Part Three—Collectivism: Increase Government?
The term collectivism embraces communism and socialism and similar philosophies on the left side of the
political/economic spectrum. Collectivist systems feature economic cooperation and varying degrees of
centralized control as contrasted with capitalism’s economic individualism and political freedom.
I. Communism
Although China, Cuba, North Korea, Vietnam, and a few other nations continue to practice communism,
the balance of the world has clearly rejected Marxist-Leninist totalitarianism. China is rapidly and
enthusiastically embracing free market practices, with continuing state direction; a strategy that some
label state capitalism. Fidel Castro’s departure from the Cuban presidency in favor of his brother Raul has
resulted in initial free market reforms. For the first time in 50 years, Cubans are now allowed to buy and
sell houses freely as well as used cars. Communist Vietnam is also embracing elements of capitalism.
Nike, Samsung, and smartphone component suppliers for Apple are among the manufacturers drawn to
Vietnam for its relatively low wages and stable political environment.
A. Communist Principles
Karl Marx, along with Freud and Einstein, is among the thinkers who most profoundly shaped the 20th
century. He felt that the pursuit of wealth and self-interest would erode society’s moral core. He built an
economic interpretation of history, arguing that “the mode of production in material life determines the
general character of the social, political, and spiritual processes of life.”
[For an introduction to Marxist thought, see http://www.cla.purdue.edu/English/theory/marxism/]
Communism to Capitalism: A Bumpy Road
People in former communist nations in Eastern Europe, including Romania, Poland, Hungary, the
Czech Republic, and Russia, report mixed feelings as they look back on the years following the fall of
the Berlin Wall and the end of the Cold War between the former Soviet Union and the Western
European/American allies.When dictatorships were replaced by democracy, the initial reaction was
euphoria, but in subsequent years some nostalgia for the certainties of communism has emerged.
High unemployment, poverty, and harsh cuts in public spending have dashed the high hopes for
post-communist prosperity. Many in Eastern Europe yearn for the comfort of state-provided health care
and education and state-subsidized goods and services, but the evidence suggests they tend to forget
about the poor quality of those goods and services, state censorship, the absence of freedom, and
fear of the state.
Sources: Michael J. Jordan, “After the Berlin Wall, Nostalgia for Communism Creeps Back,” The
Christian Science Monitor, November 8, 2009
[http://www.csmonitor.com/2009/1109/p11s01-woeu.html] and Rossen Vassilev,“The Tragic Failure of
‘Post-Communism’ in Eastern Europe,” Global Research, March 8, 2011
[http://www.globalresearch.ca/the-tragic-failure-of-post-communism-in-eastern-europe/23616]
II. Socialism
Socialists rejected communist totalitarianism and embraced democracy, while calling for aggressive
government intervention to correct economic and social ills. Socialists aim to retain the benefits of
industrialism while abolishing the social costs often accompanying the free market. The government is
likely to be directly involved in regulating growth, inflation, and unemployment. In the contemporary
Western world, Austria, Norway, Denmark, Sweden, South Africa, Finland, and France are among the
nations where socialist principles have retained a significant presence.
A. Socialist Goals
A critical distinction between socialists and capitalists is that the former believe a society’s broad
directions should be carefully planned rather than left to what some take to be the whimsy of the
market. Furthermore, socialists are convinced that problems of market failure mean that the free
market is simply incapable of meeting the needs of all segments of society.The socialist agenda
includes the following elements:
Liberty—to a socialist, the freedoms of capitalism are largely an illusion, accessible only to the
prosperous and powerful.
Social welfare—Socialists believe that the economy must be directed toward the general
interest rather than left free to multiply the welfare of successful capitalists. Hence they
advocate income supports, free education, free health care, and the like to correct the failures of
capitalism.
Fulfilling work—socialists object to the harshness of working life where a large segment of
society is chained to degrading labor.
Community—socialists seek a communitarian approach to life where the excessive
individualism of capitalism is muted by a concern for the welfare of all.
Equality—class distinctions are anathema to the socialist. All humans are equally meritorious,
and distinctions among them are inherently unjust.
