Socialism and the White House

The Trump White House research team have issued a very strange report.  It’s called “The Opportunity Costs of Socialism,”.  It purports to prove that ‘socialism’ and ‘socialist’ policies would be damaging to Americans because the ‘opportunity costs’ of socialism compared to capitalism are so much higher.

What is strange and rather amusing is that the White House advisers to Trump deem it necessary to explain to Americans the failures of ‘socialism’ in 2018.  But when you delve into the report, it becomes clear that what is worrying the Trumpists is not ‘socialism’, but the policies of left Democrat Bernie Sanders for higher taxes on the rich 1% and the increased popularity of a ‘single-payer’ national health service for all.  The popularity of these policies threatens the Republican majority in Congress and also the wealth and income of big pharma corporations and Trump’s billionaire supporters.

What the White House means by socialism is apparently a national economy that is dominated and controlled by the state rather than the market. “Whether a country or industry is socialist is a question of the degree to which (a) the means of production, distribution, and exchange are owned or regulated by the state; and (b) the state uses its control to distribute the economic output without regard for final consumers’ willingness to pay or exchange (i.e., giving resources away “for free”).”

So the report has a wide and all-encompassing definition of ‘socialism’ that includes Maoist China (but not modern China it seems), the Soviet Union, Cuba and Venezuela and the Nordic ‘social democratic’ states.  The latter are bunched together with the former because Sanders lauds the latter and not the former.  Naturally this raises the question of whether any of these countries can be called ‘socialist’ ie a peasant-dominated Soviet Union in 1920 or China in 1950; or the family-owned corporate dominated economies of Sweden, Denmark and Norway.

The White House definition is not socialism or communism as proclaimed by Marx and Engels in the Communist Manifesto.  For them, Communism is a super-abundant society with no role for a state but only for the free association of individuals in common action and ownership of the products of labour.  Of course, such a world system does not exist and so cannot be compared with capitalism.  Instead, in effect, the White House is really trying to compare a planned national economy with a capitalist-dominated national market economy. But we should not be too harsh on the White House researchers: they are not going to know what socialism is; and their definition (that they got from the dictionary, apparently) is probably most people’s view.

Leaving that aside, what is wrong with all these ‘socialist’ states?  Well, “they provide little material incentive for production and innovation and, by distributing goods and services for free, prevent prices from revealing economically important information about costs and consumer needs and wants.”  In Maoist China and Stalinist Russia “their non-democratic governments seized control of farming, promising to make food more abundant. The result was substantially less food production and tens of millions of deaths by starvation.”  Thus socialism was a disaster.

From their definition, the White House report concludes: “The historical evidence suggests that the socialist program for the U.S. would make shortages, or otherwise degrade quality, of whatever product or service is put under a public monopoly. The pace of innovation would slow, and living standards generally would be lower. These are the opportunity costs of socialism from a modern American perspective.”

The White House report also claims that “replacing U.S. policies with highly socialist policies, such as Venezuela’s, would reduce real GDP at least 40 percent in the long run, or about $24,000 per year for the average person.”  And replacing the current US tax regime with that of the Nordic countries would increase the tax burden on Americans by $2,000 to $5,000 more per year net of transfers. “We estimate that if the United States were to adopt these policies, its real GDP would decline by at least 19 percent in the long run, or about $11,000 per year for the average person.”

The first argument of the White House report is that living standards are higher in the US compared to the ‘socialist’ Nordic states.  A most hilarious case study is presented for this claim: the cost of buying a pick-up truck in Texas compared to the cost in Scandinavia!

Well, a pick-up truck may be much more useful in Texas than Stockholm and, given that taxes on vehicles are lower in the US and fuel taxes are substantially lower, the argument that a pick-up truck costs much less than in the Nordic countries is irrefutable!  But does the more expensive truck in Norway compared to Texas prove that there is a higher ‘opportunity cost’ of living in ‘socialist’ Norway?  What about public transport, public services, health and education, unemployment and welfare benefits – things that the richer part of any capitalist country does not need or use as a ‘social wage’?  These things are not compared by the White House report.

The report points out that real GDP per capita is higher in the US than in the Scandinavian economies and in the non-oil part of Norway.  The data show this is true.  But all this shows is that Northern Europe started at a lower level when Marx wrote the Communist Manifesto.  Actually, if we look at real GDP growth per capita since 1960 (when Americans are told that they live in the greatest place on earth), US growth has fallen behind the most Nordic economies and for that matter, most European economies.  Indeed, since the early 1990s, real GDP per capita growth has been faster in Sweden than in the US.

