Last Tuesday (March 10th), opinion columnist, Thomas Friedman published and OpEd In the New York Times. It was entitled “Joe Biden, Not Bernie Sanders Is the True Scandinavian.”
There, Friedman argued that despite Mr. Sanders’ frequent references to Denmark as the standard for “democratic socialism,” the country is actually a hotbed of free market capitalism. Hence, Biden’s more balanced views on trade, corporations and unions make him more “Scandinavian” than his rival. Hence too, Biden’s free market capitalism is vastly preferable to Sanders’ socialism with its proposal of a totally planned economy.
To prove his point, Friedman’s crucial focus was not so much on Denmark as on three well-worn rhetorical questions addressed to the senator from Vermont:
- Does money grow on trees or does it come from heroic capitalist risk-takers who deserve their profits because of the jobs they provide? And shouldn’t they be rewarded accordingly?
- Aren’t at least some capitalist entrepreneurs admirable, or are they all examples, as Sanders would have it, of “corporate greed and corruption?”
- What’s better at producing jobs and prosperity, a free enterprise economy or one based on central planning? (It was here that the question of Denmark came sharply to the fore.)
All three questions were entirely disingenuous and misleading. Let me explain.
In Praise of Risk Takers
To begin with (and to answer Friedman’s first question) money obviously doesn’t grow on trees and capitalist risk-takers do, of course, play an important role in the provision of jobs and prosperity. And risk deserves corresponding reward. All true.
However, what Friedman neglects to mention is that capitalists aren’t alone in highly productive risk-taking. No, far from being passive beneficiaries of entrepreneurial courage and largesse, workers and the risks they take clearly confer huge benefits on their employers. Hence, if their employers’ gambles deserve reward, so do their own.
By this I mean not only the obvious – viz. that capitalist enterprises would never succeed without workers. I mean as well that the capitalist system actually forces employees to be more adventuresome risk-takers than their employers. While the latter typically risk only their money, workers within the system risk their very lives and the existential welfare of their families.
Think about it. In preparing themselves to enter the world of work, college students bet four years or more of their lives as well as thousands of dollars in borrowed money on the wager that their “major” (be it Economics, Business, English, Math, Science, Pre-Med, etc.) will actually someday land them a job. That’s a gamble that benefits not only employers, but the rest of us as well.
Moreover, if they’re fortunate enough to land a job, the graduates’ work often forces them to change location to places far from their families and friends. That too involves leave-takings, courage and high-stakes risk.
And if their gamble does not pay off (unlike their employers) there’s no Chapter 11 for them to invoke. Thanks to politicians like Joe Biden, they still have to pay back those college loans, and/or live far from the support of their extended families.
It’s similar for those who do not go to college. Every day, countless numbers of them risk their very lives in jobs whose dangers are far more threatening than losing money in a failed business venture. So, if roofers fall from a great height, if fishermen are swept overboard, or if carpenters cut off a finger or hand, they often have no benefits to sustain them while recovering or to insure their eventual return to the workforce. All of that represents acceptance of risk that benefits employers. It contributes far more to economic prosperity than dangers involved in the process of securing loans in the comfort of a banker’s office or in a simple telephone call.
So, no, Mr. Friedman, money does not grow on trees. It comes from employers risking their money. However, in at least equal measure it derives from the risks taken by their employees. The latter deserve guaranteed reward that can fittingly come from government’s repaying them with as much abundance as it currently extends to their employers.
A Corrupt System
As for Friedman’s question about greed and corruption. . . Is Sanders correct in saying that all capitalists are somehow consumed by avarice?
Of course not. And it’s clearly deceptive to accuse Mr. Sanders of saying so. And this even though we have ample evidence that many capitalists (including our current president) are indeed wildly greedy and deeply unethical.
The truth is that many more of them are no more acquisitive and dishonest than the rest of us.
However, the capitalist system itself is indeed corrupt. That’s because it rewards immorality in the form of underpaying workers, environmental destruction, and acceptance of huge income inequalities in the face of widespread hunger and poverty.
For starters, consider how the dynamics of an unregulated wage market forces workers to accept the lowest remuneration possible. This is especially true in job categories deemed “unskilled.” Because of such classification, and absent minimum wage guarantees, capitalist theory rewards such occupations (belonging to waitpersons, cleaners, grocery clerks, vegetable pickers, etc.) with wages as close as possible to what’s absolutely necessary to keep body and soul together. (It’s why, for instance, Wal-Mart workers often end up qualifying for food stamps – a form of socialism, as Mr. Sanders rightly observes.)
