In Essays, Innovation

The evils of socialism threaten the economic freedoms that are synonymous with freedom of speech, free exercise of liberty, and America’s other fundamental rights, according to a speech Nikki Haley made to the Hudson Institute late last month (as reported by George Will, and here’s the full transcript of her remarks).

She’s either mistaken, perhaps blinded by her sincere love of country and principle, or purposefully misleading (like her past references to a “Democrat leadership” that doesn’t exist by that name).

Or a little of both.

Her argument is a mishmosh of ideas but it basically boils down to a false choice: We can have capitalism, and thereby democracy, or socialism, which is really a step toward totalitarianism.

The choice is false on face value: Every democracy on earth embraces and mixes capitalism and socialism. All of them rely on markets in which goods and services as assigned values based on what society has decided to value.

Think about that for a moment. Capitalism doesn’t create anything, it’s a tool that allocates and assigns resources in ways that conform to what its participants value. Like baseball, it’s a rules-based game.

So there is no great global battle between capitalism and socialism…in fact, nearly all of the “socialist” countries Haley derides are simply democracies in which citizens have taken a more active role in asserting their values. Her labels aren’t helpful.

Why doesn’t Ambassador Haley want us to have a debate in America about how our democracy defines and uses our markets, and who gets to participate in making those decisions?

Let’s debate reality, not myths

Again, how capital is valued and where it is parked has no morality or purpose. Markets reflect the values of the voters who participate in those democracies, and allocate prices and purchases thereby. We voters get the outcomes we prefer, or tolerate, not those of some independent, agnostic third-party.

In fact, the idea that any market is truly free is laughable. Here in the US, our government has incentivized everything from nuclear power (Congress absolved utilities from any liability for accidents early in the industry’s history) and fossil fuels (via direct tax credits for oil, and letting coal companies avoid the expenses the market would impose on them for pollution), to real estate speculation (again, tax credits and brilliantly twisted accounting rules that assign value to things that are borrowed, not owned) and healthcare (if you don’t know this one by now you’ve not watched TV for the last decade).

Capitalism doesn’t drive democracy; it’s just a tool to express the changing proclivities of voters. It doesn’t answer questions of value for us, but rather puts our values to work.

That’s how we had functioning markets back in the days when black people were considered three-fifths of human beings and had participatory role other than as ownable property. It’s how markets worked just fine when women didn’t have the right to vote, people starved on the streets when they were too poor or old to care for themselves, and when companies spewed pollution that was considered “external” to any pricing implication.

I happen to agree with her argument that the declarations of “purpose” and capitalism intended to do things other than operate markets and run businesses are utterly silly (especially coming from unlikely places like the Business Roundtable and the zillionaires who gathered at Davos earlier this year).

The call to action for businesses, just like politics, should be for more transparency and honesty in how institutions communicate with their communities of buyers, employers, vendors, etc. If Company X’s stakeholders want it to reduce carbon emissions and sacrifice Y% of profits to do it, then have at it; similarly, if Company Y wants to pollute and its shareholders think it’s a great idea, the market should accurately reflect the cost of those behaviors and price the business accordingly. Everything else is marketing nonsense and, worse, often a lie.

But she looses me with her unfailing belief that some magic of capitalism has or will do it for us.

We need more democracy, not less

Capitalism doesn’t lift people up, democracy does when it evolves and, most importantly, when it involves its citizens.

Only ours has resisted that evolution, evidenced most blatantly by the way her party’s leader almost single-handedly chooses which industries he favors (giving bailouts to farmers because they voted for him), punishes states that he dislikes (like making life difficult for California and New York), cherry picks the companies his government should reward (i.e. contracts for Microsoft over Amazon because he doesn’t like negative coverage from Bezos’ Washington Post), and allows his family to manage for-profit businesses while they maintain direct and constant access to the Oval Office.

More broadly, states in which her party has governing control have been purging voters and making voting harder for those who remain in a cynical effort to keep people out of the political process.

There’s a word for a government that does these types of things — totalitarian, or kleptocratic dictatorship maybe — but like I said earlier, labels aren’t helpful.

Nor is blathering about the myth that every American can overcome any obstacle if they’re plucky enough; in fact, it’s a kick in the shins to millions of Americans who are born facing obstacles they cannot change, like their race or gender orientation, and markets that are seem almost purposefully structured to impede their success. People aren’t free to compete when they are saddled with unavoidable student debt or can’t afford to work as summer interns without pay. Markets aren’t competitive when access to capital is determined by social status more than the quality of ideas.

Nobody in our country is free to realize his or her dreams when some of us live in communities starved of basic social services and the necessities of living (the shocking large number of places without access to healthy drinking water is unacceptable).

Horatio Alger platitudes about failure as the result of some personal moral defect is, well, that kick in the shins.

We have a duty — and incentive — to provide every citizen a real chance to realize their potential; deciding what level of protections and help doing that requires is not a conversation about capitalism or socialism, but of what it means to be an American.

We can and should make markets better.

Some intellectual honesty on the topic would be helpful, but there’s little of that in Ambassador Haley’s threats that the slightest suggestion of “socialism” will crush the Americans’ individualism and personal initiative while sending us down the road hewn by Venezuela and the Soviet Union.

Governing policies aren’t gateway drugs, they’re agreements between voters on what matters to them.

Our electorate has been constantly growing and changing ever since our country was founded, and the issues that matter to us have changing accordingly. The outcomes of spirited and sometimes violent debate have been each generations’ statement of its shared vision of the promise of our country.

Our capitalist markets serve those promises.

Ambassador Haley and her political allies should encourage debate, not present a false choice that is intended to distract and then stifle the conversation.

PS: It’s Democratic Party, unless she wants to rename the Republic Party, too. Or is that another false choice?

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