Socialism Comes to America?

By Chris Monday

Last month witnessed the abrupt metamorphosis of the state into the core realtor, investor, and banker of the U.S., an event which has warranted some to speak of the dawn of a socialist epoch.

Undeniably, the Treasury Secretary has become an ``economy czar" wielding extraordinary and unprecedented power over the ``commanding heights": control over housing giants Fanny May and Freddie Mac, and now $700 billion of bailout funds which are to be spent as the secretary sees fit, not only on mortgages, but on any financial instrument.

The re-centering of the nexus of the American economy is a radical turn from market principles to ``socialist" methods.

Few had prophesied this outcome. In fact, during the tumultuous first decade of the 20th century, German sociologist Werner Sombart provocatively inquired why there was no ground for a socialist movement in America.

Comparing the U.S. with Europe, then dominated by socialist parties, Sombart uncovered that unique economic, political, and cultural factors intersected in such a way that socialism became infeasible. For one, American politics, with its party machines and winner-take-all elections, precluded third parties.

Moreover, the U.S. working class was very lucky because they had inherited the right to vote. Without a violent struggle for basic rights, as had been the European case, there was no room for a formative socialist incubation; the American working class was already part of the political system, at least for white men.

In addition, the party machines provided patronage jobs and protected workers in ``bread-and-butter" issues. As for economics, Sombart argued that ``all socialist utopias come to grief with roast beef and apple pie."

In other words, socialism can never prosper when living standards are rising. In fact, at that time the U.S. working class was enjoying surprising prosperity. Finally, because America had never experienced feudalism, its society was far too fluid for the formation of true class consciousness.

Economically, socially, and politically ``the proletariat" was marching to join the ranks of the bourgeoisie. As Marxists would say, the American working class was a class in itself, but never really for itself.

The insights of Sombart are relevant today. It is certainly not the ``workers" clamoring for more government intervention, if we are to judge by Fox News and Rush Limbaugh.

Nor is the U.S. intelligentsia advocating an increase in the powers of government, as can be seen by the vitriolic opposition to the ``bailouts" in the pages of left-leaning ``The Nation." Incongruently, it is the capitalists themselves who plead for government intervention and regulation.

This turn to state regulation, therefore, seems to fly in the face of leading sociological theories. How would Marx comment?

He held that declining profits, lower wages, contradictions between circulating and fixed capital, and the misery of the workers would lead to the breakdown of capitalism. What about left-wing economists who maintained that the shrinking domestic market and imperial conquests would doom capitalism?

And John Maynard Keynes? While Keynes did warn about the effects from the fall in aggregate demand and a fear to invest, he called on the intelligentsia to take over government and save capitalism from itself.

No, apparently we are challenged with a transformation envisioned not by Marx or Keynes, but by Austrian economist Joseph Schumpeter. He contended that not economic crisis or material conditions, but changes in the nation's spiritual values favored socialism.

Somewhat tongue-in-cheek, Schumpeter's theory states that the very success of capitalism will eventually lead to a corporatist state and the incubation of a worldview antithetical to capitalism.

Ironically enough this would occur not among the workers, but rather among the capitalists themselves as the cultural ideals necessary for ``creative destruction" and entrepreneurship would gradually disintegrate.

Capitalist society would be corroded from within as capitalists themselves willingly voted for the restrictions and regulations which would corrupt the entrepreneurial spirit.

As Schumpeter wrote: ``Faced by the increasing hostility of the environment and by the legislative, administrative and judicial practices born of that hostility, entrepreneurs and capitalists ― in fact the whole stratum that accepts the bourgeois scheme of life ― will eventually cease to function."

``Their standard aims are rapidly becoming unattainable, their efforts futile. The most glamorous of these bourgeois aims, the foundation of an industrial dynasty, has in most countries become unattainable already, and even more modest ones are so difficult to attain that they may cease to be thought worth the struggle as the permanence of these conditions is being increasingly realized." In short, capitalism was doomed to self-destruct.

Of course, Schumpeter was ironically describing an anti-utopia, where lethargic capitalists allow a new class of bureaucrats to seize control over the economy. His dark vision, which has been mocked for over 60 years, may now be coming to fruition.

If that is the case, then we must ask ourselves other, deeper questions. Are American values actually malleable enough to adapt to the new circumstances? Was there a more profound reason which led Sombart to conclude that socialism in America was unattainable?

Chris Monday is a professor of economics at Dongseo University in Busan. He can be reached at chrismonday@gmail.com.