Generous employers who decide to exceed the market-determined minimum will typically find themselves undersold by competitors who more obediently follow the dictates of unfettered markets. Because of wage differentials with their rivals, the generous ones will soon find themselves shuttering their enterprises and witnessing from afar the success of their more tight-fisted counterparts.
It’s similar with the environment. Competitive market forces reward producers who choose to externalize their costs. Meanwhile, market forces penalize conscientious manufacturers who for example, put scrubbers on their smokestacks or filters on corrosive effluents otherwise polluting nearby bodies of water.
This is because the use of environmentally friendly technologies cost money. They necessarily raise costs of production. They disadvantage those who implement them as they compete with their marketplace opponents who lack environmental conscience. Such destructive outcomes result not from personal greed and corruption, but from systemic failure.
And finally, in an unregulated market, the underpayment of workers along with the externalization of environmental costs (as well as colonial theft of resources) inevitably and historically results in wide income gaps that can only be described as unconscionable.
To illustrate this point, it suffices to cite a single now-familiar statistic that Mr. Sanders often does call out: three American entrepreneurs own as much wealth at the bottom half of U.S. wage earners. And this in a context where an estimated 48.8 million Americans, including 16.2 million children, live in households that lack the means to feed themselves on a regular basis.
Almost anyone with a conscience would be justified in calling such a system “greedy and corrupt.” However, the application of those epithets is justified not principally by the shortcomings of entrepreneurs, but by the capitalist system itself.
Capitalism vs. Socialism
And that brings us to Thomas Friedman’s final question to Bernie Sanders. Despite its acknowledged shortcomings, isn’t capitalism the best we can do? Is Sanders really claiming that planned economies are more productive than their free market alternatives?
Of course, Mr. Sanders says no such thing. This is because despite their rhetoric of “democratic socialism” and “free market economy,” the senator from Vermont no more champions an entirely planned economy than Friedman does an economy without any regulation at all.
In reality, both have no alternative but to advocate some form of mixed economy. That’s because mixed economies are the only game in town. Except for black markets (which almost everyone recognizes as criminal), no economy in the world can function without heavy regulation. And Mr. Sanders’ version of “democratic socialism” is nothing more than Rooseveltian New Dealism, which ironically was required during the 1930s to save capitalism itself.
More specifically, the New York Times columnist praises Denmark’s “broad social safety net” its “expanded welfare state, high level of taxation, as well as its spirit of cooperation between all stakeholders. All these taken together with free markets explain for him the country’s enviable living standards.
For his part, what Sanders demands repeatedly is not the dissolution of corporations, but that they play by the rules and pay their fair share of taxes.
None of this implies however that Friedman and Sanders want the same mixed economies.
Instead, they differ in argument about whom the economies they favor should be mixed in favor of. Friedman wants an economy mixed in favor of the opulent risk-takers he lionizes along with the rest of mainstream media and education. Ignoring worker risk-taking, he evidently believes in shopworn trickle-down theory.
Nevertheless, Friedman’s economic class has shown again and again that it is not averse to socialism when the stock markets crash, when their opulent sea-side homes are destroyed by natural disasters, or when national survival demands “war socialism” complete with ration cards and patriotic slogans about sharing.
Sanders on the other hand, wants an economy mixed directly in favor of working classes and the impoverished. Rather than trickle-down, his ideal might be called percolate-up. It’s a theory that (in watered-down form) has actually worked throughout Europe in the form of post-WWII welfare states, in Denmark, and (yes!) in the United States under FDR.
So, what’s the formula that might deliver the world from the ills of low wages, environmental destruction, and huge income gaps between rich and poor?
In the light of the inevitability of mixed economy, any answer to that question must strike a compromise between economies mixed in favor of the rich and those mixed in favor of working classes and the poor.
The formulation of that compromise would run as follows: “As much market as possible with as much planning as necessary.”
Yes, maximize incentives that might motivate capitalists to innovate, produce, and create jobs. That’s what Thomas Friedman, Joe Biden, and Denmark’s entrepreneurial classes seek.
But also recognize and implement the interventions in the marketplace necessary to ensure the emergence of a world with room for everyone. That’s really all Bernie Sanders is after: As much market as possible, with as much planning as necessary to ensure that kind of capacious planet.
In the end, this is not a debate about who or what is more Scandinavian. It’s about recovering what experience under FDR and Europe’s welfare states have shown is entirely feasible.