Capitalism

The right claims that capitalism offers the most freedom of any economic system. If we want as many people to have as much freedom as possible, we need to have a developed economy that provides us with high living standards. But according to the right, the only way this can happen in the long run is for countries to adopt capitalism and “free trade.” Developing countries, for example, can accumulate wealth by opening their economies to global capital, exporting raw materials, providing foreign corporations with access to cheap labor, and importing finished goods. These countries shouldn’t impose tariff subsidies, enact capital controls, or implement expansive welfare states, high taxes, and onerous regulations, all of which supposedly hamper market efficiency. Developed countries should likewise refrain from adopting policies that hamper free markets, or we’ll find ourselves regressing down a slippery slope to “socialism,” which inevitably ends with mass starvation and totalitarian dictatorships—just see the USSR under Stalin and China under Mao—or even fascism, which the right claims is a left-wing phenomenon. Venezuela offers a more contemporary example, where “socialist” policies have supposedly led to widespread food shortages, forcing some people to eat rats and dogs in order to survive.

The right also points to technological innovation as a reason to support free markets and forego left-wing economic reforms. We’re told that capitalism is solely responsible for most of the technological innovation that allows us to enjoy high living standards today. If we want living standards to continue to rise, we shouldn’t adopt left-wing policies, because these policies waste wealth that could otherwise be used to invest in new technology.

Furthermore, while some problems have occurred under capitalism—like monopolies, environmental destruction, and war—these problems aren’t the fault of capitalism, but of government “intervention” in the economy. Monopolies, for example, are created when corrupt politicians regulate industry on behalf of incumbent firms. If we want to eliminate these problems, according to the right, we just have to move further in the direction of capitalism, meaning we should eliminate the government’s authority to regulate corporations, and allow the market to foster competition between businesses, which will lead to the most socially-beneficial outcomes.

The right makes these arguments to trick society into making a false choice—between “capitalism” and “socialism”—even though countries have a wide variety of options available to them. What the right really means is that we should force certain policies—those that primarily benefit corporations and their investors—on domestic populations, rather than allow ordinary people to have a say in how their economies are organized. Take “free trade.” No country has ever joined the ranks of the developed world by following “free trade” policies—including the US, which only pushed for free trade once it became advantageous for them to do so. It turns out that countries develop faster, wealth is more widely shared, and the poor fare much better when nations are free to develop independently, often by adopting policies that run counter to free trade. Indeed, free trade is a misnomer, since free trade policies are imposed by foreign lending institutions and corrupt local elites who repress their citizens, often with military aid from developed countries at the behest of capitalists in those countries who profit from unequal trade partnerships; and much of the “trade” that occurs under free trade regimes doesn’t take place between trade partners at all, but is internal to large multinational corporations who simply want to move some of their operations across nearby borders so they can take advantage of lower labor costs, lower taxes, and lax regulation.

Nor do left-wing economic policies lead to mass starvation and totalitarian dictatorships. Left-wing reforms have expanded freedom for millions of people, most notably in the Nordic countries, which have less poverty, offer more economic mobility, and compare favorably to the US in a number of other economic indicators. And while the right points to atrocities committed by Stalin and Mao in order to discredit alternatives to the right’s preferred policies, the right ignores similar atrocities committed by capitalist governments in India, Latin America, China, Africa, and Southeast Asia. This is understandable, given that the victims of these atrocities number well over 100 million.

Nor is Fascism left-wing. Fascists allied with capitalists to gain political support, and once in power, bolstered the power of capitalists while doing everything they could to destroy the left. To invert this reality, the right uses a host of fallacious arguments to confuse their audience.

The claim that Venezuela shows what happens when we adopt “socialist” economic policies is also problematic. Venezuela’s economy is capitalist, not socialist, a fact that some on the right were happy to tout when Venezuela’s economy was booming under President Hugo Chávez. Venezuela’s subsequent economic failures weren’t due to socialist policies, but the result of economic missteps that countries that are more “socialist” have avoided, along with economic sanctions by the US. Indeed, Venezuela’s economic story says more about the power of capitalism—when wielded by the most powerful government in the world—to destroy weaker nations that eschew capitalist orthodoxy, than it does about left-wing economic reforms.

We’ll also see that, far from leading to technological advancement, when capitalism is allowed to grow unchecked, capitalist firms do everything in their power to stifle innovation, erasing many of the benefits capitalist ideologues tout to justify their opposition to left-wing economic reforms. Nor is capitalism sufficient in order to develop advanced technology. The most important technological advances we’ve seen (computers and other advanced electronics, the internet, and so on) have relied heavily on government funding for their existence. This undercuts the claim that we need to slash taxes and regulations if we hope to benefit from new technology.

And while the right tries to absolve capitalism of responsibility for the wreckage it’s caused by claiming that actually-existing capitalism is not really capitalism, but “crony capitalism,” I’ll show that oligopoly, corruption, and unchecked economic inequality are intrinsic features of capitalism.

Free Trade

There’s widespread agreement among the political establishment—as well as the economics profession—that for countries to develop, they need to adopt “free trade.” According to proponents of this doctrine, the free flow of capital both within and across national borders will lead to its most efficient use, allowing developing countries to specialize in producing things they’re good at, like agricultural exports and raw materials. This allows these countries to accumulate wealth, and invest this wealth to further develop their economies over time, as well as purchase finished goods from developed countries. Accordingly, governments shouldn’t impose tariffs or offer other subsidies to businesses, nor restrict the movement of capital; they should keep inflation low, reduce government bureaucracy, maintain the value of their currencies, and keep social spending low in order to pay off creditors. These policies have lifted millions of people out of poverty, according to proponents of free trade, and indeed are the only way impoverished countries can develop in the long run.

