Financial Bailouts: Is the U.S. on the Road to Socialism? (Part 1)

All nation-states reside somewhere on the continuum between laissez-faire and total-state central planning. No country is completely capitalist and no country (with the possible exception of North Korea) is entirely socialist. So how are we to define roughly “capitalist” and “socialist” countries? Where is the dividing line? How do we know if we are still a capitalist country?

Ludwig von Mises said the difference between a roughly capitalist country and roughly socialist one was a functioning stock market. In a socialist country, Mises said a market simply could not function. With the recent unprecedented interventions into the economy, the stock market isn’t functioning. Is this a temporary setback or have we passed a crucial threshold into socialism?

In this first of a two-part blog series, I will examine how the American system compares to the 10 planks of Karl Marx’s Communist Manifesto . According to Marx, these were the ten preconditions a country needed to meet before transitioning from capitalism to socialism.

1. Abolition of property in land and application of all rents of land to public purposes.

We still use the term “real estate,” which is derived from the historic “royal estate,” meaning that royalty (the government) was the true owner of all lands. Although the U.S. has a noble history of homesteading and laissez-faire, we now impose property taxes on the supposedly private property of individuals and evict them if they don’t pay. That sounds an awful lot like the rent system of feudalism and Marx’s manifesto.

Eminent domain further calls into question whether people really own their land. The Constitution, itself a step away from the comparative laissez-faire of the Articles of Confederation, gave the federal government the authority to seize private property for public purposes. Now, thanks to the Supreme Court’s Kelo Decision, government at all levels can take “your” land and give it to Wal-Mart for the “public purpose” of “economic development.”

2. A heavy progressive or graduated income tax.

Although the top marginal tax rates have dropped considerably from the peaks above 90%, the graduated income tax is a staple of the U.S. economic order. Barack Obama would raise taxes on the wealthiest, making the tax code more “progressive,” but John McCain wouldn’t undo the progressivism of the code: it’s here to stay.

3. Abolition of all right of inheritance.

We still have the right to transfer property upon our deaths, but that right is subject to taxation. Still, not “all rights” of inheritance have been abolished, so I guess we fail to meet Marx’s third condition.

4. Confiscation of the property of all emigrants and rebels.

We don’t quite meet the grade here, either. No one dare act in open rebellion to the all-powerful federal government — we haven’t had any “rebels” since the War Between the States, in which the North followed Marx’s prescription and confiscated the property of rebels. Marx, it is said, was an admirer of Lincoln.

5. Centralization of credit in the hands of the State, by means of a national bank with State capital and an exclusive monopoly.

There’s no ambiguity whatsoever here: we have exactly the system Marx envisioned in the Communist Manifesto. And what’s more, there’s literally no disagreement on the matter between the nation’s dominant political parties.

Credit is centralized in the hands of the Federal Reserve, the country’s national bank. The Federal Reserve System acts as a cartel with an exclusive monopoly on credit and money creation. Thus, the government can easily fund pseudo-Marxist schemes via its printing presses — which has allowed it to cut back on Marx’s heavy progressive tax code. Even Marx could not have imagined the willingness with which people all over the world trade real goods and services for essentially worthless paper notes. In this area, we’ve out-Marxed Marx!

Next time, I’ll look at the remaining five planks:

  • Centralization of the means of communication and transport in the hands of the State.
  • Extension of factories and instruments of production owned by the State; the bringing into cultivation of waste-lands; and the improvement of the soil generally in accordance with a common plan.
  • Equal liability of all to labour. Establishment of industrial armies, especially for agriculture.
  • Combination of agriculture with manufacturing industries; gradual abolition of the distinction between town and country, by a more equable distribution of the population over the country.
  • Free education for all children in public schools. Abolition of children’s factory labour in its present form. Combination of education with industrial production.

2 comments to Financial Bailouts: Is the U.S. on the Road to Socialism? (Part 1)

  • Even in a purely capitalist economy, the government cannot be a mute bystander to a crisis. The government is duty bound to act in a crisis.

  • New York

    * Socialism = Preventing Race to the Bottom
    * Capitalism = Promoting Race to the Top

    We need BOTH Socialism and Capitalism (either implicitly or indirectly) to build and sustain a great Nation.

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