The Case for Socialism

Posted by Bob Lord

I truly believe that by drilling down just a little into the job numbers and put them next to the assault on unions and the increasing concentration of wealth and income in the top one percent, there’s a strong case to be made that we should be embracing socialism instead of demonizing it.

Start with the job numbers. We were fairly close to what is considered full employment during most of Bush’s presidency. Then, in 2008 – 2009, we hemorrhaged jobs. Since then, we’ve had a fairly anemic recovery and seem to be stuck somewhere in the 8% unemployment range, with many more under-employed or having dropped out of the work force entirely. But that’s an entirely distorted picture of the economy’s ability to produce jobs over that same period. From 2001 through 2006, the construction industry was producing a glut of homes and office and retail space. The effect of the construction industry’s hyperactivity during that period, essentially, was to borrow jobs from the future. Think about it. If the construction industry had not over built during the 2001 – 2006 timeframe, there would have been fewer jobs, not only in construction, but in related industries (mortgage banking and finance, to name a few). Quite obviously, there also would not have been a huge loss of jobs in 2008 – 2009. And, without a glut of homes and office and retail space, there would have been more construction activity over the last few years and, hence, more jobs. But we still wouldn’t be at full employment, or even close.

If you adjust for the artificial shifting of today’s jobs to an earlier period caused by the construction bubble, the jobs picture in America would have been far more stable, but would show that for a full decade we have not been producing enough jobs to employ the entire workforce. That’s not an accident and it’s the fault of neither the Democrats nor the Republicans. The hard reality is that technology and mechanization are fantastic for productivity, but they costs jobs — lots of them. Just a few decades ago, a law office needed almost one secretary per attorney. Today, law offices do just fine with one secretary for every three attorneys, and plenty of attorneys (especially younger ones), don’t need a secretary at all. That’s what happens when you replace typewriters with desktop computers and steno pads with dictation equipment and voice recognition software, and regular mail with email. The global economy also is a reality. Yes, our trade and tax laws suck and, yes, we wouldn’t have lost as many jobs to outsourcing if those laws were better conceived, but we still would have lost jobs and the availability of vastly cheaper labor in other parts of the world will continue to cost us jobs.

The new normal really is that it will be more and more difficult for our economy, as currently structured, to produce jobs for all who want them. Not long ago, Tom Friedman noted in one of his columns a new device in the restaurant industry that ultimately could eliminate most of the jobs currently held by waiters and waitresses. Technology will be used in the near future to enable a highly talented professor to teach tens of thousands of students, instead of just a few hundred at a brick and mortar institution. That may improve education and also decrease the cost of a college degree, but it also will cost a lot of slightly less talented professors their jobs. Changes like these will swamp our ability to create new jobs.

This explains why real wages have been flat or falling for most Americans for a decade. Wages are subject to the laws of supply and demand. If the number or workers increases and the number of jobs decreases, the pressure on wages is downward. Now, consider the impact of the assault on organized labor. The organization of workers essentially is a mechanism to blunt the effect that the laws of supply and demand otherwise would have on wages. Without unions, workers compete more fiercely for jobs by accepting lower wages. Also, the bargaining power of workers is dramatically worse without organization. The decimation of organized labor exaggerates the downward pressure on wages caused by the changed jobs picture over the last decade. So, the decline in wages is the natural outgrowth of economic forces and the assault on labor.

While workers have been losing jobs and losing wages, however, our national income has increased. Productivity and cheap foreign labor are not good for jobs, but they’re great for profits, profits that flow to upper level management and shareholders, otherwise known as the top one percent. So we have more income overall as a country, yet wage earners are making less. The math here isn’t hard. Those at the top have done phenomenally well over the last decade, while everyone else has suffered.

So, do the same forces that explain the change in the jobs picture and the decrease in wages also explain the dramatic increase in the concentration of wealth and income in the top one percent? Only partially. Even without those forces, we need strongly progressive tax laws and well conceived regulation of businesses in order to prevent undue concentration of wealth and income at the top. Of course, over the past decade, we’ve had the opposite. The tax burden on the top has been reduced to the point where many wealthy individuals pay taxes at a lower effective rate than ordinary Americans. At the same time, the deregulation of the finance industry and others effectively allowed ultra wealthy bankers to fleece the public out of the wealth they thought they had in their homes and 401(k) accounts.

Think of it this way. The board game Monopoly channels unfettered capitalism. Wages are represented by the $200 a player gets each time he completes a lap around the board. Capital is of course the money he starts with, plus all the properties he is able to acquire as the game proceeds. The amounts a player pays for stopping on various squares represents the cost of living. Over the course of the game, the value of labor relative to the cost of living declines rapidly. The wages for each lap stay the same, but the cost of completing the lap increase, especially if you land on Boardwalk or Park Place a few times. And capital, of course, is the ultimate winner. In the end, the concentration of wealth at the top is one hundred percent. One player owns everything and all the other players are broke.

In Monopoly, you could at least slow the concentration of wealth in the winning player if each time a rent was paid, the recipient had to pay 50% of it out in equal shares to all the players and each time that player completed a lap around the board he had to pay property tax. The Community Chest and Chance cards attempt to do this, but the rate of tax they impose is akin to the rates that would apply in Mitt Romney’s dream world.

Over the last decade the American economy has become more and more a game of Monopoly. Those with some form of capital (money, property, high intelligence, unusual athletic ability or exceptional looks, etc.) have done increasingly well. The rest of us all have suffered.

All of this can be summed up in one sentence: In the constant struggle between capital and labor, capital has gained a huge advantage that it is unlikely to lose without real changes in policy. On this front, virtually all of today’s politicians are delusional (or, more likely, bought off) in that they exalt capitalism and the so-called market economy. No economy is purely capitalist and no economy is purely socialist. From a policy perspective, when the playing field tilts in favor of labor, capitalist policy makes sense and, when the playing field tilts in favor of capitalism, socialism makes sense.

Right now, because of the relative positions of capital and labor, we need a healthy dose of socialist policy. We need policies that promote the organization of labor, perhaps even mandate it. We need a far more progressive tax code, that will, perish the thought, redistribute wealth and income away from the top. And doing away with the Bush tax cuts won‘t be enough. We need top income tax rates above 50% for those making over a million dollars per year. And the lower income tax rate on capital gains and dividends needs to go. If anything, the income Paris Hilton receives from sitting on her butt waiting for the dividend checks to roll in should be taxed at a higher rate than the income of a steelworker or a secretary. We need federal, state and local governments to create jobs through public works and infrastructure projects and the hiring of sorely needed teachers. We need a truly socialist health care system in which the government guarantees health care for all Americans. Lastly, and most importantly, we need to expand, not contract, the social safety net. It’s flat out ludicrous to cast blame on a worker who has not been able to find employment. If that worker found employment, another worker would be out of a job. So it makes no sense to discontinue unemployment benefits. Instead, we should be encouraging certain workers to leave the workforce by enhancing social security benefits, not reducing them. If we reduce the retirement age to 60, or even 55, but tax the crap out of the benefits if a recipient continues to work, we encourage soon to be geezers to hang it up earlier in life, which frees up jobs for 20 somethings who desperately need to start their careers. Similarly, if we make a quality college education available for any student who has the mind and desire to learn, we free up the jobs those students otherwise would take if the cost of college precludes them from attending. There are countless other policies to "spread the wealth" that ought to be on the table.

There was a time in this country when socialism wasn't demonized. We even had a Socialist Party. It wouldn't be a bad thing if the Socialist Party rose again.