Guest Submission by Ervin Sims

While Sarah Palin is talking about and rightly criticizing crony capitalism, I thought we should look again at just was what basic definitions of Capitalism and Socialism are. In my World History Class I teach that there are three important aspects of capitalism. One is the private ownership of property, another is the presence of risk-taking entrepreneurs, and the third is the free-market determination of the price of goods (understood in this is the law of supply and demand). I have looked in several dictionaries, and while they vary, none truly contradict with my three aspects. Robert Hessen in The Concise Encyclopedia of Economics says:

“ Capitalism,” a term of disparagement coined by socialists in the mid-nineteenth century, is a misnomer for “economic individualism,” which Adam Smith earlier called “the obvious and simple system of natural liberty” (Wealth of Nations). Economic individualism’s basic premise is that the pursuit of self-interest and the right to own private property are morally defensible and legally legitimate. Its major corollary is that the state exists to protect individual rights. Subject to certain restrictions, individuals (alone or with others) are free to decide where to invest, what to produce or sell, and what prices to charge. There is no natural limit to the range of their efforts in terms of assets, sales, and profits; or the number of customers, employees, and investors; or whether they operate in local, regional, national, or international markets.

The United States for at least its first one hundred and thirty years had in essence a laissez-faire capitalist economic system. Then the progressives came along. Progressive, is the name that American Socialist used for themselves to avoid all the bad press that European Socialists were getting. Now Socialism is quite different from Capitalism. Robert Heilbroner of The Concise Encyclopedia of Economics says:

Socialism—defined as a centrally -planned economy in which the government controls all means of production—was the tragic failure of the twentieth century. Born of a commitment to remedy the economic and moral defects of capitalism, it has far surpassed capitalism in both economic malfunction and moral cruelty. Yet the idea and the ideal of socialism linger on.

Many American progressives have had a love affair with socialism since the late nineteenth century. Progressives have been in both parties. Teddy Roosevelt and Herbert Hoover were progressives, and since Woodrow Wilson and Franklin Roosevelt all Democratic presidents have been to varying degrees progressive. The two most prodigious progressives were Franklin Roosevelt and Lyndon Johnson. That is until the current president — and the jury is still out on him.

Roosevelt instituted a variation of socialism, a highbred of socialism and capitalism that formed a coalition with big business and big labor to form an ungodly triumvirate of big business, big labor and big government. That is in essence what the American economy has become over the last hundred years. One might argue that the United States is not a government like 1930′s Italy and Germany were. This, however, is true only to a minor degree. There is a difference between strong mustard and mild mustard, but one must admit in the end that they are both mustard.

One indelible mark of socialism on the American body politic is the “safety net.” Programs like Social Security and Medicare are now deemed to be permanent fixtures. They are referred to as the “third rail of politics.” This is in reference to the electrified rail that powers the engines on subways and similar modes of rail transportation. To touch the rail can cause death. If Social Security has truly become a third rail then the United States has indeed a fascist or socialist component to its government. But is that completely true? Can a safety net be created or structured on a capitalist model rather than a socialist one?

Perhaps it is equivocation, but a capitalist -modeled safety net might well be devised. First, it must deal with funds belonging to the citizen and not the state. Real choices and options regarding the disposition of such funds must be available to the individual recipient of such funds. Unused funds must revert to the individual’s estate and not the government. If the people wish the government to contribute to the individual, certain safeguards against early withdrawals can be set up. However, once the funds are contributed, they will belong to the individual and not the state.

In a similar fashion, a health care system might be set up by the state, but it will be as a fair broker of options and not a mandate-issuing tyrant. The state can set standards for insurance or care coverage in which those health care providers wish to participate can freely compete for customers. If the people wish, the government can contribute to the payment of premiums, but the citizen is free to choose the coverage they desire. This insures that free-market competition will provide products that are universally available. The individual, who knows his/her requirements best, will make the choice.

Such systems used for safety net structure may prove to be the answer to the fascist-sired, one-size-fits-all government-controlled systems. A properly structured Social Security system could be a way to create true estates that citizens could pass on to their children. Such systems could not cure all the ills that this nation faces, but perhaps it could be used as a model or framework for a capitalist safety net if such a thing can exist.