When The Plutocrats Worry About “Socialism”

One of the untold stories of the Cold War is how the very existence of the Soviet Union and the long-feared “communist menace” ameliorated the excesses of Western capitalism. Much of the early US Cold War domestic and foreign economic policy was based in the ideological fight to gain the moral high ground and show that capitalism could better provide for the common good of all its people than communism. More often than not, that involved significant government investment.

The maintenance of the high marginal tax rates in America, which were instituted initially in response to the Great Depression and were further raised in order to fight World War II, were maintained into the 1950s in order to finance the rebuilding of Europe via the Marshall Plan and to restructure the American economy and society from its wartime posture. That restructuring included the Eisenhower interstate system, a massive public works project that lasted for decades, the GI bill that subsidized education for millions of veterans, continued strong antitrust enforcement, expanded Social Security, and increased minimum wage. In the Kennedy-Johnson era, the quest for supposed moral superiority over communism extended to the expansion of civil rights and the beginning of the war on poverty with the introduction of Medicare and Medicaid. In addition, the military power of the Soviet Union itself and the emerging nuclear era were an existential threat, creating a sense of shared purpose and patriotism even among the business elites. Taken together, America’s political and economic leaders constrained and regulated capitalism to ensure it provided a better standard of living for the majority of Americans than communism.

That consensus, which had created the great American middle class over the prior two decades, began to fray politically with the Vietnam War and Watergate and economically with the economic stagnation of the 1970s. The belief that was good for workers was not only good for the country but good for business completely died in the Reagan administration when the postwar consensus unraveled as the Cold War ended and the new structures for global capitalism were implemented. In this new environment, tax rates on the wealthy were slashed, organized labor was decimated, jobs were shipped offshore, the primacy of the shareholder replaced any corporate responsibility for workers or communities, and government regulation was rolled back, especially anti-trust enforcement. The emerging dominance of the Democratic party by pro-business moderates did some, but not nearly enough, to slow the inexorable decimation of the middle class and rampant and ever-rising inequality.

The Great Recession appears to have possibly been the beginning of the end of the Reagan era of global capitalism. Obamacare started the process of reestablishing the importance of government investment and constraining unregulated capitalism. Bernie Sanders primary run in 2016 moved the ball even farther forward, as he began the discussion of how to restructure the system to attack inequality and rebuild the middle class, while unabashedly defining himself as a democratic socialist and his policies as democratic socialism, something made easier with passage of time lifting the stigma of the word. The success of AOC and self-described democratic socialists in 2018 and since again challenged the post-Reagan consensus and added to the increasing acceptance of some form of socialism, at least in concept, but probably best described as progressivism.

And now, the plutocratic class that has ripped off the average American for decades are beginning to notice. Donald Trump and the Republicans will paint whoever emerges from the Democratic primary as a “socialist” determined to turn the country into Venezuela, exact echoes of their Cold War attacks on liberal Democrats. In his State of the Union message, Trump declared, “Tonight, we renew our resolve that America will never be a socialist country”. JPMorgan CEO Jamie Dimon, in his annual letter to shareholders, wrote, “When governments control companies, economic assets (companies, lenders and so on) over time are used to further political interests — leading to inefficient companies and markets, enormous favoritism and corruption. Socialism inevitably produces stagnation, corruption and often worse — such as authoritarian government officials who often have an increasing ability to interfere with both the economy and individual lives — which they frequently do to maintain power. This would be as much a disaster for our country as it has been in the other places it’s been tried”. It’s worth pointing out, especially in the wake of the financial crisis and the increasingly authoritarian Trump presidency, that capitalism has done a pretty good job of producing “stagnation, corruption and…authoritarian government”. But, whenever the capitalist class is worried about emerging socialism, it is a good thing. As in the Cold War, the very possibility will force capitalists to ameliorate their most extreme excesses or at least some recognition that they must do so.

Virtually every current Democratic presidential hopeful is agreed on the need for serious government intervention to regulate capitalism and provide for the common good. Even the most moderate candidate is committed to universal health care, while maybe not agreeing specifically how to get there. Even Tim Ryan, in the announcement of his candidacy yesterday, supports the Green New Deal as part of a more comprehensive national industrial policy, advocates attacking the agribusiness monopolies, believes we need to increase revenues, and supports some version of Medicare for All. Even if they refuse to label themselves as socialists, they are virtually all united in their belief that capitalism needs to be much more strictly regulated and made to work far more for communities and labor instead of shareholders and executives.

Perhaps, more than any other current Democratic candidate, even Bernie Sanders, Elizabeth Warren understands the need for a drastic reform the American economic and political system similar to what occurred in the postwar era. That does not mean that other candidates don’t. But, by any objective measure, Warren has the most comprehensive plans not only for those needed structural reforms but also on how to enact them and how to pay for them. Rather than targeting specific problems with specific solutions, her structural reforms address a multitude of issues at once and provide the framework and the money to address individual issues. And her biggest reform is the one that the 1% fears the most.

Warren’s plan to fight corruption by restricting the movement of lobbyists in and out of government, preventing those in Congress from trading stocks, strengthening a code of conduct for the Supreme Court, and forcing every candidate for federal office to release their tax returns may not really bother the plutocrats. Overturning Citizens United, eliminating partisan gerrymandering, and enacting a constitutional right to vote will be difficult to enact, especially in the face of the expected strong opposition from the plutocrats and their GOP allies. Criminal justice reform and banning private prisons will annoy a small number of businesses.

The plutocrats do not really fear any of those. What they do fear is Warren’s “annual 2% tax on every dollar of net worth above $50 million and a 3% tax on every dollar of net worth above $1 billion”. They do fear her focus on strong antitrust enforcement, her pledge to actually prosecute criminal businesses and, more importantly, the executives who run those organizations, and her plan to require substantial employee representation on boards of the largest companies. Warren’s wealth tax would effect less than 100,000 households, negating any opportunity to claim it would be a tax on the middle class, the traditional GOP attack. Since it is a tax on assets, tax avoidance will be difficult. And it is especially scary because Warren is willing to eliminate the Senate filibuster in order to get these policies passed. And the nearly $3 trillion that the tax would raise over ten years can pay for all sorts of progressive policies such as universal child care, universal health care, and Green New Deal investments.

I can not judge Warren’s electability although the media believes it is questionable. I can not judge if she can connect with the critical Democratic constituency of African-American women. And it may be true that she would be the preferred candidate for Trump to run against. She may not even be the best Democratic candidate, especially in this outstanding field. But what I do know is that Warren speaks the language of class warfare through her detailed proposals while her rhetoric is about expanding opportunity and leveling the playing field; that a wealth tax is the ultimate attack on income inequality and the plutocratic class; that democratic socialists like AOC are, in contrast to their GOP colleagues, espousing policies to address the problems of the 21st century, much of which are caused by unregulated capitalism. And all of that really does scare America’s plutocratic business elites and their enablers which is why we are now hearing their bleating about “socialism”. That, by itself, is a good sign.

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Originally published at thesoundings.com on April 6, 2019.

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