Capitalism vs Socialism: The “Mixed” Economy Has Mixed Everything Up in People’s Minds

by | Feb 7, 2020 | POLITICS

How much of a private business’s profits have been made and earned through making that “better mousetrap” and how much is due to corruption and influence in the political arena. It all seems mixed together in the “mixed” economy.
Photo by Gage Skidmore

Election years tend to polarize people’s views about political parties, proposed social and economic policies, and the candidates running for high governmental office. This presidential election cycle is not only no different, it is far more so.  This shows itself especially in how many younger Americans view the political, economic and social system under which they live.

According to a fairly detailed Gallup public opinion poll released in late November, 60 percent of those surveyed said they, in general, had a “positive” view of capitalism, while only 39 percent had such a positive attitude toward socialism. Not a blockbuster endorsement of the private enterprise system, but still a respectable majority of six out of every ten.

Generational Differences on Socialism’s Attractiveness

But that fades away once the numbers are disaggregated into various age groups. Among Baby Boomers (those 55 and older) capitalism is viewed favorably by 68 percent; that falls to 61 percent among X-Generationers (40 to 54 years of age) and drops even further among Millennials (those 18 to 39 years old) to barely a majority at 51 percent.

On the other hand, while Baby Boomers and X-Generationers express positive views about socialism of only 32 and 39 percent, respectively, 49 percent among those in the Millennial category say they view socialism positively. What is possible is that the generational perception of socialism is partly dependent upon the political times in which people in these categories have lived a good part of their lives. For those 55 and older, many decades of their lives were lived in the shadow of the Cold War, and “socialism” was generally synonymous with the Soviet Union, America’s adversarial Superpower.

But for Millennials, their lives have been spent in the post-Cold War era that followed the demise of the Soviet Union in 1991. The realities of socialism as often shown to be the case behind the “Iron Curtain” during the Cold War era have been rarely or ever seen by or explained to the Millennials in the media, or in school classrooms they attended, or in the popular literature they may have read.

Instead, “socialism” has been presented to this younger generation as a fuzzy and warm, nice and socially just, social system in which everyone would be treated fairly, nobody would not have enough of whatever they needed and wanted, and all the “bad things” of the past and the present would be done away with. Aah! That feels so good. And their teachers have told them that they can self-righteously feel themselves to be on the “right side of history” in wanting that “better world.”

Behind the Political Labels, Most Want More Government

But what if we look behind the labels of being positive or negative about “capitalism” versus “socialism” and inquire about what people want government actually to do in society? In that same survey, Gallup asked a variety of questions relating precisely to the question of what Americans, in general, think government should have among its responsibilities.

The country is almost split down the middle about whether government does too much or too little. The poll found that 49 percent think government is doing too much, while 47 percent hold the opposite view that government is doing too little. But when it comes to specific areas of government intervention and regulation, large numbers want a heavier governmental hand in America.

At the top of the list, 93 percent of those surveyed by Gallop said government needed to protect Americans from “foreign threats;” 82 percent said that only government can build roads and finance scientific research, because the private sector would not have the incentives to do so; 79 percent support government regulation to assure consumer product safety; 71 percent believe government should actively intervene to prevent discrimination; 69 percent want government to be involved in protecting the environment; 68 percent want government to assure that everyone has “adequate” healthcare; 54 percent say its government’s duty to assure that everyone has a job who wants work; 50 percent say that it’s the responsibility of government to provide a minimum standard of living for all Americans; 45 percent consider it to be the job of government to uphold the moral standards of the citizenry (whatever that may mean to different people); and 42 percent want the government to reduce income inequality between “the rich” and “the poor.”

What are among the reasons why people have these policy preferences? According to the Gallup poll, 53 percent of those surveyed believe that business will “harm society” if not regulated by government. And 41 percent think that government acts more fairly and justly toward people than the way private businesses treat those with whom they interact. In addition, almost 30 percent think that government can do things more efficiently than private enterprises.

Yet, at the same time, according to Gallup, 38 percent said that government regulates business and industry too much, 28 percent said that government regulates business and industry too little, while 33 percent thought it was just the “right amount.”

The Human Cost of Building Socialism

Millennials have grown up in an Orwellian ideological “memory hole,” in which the past has been erased or rewritten to fit the “politically correct” present vision and version of the world. This is unfortunate because the last century offered an almost laboratory experiment of the consequences when societies accepted or had imposed on them systems of fairly comprehensive socialist command and control.  From the time that Lenin and his band of murderous Marxists came to power in Russia in November 1917 their stated ideal was to create a bright and beautiful “new world.” The reality was a chamber of horrors.

