In the third part of Alan Woods’ reply to Trump’s advisers’ so-called empirical critique of socialism, he addresses their gross mischaracterization of the Nordic economies, Venezuela and the USSR. Alan also refutes the accusation that socialism will inevitably lead to food shortages and economic ruin; and responds to the falsehood that socialists want to “nationalize everything.”
Although they are sometimes cited as more relevant socialist success stories, the experiences of the Nordic countries also support the conclusion that socialism reduces living standards. In many respects, the Nordic countries’ policies now differ significantly from what economists have in mind when they think of socialism. For instance, they do not provide healthcare for “free;” Nordic healthcare financing includes substantial cost sharing. Marginal labor income tax rates in the Nordic countries today are only somewhat higher than in the United States, and Nordic taxation overall is surprisingly less progressive than US taxes. The Nordic countries also tax capital income less and regulate product markets less than the United States does. However, the Nordic countries do regulate and tax labor markets somewhat more; thus, American families earning the average wage would be taxed $2,000 to $5,000 more per year net of transfers if the United States had current Nordic policies. Living standards in the Nordic countries are at least 15% lower than in the United States.
It may well be that American socialists are envisioning moving our policies to align with those of the Nordic countries in the 1970s, when their policies were more in line with economists’ traditional definition of socialism. We estimate that if the United States were to adopt these policies, its real GDP would decline by at least 19% in the long run, or about $11,000 per year for the average person.
This document, which masquerades as a piece of independent, scientific and “empirical” research, is no such thing. The authors have carefully selected pieces of “evidence” in order to show that socialism is a “bad idea.” In reality, however, the very fact that they felt compelled to produce such a document, shows that they are worried about the growing interest in socialism.
Under the pressure of the working class and the labor movement, the capitalist class of certain countries has carried through certain measures in the interest of the workers, such as public health services. That was the case in the Nordic countries in the decades of economic upswing after World War II.
At that time, the capitalists could afford it. But the crisis of capitalism has hit Scandinavia as hard as everyone else, and instead of reforms, we now see cuts and austerity measures. As is stated in the document, it is not true that healthcare is provided as a “free” gift of the state in most Nordic countries. Health care is only free in Denmark. In Norway, Sweden and Finland, it costs money, although there is only a nominal charge of $25–$76, which is intended to deter overuse. But this would be considered an enormous advance by most American workers, compared to the prohibitive costs of healthcare in the States.
The dismissive attitude of the authors of the document towards Scandinavia, in any case, is very dishonest. They attempt to present living standards in the USA as superior to the Nordic countries. This is profoundly misleading. Although these countries are very far from being socialist, they are ahead of the USA in many respects, thanks to the conquests made by the labor movement in the past.
The Human Development Index, which includes things such as life expectancy, places the US at number 13 in the world, while Finland is 15. But Denmark 11, Sweden is 7, Iceland is 6, and Norway is number one. Sweden, Norway, Iceland, Denmark and Finland all have a higher life expectancy than the USA.
What is very clear is that Nordic workers have more benefits, such as healthcare, education, and housing regulation. And although the average wage in the US is high, that masks the fact that it is very unequal, with low-paid workers having very little money compared to their Nordic counterparts. In addition, US workers have to work many more hours, or have more than one job, to stay afloat.
But let’s not get too starry eyed about the so-called Swedish model of “socialism.” The countries of Scandinavia, like all the other European countries, have nothing to do with socialism. They are fundamentally based on private ownership of the means of production and function according to the laws of the free market economy. Certain consequences inevitably flow from this fact.
The welfare state, particularly in Sweden but also in the other Nordic countries, has been severely cut back since the mid 80s. That includes making taxation less progressive and ending subsidies of dental care, etc. Income inequality has also increased dramatically. The Gini coefficient (which measures inequality) in Sweden rose from 0.2 in 1980 to 0.33 in 2013. Homelessness, mental health, stress at work, etc. have become serious problems.
In other words, Scandinavia has joined the rest of the capitalist world in a rapid and never-ending race to the bottom. And this has nothing whatsoever to do with socialism.