Proponents of free trade, however, couldn’t be more wrong. No country has ever joined the ranks of the developed world by adopting “free trade.” Britain developed its economy by stealing resources from its colonies—like slave-picked cotton—to fuel its textile industry, banning exports from its colonies that competed with its own products, and by using tariffs to protect its manufacturing sector from superior products made elsewhere.¹ Similarly, the US developed its economy by stealing land from its indigenous inhabitants, relying on its slave economy to bolster other industries (such as shipping), using the profits from cotton production to fuel investment in other industries, using tariffs to protect infant industries, giving away free land to American settlers, and by using the government to subsidize transportation infrastructure and protect American industry from superior British goods.²

These weren’t the only factors that allowed countries like Britain and the US to develop. Deforestation in Europe, along with the presence of large coal deposits in England, led to a shift to alternate forms of energy, and subsequently a shift to new technologies that would fuel industrialization. Competition among European states during the eighteenth century developed these states’ fiscal, bureaucratic, and military capacities, which they used to dominate and pillage poorer countries. None of the factors have anything to do with free trade.³

If we want to see how free trade actually works, we can look at other countries during this time that adopted free trade. When Britain was siphoning off wealth from its colonies and using tariffs to protect its early textile industry in order to develop, China had free trade. Its markets were highly integrated, extended over a large area, and encompassed a vast supply of natural resources. Serfdom had largely disappeared by this time, whereas it still persisted in Europe. Labor mobility was much greater than in Britain. And taxes and public debt were far lower than they were throughout Europe. Yet China failed to industrialize.⁴ Or take Egypt. Whereas the American colonies won their independence from Britain, and pursued an independent development path using the policies listed above, Egypt was precluded from adopting similar policies by Britain, France, and their Ottoman proxies. Despite having the capacity to develop a modern manufacturing base, a large labor force, as well as its own cotton industry, Egypt failed to develop because capitalist powers like Britain and France didn’t want to face industrial competition from Egypt and wanted access to Egyptian markets and raw materials.⁵

It was only after using protectionist policies—along with slavery, conquest, and theft—to establish a “comparative advantage” over underdeveloped countries that Britain and the US adopted “free trade” policies and started recommending that developing countries do so as well. It doesn’t take a genius to figure out why. The US and Britain wanted new markets to sell manufactured goods, along with access to the cheap imports, cheap labor, and raw materials that developing countries could provide them. The US and Britain didn’t recommend these countries adopt free trade because they believed it would help these countries develop, but because it benefited the US and Britain.

Now take Russia. Russia turned itself from a backwards peasant society into one of the world’s two major industrial super powers in just a few decades using central planning, and did so despite enduring military attacks from the US, a major civil war, and two world wars that destroyed much of the country and killed tens of millions of its citizens. In contrast, Brazil, which was comparable to Russia in size, started at roughly the same level of economic development, had access to an enormous stock of natural resources, and had no enemies attacking it, stuck with free trade policies during this period. Yet Brazil remained an economic backwater.⁶

This isn’t to say that countries should adopt Soviet-style central planning or admire dictators like Joseph Stalin. But what does the comparison between Russia and Brazil say about free markets and free trade, under which millions of Brazilian peasants fared worse than their Russian counterparts? Nor could central planning sustain the Russian economy indefinitely, but the degree of central planning carried out by the Soviet Union is far from the only alternative to the brand of free markets and free trade promoted by capitalist powers like the US and Britain. Indeed, the market reforms that followed the collapse of the Soviet Union only further hampered Russia’s economic development, pushed 72 million people into poverty, created a drug epidemic, doubled Russia’s suicide rate, increased violent crime by a factor of four, and likely killed several million people.⁷

The right eschews comparisons like these, instead comparing countries that share only superficial similarities. In order to tout the merits of free trade, the right points to North Korea and South Korea. After the Korean War, South Korea’s capitalist economy developed, whereas North Korea’s communist economy became one of the most dysfunctional in the world, and remains so to this day. There’s a problem with this comparison, however. North Korea was literally flattened by the US during the Korean War, had fifteen percent of its population slaughtered, then succumbed to authoritarian rule, led by despots who chose economic isolation and military spending in order to deter further US aggression rather than develop its economy. Again, these aren’t the only available alternatives to free trade and free markets.

