The Case for American Socialism

Capitalism in America has failed. With the Dow Jones Industrial Average reaching a record high recently, many would argue that the United States has rebounded from the economic recession and is now well along the path to full recovery, and that the previous assertion is far from truth. Failed economic policies and pandering to corporate-supported lobbyists over the past several decades resulted in a housing bubble and subsequent burst that catalyzed a recession larger than any since the Great Depression in the early 20th century. Though the country is indeed on the upswing again, the abhorrent mismanagement of our economy, our society, and our political structure will unfortunately continue as long as policymakers with poor understandings of the mechanisms that drive them continue to be elected and supported.

Every election cycle in America brings with it a host of tired, poorly-reasoned methodologies. Politicians continue to implement failed fiscal ideologies like trickle-down economics and lower taxes for higher earners, ever tighter government control over our civil liberties with the odious Defense of Marriage and Patriot Acts, and political grandstanding with repeated filibusters against every piece of legislation to circulate through the House of Representatives and the Senate. Despite every indication to the contrary, a significant portion of the American government pushes poorly-reasoned positions, promising a better America but ultimately only causing damage to the financial underpinnings of the entire planet, reduced freedoms through laws of dubious legality, and unreasonable inefficiency of Congressional proceedings. Were the people able to more directly shape policy in this nation, many of these issues would be resolved, at least in part.

In “Stumbling on Happiness,” Daniel Gilbert explores the concept of “super-replicators” – anything capable of multiplying or being transmitted more effectively or much faster than would normally be expected – through the lens of genetic replication and idea transfer, to explain the misguided belief that having children makes people happier, and its persistence through time across our entire society. More-so than any other argument presented in Gilbert’s essay, this one struck a deep chord. What is it about bad ideas that causes their superior comparative uptake with respect to good ideas? More generally, how do we decide what bad ideas are? Why do ideas that we know are bad continue to resurface even after being cast aside or fading away? Specifically in the context of social and economic politics, how do ideas we already know are bad continue to exist?

The actions of the United States government have resulted in the gradual stripping of American freedoms and the imperilment of the American Dream. Most recently, this has been done through obscene systematic judicial overreach via the broken plea bargain system, levying extreme sentences against political dissidents ending in the death of a young man with a bright, promising future. Also symptomatic of the decline of the nation is the absurd, disproportionate violence by militarized police forces throughout the country; the current system arms officers well beyond what is necessary to carry out their duties, to the detriment of the people as a whole. Similarly, on a global scale, America has caused the deaths of hundreds of thousands of civilians in two unfunded and poorly overseen wars that this and the previous administration were lax in pushing to take care of. Aggression by the United States against other sovereign nations, both friend and foe, is not confined wholly to paramilitary activities, however; the capitalist perpetual greed machine has endangered the entire planet’s future through willful violations of financial procedures and laws by the banking system, it has directly contributed to the wholesale destruction of the ecosystem through lax environmental regulations, and stripped funding and thereby efficacy from the educational system, reducing our chances of maintaining, protecting, and improving the planet we call home.

Yet through it all, the American people have continued to vote along party lines and vehemently resist any real meaningful change. The commonly held belief in this country is that the hard-capitalism and pseudo-representative democracy economic and political systems in place here are the best in the world, but this is an unfounded belief, and in many ways quite wrong. The United States consistently ranks well behind the social-democracies in northern Europe in happiness, education, and life expectancy, to name a few metrics. Despite this, many Americans have remained resistant to the socialist label; the Republican Party went as far as passing a resolution derisively referring to the Democratic Party as the Democratic Socialist Party. Truly, the anti-socialist sentiment is a super-replicator: this behavior in the United States originated with the First Red Scare following the 1917 Bolshevik Revolution in Russia. Things settled down until the Second Red Scare, pushed primarily by Senator Joseph McCarthy, after the Second World War. McCarthyism never fully left the country after the Second Red Scare, and has most recently been popping up in political rhetoric, targeted at President Barack Obama and the modern Democratic Party. But would a Democratic Socialist Party really be a bad thing?

