Tag: Mixed Economy

Animal Farm Revisited

I just reread George Orwell’s Animal Farm. That was because I was trying to help my 11-year-old grandson understand the “isms” portrayed in the book, which his class has been assigned for reading and discussion. I’m talking about Marxism, communism, capitalism, socialism, mixed economy, and fascism. They’re all there. And at its early stage of development, my grandson’s class is trying to understand what those terms mean with the aid of Orwell’s allegory.

So, let me try to explain them one-by-one, and then draw some simple conclusions about Orlando’s Orwellian project.

Economic Systems

To begin with, Marxism (simply defined as the philosophy of Karl Marx), hangs over the book like the specter he and Friedrich Engels warn about in the first line of their “Communist Manifesto.” That philosophy holds that (1) capitalism necessarily exploits the working class and the natural environment, (2) workers will rebel against such exploitation substituting socialism for capitalism, and (3) socialism will eventually evolve into communism.

That’s the basic story of the animal farm allegory. A drunken Farmer Jones runs Manor Farm without concern for the pigs, horses, donkeys, chickens, cows, ducks, dogs, cats, and even rats. All the latter live under the capitalist system with its (1) private ownership of the means of production (Manor Farm itself), (2) free and open markets (where eggs and milk are sold), and (3) unlimited earnings (all horded by Farmer Jones). Under that arrangement, Jones gets rich while the animals find themselves overworked, underfed, and highly resentful.

So, they revolt against their master and take over his farm, even changing its name from Manor Farm to Animal Farm. They replace Farmer Jones’ capitalism with socialism which is the exact opposite of capitalism. It’s about (1) public (i.e. community) ownership of the means of production, (2) controlled markets, and (3) earnings limited by considerations of human welfare – reinvesting profits above that into improving community life.

At least in the beginning, all that works out quite well because the animals are guided by a “North Star” ideal called communism (expressed in their popular anthem “Beasts of England”). Communism is an unrealizable ideal (like the Kingdom of God) that guides the planning of socialists. It shoots for (1) abundance for all, (2) consequent elimination of economic classes, and (3) no need for a state (i.e. for a central authority to impose on entire communities the will of the dominant class, be it capitalists or workers).

Eventually however, the Animal Farm project finds itself threatened by a counter-revolution led by Farmer Jones and his fellow capitalists who want to reverse the gains of the animals’ socialism and reclaim their lost private property. Together the dispossessed capitalists launch violent attacks on the socialist experiment. They kill and maim the Farm residents. They destroy their infrastructure (most notably a windmill that would provide electricity for Animal Farm giving workers there with more leisure, light, warmth, and power for labor-saving machinery).

Eventually too, the leadership of the commune realizes that it needs goods and services that it cannot provide for itself, such as iron, nails, and paraffin oil. This realization causes the community to move from a socialist economy to a mixed economy. Mixed economies combine the best features of capitalism and socialism. They incorporate (1) some private ownership and some public ownership of means of production, (2) some free markets and some controlled exchanges, and (3) earnings which though limited allow capitalists to earn profit.

For a while, this new system works. However, Animal Farm leadership becomes so comfortable with their former sworn enemies (the capitalists led by the lawyer, Mr. Whymper) that the community governors gradually identify more with their outside trading partners than with the Animal Farm community. They end up dressing like the capitalists and adopting their ways (such as drinking previously forbidden alcohol, sleeping in luxurious beds, excluding animals from their meetings, and adopting the practice of capital punishment).

All of this enrages Animal Farm residents not only against the capitalists, but against their own increasingly repressive leadership. Rebellion simmers once again on the farm. The capitalists and their Animal Farm allies feel threatened causing them to institute a system of fascism (i.e., capitalism in crisis featuring a union of interest and policy between government and capitalists). Fascism might be defined as (1) capitalism in crisis, (2) forced on resentful workers by a police state and (3) blaming the system’s dysfunctions on “the usual suspects,” viz., communists, socialists, Jews, non-whites, immigrants, and sexual “deviants.” In the case of Animal Farm, Snowball the Pig is a stand-in for all the latter. He’s blamed for everything!

Conclusion

So, what’s the bottom line of Animal Farm? Many see it as a diatribe against socialism and communism illustrating the old saw: “Communism is great in theory, but it doesn’t work in practice.”