Relentlessly pursuing their vendetta against Scandinavia—and any other country that shows the slightest leaning in the direction of “socialism”—the document continues:
The Nordic and European versions of socialized medicine have been viewed as so desirable by modern US socialists that they have proposed nationalizing payments for the healthcare sector (which makes up more than a sixth of the US economy) through the recent “Medicare for All” proposal. This policy would distribute healthcare for “free” (i.e., without cost sharing) through a monopoly government health insurer that would centrally set all prices paid to suppliers such as doctors and hospitals. We find that if this policy were financed out of current Federal spending without borrowing or tax increases, then more than half the entire existing Federal budget would need to be cut. Or if it were financed through higher taxes, GDP would fall by 9%, or about $7,000 per person in 2022, due to high tax rates that would reduce incentives to supply the factors of production. Evidence on the productivity and effectiveness of single-payer systems suggests that “Medicare for All” would reduce both short- and long-run longevity and health despite increasing somewhat the population with health insurance.
It would appear that the whole of the American Right views the very idea of a free public health service like something out of a horror movie. The very mention of it is sufficient to send good Republicans reaching for their Colt .45s. If the capitalists could bottle the air they would charge us to breathe! Yet a public health service is considered by the overwhelming majority of Europeans—not just in Scandinavia—as a fundamental precondition for a civilized life.
The CEA carefully avoids mentioning the exorbitant profits of the big pharmaceutical companies and HMOs in the USA. They never mention the terrible misery suffered by those millions of Americans without healthcare. They try to conceal the facts by generalizing everything, citing GDP averages and income per capita, instead of looking at the class basis of the unequal distribution of wealth in America. The lack of a decent system of public health remains a gaping hole that disfigures American society.
The authors of the document paint a frightening picture of a monster state crushing American citizens under a mountain of taxation. But if we are to finance decent public services, an adequate level of taxation is clearly necessary. The question is: who should pay the bill?
We have already pointed out that in America, as in every other country, the rich do not pay much in taxes. Almost the entire burden of taxation is placed on the shoulders of the working class and small businesses. That is why the Republican battle cry of “no taxes!” gets a certain amount of sympathy from the public. But there is no reason why taxes should hit the poor harder than the rich.
The very notion that the richest country on earth cannot afford to look after the health and welfare of its citizens is an affront to their intelligence. The question is not whether America can afford to provide good healthcare. The question is: can America afford not to do so? Quite apart from the human cost in suffering, pain and death, there is a very high economic price to be paid for neglecting the health of the population in lost hours, days, weeks and years of labor.
Good healthcare should not be a luxury available only to people on high incomes. It is a necessary investment in the future of society. The American Declaration of Independence put forward the idea that life, liberty and the pursuit of happiness are inalienable human rights. But how can human life be protected if there is no guarantee that the health of the human species will be maintained? And what does the pursuit of happiness amount to if men and women are constantly dogged by the fear of illness or healthcare-related financial ruin?
Freedom from fear is surely also an inalienable right. And it is a condemnation of the priorities of US society today that it places more stress on the right to make profits than it does on the preservation of the health of its citizens. We are in favor of taxing the wealthy and nationalizing the healthcare sector in order to pay for free healthcare for all. For a start, all indirect taxation should be abolished as unjust and falling on the shoulders of the people who can least afford it. Instead, this should be a heavily progressive income tax imposed on the people who can most afford to pay—the rich.
The defenders of capitalism have been using the scarecrow of Stalinism to frighten people away from the idea of socialism, just as parents try to frighten their naughty children by referring them to the bogeyman. The people of America are not little children, and are not so easily frightened as perhaps they used to be. But that does not stop the defenders of capitalism from dragging in the bogeyman at every available opportunity:
We begin our investigation by looking closely at the most highly socialist cases, which are typically agricultural economies, such as Maoist China, Cuba, and the Union of Soviet Socialist Republics (USSR). Their nondemocratic 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.
Is it really true that the nationalized economy in the Soviet Union never produced anything except a collapse in production and living standards? Let us look at the facts. In 1917, tsarist Russia was a tremendously backward country. In many ways, it was more backward than Pakistan today. Before 1917 there were only around four million industrial workers in a country of 150 million, mostly-illiterate people. In other words, tsarist Russia was substantially more backward than Bolivia or Peru are today. So how did it go from being an extremely backward country to becoming the world’s second power after the United States?
The truth is that the Soviet Union’s transformation is one of the most remarkable phenomena in world history. For all the bourgeois lying, twisting and slandering to try at all costs to underrate and deny the Soviets’ impressive accomplishments, this transformation—with no historical precedent—highlights the superiority of the nationalized planned economy over capitalist anarchy.
In a couple of decades, the Soviet Union built a powerful industrial base, which paved the way for educational, scientific and cultural progress. No less important were their breakthroughs in healthcare and medical science. World War II revealed the Soviet Union’s massive superiority in the military field. The war in Europe was reduced to a titanic struggle between the USSR and Hitler’s Germany, supported by resources seized from all over Europe. Both the Americans and the British were mere spectators up to the last minute.
