Socialism and capitalism in the modern world

Let me begin by saying I wouldn't really describe myself as a 'socialist', its more complicated than that. I'd say I'm center-left, but given the economic and political realities of our time, its hard for any of us to avoid the 'socialist' label altogether. Lets face it, today just about all of us are at least social democrats, or in other words believers in 'democratic socialism' where large parts of the economy are run by the public sector under the watchful eyes of a democratically accountable government. Things have changed dramatically in the past century, or even the past twenty-five years since the end of the Cold War.

In 1989 political scientist Francis Fukuyama wrote a famous essay titled 'The End of History'. His essay voiced the assertion, much debated since, that the collapse of the Soviet Union constituted the final victory of western-style capitalism and liberalism over all other ideologies. Monarchy, fascism and communism had all now fallen, leaving capitalist democracies as the world's dominant states. Fukuyama did not of course mean that humanity would suffer no more wars and revolutions, but that events now could only move inexorably in the direction of democratic capitalism.

Now in a sense, I agree with him wholeheartedly. The part of his essay referring to democracy I think is absolutely true. Democracy is by far the best political system (or the least-worst, as Winston Churchill would say) because of the way it makes governments accountable to their citizens, The government works for the people, not the other way round.

However, I would take issue with the other half of his essay that refers to which economic system will predominate. Is socialism really dead? Or is the competition between it and capitalism still well and lively? In one paragraph in his essay Fukuyama says -

'But the century that began full of self-confidence in the ultimate triumph of Western liberal democracy seems at its close to be returning full circle to where it started: not to an "end of ideology" or a convergence between capitalism and socialism, as earlier predicted, but to an unabashed victory of economic and political liberalism.'

I disagree, vehemently. I think a 'convergence between capitalism and socialism' is exactly what's happening, at the very least. Allow me to explain why.

Now a lot of political debates over economic issues come down to disputes over what exactly constitutes 'capitalism' or 'socialism'. Is a strictly regulated marketplace still capitalist? Is a government program run for profit still socialist? Ultimately a decent measurement as to how 'socialist' or 'capitalist' a society is comes in the form of that country's government spending as a portion of GDP. What is the updated situation on government spending by country?

First though, before we get to that, here's an update on how the still-existing communist world looks politically today -

MARXISM TODAY - 2013

Source: http://en.wikipedia.org/wiki/List_of_current_communist_states

http://en.wikipedia.org/wiki/List_of_anti-capitalist_and_communist_parties_with_national_parliamentary_representation

Red: Countries where Marxist political parties control a government majority
Dark Pink: Countries where Marxist parties make up part of the ruling coalition
Pink: Countries where Marxist parties have some parliamentary representation

While the fall of the Soviet Union was a major blow, there are quite a few communist countries still around, and the number has actually grown somewhat since 1991. There's the old brand born of revolutions back in the early to mid twentieth century (China, Vietnam, Laos, North Korea, Cuba) but there are also a few new ones where communist parties have come to power, and usually through democratic means. These include Nepal (where the communist party succeeded in overthrowing the country's monarchy in 2006 after a decade-long civil war and established a republic, it currently holds a democratic majority), Venezuela (where Hugo Chavez was in power since 1999, his successor now holds office), Nicaragua (where a communist insurgency overthrew the country's right-wing dictatorship in 1979) and Uruguay (where a coalition of socialist parties won a democratic majority in 2009).

Furthermore, there are thirty-two other countries where communist parties have parliamentary representation. These includes such third-world backwaters as...Germany (the party is called 'the Left' and won about 12% of the vote in 2009), France (where the communist party is the third-largest, the second-largest being the Socialist party, which currently holds office), Spain (7% of the vote, and again the third largest party after the socialist party which is second, and which held office until 2011), Japan (the communist party has won 7-10% of the vote in recent years), Brazil (the communist party won 7% of senate votes in 2010, and makes up part of the ruling coalition) and, interestingly, Russia, where the Communist party won 20% of the vote in 2011 (and has managed to win between 11% and 25% since the Soviet Union's collapse).

