Free Markets, Free People

ownership


Podcast for 07 Jun 09

In this podcast, Bruce, Michael, and Dale discuss the Obama “Muslim” speech, and the socialization of the economy.

The direct link to the podcast can be found here.

Observations

The intro and outro music is Vena Cava by 50 Foot Wave, and is available for free download here.

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Socialism In America

Perhaps the time has come to be perfectly frank. We Americans live in a socialist country. In point of fact, we have for quite some time, even though private property has a long, continuing and still revered position in our society. To be sure, we aren’t an entirely socialist country, but instead a mixed one that teeters between the two extremes of collectivism and freedom (i.e. socialism and capitalism). In the past century or so, however, the scale tipped noticeably toward the socialism side, and we are now at the point where capitalism is not the dominant force. Of course, there are many who will disagree with my assessment.

Conor Clarke, for example, offers the following to dispel notions that we have become a socialist country:

Government vs. Private Ownership

Government vs. Private Ownership

Conor explains:

Have you heard that the United States is headed toward socialism? Jonah Goldberg says it is. Alabama Senator Richard Shelby says it is. Phyllis Schlafly says it is. Richard Viguerie says it is. The Republican National Committee says it is. We must be getting pretty close.

[...]

The hot-pink portion of this pie chart is the percentage of listed American business assets that have recently been nationalized by the American government (ie, General Motors). Obama’s version of socialism is so sneaky you can hardly see it!

(And there is some reason to think this actually overstates the portion of the corporate landscape that’s been nationalized, but more on that at the end of the post.*)

While the chart above would appear at first glance to be pretty dispositive of the issue (if the federal government owns so little, can we really be socialist?), it actually begs a huge question. If the segment of the economy effectively nationalized in the past several months is so vanishingly small, why is it necessary for taxpayers to fund trillions of dollars to save it? We’ll come back to that.

Next, Jon Henke observes:

NOTE: The fact is, American has always had a mixed economy, as do all modern, developed economies. The question is not one of category – capitalism or socialism? – but of degree.

[...]

Obama is not socialist. But he is more comfortable with centralizing economic power. As that centralization proceeds, the focus of public interest will shift from “how do we fix the immediate economic problems?” to “how do we fix the problems we created when we tried to fix that temporary problem?” That is when the pendulum can swing back towards decentralization and individual empowerment.

Jon takes a more organic view of the subject. That is, he posits the governing structure of the US as subject to the tolerance of the polity for centralized control of the economy. In his view, just because Obama “is more comfortable with centralizing economic power” that does not mean that we have become a socialist nation. Instead, we are merely experiencing a swing of the political pendulum towards socialism that will inevitably swing back towards the capitalism node. Left unsaid is how often that pendulum has swung away from socialism in the past 100+ years. More importantly, Jon’s assertions beg their own question — i.e. how “comfortable” must a politician and/or the populace be with centralized power before we can safely label it socialism?

In addition to the above, another line of argument is sure to be made (if it hasn’t been already) that we cannot possibly be a socialist country because private property has not been outlawed and the people as a whole do not own and control the means of production. Truly, this is the argument that Conor attempts to support with his graph (not that Conor necessarily agrees with that argument, just that he is holding up evidence that would tend to suggest socialism is not at hand). Essentially, although socialism comes in many forms, a primary ingredient is that the state (on behalf of the people) have dominance over the means of production instead of private concerns. The most extreme form, of course, is where all private property is abolished and the state decides what will be produced, by who, when and how much. Much milder versions such as social democracy exist today that, while they allow private property and much more freedom than, say, Stalinist North Korea, maintain a firm grip over the economy as a whole. Is there any doubt that Germany is a socialist country for example? The question then is, where does America fit when it this spectrum of socialist possibilities, if it fits at all?

At bottom, the problem with these sorts of arguments is almost always definitional. If I start arguing that communism never works and use the Soviet Union as an example, someone is sure to pipe up “that wasn’t real communism” followed by a neat explanation how Lenin and Stalin perverted what the true communists wanted in order to seize power for their own means. In order to avoid that annoyance, let’s at least agree on the dictionary definition of socialism:

An economic system in which the production and distribution of goods are [owned and] controlled substantially by the government rather than by private enterprise, and in which cooperation rather than competition guides economic activity. There are many varieties of socialism. Some socialists tolerate capitalism, as long as the government maintains the dominant influence over the economy; others insist on an abolition of private enterprise. All communists are socialists, but not all socialists are communists.

