PA Coalition for Responsible Government

Member Group : News Releases

PA Coalition’s Economics 101 tutorial on Economics and Social Systems

On June 2, Barack Obama visited Pennsylvania (CMU) and spoke mainly on the economy, small businesses and "clean energy". Initially, we were concerned that, in addition to takeovers of major industries, he would now propose to start taking over small businesses that focus on profits instead of the collective. But no… we dodged THAT bullet for now.

He "only" proposed punishment of profitable companies through new taxes while rewarding the most uneconomic sectors of the economy by providing funding for "clean energy". This is more of the same anti-capitalist rhetoric that we have come to expect from this President.

Perhaps his time would have been better spent at Carnegie Mellon University if he had taken the PA Coalition’s Economics 101 tutorial on Economics and Social Systems. Is Barack Obama a Capitalist, Socialist or Fascist? You decide.

Economic and Social Systems

Capitalism – This typically refers to an economic and social system based on enabling the individual through private ownership of property. Enabling the individual facilitates the private accumulation of wealth, private control of the means of production along with the personal choice to use the profits as the individual(s) deems appropriate. Investments, distribution, production and income are determined by private decisions with limited government regulation.

The role of the government in a Capitalist society is the protection of individual and private property rights. In a Capitalist system, the individual and society are negatively impacted when burdened by excessive government regulations, taxes, and social programs that move money from the producers to the non-productive members of society.

Most capitalist societies are characterized by freedom, high standard of living, innovation, and strong scientific/social advancement.

Marxism – The theory of Marxism was developed in Germany by Karl Marx beginning with the publication of his first works in 1847 and 1848. The basic principal of his philosophy is the "Labor Theory of Value", which states that the basic value of a commodity can be objectively measured by the average number of labor hours needed to create that commodity. According to Marx, a commodity’s value should be determined by the labor hours needed to produce the item and the workers sell this labor to the Capitalists for a wage. Since the Capitalists enjoy profits from the sale of the commodity, the workers are being ruthlessly exploited by either underpayment of their labor or by being required to work more hours than are needed to create the product. In short, Capitalists extract "surplus value" from the worker and profit from their labor. Marx maintained that Capitalism was a system that alienated the masses because the free market, not the workers control things. This leaves the workers in degrading and monotonous work more suited for robots and decisions are based on profitability not on human need.

Marx assumed that the people could successfully replace a market-based economic society with a comprehensively planned society. The problem with this system is that it denies the natural state of man including human rights and human dignity. Application of this theory, even in a technologically advanced society, is not practical because we cannot create a fully planned system that puts an end to scarcity and uncertainty. Under Marxist Governments, the Government owns everything; there are minimal private rights and NO private property. Since there is no private ownership of property, there is no incentive to work hard to better oneself.
Both Communism and Socialism are variations of Marxist philosophy, while Fascism is Marxism with a veneer of Capitalism. Regardless of the theory, the application of this theory has historically resulted in unequaled human suffering at the hands of the "elite class" or party officials.

Socialism – This refers to a broad spectrum of economic and social theories that advocate government or community ownership and administration of the means of production and distribution of products. In addition, the society is supposed to be characterized by equality for all individuals and an egalitarian compensation method.

Under socialist systems, all receive an equal share of the output and proceeds of the economy. Non-producers (looters from Ayn Rand) do not have to contribute to receive their share of the proceeds. These non-productive elements of society must be paid by the producers. Typically, an ever increasing amount must be taken from the producers to contribute to the non-productive members. At some point, the productive individuals realize that they will not receive additional benefits from their efforts and cease to produce, leading to the collapse of Socialism. Margaret Thatcher may have said it best: "The problem with Socialism is that you eventually run out of other people’s money." This system never realizes its "good intentions" because it denies the natural state of man including human rights and human dignity.

Communism – This is a system of government in which the state plans and controls the economy and a single, often authoritarian party holds power, with a goal in which all goods are equally shared by the people. Prior to the Russian revolution of 1917, "communism" and "socialism" were synonyms that described economic systems wherein the government owned the means of production. Communist systems have only been able to flourish in agrarian societies however; the takeover of the means of production in an agrarian society requires the seizure of the property of tens of millions of peasants, not just the takeover of a few industrialists. Lenin believed that, since the vast majority of the population would oppose government seizure of property, true socialism could only be attained by violent revolution. Lenin believed the best way to impose his philosophy on the population and quell resistance was through "terror" that included mass executions, starvation and slave labor. The collectivization of the land and farms in Russia by Lenin reduced food production and led to deaths due to starvation of millions peasants. Lenin’s successor, Stalin, completed the takeover of all farms and sent millions of the most successful producers to slave labor camps and starved the rest into submission.

Other socialist nations embraced Lenin’s brutal methods of control in China, Indo-China, North Korea and Eastern Europe and all became known as "Communists".

– Fascism is Socialism with a Capitalist coating. A Fascist system is marked by centralization of authority under a dictator, forcible suppression of opposition and criticism and stringent socio-economic controls.

Under Fascism, private individuals continue to run businesses, but under the strict control of the government. Owners of industry and private property are required to use their property "in the national interest". No economic activity can be undertaken without the government permission and strict licensure is ubiquitous. In order to quell popular unrest over high unemployment, fascist governments try to stimulate the economy by initiating huge public works projects that are financed by excessive taxation, printing of fiat money and high levels of borrowing (sound familiar?)

The poster boy for Fascism is Benito Mussolini of Italy, who promoted planning schemes to control the economy of Italy, followed closely by Adolf Hitler who instituted a modified fascist government in Germany. Both the Fascists in Italy and the Nazis in Germany were certainly to the right of the Russian communists (who they hated), but to contend that they were right wing or conservative, as liberals in America’s contend, is just plain wrong.

The next election cycle is critically important to the future of our nation and its economic health. We need to elect representatives that promote the social and economic values that have made America the economic engine of the World.