Its easy for people in the United States, or here in Australia where we don't have any declared socialist parties pulling in significant numbers of votes, to just dismiss communism as some old ideology as dead as monarchy. But in many countries this is simply not the case, and the clout of far-left parties has in some places increased since the collapse of the Soviet Union, though they still tend to be small minorities of course.

However far more important than this rather modest electoral comeback for Marxism as of late is the economic reality of the developed world today. At the start of the 20th century, when socialism was in its infancy, few countries devoted significant amounts of their national economy to public spending programs. Since then, public spending on everything from education to healthcare to unemployment benefits to social security has skyrocketed. For somebody who thinks socialism is dead, the net result is sobering -

Government Spending by country/Countries with Marxist governments

Red: Countries with government spending over 50% of GDP
Dark Pink: 40-50%
Pink: 30-40%
Light Pink: 20-30%
Yellow: under 20%
White: No data

Note: The nine countries from the first map with officially Marxist governments I have left shaded red, though as they are all developing countries their percentage of government spending is generally lower than 50%

Things have hardly 'turned full circle' have they? Few countries were even democracies in 1900, and much of the world was dominated by a handful of imperialist powers. Today practically all western countries have enormous public sectors making up anywhere from a third to over half of their economies. As for the rest of the world this hasn't come to pass so much by choice as by their lack of economic development so far. This has precluded the formation of organised public spending programs, or really stable, democratic government in general.

Even in the United States, supposedly the world's greatest crusader against socialism, government spending now composes around 40% of GDP. At the time of the Bolshevik revolution in Russia in 1917 this figure was just under 10%, at the start of the Cold War around 20% and has continually increased since then as this figure shows -

The spikes in the 1910s and 1940s are concurrent with the World Wars, during which the United States spent an enormous amount of taxpayer money on its military. The amount of money a country spends on its military is of course something of a flaw in our above analysis of 'socialist' spending by country, but not a very large one. Military spending in the US used to dominate government budgets, though it only makes up around 20% of federal spending now. The key point is that public spending on education, healthcare, pensions, welfare and other clearly 'socialist' programs has ballooned across the developed world over the last century. This graph shows the recent growth in these areas in the United States - 

It is a trend that shows no sign of reversing. Large amounts of public sector spending seem to go hand in hand with industrialization  Even South Korea for instance, commonly cited by economic conservatives as a 'capitalist success story' especially compared to the basket-case that is North Korea, now spends over 30% of its GDP in the public sector. 10% of the economy consists of public spending on education and healthcare alone. This figure is bound to grow, partly due to the country's rapidly aging population, which is driving an enormous rise in public spending on pensions and healthcare.

Unlike in 1900, most countries have universal public education and healthcare systems, providing either all or at least a large chunk of services in these areas. Since the passage of 'Obamacare' in 2010, the United States has joined an ever growing number of countries, including virtually all the world's major economies, in providing universal healthcare coverage of some kind to its citizens.

Universal Healthcare by Country

So what exactly am I saying, you may ask? Well I'm not calling for the complete abolition of capitalism. I understand the benefits of having free markets, though generally some degree of regulation is needed. There's a logic to letting people have the freedom to compete with one another in pursuit of a profit motive. But just as there may be decent arguments in favor of large sectors of the economy being privatized, they need to be balanced with similarly compelling arguments in favor of government spending and regulations. The reason we have public schools for instance is to dissuade a system of hereditary rule, whereby the children of the rich get an education while the children of the poor don't. There's no sense to letting such a situation occur. What family you're born in shouldn't greatly affect the standard of education you get. There's just as much chance of the next Einstein or Bill Gates being born into a poor family as a rich one. The healthcare industry should also have public options where risk is shared communally by a society through taxpayer funds. The average person usually has no way of knowing if tomorrow they'll be hit by a car and become a paraplegic needing a wheelchair for life, or will suddenly suffer from cancer or a stroke or some other unpredictable ailment. Its impractical to leave the average person to fend for themselves against such debilitating, unpredictable risks. It creates a great deal of uncertainty in the economy which is anathema to economic growth.

