Let's Fix This Country

What’s Causing All These Socialists? That’s Easy. Capitalism

The younger generation of Americans is increasingly disenchanted with capitalism. That came to light a couple of years ago when the Institute of Politics at Harvard released a survey that
said more than half of respondents between 18 and 29 do not support capitalism, that one-third support socialism. Only 19% of that age group declared themselves to be capitalists.

The socialism they have in mind does not likely fit the dictionary definition, which calls for the transfer of ownership of the "means of production and distribution, of capital, land, etc." to the people. Rather, they are attracted by the Scandinavian model of universal healthcare, free education, a strong safety net but, let's not forget, high taxes.

It won't come as a surprise that it's Democrats who yearn for this different form of government. Among all age groups, 57% of them have a positive view of socialism (compared to just 16% of Republicans). The percentage of Democrats who have a positive view of capitalism has dropped from 57% to 45% in just two years, says Gallup.

This has been brewing for a time. By 2015 a Gallup poll already reported that confidence in American institutions had "big business" second from the bottom, above only Congress, with only 21% expressing "a great deal" or "quite a lot" of confidence in it.

What explains this turnabout? Who can deny that capitalism has made America the most successful nation in history, that free markets have brought millions out of poverty and into lives lived in comfort in a stable society? In the 75 years since World War II Americans have steadfastly believed that democratic capitalism was certainly more in their interest than the other models they'd seen — national socialism in Germany, fascism in Italy, communism in Russia.

So what gall that these millennials and privileged college students should criticize what has been handed to them, ignorant as they are of the toil and sacrifice that went into building the prosperous society that they enjoy without a word of thanks. Those nifty smart phones that the young find essential to life itself are the product of human endeavor "characterized by free enterprise, free markets, private investment, etc., that we call capitalism", the National Review reminds them.

Except that these ingrates have seen the underside of capitalism. They've seen how it can overheat, careen out of control, and in the U.S. produce the highest degree of income inequality of any of the 34 OECD countries. They are aware that since the mid-1960s, after adjustment for inflation, worker paychecks grew by only $1.25 an hour, whereas almost all of the nation's income gains each year now goes to the top 10%, and the top 1% now owns 20% of the nation's wealth. They see that whereas in 1978 the CEOs of big companies took home 30 times the pay of their average workers, now the ratio is 271 to 1, says the Economic Policy Institute. That organization showed up the injustice of capitalism when in 2015 it reported that the top nine executives on Apple's executive team received compensation packages equal to 90,000 Chinese factory workers. And those disenchanted with capitalism may have seen this headline in December: "Aetna CEO in line for $500 Million Payout", and this would be upon his leaving Aetna after a merger. Compare that with Congress holding the minimun wage at $7.25 an hour since 2009, with no adjustment for inflation, and insisting the poor should work in return for food stamps and Medicaid. Socialism looks a lot fairer than that.

Those who argue for capitalism want to give the newcomers to the planet an education. The oldest among them were born into the Great Depression when "poverty was rampant — real poverty, not lack-of-a-flat-screen-television-set poverty" as the conservative magazine The Weekly Standard puts it. There were daily lines for bread. The unemployment rate hit 25%. World War II then struck. A number of Americans unimaginable today — 418,500 — died. That generation cannot believe today's whining.

Overcoming such hardship, the United States went on to produce a dazzling array of products — refrigerators and freezers to replace "ice boxes", washing machines to replace hand wringers, air conditioning to cool entire houses and offices, automobiles that have no rival in the improvement score-keeping, having replaced with quality and reliability cars that were once so prone to breakdowns, part failure and flat tires. And now we have personal computers of every sort, smart phones, the miracle of the Internet — the list of bounty knows no end.

The millennials never experienced life without them. So they take the positives for granted, while mostly seeing the negatives. They experienced the economy crashing in 2008 and a government that rescued the banks, a giant insurer, the car companies with a $700 billion bailout, but did almost nothing for the homeowners foreclosed by those banks, even families of military personnel serving overseas. They saw people treated as expendable, millions of their mortgages stacked into securities by investment banks, filled with loans that people could never afford to repay, the rating agencies paid to bless them with AAA quality anyway, each jumble then sliced into "tranches" to sell to an unsuspecting world until all came crashing down.