Perhaps more discerning conclusions would be that:

  • The book illustrates the clear superiority of socialism over capitalism. The animals were much happier under communal ownership of the means of production than under Farmer Jones.
  • However, capitalists do not give up easily. They inevitably launch counter revolutions involving mayhem, murder, and cynical property destruction – all aimed at making workers dissatisfied with their new situation.
  • Capitalists can also buy off socialist leaders with money, gifts, prestige, and privilege causing them to identify more with their former enemies than with the people they are supposed to serve.
  • Revolution is not a one-off affair. It is a constant process always in need of periodic renewal.
  • Or as Thomas Jefferson put it: “Every generation needs a new revolution.”

Economic Systems: Notes on My Conversation with My 13 year-old Granddaughter

Last evening, my granddaughter, Eva (who’s about to celebrate her 14th birthday) and I had a remarkable hour-long conversation about economic systems. The topic was the focus of one of the classes she’s taking here in Spain, where the government is run by a coalition of socialists and rechristened communists (in a party called “Podemos” (“Yes, We Can!”). Whereas in the United States one can hardly use the word “socialism” without suffering opprobrium, I’ve learned that it’s the opposite here in Spain. Discussing socialism in clear and objective ways is de rigueur in school.,

Since Eva’s classes are in Spanish (and she’s only been here a couple of months), she had a hard time understanding the thrust of her teacher’s remarks and of observations by her fellow students.

So, Eva asked me about the differences between capitalism and socialism — a topic I’ve taught about and have tried to simplify or years and years.

She was very attentive as I shared what I know. Afterwards, we promised to continue the discussion. And to that end, I made up the following notes on the similarities and differences between capitalism, socialism, mixed economies, Marxism, communism, and fascism. I promised Eva that if she just understood and memorized what appears below in bold, she’d be streets ahead of most college students (and many professors!).

I sent her the notes with the following message:

Dearest Eva,

Really enjoyed our discussion last evening. It drove me to compose the attached summary for you. Please study it. Bring your questions the next time we get together for a chat. Learn as much of it as you can. THERE WILL BE A QUIZ!  I’ll expect ready answers to my questions. 

Love,

Baba

Economic Systems

Key Terms

Means of production = what produces consumer goods, viz., land, mines, forests, factories, oceans

Markets: Places where goods are sold and bought

Free Markets: No regulation. Anything (including people) can be bought and sold

Open Markets: Anyone can be a buyer or seller regardless of age or other restrictions

Earnings: Profit, income, wages. . ..

I

Capitalism

(An Economic System comprising the following elements)

1.Private ownership of the means of production

2. Free and open markets

3. Unlimited earnings

[In its pure form, this type of “free market capitalism” exists only in the illegal black market, where the Mafia, for example, sells anything (or anyone) without regulation or paying taxes. Note also that the three points indicated above summarize the ENTIRE economic program of the U.S. Republican Party that always seeks PRIVATIZATION, DEREGULATION OF MARKETS, AND LOWER TAXES.]

II

Socialism

(The opposite of capitalism. It is an economic system comprising the following elements)

  1. Public ownership of the means of production
  2. Controlled or regulated markets
  3. Capped or otherwise limited earnings (e.g., by income taxes).

[In its pure form, socialism does not and never has existed. That’s because ALL economies represent mixtures of capitalism and socialism. That is, they are “mixed economies.” The question is, “mixed in favor or whom — the rich or the poor?”]

III

Mixed Economies

(Economic systems embodying some elements of free market capitalism and some of socialism featuring the following elements)

  1. Private ownership of some enterprises and public ownership of others [e.g., in the U.S. the government (i.e., the public through their elected representatives) is the country’s biggest landowner (through its national park system); it also owns the U.S. postal system, and the rail system. In many other “capitalist” countries, governments also own electrical grids, energy sources (such as oil), water supplies, and transportation systems (like airlines).
  2. Some free and open markets and some that are regulated. [For instance, in the U.S., regulations insist that minors cannot buy tobacco products or alcoholic drinks. Restaurants must maintain standards of cleanliness or risk being closed by government authorities. The same with food factories.]
  3. Limited earnings usually by a “progressive” income tax (meaning that those with larger incomes pay in taxes a higher percentage of their income).

