Right after I watched a segment on PBS’s
‘Firing Line with Margaret Hoover’ featuring an interview with Niall Ferguson,
who seems to be very intelligent and in touch with current political events, I
saw an ad for a free eBook of this section of a larger book called the Human
Prosperity Project. It is 25 pages long and has a section from Niall Ferguson
titled Capitalism, Socialism, and Nationalism: Lessons From History, and
a smaller section from Victor David Hanson titled Our Socialist Future? Ferguson
and Hanson are fellows at Stanford’s Hoover Institution, which is considered to
be a center-right group. Their current director is Condoleezza Rice, Secretary
of State during the George W. Bush administration. While Condy Rice is OK, I am
less thrilled about Stanford alum Doctor Scott Atlas, an instigator in Trump’s
first administration that argued against vaccines for Covid in favor of forcing
herd immunity, which likely would have resulted in many more hospitalizations
and deaths, perhaps many more, being one of the institute’s leaders. Atlas is
listed as one of two editors on this report. The letter from the editors begins
the report, noting:
“Free-market capitalism with private ownership and
market determined allocation of goods and services is often credited with
generating economic growth and high average income, but its critics argue that
a market-based economy creates significant inequality and does not help the
poor. Socialism and its variants, which couple government ownership of much of
the means of production with substantial centrally determined allocation, is
championed as being more benevolent than free-market capitalism.”
“The goal of this project is to provide objective and
scholarly analyses of free-market capitalism, socialism, and hybrid systems and
to provide evidence on the effectiveness of the various systems on outcomes
that affect prosperity and well-being.”
Capitalism, Socialism, and Nationalism: Lessons from
History -by Niall Ferguson
In the abstract, he
notes that even though experiments with socialism largely failed everywhere it
was tried by the 1980s. He also notes that after the 2008-2009 financial crisis
and influenced by the left-wing bias of Western education, a new interest in
socialism arose, especially among young people. He also says those young people
did not embrace the main issue that defines socialism, the violation of
property rights, but emphasized more accessible health care and European-style
financial redistribution. He also says that “socialism’s
greatest weakness is its incompatibility with the rule of law.” The
paper has four sections: The Pessimism of Joseph Schumpeter, The Origins of
Socialism and Capitalism, The Turning of the Tide, and The Strange Re-Birth of
Socialism.
I. The Pessimism of Joseph Schumpeter
He notes that Joseph
Schumpeter, though a “conservative by temperament,” and a believer in
capitalism, was pessimistic in that he believed socialism would eventually
prevail as a system, as he expressed in a 1942 book. Schumpeter noted that
capitalism’s propensity for “creative destruction” was also a source of
weakness. He also acknowledged that capitalism tends toward oligopoly. We see
that now, with billionaires pervading the government. He was at Harvard, where
intellectuals, funded by the capitalistic system, were drawn toward socialism. I am not
sure if it was the case that Harvard was a hotbed of Marxism back then, but I
have heard from prominent scientists that it was in the 1970s and just
yesterday I heard David Brooks say that it was saturated with Progressivism,
though not explicitly Marxist, leans toward socialism, which Marx originally
defined. He said, and I probably agree, that Harvard should alter some of its
policies to rein in potential anti-Semitism. However, that does not justify
Trump’s brazen attempt to destroy the historic and prestigious university that
is a global leader in scientific research and knowledge.
He notes that the belief that
socialism could be successful was widespread, and people cited the Soviet
economy as a success at the time. He mentions a 1961 book by Schumpeter’s
pupil, Paul Samuelson, who thought the Soviet GNP would overtake that of the
U.S. The timeframe moved back until the 1980 edition, where the idea was
dropped since the Soviet economy did not improve like the U.S. economy did. By
the 1991 Soviet collapse, the GDP was one-third that of the U.S. Ferguson notes
that the term “socialism” began to go into decline around
1979.