Rationality—socialists fear the “irrationality” of a society based on competition and unrestrained
pursuit of industrial growth.
Socialism in South America
Recently deceased President of Venezuela Hugo Chavez hoped to build a “21st century socialism” in
South America that would elevate the poor—forgotten by “savage capitalism”—while leading his
country and neighbors including Bolivia, Ecuador, Honduras, and Nicaragua away from American
dominance. Chavez nationalized many companies and redistributed land from the government and
private owners to the poor. Critics say he stifled dissent, took control of almost every government
institution, and subjected the nation to double-digit inflation, food and power shortages, a devalued
currency, and a murder rate that has doubled in recent years. At this writing in 2013, Chavez has been
succeeded by former Vice President Nicolas Maduro, who seems to share Chavez’s ideology.
Sources: Associated Press, “Chavez Asserts: We’ll Bury Capitalism,” The Des Moines Register, July
19, 2010, p. 10A; Editorial, “The State Department Responds to Repression by Hugo Chavez,” The
Washington Post, January 4, 2011[http://www.washingtonpost.com/]; Juan Forero, and “Venezuela
Tries to Create Its Own Kind of Socialism.”
III. Coping with Capitalism—China and Russia
A. China—Economics
China and some other nations practice what is sometimes labeled “state capitalism” in which the
government is the dominant economic force as it intervenes in and shapes the market to further the
state’s political goals.
State-owned firms control about 30 percent of the Chinese economy with about 120 giants controlled
by the central government and about 150,000 smaller, state-owned companies. Huge sectors of the
economy are dominated by government entities.
Problems
China faces many problems, particularly as it attempts to balance its export-led economy with
increased domestic consumer spending. Stunning levels of environmental pollution; stock market
manipulation; dangerous foods and drugs; rampant piracy of software, movies, and music; and
government corruption are among those difficulties. Basic social support structures like affordable
access to health care, unemployment insurance, and pensions remain inadequate.
Changing Labor Markets
Low wages, often difficult working conditions, and a rapidly shrinking supply of young laborers (the
result of strict family planning policies) have caused unrest among workers leading to occasional
strikes and some increase in wages, although those wages remain low relative to the economy’s
overall health. China’s reliance on cheap labor to drive its economy is threatened as other nations
are able to undercut the Chinese advantage. Despite China’s renewed global prominence and its
stunning economic advances, record numbers of professionals reportedly leave annually.
B. China—Politics
Freedom
China remains a dictatorship governed by the Communist Party. Repression is common. The
government controls the media as evidenced by censorship battles between the Chinese
government and Internet news sources such as Google, The New York Times, and Bloomberg,
each of which has been blocked at times. China uses its “Great Firewall” of Internet censors to filter
search results, particularly those addressing politically sensitive themes.
Reforms
Even as China has rejected calls to guarantee freedom of speech and move toward democracy, the
Communist Party leadership recognizes the need for gradual change. In a bid to stimulate a
slowing economy, China announced in late 2013 that it would open state industries to greater
private-sector competition while also easing some limits on foreign investment.
Still Communist Party bosses use the law as a means of social control, repression remains
common, and governance by the rule of law, where no person or political party is above the law, is
not yet the case in China. [For the latest Chinese news, see http://thebeijingnews.net]
Visit Mom and Dad
China’s Buddhist heritage commands extraordinary respect for parents, but effective July 1, 2013,
a new Chinese law requires attention to parents 60 and older and living on their own. Family
members “should often visit or send regards to their parents,” and they must attend to their parents’
“spiritual needs” and must not “overlook” or “neglect” them. The law does not specifically define
those new expectations. Some Chinese are troubled that their nation may have reached the point
where it must force filial piety by law, but others suspect the state is simply looking for a way to
sustain a swelling elderly population as the workforce shrinks, in part as a consequence of the
official “one child” population control policy.