Economies can be mixed in favor of entrepreneurs as in the United States (offering them government subsidies, tax breaks, and deregulation) or in favor of workers as for example in Cuba or China (offering them free healthcare, education, subsidized food and housing, etc.)

IV

Marxism

(The philosophy of Karl Marx, who was a socialist and a communist — see below.) His analysis held that

  1. Capitalism necessarily exploits workers and the environment [“Necessarily” because the market system has workers competing with one another for scarce jobs. They therefore bid one another down as they seek employment until they end up working for the lowest wage possible. Also, few entrepreneurs seeking to maximize profits will ever voluntarily add costs to their production by protecting the environment (e.g., by adding scrubbers to their smokestacks or filters cleansing any effluents pouring into nearby rivers). Those who do protect the environment voluntarily drive up their costs of production and will be undersold and driven out of business by competitors lacking environmental consciences.]
  2. The workers will inevitably rebel against such exploitation, replacing capitalism with socialism.
  3. Socialism will eventually evolve into communism.

V

Communism

(A vision of the future embraced by some socialists.) All communists are socialists; some socialists are communists, most are Marxists who envision a future with

  1. No classes (rich or poor)
  2. No state (because they see the state as enforcing dictatorships – either the “dictatorship of the capitalists” (whereby a small body on boards of directors decide unilaterally on what is produced, where it is produced, and what to do with the profits) or the “dictatorship of the proletariat” (Marx’s term for the working class). Under the envisioned proletariat’s dictatorship, workers, e.g., through their labor unions, and as co-op owners of the means of production decide what to produce, where to produce it, and what to do with the profits.
  3. Abundance for all

VI

Fascism

Police state capitalism. It is the form capitalism (or more accurately an economy mixed in favor of entrepreneurs rather than workers) tends to assume when it is threatened by socialist movements or by other malfunctions such as falling profits, widespread unemployment, high inflation, etc. It is:

  1. Capitalism in crisis
  2. Enforced on workers by police and military forces
  3. Blaming “the usual suspects” for capitalism’s malfunctions (e.g., Jews, Muslims, terrorists, socialists, labor unions, communists, immigrants, asylum seekers, non-whites, women, the disabled . . ..)

Remember: THERE WILL BE A TEST!!

Critical Thinking: Mixed Economies Are All We Have

Mixed Economy

[This is the fourth blog entry in a series on critical thinking which lays out ten guidelines for critical thought. My previous two entries addressed the first rule of critical thought, “Think Systemically.” That rule holds that we can’t really remove our culture’s blinders unless (without prejudice) we’re clear about the meaning of the key systemic terms: capitalism, Marxism, socialism, communism, mixed economy, and fascism. So having already dealt with capitalism, the last installment tried to explain Marxism, socialism and communism in fewer than 1000 words. This week’s episode finishes Rule One by explaining mixed economy and fascism in just three points each. Next time we’ll move on to the second rule of critical thinking, “Expect Challenge.”]

MIXED ECONOMY

Following the Great Depression of the 1930s, the world as a whole has moved away from attempts to implement either pure capitalism or pure socialism. Instead, the trend virtually everywhere has been towards selecting the best elements from each system in a “mixed economy.” As the phrase implies, this involves (1) some private ownership of the means of production and some public ownership, (2) some free and open markets and some controlled markets, and (3) earnings typically limited by a progressive income tax.

Of course what we have in the United States is a highly mixed economy. The U.S. government is, after all, the largest land owner in the nation. Drug, alcohol, food, and medical care markets (and many others) are highly regulated. Following World War II, Americans earning more than $400,000 were taxed at a rate of 91%. Currently, the top income tax bracket is 34%. None of that would be possible under pure free market capitalism.

Similarly, countries claiming to be “socialist” (like Venezuela) or “communist” (like Cuba) have mixed economies. Private enterprise is a key part of both.

