Can socialism save capitalism?

Can socialism save capitalism?

Maybe not. But in the United States, capitalism is not about to save itself.

Covid-19 is not slated to disappear, nor are the other serious diseases caused by the novel coronavirus. Moreover, global interconnectivity and climate change are liable to cause further unpredictable and severe stresses to our enterprises and our supply chains. From all indications, we are now at the beginning of a global depression. Each nation will struggle to get back on its feet, cooperating with other nations where possible and competing with them where necessary.

To get through this, we will surely need more direct help to citizens who have lost jobs or are furloughed from them, and to enterprises that have been disrupted. The Chairman of the Federal Reserve has already spoken of this. Unfortunately, the President, his economic advisors, and most of the Republicans in Congress are proceeding on the theory that we can ease ourselves out of this crisis by gradually returning to our old normal. This is clearly inadequate.

But what is the alternative? The political resistance to making further direct payments and loans to sustain our disrupted economy and relieve those who can no longer pay their expenses comes from fear of the political consequences of these steps as much as from the hope that carefully timed re-openings will solve the crisis. That fear takes two forms—fear of exploding the federal deficit, and fear of a drift towards socialism. I can’t address the deficit issue—liberals claim that conservatives are hypocrites for allowing budget-busting tax cuts but balking at increased public spending during times of low inflation, which past experience has shown to yield positive long-term results. Conservatives have some sort of counter-argument that I’m not going to try to describe here. The other fear, of government interference stunting private enterprise, has animated American conservatism for the last forty years. Here again there’s an argument about macroeconomics that is beyond my competence and the scope of this essay.

There is general agreement that the $2 trillion stimulus that Congress passed and the President approved in March was a necessary step (though there is plenty of anger about which businesses got help, and which didn’t). In order to take the next necessary step, however, we’ll need to address the fears that conservatives and some moderates have about the aftermath of large-scale government intervention. Re-normalizing federal and state government regulation of broken markets, instituting a single payer healthcare system, reversing income inequality and combatting racial and ethnic discrimination are currently the defining goals of the Democratic Party. The fears of conservatives and the hopes of liberals need to be put on the table, or we’ll keep talking past one another, accomplishing nothing until next January, when it will be much harder to undo the damage.

Look--America’s democratic socialists and old-school liberals are not hoping for state control of the means of production. The left, broadly, understands that fully state-controlled economies are so inefficient and so prone to corruption as to guarantee misery and loss of freedom. We get that. Are we hell-bent on confiscating large portions of the wealth that savvy investors have built up through careful allocations of capital resources? Well, maybe. While we’re in the process of delivering life support to people and businesses, we’re going to be talking about wealth inequality. Whether and how to address that problem will be part of the conversation. So will endemic racism, and the oppression and demonization of immigrant workers and families.

In March, we hit the pause button on the US economy. Now the situation is different. We need to push reboot. If easing back to normalcy isn’t an option, we’ll have to reconfigure our economy to adapt to new conditions. Analogies to 1932 are justified—back then, we had a Democratic-controlled House, a Republican-controlled Senate and White House, and a similar set of concerns on both sides. Congress and the President worked out a compromise relief plan, The Reconstruction Finance Corporation Act, in January 1932, and a further direct stimulus bill in July. The consensus was that this relief was necessary, but voters ultimately found it insufficient. Roosevelt crushed Hoover in the November election, and Democrats gained a whopping 12 seats in the senate. (I’m reposting Todd Tucker’s April 24 Politico article on 1932 here.)

Democrats see in the present crisis an opportunity to redefine the role of government in American life. If the GOP continues to minimize the scope of the problems we are facing, the right may be heading towards an historic and ignominious defeat.

https://www.politico.com/news/magazine/2020/04/26/what-donald-trump-could-learn-from-herbert-hoover-207034