II. The Origins of Socialism and Capitalism
Ferguson states that the
origins of the terms socialism and capitalism arose amid the
19th-century Industrial Revolution. It was a time when mortality rates in
cities were high due to public health emergencies. Boom and bust cycles also
influenced negative views of capitalism. Refuson writes:
“Although the Industrial Revolution manifestly improved
life over the long run, in the short run it seemed to make things worse.”
Artists like William Blake and Richard Wagner portrayed
industrialism disapprovingly. Scottish philosopher Thomas Carlyle compared
market competition to warfare, where the spoils were not distributed equally.
It takes place at the “cash nexus.”
“The founders of communism, Karl Marx and Friedrich
Engels, were just two of many radical critics of the industrial society. But it
was their achievement to devise the first internally consistent blueprint for
an alternative social order.”
He notes that Marx was often financially dependent on
Engels, whose wealthy father owned cotton mills in Manchester. One might even
say that Mar was supported by “Big Cotton.” They were influenced by Hegel and
by economist David Ricardo.
“Marxism took Carlyle’s revulsion against the industrial
economy and substituted a utopia for nostalgia.”
Marx and Engels, like many
others of the time, observed the unfairness of capital being in the hands of
the few while others had to slave for wage labor. It is well documented that
the Industrial Revolution led to increasing inequality. Marx suggested that a
revolting working class would be the result, the well-known “revolution” of the
working class.
Ferguson notes the first use
of the term “socialist” in 1822 and the first use of the term “capitalist” in
1833. Marx’s revolution never really happened, as workers instead often chose
collective bargaining and strikes to fight for better conditions.
“Marx and Engels called for the abolition of private
property; the abolition of inheritance; the centralization of credit and
communications; the state ownership of all factories and instruments of
production; the creation of “industrial armies for agriculture”; the abolition
of the distinction between town and country; the abolition of the family;
“community of women” (wife swapping); and the abolition of all nationalities.
By contrast, mid-nineteenth-century liberals wanted constitutional government,
the freedoms of speech, press, and assembly, wider political representation
through electoral reform, free trade, and, where it was lacking, national
self-determination (“home rule”).”
Ferguson notes that Marx and
Engels were wrong about two things: that wages would stagnate and that the
state would not adapt to change.
“Wealth did indeed become highly concentrated under
capitalism, and it stayed that way into the second quarter of the twentieth
century, but income differentials began to narrow as real wages rose and
taxation became less regressive. Capitalists understood what Marx missed: that
workers were also consumers.”
Nation-states arose in ways
that led to many improvements, but also to cholera outbreaks and new
nationalistic urges:
“Entities like Italy and Germany, composites of multiple
statelets, offered all their citizens a host of benefits: economies of scale,
network externalities, reduced transaction costs, and the more efficient
provision of key public goods like law and order, infrastructure, and health.”
These improvements quelled the desire to revolt, as people
realized that commerce/trade, industriousness, and most of all, wise use of
capital, can lead to quality-of-life improvements.
III. The Turning of the Tide
Ferguson explains that two
events, spurred by nationalistic tendencies, World Wars I and II, really aided
a move back toward socialism, among the intellectual elite, but also gave us a
taste of it by implementing policies similar to socialist ones, albeit for
different reasons than socialism.
“The world wars made the case for socialism in multiple
ways. First, they seemed to confirm the destructive tendencies of “imperialism,
the highest form of capitalism,” in Vladimir Lenin’s words. Second, they
greatly expanded the role of the state, which became the principal purchaser of
goods and services in most combatant countries, creating precisely the kind of
state-controlled economy that socialist theory claimed would perform better
than free markets. Third, the wars acted as a great leveler, imposing very high
marginal rates of taxation, wage controls, and price controls in ways that
tended to reduce wealth and income disparities. Fourth, in 1917 the German
government financed the Bolshevik coup in Russia that brought Lenin to power.”
Ferguson then shifts to the
harsh realities and hellish conditions of socialist and communist societies.
“According to the estimates in the Black Book of
Communism, the “grand total of victims of Communism was between 85 and 100
million” for the twentieth century as a whole.”
