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.