To see one of these alternatives, we can look to South Korea itself. After the Korean War, South Korea’s economy was less “free” than India’s, yet South Korea developed faster. As social theorist Vivek Chibber shows, both South Korea and India relied heavily on state intervention to regulate private industry. South Korea, however, achieved a higher rate of development because its state apparatus was stronger, and because the state used its power to discipline its capitalist class, forcing investment into key sectors. India’s state capacity was weaker in comparison, leaving key investment decisions in the hands of capitalists. This suggests that economic development depends not on how “free” a nation’s markets are, but on the nature and extent of state economic intervention.⁸

Some on the right try to get around this problem by claiming that India’s economy was socialist during this period. Conservative writer Kevin Williamson argues that because Indian Prime Minister Jawarahal Nehru shared socialist economic views with Ghandi, and because the Indian government instituted various five-year plans to develop the Indian economy—supposedly just like the Soviet Union—then India must have also been socialist.⁹ At no point in history, however, has India had a socialist economy. Prior to independence, India had been under British rule for nearly a century. Its economy was capitalist. The means of production were privately-owned. When India won its independence, its government aimed to implement a version of socialism, but this doesn’t mean India actually became socialist. Private ownership remained the norm, and India’s “five-year plans” shared few similarities with those implemented by the Soviet Union. In the Soviet Union, the government directly controlled the country’s factories, and could therefore direct production and distribution in order to adhere to its plans. The Indian government, however, lacked the power to implement its economic agenda. Instead, India’s capitalist class ran India’s economy.¹⁰

Williamson also compares India to capitalist Taiwan and Hong Kong. But Taiwan and Hong Kong also adopted a high degree of state intervention. Taiwan embraced friendlier policies towards foreign investors, but also used state-owned enterprises more extensively. Singapore lured capital investment with subsidies; invested in infrastructure, education, and key industries; owns all of the land in the country; and supplies 85 percent of all housing. Hong Kong is the exception, but its economy can hardly be considered an example of free trade, as all its land is owned by the government.¹¹

This pattern holds true generally. Since the end of World War II, developing countries have seen their economies grow faster when choosing not to follow “free trade” policies. In the 1960s and 1970s, per capita income grew by 3 percent annually in these economies, much faster than they did during the age of imperialism and free trade. These countries relied on state-owned enterprises, implemented capital controls, invested in public healthcare and education, enacted land reform, nationalized key resources, and used their governments to coordinate investment in key industries. Incomes in these countries subsequently grew, poverty rates fell, and the gap between rich and poor countries began to close.¹²

From the 1980s to 2000, however, many of these countries were forced to adopt free trade. They faced balance of payments crises brought on by a global recession in the early 1980s. To dig themselves out, they turned to the International Monetary Fund and the World Bank for loans, which required them to make their central banks more “independent” (in other words, less accountable to elected governments), allow capital to flow in and out of their economies, privatize key industries, deregulate labor markets, and cut government spending on pensions, healthcare, and public sector jobs. These countries subsequently saw their economies grow at a slower rate—about half as fast as they grew during the prior two decades—and economic inequality significantly worsened.¹³

This trend was only reversed once western influence began to wane. When Argentina faced a financial crisis and defaulted on its debt in 2001, its economy contracted by 11 percent, unemployment rose to 22 percent, and the poverty rate rose to 57 percent. In order to escape this crisis, the government eschewed “free trade” by devaluing its currency, and increased domestic consumption and investment. Argentina’s economy then grew by 63 percent and poverty was reduced by nearly two-thirds.¹⁴ A number of left-wing governments were elected to office in Latin America during this time—in Argentina, Brazil, Bolivia, Ecuador, Chile, Uruguay, Paraguay, El Salvador, Nicaragua, and Honduras—after which growth improved in the region, and poverty declined dramatically.¹⁵

This pattern can also be seen within developed economies. From the end of World War II to the early 1970s, the US economy saw its fastest rate of growth, and the economic gains from this growth were widely shared. The US also suffered no financial crises. Yet this was a period during which tax rates were much higher—with marginal rates as high as 91 percent on top earners—a much higher percentage of the workforce was unionized, the banking system was tightly regulated, and the federal minimum wage grew to over $12 an hour (adjusted for inflation). Over the past five decades, however, we’ve seen unionization rates fall dramatically, along with wave after wave of financial deregulation, privatization, trade agreements, offshoring, tax cuts for the rich, and so on, with growth falling substantially during this period, coupled with multiple financial crises.¹⁶

The global financial crisis that began in 2007 offers another example of what happens when governments follow the advice of free trade ideologues. In the wake of the crisis, the European Union’s member states were forced to undergo fiscal austerity. These states couldn’t devalue their currency because they were tied to the Euro, and they couldn’t undergo monetary expansion because they were at the mercy of the European Central Bank. Blame was cast at the supposed profligate spending of states like Greece and Spain, but when these countries slashed their budgets, this only worsened the crisis.¹⁷ In contrast, the US didn’t introduce market discipline to the same extent. Instead, the Federal Reserve pumped trillions of dollars into the economy, and the government enacted a modest economic stimulus package and ran massive budget deficits, which allowed the US to recover faster than Europe.¹⁸

Nor has free trade delivered on its promise to alleviate global poverty. In 2015, the UN published its final report of the Millennium Development Goals, which claimed that global poverty had been cut in half since 1990. Free trade ideologues tout this statistic as evidence showing free trade works. The UN report, however, doesn’t show this at all. For one, most of the reduction in global poverty during this period occurred in China, which didn’t develop using free trade policies. China is dominated by state-owned enterprises, and the state controls most of the banking system.¹⁹ It was also able to attract foreign investment because it had a large, educated workforce that had been created under communism. Second, the UN’s statistics underestimate the number living in poverty. The UN sets the cutoff for living in poverty at $1.90 per day. But the consensus among scholars is that the cutoff should be much higher—some say as high as $12.50. Proponents of free trade use $1.90 per day because it fits the narrative that their economic recommendations have reduced poverty. When using higher numbers, a much different story emerges. If we use a $4 per day threshold, for example, and exclude China, poverty has barely budged.²⁰

