We're Not Heading to Socialism

News at Home

Mr. Toplin, Professor of History at the University of North Carolina, Wilmington, has published several books about history and politics.

Socialism has become our new scare word. It is not yet the major bugaboo that communism became during the Cold War or terrorism became after 9/11, but this “ism” has been getting a lot of nervous attention of late. Some politicians warn that the government’s stimulus package and aid to financial institutions could put the country on a road to socialism. Newsweek’s editors summed up the concern in a recent cover story: “We Are All Socialists Now: The Perils and Promise of the New Era of Big Government.”

Warnings about a swift American turn in the direction of socialism are mistaken. Current efforts by American leaders to intervene in the troubled economy have nothing to do with the pursuit of socialism. We need a better term that succinctly characterizes Washington’s efforts to rescue troubled American businesses.

During the presidential race of 2008, Republicans often invoked a fear of socialism. John McCain warned about the danger in his speeches, and his campaign ad suggested Barack Obama’s economic plan “sounds a lot like socialism.” Crowds at Republican rallies chanted “Socialist!” when they heard Obama’s name mentioned.

In the days since Obama took the oath of office pundits on the right have amplified this theme. Broadcaster Sean Hannity characterized Obama’s stimulus package as “the European Socialist Act of 2009.” Columnist Cal Thomas said the stimulus will transform America into “a socialist system.” Some conservatives expressed worry that the U.S. government took a stake in the financial institutions it aided. They warned that Democrats aim to nationalize banks. A few detected socialist goals in legislation that limits the bonuses of top executives at companies receiving TARP funds.

The leading socialists of earlier American history, such as Daniel De Leon and Eugene Debs, would be surprised to hear that the emergency measures advocated by Obama and leaders in Congress constitute socialism. De Leon and Debs differed vigorously on details but agreed on essentials. Capitalism, said Debs, was a “monstrous system.” As socialists, they wanted to make the government (or powerful organizations representing the “people” or the “workers”) owner and manager of some of the great corporations. Socialists aimed to nationalize large businesses, because they judged capitalism exploitative. They believed socialism would provide better treatment of workers and fairer distribution of society’s goods.

Today’s advocates of strong federal action do not share that enthusiasm for replacing capitalism with socialism. They understand that the free enterprise system is vastly superior to one based on state-run industries. And they are not enthusiastic about investing public funds in failing businesses to give them temporary protection from a meltdown. Socialists, by contrast, eagerly sought a permanent role for government as owner and manager of the great industries.

Obama, the Democrats, and some Republicans agreed to let the government take a financial stake in AIG, auto companies, and troubled banks as well as a larger commitment to Fannie Mae because those institutions were teetering. Eventually, some banks may need to be nationalized (temporarily) so that collapse can be prevented, toxic assets can be removed from their balance sheets, and depositors are protected.

We have been here before – in the 1980s -- when the government managed temporary rescues of the savings and loan associations.

Leaders in Washington are pouring public money into troubled institutions in order to save them for capitalism, not to transform them into socialist enterprises. When the crisis passes and, hopefully, these organizations become solvent again, government leaders will happily free Uncle Sam from the financial commitments. Leaders in Washington are not happy with an arrangement that socializes losses and privatizes profits, but they see no alternative in the crisis.

Since “socialism” fails to identify the government’s controversial initiatives, how can those actions best be characterized? Revival of an old concept, Welfare Capitalism, can throw light on the situation. In the past, historians employed this term to identify a capitalist society that offers welfare programs for its citizens, and they used it, also, to describe businesses that provide welfare-like services to their employees. In a related way this term suggests the main idea behind current measures.

Washington’s rescue efforts are providing welfare for businesses. The federal government is assisting huge corporations so that they can avoid collapse, much like the government sometimes helps individuals who confront a temporary economic crisis. Leaders in Washington certainly do not wish to keep AIG, Citicorp, and General Motors on the dole. They want these organizations to take full responsibility for their affairs once they “find a job” – that is, return to profitability.

Let’s recognize the new situation for what it is: Welfare Capitalism. Americans are not happy about the program’s huge cost, and they are disgusted that some of the business titans whose actions contributed to the financial mess may benefit if the rescue works. But Americans remain committed to the free enterprise system, and most of them understand that in an emergency government has an important role to play in saving capitalism from its excesses.

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Jim Good - 2/24/2009

It's refreshing to see from the penultimate paragraph in your post that you're completely above all that tarring of opponents with sweeping generalizations.

Grant W Jones - 2/23/2009

How economic "stimulus" works:

Shortly after class, an economics student approaches his economics professor and says, "I don't understand this stimulus bill. Can you explain it to me?"

The professor replied, "I don't have any time to explain it at my office, but if you come over to my house on Saturday and help me with my weekend project, I'll be glad to explain it to you." The student agreed.

