With the wave of Democratic Socialism sweeping over the left flank of the Democratic Party and the new class of candidates hoping to be seated in Washington in January, yet another debate over the relative merits of socialism is underway. People with very little exposure to actual socialism are either asking questions or, in some cases, eagerly adopting the label of socialist. Of course, this flies in the face of democratic capitalism, the foundation upon which our society has grown and thrived. Who will make sense of it all?
Stepping in to fill the void is Steven Pearlstein, columnist for the Washington Post. Apparently noticing people becoming rather nervous about the prospect of socialism taking over our government, Pearlstein has arrived to calm their fears with a column explaining why capitalism isn’t all it’s cracked up to be. He lays out “Five Myths About Capitalism,” apparently to ease your transition into a socialist lifestyle.
Thirty years ago, in the face of a serious economic challenge from Japan and Europe, the United States embraced a form of free-market capitalism that was less regulated, less equal, more prone to booms and busts. Driving that shift was a set of useful myths about motivation, fairness and economic growth that helped restore American competitiveness. Over time, however, the most radical versions of these ideas have polarized our politics, threatened our prosperity and undermined the moral legitimacy of our system. (A recent survey found that only 42 percent of millennials support capitalism.) Here are five of the most persistent ones.
Here are the five “myths” the Pearlstein sets forth:
- Greed, a natural human instinct, makes markets work
- Corporations must be run to maximize value for shareholders
- Workers’ pay is an objective measure of economic contribution
- Equality of opportunity is all people need to climb the economic ladder
- Making the economy fairer will make it smaller and less prosperous
The word salad the author generates about greed, replete with quotes from Gordon Gekko and Adam Smith, offers little of substance. Greed is neither good nor bad, but rather the natural desire of human beings to survive, thrive and establish security and comfort for themselves and their offspring. People in socialist nations like Venezuela are greedy too, only they rarely get to exhibit it beyond an effort grab the least moldy crust of bread out of the government dumpster before anyone else can snag it.
As to maximizing shareholder value, Pearlstein argues that “corporations are free to balance the interests of shareholders with those of customers, workers or the public.” That’s an obviously true statement, just as it’s equally true that business owners are free to operate their company at a loss if they wish. Of course, when the money runs out they will lose the company. So be it. But the reality is that few people have the resources to launch a major corporation on their own. That means venture capital is required and if the company goes public, shareholders will be involved. How many people are willing to risk putting their retirement savings into a company which delivers a minimal return but explains it away by saying that they’re being very socially conscious? Good luck with that.
The crux of the author’s argument is found in the fourth “myth” he purports to debunk. When it comes to “income inequality” in America, Pearlstein argues that equality of opportunity is a myth. Let’s look at how he explains this away.
But while the United States has made great strides in removing legal barriers to equal opportunity, at least half the difference in income between any two people is determined by their parents, either through inherited traits like intelligence, good looks, ambition and reliability (nature), or through the quality and circumstances of their upbringing and education (nurture). As our society has become more meritocratic, we’ve simply replaced an aristocracy based on title, class, race and gender with a new and equally persistent aristocracy based on genes, education and parenting. Unless we are prepared to engage in extensive genetic reengineering, or require that all children be brought up in state-run boarding schools, we must acknowledge that we can never achieve full equality of opportunity.
If you read that passage carefully, you’ll see that the author is decrying equality of opportunity because the majority of people won’t do as well as those who are born to more fortunate circumstances. This somehow justifies a preference for equality of outcome in the minds of those inclined toward socialism. But it’s also self-defeating thinking. If you start with a pool of people who all have the same opportunity, at the end of the race some will have done better than others. They will naturally pass those advantages down to the next generation. It’s part of the definition of equality of opportunity. By labeling this as some sort of proof of failure, you are simply arguing that equality of opportunity is bad because there was no equality of outcome.
Let me simplify this with one important point: Equality of opportunity and equality of outcome are mutually exclusive. You can have one or the other, but not both.
The two are definitionally opposite. But it also doesn’t mean that those coming from more humble origins don’t still have the opportunity to succeed spectacularly. It’s just harder to do so. And what’s the alternative? Equality of outcome means handing over complete control to the government. It also saps any incentive to achieve from the masses. Why put out additional effort, build businesses, create jobs and bust your butt if the rewards will be taken away and redistributed?
This sort of cheerleading for socialism is spreading like a plague. People need to remember that socialism almost always ends the same way and you need look no further than Venezuela in 2018 to see where that road leads.