Everyone who lives in a capitalist society wants capitalism to work for them, but when it doesn’t they scream for socialism support. This is not a bad thing. There are a number of programs such as medicare, social security and food stamps that people are thankful for when they can use the help (“socialism” is commonly applied as a term for using government programs as a social welfare state to help people who need assistance).
However, if you are going to apply these programs then at least accept the hybrid economic model as is and don’t slam one against the other.
Formal economies operate within limits of established and monitored policies and regulations. Informal economies do not and therefore include underground economies. Capitalism and socialism are considered formal economies.
The major differences between capitalism and socialism are based on the role of the government and equality of economics. Capitalism allows for economic freedom, consumer choice, and economic growth. Socialism, which is an economy controlled by the state and planned by a central planning authority, provides for a greater social welfare and decreases business fluctuations. The truth is, there are elements of socialism in all capitalist economies, although many would not like to admit.
We can start with the Federal Reserve. The Federal Reserve is a “central” bank with centralised power over interest rates and the power to print money under the guise of financial system “stability.” Although one wonders what is meant to be stable in a capitalist society? Capitalism is inherently unstable and prone to boom/bust periods, or crises, even during a period of strong and stable growth. There is a history of recessions that prove it. However, lately the Fed is doing everything in their power to avoid recession.
Consider the two following statements;
“Centralization of credit in the hands of the state, by means of a national bank with State capital and an exclusive monopoly.”
Congress shall have power to “coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures.”
The second statement comes from the United States Constitution, Article 1 Section 8. The first statement was written by Karl Marx and Friedrich Engels in 1848 in their infamous “Communist Manifesto.”
The Federal Reserve could never exist to operate the way it does in an open democracy. They have a strong recent history of socializing risks (making taxpayers responsible for bankers’ losses) and privatizing their profits (letting the bankers keep their bonuses) for the benefit of its members (the banks). An audit of the Federal Reserve uncovered details about how the U.S. provided an astounding $16 trillion in secret loans to bail out American and foreign banks and businesses during the crisis of 2008. This highlights that the Federal Reserve has to transform America to a socialist model in order to maintain its own growth and ultimate power which it has shown to do quite effectively.
Pro Publica has been tracking where taxpayer money has gone in the ongoing bailout of the financial system. Their impressive database accounts for both the broader $700 billion bill and the separate bailout of Fannie Mae and Freddie Mac.
How about the President? Where does he stand on the socialist agenda? He has had a lot of praise for many socialist leaders. Does this make him one? Probably not. This could be a simple mafia strategy of keeping your friends close and your enemies closers, or he actually has a real admiration for them.
But how about his actions? In spite of his public distain for the socialist agenda, he recently announced that he is going to implement price controls (socialism) on prescription drugs. Since he was elected, GM has got more than $600 million in federal contracts plus $500 million in tax breaks. Some of this has gone into the pockets of GM executives. Chairman and CEO Mary Barra raked in almost $22 million in total compensation in 2017 alone. As the Trump administration continues trade talks with China, the U.S. Department of Agriculture (USDA) has paid out a total of $7.7 billion in aid to farmers to offset the effects of tariffs.
So, the US clearly has shown to exercise a socialist will on many occassions (and will most likely do so on a much bigger scale during the next economic downturn). Does this put it in the same category as Russia or China? Of course not, but don’t slam socialism ideals when you are taking advantage of them.