The cruelty, excesses, and failures of Stalin and Mao are
recounted. The massive corruption of those states, along with the “durable
dictatorships” but largely failed states of North Korea and Cuba (one might add
Venezuela), clearly show that Marxism has failed miserably and wrought misery
on their citizens. Along with mass death came poor living conditions, much
poorer than in capitalistic societies. He notes that the collectivization of
farming led to lower food output and famines, which added to the unnecessary
deaths. The widespread failure of central planning also became evident. China
provides the most striking example that when socialist societies move toward
capitalism, life gets better for their citizens as a result of economic growth
and trade. It became a consensus that privatization and lowering marginal tax
rates benefited the whole society economically.
IV. The Strange Re-birth of Socialism
He notes that by 2007,
socialism seemed dead as a useful system or idea. Schumpeter noted that
capitalism “creates, educates and subsidizes a vested interest in social
unrest,” namely intellectuals; and Ferguson notes that “socialism is
politically attractive to bureaucrats and (many) democratic politicians.”
The financial crisis of
2008-2009 revived an interest in socialism, since it was seen as a failure of
the capitalistic system. Combine that with the left-leaning, often Progressive,
academic institutions in the U.S., and the revival of interest in socialism
makes more sense. He notes that young people, Millennials, and Gen Z’ers tend
to be more attracted to socialism. He goes on to say that these determinations
depend on what is meant and understood by the terms capitalism and socialism.
Alexandria Ocasio-Cortez (AOC), when asked, invokes the Swedish system, but
that is not really socialism at all, but an increased emphasis on social
welfare programs. Gen Z favors many things that Bernie Sanders promotes, like
single-payer healthcare, free college, and federal job guarantees. Slightly
less support a “militant and powerful labor movement.” Many
young people support:
“…a more European system of fiscal redistribution, with
higher progressive taxation paying for cheaper or free health care and higher
education.”
I think the lure of socialism for many is the perceived guarantee of fairness and equality, which are great ideals, but difficult to achieve in practice. Those ideals should be encouraged but not forced, as forcing leads to undesirable secondary effects such as resentment, backlash, and workarounds.
However, he points out rightly that these ideals are not
socialism. He mentions the case of China, where the most profitable companies
are privately owned rather than state companies, and that, quoting The
Economist, “the non-state sector contributes close to two-thirds of China’s
GDP growth and eight-tenths of all new jobs.” Thus, China has a
capitalist-dominant economy. However, he also notes that since Xi Jinping came
to power in 2012, there has been a move back toward state-controlled economics.
“A common error made in the wake of the 1989 revolutions
that ended communism in Central and Eastern Europe was to argue that it was
capitalism and democracy that were interdependent, whereas in reality it is
capitalism and the rule of law. On this basis, it is striking not only that
China is so much inferior to the United States by most measures in the World
Justice Project Rule of Law Index but also that Sweden is some way ahead of the
United States (see Figure 7).”
“The defining characteristic of socialist states is not
their lack of democracy, but their lack of law. So long as China does not
introduce a meaningful reform of the law—creating an independent judiciary and
a truly free legal profession—all property rights in that country are
contingent on the will of the Communist Party.”
Ferguson concludes the
section with the following quote, emphasizing that loss of rule of law, as in
China and Venezuela, or realizing the downsides of state ownership, as Sweden
realized in the 1950s and 60s when socialist politicians had more influence.
“The socialist economy can then go down only one of two
possible paths: toward authoritarianism, to rein in the oligarchs and
carpetbaggers, or toward anarchy. This is a lesson that young Americans might
have been taught at college. It is unfortunate that, as Schumpeter predicted,
the modern American university is about the last place one would choose to
visit if one wished to learn the truth about the history of socialism.”
