Showing posts with label Alexandria Ocasio-Cortez. Show all posts
Showing posts with label Alexandria Ocasio-Cortez. Show all posts

Sunday, February 10, 2019

What is Democratic Socialism and does Trump Need to Protect Us from Sanders and Ocasio-Cortez?


What does it mean to be a Democratic Socialist and are Bernie Sanders and Alexandria Ocasio-Cortez supporters such that Trump needs to protect us from them as he declared in his State of the Union speech?

The simple answer is that historically democratic socialism meant democratic ownership and control of the means of production or of the economy, including major corporations.  Democratic socialism is not simply providing government benefits such as Social Security or health benefits.  This is enlightened capitalism or welfare state capitalism but certainly not socialism.  Conflating all this with democratic socialism is simply another effort to Red bait anyone who believes in government helping others.


 In 2015 Sanders declared:
And what democratic socialism is about  is saying that it is immoral and wrong that the top one-tenth of 1 percent in this country own almost 90 percent - almost - own almost as much wealth as the bottom 90 percent.  That it is wrong, today, in a rigged economy, that 57 percent of all new income is going to the top 1 percent.

That when you look around the world, you see every other major country providing health care to all people as a right, except the United States.  You see every other major country saying to moms that, when you have a baby, we're not gonna separate you from your newborn baby, because we are going to have - we are gonna have medical and family paid leave, like every other country on Earth.

For Sanders, economic justice and leveling the opportunity and income gap between the rich and poor is what part of what it means to be a democratic socialist.  Yet historically the term has meant  more that economic justice, it also included democratic control of the economy.

Democratic socialism emerges as a political movement in response to Karl Marx’s criticism of capitalism in the mid nineteenth century.  To simplify, Marx had argued that the core problem of capitalism was  a class exploitation and struggle between the bourgeoisie and proletariat where the latter sells labor power which is extracted as surplus value by the former.  The bourgeoisie own the means of production and over time in their race to maintain profits they increasingly replace human labor power with machines, they drive down wages placing more and more individuals into poverty.  This process creates an economic crisis, intensifying class struggle, and eventually creating conditions for a capitalist struggle.  As the theory was eventually amended by Engels, it suggested an economic inevitability for the revolution.  With Lenin, the communist party would serve as a vanguard movement to lead the revolution.  As further amended by Stalin, this party in practice was highly undemocratic.

Starting in the late nineteenth century individuals such as Eduard Bernstein in Evolutionary Socialism argued that the revolutionary tactics and economic inevitability of the revolution were not  practical or certain.  He and others agreed with much of the basic criticism of Marx but instead tied the future of a classless society to parliamentary democracy.  Specifically, the emphasis was upon linking universal franchise to socialist ideals with the hope that socialism could be brought about by elections.  For Bernstein, socialism was an ethical imperative, it was about treating everyone with respect, and it was grounded in the French Revolution ideas of promoting “Liberty, Equality, and Fraternity.”  It was taking the ideals of political liberalism and translating them into economic democracy.  In effect, workers would have democratic control not just of the government but of the economy.

There was serious debate over whether parliamentary socialism was possible, with writers such as Rosa Luxemburg, Karl Kautsky, and Leon Trotsky reaching various conclusions.  But the core argument about what constituted democratic socialism centered on democratic control of the marketplace–it was democratic control of capitalism.  It was about ensuring that workers and not capitalists made decisions about what to invest, not letting the choice simply remain in the boardrooms of corporate executives.

The dividing line between democratic socialism and what we might call enlightened capitalism or liberalism is significant.  John Stuart Mill’s Principles of Political Economy argued that social injustices could be addressed by simple redistribution of economic resources–the classic welfare state.  Here the government would tax the rich and redistribute economic resources, or use its power to improve the economy.  Eventually this would be the Keynesian economics of the New Deal and Great Society.  It is state capitalism for the benefit for middle class and poor, but it is still capitalism.  Yes, the government can act and manipulate the economy for the benefit of the people, but it can also do that for the benefit of the rich.  This is what the US government has essentially done for the last couple of generations, and this is the criticism that Sanders is leveling.

In so many ways, Sanders is a left liberal following Mill and Keynes–we can use state capitalism to augment  economic redistributions–but he is not a democratic socialist in the classic meaning where the emphasis is upon democratizing both the political and economic systems.  It is about subordinating market choices and the free market to serving democratic imperatives.

Michael Harrington was perhaps America’s finest theoretician of democratic socialism.  He was one of the founders of the Democratic Socialists of America.  His book The Other America in the early  1960s is one of the clearest criticisms of American capitalism and it inspired many.  But in his Socialism Past & Future he crisply defines democratic socialism as:

[D]emocraticization of decision making in the everyday economy, of micro as well as micro choices.  It looks primarily but not exclusively to the decentralized, face-to-face participation of the direct produces and their choices in determining the matters that shape their social lives.  It is not a formula  of a specific legal mode of ownership, but a principle of empowering people at the base...This project can inspire a series of structural reforms that introduce new modes of social ownership into a mixed economy.

Democratic socialism is not the central state planning of the economy where the government owns  all the businesses.  It is as Alec Nove describes in the Economics of Feasible Socialism a variety of business types, but all are connected by the idea that there is democratic control over basic economic choices.  What China has with its state-owned enterprises is not socialism, it is state capitalism, and mostly to the benefit of a few.  Few Chinese have much say over the economic choices being made in that country, one where there is a sharper and sharper class divide.

