Our False Debate Over Socialism
In terms of economic policy, the U.S. is ranked roughly on par with Denmark and Sweden—countries Bernie Sanders has named as his socialist ideals
So What’s the Rumpus All About?
A WOMAN IN MY FITNESS CLASS PROUDLY proclaimed last week that she was a socialist. Who knows why. But it did start a passionate debate about socialism vs. capitalism. Passionate, but a little confused. And there’s a good reason why: It’s a dumb argument.
During my business career, I worked in 26 countries. I learned how misleading the labels “socialism” and “capitalism” are. All modern economies are a mix of both, and the U.S. is about as socialist as everyone else.
For 25 years, the Heritage Foundation, a conservative think tank based in Washington, has put out The Index of Economic Freedom. Every country in the world is ranked from 0 to 100. An economy completely free of government intervention, essentially the
“least socialist,” would score 100. According to the 2019 Index, the most socialist country in the world is North Korea, whose ranking of 5.9 is 20 points below the next country on the list. But the least socialist, or free-est, country in the world isn’t the United States. Not even close.
The U.S. is way down the list at twelfth, with a score of 77. That’s the same score as The Netherlands. It’s just a fraction above Denmark, and less than two points above Sweden, countries that Bernie Sanders has named as his socialist ideals.
The closeness of those scores would probably surprise progressives—and also surprise conservatives, who fear ending up like Sweden only slightly less than finding themselves in an elevator with Alexandria Ocasio-Cortez.
In fact, almost all Western countries are in a narrow range between 65 and 80. When we argue socialism vs. capitalism in the context of the U.S., we’re pretty much arguing whether to turn the thermostat up or down, not whether
we should rip out the furnace.
The Index tracks 12 metrics. Of those, the only one where the U.S. is notably “free-er” than most similar countries is when it comes to tax burden. It’s true that some define socialism based on the marginal tax rate. In a recent Newsweek interview, John McAfee, former entrepreneur, CEO and suspected murderer, called taxes “slavery.” Obviously, McAfee hasn’t read up on slavery, but he means that taxes are an infringement on personal liberty. And so what? So are traffic lights, seat belts and laws that say you can’t drive after chugging a fifth of tequila. As Oliver Wendell Holmes said, taxes are the price we pay for civilization, and Americans pay a little less than most of the developed world.
Saying that the U.S. is already about as socialist as everyone else is not to say the U.S. doesn’t need change. It does. The U.S. does a poor job relative to some in terms of the social safety net. I have first-hand experience. I grew up below the poverty line in the housing projects in Waycross, Ga. Poverty sucks. Being poor doesn’t just mean going without, it means living in constant fear. The poor are economic hemophiliacs. One scratch can be fatal. Rich and even middle-class people think they get it because they were “broke” once on a college road trip. They don’t.
But we can make a lot of change without getting rid of the whole system. And neither side should be afraid of change. We can raise rates on the rich or have universal healthcare without risking disaster. So what if we get it wrong? Pundits would have us believe that if we veer even slightly off the road of progress, we’ll crash through the guardrails and plummet down the economic cliff. But it’s really more like crossing over the centerline and nudging the steering wheel to get back in your lane.
Modern economies adjust all the time. They tweak. Look at New Zealand, which was socialist in the 1970’s. But over time expenditures as a proportion of GDP grew too high and economic growth stalled. Roger Douglas led a liberalization of the economy. I spent six years in New Zealand helping companies transition from socialism to a more market-based economy. Over the next decade, government spending as a portion of the economy fell and economic growth rose. It’s continued to go up and down in the decades since.
My observation is that Western countries tend to have as much socialism as they can afford. When the bill gets too high, they dial it back. No big deal. Guess who’s higher than the U.S. on the Economic Freedom metric today? That’s right, New Zealand, which is the third free-est economy in the world.
It’s nonsense to propose junking our economic system in favor of one that has failed and continues to fail in places like North Korea, Cuba and Venezuela. It’s just as silly to suggest that any tweaks will doom us to dystopian socialism.
Instead, let’s focus the debate on the real issue—what our tax money is spent on. Let’s have the argument a different way. Shorthand is meant to make arguments more efficient and productive.
In this case, the shorthand “socialism vs. capitalism” isn’t helping.
→ Sam Hill is a writer and former business executive. He served as the director of international strategy for Kraft Foods and as vice chairman and worldwide director of strategy at DMB&B (now known as Publicis). He was also a partner at management consultant Booz Allen & Hamilton. The opinions expressed in this article are the author’s own.
“The poor are economic hemophiliacs. One scratch can be fatal.”