After the war, and despite the loss of 27 million of its citizens—half the total number of casualties worldwide—and the destruction of most of its productive forces, so painstakingly created by the Soviet working class, the Soviet Union managed to rebuild its economy in just a few years. In the 1950s and 1960s, the US Central Intelligence Agency admitted the Soviets had a definite edge in many fields, including space exploration.
In the last analysis, the bureaucracy undermined and destroyed the nationalized planned economy. The great Russian Marxist, Leon Trotsky, explained that a nationalized planned economy needs democracy as much as the human body needs oxygen. It goes without saying that Trotsky wasn’t talking about the caricature of democracy that exists in the West, where a small minority of wealthy parasites own the land, the banks and the monopolies. He was talking about the real, Soviet democracy established in Russia after the victory in 1917.
What failed in the Soviet Union was neither socialism nor communism, but a bureaucratic, totalitarian caricature of socialism.
To the enemies of socialism, the collapse of the Soviet Union is the ultimate proof that Marxism failed and socialism is impossible. They spoke about the end of socialism and communism, and even the end of history itself. However, the bourgeoisie’s joy following the fall of the Berlin Wall was rather premature. The events of the last 26 years provide enough hard evidence that history is far from over. Everywhere, we witness the deep crisis of capitalism, characterized by wars, revolutions and counterrevolutions. This is the most unstable period since the end of World War II.
We might add that Francis Fukuyama, the man who coined the notorious phrase about the “end of history,” now says that “socialism” ought to make a comeback!
The old B movies of the 1950s were often horror films about alien monsters from outer space or zombies rising from the dead. But nowadays, these monsters have lost their power to shock and actually seem rather cute. In the same way, through constant repetition, the old stories about Russia have lost a lot of their impact. So, the old scarecrow must be supplemented by a new one. Here we go:
Even if highly socialist policies are peacefully implemented under the auspices of democracy, the fundamental incentive distortions and information problems created by large state organizations and the centralized control of resources are also present in industrialized countries, as is currently the case in Venezuela. Lessons from poorly performing agricultural economies under socialist regimes carry over to government takeovers of other modern industries: They produce less rather than more.
It is interesting to note that, when dealing with Venezuela (which it mentions only in passing, without any pretense of a serious analysis) the document tacitly admits that the Bolivarian revolution was in fact “peacefully implemented under the auspices of democracy.” This makes a refreshing change when compared to the constant barrage of propaganda that for 20 years or more persisted in describing Hugo Chavez as a “dictator.”
As a matter of fact, Chavez won more elections and other democratic consultations than any other politician in the world. Nor can it be said that these elections were rigged, since they were scrutinized with microscopic precision by international observers, including former US President Jimmy Carter. Had the observers found even the slightest indication of electoral fraud, it would have been shouted from the rooftops by every newspaper and TV channel in the world. But no such evidence was ever found.
The USA has backed every vicious, blood-soaked dictatorship there ever was in Latin America: from Somoza to Batista and from Pinochet to Noriega. So whatever problem the gentlemen in Washington may have had with Hugo Chavez, you may be absolutely sure that the question of dictatorship or democracy had nothing to do with it.
Anastasio Somoza was well known to be a ruthless dictator, yet the United States continued to support his regime as a non-communist stronghold in Nicaragua. President Franklin D. Roosevelt (FDR) allegedly remarked in 1939 that, “Somoza may be a son of a bitch, but he’s our son of a bitch.” The problem with Chavez—the only problem—was that, unlike Somoza, he was not the obedient servant of Washington.
The fact that Chavez was elected by landslide majorities cannot be explained by the authors of the document. They never mention the fact that Chavez used the money from the sale of oil to provide the Venezuelan people for the first time with free healthcare and education. The money was used to build houses, schools and hospitals. And Chavez gave the poor people a voice and a cause. He gave them hope for the future, which they never had before.
No one can doubt the colossal popularity of Chavez, the reasons for which would be self evident to any honest observer. In the beginning, he did not speak of socialism, nor did he nationalize anything, limiting himself to social reforms to benefit the people and a new and very democratic constitution. Despite this (or rather, because of it) the Venezuelan oligarchy denounced him as a “communist.” The USA and its agents in Caracas were determined to get rid of him and they organized a violent coup to oust him in April 2002.