For similar reasons pension schemes like superannuation and social security have been introduced worldwide. Nobody knows at what age they're going to die, thus nobody knows at what age they should ideally retire at.  You could optimistically expect to live until you're 90, and so not retire until you're 65, only to die of cancer at 68. Alternatively you could pessimistically retire at 50, not expecting to live beyond 70, only for you to still be alive well into your 80s. What will you do then? Return to work? If you're part of the 1% of the population rich enough not to have to worry about this then good for you, but before the introduction of social security in the United States half of all elderly people died in poverty because so many people inevitably misjudged it one way or the other.

Ever since Karl Marx wrote the Communist Manifesto in 1848 there have been two main schools of thought that have striven to implement his ideas. On the far-left you have what could be called the real, die-hard communist revolutionaries (generally distinguished today by labels such as Maoist, Marxist, Trotskyist, etc) while on the center left you've had the softer socialists. The latter group doesn't necessarily believe in a model of socialism any less stringent than the former, but has sought to achieve it through more peaceful means and more gradually, such as through the democratic process rather than violent revolution. While the former group has fallen into obscurity (if not infamy) in many countries, the latter today is well...lets face it, they're pretty much running the world.

Just look at Australia today. We've got a labor government in power for Christ's sake! Do you know when and where the first Labor government in history came into power? It was in Queensland in 1899. It probably wasn't until the Bolshevik revolution in Russia in 1917 that a more left-wing government would come into existence. All the old left-wing policies workers unions argued for in the 19th century, from the eight-hour work week to the minimum wage, have not been abandoned. Their legacy remains intact. We have numerous government agencies tasked with regulating everything from food labeling to environmental protection to unfair labor practices. Partly due to these safety nets that protect consumers and greatly diminish the number of avoidable deaths from events such as poisonings, drownings, workplace accidents, car crashes, etc, many western countries now have life expectancies above 80 years, compared to 50-60 years in 1900 (alongside better and more widespread technologies of course). 

In terms of social policy as well the western world is actually following the lead of the Soviet Union in many ways. The Soviet Union was one of the first countries to make abortions legal as far back as the 1920s, and this is now the reality across most of the world. Attitudes to homosexuality in communist countries have varied over time, but were often ahead of the christian west. Even no-fault divorce, only common in the west since the 1960s, was introduced back in the Soviet Union's early days. The country never had a state religion, having embraced secularism from the start. Women were encouraged to enter the workforce generations before such behavior was seen as normal here in the west. During the Second World War women served in all sorts of combat roles. There were even female Soviet air aces, a world first. Partly this was due to necessity, but even western countries faced with similarly dire military situations (France in 1940, Italy in 1943, Germany in 1945) did not call up women to fight to any great extent in frontline roles. Also of note is that the first women in space was not Sally Ride, who the Americans sent up in 1983. The first woman in space was called Valentina Tereshkova who the Soviets sent up in 1963, twenty years before the Americans even accepted women into their space program.

The Soviet Union of course had a deeply flawed political system, perhaps its greatest problem being that is wasn't democratic. The country had a particularly bloody history, with first the Tsar and later the Nazis causing the slaughter of millions of Russians in each of the world wars. Against such vehement opposition the communist revolutionaries in Russia resorted to extreme measures. Millions tragically died in the sudden (though ultimately quite successful) drive to industrialize the country in the 1930s. Political repression in the Soviet Union eased after Stalin's death, but was still overly harsh right up until it's collapse in the 1990s. Despite all this, it pioneered many social and economic policies that we've later adopted here in the west. 

If you're the sort of person who says 'I'm a conservative, though I do support public schools, hospitals and social security' then you're not really the sort of person I'm seeking to lecture here, we agree on a lot already. You may not recognize that half your political positions are inspired by Karl Marx, but at least you're not in total denial. You're accepting of certain social programs making economic sense in our modern world. The people I'm really talking to are the current crop of far-right, Fox News-watching conservatives (often calling themselves 'Libertarians' these days, though I struggle to see the difference between that label and 'anarchists') who think the government can never do anything right and that socialism is the worst thing since un-sliced bread. I've had debates with conservatives who insist there's no reason for government spending to be more than 10% of GDP and that taxation and regulations can only distort the economy in a negative sense.

