1. Opinion

Hitting back when hit with the charge of 'socialism' | Column

Dr. Erik Edens in Iowa carries a sign against the health care reform bill that President Barack Obama signed into law in 2010. Associated Press (2010)
Published Jun. 20

Republicans are claiming that the candidates seeking the 2020 Democratic nomination are forcing their party to take a "hard left turn" toward socialism. This gambit evokes powerful negative imagery that many voters associate with socialism: economic failure, privation and the suppression of individual initiative and innovation. Moreover, with little analytic effort, it provides instant distraction from issues of great concern for the nation. The best defense, with a quick pivot to offense, incorporates mainstream economics in the response. Let's consider a few specific examples.

ECONOMIC ISSUES OF GREAT CONCERN TO VOTERS. Many of today's concerns (health insurance, infrastructure, jobs and wages) derive from the failure of the market sector to perform well or from the failure of the government sector to perform the functions assigned to it. As the campaign proceeds, both voters and pundits must keep in mind a guiding economic principle: Capitalism requires efficient provision of public assets that private markets will not provide.

We do not face a choice between capitalism and socialism: All economies are "mixed economies" in which a large number of activities are directed by private market forces while others are directed by government forces. Because capitalism is such a successful wealth-producing system, the American presumption is that goods and services are best directed by market forces rather than through government direction. However, the challenge for modern society is not to choose capitalism over system-wide socialism. Instead, it is to determine task-by-task, sector-by-sector, whether private enterprise markets or a well-chosen level of government would be the better allocator of resources within each sector.

In those sectors where market direction is chosen, profit-driven private firms will compete to provide those goods and services that can be owned by individuals and bought and sold on markets. When government direction is chosen, the means of production will be owned collectively and directed by bureaucracy and elections.

Two types of error can be made: Type I is the error of implementing socialism in a sector that would be better served by market forces. Type II is the error of relying on markets when socialism would serve society better. Steady improvement of an economy's performance depends on avoidance of both types of error.

HITTING BACK WHEN HIT WITH THE CHARGE OF "SOCIALISM." Candidates can use well-accepted economics to hit back sharply when confronted with a charge of socialism, with a response such as this:

"Because my opponent has no working knowledge of economics, her answer to everything is to let the free market sort things out. She has no ability to determine when markets work well and when they should work with government to achieve greater efficiency, as with police and fire protection, courts, patent and copyright systems, as well as roads, health insurance, and climate."

ON DETERIORATING ROADS. "We are plagued with terrible road conditions that increase costs for commuters and business firms. They got that way because Republicans promised that tax cuts would promote growth and revenue, and that revenue could be used to pay for stuff like roads. It didn't work. Fixing roads requires a collective initiative — and money. To pay for the roads, I support user fees to require that those who use the roads pay for them. For now, that means raising the fuel taxes; as technology improves, so will better ways to impose user charges. It is ridiculous to call investments in roads and user charges socialism; roads provided publicly are essential for capitalism to thrive."

ON HEALTH INSURANCE. "My opponent claims that the Affordable Care Act will lead to socialized medicine. No: As shown by the Heritage Foundation, a pro-market think tank, free market insurance alternatives cannot provide universal health insurance coverage. Why not? Competition forces insurers to employ experience rating: Higher risk policy holders are charged higher premiums. The poor and those with pre-existing conditions would be priced out of the market for insurance and lose access to proper medical care."

ON GREENHOUSE GAS EMISSIONS. "An important first step in addressing the climate threat is to recognize that the current cost of emitting carbon is too low. Consequently, the powerful forces of the market encourage polluters to overproduce and underprice their products. To re-direct those market forces toward reducing carbon emissions, I endorse the carbon tax. My opponent calls this socialism. Ridiculous. The carbon tax is an example of how to use market forces to save the planet."

William L. Holahan is emeritus professor of economics at the University of Wisconsin at Milwaukee. Charles O. Kroncke, retired dean of the College of Business at UW-M, is also retired from USF. They are co-authors of "Economics for Voters."


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