That coup was organized with the active participation of the American embassy and the CIA, which has been a common feature of Latin American politics for decades. The coup was supported by the bankers and capitalists (it was headed by the president of the Venezuelan employers’ organization), with the active participation of generals, police chiefs, the media (which played a key role in mobilizing for the coup), and the Roman Catholic Church.
The coup was defeated by a spontaneous movement of the masses, and overthrown in the space of 48 hours. These facts were never explained to the US public, who for decades has been fed a constant stream of lies, distortions and falsifications intended to discredit the Bolivarian Revolution. This was, however, only the tip of a very large and ugly iceberg.
US imperialism saw in the Venezuelan revolution a deadly threat that had to be overthrown at all costs. It took steps to isolate Venezuela internationally and to wreck its economy by vicious sanctions. Together with the falling price of oil, which hit Venezuela’s main industry hard, the economy was seriously damaged. To a very large extent, the crisis we now see in Venezuela was the result of the aggressive policy of US imperialism. Economic sabotage was an important part of the attempt to overthrow a regime that it saw as inimical to its interests.
It is true, however, that the present economic collapse was also due to other factors. The problem of the Venezuelan revolution is not that it went too far in introducing socialist measures, but that it did not go far enough. It stopped short of expropriating key sectors of private industry. The Venezuelan capitalists were allowed to continue their policy (with the active involvement of the USA) of sabotaging the country through a strike of capital that crippled an already weakened economy, hoarding foodstuffs and other basic commodities in order to create shortages and increase inflation.
All history shows that it is impossible to carry out half a revolution. An economy can be run on capitalist lines or on socialist lines. But it cannot be a hybrid in which elements of nationalization and state regulation coexist with elements of a market economy. That is a finished recipe for chaos, which is what we now see in Venezuela.
A further factor that undermined the nationalized sectors of the economy was the elimination of workers’ control and the imposition of a bureaucratic regime modeled on Stalinism. This helped to strangle the nascent socialist economy, leading to massive corruption, waste and inefficiency. This is precisely what destroyed the USSR, and is also places the future of the Venezuelan revolution in question.
What all this shows, however, is not the superiority of capitalist market economics over socialist planning, but the need for genuine socialist planning, which must be conducted on democratic lines. It certainly does not provide any justification for reformist half measures. Trying to regulate capitalism instead of abolishing it leads to disaster. That is the real lesson of Venezuela, and of all other attempts to reform capitalism.
Having presented a completely distorted and one-sided picture of the kind of “socialism” that has been introduced in Venezuela, Russia and China, the authors of the document then engage in a weird and wonderful piece of futuristic imagining. What would be the effects of socialist planning if it were introduced in the USA? The authors naturally have a ready-made answer to this intriguing question:
These countries are examples of a more general pattern of socialism’s negative output effects. Such outcomes have also been observed in cross-country studies of the effect of greater economic freedom—quantified as an index of taxation and public spending, the extent of state-owned enterprises, economic regulation, and other factors—on real gross domestic product (GDP). This literature finds a strong association between greater economic freedom and better economic performance. It suggests that replacing US policies with highly socialist policies, such as Venezuela’s, would reduce real GDP at least 40% in the long run, or about $24,000 per year for the average person.
So, there we have it! Socialism in the USA would mean a reduction in real GDP of at least 40 percent “in the long run,” and a resulting catastrophic collapse of living standards. We do not know how long “the long run” might be. But what we do know is that living standards in the USA have been falling, or in the best-case scenario stagnating, for the majority of the population for quite some time. As we have already pointed out, many families in the richest country in the world are living on the borderline of poverty, or below it. Many people are homeless. Many more have no health insurance, and are constantly faced with the fear of falling ill.
The authors of the document, like the present incumbent of the White House itself, are blissfully unaware of these facts. For them, to paraphrase the famous sentence from Voltaire’s Candide, everything is for the best in the best of all capitalist worlds. And anyone crazy enough to call this capitalist paradise into question is immediately invited to examine the situation in Venezuela, as a terrible warning of what socialism in the USA would signify.
On the basis of advanced technology, it would be possible to implement socialist planning in the USA on a democratic basis, involving the entire population. Not only the workers, but also the scientists, technicians, economists, managers and other professional people would be involved in drawing up a democratic plan of production, and also supervising its implementation.
The powerful democratic instincts of the American people, and that strong sense of individual rights and freedoms that have been inherited from its revolutionary past also provides a serious guarantee against any attempt to impose bureaucratic or totalitarian rule. On the contrary, from the very beginning, the people would be able to submit everything to a rigorous democratic scrutiny.