In the face of evidence showing the superiority of the modern socialist democracies, the anti-socialist diatribe has not ceased. Following the passage of the Affordable Care Act spearheaded by President Obama, many pundits and political commentators around the country decried the new “socialist” policies, though they were actually corporatist in nature. The Republican Party bills itself as the party of smaller government, claiming that larger governments with more employees are inefficient and to be avoided. That position seems strange: the Organization for Economic Co-Operation and Development has compiled a database of statistics regarding the economies of the world, and this database shows quite plainly that twelve countries are ahead of the United States in total employment as of the third fiscal quarter of 2012, and the Nordic countries specifically employ roughly 30% of their population in the public sector. The 2009 bailout of the financial and automotive industries was widely regarded in America as a very socialist move, despite the fact that, following the bailout, the United States government still owned only about one twentieth of one percent of American companies. This last opinion makes even less sense when juxtaposed with the reality of the social democracies of the Nordic sphere: Sweden allowed Saab to go bankrupt and Volvo is now owned entirely by Geely, a Chinese company. When it was discovered that the major banks in Iceland held assets worth nine times the country’s economy, the financial structure was destabilized and every other bank folded up and collapsed. In response, Iceland eased consumer debt by amending loan repayment laws, raised taxes, and seized control of the largest lending firms in the nation, even eschewing America’s tradition of ignoring financial executives’ responsibility for the economic disaster and jailing at least two for fraud. Most of the northern European countries are strongly in favor of free trade too, and to a greater extent than has been seen in America in over a century. Democratic socialist countries in Europe are living the American dream while America itself is not.

Sweden learned over a decade ago how to cope with an economic recession and the effects of bad government, and they emerged a much stronger social democracy because of it. Iceland recovered from a then-terrifying financial crisis a short while ago where their foreign debts were over eleven times larger than the entire Icelandic gross domestic product, and their economy is fantastically strong after strict regulation and oversights helped get them back on track. Other countries in the region have dealt with and resolved economic issues of their own, and all have proven consistently to be the most socially progressive nations on the planet. The major differentiating factor between those populations and any of the regional populations of the United States is the adoption of socialism in some form or another, and America would be quite foolish indeed to continue ignoring that fact. Free market, laissez-faire capitalism in the United States has failed the American people, and tried-and-true socialist ideas can provide the answer we so desperately need. Daniel Gilbert was spot-on when he described the spread of certain ideas as super-replicators: poor ideas do spread and persist, specifically in politics and economics, though this does not have to remain the case; with the proper education and public relations efforts, the ideals held by the successful socialist democracies throughout the rest of the planet could become super-replicators in this country as well.

“The GOP’s savior will be a woman”

condoleezza rice

The GOP’s savior will be a woman:

The Republican party of yesteryear abolished slavery. That same Republican Party expanded affirmative action through the “Philadelphia Plan.”

The party sent the 101st Airborne to Little Rock, Arkansas to enforce federal court orders to desegregate public schools. A Republican president appointed Earl Warren to the U.S. Supreme Court (Warren wrote the Supreme Court’s decision in Brown v. Board of Education), and signed into law the Civil Rights Acts of 1957 and 1960, legal tools guaranteeing all Americans the right to vote.

The Republican Party established the Environmental Protection Agency, and passed the 1986 Immigration Reform and Control Act, granting legal status to approximately 3 million undocumented immigrants.

Reading through this list, it’s amazing just how different the Republican Party today is from the party that existed for the century between the Civil War and the Civil Rights Movement. The problem with the Republican Party isn’t the person being used to sell it. Having a woman or Hispanic as the GOP candidate in 2016 will mean nothing if the Republicans don’t stop being the party of ignorance, hate, and welfare for the wealthy.

Raising Medicare eligibility age to 67 would cost patients twice as much as it would save the government

Medicare retirement age: Raising Medicare eligibility age to 67 would cost patients twice as much as it would save the government—don’t do it. – Slate Magazine:

The Kaiser Family Foundation has found that lifting the eligibility age from 65 to 67 would reduce federal spending by about $5.7 billion in its first year of full implementation. But that would be offset by $11.4 billion in spending by other parties. That includes $3.7 billion in higher costs for 65- and 66 year-olds, $4.5 billion from employers through company-sponsored insurance, $0.7 billion from state governments, and $2.5 billion in higher average prices for third parties once younger seniors are shifted out of the Medicare risk-pool and into the general population.

That’s an absurd means of saving the federal government money—akin to raising $12 billion in taxes and then setting half the money on fire. The only people who actually benefit from this shift are health care providers who get to charge higher prices to 65- and 66-year-olds.

Rather than shrinking Medicare, we ought to be taking advantage of the program’s lower costs. One way to do that would be to lower the retirement age—potentially all the way down to zero—and bring more people into the program. That would reduce system-wide costs but require higher taxes or bigger deficits. A more viable idea would be to bring back the “public option” concept that liberals were forced to drop from Obamacare. The idea here was that the new insurance exchanges that will be set up in 2014 should have an option that’s linked to Medicare and its payment rates. The Congressional Budget Office says such a public option could save the government about $68 billion in reduced subsidies over 10 years, while also reducing out-of-pocket costs. Alternatively, you could structure the option as a formal offer to let non-seniors “buy in” to Medicare with the same mix of personal funds and government subsidies that Obamacare envisions being used for private plans.

