Economic Systems, Political Labels, and Ignorance

In the recent political campaigns, there were a number of political labels thrown around.  The Republicans accused Democrats of being socialists and in more extreme cases, communists.  Obviously, the latter is particularly ridiculous, but that is today’s reality.  On the other side, the Democrats accused Republicans of being autocratic crony capitalists and fascists, with the latter being rather absurd.

In this paper I want to clarify very briefly what some of these labels really mean.  Obviously, there will be some overlap between the terms.  Quite honestly, if you want a reality check on the current environment, I suggest reading a book about the Great Depression years, which span the decade of the 1930s.  During that period, Socialist and Communist parties in the U.S. were quite real and had significant support.  Fascism had some support as well.

I am not an expert in the nuances of these political/economic systems, but I will try to apply some guidelines to them.  I can say that in the recent election, these terms were totally misapplied.


It was alleged that Democrats were Socialists, which fundamentally means that the government controls major sectors of the economy.  That is the correct definition of socialism, but it is not what Democrats were advocating.

A classic example of Socialism is England after WW II.  The government controlled key industries such as mining, transportation, power, health care, and other key sectors.  This was the essence of the Labor Party, and it largely prevailed until Margaret Thatcher became prime minister.

It is important to note that while large sectors of the economy were government controlled, parliamentary democracy was the political system.  This stands in contrast to Madura in Venezuela.  There is a nominal democracy there, but it is really autocratic/dictatorship.  The primary industry, petroleum, is government controlled.  Because of the economic collapse, the government is the economy.

Social Democracy

When conservative politicians were calling Democrats “socialists”, there were just wrong.  What some Democrats were advocating was not socialism, but social democracy along the lines of the Scandinavian (and some other) countries.  In these countries, capitalism prevails.  In fact, some studies have shown that upward household mobility is higher in these countries than in the U.S.

Whether that is true or not is not the point.  Rather, the Scandinavian countries provide comprehensive public support for education, healthcare, childcare, and family leave policies among the primary elements. 

These types of programs were what some Democrats were advocating.  This is not socialism.  The political system is democratic, and the economic system is capitalist.  Taxation is quite high because of the required funding for the social programs.  Do some individuals and households “game” the system?  Of course they do, but these countries obviously believe that the social benefits outweigh the costs.

Whether or not to enact these programs in whole, in part, or at all is a political decision.  They would not fundamentally change the capitalist orientation of our economy.  It is not socialism where the government controls the key sectors of the economy.

Autocratic Crony Capitalism

The most egregious example of this is Russia.  Following the collapse of the Soviet Union, state assets were sold at ridiculously low valuations to politically favored individuals.  This led to the establishment of a crony capitalist system under the aegis of an autocrat, Vladimir Putin.  Russian oligarchs/billionaires were the outcome.

Was Trump headed in a similar direction?  He relaxed pollution mitigation rules for power plants to support the coal industry, an inefficient polluting source of energy.  He designated Canada (of all countries????) as a national security threat to restrict Canadian steel imports, a blatantly protectionist move to curry favor in the Midwest manufacturing states.  He threatened retaliation against GM and Carrier for moving some production facilities to Mexico.  He enacted favorable tax legislation to benefit the real estate industry, an obvious conflict of interest.  He opened up public lands and the Atlantic and Gulf coasts to oil drilling, at a time when there is a substantial world-wide surplus of oil.  His tariffs cost farmers export markets, but then he paid them off with $68 billion in subsidies.  I guess that this could be called democratic crony capitalism.

Ignorance and Politics

It is easy to throw labels around.  Unfortunately, there often is a fundamental misunderstanding of what the labels mean.  In the future, how do we promote understanding and not ignorance so that rational political discussions can be held?

I am not optimistic.  It is much easier just to act out of ignorance.

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