C. Russia—Economics
Russia remains a developing nation with a total economy about one-eighth the size of the U.S
economy. With only a brief bump during the Great Recession, Russia has used its vast natural
resources to buy increased prosperity and achieve a balanced budget with near full employment. At
this writing in 2013, however, growth has slowed and Russian president, Vladimir Putin, has proposed
borrowing from Russian pension reserves to modernize the famous Trans-Siberian Railway.
The Russian government controls about 50 percent of the nation’s economy, a presence that many
economists believe must be reduced if Russia is to encourage foreign investment and maintain a
vibrant economic future. A big threat to Russia’s long-term economic welfare and national stability is its
aging population, now at about 143 million and growing slightly, but projected to decline to 116 million
by 2050. Life expectancy declined to 69.7 years in 2012. Russia’s population dilemma is at least
significantly attributable to a national culture of drinking and smoking that has contributed to a life
expectancy for Russian men of only 60 years.
D. Russia—Politics
Russia’s future economic success is intimately tied, of course, to its political processes. The state
needs to win over foreign multinational investors who fear political tyranny and domestic
corruption. The Russian government’s centralization of economic power has been accompanied
by tightened control over politics, courts, activists, and the mass media.
At this writing in 2013, hundreds of Russian civil organizations have been subjected to “inspections”
for “political activity.” Critics question whether state capitalism as practiced in Russia can succeed in
the face of political repression, routine corruption, and abuse of the rule of law.
Part Four—Middle Ground? A Mixed Economy (The Third Way)
Communism has failed. Socialist principles, to the extent that they require central planning, bloated
bureaucracies, and restraints on personal freedom, are discredited. An era has passed, but the shape of
the future is unclear. The state capitalism of China, Russia, and other nations has little appeal in America
and Western Europe and yet America’s brand of free market capitalism has lost a great deal of luster in
the recent financial collapse and the ongoing Great Recession. For years, the Nordic states of Sweden,
Norway, Denmark, and Finland practiced their market socialism or social democracy with such success
that it was labeled a “Third Way” between the harsher extremes of capitalism and communism. Their
welfare states provided healthy economic growth with cradle-to-grave social care for all in a system
emphasizing the collective welfare over individual preferences.
A. Sweden
Life expectancy in Sweden is 81.28 years, as compared with about 78.62 years in the United States.
The government provides education, health care, child care, maternity and paternity leave and
unemployment protection, and more. Government incentives promote preferred behaviors. For
example, the Swedish government will pay 80 percent of a parent’s salary (capped at $65,000) for up
to 13 months of parental leave from work. Overall, the parental leave policy has contributed to
Sweden’s standing as a world leader in gender equality. About 72 percent of working-age Swedish
women work at least part time.
Gender Equality
Sweden aggressively encourages gender equality. Believing boys have an unfair edge, eradication of
gender stereotypes has become a key ingredient in Swedish education. At Stockholm’s “Egalia”
(equality) preschool, for example, the staff avoids using the words “him” or “her” and addresses all
children as “friends.” Children’s books often feature homosexual couples, single parents, or adopted
children and classics like Cinderella are shunned. Egalia’s methods are controversial, even in Sweden.
Taxes
To pay for its cradle-to-grave welfare benefits, Sweden takes about 45 percent of its national
income (gross domestic product-GDP) in taxes, while the United States, in contrast, has one of the
developed world’s lowest total tax burdens at about 27 percent of GDP in recent decades, but
down to about 24 percent during the recession. In order to keep its economy healthy, Sweden has
followed a policy of comparatively low total corporate taxes. Sweden’s economic performance over
the past 20 years has been among the strongest in the world.
One expert attributes the Third Way success to “lavish” spending on research and development
and higher education. Thus, for Sweden and the other Scandinavian states, wise government
spending is a key ingredient in a successful market-based economy. One should remember, of
course, that Sweden is a small, homogeneous nation. Replicating its policies in the United States
would be difficult.
