The health care debate, socialism, government take over of GM, regulation of Wall Street – say these words and very few people will resist giving a reaction: a roll of the eyes, a string of expletives or a thoughtful opinion.
Capitalism
Is the US really a capitalist economy? Wikipedia (sorry Encyclopedia Britannia, you’re SO over) defines capitalism as “private ownership of the means of production, creation of goods or services for profit in a market and paid employment”. So yeah, I’d say for the most part, the US is a capitalist economy.
Socialism
Some claim we are moving towards socialism. Well, no. Not even close. Wikipedia defines socialism as “large portion of resources (capital) should be in hands of a society rather than individuals”. Does the US even remotely resemble this definition? Not even. How many companies have had their ownership taken over by the government?
By the way, loaning money (the dreaded term “government bailouts”) is not taking over a company. The US does not really own GM, they are just the current largest stockholder, with the understanding that GM will eventually purchase back the stock. In addition, the Fed is selling the “taken over” banks and their assets to private investors as quickly as possible.
But let’s assume government loans, bailouts and stock purchases are government takeovers. Let’s count: GM…ok, and how many banks taken over by the Feds? Any other companies on the list? Let me know if you think of any.
Given this definition, let’s conservatively estimate there are 200 companies “taken over” by the government. How many privately owned companies are there in this country? In 2004, there were approximately 24.7 million businesses in the United States, according to the Office of Advocacy. In addition, there is such a thing as a list of Fortune 500 companies – most of whom have greater cash reserves and assets than the U.S. government.
Communism
Some people think communism is like socialism, a common confusion. The remaining economic power with communism as its base is China (though some argue Russia is slipping back into communism). With communism, the government owns everything, and this government is in the hands of a few people, essentially a dictatorship. Even in socialist countries such as Canada and France, private citizens are allowed to own property and businesses. Once again, are we even approaching communism in the US? Nope.
(For an intelligent discussion of socialism vs. communism, here is a great article.)
Free Market
In a true free market economy, there is no to little regulation of the markets. Here in the US, we like to think we have a free market system. For the most part this is true, until certain conditions kick in – for instance monopolies – and then regulation occurs.
It’s my opinion that big business does not care about the average American, the so-called “middle class”. They are not in business to make people happy, but to make a profit. If they can make a profit by making people happy, great, but in my opinion, this is not their main goal. In this capitalist economy, the danger of monopolies is large. Some of these industries: prescription drugs, health care, auto, energy, banking and food. Good thing there’s no such thing as a “breathable air” industry.
More Regulation?
Some think regulation of the markets is a bad thing, and we don’t need any more. If you’re among them, let’s think about how the US economy took such a big nose dive. Were you one of the people appalled by the lack of oversight on the crazy mortgages given out to Americans who couldn’t afford them? How about the fact that Wall Street packaged these same mortgages up as Triple A rated securities and sold them to brokers managing your IRA or 401K plan? Left unchecked, things like this will happen again.
If competition for one type of product or service exists in the market, there is little need for regulation. When only a few companies have all the business, I do think regulation is needed. How much regulation? As much as it takes. The president is pushing for Wall Street reforms at the moment, and I think it’s a good thing.
What’s your opinion on the matter? We know you have one! Tell us by leaving a comment!
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We are still a long ways from becoming a socialist country, but I think that the general uneasiness over what the government did with GE and other companies has its roots in the fact that the actions themselves have the appearance of moving in a more socialized direction.
Personally, I’m for the government only taking actions involving businesses when they need to regulate business practices, not which businesses succeed or fail. There is no doubt in my mind that if GE had gone down another company would have risen to fill the demand and that company would have been better structured for the modern market.
With the power to succeed, we must be given the power to fail, otherwise we will not be given a chance to learn from our mistakes and move forward.
I’m not sure what would have happened if GM failed, and not sure I don’t agree with you about that. I did applaud the Bush’s bailout of the banking system last summer, though. Without it, the global financial markets would have collapsed and we would be in a far worse position that we are now.
Great read. You always know how to put things in to perspective. Pointing out the differences between capitalism, socialism, communism etc. will hopefully clear things up for some people. I do feel that too much government “ownership” is a bad thing, especially when the companies they are helping out are being advised by “Czars” that really don’t seem to know all that much about the industry they are advising on. This country was built on people taking chances, and trying to better themselves. Sharing the wealth will only lead to a more lackadaisical attitude. There will be no desire to better oneself if we all make the same wage.
Getting back to the capitalist v. socialist argument, I think it is more of the beliefs of people in the administration that more people are afraid of, at least in terms of becoming a socialistic state. The progressive thinking by some of these advisers is a bit unnerving.
I think lots of people forget that most of the “bailouts” in the past year were done during the Bush administration. The only bailout performed by the Obama administration was the auto industry. The last time this happened was the bailout of Chrysler during the Reagan era, and we taxpayers made money on that one.
One more comment – What beliefs are they afraid of? In addition – isn’t being progressive a good thing? Another question I have is your “Czar” comment. Which Czars are we talking about and what policies are so frightening?
Good article and I agree with most of what you say. However, much of the problems regarding the “crazy mortgages” given to Americans who couldn’t afford them was because the government put rules (oversight) in place that required banks to loan more to high risk individuals and communities if the banks wanted to grow. Those regulations started under Clinton, but continued through to Bush as well. Why were these regulations put in place?- short term political paybacks and votes.
Some oversight is required and good to keep too much power from Monopolies, but the same power is usually bad in the hands of big government as well, who make decisions often for their own benefit vs. the benefit of average citizens. Additionally, many politicians (of both parties) make short-term decisions to get re-elected, despite long-term consequences to our country.