This blog post is republished from an entry posted on August 17, 2016 by Ellis Winningham, who wrote about MMT and modern macroeconomics. The relevant website is now defunct, but this article was retrieved from the Wayback Machine on 9/14/2020, as of 30 May 2018. It deserves to be read, and read again. Any emphasis is mine.
There is an immense problem with the term “socialism”, especially in the United States, where the word is abused endlessly by right-wing politicians, “free market” enthusiasts and now, even liberals have joined the red-baiting bandwagon, labeling former Sanders supporters, many of whom are now Stein supporters as “socialists” and any proposed economic initiatives as “socialism”. This is the result of a successful long-term propaganda campaign of intentional misinformation which causes the general public to view any public purpose spending as socialism and so, they irrationally fear the public purpose. Meanwhile, the 1% reaps the benefits through continued abuse of an unwitting public, allowing them to profit at the expense of the national economy and society. Let me assure you that there isn’t an academic definition of socialism for those of us who possess degrees and then an entirely different one for the general public. It doesn’t work that way. There is only one definition of socialism and we will discuss it today, because the nonsense needs to stop.
Many people think that universal healthcare is socialism. It is not.
Many people think that public schools and free college education are socialism. They are not.
Many people think that welfare is socialism. It is not.
Many people think that police and roads are socialism. They are not.
And many people now think that a federal Job Guarantee is also socialism. It is not.
I mentioned “red-baiting” a moment ago. It’s important to our discussion. Some of you, especially the younger generation, might not know what it is. Back in the 1950’s when the Soviet Union was the world’s enemy and the Cold War was in full swing, prominent politicians were certain of a communist conspiracy afoot in America and elsewhere in the western world and told every American to fear communist subversion.
A whack-job named Senator Joseph McCarthy rose to prominence in 1950 and led a highly un-American nation-wide campaign to root out every last commie. He claimed that communist spies were everywhere, lurking in the shadows, awaiting the opportunity to lure our children in and poison their minds. They could be teaching in our schools, working at the post office, acting on the silver screen, writing books, pumping gas, bagging groceries; they could even be in the highest levels of government. He began accusing people by name of being communist spies and sympathizers. Given the public’s fear of the Soviet Union – the result of intense Cold War propaganda – most people believed McCarthy’s accusations. This caused many to fear ending up on McCarthy’s “hit list” so to speak. The Senator’s tactics became known as “McCarthyism”.
McCarthy’s wild and unsubstantiated accusations, labeling people communists or communist sympathizers, is what we call “red-baiting”. It is a fear tactic that is used today, mostly by those of a right-wing political persuasion, to either derail or totally silence progressive political opinion and initiatives. Because the Soviet Union is long gone, the words communism and communist have mostly fallen into disuse by politicians and the general public. Today, “red-baiting” takes the form of accusing people and their ideas of being socialist. Of course, there are delusional individuals on the far right such as “the Tea Party” who accuse people of being a “fascist, Marxist, socialist commie” (whatever that is), but on the whole, accusing people of socialism is the new “red-baiting”.
Like communism, socialism is seen as un-American, unpatriotic, anti-freedom and most importantly and relevantly, “anti-free market”. If you’ve followed my articles for any length of time, you’ve learned that there is no such thing as a “free market” when a national government like the US federal government, issues its own sovereign currency. Because the market uses the government’s US Dollar, the government has the authority to regulate that market as it sees fit for the benefit of the nation. The market does not make laws and so, does not have the authority to determine what is best for the nation. That is the job of the federal government. In a modern monetary economy, the US government is the monopoly issuer of US Dollars. They come from nowhere else in the world. It is the issuer and since its US Dollar floats freely on an exchange (See FOREX) and is non-convertible fiat, it has an infinite supply of US Dollars at all times. It needs no income to spend. And when you are but a mere user of the federal government’s US Dollar, like the market is, you are entirely dependent on the federal government for your survival. There is no such thing as a “free market” and “free market ideas” cannot successfully function, nor can the market self-regulate for the simple facts that the market has no authority to create laws and it can run out of US Dollars and go broke. Involuntary bankruptcy is not possible for the federal government. It is the sovereign to which the market is subject. With that out of the way, let us turn our attention to what socialism actually is versus what many people incorrectly think it is.
Socialism is the complete control over the means of production by the workers (the people), with government as the people’s central representative authority. It need not be democratic. For instance, in authoritarian socialism, a regime could take charge of the federal government and seize the entirety of production, leaving the people as slaves to the state. Democratic socialism, on the other hand, is the democratic control over the means of production. Here, the federal government controls the entirety of the production infrastructure and the people have a democratic say in employment conditions and the direction output takes. But what is important here is that socialism, whatever flavour, means the complete control over the means of production. It is the throwing off of capitalism altogether and the restructuring of the entire economy and society to one of central planning. Public purpose spending for programmes such as universal healthcare cannot and will not result in the entire means of production in every sector shifting from independent businesses to government control. Such thinking is nonsense.