Using income as the sole metric to measure the success of free trade policies is also problematic. When incomes rise, this doesn’t necessarily mean that the lives of those who receive this income have improved. This is because free trade often deprives people of other means by which they may provide for themselves. Much of the global population doesn’t depend solely on income to meet their needs, but can instead subsist on their own by living off the land and relying on their communities to distribute resources where they’re needed. They might earn income to supplement these needs, but they’re not wholly dependent on labor markets to survive. Free trade, however, often forces these people off their land. When large, multinational corporations enter their communities, these corporations cause pollution, destroying water sources and crops. The corporations are also subsidized by their home governments, which enables them to flood foreign markets with cheap goods, undercut smaller competitors, and put them out of business. In other cases peasants are literally forced off their land by private goon squads who beat, intimidate, or murder those who resist. Once this happens, peasants are forced into labor markets and either have to work in sweatshops for below-subsistence wages, or migrate elsewhere in search of a better life.²¹

It would be naive to assume “free trade” is anything other than a continuation of five centuries of colonial pillage. But the evidence shows this to be true. Free trade is a euphemism given to policies that allow investors in rich countries to continue to extract wealth from developing countries, driving inequality both within and between countries, and creating widespread misery.

Stalin and Mao

The right claims we shouldn’t implement social-democratic welfare programs in the US because this is “socialism,” and socialism has led to mass starvation under totalitarian dictatorships. Libertarian thinker Matte Kibbe warns, “Let me name a few names: Vladimir Lenin and Joseph Stalin; 67 million people dead. Mao Zedong, the greatest Chinese experiment in socialism, killed anywhere from 38 to 45 million depending on the estimate.”²² Even though the Soviet Union enjoyed high rates of growth as its economy developed, and China greatly reduced poverty and improved public health and education under communism, these achievements came at too great a cost. Any move towards “socialism” will eventually either run up against problems with distributing resources like food, or succumb to totalitarianism, ending in widespread human suffering, according to the right. There’s no causal relationship, however, between social-democratic welfare programs and mass starvation or totalitarianism.

Countries that have implemented social-democratic welfare programs remain among the freest and most prosperous in the world. Many rank ahead of the US in a number of indicators of well-being, such as happiness, press freedom, and lack of political corruption.²³ Even by the right’s standards, some of these countries compare favorably to the US—for example, in the rate of start-up companies and “economic freedom” (as defined by the right-wing Heritage Foundation).²⁴ It’s also without question that those at the bottom of the economic ladder in these countries enjoy far greater levels of freedom than their counterparts in the US.²⁵ Indeed, if the types of social-democratic welfare programs we find in other wealthy countries were implemented in the US, they would supplement a wide array of successful programs, like Social Security and Medicare, which have not only drastically reduced poverty but remain widely popular.

But if the right wants to judge socialism (and by extension social-democratic welfare states) solely by the atrocities perpetrated by regimes the right considers socialist, then it’s only fair to judge “capitalism” by the same standards. When we do this, we see that the death and destruction wrought by “capitalism” far surpasses that of “socialism.” In the United States, white settlers, along with the US Army, slaughtered hundreds of thousands of Native Americans, spread disease among the Native American population, and stole their land. In Ireland, English landowners—despite having enough food to feed the local population—exported their crops to global markets in order to accumulate wealth, killing a million people during the Irish Potato Famine.²⁶ In the West’s colonies during the El Niño famines of the late nineteenth century, food sat around awaiting export while much of the local population starved. Between 30 and 60 million people in India, China, Brazil, and elsewhere perished under famines caused by their colonial rulers. Author Mike Davis describes these episodes as “late Victorian holocausts.”²⁷ Capitalism killed millions more in colonial Africa, most notably in the Belgian Congo beginning with the rule of King Leopold II. Corporations spawned from capitalist economies ravaged the Congo to harvest ivory and rubber. They shared their profits with Leopold’s Congo Free State, and worked side-by-side with the State to enslave, murder, and spread disease among the local population.²⁸

Capitalism killed tens of millions more in India. We can see this by comparing India with China from 1947-1980. As China and India each transitioned to independence in the late 1940s, both countries started at roughly the same level of development and had nearly identical mortality rates. China adopted a more “socialist” program, providing basic health care, food, and education to its population, whereas India adopted a more “capitalist” program, limiting public food distribution to urban areas in normal times and to rural areas only during famines. This helped India avoid high death tolls during famines, but India’s excess mortality rate was on average 4 million per year greater than China’s during this time span, even when we include the Chinese Famine. In other words, the death toll from leaving food distribution to the market during this period was on the order of 100 million, more than the number of deaths than can be attributed to Stalin and Mao combined.²⁹

This should come as no surprise. Hundreds of thousands of Americans, if not millions, are painfully familiar with the devastation caused by relying on markets to distribute vital resources. Despite being the wealthiest country in human history, with the means to easily provide healthcare to our entire population, tens of thousands of people die each year because they’re priced out of the US health insurance market.³⁰