At the agreed-upon time, the student showed up at the professor's house. The professor stated that the weekend project involved his backyard pool.

They both went out back to the pool, and the professor handed the student a bucket. Demonstrating with his own bucket, the professor said, "First, go over to the deep end, and fill your bucket with as much water as you can." The student did as he was instructed.

The professor then continued, "Follow me over to the shallow end, and then dump all the water from your bucket into it." The student was naturally confused, but did as he was told.

The professor then explained they were going to do this many more times, and began walking back to the deep end of the pool. The confused student asked, "Excuse me, but why are we doing this?"

The professor matter-of-factly stated that he was trying to make the shallow end much deeper.

The student didn't think the economics professor was serious, but figured that he would find out the real story soon enough. However, after the 6th trip between the shallow end and the deep end, the student began to become worried that his economics professor had gone mad. The student finally replied, "All we're doing is wasting valuable time and effort on unproductive pursuits. Even worse, when this process is all over, everything will be at the same level it was before, so all you'll really have accomplished is the destruction of what could have been truly productive action!"

The professor put down his bucket and replied with a smile,

"Congratulations, and welcome to socialism. You now understand the stimulus bill."

I love it how people who support an "Army for a Values Revolution" are so afraid of the "F" word.

"a transformational conversation about how we live our lives," it's nobody's damn business how I choose to live my life. Unless your premise is that my live belongs to the collective. Just don't call it fascism when it arrives.


Grant W Jones - 2/23/2009

Your "common sense" is going to lead to stagflation. Then you can lecture the rest of us on the "pragmatics" of state control over buying and selling.

Actually, James Madison recognized that the greatest threat to liberty were demogogues who incite class war.

So, under Mussolini the "free market was allowed free reign?" As for you vicious attack on Friedman, the policies he taught help pull Chile out of hyperinflation. Remember how your Marxist "pragmatist" Allende destroyed the Chilian economy? No, of course you don't.

Leftist who are hostile to "greed" i.e. rational self-interest, are the ones leading this nation on the road to serfdom. It is the ultimate result of their hostility to liberty and lust for power.

The attempt to tar those who disagree with their agenda of total government control over the economy as "fundamentalist," "theological," and attackers of "heresy" demonstrate a mindset that must engage in smears of all opposition. According to the Left, those who support capitalism are fascists and irrational. Try lookin in a mirror on that score as you work to give ever more power to the state.

Nigel Anthony Sellars - 2/23/2009

Lest we forget, Alexander Hamilton understood the government had to have a role in the economy, if only to make the wealthy realize their welfare depended on the government. The purpose of welfare capitalism is to recognize that greed--as TR called them, "the malefactors of great wealth"--must be checked. James Madison understood that when he noted the greatest threat to a republic was the unequal distribution of property, i.e. wealth.

Mr. Jones should also realize that under fascism, the free market was allowed free reign. If he wants recent examples, he might examine Chile, where Milton Friedman's free market fundamentalism was tried by Gen. Pinochet's regime, to terrible effect.

Unfortunately right-wing ideologues fail to see what many on the left recognized long ago and what most Americans understand: When it comes to the economy, pragmatism works best, especially since it tends to prevent revolutions with their rather nasty consequences.

Free market fundamentalists, having a theological mindset, tend to think any tampering with the market is heresy, rather than the common sense it, particularly when we know it works.

Mike Schoenberg - 2/23/2009

To Mr. Jones, 100 + years after Upton Sinclair wrote "The Jungle", we still have to worry about the food we eat. Why don't you include peanut protects in your ditty?

Arnold Shcherban - 2/21/2009

The stupidity and greed of zealots of
pure capitalism (that ceased to exist many decades ago) cannot be

Ruel J. Eskelsen - 2/20/2009

Oh Please stop with the over-the-top "isms"
Fascism = single party rule
Socialism = permanent government ownership of the means of production.

The government bailout is a temporary partnership with business to shore up confidence in the basic financial system and help renew effective demand.

We should now have finally reached the end of the debate on whether the business sector needs to be regulated for stability. It does.

Every human interaction needs rules and a referee. The rule of law is the best tool we've found so far, despite its imperfect implementation.

Grant W Jones - 2/19/2009

Let’s recognize the new situation for what it is: Fascism. And it's not new.

You belong to me,
Every breath you take,
I'll be taxing you,


Bill John Stettler III - 2/19/2009

Nice effort, you got me at hello ...."Today’s advocates of strong federal action do not share that enthusiasm for replacing capitalism with socialism. They understand that the free enterprise system is vastly superior to one based on state-run industries. And they are not enthusiastic about investing public funds in failing businesses to give them temporary protection from a meltdown."