Because the federal government is the highest public authority and charged with the duty (US Constitution, Article 1, Section 8) to issue US Dollars, it must issue currency with the intent of serving the needs of the public in its entirety, not just a few private individuals and entities. The US Dollar is public “money”; the sole product of the federal government and must be issued for the public purpose. What then is the public purpose? That which benefits the entire nation.
1.) The provisioning of the federal government with goods and services, ensuring that it can properly function for the benefit of the nation.
2.) Military spending for defense of the nation.
3.) Infrastructure – transportation, railways, airports, roads and highways, bridges, power grids and energy resources, hospitals, buildings and ports.
4.) Indefinite full employment which allows for perpetual economic stability, ensuring that whatever the United States produces can be purchased by consumers.
The US government – A public entity. US Dollars – Public currency. All US citizens – The public.
Private markets – Social and individual activities within the national boundaries that are not conducted by agencies of federal, state or local government, nor a function of federal, state or local government, but which are entirely dependent on public funds issued by the federal government to function and are subject to the laws of the land – full stop.
As time advances, new technology arises that enhances the quality of life and the security of the citizenry. The US Air Force is clearly not mentioned in the US Constitution, precisely because nobody alive in 1791 could completely envision a future where man could fly, let alone use the flying contraption for defense of the nation. Hence, the US Air Force was created and is now funded by the US government to meet the needs of the military, or more precisely, to meet the needs of the public purpose.
As the US government is the sole currency issuer and as it has an infinite supply of that currency and as its constitutional duty as that sole currency issuer is to issue US Dollars for the public purpose, only the US government can ensure that infrastructure can be fully modernized, that full employment can be sustained indefinitely, that disease and spinal cord injury research can be properly conducted, that the health needs of the public, whatever the treatment needed, can be completely looked after, that the educational needs of our children and college students can be met without financial hardship.
And so, we continue with our list of what constitutes the public purpose. The question is never “how do we pay for it?” The question is always “Does the United States have the real resources available to meet the needs of the public purpose?”
5.) Education – an uneducated populace hinders today’s economy as well as a future economy by obstructing advances in technology necessary to increase the citizenry’s standard of living and enhance their quality of life as well as the expertise needed to work with that technology. Student loans do not advance education, but rather, damage today’s economy and mortgage the nation’s future by leaving students who are lucky to be employed spending a large chunk of their income on debt, rather than on goods and services today, resulting in unemployment. For those who cannot find a job in their field due to reduced consumer spending, their intellect and input remain idle, thus obstructing the advance of technological development for tomorrow. Those who cannot afford college and do not wish to go deep into debt to pay for it, forego a beneficial education, further compromising a future economy.
6.) Healthcare – an unhealthy workforce is an inefficient workforce, hindering production. An unhealthy populace means a reduced labour supply, which in turn, means reduced output capability. A population burdened by healthcare costs means debt and bankruptcy and so, reduced consumer spending which then contributes to persistent unemployment and reduced output.
There were no iPhones, cars, refrigerators and airplanes in 1791, legs and arms were amputated regularly for injuries that are easily treatable today, dentistry was questionable, people died of diseases that are easily treatable today. You cannot operate a modern monetary economy from a 1791 perspective, unless you are willing to forego all of the advancement from that day to this. Two hundred years from now, things will have advanced even further and that which is related to the public purpose will only expand, along with the federal government’s spending to ensure it. The failure of the US government to advance the public purpose through deficit spending is detrimental to the people’s standard of living, their quality of life and the nation’s security.
Understand me clearly here – a capitalist framework does not imply a restricted public purpose. Whatever technology is developed by private entities using the government’s US Dollar that enhances the quality of life of the citizenry, increases their standard of living and ensures the nation’s security, that technology has a public purpose and the federal government has a duty to fully utilize it for the common good. I am not saying here that the federal government must seize control of the technology and all sectors of production (socialism), but utilize it, fully funding both national programs which the public can access free of charge and fully funding the private entities developing that technology through appropriate levels of deficit spending, resulting in increased consumer spending, thus increased private profits and development (capitalism).
Within capitalism, there is still the federal government at the head. It is the centerpiece of a modern monetary economy and issues the currency necessary which capitalism uses to function. Universal healthcare is not socialism. Free primary and secondary education is not socialism. Police and roads are not socialism. A federal Job Guarantee is not socialism. It is capitalism functioning properly and efficiently within a modern monetary economy.
When the state seizes control over the entire means of production, issuing three and five year plans for production across every, single sector, then you can call it socialism – not before.
Stop listening to the right-wing fear-mongers and talking heads who would have you looking for Bolsheviks under your bed every night. America’s Constitution is sound, and despite efforts by The Thermonuclear Bowel Evacuation Currently Disgracing the Oval Office to destroy everything good that our nation stands for, we will never become a Soviet wannabe.
The Old Wolf has spoken.