The United States, the Socialist Boogeyman and a Solution walk into a Bar

For the last while a debate between socialism and capitalism has been raging in the United States. Capitalists sing the praise of past American achievements and economic dominance. They often compare any effort to provide additional government help to people in need as a path to become “like socialist Venezuela”. Others claim to support a socialist agenda for the common good and to balance the scales of inequality. The advocates of socialism are vilifying the rich upper class, making them responsible for everything wrong with American life.

I thought, as a Canadian futurist looking in, that I would add my 2 loonies to the discussion with some definitions, some facts, and a suggestion or two.

First off, we really need to address a vocabulary problem. Americans have a good idea of what capitalism is all about. I suppose there is a massive section on it in their civics class. However, Americans are very confused about socialism and how it is implemented in most of the advanced nations of the world.

I found a great article that explains the pros, cons and differences between the two, entitled “Socialism vs Capitalism”, by an economics teacher at Greenes College, Oxford, named Tejvan Pettinger. Pettinger also created and published on Economicshelp.org the following chart that summarizes the differences between the two economic systems.

When we think of America, we immediately think capitalism. The US is almost exclusively capitalist, including its problems. It is a well-known fact that capitalist economies using offer, demand and private enterprise to drive motivation and innovation result in terrific economic growth. Capitalism encourages competition of ideas and a free market where consumers choose which company or product wins, and which loses. The consumers are the massive winners in this type of economy because all this competition keeps product quality high, prices low and workers busy thinking of how they can enjoy the extra cash flow.

Socialism was meant to be a replacement for capitalism originally thought out by the German philosopher and economist Karl Marx in the early 20th century. The core ideology of socialism, according to the revolutionary thinker, was a nation’s workers would inevitably team up and take control over the bourgeoisie of owners that dominated markets, thus spelling doom for capitalism. Ergo, Marx thought of an economic system where the people would control the production of goods and its distribution through an organized cooperative or government. The most prominent socialist countries that emerged soon after, based on Mark’s theories, were the Union of Soviet Socialist Republics (USSR) and communist China. At that time, both countries had serious class inequalities that their populations wanted to ease. This led to revolutions and the popular adoption of communism and socialism to create equal opportunities for the whole population.

With the USSR and China, the people sought a progressive way to solve their perceived collective problem. There was no new model out there, except for Marx’ rather unpopular theories, so the workers and soldiers of those countries thought a drastic change would ensure they could put bread on the table. We’ve all see what happened afterwards in the USSR and China, for better or for worse.

Failures for both economic systems

To Marx’ credit, on paper, socialism had significant benefits. Free healthcare, free education, guaranteed resource redistribution and class equality. It sounds amazing for those less fortunate elements of a population struggling to survive. But just like capitalism, it suffered its own problems in the lack of personal motivation from workers to do anything with any zeal. The accompanying production inefficiencies impacted the whole economy for the worse… and the people became hungry again.

We’ve seen both systems, opposites of each other, fail badly. Both systems have failed the people were supposed to serve due to power struggles in positions of leadership too. Corruption is present in every capitalist and socialist country in the world.

Today, the United States of America has a growing problem of income inequality. According to a paper by the Economic Policy Institute, in 2015, the top 1% earners in the US were making on average 26.3 times more than the bottom 99%. This has increased since 2013. In addition, huge corporations dominate the markets, leaving less room for competition. In fact, in the last 20 years, half of the companies on the stock market have disappeared through closures, mergers and acquisitions. The world of competition is getting smaller, and that’s bad for capitalism and bad for consumers.

The traditional solution to prevent monopolies and its undesirable market drivers is for government to get involved to prevent large companies from dominating any market segment. Extreme capitalism advocates are strongly against any government involvement to redress the free markets. The larger companies often have money in politics, making it even easier for politicians to ignore market movements that may threaten the economy, to keep their positions.

Meanwhile, like before the Bolshevik revolution of 1917, workers across America are getting upset at the established elitist government, the scandals, the corruption, the money. Unlike the Russian monarchy before the Soviet revolution, the US is a democracy, so the American outrage seems to manifest itself as political candidates using the word socialist instead of an outright worker’s revolution. This seems to create a good amount of retaliatory criticism and name-calling from conservatives and capitalists, however. The word socialist fill people’s minds with imagery of old rivals and some recent international struggles in countries with clear, widespread socialist programs, like Venezuela.

The truth is, both sides are focusing on the words socialism and capitalism without thinking about how to solve the economic and humanitarian issues in the United States of America today.

A bit of this, a bit of that…

Among the 34-member countries of the Organization for the Economic Co-operation and Development (OECD), all have a little of socialism integrated into their governance and economic system. OECD countries include most of Europe, Japan, Korea, North America, Australia and a handful of countries on other continents. Russia, China and Venezuela are not members. Al OECD members are strong economic players on the world stage. Member countries have implemented socialist programs to help citizens gain a certain baseline of comfort and support, giving citizens a fairer opportunity to find their feet and strive on their own. All OECD countries also have strong capitalist tendencies being part of a competitive global economic landscape, to everyone’s benefit.