Capitalism’s death toll doesn’t end there. The US killed several million people in the Korean War and Vietnam War in the name of “anti-communism.”³¹ The devastation wrought by the use of chemical weapons in Vietnam has led to widespread cancer and birth defects among the population, which persists to this day—that’s when peasants aren’t being blown up by land mines left behind by the US military.³² The US also destroyed much of Cambodian society with its bombing campaign under the Nixon administration. This created a power vacuum into which Pol Pot and the murderous Khmer Rouge ascended.³³ And while the Khmer Rouge was slaughtering hundreds of thousands of peasants in Cambodia, the Indonesian military—backed by the US—was doing the same thing to the people of East Timor, wiping out one-third of the East Timorese population.³⁴ Right-wing regimes around the globe killed at least a few million more during the Cold War—with full US support. The US trained killers in Indonesia, Central America, and South America, and provided economic aid, weapons, intelligence, and diplomatic support to help carry out this mass murder program.³⁵

Instead of pointing to atrocities committed by the worst regimes throughout history, and attempting to associate them with one’s political opponents, we should instead be asking what these examples have in common. As Amartya Sen and Jean Drèze have written, in the case of the Chinese famine, blame should be attributed to the totalitarian political climate—in particular the lack of a free press—that characterized Mao’s regime, not the fact that the Chinese economy was communist.³⁶ This should lead us to conclude that democratic accountability is necessary to force those in power to ensure vital resources reach the population. And it’s why we should place such accountability at the forefront of our demands, and favor economic and political institutions that bring about a more democratic society. The right makes no such commitment, however. They attempt to scare people into rejecting moderate reforms that would improve the lives of millions, and instead force them to accept the right’s cruel brand of capitalism that places power into the hands of a tiny, unaccountable, corporate elite.

Liberal Fascism

Some on the right claim that fascism is “of the left.”³⁷ The Nazis, according to the right, “hated capitalism” and “did not believe in private property.”³⁸ The right notes similarities between fascist regimes and “leftist” historical figures like Woodrow Wilson and Franklin Roosevelt, who—like fascists—made extensive use of propaganda and favored authoritarian government and state economic management.³⁹ The right also points out that “Nazi” literally stands for National Socialism.⁴⁰ Indeed, the right claims that Hitler was himself a socialist who endorsed the Nazis’ “25 Points” manifesto, which included several left-wing economic reforms.⁴¹ Furthermore, according to the right, “left-wing” is synonymous with big government, and there’s no better example of big government than fascism. But there are problems with each of these claims.

While it’s true that in the early stages of fascism, some fascists denounced certain aspects of capitalism, it was an alliance with capitalists that allowed fascists to gain support and root themselves in the political system. In 1921, Italian Prime minister Giovani Giolotti included Mussolini’s Fascists in his electoral coalition, along with liberals and nationalists, in order to roll back prior gains made by socialists.⁴² Mussolini’s Blackshirts also helped Italian landowners beat up their socialist enemies and destroy socialist newspapers, clubs, and organizations.⁴³ When it came to picking sides between fascism and the left, capitalists had no problem joining with fascists.

Look at the makeup of German political parties during Hitler’s rise to power and it’s obvious which side the fascists were on. Most of the left in Germany came from the industrial working class and belonged to the Social Democrats or the Communist Party. German fascists, however, came from other social groups—rural farmers, workers who were not part of the labor movement, war veterans, the middle class, and conservatives—and belonged to the Nazi Party.⁴⁴ Fascism’s supporters had little interest in helping the left defeat capitalism in either Germany or Italy. Rural farmers in Germany supported the Nazis not because they held left-wing economic views, but because they shared a hatred of Jews and Marxists, and supported Nazi efforts to expand access to farmland through annexation. War veterans in Italy hated the left because the left didn’t fully support the war effort in World War I. Conservatives, along with fascists from the middle class, hardly supported left-wing economic policies such as tax hikes and unemployment compensation.⁴⁵

The most telling evidence that shows which side the fascists were on, however, is what fascists did once in power. In Italy, fascists rejected “progressive and confiscatory taxation” as “fiscal demagoguery that discourages initiative,”⁴⁶ cut taxes, adopted the gold standard, and balanced the nation’s budget.⁴⁷ Fascists in Germany banned strikes, dissolved independent labor unions, lowered wages, and boosted capitalists’ profits through arms build-ups. Fascists also pioneered what we now call privatization—in other words handing over public goods to private corporations for profit. Mussolini privatized the post office, railroads, telephone companies, and state life insurance companies. Hitler privatized banks, shipyards, railway lines, shipping lines, and welfare organizations.⁴⁸ Fascists did not, as Republican Senator Rand Paul has claimed, “not believe in private property.” When Nazis confiscated property, they did so only from their political opponents, foreigners, and Jews.⁴⁹ It should also be noted that socialists were among the first to be shipped off to concentration camps—before Jews.⁵⁰

Some on the right try to get around these facts. Paul, for example, argues that because capitalists didn’t exercise absolute control over the means of production under Nazi rule—for example, when hiring and firing employees or setting prices—the Nazi economy was socialist.⁵¹ This is nonsense. The fact that one facet of a nation’s economy doesn’t fit a strict definition of “capitalist” does not make its economy socialist. It’s also worth pointing out here that, while it’s true that some capitalists were forced to temporarily relinquish a degree of control over their firms, they continued to maintain ownership of these firms; and that many capitalists in Germany welcomed Nazi efforts to replace market forces with state management because they would have otherwise been ruined by the Great Depression.⁵²

