Prosperity was one cause; it weakened revolutionary consciousness. The economy enjoyed some natural advantages: fertile land, ample resources and good harbors. But the larger cause was the resistance of American workers. Obsessed with “getting ahead,” they felt that socialism might hold them back.
“I believe that emotionally the American worker has a share in capitalism: I believe he loves it. Anyway, he devotes his entire body and soul to it. . . . The worker . . . wants to earn as much as his strength will allow, and to be as unrestrained as possible.”
Well, history has finally caught up with Sombart. The term “socialism” is now increasingly bandied about by pundits, scholars and presidential candidates. The result is much confusion. Many Democrats deny that their proposals (say, Medicare-for-all) are socialism; Republicans claim that they are, trying to tap into Americans’ historical opposition.
Let’s try to dispel some confusion.
It’s true that traditional socialism has fared poorly in recent decades. This strand of socialism, following Karl Marx’s political timetable, involved government owning more and more of the “means of production” — entire industries — for the good of the proletariat. Central planning, not markets, determined what would be produced and by whom, in theory.
After World War II, this traditional socialism flourished in Europe. The Great Depression had discredited private enterprise. Britain — one example — went on an orgy of nationalizations: coal, 1946; electric power, 1947; railroads, 1948; steel, 1951. Later, ailing car companies joined the list.
It was an unhappy experience. Writes economist Marc Levinson in his absorbing “An Extraordinary Time: The End of the Postwar Boom and the Return of the Ordinary Economy”:
“[The unions at state-owned firms] repeatedly won large wage increases unmatched by productivity improvements. . . . Management was in disarray, because experienced private-sector executives were reluctant to take on jobs in which key decisions were determined . . . by the government.”
As other countries faced similar problems, nationalizations waned and privatization — the selling of state-owned firms — gained. Democrats discount the failures of Marxist socialism, which (it’s argued) differs fundamentally from what’s being proposed today: These are mostly income transfers for the poor, the aged and the middle class.
That’s relevant up to a point. It’s true that modern socialism, as opposed to the traditional strain, is mostly about the welfare state. But the ultimate goal is similar. It is to control as much of the economy as possible to advance agendas of economic and social justice — to edge toward the socialist ideal of “from each according to his ability, to each according to his need.”
This has already produced huge changes. In many advanced countries, government spending constitutes roughly half of the economy’s output (gross domestic product). In 2017, the figures were 56 percent in France, 44 percent in Germany, 49 percent in Sweden, 49 percent for Italy and 41 percent for the United Kingdom, reports the Organization for Economic Cooperation and Development (OECD).
It is here that the U.S. experience increasingly resembles that of other advanced countries. In 2017, U.S. government spending for national, state and local budgets was 38 percent of GDP, according to the OECD’s calculations. If the part of health care that is not now financed by government — approaching 10 percentage points of GDP — is added to existing government spending, the U.S. total would be comparable to that of many European countries.
This is where Sombart becomes less relevant or, perhaps, not relevant at all. Americans are now all socialists in the sense that they broadly support the programs (Social Security, Medicare, Medicaid, food stamps, unemployment insurance and others) that constitute the largest share of government spending.
We don’t call these benefits “socialism,” because that would, given our history, stigmatize them, and we don’t want to do that. They enjoy public approval, because they seem the decent thing to do, and of course, they now have millions upon millions of beneficiaries who magnify their political clout.
Both parties are addicted to this socialism, though Democrats are more so than Republicans. Just because it is inconvenient to question the drift toward an ever-larger — even socialist — welfare state does not mean we can escape the possible consequences of moving in this direction.
Is the collective weight of higher government spending, taxes, budget deficits and regulations permanently eroding the economy’s capacity to grow? Could Europe’s sluggish growth indicate that some countries have already reached their limits? Could we be next? The questions linger even if we ignore them.
Read more from Robert Samuelson’s archive.