It is to you people that I make the assertion, no, you are wrong. Your worldview is wrong, and the sort of society you envisage is actually becoming a thing of the past, and quite rapidly so. You assert that 'the bigger the government, the smaller the people', not even realizing that a properly democratic government is intended to act on behalf of its people. Its a dictatorship you're thinking of. Yes its possible for governments to become unaccountable dictatorships, and we should be aware that regimes with such concentrated political power are among the most dangerous things on Earth. But you have to remember two things. 

Firstly, the government is not the only thing capable of limiting your freedom. Enemy's foreign and domestic can do the same. If I were to mug you in the street, that would be infringing upon your rights, even though I am not a representative from the government. To curb such infringement, society has decided to allow the government to set up something called a police force. Yes the police limit your freedoms in many ways. You can't steal from, assault or murder your neighbor, or even drive 10 K's over the speed limit without risking their wrath. The idea is however, that your freedoms are ultimately infringed upon much less by setting up such a system. A democratically accountable state is the lesser of two evils compared to anarchy, even if anarchy would probably be preferable to a dictatorship.

The second thing, is that while the government is just one of several institutions that can infringe upon your rights, it is the only thing that truly enforces them. Think about it. Where do your rights come from? Your freedom of speech, of religion, even the right to bear arms (if you're an American). They ultimately come from the constitution, a document drawn up by the government at its foundation. Quite simply, without the government, you have no rights. This is something we should be under no illusions about. I would plead to conservatives, given that having a state is inevitable and potentially of great benefit, can we please stop arguing over whether it should be abolished or not, and instead just start deciding how to make it actually work best?

So as for Mr Fukuyama's assertion, I would maintain he wasn't quite right. The twentieth century did not see capitalism emerge victorious as the world's dominant economic system, we are indeed seeing a merger between socialism and capitalism. Every major economy in the world is now a mix of private-sector capitalism and public-sector democratic socialism. As for whether this constitutes merely an alternative 'end of history', I'm not sure. Government spending as a percentage of GDP is still increasing quite rapidly in most countries. It already averages around 40% in the developed world, and the developing world is rapidly catching up. Worldwide public spending is about 25% of the global economy, by mid-century this figure will probably be closer to 50% as the third world develops.

One of the core tenets of communism was its support for 'public ownership of the means of production'. While government spending already makes up a huge chunk of the economy, its mostly concentrated in a few key sectors like education and healthcare. Most other major industries, such as agriculture, mining, retail, automobile manufacturing, real estate, transportation, financial services and construction, are still dominated by private companies. As globalization has expanded, particularly in the cold war's aftermath, many countries have privatized formerly public sectors of their economies. Back in the 1980s Margaret Thatcher famously privatized many parts of the British economy that had been public since the 1940s or earlier. Public spending during her time in office decreased modestly from 44.6% to 39% of GDP. This decline has since been reversed however, with that figure back up to about 44% today, though this is still less than it's peak of nearly 50% back in the mid-70s.

Britain - Historical Government spending

Source: http://www.guardian.co.uk/news/datablog/2010/oct/18/historic-government-spending-area

In the first world cycles of privatization and nationalization tend to coincide with the election of right-wing and left-wing governments respectively. In the third world however, things often get a lot nastier. Revolutions and civil wars have erupted over both political and economic ideological differences (not that the first world hasn't fought more than its fair share of ideological conflicts, such as WW2 and the Cold War). Hugo Chavez rose to power in Venezuela in 1999 because of the shambles Venezuela's economy had become after the previous government adopted policies recommended (or rather demanded) by the world bank and the international community that were overly friendly to foreign corporations. Half a dozen Latin American countries have followed suit recently in what has become known in geopolitics as the 'Pink tide'. http://en.wikipedia.org/wiki/Pink_tide. 