Democratic socialism for Harrington, and Dorothy Day, as well as Norman Thomas, Eugene Debs, and Emma Goldman, is also as Bernstein argued, infused with ethical imperatives about respecting human dignity and the banner of individual rights as articulated by classical writers such as John Locke and John Stuart Mill. Democratic socialism would assail  the power of the rich and of corporations in America, contending that is not enough just to tax them and redistribute wealth.  Instead, it is about saying they do not get to make the political and economic choices that govern the rest of society.  It is saying that the people get to own the economy and decide for themselves.  Capitalism does not dictate how democracy operates, it is vice-versa.

This is what democratic socialism has historically meant. Sanders may or may not be one or he may be redefining what the term means.  But orthodox democratic socialism is something different than what Sanders described in 2015, what Trump disparages, and what so many think of when the discuss matters such as free health care, college education, or other programs.

Monday, January 7, 2019

Alexandria Ocasio-Cortez and High Taxes on the Wealthy: Do they matter?


Let me tell you how it will be
There's one for you, nineteen for me
'Cause I'm the taxman, yeah, I'm the taxman.

–Beatles, The Taxman

Taxes impede economic growth and high taxes kill the economy, right?. This is the belief among many who criticize Representative Alexandria Ocasio-Cortez’s proposal to raise taxes on the wealthy to 70% or more.  But what does the evidence really tell us?

Do high taxes really hurt the economy as much as they believe, and will lowering them have much of an impact on stimulating it? The economic literature is clear — tax breaks to encourage economic relocation or investment decisions are inefficient and wasteful. Hundreds of studies reach this conclusion. When businesses are surveyed regarding factors important to their investment decisions, taxes often come in behind proximity to markets, suppliers, and the quality of the labor force. These other factors occupy a larger percentage of a business's budget than do taxes, and all of them are far more critical to long-term success than are taxes. Businesses occasionally admit this. Nearly 62 percent of those interviewed in a California study on hiring tax credits indicated that they had never or rarely affected their decision to employ individuals.

Anecdotal stories and illustrations also confirm the tax fallacy. High tax states such as Minnesota have generally fared better in terms of economic growth, unemployment, median family incomes, and location of Fortune 500 companies than low tax ones such as Mississippi and Alabama. In many situations high taxes, and with that, government expenditures on education, workforce training, and infrastructure, correlate positively with income, low unemployment, and business retention. One needs to look not just a one side of the equation—taxes—but the other side too—what taxes buy—to see what value businesses get out of them in terms of educated workforces and infrastructure investments. Most debates fail to do this.

Bureau of Economic Analysis statistics demonstrate how economic growth is related to tax rates. One can compare annual economic growth as measured by the percent change in the gross domestic product (GDP) percent based on current dollars to the highest federal individual tax rate and the top corporate tax rate since 1930. If taxes are a factor affecting economic growth, one should see an inverse relationship between growth of the U.S. economy and higher tax rates. The GDP should grow more quickly when top individual and corporate tax rates are lower. If taxes are a major factor deterring economic growth, lines on a graph should go in opposite directions: As tax rates go up the GDP should go down.

No such pattern emerges between high taxes and GDP growth over 80 years. During the Depression of the 1930s corporate and individual taxes rates increased, but in 1934 through 1937 the GDP grew by 17%, 11%, and 14% annually. Top corporate tax rates climbed to over 50% through the 1960s, again with no discernable pattern associated with decreased economic growth. The same is true with top tax rates on the richest which were 91% into the 1960s. Conversely, since the 1980s after Kemp-Roth and then after 2001 with the Bush era tax cuts, there is no evidence that the economy grew more rapidly than in eras with significantly higher tax rates on the wealthy and corporations.  The same is true even of the much heralded 1960s Kennedy tax cuts.  While at one time economists thought they had an almost magical impact on the economy, more recent evidence questions that.

Looking at time periods when tax rates were at their highest, GDP often grew more robustly than when taxes were cut.

Pictures are worth a thousand words, but statistics are priceless. Statistically, if a tax hurts economic growth, the correction with it is -1. If they positively facilitate growth the relationship is 1, and if they have no impact the relationship is 0. The correlation between GDP and top individual taxes is 0.29, between GDP and top corporate taxes is 0.32, and among the three it is 0.14. Statistically, there is a slight positive impact on either top individual or corporate taxes or economic growth, but overall almost no connection between tax rates on the wealthy and corporations and economic growth in the United States.

But what about taxes as job killers? Again running similar statistical tests, there is little connection. Using Bureau of Labor Statistics data on unemployment rates since 1940, the correlation among top individual and corporate taxes and the annual unemployment rate is -0.02—essentially no connection at all.

The simple claim that high tax rates on the wealthy and corporations hurt economic growth and job production is false. The evidence is simply not there to support assertions that high taxes alone hurt the economy or that cutting them will have the stimulus effect asserted.  Representative Alexandria Ocasio-Cortez may be correct that increasing taxes on the wealthy will not only be more fair, but an efficient means to stimulate the economy, help the poor, and generate the resources necessary to fund a fair and equitable America.