They saw neighbors lose their homes and their jobs under capitalism's wild gyrations. They've been living in the fallout since. They famously lived with their parents, unable to afford skyrocketing rent much less house purchases. Marriage and children were postponed as unaffordable. Only now, 10 years later, are jobs easy to find.

But the younger generations are burdened with staggering debt from from a predatory college system that has cashed in on government-issued loans by raising tuitions far beyond the rate of inflation. In 1958, for example, Yale cost about $16,700 in today's dollars. So how did tuition, room and board get to be $66,900?

With their low pay jobs, if they had one, the healthy among the young were not enthusiastic about the Affordable Care Act's insistence that they buy insurance, but they probably went slack-jawed to then see government set about dismantling what at least was an attempt to create a healthcare system. And nothing to replace it, so bent on restoring the dysfunctional crazy quilt that preceded it were Republicans. Eyes turned to Denmark, or Sweden. Meanwhile, woebetide contracting an illness that calls for one of the drug companies' miraculous products that cost from from $26,400 to $96,000 a year (to combat hepatitis C). Or how about $272,000 a year (not a misprint; that's for cystic fibrosis, and it only modestly helps). Those are U.S. prices. The prices in other countries are a fraction. But, yeah, thanks for the smart phones.

downwardly mobile

Economist Raj Chetty at Harvard showed that capitalism is no longer succeeding for people as it once did, and our younger generations know it. For decades, American kids grew up and achieved a standard of living higher than their parents. But Chetty and his co-authors found that this is no longer true, that upward mobility has stalled. Whereas nine of ten born in 1940 exceeded their parents economically, only half of those born in the 1980s can make that claim. They've been hearing that, set back by the lost decade of the Great Recession that followed 2008, they'll never catch up.

Political scientists Martin Gillens of Princeton and Benjamin Page of Northwestern came out in 2014 with a renowned study in which they tracked 1,779 policy issues over two decades to see how well various groups influenced the actions of Congress and the executive branch. The results were startling. Economic elites and organized interest groups got their favored policies adopted about half the time; legislation to which they were opposed was defeated nearly all the time. Whereas:

"…the preferences of the average American appear to have only a minuscule, near-zero, statistically non-significant impact upon public policy".

That said corporate power had grown under capitalism to the point of oligarchy, with elected officials doing the bidding of big business and their lobbyists to win financial backing for elections, whereas the public has a negligible say in the affairs of the country.

Exhibit A: The tax cuts. Weren't we planning finally to repair America's crumbling infrastructure, Mr. President? Instead, young Americans saw tax rates for businesses, big and small, cut by a whopping 40%. The president himself will benefit hugely from the bill he signed that will allow his hundreds of real estate partnerships to be treated as "pass-through" businesses eligible for the 21% business rate rather than the 37% maximum for individuals, a bonanza of who knows how many millions of dollars. The tax cuts will save those in the top 1% an average of $51,140, according to the Urban-Brookings Tax Policy Center, whereas families earning between $48,600 and $86,100 will save just $930.

Moreover, the reduced tax rates for individuals expire after eight years whereas the cuts for businesses are permanent. The tax cuts continue to be very unpopular because the public sees the profound unfairness. They know they've been played.