The definition above comes from the The American Heritage® New Dictionary of Cultural Literacy, Third Edition, and I think sums up the idea nicely. The one thing missing is the word “ownership” which, I expect, someone will insist upon, so I’ve inserted the words “owned and” into the definition. As luck would have it, this is the very concept that I think is missed by almost everyone who discusses whether or not we are a socialist country.

Specifically, what is the difference between ownership and control? Looking again to the dictionary, here is a good legal definition of “ownership”:

“one’s exclusive right of possessing, enjoying, and disposing of a thing.” 72 So. 891. The term has been given a wide range of meanings, but is often said to comprehend both the concept of possession and, further, that of title and thus to be broader than either. See 139 N.W. 101. See fee simple.

The primary concept behind ownership is that of exclusivity, such that if I own real property, for example, I can by right exclude all others. Without the ability to exclude, my “ownership” is something less than complete and the use, enjoyment and alienation (a fancy word for selling, trading or giving away) of property is limited.

To illustrate the idea, consider that you own a piece of real property (Blackacre) which is rich with gold and silver mines, oil, and an abundance of flora and fauna. In short, it is a little slice of heaven and it is all yours. Or at least it would be if were not for the fact that the flora are mostly designated as protected, the fauna are all listed as endangered, and the mineral deposits are tightly regulated, all to the extent that you cannot make any real use of your land except to look at it from a neighbor’s yard in humble admiration for its splendor. Not only are you prevented from drilling or mining on your property, you cannot even build a house or structure of any kind because that might disturb the protected species. The rules and regulations governing Blackacre are so ominous, that you can’t even sell it without first offering it to the government for a price it will set in its own arbitrary discretion. Furthermore, just on the other side of Blackacre is the Pacific Ocean fronted by a lovely beach, to which the law declares access must be allowed for the public, and there is nothing you can do to prevent them from traipsing across your wonderland. In short, you may own Blackacre in title, but you have very little, if any, control.

Of course, at least here in America, the laws and regulations aren’t quite that strict. And the vast majority of people would agree to at least some controls over private property to prevent the owners from harming other property or people (e.g. pollution, building setbacks to prevent fire, etc.)[ed. - let's ignore Coasean bargaining for now, shall we?]. At some point, however, those restrictions on the owner’s use become so burdensome as to effectively deprive the owner of any real control. The same can be said for the ownership of capital, which can be anything from money to a large factory for building tractors. When the government sets up enough rules and regulations affecting the use and enjoyment of that capital, the fact that ownership is nominally in private hands does not somehow render that government as something other than socialist.

Now, getting back to our definition of socialism, which is more important, “ownership” or “control”? To my mind, this isn’t even a close call. Without control, ownership is next to meaningless. Therefore, if the state has the ability to control the means of production (a.k.a. capital), whether directly through ownership, or indirectly through law and regulation, I contend that such state should be deemed socialist.

Think of a scale that measures the owner’s rights in her own property and how, with each new government missive, that ownership indication drops a little more. Where the state’s intervention becomes intolerable will be different for each person, but from a definitional standpoint, that intervention represents socialism. When the scale registers a significant enough intervention into the owner’s rights, socialism becomes the prevalent factor in the control of property, and private, capitalist “ownership” is either dulled or altogether neutered. Again, without the ability to control that capital, ownership is a meaningless concept that should be left out of the conversation.

Accordingly, when Conor suggests that we are not a socialist nation because the government only owns an almost immeasurable portion of the corporate assets of this country, I suggest that he use a new measurement. Specifically, one that measures the amount of control that “owners” have over their property/capital/etc. That graph would look significantly different in my estimation.

Furthermore, when Jon states that Obama is not a socialist, he’s just comfortable with centralizing economic power, I ask that he consider what ways centralizing power (i.e. control over the means of production) is not socialist, and that he provide a few examples for clarification. Also, if the pendulum is going to swing back towards more decentralization (i.e. less control over capital), how far back would it have to go before most people could be reasonably certain that we are not, in fact, a socialist nation? How far back does he think it would have to go, or is his contention that the pendulum simply hasn’t swung into socialist territory? In considering those questions, I’d ask that the concept of control, rather than titular ownership, be the dominant factor in deciding where the state stands vis-à-vis socialism.

As I see it, we’ve been living with socialism in this country for a very long time. The only difference has been one of degree and magnitude. Its pervasiveness has ebbed and flowed over the decades, but American’s tolerance for it has grown substantially, even if many of us don’t like to call the governance we desire “socialism.” Unfortunately, that’s exactly what it is, and it’s only going to become more prevalent and intrusive. After all, why would anyone who is comfortable with centralizing economic power stop it? They’ll just call it something else and move on with asserting they’re control until one day you’ll be gazing longingly at Blackacre from the public beach, because that’s the only place where you can legally see it.