Speeding Ticket
Ferrari-driving millionaire, “Roland S.” was fined $290,000 in 2009 for speeding 60 miles per hour
through a small village in Switzerland where the speed limit was 30. In their verdict, which was
subject to appeal, judges labeled the driver a “traffic thug.” The fine reflected a 2007 Swiss law
allowing judges to hand down fines in certain misdemeanor cases based on personal income and
wealth. “Roland S.” was worth some $20 million, and he was a repeat offender. The maximum
Swiss fine is $1 million, while Germany permits as much as a $16 million fine. France, Austria, and
the Nordic nations also permit punishments based on personal wealth. (Source: Frank Jordans,
“Rich Driver Hit with $290,000 Speeding Ticket,” The Des Moines Register, January 11, 2010, p.
1A.)
I. American Capitalism in Europe?
In building entrepreneurial spirit, personal freedom, and personal wealth and income, the United States is
the clear world leader, but the EU’s very powerful, 28 nation, over 500 million person bloc generates a
gross national product slightly larger than the United States and more than three times that of India or
Japan. Europeans choose to work less than Americans, and as they see it, enjoy life more. Their
economy is less flexible than that of the United States and typically produces fewer jobs, but it is also less
harsh. Universal health care, job protection and strong unemployment benefits are part of the European
identity.
Welfare Reform
Europe’s warmer, more communal values and practices are inviting, but the ongoing recession has
resulted in an EU unemployment rate of more than 12 percent and the need for Eurozone
economic bailouts of nearly bankrupt economies in Ireland, Greece, Spain, and Portugal. Youth
(age 15–24) unemployment at over 23 percent for the EU generally and nearing 60 percent in
Spain and Greece has produced something approaching a “lost generation” in some countries.
These struggles have also sharpened the divide between the more prosperous northern European
nations and the struggling south. Austerity, that is, higher taxes and sharp cutbacks in government
spending, has been implemented in the struggling nations.
EU Failure?
The Great Recession has shaken the European Union. Yale professor Nicholas Sambanis argued
that the European Union’s problems extend beyond economics to its very identity. Compounding
their economic challenges, many European nations are struggling to assimilate immigrants and to
become comfortable with growing Muslim populations, as pointedly noted by German chancellor
Angela Merkel:
This multicultural approach, saying that we simply live side by side and live happily with each other,
has failed. Utterly failed.
A. Contrasting Values
Obviously, both Europe and America are struggling in this troubled time, but which vision of life seems
most promising over the long term? American commentator and social activist Jeremy Rifkin
contrasted the American and European “Dreams” such as—wealth/Individual success vs. quality of
life, growth vs. sustainable development, and so on. Rifkin thinks the European strategy is the better
one.
Is the Welfare State a Key to Personal Happiness?
Denmark turns out to be the happiest place on Earth, according to a 2013 United Nations study of
global happiness in 156 countries. The top of the happiness list includes: 1. Denmark, 2. Norway, 3.
Switzerland, 4. The Netherlands, and 5. Sweden, all northern European states with strong welfare
principles. Broadly, good health, education, freedom, and wealth are associated with happiness, but
wealth seems to increase happiness only up to a point.
2011 Wall Street Journal survey of happiness research raised a cautionary note by drawing a
distinction between a purposeful life and a happy life. Mounting evidence suggests that people who
focus on a meaningful life, while sometimes sacrificing happiness feelings in the moment, may be
healthier, live longer, and have a greater sense of well-being over time than people who focus on
short-term feelings of happiness.
Part Five—America’s Economic Future: Where Are We Going?
How Much Government?
This section starts with the following questions being posed to the students—should Americans
expand their faith in free market capitalism, or do they need to move their present mixed economy
a bit closer to the welfare state model, which itself is under great pressure? Or must a new model
emerge?
Good News
Much of the world strives to achieve America’s blend of entrepreneurial capitalism along with
intellectual and pop culture leadership. Indeed, recent polling data ranked the United States first
among the nations of the world in helping others (donations, volunteering, and aiding strangers).
I. The American Dream at Risk?
Globalization and new technology, in the short run at least, have chipped away at the American job
market. Labor unions have lost much of their power. The American multinational giants seem to be more
interested in investing abroad than in America.