And as for China, the growth rate has outstripped that of the US many times over since the 1990s, taking 800m people out of World Bank defined poverty.  No doubt the White House researchers would argue (although they don’t) that China turned ‘capitalist’ in the 1980s and this is why the economy has rocketed.  But this would be inconsistent with their view that a ‘socialist’ state is one where the state dominates and controls the free market economy.  For China must be the most state-directed major economy in the world, way more that the so-called ‘mixed economies’ of the Nordic countries.

Overall income is one thing but the distribution of that income is another.  Here the White House has to admit that “though the Nordic economies exhibit lower output and consumption per capita, they also exhibit lower levels of relative income inequality as conventionally measured.”  What is interesting here is that the US still has much higher inequality of wealth and income, but Nordic inequality has also risen much in the last 30 years as governments there adopted pro-business polices of reducing corporation and personal taxes (ie pro-market policies).

Indeed, as the White House report says, on some measures, the Nordic tax system is more accommodating to the top 10% than the US system – at least for personal tax: Lower personal income tax progressivity in the Nordic countries, combined with lower taxation on capital and on average only modestly higher marginal personal income tax rates on the right tail of the income distribution, means that a core feature of the Nordic tax model is higher tax rates on average and near-average income workers and their families. That is, contrary to the misperceptions of American proponents of Nordic-style democratic socialism, the Nordic model of taxation relies heavily not on imposing punitive rates on high-income households but rather on imposing high rates on households in the middle of the income distribution.”

This may be an attack on Sanders’ praise for the Nordic economies, but it seems to me that it proves how far away the Nordic states are now from ‘social democracy’, let alone ‘socialism’.  On the one hand, the White House report claims that ‘socialist’ states want to tax the rich harder (a la Sanders) but in reality they tax them less hard than in the US!

Of course, this is all smoke and mirrors.  All the data on inequality of wealth and income in the major advanced economies show that the US is the most unequal, both before and after tax; and that real disposable incomes for the average American family have hardly risen in 30 years while the top 1% have seen substantial rises.

The share of wealth held by the top 1% of earners in the US doubled from 10% to 20% between 1980 and 2016, while the bottom 50% fell from 20% to 13% in the same period.

But the main part of the White House report is to argue that privately-funded education and healthcare is more cost-effective than publicly-funded state schools or a national health service.  The report argues that paying for a US college education will bring a much bigger return in future earnings than it will in Norway, where there are no college fees.  What this implies, however, is that people in the US without higher education qualifications have no chance of earning decent incomes, while those without degrees in Norway do not earn much less than those that do!  So actually the opportunity cost of not having a college education in Norway is much lower.

Then there is healthcare.  According to the White House, ‘single payer’ health systems, as applied in nearly all advanced economies, are not as efficient and beneficial to health as America’s free market insurance company schemes, especially if Obama-care is excluded.  The proof? Well, old people in the US have to wait less time to be seen by a specialist than in single-payer systems, says the report.

Actually, American ‘seniors’ mostly receive Medicare, so they are on a single payer scheme when they get to see a specialist!

All healthcare systems are under pressure as people live longer and develop more illnesses in later life.  And they are under pressure because healthcare is not funded sufficiently compared to defence, business subsidies and tax cuts.  This applies to the US system too.

And if we look at an overall comparison of the efficacy of healthcare systems, the US scores badly.  The US health-care system is one of the least-efficient in the world.  America was 34th out of 50 countries in 2017, according to a Bloomberg index that assesses life expectancy, health-care spending per capita and relative spending as a share of gross domestic product.  “Socialist” Sweden is 8th and “Socialist” Norway is 11th.

Life-expectancy is a way of measuring how well, overall, a country’s medical system is working, which is why it is used in the index.  In the US, health expenditure averaged $9,403 per person, or a whopping 17.1% of GDP and yet life expectancy was only 78.9.  Cuba and the Czech Republic — with life expectancy closest to the US at 79.4 and 78.3 years — spent much less on health care: $817 and $1,379 per capita respectively. Switzerland and Norway, the only countries with  higher per capita spending than the US — $9,674 and $9,522 — had longer life expectancy, averaging 82.3 years.  Why? Well, the US system “tends to be more fragmented, less organized and coordinated, and that’s likely to lead to inefficiency,” said Paul Ginsburg, a professor at the University of Southern California and director of the Center for Health Policy at the Brookings Institution in Washington.

So the opportunity costs for the average American seem to be higher at least for basic public services like health and education than for the average Nordic ‘socialist’.

15 thoughts on “Socialism and the White House

  1. ” Naturally this raises the question of whether any of these countries can be called ‘socialist’ ie a peasant-dominated Soviet Union in 1920 or China in 1950; ” Why not? What does peasant dominated mean, anyway?

    ”The White House definition is not socialism or communism as proclaimed by Marx and Engels in the Communist Manifesto. For them, Communism is a super-abundant society with no role for a state but only for the free association of individuals in common action and ownership of the products of labour. ” Where do they say ‘super-abundant’? What does ‘super-abundant’ mean, anyway?

