LET’S USE THE PANDEMIC TO BURST THE MYTH OF FREE MARKET CAPITALISM!

As the Trump administration bumbles its way to killing more Americans in six months than died in six decades of U.S. wars, query what remedies can be employed to address the resulting economic disaster. Thus far, only slightly enhanced unemployment benefits and a single, meager direct payment have occurred. This pitiful effort for Americans left jobless by the Covid-19 pandemic was overshadowed by the “Paycheck Protection Program”, a plan for forgivable loans to small businesses to maintain payrolls and avoid further layoffs. This “small business” loan program is a failure, as millions of dollars went to huge national firms. Stanley Morgan noted, “In fact, the U.S. government has allocated at least $243.4 million of the total $349 billion to publicly traded companies…” (Franck, Thomas, Here Are The Largest Public Companies Taking Payroll Loans Meant For Small Businesses, CNBC). Anyone who has read Adam Smith might suggest that well-run firms should have reserves upon which to rely in market downturns, and if not, failure would be a market signal that assets were being used inefficiently.

The overarching theme of capitalism is the myth of laissez-faire – the fairy tale that persuaded Adam Smith that the market could right all wrongs and achieve maximum efficiency without government intervention. However, the modern American marketplace is a unique phenomenon – it acts like a free market when it benefits the richest companies and individuals, but when those people and firms cannot benefit from a free market, they beg for what can only be called socialist market intervention. This is often referred to as “corporate socialism”, but it is really something else – cronyism. In this case of corporate greed, money paid by individuals in tax is handed over to failing corporations and their management teams. The notion which has been advanced by some is anathema to capitalism – the idea that some firms are “too big to fail”. The whole predicate of capitalism is the notion of “sink or swim” in the market – that the only firms which will survive are those which efficiently allocate their resources to meet consumer demand and gain a market share as a result. However, we know that connectivity of power and money precludes actual market failures for most wealthy firms and investors, at least in the traditional sense.

An interesting feature of virtually every nation’s pandemic “stimulus package” is their similarity. Most initiatives include direct payments to citizens and large subsidies to businesses, often forgivable loans, or government purchases of corporate debt to provide market liquidity. Many would call these distributive policy initiatives “socialist” in nature, and not without reason.

Most Americans are at sea about the definition of socialism. In fact, there are whole libraries filled with volumes attempting to define socialism or limit it as a critique of capitalism, and many respected scholars have had careers consisting of that very endeavor. However, much as a famed jurist, once said that while he couldn’t define obscenity, “I know it when I see it”, I suspect many Americans who have no idea what socialism is, claim to “know it when they see it”. If Americans do not know what socialism is, how can they oppose – or support it? If we are to open minds and persuade logical souls that socialist policies can improve lives, a new approach is required. Imagine a population taught that chocolate is bad and to avoid it – and yet, have never tasted chocolate. If you were to blindfold them, hand them a piece of chocolate, and tell them to sample the unidentified treat, the vast majority would say, “Oh, yes, I love it!” Our remonstration would end with, “THAT is chocolate!”.

In that regard, if stimulus packages (and other government programs) were properly characterized – redistribution, government control of some production, and government management of the economy, many people who think they “know socialism when they see it” might become converts to the familiar taste of “chocolate”, as socialism would be redefined as a helpful and even necessary tool during a catastrophic economic collapse. When America faced its greatest economic challenge, the Great Depression, only vast government expenditures of the New Deal, and its “alphabet agencies” of expanding government workers saved this nation. Well, guess what, America? That was socialism, too – and you can confirm with your grandparents – the chocolate they had in the 1930’s tasted good then too!

Capitalists will cry foul, but a review of central banking practices which prop up capitalists globally reveals that there is nothing “free market” or laissez faire about central banks buying or selling government or corporate debt. That is direct intervention into the markets to manipulate them - about as far from laissez faire as one can get! Yet, supposed “capitalists” cheer on the interventionist practices which could just as easily could have been orchestrated by the Russian central bank or the Chinese central bank in their respective systems. When the Fed tosses billions (or trillions!) into the market to prop up businesses with poor capital structures and inadequate cash reserves, it’s a “liquidity facility”, and Americans accept it as a complicated financial matter they’d rather know nothing about. Moreover, new policy rumors have been floated which tell us to expect the Federal Reserve to start buying private equity shares to prop up private companies failing in the “pandemic economy”. Think of that objectively, a “quasi-governmental” entity buying private company shares – that sounds awfully close to government ownership of the means of production (the EXACT definition of socialism), doesn’t it?!

It seems all part of the same story - the myth of “free market capitalism” has been swallowed hook, line, and sinker by most of the population. The same down-to-earth types who use quaint aphorisms like “if you put lipstick on a pig, it’s still a pig” accept redistributionist, interventionist or socialist policies all the time, but mistakenly accept them as part and parcel of the myth of “complicated market concepts” in their vaunted free market capitalist system.

Don’t you think that if people were asked specific questions about their attitudes towards policies without regard to ideological name tags, the results would look quite different? There is no rational argument against quick distribution of government cash to people in need. There is also no rational way to characterize such an action as anything other than socialist in nature. Yes, that chocolate does taste good, doesn’t it?

Professor Michael Eaton