The document states:
The CEA does not expect that socialist policies would cause food shortages in the United States, because socialists are no longer proposing to nationalize food production. Rather, the historical experience with agriculture is relevant because it involved economic disincentives, central planning, and a state monopoly over a sector that was large when socialism was introduced—similar to healthcare today. The historical evidence suggests that the socialist program for the US 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.
We are greatly relieved to discover that the introduction of socialism in the United States will not immediately signify a famine of biblical proportions. Thank goodness for small mercies! However, we do not know which American socialists are “no longer proposing to nationalize food production,” since they are not named. Nor does the CEA define what exactly do they mean by “food production.”
If they mean that we do not advocate nationalizing the property of small farmers, they are quite correct. But if they mean that we are not going to nationalize the big agricultural firms and the big companies that control things like transportation, chemicals and fertilizers, and above all, the big supermarkets and food monopolies, they are very much mistaken.
In arguing against socialism, the right-wing defenders of market economics frequently attempt to frighten the middle class, the small farmer, the small shopkeeper, the small businessperson, that “the socialists want to nationalize everything,” they want to bring everything under the suffocating control of the bureaucratic state monopoly, and so on and so forth.
That is completely untrue. What socialists propose is the expropriation of the big banks and monopolies that oppress and exploit the people—not only the working class, but also the middle class and small producers. The banks, for example, rigidly control the supply of credit and charge exorbitant rates of interest and other charges that cripple small businesses. A nationalized banking system would provide a free flow of cheap credit to the small farmer and shopkeeper.
In fact, the proof that big business is profoundly hostile to private initiative and the interests of the small producer is precisely agriculture. The small farmer and his family work hard to produce the milk, butter, meat, fruit and vegetables that people need. But the farmers do not receive a fair return for their hard work. The big supermarket chains pay absurdly low prices for agricultural produce, while charging exorbitant prices to the consumer for the same produce.
But the robbery perpetrated against the small farmer does not stop there. The big transport companies take their cut, as do the big chemical and seed companies that charge high prices for the products they sell. In order to improve the position of the small farmer, it is necessary to eliminate the middleman. By expropriating the big banks and monopolies that suck the blood of small producers, it will be possible both to provide a decent standard of living for the farmers and at the same time lower the price of food for the consumer.
We can give a concrete example of this by referring to the great general strike that occurred in May 1968 in France. The striking workers established contact with the peasant organizations in the rural areas, and food supplies were arranged, with prices fixed by the workers and peasants. To prevent profiteering, shops had to display a sticker in the window with the words: “This shop is authorized to open. Its prices are under permanent supervision by the unions.” The sticker was signed by the unions. As a result, a liter of milk was sold for 50 centimes compared to the normal 80. A kilo of potatoes was cut from 70 centimes to 12; a kilo of carrots from 80 to 50, and so on.
By cutting out the middleman, everybody gains—except the fat cats on Wall Street. But their sorrows do not particularly concern us, or anybody else, for that matter. The fact of the matter is that the small producers are already oppressed and exploited by monopolies. The only difference is that, under capitalism, these monopolies are in private hands and only exist for the purpose of squeezing profits from the labor of the working class and the small producers. By substituting state monopoly for private monopoly, the profit motive is eliminated, and the producer and the consumer both gain a tremendous amount.
Socialists have no interest whatsoever in nationalizing small businesses. Actually, small businesses can operate in certain sectors of the economy quite efficiently, for example, the small corner shop or bar. There would be absolutely no point in nationalizing them. We need to nationalize the big monopolies and banks because, in so doing, we obtain control of the main levers of economic life—the commanding heights of the economy—as they have been called.
Once we have control of the banks and big monopolies, will be able to plan the economy in the interests of society at large. The fundamental difference is that whereas under capitalism the private monopolies only represent the interests of a tiny privileged minority, under socialism the state and the nationalized industries will be owned and controlled by the working class who constitute the overwhelming majority of society.
This is the difference between the caricature of democracy that now exists, where no matter who sits in the White House, it is always the 1 percent of super-rich parasites who decide what happens, and a genuine socialist democracy, which hands both economic and political power to the majority of people who really create the wealth of society.
It may be that, in the long run, small shopkeepers and farmers will decide that they are better off working in publicly owned enterprises, where they will undoubtedly work fewer hours with better conditions. But that decision must be taken voluntarily by them. In the meantime, the small farmer will be free to work the land as before, but will be sure of an infinitely better deal than was the case when he was enslaved to the big banks and monopolies.
In the fourth and final part of his reply, Alan will detail the crimes of the American capitalist state, and explains what a socialist state and economy would look like . . .