More important than how much the government spends on health care is how much everybody spends on health care. If you take people who normally would be on Medicare and force them to continue using private plans, their costs will be much, much higher. The reality is that having everyone be covered by Medicare/a public option would cost everyone less overall.

The lessons we can learn from the Nordic nations

The Economist has put up a great piece taking a look at what the Nordic countries (The Netherlands, Norway, Denmark, Sweden, and Finland) are doing differently from the United States and the rest of Europe and how this could be used as a model going forward. I decided to add some commentary and data to the most interesting bits from the article.

The Nordic countries: The next supermodel | The Economist:

If you had to be reborn anywhere in the world as a person with average talents and income, you would want to be a Viking. The Nordics cluster at the top of league tables of everything from economic competitiveness to social health to happiness. They have avoided both southern Europe’s economic sclerosis and America’s extreme inequality. Development theorists have taken to calling successful modernisation ‘getting to Denmark’. Meanwhile a region that was once synonymous with do-it-yourself furniture and Abba has even become a cultural haven, home to ‘The Killing’, Noma and ‘Angry Birds’.

Here’s the United Nations’s World Happiness Report for 2012. The Nordic countries dominate the top of the list, while the United States comes in 11th place. Here’s a graph of the employment rates in the Nordic countries versus in the United States, from the OECD’s statistics database:

Employment for all person Nordic countries versus United States

Socialism is clearly taking its toll on the Swedish work ethic. Of course, one major reason the United States is so far behind is our employment of women compared to the Nordic countries:

Employment rates in Nordic countries versus United States

Employment males Nordic countries versus United States

Government’s share of GDP in Sweden, which has dropped by around 18 percentage points, is lower than France’s and could soon be lower than Britain’s. Taxes have been cut: the corporate rate is 22%, far lower than America’s. The Nordics have focused on balancing the books. While Mr Obama and Congress dither over entitlement reform, Sweden has reformed its pension system (see Free exchange). Its budget deficit is 0.3% of GDP; America’s is 7%.

The Free exchange article about notional savings accounts sounds a lot like the suggestions put forward in a piece in The Atlantic I talked about a few weeks ago. Such cuts would make Social Security sustainable for the foreseeable future and help to balance the budget.

So long as public services work, they do not mind who provides them. Denmark and Norway allow private firms to run public hospitals. Sweden has a universal system of school vouchers, with private for-profit schools competing with public schools. Denmark also has vouchers—but ones that you can top up. When it comes to choice, Milton Friedman would be more at home in Stockholm than in Washington, DC.

Private firms running anything with public funds has a bad reputation here in the United States for a few big reasons. The biggest is probably the money pit that is Medicare Advantage, the program that lets you get Medicare benefits via a private plan. As an example of how wasteful this program has been, a 2008 study found that the United States government was overpaying for Medicare Advantage plans by about 12%. As for school vouchers, studies of programs here in the United States have found either no impact or decreases in student achievement. While the necessary changes to how school works in the United States are massive, perhaps taking a look at how the Nordic countries implement their systems would point us in the right direction.

This may sound like enhanced Thatcherism, but the Nordics also offer something for the progressive left by proving that it is possible to combine competitive capitalism with a large state: they employ 30% of their workforce in the public sector, compared with an OECD average of 15%. They are stout free-traders who resist the temptation to intervene even to protect iconic companies: Sweden let Saab go bankrupt and Volvo is now owned by China’s Geeley. But they also focus on the long term—most obviously through Norway’s $600 billion sovereign-wealth fund—and they look for ways to temper capitalism’s harsher effects. Denmark, for instance, has a system of “flexicurity” that makes it easier for employers to sack people but provides support and training for the unemployed, and Finland organises venture-capital networks.

This is definitely something that Americans can learn from – having the government employ lots of people to provide services is not what makes “big government” a problem, it’s when government oversteps into your private life (you know, by telling you who you should sleep with, deciding what chemicals you can put in your body, and snooping through your mail). Additionally, the Nordic countries are clearly strong believers in the idea of a strong free market backed by a strong safety net to help people get back on their feet when things go bad.

