ill-advised, and that is a sufficiently valid point on its merits. Socialism need not be brought into it for two reasons: First, it is poor logic to conclude that because something contains some of the elements of a particular idea, that it creates sufficient evidence to conclude that the broad generalization of that idea is contained wherever those elements are present. Secondly, it brings no progress to the debate over the proper role of government because it is disrespectful to those who might agree, and is, therefore, ultimately unpersuasive.
The key feature of a socialist system of economic organization is shared, collective, or public ownership of the means of production on a national (and international according to Marx) scale. Then, workers are compensated according to the Labor Theory of Value, or their average productivity (not their marginal productivity as market theories suggest). An egalitarian distribution of income is an indirect consequence of that compensation mechanism.
Public provision of certain "public" or "merit" goods does not constitute the breadth or depth of public or shared ownership to constitute "socialism." In the field of comparative economics these systems are characterized as "mixed" economies, which generally includes every democratic industrialized country in the world these days. Public provision of one narrow sector of the economy is no more "socialism" than another. Take defense, or education. It would be false to claim that government-provided defense or a publicly-funded educational system is (by itself) socialism.
With regard to income redistribution, socialism is not the only economic system in which advocates egalitarianism, and economic thinkers (including the fiercely laissez-faire french thinker Frederic Bastiat) showed concern over income distribution well before Marx. As an example, fascism also advocates for equitable redistribution of income as a means toward building a society in which interest groups of all stripes are united by a sense of duty and obligation and a triumph over the individual. Economic organization in Fascism involved a cooperation between the State and corporate interest groups, which, in theory, could avoid the wasteful competition of market capitalism. As in Socialism, an indirect consequence of this cooperation is an egalitarian distribution of income. The key point here is that welfare programs and negative taxes do negatively impact efficiency by weakening incentives, but are not sufficient conditions for socialism.
In an interesting tangent to the role of democracy Joseph Shumpeter predicted that the ultimate demise of individual capitalism was that it led to democracies that were doomed to implementing huge welfare states and collapsing. Market economists also express concern over the tendencey for democracies to foster radical swings to the left whenever people become dissatisfied with harsh economic conditions (e.g. Venezuela).
Whether income redistribution or universal health care evolves from a socialist, fascist, democratic, or other form of political or economic system its ideological origin is not really important. What is important is that we, as a society, are able to have a civil debate over the merits of various policies. Labels and name-calling are ultimately counter-productive. Yet markets, directed by the interaction of many independently-acting agents on both sides seem to be the best starting point in terms of efficient allocation. To quote Adam Smith: "By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good."


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