The core of America—the middle class—and the very idea of the American Dream seem at risk. The
middle class struggle has been particularly damaging to those younger than 35, whose net worth, for the
typical family, fell by 68 percent between 1984 and 2009, after adjusting for inflation. The section ends
with a question about whether there should be doubts about the top-to-bottom fairness of the American
system.
A. Overall Quality of Life
According to a United Nations 2013 report on overall quality of life (based on income, life expectancy,
etc.), the U.S. is doing very well, ranking third behind Norway(1st) and Australia(2nd), but when the
scores are adjusted for inequality in health, education and income the United States ranks 16th in the
world in overall human development behind Norway(1st), Australia (2nd), and Sweden (3rd), among
others.
In general, the United States ranks well on standard economic measures and not so well on standard
social measures. In 2013 estimated life expectancy, the United States ranked 51st at an estimated
78.62 years while Japan, for example, ranked 3rd at an estimated 84.19 years. Among the most
discouraging U.S. performances is in the category of infant mortality where 50 nations do a better job
of keeping babies alive than America does.
Some trends portend a worrisome future. The United States ranks fifth in the world in total spending
for education, but young adult college completion rates have fallen to 14th globally. Family structures
are changing dramatically. Marriage itself is in decline, particularly among those who are not well
educated.
B. Poverty
Four out of five U.S. adults, for at least a part of their lives, are on welfare, unemployed, or facing near
poverty, according to a 2013 study. Fifteen percent of Americans fall below the official government
poverty line ($23,021 for a family of four in 2011), but that number understates the magnitude of the
problem.
The result of these dismal economic conditions is that poor people, as commentator Paul Krugman
explained, live in a separate America. Of course, America’s poorer people live better than the bulk of
the citizens of the world. Thus, many Americans lead surprisingly harsh lives, and their prospects for
the future are not as bright as the American Dream suggests.
Pets or People?
People in America may not take the best care of their disadvantaged fellow Americans, but they seem
to be unstinting in generosity toward their pets. Americans in 2011 spent nearly $61 billion on their
pets, a sum that exceeds the gross domestic product of all but about 70 nations.
Sources: Danielle Kurtzleben, “Americans Spend $61 Billion on Pets,” US News and World Report,
May 22, 2013 and “GDP—Official Exchange Rate 2013 Country Ranks,” Countries of the World]
C. The Gaps
Extravagant wealth, side-by-side with punishing poverty, is perhaps the greatest disappointment and
injustice, from the critics’ point of view, in the global advance of capitalist principles. The wealthiest 1
percent of Americans now have a greater collective net worth than the bottom 90 percent. Income
inequality in the United States is the largest among Western industrialized countries. It should be
noted, however, that the rich-poor gap has been growing in most industrial nations, including the
Scandinavian states. The average CEO pay has risen from about 20 times the average worker’s pay
in 1965 to about 273 times today (down from a high of 383 in 2000).
Practicing Ethics: The Moral Decline of White Working-Class America?
Libertarian scholar Charles Murray in his controversial book, Coming Apart: The State of White
America, 1960–2010 points to declining moral values in that group as a crucial factor in American
inequality and reduced mobility. He provides evidence of an alarming fall in white working-class social
capital (neighborliness and civic engagement) prompted by decreasing industry, community, religion,
and marriage. Murray does not ignore similar problems in the black working class, but his focus is on
white people.
C. Community
American capitalism, despite its extraordinary success, is criticized for problems of poverty, inequality,
and unfairness, among others. Perhaps the more interesting concern, however, is mounting evidence
that the lives of Americans are increasingly solitary, distant, alone, and unshared. The market is driven
by and rewards individual achievement.
Only 30 percent of Americans, according to a 2008 study, report a close confidant at work, down from
nearly 50 percent in 1985, and workers in many other nations are much more likely to have close
friends at work than are Americans. American workers report inviting 32 percent of their “close”
colleagues to their homes, while Polish and Indian workers report inviting more than double that
percentage.
D. Declining Social Capital?
In his now famous book, Bowling Alone, Robert Putnam meticulously documented the decline of what
he labeled social capital, the community and commitment bonds that seem to emerge in a culture
where people regularly interact with one another. Putnam’s book explains that virtually every measure
of social interaction, from voting to picnics to playing cards, to church attendance, to membership in
social clubs fell significantly from roughly 1975 to 2000.