What seems to differ from one country to the next is in the details of how government implements these social support programs. Denmark uses a strategy of raising a massive income tax to pay for social services. But according to a Gallup survey done in 2014, 90% of Danes approve of their 45%+ income tax rate. Why? Because their government the money well. Denmark is one of the best places to live and operate a business in the world. In Canada, the income tax rates are like that of the US but the government controls the cost of healthcare and education strictly to ensure the population has free healthcare and education. Private education and healthcare are still available as an option as an out-of-pocket expenditure for anyone desiring such offerings. It costs Canadians a large proportion of taxes to keep these expensive public systems running through the government. However, a healthier and more educated population (53% of Canadian adults have at least a college degree versus 33% of Americans), saving huge bucks to the economy, paying for the extra expense through higher buying power and superior exportable expertise. Poverty and bad health are costly to a country.

Therefore, countries that have succeeded being at the top of the economic game have a capitalist economy and have solid socialist programs. Recently, even China and Russia have awakened and added significant amounts of capitalism to their socialist economies to great benefits. China is a rising star despite the stranglehold their government still holds on the most important industries in the country. It is expected that China will surpass the US in economic power by 2030 because they have figured out, like the OECD countries, that what works is to take the best parts of capitalism and socialism.

In summary, socialism is better at ensuring the nation’s population is healthy, well educated, fed, housed and secure. Once those basic needs are met, individuals need a capitalist economy to get great prices as consumers and where they can innovate, get passionate and chase their dreams with gusto. That’s what the capitalist economy is best at.

Automation to the rescue

The problem with social systems is that they must be unbiased. It thus becomes the role of the government to take care of its implementation and deployment on behalf of the citizenry. However, we know from our own history that government and its employees are inefficient, but that’s the trade-off. Thanks to the growing capabilities of artificial intelligence, fine developments in robotics and blockchain technology, it would be possible to automate and decentralize the redistribution of resources needed to keep everyone in our society supported. Automation could take care of us without bias, ensuring we have our basic needs met, free healthcare and education.

With blockchain technology, we could create a decentralized, distributed, unbiased system to hold our education, healthcare and income records. We could use the same system to automate the distribution of a basic income based on a measurement of national production. It could be done the same way Alaska redistributes the states’ oil revenues (Alaska Permanent Fund). Another more progressive basic income funding tactic could include a carbon tax and dividend like the one being discussed for Canada under the Trudeau government. Combined with a land value tax, it would be enough to give poverty-line amounts to families, so they can pay for what they need to survive.

We could use artificial intelligence to manage the decentralised blockchain without government involvement. The government would only be needed to set it up and then supervise the system in case it needs to be adapted, updated or changed. AI-empowered robots can be deployed to ensure the low costs of such a system. We don’t need employees to carry out repetitive tasks often associated with government work. Automated systems could transport national resources from point A to point B and build specialized government housing (think automated 3D printed houses). The upkeep costs transferred to the nation’s citizens could be minimal, to the relief of both conservatives and liberals. We could minimize costs by automating large chunks of public education and healthcare too.

With such a social system in place, the nation’s citizens have no stress. Based on previous basic income pilots, citizens would stay longer in school, they would wait longer for the right job to come along and a greater quantity of citizens would start businesses. These are all great outcomes of all basic income pilots measured in modern times. In addition, with a population not stressed about survival, crime rates can drop by over 40% (Namibia experiment) and healthcare costs could go down over 8% (Mincome experiment).

That’s a great springboard for a population craving to relieve chronic economic stress and wishing they could challenge themselves but can’t. The best part is since basic income would mean there would be more cash flow in the economy, which is also great for business and employment opportunities. Based on calculations done based on the Canadian economy, a nation-wide basic income could pay for itself — without the need to raise taxes even a little.

Sitting down with the facts

What we need right now is for everyone to calm down the rhetoric. There is good in both socialism and capitalism. Those are just words and concepts. We’ve had plenty of experiences with both globally. Most countries with top economic power have done a great job of integrating both economic systems with great results. We have awesome technologies now that we can use to design something even better. We could satisfy the capitalists by building a stronger economy with more buying power and we could satisfy the fans of socialism by eliminating poverty and reducing the income gap.

Who cares what you call the resulting system? We need both. Capitalism for the competition, innovation, excitement and economic cash flow benefiting everyone. Socialism to provide basic needs and wellbeing to the population, allowing them to participate in the free market instead of being a drain.

We can solve the inequality problems of capitalism and the lack of efficiency and enthusiasm around socialism just by making wise, progressive, fact-based choices, leveraging modern ideas and technologies.

Being fearful of a word tainted with historical meaning is not practical or helpful.

We need to have the courage to look at what we have learned with fresh new eyes and remove our ego that says, “we have it better here”.

We don’t need to “Make American Great Again”. We should say, “Let’s make America great!”

My question is: which country and leader will have the guts to build on what we know? Is Estonia the innovating leader we’ll follow? Or will the strongest country in the world find the courage to set aside differences and think about what is best for their country?


The United States, the Socialist Boogeyman and a Solution walk into a Bar was originally published in Data Driven Investor on Medium, where people are continuing the conversation by highlighting and responding to this story.