Causing even more confusion, the right points to similarities between fascists and Progressive figures, such as Woodrow Wilson and FDR, who the right conflates with the left. Jonah Goldberg, for example, claims that Progressivism (and by association the left) was Fascist because progressives harassed, beat, spied upon, and threw dissenters in jail during the Wilson administration.⁵³ Goldberg leaves out, however, that when Progressives were directing the state to beat people up and toss them in jail for their political views, they were attacking the left, and doing so from the right.⁵⁴ Goldberg is referring to the First Red Scare, but only briefly mentions that socialists were among the Wilson administration’s targets. Goldberg also confuses fascism with authoritarianism, which has characterized all types of governments throughout history, both on the left and the right.⁵⁵ Lastly, Goldberg leaves out that American support for fascism came primarily from the right—especially businessmen, some of whom allegedly recruited support for a fascist coup against FDR because they perceived him as too far left⁵⁶ —and that “free market” intellectuals like Ludwig von Mises expressed admiration for fascists because, according to Mises, they had temporarily “saved European civilization.”⁵⁷

But wait a second. Doesn’t “Nazi” stand for National Socialism, and isn’t socialism left-wing? No. Nazi does stand for National Socialism, but this form of “socialism” wasn’t left-wing. When fascists denounced aspects of capitalism, they didn’t do so from the left. They did so because they thought capitalists were insufficiently nationalistic and that capitalism was too materialistic—not because they shared views with the left, such as the idea that capital exploited labor or that workers should own the means of production. When fascists branded themselves as “socialists,” they were trying to attach themselves to a popular idea, not because they shared substantive views with socialists about how the economy should be organized.⁵⁸

In order to distort the truth, the right cherry-picks evidence. Paul points to senior Nazi official Gregor Strasser, who held left-wing economic views.⁵⁹ But he leaves out that Strasser and other Nazis who held left-wing views were purged as the Nazis rooted themselves in the political system.⁶⁰

If one wants to cherry-pick evidence, one can find any number of examples to show the opposite of what the right claims. Hitler claimed, for example, that, “Communism is not Socialism. Marxism is not Socialism. The Marxians have stolen the term and confused its meaning. I shall take Socialism away from the Socialists. Socialism, unlike Marxism, does not repudiate private property.”⁶¹ He also claimed that, “The main plank in the National Socialist program is to abolish the liberalistic concept of the individual and the Marxist concept of humanity and to substitute therefore the folk community, rooted in the soil and bound together by the bond of its common blood.”⁶²

As Hitler’s words illustrate, National Socialists aimed to promote an extreme form of nationalism. The National Socialists’ “socialism” emphasized solidarity based not on class, but on nationality, whereby those within the nation would be subordinated to the interests of the collective. This form of collectivism, however, wasn’t left-wing. Fascist collectivism meant keeping the nation’s existing economic order intact, based on the belief that doing so would benefit the nation.⁶³ If anything, this is a right-wing form of collectivism.

Finally, the right tries to associate fascism and the left by tying both to “big government.” Because the left favors progressive taxation and a large welfare state, which is big government, and because fascist regimes are also a form of big government, fascism and the left are the same, according to the right. Big government is not the same as a government with a large welfare state, however. If a government cracks down on dissent, tortures and murders its citizens, shuts down the press, undermines free elections, and so on, but doesn’t institute a large welfare state, would anyone deny this to be a form of big government? Of course not. The point of denigrating government as “big” is to draw attention to its oppressive nature, not the fact that it has a large state apparatus that provides public services. But it’s understandable why the right would try to define big government in this way. The right has supported any number of regimes that have employed the type of state repression described above, including nearly every country in Latin America, and often did so with the help of former Nazis who escaped justice after World War II.⁶⁴

The terms “left” and “right” don’t refer to “big government” and “small government.” Rather, “left” refers to an economic and political system under which we might expect a more egalitarian distribution of wealth, and “right” refers to one under which we might expect a more unequal, or hierarchical, distribution of wealth.⁶⁵ Fascists were therefore on the right. They aimed to restrict material wealth to their own nation and race, supported an unequal distribution of wealth within their nation, and repressed the left in order to maintain this distribution.

The right’s attempt to associate the left with fascism rests on multiple layers of deception. The right redefines capitalism to fit with their “Nazis were anti-capitalist” narrative, lumps the left in with right-wing Progressives in order to associate the left with authoritarianism, equivocates when using the word “socialism” to associate the left with a form of right-wing nationalism, quote-mines fascist leaders to make it seem as if fascism was left-wing, and defines “big government” as being synonymous with the left in order to mask the right’s support for authoritarian government. These are the types of mental gymnastics the right must go through when there are literal Neo-Nazis marching in the streets to support the right’s political leaders. No amount of sophistry should distract us from the right’s authoritarianism, its fascist tendencies, or the immorality of any system that’s rooted in political or economic inequality.

Venezuela

According to the right, we shouldn’t implement social-democratic welfare programs in the US because these programs are “socialism,” and socialism doesn’t work. The right claims that in order to see why, we need look no further than Venezuela. In the 1970s, Venezuela was one of the richest countries in Latin America. It was then taken over by a socialist “dictatorship,” first under Hugo Chávez, now Nicholás Maduro, according to the right. The result? Food shortages, hyperinflation, political corruption, widespread social unrest, and state repression. A closer look at the factors that led to Venezuela’s current economic situation, however, says more about the problems with capitalism.