Putnam’s more recent research has produced no convincing evidence of rising community
engagement among adults, but he acknowledges they are reaching one another in different ways from
the past, principally through social media. In contrast to Putnam’s discouraging assessment,
Americans say they trust their neighbors (76 percent) and talk with them frequently (44 percent); these
self-reported measures of neighborliness have been rising recently.
An Opportunity Gap and Declining Community?
Putnam has for the last few years been collecting data about the growing gap in opportunities
among socioeconomic classes of American children. The more comfortable class of children
receive about one hour per day more time with their parents than do less advantaged children.
Young products of affluent America have steadily deepened their community engagement (going to
church more, better connecting to their parents, volunteering) while the less affluent young whites
have withdrawn or never undertaken that engagement. That disparity in involvement is not present
among young blacks, but the overall engagement gap between whites and blacks is wide.
Practicing Ethics: Technology and Loneliness
Since publishing Bowling Alone, Robert Putnam has spoken about the need to develop new kinds of
connections when old ones die. A 2008 survey of American adults found 60 percent saying that new
technologies had not affected the closeness of their families and a 2011 study found that self-reported
feelings of empathy were higher among college students the more time they spent on Facebook.
However, MIT professor Sherry Turkle says people have sacrificed conversation for “mere connection.”
Sources: Charles M. Blow, “Friends, Neighbors and Facebook,” The New York Times, June 11, 2010
[http://www.nytimes.com]; Shirley S. Wang, “Could Those Hours Online Be Making Kids Nicer?” The
Wall Street Journal, August 16, 2011, p. D1; and Donna St. George, “Internet, Cell Phones May
Strengthen Family Unit, Study Finds,” washingtonpost.com, October 20, 2008, p. A07.
II. Too Much Capitalism? Or Too Little?
Many questions have been posed in this section, such as—Has America placed too much faith in the
market and too little in government? Is the alleged decline in community a product of capitalism itself? Are
poverty, inequality, crime and the Wall Street collapse inevitable by-products of a “selfish, greddy”
market? Can robust capitalism be sustained if it produces not just efficiency and growth but also extreme
income and wealth gaps, corruption, and injustice? Can people tolerate capitalism’s collapses and
injustices? Can the market be improved through judicious regulation? Or must people look for new
answers?
A. A “Remix” Needed?
According to a 2013 nationwide Marist Poll, 55 percent of Americans favor free enterprise and fear
expanded government regulation of business Perhaps some form of “re-mix” is needed. Journalist
Anatole Kaletsky reminds one that capitalism is adaptive, reinventing itself through crises. Kaletsky
thinks his Capitalism 4.0 should involve smaller, smarter governments, less reliance on theory, and
greater recognition of the need for pragmatic change.
B. A New World Consensus?
In his book The End of the Free Market, political scientist Ian Bremmer says capitalism may have
established its claim as the best economic system, but the world is still in conflict over whether
Western capitalism is the best political-social-economic system. As New York Times columnist David
Brooks explained in reviewing Bremmer’s work, the world now seems to be divided into a pair of
general camps. Democratic capitalism in the United States, Japan, Denmark, and other nations favors
business to create wealth and government to regulate as needed. State capitalism in countries such
as China, Russia, and Saudi Arabia employ the market to build wealth which, in turn, is controlled and
distributed by the state for its political purposes. The two systems trade with each other for mutual
advantage but are economic and political rivals.
Individualism Up, Morality Down?
Scholars now have access to a giant Google database of 5.2 million books published between 1500
and 2008. They can type in a word and see how frequently it has been used over the years. One study
looking at 1960 to 2008 found individualistic words (e.g., self, standout, unique) were used more
frequently over those 48 years whereas communal words (e.g., collective, common good, band
together) declined in use. Another study found that general moral terms (e.g., virtue, decency,
conscience) and words associated with moral excellence (e.g., honesty, patience, compassion)
receded in use over the course of the 20th century.