The noted political scientist, R. J. Rummel (1932-2014) spent his professional career studying the impact of tyranny and war on mankind in the twentieth century. He calculated that upwards of 64 million people may have been killed by the socialist regime in the Soviet Union between 1917 and 1986. In the case of China under Chairman Mao, from the time he came to power in 1949 to his death in 1976, as many as 80 million men, women and children may have perished in the name of a “workers’ paradise” for the Chinese people. Adding up similar human costs in trying to create socialist societies in other countries, the total for the twentieth century is likely to be somewhere between 150-200 million people.

These tens of millions of human beings – innocent and unarmed men, women and children – were killed through execution, torture, starvation and slave labor. At the same time, those who lived and survived in these societies experienced the reality and the failure of socialist central planning.

Private property and free enterprise were done away with. Government nationalized or heavily regulated all agricultural production and industrial manufacturing. What was produced, how and where it was produced, and what its quantities and qualities were, were now determined and dictated by the government’s central planning agencies. From toothpaste to toilet paper, from clothes to canned corn, from housing to medical care, government bureaucracies determined the availability of everything, and to whom it was supplied.

The Poverty of Government Planning

I witnessed this in the last years of the Soviet Union, when I was traveling there on a fairly regular basis as a consultant on economic reforms. The government retail stores in Moscow, the city meant to be the showcase for socialism, either had empty shelves of those goods people really wanted or untouched shelves of shoddy, poor quality goods nobody wanted and wouldn’t buy.

Having long ago abolished private businesses and outlawed the profit motive, there were no incentives for the state managers of the government enterprises to be concerned with or interested in producing and selling what the Russian people actually wanted to buy. They were answerable not to the consumers of the society whose demand for things would determine whether they earned a profit or suffered a loss, like under private enterprise.

No, those state enterprise managers merely had to fulfill the production quotas given to them by the central planning agencies. Meet those, and you kept your job, got a bonus, and had access to special stores and choice vacation resorts supplied to them by the government.

This led to corruption and black markets. Since you often could not get what you needed or wanted through the official government retail stores, you turned to “connections,” with those having access to the things you might want, and got them to supply it to you through illegal bribes or some favor you could do for them through informal off-the-books exchanges for what they could do for you.

The Farce of Civil Liberty Under Socialism

At the same time, since the government was responsible for the producing and supplying of everything in society, this also placed matters of art, literature, music and culture in general at the discretion of the same government planning agencies that were providing shirts, sandwiches, and soap.

The Soviet Constitution spoke of freedom of speech and the press, freedom of religion, and freedom of association. But in reality, the government controlled and restricted all of these, based on its own goals and attempts to limit or prevent any discontent or disagreement with what those in political power set as priorities and plans.

Controlling the supply of paper and the printing presses, the only books, newspapers or magazines published were those planned for and approved by the socialist government leadership. Dissenting or opposing views never were allowed the light of day.

Recording studios for music, and movie and television production facilities were, likewise, under the control and command of the government. The only music, movies and television shows available to people were those the socialist planners considered consistent with a socialist vision and view of a good and healthy society – as decided by the government officials above the central planning bureaucrats.

There was an underground world of forbidden music, books, and films. But getting caught with any of them, as buyer or seller or user, could result inlong-term imprisonment, including to a forced labor camp, or even execution as an “anti-social” black marketeer and “enemy of the people.”

The Dictatorial Dead End of Socialism

Rather than the fair, equitable, and “just” society that socialism as an imaginary dream seemed to many people, its reality was a dismal, dirty, and discouraging world in which human beings had to conform to the dictates of the state and the planners. After all, with the end of private enterprise, the government was left as the only employer in town. Your entire future in terms of career, job, salary, living accommodations, and quality and standard of life was transferred from your own hands to that of those in political power.

This was socialism-in-practice in every country that attempted to fully implement that dream of a world without free enterprise, personal liberty, and freedom of association based on voluntary exchange and trade. It will be no different if the millennial generation gets its wish to live under any future socialism, as well.

Far too many Millennials who think about such things lounge about in an intellectual la-la land of socialist dream-world fantasies. But across the board, large numbers of Americans, at least as reflected in this Gallup opinion poll, want government to do more of the things that entail a widely intervening and highly intrusive political system.