Our Socialist Future? by Victor Davis Hanson
He first notes the demands
and instigations of Black Lives Matter and supportive protestors after the
death of George Floyd in 2020. Socialist ideals were a part of it. Black Lives
Matter has strong socialist origins, and another instigator group, Antifa, does
as well. He notes that the demands included:
“…the abolition of urban police forces,
multitrillion-dollar reparations, relaxed grading for African American
students, and an end to incarceration as a penalty for most crimes.”
He notes that history has
shown very well that socialism often leads to communism, anarchy, and nihilism.
He notes that while the EU deems itself a social democracy with socialist
aspects, those aspects fall away in the face of difficulty. For example,
Germany was not ready to share its wealth with poor Mediterranean countries
after the financial crisis and Eastern Europe did not see more open borders as
beneficial. He notes the failure of socialist ideals to gain traction in the
U.S. and asks what gives it appeal these days:
“Antiwar socialists in the 1960s and “green” socialists
in the twenty-first century have all failed to assume power. And given
long-held and traditional American suspicions of an all powerful,
redistributive state, what then explains the flirtation with socialism by the
current generations of American youth?”
Hanson notes the rise of
socialist politicians in the U.S. with Sanders, AOC, and her “Squad” and their
influence on the Democratic Party, particularly in the primaries, where they
tended to shine. My own observation is that while they may have seemed relevant
and a major force during those times, in reality, they make up a small
constituency of the Democratic Party and were essentially “punching above their
weight.” It annoyed me when Bernie Sanders was inviting other socialist folks
to help define the Democratic Party platform in 2016. I believe that if this
resurgence never occurred, we would never have had Trump ascend to power, in
part as a check against it.
He also mentions China’s
free-but-unfair trade policies that led to too much offshoring of U.S.
manufacturing. He sees unemployment after the financial crisis, lack of
financial resources, and nonmarketable degrees and skills with burdensome debt
as reasons many young people became angry and embraced more socialistic
attitudes. I can understand that a bit as I am now poor, unemployed, and
worried about the future. I see few, if any, sources of help, including
government handouts, as an option for me in the dog-eat-dog world of trying to
make a living.
Hanson suggests that during
the Obama presidency, government dependency was even promoted, and that
shunning things like marriage, religion, community, and family support became
more common. I’m not sure if that is accurate. He mentions Obamacare as a means
to collectivize medicine. That, too, seems inaccurate to me. As someone who
will turn 60 this year and who has no medical coverage, I can relate to the
desire for healthcare if needed. Affordable healthcare is not socialism. Hanson
seems to see people in need as brats looking for handouts. I disagree.
Like Ferguson, Hanson sees
socialist revolutions as the children of wars, but their leaders came from the
educated classes rather than the so-called working class. Like others have
noted, he asserts people became more conservative, more self-reliant, and more
suspicious of Big Government as they age due to early marriage, early
mortgages, child-raising, etc., until more recent times when they are delaying
those actions.
He notes that socialist
ideals were spurred by the COVID-19 pandemic when government money was applied
directly to people and the economy, which led in part to the inflation we are
burdened with nowadays. Progressive politicians wanted even more money to be
redistributed. He cites the words of California Governor Gavin Newsom:
“There is opportunity for reimagining a progressive era
as it pertains to capitalism. So yes, absolutely we see this [the government
response to the virus] as an opportunity to reshape the way we do business and
how we govern.”
He then returns to the George
Floyd protests, seeing them as a socialistic resurgence.
“A final catalyst for reemerging socialism was the
substitution of race for class struggle, on the premise that while income and
capital are fluid, one’s race is fixed and the sole determinative of class;
thus the struggle against “white privilege” is endless, even if one is an elite
like Barack Obama.”
“…a socialist paradigm that had been considered eccentric
and an object of paradox as recently as late 2019 was now mainstreamed as near
normal. Such is the way destructive socialism inevitably creeps in - more with
a parasitic whimper than with a confrontational bang.”
References:
The
History of Socialism and Capitalism – by Niall Ferguson and Victor David Hanson
- excerpted from The Human Prosperity Project. The
History of Socialism and Capitalism.pdf
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