And what are corporations doing with their huge tax windfall? Hiring more? Giving their employees raises? Some did, but more declared one-time bonuses rather than the ongoing cost of pay raises. What companies really did in the six months since tax reform took effect was buy back their own stock. Major American companies such as Apple, Wells Fargo and McDonald’s have embarked on a spree, spending over $700 billion to take chunks of their own stock off the market. That divides the value of a company by fewer shares, increasing each share's value. Who benefits? The CEO, upper management and directors of those companies. They're paid largely in stock and options. They use billions in shareholder money to enrich themselves. That's what capitalism looks like to the wakening generations.

the proselytes

That has led to the growing consensus that that our economic system is stacked against the least powerful of us and explains why so many gravitated in the 2016 campaign toward the program of the elder senator from Vermont, Bernie Sanders. He dangles the prospect of free public colleges and universal healthcare. He introduced the Medicare for All Act last year with 16 co-sponsors. It would offer expanded coverage of dental, vision, and hearing with no co-payments, no deductibles, no cost-sharing, no first dollar costs.

And now, in a stunning upset in the primaries, comes Alexandria Ocasio-Cortez of the Democratic Socialists of America, who adds to the list the abolition of ICE, government-guaranteed jobs and housing, and ousting the private-prison industry from the justice system. DSA's national platform calls for abolishing capitalism, nationalizing the entire health-care industry, "economic planning", ending "the influence of money in politics", and restructuring "gender and cultural relationships to be more equitable."

It would be a colossally expensive transformation. Sanders figures his plan would cost $1.4 trillion. He would tax the income of most individuals an additional 4%, tax employers 7 1/2%, and increase tax rates on a sliding scale for those earning over $250,000 with a top rate of 52%.

Charles Blahous of George Mason University tackled Sanders' cost estimate. His calculations say that paying for every American's healthcare would run to an average of $3.26 trillion a year, more than double Sanders' estimate, and calls this a lower bound because it assumes Medicare's reduced payments to health providers, as well as reduced administrative and drug costs.

Lanae Hatalsky of Third Way, a centrist think tank, warns: "If the democratic socialists were able to take over the Democratic Party, I think it would become a minority party for the next 10 to 20 years."

1 Comment for “What’s Causing All These Socialists? That’s Easy. Capitalism”

  1. Al Rodbell

    John Gelles died three months ago, being born in 1926 into a politically active family who were successful before the Depression hit. More than simply wealthy, they were intellectuals, where conversation around the dinner table was steeped in the unfolding issues of the moment, as they went down along with the great depression. He was bred on the idealism of FDR, especially his “Second Bill of Rights” which is the blueprint of the current socialist democrats who probably never heard of this 1944 speech listened to by most of the country on their radios in 1944. John, having served among the youngest naval officers of WWII, then getting his law degree, to his dying day was convinced that it was only for lack of effort that FDR’s ideals had not been achieved.

    I bring up Mr. Gelles, as he and I spent hundreds of hours in discussion with a few of us. He was steadfast in his belief that it was only the intransigence of capitalists that prevented every American from living the good life that FDR prescribed. Oh, there were the Father Couglins, and his Christian fascism that countered the vibrant strand of Trotzkyites’ more democratic Marxism, that for John wasn’t learned from a book, but from his earliest years living through this transformational period of history.

    I can imagine a resurgence of, I’ll call it for lack of a better term, (DU) discursive understanding, where any deeply held belief must be buttressed by an in-depth immersion in the most scholarly articulation of its antithesis. To be in favor of FDR’s or Bernie Sander’s brand of socialism one must be able to articulate the works of such as Friedrich Hayek, Noble Prize Economist whose 1944 “Road to Serfdom” was the popularized version of what is known as “Austrian Free Market Economics.”

    Needless to say, this DU of mine, this Depth of Understanding, not only tolerates, but requires interaction with those who have concluded that one system of government is preferable to another. The historian Howard Zinn expressed the challenge during the Vietnam war in the title of his book, “You can’t be Neutral on a moving Train”

    It is the suspension of passionate conviction, which is accompanied by hate and fear of the opposition, that is the rub. The neutrality that is necessary to achieve depth of understanding is negated by a phrase that one has to be approaching his ninth decade to remember. That moving train of formation of a world, a country, a Zeitgeist, isn’t stopping for a contemplation timeout.

    They were the stentorian words after newsreels of the chaos and carnage of the ending of WWII that continue to have more meaning as the years go by, “TIME MARCHES ON.”

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