The High Percentage of People Wanting More Government

High percentage numbers saying that government is responsible to protect Americans from foreign threats or to fund infrastructure are not surprising because these have been considered “legitimate” functions of those in political authority practically since the founding of the United States. Traditionally, national defense and “public goods” have been considered to be in the domain of government, so many Americans wanting the government to do such things is not, historically, out-of-step.

The classical liberal, however, may challenge what is or has caused a possible “foreign threat,” which may have been the U.S. government’s own prior foreign interventionist policies. And the free market liberal may also suggest that even roads and bridges, as well as scientific research, have been funded by private enterprise in the past and could do so far better than government in the future. But for most Americans these are, broadly, not controversial policy issues.

But what is disturbing is the high percentages of Americans who desire the government do more of the very things that, say, a hundred years ago, or in some cases even fifty years ago would have been considered outside of the reasonable and legitimate functions of government in a free society.

Even some of those who would declare that they vehemently opposed socialism or socialist-type policies, in fact, support and insist upon an expansion of government activities that were declared and condemned as “socialistic” at an earlier time during the last century. Now calling something “socialist” does not, in itself, prove or disprove its desirability or workability. That must be demonstrated by reason and reality; that is, argumentation and historical experience and evidence.

What makes this difficult for many Americans to understand and analyze, in my view, is that the social and economic system under which we live in the United States (and most other Western countries as well) is neither “capitalist” nor “socialist” in the historical definitions of these two alternatives. Instead, we live in a “mixed economy.” It has elements of both markets and planning, competition and regulation, freedom of choice and paternalistic commands and compulsory redistributions.

How Different Were Things Not Long Ago

“Progressives” and New Deal Democrats and those who followed them for the remainder of the 20th century successfully pushed variations of the socialist critique of free market liberalism that portrayed business as anti-social, competition as “dog-eat-dog,” profits as ill-gotten gains, freedom of choice in the marketplace as another term for corporate manipulation of the “common man” motivated by greed, and government as an impartial umpire, manned by benevolent servants of society that can be trusted to have the knowledge, wisdom and ability to set all bad things right.

On the one hand, most people in a country like the United States look around them and take for granted the constant and continuous improvements in everyday life that surviving market competition brings to the mass of the population on a yearly, monthly, and even daily basis. They expect less costly, better performing, and new and improved goods and services delivered to their doorstep all the time, especially in the new era of online shopping and delivery that does not require any of us to leave the comfort and conveniences of our own homes, if we do not want to.

Some simple examples. When I was a small boy, I was our family’s remote control for the television. My mother would tell me to get up and change the channel on the television set, which usually meant switching between three or five, at the most six channels depending where you lived. Televisions often had “rabbit ears” on top of the television set for picture reception. If the picture was becoming fuzzy or flipping on the screen, I was told to get up and move the antenna around by hand; sometimes the best picture was had if you held the antenna high up over your head while standing on one foot: “Don’t move. The picture is perfect!” A bit of an exaggeration, but not very much.

You wanted to listen to music. You had a vinyl record, either a “single” or a long-playing album. It was great, unless you scratched the record by accident with the playing needle on the record player or played some favorite record over and over again so many times, that it began to wear out with increasing sounds of pops and hisses.

Growing up in New York City as a very young boy, my family would often drive up to the Catskill Mountains in upstate New York to stay for weekends at the summer home of my aunt and uncle. The only problem was that the temperature was usually in the 90s, and in the bumper-to-bumper traffic trying to get up the Henry Hudson Parkway to the George Washington Bridge, the only air conditioner available in the car was to open the windows for a slight breeze, and the windows were rolled down by hand. Cars would often overheat in the slow crawling traffic and then be stuck on the side of the road, waiting for the engine to cool down enough to open the radiator cap and pour in some cold water.

For a while my family lived in a tenement in Hoboken, New Jersey in a small two-bedroom apartment. In summer the only air conditioning was small desktop fans. If the weather was clear at night, you’d climb out of one of the bedroom windows on to the fire escape, and try to sleep outside on an old mattress, hoping for a bit cooler air.

How things Have Changed in One Lifetime

For anyone under 30 years of age, even 40 years of age, all of this must sound like some “other world” from the one they have been living in. Cable and fiber optic streaming of hundreds of channels of niche programing with crystal perfect imagery on the screen; music whenever and wherever you want it on your desktop or laptop computer, or on your tablet or smartphone, with perfect sound at all times through wireless earbuds.