Does this mean that the economic systems of the United States and Cuba for example are the same? Not at all. True, both economies are “mixed.” But they differ in terms of whom they are mixed in favor of. The United States economy is mixed in favor of the wealthy and corporations. This is illustrated by consideration of the recipients of recent government bailouts – basically large corporations and Wall Street firms rather than middle or lower class people. The theory at work here is “trickle down.” That is, it is believed that if the wealthy prosper, they won’t hide their money under their mattresses. Instead they’ll invest. Investment will create jobs. Everyone will benefit. So mixing an economy in favor of the wealthy is not sinister; it’s done for the benefit of all.

Cuba, for instance, has a different approach. Its theoreticians observe that historically the wealth hasn’t trickled down – at least not to people living in the Third World (the former colonies). So, (the theory goes) the economy must be mixed directly in favor of the poor majority. The government must adopt a proactive posture and interfere directly in the market to make sure that everyone has free education (even through the university level), free health care, and retirement pensions. Food is subsidized to ensure that everyone eats. And the government is the employer of last resort to provide dignified employment for everyone, so that Cubans are not simply on the dole.

In summary, then, all we have in the world are “mixed economies.” Today, most of them are mixed in favor of the wealthy (once again, on the “trickle-down” theory). Some, like Cuba’s, prioritize the needs of the poor.

FASCISM

What about fascism then? Today the word is thrown around on all sides, and seems to mean “people I disagree with,” or “mean people,” or “those who force their will on the rest of us.” There’s talk of Islamo-fascists. President George W. Bush was accused of being a fascist. Recently President Obama has been similarly labeled.
None of those really capture the essence of fascism. Benito Mussolini, who claimed fascism as a badge of honor in the 1930s (along with Adolph Hitler in Germany, Antonio Salazar in Portugal, and Francisco Franco in Spain), called fascism “corporatism.” By that he meant an alliance between government and large business concerns or corporations.

In terms of Rule One of Critical Thinking, then, we might understand fascism as “capitalism in crisis” or “police state capitalism.” That is fascism is the form capitalism has historically taken in situations of extreme crisis, as occurred in the 1930s following the Great Stock Market Crash of 1929.

More accurately however (in the light of our previous section on mixed economies), we might call fascism police state economy mixed in favor of the wealthy. Fascists are always anti-socialist and anti-communist.

The three elements of fascism then include: (1) A police state (2) enforcing an economy mixed in favor of large corporations, (3) characterized by extreme anti-socialism and anti-communism, and by scapegoating “socialists,” “communists” and minorities (like Jews, blacks, gypsies, homosexuals . . .) for society’s problems.

HUMAN RIGHTS

Both economies mixed in favor of the rich and those mixed in favor of the poor claim to respect human rights. They also blame their opponents for not following suit. The truth is, however, that both types of economies both respect and disrespect human rights. That is, despite claims to the contrary, no system of political-economy has shown consistent respect for all human rights. Instead all systems prioritize them according to what they consider the most basic. This means that capitalism respects some human rights more than others. So does socialism.

Capitalism puts at the top of its list the rights to private property, the right to enter binding contracts and have them fulfilled, as well as the right to maximize earnings. These rights even belong to corporations which under capitalism are considered persons.

On the other hand, capitalism’s tendency is to deny the legitimacy of specifically human rights as recognized, for example, by the U.N. Declaration of Human Rights. For this reason, the United States has never ratified key protocols implementing the Declaration, or other key documents asserting rights beyond the corporate. Moreover, if capitalism’s prioritized rights are threatened, all others are subject to disregard, including the rights to free elections, speech, press, assembly, religion, and freedom from torture. Historical references in the blog entries which follow this one will support that observation.

Similarly, socialism heads its own list with the rights to food, shelter, clothing, healthcare and education. In the name of those rights, socialism relativizes rights to private ownership and the rights to enter binding contracts, and to maximize earnings. If the rights socialism considers basic are threatened, history has shown that it too, like capitalism, will disregard all others.

CONCLUSION

What’s the “take-away” from all of this? Simply this: capitalism is both a simple and complicated system; so is socialism. Both can be summarized quite simply, as can mixed economies, Marxism, communism, and fascism. Capitalism respects some human rights, while disregarding others. The same can be said of socialism and systems that call themselves “communist.”

Critical thinkers should remember those simple summaries and truths about human rights. Doing so will help cut through many of the misunderstandings and distortions that characterize discussion of today’s key issues.