A friend of mine asked if China-style Socialism can be implemented in the U.S.A.? Since we are going to be hearing a lot about “America becoming socialist” this week, I thought I would put my answer here.
“Socialism” is too broad of a word. Every democracy has a healthy mix of Capitalist and Socialist policies. Social Security, Medicare, Medicaid and many other programs conservatives are dependent on were labeled “socialist” when they were introduced. But it didn’t turn the country socialist. It was the result of the rich-poor divide getting too great.
Ironically, right now the U.S government is practicing a form of state-controlled socialism/manipulating the economy. Your tax money is being used by the government to artificially inflate the stock market. The Federal Reserve is literally printing money and giving it to junk bonds, hedge funds, and even Apple–which has had record profits this year. Farmers were given millions in bailouts too. That’s “socialism.” It’s just socialism for corporations which no one ever complains about. It’s only when tax money goes to the poor that the socialism alarm is sounded. But in this election season, all we are going to hear is the word “socialism” said in an over-generalized way.
It would be impossible for the United States to truly implement China-style socialism. The U.S, is the world’s only reserve currency and the place where countries and companies around the world park the bulk of their financial capital. They wouldn’t do that if the U.S.A. were truly a socialist nation or becoming one. China’s economy is made up of state-owned enterprises and “private companies” that the government has full access to and can interfere with anytime. If the government wants to put surveillance equipment into Huawei phones, they can do that at anytime. But all of these companies practice capitalism, just under an authoritarian system. So China too is a hybrid economy; but far too regulated and controlled by the government to ever be deemed truly trustworthy by investors over-the-long haul; which is one of the reasons many companies are moving out of China.
The United States is truly made up of independent capitalist companies. But the Federal Reserve is using taxpayer money to choose winners from those companies in the American economy which is not supposed to happen in true capitalism. It’s highly dangerous and will lead to an economic day of reckoning.
Both the U.S. and China lie about their economic statistics, both flirt with authoritarianism, both have “socialist” elements and both practice a hardcore version of Capitalism that doesn’t leave families with much room for error. There’s virtually no true “socialist” safety-net in either country and both are now experiencing extreme wealth divides. The difference is that China is a one-state party which is bad. And the United States has the core fundamentals to remain a genuinely capitalist society. Both countries are drowning in government debt because of truly stupid decisions over the past 20 years.
Since both countries have broken their social-contract with the people; both countries will have to initiate programs to even the divide between rich and poor. People may want to call that “socialism”, but it’s not. It’s something all economies have to do when the wealth imbalance gets too big. Roosevelt and even General Eisenhower were labeled “socialists” and “communists” when they had to make adjustments. Reagan raised taxes when deficits got out of hand, so he would be labeled a “socialist” now.
Eventually in both countries (and the U.K. and many other countries), money will have to be re-directed to the middle-class and poor people because they all went too far in rewarding corporations and the wealthy. Both China and the US are massively in debt, so they both will have governments that need to keep overspending to stay afloat. That is the box both China and the US created between 2000-2020. They are now so in debt and so trapped, they have to keep spending and adding debt to survive. Makes no sense, but that’s the trap they are in unless they want 50% unemployment or higher.
Now we will go into a period of adjustments and people will be panicking about “communism” and “Socialism;” but people should know the stock market already is under government control and bailing out rich companies with bad debt. It’s only when normal people get helped out that people start complaining.
If the Democrats win, the next big debate will be about MMT–Modern Monetary Theory which will be labeled “socialism.” MMT is Printing money out of thin air to give away and not worrying about debt. That’s risky. But of course, the FED has ALREADY been practicing MMT since 2008 and that’s MMT. That’s Dick Cheney’s “Deficits don’t matter” stuff. It doesn’t matter whether it’s a Democrat or a Republican President. They call it “Q.E.” (quantitative easing) instead of socialism or MMT. So when you hear all the panic about socialism this coming week; just know, it’s already been here for a long time. Demand more intelligent conversation on the subject instead of generalized slogans that are not really about analyzing the state of the country’s economy.