Automobiles that never overheat and always offer the perfect climate control through an electronic system that includes GPS mapping to any destination compared to the old paper travel maps you’d hold in your hand on the steering wheel of the car while trying to look up and watch the road at the same time to avoid crashing into anything.

Homes that are fully computerized as well, so you can cool or heat your house long before you arrive through a smartphone app, including  turning off the security system that you’ve “armed” while being away, and opening the garage door before you even approach the driveway.

My car also already has driverless features, including taking my hands off the steering wheel and the car’s electronics, again, taking over for a couple of minutes before telling me to steer while keeping me in the lane even on turns, and automatically stopping the car if I’ve not manually started breaking in time to avoid a collision with the automobile in front of me.

These are just a few of the more obvious improvements and changes in our daily lives with a few consumer items over the last few decades. The list would be endless with a little reflection and the time to explain the literally hundreds or even thousands of such betterments in the ordinary person’s life.

All of these have been due to the existence and extent of market competition and a fiscal policy environment that had enabled people to save and invest and retain part of the profits their successes may have earned them. Compare all this to the irritations, inconveniences, and wasted time most of us have spent waiting on long lines at U.S. postal branches mailing a package or in the Department of Motor Vehicles renewing our tags or our driver’s license.  And the means and methods by which government services are provided seem to change for the better at a turtle’s pace over the years.

The “Mixed” Economy Has Mixed Everything Up in People’s Minds

But people have been told over and over again through almost every public and educational outlet that business is about greed, exploitation and abuse of consumers and employees. So, all the improvements can seem to have happened in spite of the “evils” and downsides of profit-making enterprise. And if these “good things” have been happening, it must be because an intrusive hand of government prevented the worst of the private sector’s anti-social perversities.

But equally if not more significant in explaining the contradictory and confused thinking about “capitalism” and the market is precisely due to it being a “mixed economy.” Free market-oriented economists, including many Public Choice theorists, have explained the negative impacts and unintended consequences from government interventionist, regulatory, and redistributive policies.

Part of these negative effects have been from privileges, favors, protections and subsidies for interest groups in society that have been successful through lobbying and related activities to get government policies implemented to benefit themselves at others’ expense. Some banks are “too big to fail” in a financial crisis; industries and some firms exist due to subsidies to cover costs they cannot recoup on a freer market; trade protections shelter domestic companies from foreign rivals; domestic regulations limit and hamper the emergence of new competitors from potentially eating away at the market shares of existing private enterprises.

It becomes difficult if not impossible to distinguish and determine how much of a private business’s profits and particular successful enterprisers’ personal wealth have been made and earned through making and marketing that “better mousetrap” and how much is due to corruption and influence in the political arena. It all seems mixed together in the “mixed” economy.

And it is. It is not a free market, but it is not a socialist centrally planned economy. So in the face of the ideological propaganda coming from the “progressives” and, now, the “democratic” socialists, and the hype and hysteria of political campaigning in general, plus that “leftist” bias in the media and the educational establishment, people wonder if it would not all be better if only government regulated a bit more, saw to it that medical matters were managed more by informed and funded bureaucratic agencies, and that jobs and standards of living were guaranteed and taken care of by those in political office, as well.

This overlapping of competitive markets with government-managed markets, with market competition and political controls, with honestly earned market income and profits due to political power and pull, create this schizophrenic set of policy views concerning private enterprise and government regulation and planning of society as reflected in the responses expressed in that Gallup poll.

This makes it imperative, I suggest, that friends of freedom take as one of their primary tasks to clearly and carefully delineate and distinguish their ideal of a truly competitive, free market society from the corrupt and controlled “mixed” economy under which people presently live. Otherwise, the real enemies of free market liberalism will continue to successfully persuade even more people that all the evils and disappointments they face in society is due to what remains of the market and not the extent to which the government has already preempted and compromised what there still is of a free economy.

Made available by the American Institute for Economic Research.

Dr. Richard M. Ebeling is the recently appointed BB&T Distinguished Professor of Ethics and Free Enterprise Leadership at The Citadel. He was formerly professor of Economics at Northwood University, president of The Foundation for Economic Education (2003–2008), was the Ludwig von Mises Professor of Economics at Hillsdale College (1988–2003) in Hillsdale, Michigan, and served as vice president of academic affairs for The Future of Freedom Foundation (1989–2003).

The views expressed above represent those of the author and do not necessarily represent the views of the editors and publishers of Capitalism Magazine. Capitalism Magazine sometimes publishes articles we disagree with because we think the article provides information, or a contrasting point of view, that may be of value to our readers.

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