Archive for January 3rd, 2009

Capitalism, Communism, Humanism

I’m currently teaching a winter term topics course on German unification.  It’s a three week course, taking place during that time that is usually the semester break.   There are only eight students in the course, so it’s a nice time to really get into the issues surrounding German unification and its aftermath.

One thing that studying Europe has shown me is that both communism and capitalism have very dark sides, and either one can exploit, enslave and abuse.  I have come to absolutely reject the views of those true believers who either embrace the state and government as the key to ending the ‘tyranny of big money,’ or those who embrace the free market as somehow able to create the best result possible.  Moreover, our culture tends to see the world in dichotomies, where one “side” is good and the other bad.  In such a world view the obvious evils of bureaucratic socialism (aka communism) means some take it as a matter of course that the other extreme is best.  If totalitarianism is complete lack of individual freedom, then wouldn’t free market capitalism be its ultimate expression?

Looking at the case of Germany, it’s hard to keep up that dichotomy.  First of all, no one in their right mind denies the evil that bureaucratic socialism created.  People were spied upon, their individual initiative thwarted, and basic freedoms denied.   Bureaucracies are inherently conservative and resist change.  Communist economies thus tended to reproduce past practices rather than innovate, and individuals with creative, intriguing ideas learned to suppress or at least keep quiet about those ideas.   The result was an economy that, after growing gradually from 1949 to the mid-sixties, started to stagnate, and then after 1971 lived beyond its means on borrowed capital, mostly from West Germany.  By 1989 the economic system was near collapse, mirroring conditions in the rest of the East.  The fall of communism had a clear cause: as an economic system, communism cannot work.

To be sure, it could have ended with a bang rather than a whimper.  If Gorbachev had not been a true humanist, more willing to see Eastern Europe break away and his reforms fail than to use force, the system could have persisted perhaps quite awhile longer in some form.  If Ronald Reagan had not changed his policies to stop his defense build up and work to build actual nuclear disarmament — in his second term he was actually quite “liberal” in that regard, and while they seem now to forget it, conservative Republicans were angry at him for becoming soft on communism — then perhaps Gorbachev would have failed and an actual war could have ensued.  Gorbachev and Reagan worked well together to prevent that.

But the failure was economic.  You can’t deny people their individual expression and initiative while running an economy through bureaucratic planning and have it keep up with dynamic market economies which use the market to gather diffuse information from every individual who participates.  But does that mean that market economics taken to an extreme are best?

No.  Communism emerged for a reason — a response to European sweat shops and exploitation that would appall anyone with a conscience.  And, while in the comfort of ones’ easy chair it’s easy to sniff, “well, they had to go through that to get to where they are today,” that’s an exceedingly arrogant and inhumane position to take.  Individual lives were involved, children killed in factories, people used simply to make money for those elites who thought nothing of abusing other humans for personal gain.  It was abstraction of humanity in the extreme, as evil as the abstraction used by dictators like Stalin to rationalize their horrors.

The most profound problems with markets are basic:  First, humans lack perfect information and in fact often deal with misconceptions and misleading information.  Those who can control or gain better information have a profound advantage.  Second, those who “win” in the market can use their advantage to structure future games to benefit them, usually through better access to information, as well as the capacity to do things others cannot.   The result is an inherently unjust system that gets manipulated by a few “winners” to create real class divisions and structural exploitation.   Socialists are right in how they diagnose many of the core problems of capitalism.  Capitalists are right in how they diagnose many of the core problems of socialism.

Modern market capitalism avoids most of the evils of pure market capitalism through regulation, whether prohibiting most forms of child labor, passing labor safety laws, protecting unions, limiting work weeks, and various other laws that try to create a more even playing field.  Nonetheless, the gap between the rich and poor has been increasing.  And while the poor may be doing better in absolute terms, politics operates through relative relations, not absolutes.

In Germany Christian Democrat Ludwig Erhardt pioneered the notion of a “social market economy,” as a compromise between capitalism and socialism.  Erhardt, archetect of the German post-war economic miracle and Chancellor of West Germany from 1963 to 1966, argued that market economies operate best, but must be steered to assure that the people are put first, not the profit or the bottom line.   People deserve fairness, they deserve health care, they deserve education, they deserve true opportunity.  This can be achieved without socialism.   Some call any government program socialism (e.g., the misnomer ‘socialized medicine’ for a health care system like those throughout Europe — that’s not socialism), but it’s really a mixed economy, with markets operating under loose regulation.  If the regulation gets too tight the economy veers towards the mistakes of bureaucratic socialism, if it is too light, the dangers of unrestrained market activity occur.

And to me that’s the key: put people first.  Ideologies are nice, but people get lost in the abstractions of arguments, concepts, claims to act on principle (for most people principle is the term they give to the ideas they are emotionally connected with — I ran into that in debates with an emotion driven anarchist way back in the 90s) so much that they forget that life is not just about justice, freedom, equality or material goods.  Life is about people.

By that I don’t mean life is about giving people material stuff, whether it’s health care, education, or jobs.  Life is also about allowing people freedom to create, work, express, and thrive.   Pure market capitalism can lead some to deny material needs to others through exploitation, rationalizing the inhumanity by market ideology.  Communism can lead leaders to strip people of that which makes life worth living — freedom and individuality — in order to service the “ism.”

So forget the ideology, forget trying to intellectualize and rationalize ones’ perceptions of reality in order to find out what the “right” system is.  The mind misleads, it rationalizes one’s emotional whims, and allows us to create logical edifices to protect whatever we want to believe in.  That is why ideologies consume people whole, causing them not to live as fully or appreciate their world.  In many cases they lead people to hurt, kill and abuse others.

Focus on people — practical ways in the every day to put people first.  No single policy path, no clear rational way to determine the role of government, markets or choice.   Erhardt’s social market economy was an effort to work on that principle.   But beyond economics it’s a good principle for life:  people first, then do the right thing.