The main lesson to learn from the Nordics is not ideological but practical. The state is popular not because it is big but because it works. A Swede pays tax more willingly than a Californian because he gets decent schools and free health care. The Nordics have pushed far-reaching reforms past unions and business lobbies. The proof is there. You can inject market mechanisms into the welfare state to sharpen its performance. You can put entitlement programmes on sound foundations to avoid beggaring future generations. But you need to be willing to root out corruption and vested interests. And you must be ready to abandon tired orthodoxies of the left and right and forage for good ideas across the political spectrum. The world will be studying the Nordic model for years to come.

I couldn’t have said the first three quarters of this paragraph better myself. The one major problem is that short sentence near the end, about rooting out corruption in vested interests. I probably don’t need to tell you how bad those are here in the United States. Lobbyists, Super PACS, corporations with the ability to donate as much as they want – all of these make for a system where those who have money can buy the government they want. Unless we can clean up the system and bring this country back in line with the ideals of representative democracy, it seems that it would be incredibly difficult to make the reforms that could bring us closer to something like the Nordic model.

Prices are higher in small towns than in big cities (also, a tutorial for R)

So I’ve decided to start learning about statistical computing ahead of the harder stats classes that I’ll be taking this fall (my subfield within the political science major is Empirical Theory and Quantitative Methods) and as my first little project to teach myself the basics of the R language/environment I decided to take a look at the consumer price index in small cities (population less than 50,000) versus large cities (population greater than 1,500,000). To do that, I needed to get that data, format it in a way that was R-friendly, and then present it in a way that makes sense. Since I noticed that many of the R tutorials out there aren’t very clear on some things, I decided to document my steps as I figured out what worked.

Getting data

The Bureau of Labor Statistics gives anyone access to their consumer price index database, and lets you see the information for specific regions. The two pieces of data I chose were Size Class A (over 1,500,000) and Size Class D (under 50,000) for 1993 to 2012. Retrieving the data as tables, I pasted each into a separate Numbers spreadsheet (this is on my MacBook Air) and exported them to my Downloads as “cpibig19932012.csv” and “cpi19932012.csv”, respectively. 

Getting it into R

Working in RStudio, I clicked on the Files tab in the bottom right window, clicked Home, clicked Downloads (or wherever you decided to save the .csv files), clicked More, then Set As Working Directory. This lets us access the .csv files in the R environment.

In a new script in the top left window, I import the data into variables cpi and cpiBig for the small cities and big cities, respectively:

cpi <- read.csv(file=”cpi19932012.csv”,head=TRUE,sep=”,”)
cpiBig <- read.csv(file=”cpibig19932012.csv”,head=TRUE,sep=”,”)

Making a graph

I decided that the best way to represent the data over time would be a line chart showing both data sets on the same graph. I start by deciding on a heading, “Consumer Price Index in small vs. large cities 1993-2012”:

heading = “Consumer Price Index in small vs. large cities 1993-2012”

Next, I had to set up the axes of the graph:

plot(cpi$Year,
cpi$Annual,
type=”n”,
main=heading,
xlab = “Year”,
ylab = “Average Annual CPI”)

This line:

  • sets the x-axis as the years from the small cities dataset, 
  • sets the y-axis as the Average Annual consumer price index from the small cities data set,
  • tells R not to also show the data points as a scatter plot on the graph,
  • labels the x-axis as Year,
  • labels the y-axis as Average Annual CPI 

Note that to see all of your options for data to assign to axes for a dataset, you can type the following into the Console in the bottom left window:

names(cpi)  

Where you can replace “cpi” with whatever variable you’re interested in.

Then we graph the data as lines, with small cities colored red and large cities colored blue:

lines(cpi$Year, cpi$Annual, type=”l”, col=”red”)
lines(cpiBig$Year, cpiBig$Annual, type=”l”, col=”blue”)

Finally, we give the chart a legend:

legend(“topleft” , title=”City Size”, cex=0.75, pch=16,
col=c(“red”, “blue”), legend=c(“Pop. < 50,000”, “Pop. > 1,500,000”), ncol=2)

This tells R to put the legend in the top left of the chart, title it City Size, colors the lines the correct color values, and gives them the correct label for each line.

To see the output of your script, click Source and then Run in the top left window. You should have something like this show up in the bottom right window:

Plot of CPI in small and big cities

So what’s happening?

The line for small cities is consistently higher than the line for big cities. How does that make sense? Aren’t small towns full of poor rednecks, and cities full of wealthy-ish hipster urbanites? 

I asked my friend Jason Zeng, an economic analyst friend here in Berkeley about it and he gave the following explanation: it comes down to rich suburbanites and urban squalor. The poor in big cities can’t buy the quality goods that the wealthier commuters in suburbs do, so their prices are lower. There are more poor in the cities than in the suburbs, so the CPI for cities is dragged lower than the CPI for suburbs.