Aside from Venezuela, left-leaning (if not outright socialist) governments are currently in power in Brazil, Argentina, Bolivia, Ecuador, Peru and several other countries in the region. For much of the past ten years about three-quarters of South Americans have lived under such administrations. Of course the region's politics are complex, but 'pink tide' seems like an accurate if simple description for this trend. These governments aren't quite 'communist', but tend to be anti-globalization, anti-US and pro-social democracy. I'd maintain the main thing Hugo Chavez strove to achieve in Venezuela was the creation of a healthy public sector not unlike those already found in most developed countries. All those conservatives blaming 'socialist policies' for any flaws in Venezuela's economy today should be aware that public spending in Venezuela is still just 34% of GDP, about the same as in Australia and much less than the United States or most European countries.

Here in Australia recently, the Rudd-Gillard governments have struggled to gather the political support to merely tax big mining corporations, let alone nationalize them. We've been hesitant to get ourselves off fossil fuels and onto renewables. Nevertheless, I'd maintain the country is still creeping in a leftwards direction, though maybe not as fast as many other countries, especially in Europe. Recently Labor announced its new disability scheme, complete with a 0.5% rise in the Medicare levy. They also managed to introduce a carbon tax, though if the Coalition comes into office later this year they'll no doubt try to repeal it. Even the Liberals themselves however are hardly a party of devout libertarians. It was Howard who introduced the GST, and Tony Abbott seeks to introduce an even more generous paid-parental leave scheme then Labor. It's genuinely debatable which party is bigger on middle-class welfare.

Aside from the two main parties, Australia, because of its preferential voting system, has a large number of organised minor parties representing almost any political shade imaginable. Not including the Greens, 13% of the electorate voted for minor parties in the 2010 senate elections. Australia does have a libertarian party, the 'Liberal Democrats' who received 1.8% of the vote that year. If you include the results for the Shooters and Fishers party who are also quite vehemently anti-government, then 3.5% of the Australian electorate would prefer a far-right economic system over the centrist status quo currently pursued by the major parties. On the other end of the spectrum the 'Socialist Alliance', 'Socialist Equality Party' and 'Communist Alliance' won a combined 0.43% of the vote. Clearly then, the country is not on course for a dramatic political shift to the right or left in the near future.

In the US Barack Obama has had few legislative successes against a famously obstructive congress. The Democrats only had a super-majority in the Senate (60+ seats out of 100) for fourteen weeks earlier in his presidency during which they managed to slip through a greatly watered down universal healthcare bill. He also managed to repeal 'Don't Ask Don't Tell', allowing gays to serve openly in the military, and expanded another federal healthcare program called 'CHIP' (Children's Health Insurance program) doubling the number of children it covers from 4 to 8 million. Government spending in the US has increased rapidly as of late, but most of this is not Obama's doing. The budget has been ballooning outwards since the financial crisis hit in 2007. Millions of people have dropped out of the workforce, shrinking the country's GDP while at the same time increasing the number of people receiving unemployment benefits. This has coincided with the retirement of the baby boomers, increasing the costs of Social Security and Medicare. 

Given the slow pace at which socialist programs have grown as of late, it looks like the 'end of history' is indeed a merger of capitalism and socialism, rather than a victory for either. But if I had to choose, I'd say its very unlikely the world will ever be dominated by the former again. Democracy and capitalism don't mix as well as many conservatives seem to think. Democracy and socialism however, demonstrably go hand in hand. Remember that 'dictatorship of the proletariat' Friedrich Engels talked about? He wasn't advocating Stalinism, or even talking about an actual dictatorship at all. He was referring to a system of government where the proletariat dominated rather than the bourgeoisie, i.e. a democracy. He said in 1892 -

"Well and good, gentlemen, do you want to know what this dictatorship looks like? Look at the Paris Commune. That was the Dictatorship of the Proletariat"

So to conclude, welcome to the 21st century, and what is shaping up to be the century of democratic socialism.