    ”The result was substantially less food production and tens of millions of deaths by starvation.” This is an outrageous lie. Quite the opposite is true, anyway!

    1. Assata Shakur on anti-communism :
      ” I wasn’t against communism, but i can’t say i was for it either. At first, i viewed it suspiciously, as some kind of white man’s concoction, until i read works by African revolutionaries and studied the African liberation movements. Revolutionaries in Africa understood that the question of African liberation was not just a question of race, that even if they managed to get rid of the white colonialists, if they didn’t rid themselves of the capitalistic economic structure, the white colonialists would simply be replaced by Black neocolonialists. there was not a single liberation movement in Africa that was not fighting for socialism.
      The whole thing boiled down to a simple equation: anything that has any kind of value is made, mined, grown, produced, and processed by working people. So why shouldn’t working people collectively own that wealth? Why shouldn’t working people own and control their own resources? Capitalism meant that rich businessmen owned the wealth, while socialism meant that the people who made the wealth owned it.
      I got into heated arguments with sisters or brothers who claimed that the oppression of Black people was only a question of race. I argued that there were Black oppressors as well as white ones. That’s why you’ve got Blacks who support Nixon or Reagan or other conservatives. Black folks with money have always tended to support candidates who they believed would protect their financial interests. As far as i was concerned, it didn’t take too much brains to figure out that Black people are oppressed because of class as well as race, because we are poor and because we are Black.
      [Earlier in my life] When someone asked me what communism was, i opened my mouth to answer, then realized i didn’t have the faintest idea. My image of a communist came from a cartoon. It was a spy with a black trench coat and a black hat pulled down over his face, slinking around corners.
      I never forgot that day. We’re taught at such an early age to be against the communists, yet most of us don’t have the faintest idea what communism is. Only a fool lets somebody else tell him who his enemy is… It’s got to be one of the most basic principles of living: always decide who your enemies are for yourself, and never let your enemies choose your enemies for you.”

  2. ” Thanks for examining this issue. And as a Chinese who was born around that time and followed this debate in Chinese forums and social media since the very beginning, I totally agree with your analysis.

    I believe the death toll of the famine from 1959 to 1962 has been greatly exaggerated by pro-Western and anti-Mao intellectuals in China. The 30 million death toll number (the lower estimation number by those who tried to discredit and demonize Mao) has been controversial in Chinese social media and BBS since the very first day it was made up and circulated in Chinese language forums. The estimation was first made by a Chinese journalist who doesn’t have any formal math training beyond high school level. Many people don’t agree with this number not only because the all of the estimation methods used are questionable, but also the number doesn’t conform to people’s life experience of that time.

    For example, 30 million would count as about 5% of total population of that time, together with normal death rate of the period(between 1-1.2% annually), there should be about 8% death of population in three years, which means one death in every 13 people. But most people in Chinese forums debating this number couldn’t tell anybody they personally know of died during that period, not to mention starve to death, even most of those who ardently argue for this number couldn’t tell. I have over hundred relatives across China, none of them died during those years. My father was a mid-level official at time (building and managing a new factory) in Beijing with relative high salary, the food ration was so little for him that he had edema; still he voluntarily reduced his own salary to help country go through this period, like many communist cadres did at the time. My mother was a student at an elite college. She told me her period stop due to malnutrition, so did many of her female school mates. Even with so little food for them, my mother and her female classmates shared their food ration with their male classmates. This is widely happened and what we heard the most from people who went through that time, not the death.

    In past ten year, and special since Wechat got popular in China, I asked many people how many relatives or people they personally know of died during those year. In my college Wechat group (about 120 people), only one person from poorest province said several of his closed relatives dead, another from one of hardest hit province said his old grandma dead. In my high school classmate group, only one person said his grandmother died, another said that there were death in his home village including two of his relatives, but he didn’t give total number of his relatives in the village so I couldn’t tell if that exceed 5%(in rural China, people usually have large extended family).

    Over the years, I also asked the same question to several maids of my aging relatives in Beijing. Those maids are all from poor rural countryside in China, only one from a poorest province said her grandparents dead during those three years.

    My aunt was sent from Beijing to rural countryside in Henan province (one of the hardest hit province by the famine) to help, she told me that she only heard of people starved to death, didn’t witness any.”

    Interesting to read what Chinese Marxists say. The above is what is called primary evidence.

  3. This is what we are up against:
    ”Castroism and the Politics of Petty-Bourgeois Nationalism
    By Bill Vann” Taken from today’s ”Worldwide Socialist Web” as a reason for the rising popularity of fascistic politics! The so-called failures of Cuba!

  4. Nothing much to add to this post: the paper is failure for the simple fact the categories it uses are failed. The analysis is failed by design.

