People often take sides about America’s economy. Are we a capitalist society or a socialist one? Both sides are correct. One could accurately describe America’s economy as capitalistic as well as being a weaker form of socialism.

Americans can profit from businesses they create and operate.

But sometimes government is, in reality, a financial stakeholder. Think about a 380 agreement (local economic development incentives). Would it exist without taxpayer funds provided by, or subrogated by, a local governmental authority’s tax revenues? In these cases, government has supplied funds for the creation of a for-profit business. Politics, not financial analysis, determines who receives those funds. A financial professional would pose just one question regarding the funding of any economic development agreement — “Which will produce a greater financial return for our community — investing tax dollars in the proposed business, or leaving the money in our citizens’ pockets to spend as they see fit?” Next time you run into an economic development professional, ask them what the internal rate of return is for taxes returned to their community.

Those who claim that America is a capitalistic society and not a socialist one are not living in reality either. In 1970, government spending was responsible for more than 34 percent of our economic activity. By 2010, that figure was north of 43 percent and is now over 44 percent. For comparison, last year Canada’s government expenditures were about 52 percent of their Gross Domestic Product and France’s was over 62 percent.

Americans that want a Nordic-style quality of life neglect to include the fact that the Nordic countries abandoned stronger forms of socialism to attain their prosperity. Fifty years ago, they were all in an economic malaise, if not worse, until they followed the UK’s example. Prime Minister Thatcher was first, followed by President Reagan, to abandon, with speed and determination, unnecessary socialist policies and give the economic power once held by the government back to its citizens. Record economic prosperity followed. Even so, to this day, those countries still cannot match America’s job creation numbers.

Society could not survive without some socialism — such as regulations designed to hold entities to account or provide needed services that would normally be unavailable in a purely capitalistic society. Read about America’s meat industry in “The Jungle” by Upton Sinclair. Review the 2008 credit crisis. Try leaving your job when you are 65 and finding health insurance that will not bankrupt you. Or what about goods we import from nations with corrupt leadership?

However, not a single nation has gone from a weak form of socialism to a strong one and prospered — but the American government is trying hard to be the lone exception to that historical truth.

A benevolent society requires order and provides for those who are unable to provide for themselves through no fault of their own. Outside of those efforts, a review of history shows us that elected leaders who wish to maximize their community’s prosperity can best achieve that by minimizing government’s economic power.

Norman Pappous lives in League City.


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(15) comments

Susan Fennewald

I don't see how the US is heading towards a strong form of socialism. For the most part, I don't see the US grossly interfering with business formation or operation.

Please provide examples.+

Norman Pappous

Hi Susan. My words were that we are moving towards a stronger form of socialism from a weaker form of socialism. No country has done that and prospered at the rate of a country that moves from a stronger form of socialism to a weaker form of socialism. Economic policy is not a science. It is an art. There are so many variables. But no dollars he spent by government that is not necessary. Thousands and thousands of economic development projects at the local State and national level highly likely did not benefit society as much as allowing the taxpayers to keep their money would have

Susan Fennewald

I always think of "economic development" money as a slush fund that politicians can spend on their friends. But...when the govt gives money to poor people - they spend it and that leads to more economic activity. When they give money to rich people - it doesn't circulate as quickly or as much. Changing the tax rate from 34% to 38% (or whatever) is not a step toward socialism. Social security was a much bigger step toward socialism.

Some govt spending is more like socialism than others. Defense spending is not socialism. The EPA isn't socialism. And even OSHA isn't socialist.

Carlos Ponce

A funny thing happened when they decided to increase the luxury taxon yachts. Did the rich suffer? No. They still bought yachts but registered them to overseas ports. Who suffered? Those who built and maintained American yachts and operated marinas.

"When they give money to rich people - it doesn't circulate as quickly or as much." You must be thinking of the cartoon character Scrooge McDuck who would swim in his money bin. A person with money SPENDS it - buying and maintaining automobiles, estates, etc., hiring staffs. A millionaire SPENDS and INVESTS.

"The EPA isn't socialism." More like crony capitalism where tax dollars go to "green" projects with no effect on the environment.

Hold your breath for a while. That will have the same effect on the environment as spending trillions.

Norman Pappous

We agree on much. Sam Collins and I wrote a column together about uniform basic income. You should read it. It is a concept rooted in conservative economics if you can believe that.

Norman Pappous

Universal not uniform

Diane Turski

I don't see how the US is heading towards a strong form of socialism either. Therefore, I also challenge such nonsensical unsupported claims.

Carlos Ponce

All you have to do is observe the long term affects of the Biden agenda, Diane.

Norman Pappous

Carlos don’t bother. She obviously did not read it or comprehend it if she did. When Bernie Sanders says he could never imagine how far Biden would go, you know the extremes are in control.

Diane Turski

BTW, Norman, Reagan's and Thatcher's "trickle down" economic theory hasn't worked.

Carlos Ponce

Reagan initiated SUPPLY SIDE ECONOMICS, not "trickle down".

Norman Pappous

@Diane "Trickle down' was never an economic theory. You will not find it in a single economic text book of the era. It is a label created out of whole cloth by 'journalists'.

Norman Pappous

BTW - Diane, Reagan won his next term in a historic landslide and Thatcher was the UK's longest serving Prime minister of the 20th century. Both experienced their enormous success after beating liberal politicians who failed to understand how markets work.

Craig Mason

Yes Reagan did win a second term, but spent so much that poor George Bush had to raise taxes, and was drummed out of office in 92. Time has been kind to Reagan. He really wasn’t that great of a President, but he was an excellent communicator.

Norman Pappous

@Craig you will get not objection from me about deficit spending by either party. I consider it child abuse on future generations. However, you have to remember the economy's health prior to Reagan. IMO anyone who wants to provide an example in fiscal excellence should review Thatcher's record.

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