The Venezuelan economy is capitalist, not socialist. In order to see why, we can look at a number of economic indicators, such as government spending as a percentage of GDP, the percentage of the population employed by the government, the percentage of Venezuela’s economy that’s publicly owned, the rate of unionization among Venezuela’s workforce, and the percentage of co-ops in Venezuela’s economy. Venezuela’s numbers are relatively small compared to what we might expect in a socialist economy—in most cases smaller than countries like Denmark, Norway, Finland, or even France and Germany, none of which have seen their economies collapse.⁶⁶ Venezuela’s private sector even grew relative to its public sector from 1999 to 2012.⁶⁷ What’s funny is that when the Venezuelan economy boomed from 2003 to 2008 under Hugo Chávez, Fox News published an article pointing out that Venezuela was capitalist, wanting to give capitalism credit for Venezuela’s economic success during this period (Venezuela’s economy continued to boom until 2013).⁶⁸ While Venezuela’s top elected officials may be self-described socialists, this doesn’t make its economy socialist.

Nor do Venezuela’s economic problems stem from its “socialist” policies. These problems stemmed from the failure of its political leadership to anticipate easily foreseeable economic obstacles. Venezuela’s economic managers squandered the country’s oil revenue by failing to bank reserves or invest in other economic sectors, which could have provided resources to smooth out the business cycle during economic downturns. Countries like Norway—which again, is more “socialist” than Venezuela—also rely on huge oil reserves, and have managed to avoid these problems.⁶⁹

Venezuela’s political leaders also failed to anticipate the power of the United States to strangle Venezuela’s economy. In 2017, the US leveled sanctions that kept Venezuela from borrowing money in US financial markets, which prevented Venezuela from restructuring its foreign debt and made it impossible for the country to recover from the deep recession that began in 2013. Limits on borrowing also reduced Venezuela’s oil production because Venezuela couldn’t finance maintenance costs and new investment to ramp up production. This in turn led to losses in foreign exchange from oil exports, which was the primary culprit that contributed to Venezuela’s hyperinflation. In 2019, further sanctions cut off Venezuela from US oil markets (35.6 percent of Venezuela’s exports)—causing further losses in foreign exchange—and froze billions of dollars of Venezuelan assets held abroad that could have been used to stabilize its economy.⁷⁰ The US has also tried to foment a number of military coups, recognized a parallel government in the country, and has cast doubt on the legitimacy of Venezuelan presidential elections, creating political instability.

The right also ignores the progress made under Chávez and other Latin American countries that have adopted socialist policies. Before Chávez, poverty and illiteracy were far more widespread. Chávez reduced poverty by 49 percent and extreme poverty by 63 percent, reduced inequality, and expanded access to education, public pensions, housing, and healthcare. Contrast this with the two decades prior to Chávez, when income growth was negative.⁷¹ If Venezuelan “socialism” is so bad, then this says more about capitalism, under which the poor in Venezuela fared worse. Similarly, Ecuador grew its economy by an average of 2.8 percent from 2007-2014, cut poverty by 30 percent, and expanded access to education and healthcare, while at the same time reducing its debt. Bolivia and Nicaragua have achieved similar outcomes, despite lacking the same resources as Venezuela.⁷² All Venezuela’s economic problems show is that the US has the power to crush weaker nations who attempt to show an alternative economic model to the right’s brand of “free market” capitalism.

Technological Development

The right argues that all the great technology we have today—computers, iPhones, apps, and so on—are the result of capitalism. Under capitalism, entrepreneurs pair up with investors who risk their capital to develop these technologies. We’re told that the level of technology we see today isn’t possible in any other economic system. Those who criticize capitalism and want to redistribute wealth should either get off their iPhones or stop complaining. When the government taxes business, this leaves fewer funds for investment, hampers innovation, and leaves society worse off. We should instead keep taxes low and regulation to a minimum, allow capitalists to do their thing, and sit back and enjoy the benefits of innovation. The story of capitalist innovation, however, isn’t as straightforward as the right claims.

Capitalism obviously leads to investment in new technology. Capitalist firms must re-invest part of their revenue to reduce the future costs of production, gain an advantage over their competitors, maintain steady profits, and repeat this process continually if they want to survive. This process has led to all sorts of labor-saving technology that has made life better for much of humanity. However, capitalism has hardly been sufficient to develop much of the advanced technology that exists today (more on this below). This is because the scale of investment required to develop advanced technology isn’t possible without massive state funding. The cost to develop this technology is far greater than any single firm can bear, and because investors are risk averse and prefer short-term gains to long-term gains that may only materialize decades in the future—if at all—capitalists often need the state to bear the initial risk of investment and sustain the conditions needed for long-term research and development.