    There are, though, two important topics that must be cleared:

    This excerpt

    “The result was substantially less food production and tens of millions of deaths by starvation [in the USSR and China]”

    is false.

    First: there was no one to count at the time those alleged episodes happened. Later historians — mainly Western ones — extrapolate data from expected births and deaths from later decades to infer how many died at the alleged mass starvation.

    In the case of the USSR, the most infamous number — 30 million dead — by a later Polish historian, came from an absurd Census extrapolations: based on how many Soviets he expected to be born, he came to this conclusion.

    The alleged mass famine during Mao’s Great Leap Forward comes from simple extrapolations on expected death rates of the later decades by end of the century historians, and is well debunked by Minqi Li’s “The Rise of China” (2008).

  5. It strikes me as if the elites are becoming increasing aware the masses aren’t buying into the economic narrative anymore. I’m afraid they may resort to more draconian measures.

  6. I think these comments miss the point. It is not about Cuba, the USSR or China, but the USA itself. This is a defensive reaction by Congress. The majority of the under 50s in the USA oppose capitalism. Why? Median wages have fallen 15% since 1973. 49% of the population subsist on $30,000 a year marginally above the poverty level of around $29,000. The USA and I should add Britain now shares the dubious distinction together with Afghanistan, Georgia, Iraq, and Somalia of having a falling lifespan. These are the material conditions, the historical arena in which this debate is occurring.

    In any case capitalism has killed far, far more people both absolutely and relatively. The single biggest loss of life in history being in India during the 1870’s due to Britain’s changed agrarian policies there. No one hears about it of course.

    What the publication highlights is that as the ideological struggle heats up they will dredge up the Soviet Union whose rebuttal requires a lot more than referencing the Critique of the Gotha programme. It requires an application of Marx’s method and its further development in order to examine the fundamentally flawed mode of production that prevailed in the USSR.

      1. We cannot know precisely how Marx would have responded to the system eventually put in place by the Bolsheviks, but I think we can say with some certainty that he would have examined the historical conditions within which the Revolution had taken place: unrelenting economic and military aggression by the dominant, liberal, imperial powers (but culminating in the Nazi invasion) against the social order the Bolsheviks created within these historic conditions.

        To say without serious qualification that Marx would have “criticized …the Soviet System” would be to trivialize (in English and German) both Marx and Russian Revolution.

      2. Correction: in the first sentence above, I state that “he [Marx] would have examined the historical conditions within which the Revolution and taken place,” when I meant to refer to “the historical conditions within which the Soviet system had to evolve.” Putting things the way I did creates confusion and redundancy.

        Of course, these historical conditions would not have come into being if the Bolsheviks had abandoned the insurrectionary peasants and soldiers to the tender mercies of the liberal imperial powers within and without Russia.

        In a sense, the unqualified critique by “marxists” of the “Soviet System”, amounts to a condemnation of the Bolshevik’s assuming power in the first place. Many “marxists” and ex-marxists (some maybe having contributed to the bs in the Congressional critique of “socialism”) take that position.

        Marx himself believed that Russia was ripe for Revolution and the possibility of it’s escaping the miseries of capitalist primal accumulation … with or without social democratic support. The socialist movement was still strong enough for him not to foresee active, social democratic hostility to the revolution. Neither did the Bolsheviks, nor could they, and act responsibly as revolutionaries.

    1. ”What Marx would have criticized about the Soviet system.” That’s easy; the point is what to do differently? ”petite bourgeois nationalism” is a substitute for real theoretical analysis.

  7. ”Anstatt dass sich aber sowjetische Industrie und Landwirtschaft aufeinander zu entwickelten, wie es von Marx und Engels empfohlen und prognostiziert worden ist, entwickelten sie sich in der Sowjetunion auseinander und die sowjetische Landwirtschaft wurde dadurch immer mehr zum wirtschaftlichen Bleigewicht.”

    I only quickly read through the part on agriculture. Here is the conclusion:

    ”Instead of Soviet industry and agriculture, however, developing together, as Marx and Engels advised and predicted ( sic) , they developed in the Soviet Union separately and Soviet agriculture consequently became ever more a lead weight.”

    In short a hackneyed conclusion that tells us nothing. Moreover, 11 of the 35 references are to one work by the anti- communist writer A. Nove! For a more balanced and original analysis cf ”From Farm to Factory”(R.C.Allen 2003). As I say, criticism is easy, but we require alternatives. Cliches will get us nowhere.

  8. “China must be the most state-directed major economy in the world.” The economy is not directed by the state. The various capitalist groups of the country each have ties with selected officials, and vice versa. Investment is not allocated according to a unified plan; the capitalist groups fight by economic and political means for loans, government contracts, regulations, and directives that favor their particular interests.

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