Without a doubt, socialism has to be the most misconstrued term in the political dictionary. Nobody really knows what it means. So here’s our take on how government gets involved with the economy. First, there are five styles.
Communism is max, where everyone works for the state. The minimum is where government exists only to defend the shores, make and enforce laws, maintain a federal currency, and run the post office. It’s called Jeffersonian and was popular in the late 1700s. Other than a few exceptions, neither of these are being used today. Instead, we see mixed economies, where both capitalism and socialism operate together. And they come in three forms:
- High Socialism (most government involvement)
- New Deal (least government involvement)
- New Deal 2.0 (most popular)
High Socialism
Socialism refers to the amount of public ownership in an economy. Total government ownership is found only in communism (along with rules like no private property and everything has to be painted grey). Other than that, there really aren’t any “socialist countries.” Only socialized elements found in every country. For example, we say Canada has socialized medicine but within our system there are capitalist components like private drug plans and cosmetic surgery.
High socialism refers to large amounts of government ownership. It’s found in countries where governments keep certain industries for themselves (typically natural resources and utilities). Common in the developing world, parts of this style remain in Canada where many provinces still run their own liquor business and auto insurance.
And there are valid reasons for high socialism. Namely a country’s population and business environment. If a nation’s population isn’t large enough to support competition, you’re basically forced into having monopolies run the airline, railroad, and utilities. Likewise with developing natural resources. Some nations simply don’t have the required infrastructure (e.g., property rights, rule of law) for capitalism to operate. But remember, a mall in a highly socialized country is essentially the same as a mall in America. Every facet from manufacturers to retailers to food courts are privatized. That’s because even within highly socialized countries, consumer and industrial goods are still produced and sold by the private sector.
New Deal
Initially, we had only one style—1700s Jeffersonian. But in the mid-1800s, people started to feel the benefits of capitalism weren’t being evenly shared. They increasingly saw industrialists as selfish hogs who cared little about the masses. This sentiment grew to spawn the communist movement.
In response to worker uprisings and social unrest everywhere, countries like Germany, England, and France rolled out what would later be called in America, The New Deal. Varying by country, it included programs like unemployment insurance, public pensions, public education, and public health care. Plus, they added laws to ensure labour standards, promote unions, and regulate industry. Communism did make its gains but these steps worked well to retain capitalism in most of the developed world. And socialist policies were adopted into each country’s conscience. Free market economist, Milton Friedman, called it a watershed moment.
New Deal 2.0
Through the 1900s and into the new millennium, many countries grew their social programs to include more items like child care, public transit, free education at the post-secondary level, and increased business regulation. So starting from left to right, it goes:
Communism ⇨ High Socialism ⇨ Large Welfare State ⇨ Small Welfare State ⇨ Jeffersonian
Liberals pull to the left and conservatives to the right. In Canada, this means lefties want new programs like national daycare and complete pharmacare. They’ll lobby for schools to provide no-pay preschool delivered by properly compensated provincial employees. They’ll fight for healthcare to be expanded to cover the cost of all drugs (replacing private plans that do it now) and they’ll want post-secondary education to be free. Throw in a public dental plan and you can almost see the future.
Summary
US senator, Bernie Sanders, is often called a socialist but he’s really not. Bernie is simply a proponent of a larger welfare state. Perhaps for America, this is a safer term. And remember, social safety nets don’t always have to be delivered by the public sector—many times they’re outsourced.
In the end, people change, environments change, and we continue to learn from our past. We also learn about what works best within human nature. The notion of a large and comforting welfare state sounds wonderful, as long as it doesn’t take us back. Liberals openly welcome the change while ardent conservatives feel they erode humanity’s basic sense of self-reliance (plus they wonder who’s paying for all this?). We’ll see.
For more information, see the Economy of Sweden, Welfare in Sweden, and this video. You’ll be amazed by what you find. Sweden isn’t a socialist country as commonly understood, it’s a capitalist one with a large welfare state. As a matter of fact, it’s more capitalist than Canada in a number of ways (e.g., charter schools, privately run hospitals, and their auto insurance is totally privatized, where it’s public in BC, Saskatchewan, Manitoba, and Quebec).