Socialism, Capitalism, and the Liberal Republic

“Nominal” Capitalism, “Nominal” Democracy

Socialists, like Bernie Sanders and Alexandria Ocasio-Cortez, and Progressives, like Elizabeth Warren, are right about one big thing: Capitalism and democracy, as currently practiced in America, are broken.  I assert, both boldly and baldly, that they are wrong about nearly everything else.

There is a malaise in American Capitalism.  It is not, at least as yet, reflected directly in productivity numbers or unemployment rates, nor is it reflected either in absolute GDP or in its rate of growth.  Economic inequality is a symptom of the malaise, though not necessarily in the ways that many people presume.

Nor is it a malaise merely of Capitalism, itself, for its roots are not in economics, per se, but in the intersection of economics with culture and with governance.  We often presume – and it is a popular topic of conversation on the campaign trail in these times – that many of the problems within our politics and society spring from the corruption and the co-option of government and culture by Capitalism.  But corruption and co-option go both ways: it is as accurate to describe the deleterious effects of government and culture on Capitalism as the other way around.


The everyday Capitalism we experience in modern America often seems far removed from the rosy and idealized version of Capitalism that was presented above.  And our experience of governance often seems similarly far removed from the rosy and idealized version of the liberal republic suggested by the Declaration of Independence and codified into the Constitution.

We now have behind us more than a century of grand “progressive” attempts to use the power of government as a force for Social Good, from the so-called “Progressive Era”, itself, to Franklin Roosevelt’s New Deal, to Lyndon Johnson’s Great Society, to Barack Obama’s recent vision of “Change we can believe in” that brought us the Affordable Care Act.  Certainly, those efforts have been moderated, to one degree or another, by ‘conservative’ resistance.  But, by almost any measure you can imagine, that resistance has proven itself only modestly and sporadically successful, for the expansive transformation in the size and scope of American government over the course of that century truly is extraordinary.  It is hard to argue that the failure of government to achieve idealistic goals for Social Good in the United States has all that much to do with a lack of authority to regulate and to tax: according to an OECD estimate, in 2015 governments at various levels spent nearly 40% of America’s GDP[7], just over $22,000 per person at a time when the officially-declared Federal “poverty-level” income for an American was on the order of half that and the median personal income was only about 40% above it[8]; and it has been estimated that something like 4,300 new laws, and nearly 90,000 new regulations, were added to the ample number already a part of the Federal Register in just the single decade leading up to that spending benchmark[9].

And yet, despite that, those who claim the system is “rigged” against the “common man” have a point.   There is, indeed, an epidemic of misconduct, callousness, and injustice running through our economy and our culture.  And that epidemic is not only abided but, in a surfeit of ways, abetted by an accretion of common business practices, government rules, institutional priorities, perverse cultural incentives, political imperatives, public subsidies, and taxation policies that, though often well-intended, all too frequently serve only to lock into place the privileges of the privileged and to impede the strivings of the dispossessed.

Our versions of Capitalism and of liberal democracy are, in many ways, merely nominal, not actual.  Rent-seeking – the practice of extracting value from someone without returning any value to them in return – is, indeed, rampant and almost always facilitated by some kind of governmental complicity, be it a tax-supported subsidy or a meaningless licensure requirement or a regulatory cartel.  Complex financial systems and their arcane processes often expose subtle defects that allow people to game them into delivering unintended and counter-productive asymmetric consequences; and both the operators of those systems and the regulators who watch over them either ignore those consequences or are inept at forestalling or mitigating them.  Externalities remain unpoliced, allowing some to reap the benefits of their activities while shifting the costs onto others or into the public commons.  Sleazy and duplicitous activities go unpunished because they successfully skirt the edge of legality, or only furtively skulk beyond it, and go unchastised by a community obsessed with rigid adherence to bright-line regulation and the absolute letter of the law.  Businessmen, whole businesses, and entire industries – and far too many “rich” people – behave in publicly disgraceful ways that discredit the very notion of business, the “Free Market”, and wealth, itself.

And, while all of that happens, far too many genuine geographical, historical, and cultural inequities that constrain both social and economic mobility do, indeed, remain unaddressed and stubbornly resistant to change.

Given the enormity of American government, its regulatory reach, and its nominally democratic provenance, how is that possible?

In the first place, the authority to level the playing field can be used just as easily to tilt it one way or another.  For that matter, such authority can, instead, be used to cleave the playing field into a patchwork of isolated hills and valleys and soaring plateaus and plunging chasms, connected by broad stairways accessible to some and only by vague and meandering trails for others, and dotted with pitfalls to trap the unprepared and the unwary.  Authority provides a means to action, but it doesn’t provide its own intrinsic mandate to exercise that means in a useful, intelligent, or ethical manner.

People are really good at finding ways to get around rules that disadvantage them.  People are amazingly adept at finding flaws in economic and social and political structures that allow them to attain greater benefit for lesser cost and at someone else’s expense.  People are as facile at trading in influence and prestige as they are at trading in goods and services.  And even the best-intended and best-designed human systems are corruptible, because they are human.   The greater the potential for cost or benefit a system offers – and the less opportunity there is to escape the powers it exercises when they are applied against you – the more your fortune rises or falls on the decisions of those who run the system and the more imperative there is to attempt such corruption.

Moreover, neither “business” nor “corporation” is a synonym for “Capitalism”.  People conducting business – individual workers and consumers (and politicians) included – are capitalists, not Capitalists, wielders of whatever capital they can bring to bear to the benefit of their own needs and desires, not advocates for an elegantly orthodox and ethical Capitalistic economic system.  Capitalism may not be safe at the hands of government or politics, but it is also not, and has never been, fully safe in the hands of capitalists.  And, in a similar vein and for similar reasons, Democracy is not, and never has been, fully safe in the hands of democrats.

Most important, however, it is actually quite difficult to use laws and punishments to force the great mass of people to behave in ways that are at odds with the received and persistent values of the culture in which they live.  The law may push on culture, but culture pushes back in equal measure.  And, in many ways, ours is not a culture that reinforces the ideals either of a liberal republic or of ethical Capitalism.

Next: A Culture for Democracy…

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