What are we talking about? How about interchangeable parts, transistors (which form the basis of modern electronics), the Internet, touch screens, the graphical user interface, voice recognition, lasers, satellite communication, biotechnology, mapping the Human Genome, computers, pharmaceutical drugs, nanotechnology, Google’s search algorithm, jet engines, nuclear power, green technology, space travel to get satellites into Earth’s orbit, lithium batteries, WiFi, LCD screens, GPS, cellular communications standards, computer programming languages, speech recognition technology, radar, the list goes on. These technologies were developed with tax dollars funneled through the military-industrial complex, or Xerox PARC and Bell Labs (both monopolies co-financed by the government). Capitalists only came in and commercialized these technologies after the government reduced the risk of investment, often long after private firms failed to see the value of these technologies.⁷³ A notable example involves AT&T and IBM, who missed their chance to privatize the Internet because they viewed it as unprofitable.⁷⁴

The government also subsidizes innovation in other ways. During the early stages of economic development in the US, corporations relied on state credit to amass the enormous sums of capital needed to build a transport network and foster commerce. Private capital markets could not have underwritten the mammoth state canal systems created in the early nineteenth century, even if they had promised enough profit to attract private investors. Businesses have also relied on the US Postal Service, and later the national highway system, to transport goods to consumers over long distances. Millions of small businesses also receive loans from the government. Indeed, commerce would grind to a halt without a stable money supply—provided by a federally-chartered central bank—as well as counter-cyclical fiscal policy, which the government uses to boost demand during recessions. The same is true of limited liability laws—a form of government protection that reduces risk by shifting costs away from shareholders and onto the public. The government also insures bank deposits, which eliminates bank runs and keeps the financial system humming along. Not to mention intellectual property law, which protects firms from competitors who might otherwise steal their ideas.

Capitalism is also often responsible for stifling innovation. Corporations are notorious for lowering prices temporarily in order to stamp out competition, or buying out their competition, often with the aim of shuttering new technology they don’t see an advantage in adopting. The fossil fuel industry has long tried to destroy alternative energy—for example, electric cars, as well wind and solar power. Corporations also buy up patents en masse to prevent competitors from developing new technology with which they might have to compete. Corporations are also well known for developing products designed to break down after a period of time, so consumers will have to purchase these items again in the future—a strategy known as planned obsolescence, or in the case of software, programmed obsolescence. Ever wonder why your iPhone starts running slow after a new software update? That’s why.⁷⁵ This should make it easy to see why cutting taxes and regulations isn’t a great idea. These policies only further entrench the power of incumbent corporations, who would have even more resources at their disposal to implement anti-competitive business strategies and extract more wealth from society. The right doesn’t want to foster innovation. They want capitalism to cannibalize itself while they sit back and funnel as much wealth into their pockets as they can.

Crony Capitalism

Capitalism has unleashed untold destruction on the world. It’s created widespread poverty, exploited the most vulnerable members of society, destroyed the environment, led to countless military conflicts, corrupted our politics, shredded our social fabric, and undermined democracy. To absolve capitalism from its role in these evils, the right shifts blame elsewhere. They distinguish capitalism from “crony capitalism.” According to the right, economic inequality, political corruption, and other social ills many attribute to capitalism aren’t really due to capitalism. Rather, these issues are caused by the government’s perversion of capitalism, which happens when the government expands its regulatory apparatus, which is easily captured by big business. It’s therefore unfair to criticize capitalism and unwise to implement social programs to solve the “problems” of capitalism. Instead, we should make the government “smaller” by cutting these programs, reducing taxes, slashing regulations, and solving society’s problems through competition in the free market. The right’s take, however, is a laughably naive.

When the right cites examples of “crony capitalism,” they mean obvious examples of corruption—lobbying and campaign expenditures in return for favorable regulation (or lack of regulation), subsidies, and so on. In order to prevent this from happening, the right claims we need to make the government “small.” Less government, less corruption, we’re told. But capitalism’s problems have little to do with these obvious examples of corruption compared to the core functions of the state the right favors. Are property rights crony capitalism? Is the enforcement of contracts crony capitalism? Are corporate charters crony capitalism? Most of the right would answer no. Yet without “big government”—taxation, redistribution, and regulation—the core functions of a capitalist state make political corruption inevitable. Once we establish a “small” government, and use this form of government to create the legal basis for capitalist firms to exist, firms that gain an initial advantage can easily undercut or buy out their competitors and consolidate their market share. These firms quickly accumulate wealth, which they can use to corrupt the government. Indeed, the smaller the government relative to the size of industry, the easier it is to corrupt.

This isn’t all. For capitalism to develop on any significant scale, it needs an activist state—to invest in infrastructure, protect infant industries from foreign competition, subsidize technological innovation, create a stable money supply, boost consumer demand, and so on. This is the only way capitalist economies have ever developed. What the right won’t admit is that an economic system that requires such a powerful state in order not only to exist, but to develop on any significant scale, leaves itself open to cronyism. Without counter-balancing institutions that redistribute wealth and regulate industry, capitalism becomes controlled by the very thing it creates. In other words, “small government” inevitably leads to big government. Once this process is set in motion, there’s no mechanism powerful enough to stop it other than the government itself. This is why the right aims to keep the government “small.” The government is (in theory) accountable to workers and communities, and the right doesn’t want the population to interfere with the prerogatives of private enterprise. The right’s “solution” to crony capitalism is therefore limited to tax cuts and deregulation, which only makes the problem worse. When the government cuts taxes and regulations, it doesn’t care about the prevailing distribution of property and power. If this distribution is highly skewed, the state perpetuates economic inequality via its enforcement of property rights, and leaves those with the most wealth and power with even more resources.

But can we expand government without having to accept high levels of corruption? This question is easy to answer. Other nations have implemented more expansive social welfare states and have managed to regulate industry to a larger degree than the US, yet they have lower levels of political corruption. There’s no reason we can’t follow their example. The key is to create institutions that greatly reduce economic inequality, make an ongoing effort to hold the government accountable to the public, and limit the possibility of economic inequality from arising. Capitalism does the opposite. There’s no difference between capitalism and “crony capitalism.”