Donald Trump, in his State of the Union address, raised the specter of radical Democrats pushing socialism which would bring catastrophic consequences similar to Venezuela’s. In response, Presidential candidate Senator Kamala Harris reaffirmed her firm commitment to capitalism. And while it would seem that the stage is set for an extended debate over the virtues of democratic socialism versus capitalism, nothing could be farther from the truth. Capitalism and democratic socialism are close cousins, with the major difference in the US being not the concept of private property but the degree of public financing or regulation.
We’re all socialists to some degree even if we won’t admit it. By definition, 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. And while almost everyone agrees that state ownership is not desirable, the need to regulate markets has been an accepted part of our economic policies since at least the time of President Theodore Roosevelt.
In democratic socialism, the amount of state ownership or regulation is fluid, it fluctuates with the political sentiment of the times. In the immediate post WWII period in Great Britain the telecommunications and transportation sectors were state owned. Today, as a result of actions taken by Parliament, both sectors have been privatized. But even as these sectors were returning to the private sector, the British chose to retain their socialized medical system.
In the US, prior to 1935, all retirement plans were private, with the signing of the Social Security Act of 1935 the government became the major provider of retirement income. In 1965, passage of the Social Security Act Amendments, popularly know as Medicare, resulted in a basic program of hospital insurance for persons aged 65 and older. Both Social Security and Medicare are examples of socialism.
Other examples can be found at the state level. The Morrill Act of 1862 allowed for the creation and funding of land-grant colleges. Prior to the Morrill Act, all colleges and universities in the US were private. After the Morrill Act the nation saw an expansion of state colleges and universities. Arkansas State University is owned and regulated by the state, classic socialism. At the local level, public schools are a textbook example of socialism. Public schools are both funded and regulated by city and state governments. The government also provides us with light houses, national and state parks, urban police and fire departments, all examples of socialism.
Kamala Harris said she’s a capitalist who believes in competition. But in the economic sense of the word we have less competition than is commonly thought. Two or three firms supplying a product or service are not competition. Economic competition requires large numbers of sellers who thus have no ability to affect market price. We allow the private sector monopoly status to provide utility services while society reserves the right to regulate the price. And while we typically don’t think of this relationship between the private sector and public utility commissions as socialism, it’s exactly that.
In the US, democratic socialists have no interest in owning the production facilities. Their interest lies in regulating markets where the absence of competition has lead to undesirable consequences. Past examples include the Federal Trade Commission, created to prevent anticompetitive, unfair, and deceptive practices from occurring in the marketplace, the Dodd-Frank Act was passed in response to the 2008 global financial crisis cause by US banks. And the Consumer Finance Protection Bureau was created to enforce federal consumer financial laws and protecting consumers in the financial marketplace.
Today, democratic socialists are looking to replicate the examples of past regulatory successes in response to current market problems, such as drug companies who routinely pay generic drug companies not to produce drugs whose pattens have expired, or who purchase a generic company and increase the price of the generic drug to astronomical levels. In the US we pay over twice as much for health care as our nearest competitor. Medicare-for-all, a classic socialist proposal, will not nationalize our hospitals nor make doctors government employees, but it will add an element of bilateral price competition between health care providers and the Centers for Medicare and Medicaid Services.
There’s no such thing as free markets. All markets have varying degrees of cultural, social, or legal regulation. The issue we need to address in the upcoming election, given the immense imbalance in economic power between consumers and business firms, is what degree of protection, via regulation, do we want? If it’s your belief that regulations are primarily designed for consumer protection, then part of you may be a socialist.