“Socialism” vs. “capitalism” is a false dichotomy [Archive.org URL]

“All this talk about socialism isn’t about socialism,” Kevin Williamson writes. “It’s about the status quo.” The idea that “capitalism” has failed us and that “socialism” is the answer relies on a cartoonish oversimplification of reality. Current economic arrangements in the US, and throughout the developed world, involve a complex mix of “capitalist” market institutions and “socialist” regulatory and redistributive institutions. […] As Williamson argues, the left needs to better appreciate the role of capitalism in producing abundance. For its part, he says, the right needs to square up to the unyielding fact of human “risk aversion” and the indispensable role safety nets in placating this deep-seated distaste for feelings of uncertainty and insecurity by insuring us against the turbulence of capitalist dynamism.

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As I’ve argued ad nauseam, go-go capitalism is how you pay for safety-net soft socialism. […] In the real world, you finance soft-socialist guarantees with a level of tax revenue and borrowing you can only sustain through capitalist innovation, competition, efficiency, trade, and growth. That’s the lesson of the Nordic social democracies.

The other side of the equation, the part the right often misses, is that insuring folks against bad luck and the downside risks of capitalist disruption is how you maintain political support for “neoliberal” market dynamism — and mute democratic demand for reactionary economic nationalism. (It’s also how you ensure that prosperity is broadly shared.)

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Williamson insightfully chalks up the current appeal of both socialism and Trump’s mercantilism to the urgent human desire to be insulated from the anxiety of uncertainty, and suggests that the libertarian idea that “The free market will take care of it, or private charity will” is the right-wing analogue to socialist wishcasting about bottomless budgets and technocratic omnicompetence. It is a fantasy vision incapable of answering deep-seated anxieties about dislocation and loss that inevitably shape democratic politics. I wholly agree.

Instability and uncertainty are nerve-racking. The market competition that drives innovation and efficiency is a wrecking ball that leaves some among us sifting through the rubble, all the time. For those of us living paycheck to paycheck, and that’s most of us, it’s scary. Capitalism creates wealth by setting up a contest for profits that necessarily creates a steady stream of losers.

The fact that capitalism also creates a steady stream of opportunities does not, by itself, make the risk of losing tolerable. If rough seas keep tossing folks overboard, and people are barely keeping their heads above water (“Just keep paddling, Aunt Andrea!”), it’s not enough to be told that there’s usually a boat to swim to. We’re more willing to risk storm-tossed seas when the ship of state is bristling with lifeboats and manned by a competent crew.

That’s a key insight of “the free market welfare state.” Call it “lifeboat laissez-faire.”

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We need markets to make us richer. But we also need them to make all of us richer, and that’s not just about making sure that we’re indemnified against the risks of wrecking-ball competition. It’s also about making sure the basic rules of the game aren’t rigged to favor people who already won, locking the rest of us into a lower tier of possibility.

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Now, the problem isn’t exactly “markets without rules.” The problem is that markets are defined by an incomprehensible jumble of regulatory kludges — an accumulation of individually reasonable but cumulatively stifling technocratic fixes — that strangle economic freedom for ordinary people, allowing the powerful to capture the economy by writing and selectively enforcing the rules to their advantage.

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No less a classical liberal than F.A. Hayek supported a robust safety net capable of “providing for those common hazards of life against which few can make adequate provision.” It’s true, as Williamson says, that “There isn’t any obvious and non-arbitrary place to draw the line on those common hazards of life.” But he’s wrong that “the fundamental difference between Right and Left is where to draw that line (or those lines) and how to go about helping those we decide to help.”