The History Of Socialism And Capitalism

for nearly two centuries societies have weighed the merits of free market capitalism and socialism debates continue over which system maximizes prosperity and better promotes human flourishing free market capitalism decentralizes economic decisions giving individuals control over what to produce how much to charge and what to buy their decisions are informed by market prices which convey important information about scarcity and consumer value proponents contend that capitalism delivers the best economic outcomes by giving individuals incentives to create and produce critics on the other hand point to the persistence of poverty in market economies and rising inequality as proof that capitalism fails to deliver broad-based prosperity they maintain that this inequality ultimately gives the rich disproportionate economic and political power in contrast socialism grants the government the authority to make most economic decisions the government chooses how to allocate scarce resources based upon what it determines to be most useful to society as a whole proponents argue that socialism ensures society's resources are fairly distributed critics claim that socialism fails to give people proper economic incentives to innovate and produce which ultimately reduces economic opportunities for all opponents further argue that socialism's powerful central governments become autocratic and threaten political freedom so which system is better for humanity for as long as this question has been asked the debate all too often devolves into name-calling an emotional arguments that failed to advance the discussion and yet it is imperative that we keep asking the human prosperity project that the hoover institution seeks to overcome these preconceptions it employs analysis of free market capitalism and socialism and its many variants to assess how each system affects human flourishing [Music] good morning and welcome to this speaker series of the hoover institution called the human prosperity project i'm russ roberts the john and gene denault research fellow here at the hoover institution and founder and host of the weekly podcast econ talk this series is based on research and commentary from hoover scholars participating in the human prosperity project on socialism and free market capitalism the overarching goal of the project is to investigate the historical record to assess the consequences for human welfare individual liberty and interactions between nations of various economic systems go to hoover dot org slash human prosperity project hoover dot org slash human prosperity project to find essays and videos from this series and those you listening live during today's presentation use the q a button at the bottom of your screen to submit questions as the conversation begins i'm joined today by two hoover colleagues neil ferguson and victor davis hanson to discuss the history of socialism and free market capitalism both have written essays for this project that are available online at hoover.org neil ferguson is the milbag family senior fellow at the hoover institution and a senior fellow of the center for european studies at harvard where he served for 12 years as the lawrence a tisch professor of history his book kissinger 1923 to 1968 the idealist won the council on foreign relations arthur ross prize his latest book is the square and the tower victor davis hanson is the martin and ellie anderson senior fellow at the hoover institution the author of newbush books and articles on war the ancient greeks and history generally his latest book is the case for trump he was awarded the national humanities medal in 2007 and the bradley prize in 2008 gentlemen welcome you know in 1942 joseph schumpeter published capitalism socialism and democracy and he asked if capitalism would survive what was his answer his answer was no russ this is what schumpeter wrote can capitalism survive no i do not think it can and he went on later to write can socialism work of course it can now it's important to know uh that although he was a harvard professor when he wrote those words schumpeter was in fact a conservative who did not regard the answers to his own questions as good news he wrote i think in a spirit of wartime fatalism uh arguing that the forces that were making socialism seem more and more attractive uh were very hard indeed to uh to resist uh so i i started with re-reading schumpeter when the idea came up of of of writing about capitalism and socialism and i was started to find how well it read actually i i hadn't read it since i was an undergraduate but actually it's it's a good read great book part two especially big fan of that uh victor what are your thoughts on the sustainability of of capitalism does it have a chance yes it does a lot of these questions were posed uh at the turn of the century but all the way into the 40s and this was before really the implementation of the capitalist support or capitalist economies that incorporated things like the eight hour work day the forty hour work week social security that whole safety net so to speak that is constantly expanding but it's really changed the dialogue so when people say can capitalize capitalism can't survive it was a period in which the middle and lower classes didn't have the social protections that were not only implemented but were eventually felt at least in their nastiest form not to be encap incompatible with capitalism now let's go back a century before that roughly uh to marx uh neil you wrote in your essay that quote marx famously called religion the opium of the masses if so then nationalism was the cocaine of the middle classes it's a great line explain what you mean what what's the role of nationalism in the middle classes in the uh in this conversation well marx and engels got a couple of things wrong i mean it's not that they invented socialism by the way that idea had been around uh since the 1820s and and was a part of a debate about the industrial revolution that uh that that really crossed uh the conventional ideological lines there were plenty of conservatives uh who were nervous of capitalism not least the great scottish critic thomas carlisle but by the time marx and and engels came on the scene what they were trying to do marx in particular was to kind of synthesize uh german idealist philosophy from hegel uh and uh the the ideas of political economy particularly those of david ricardo uh and the idea was that you had a dialectical theory of history a model of of of historical dialectics plus ricardo's idea that wages were inexorably going to be ground down to subsistence and the core prediction which mark spent uh the rest of his life uh refining indus capital was that the tendency of capitalism was for widening inequality to grind the proletariat down into the dust until the point came when the expropriators would be expropriated well two things were wrong with this theory one was that in fact industrial capitalism did not grind wages down to subsistence level the more industrialized countries had the highest wages this was absolutely clear by the uh time that marx was writing capital and it became even more obvious in the second half of the 19th century as time went on but the second thing that they missed was the way in which nation states and the idea of nationalism would in some ways transcend the appeals to class interest that were central to the whole uh socialist and communist project the proletariat would not in fact unite against the capitalist class because national loyalties would be more important than class loyalties and when it came to the crunch in 1914 uh there was no way that a general strike uh could uh could stop the outbreak of world war one there was no way you could stop uh the peoples of the various european countries uh rallying to their national standards and indeed the attempt to have a meeting of the great uh socialist international failed altogether and the the congress did not take place in 1914 and i think that illustrates the the great mistake that marx made which was was to underestimate uh nationalism as an ideology yeah that's um victor i'm going to let you respond to that in a second but i want to ask you know one follow-up to that you're suggesting there's a sort of um a tribal urge that has to be satisfied that that that mark saw it as being class generated and it was dominated by nationalism i mean can i be both a nationalist and a socialist without being a nazi pardon the confluence there but could can i support my nation in a war and at the same time be fighting for revolution at home that's one of the great questions uh of of the 20th century is there some kind of synthesis possible between nationalism and socialism and the national socialism that emerged in germany was just one of many uh attempts to come up with a fudge stalin actually came up with a version which was socialism in one country uh that this this was a kind of uh preoccupation really uh right across the left uh for much of the 20th century because it was obvious uh that the appeal to a kind of international proletariat uh kept running into uh political barriers um that the russian revolution itself which lenin and trotsky thought would go global ran into a an impenetrable wall in poland where it turned out that actually no the polish working class and indeed the polish nation was not about to simply roll over and embrace uh what was very clearly a russian revolution so i i think this this was a a preoccupation uh and a puzzle really for socialists right down to our time uh i i can remember my myself as a student watching the knots that members of the labour party would tie themselves into uh on questions of national security insisting that no they really were tremendously patriotic but at the same time they'd quite like to get rid of nuclear weapons unilaterally because the soviets were really not going to do anything bad after all so i think this this problem never quite got solved and it's been one of the great weaknesses of socialism as an enterprise almost from the very inception victor you make similar points but from a very different perspective uh give us your analysis of the role that nationalism has played in the evolution of socialism as a successful or failed movement well it's funny that marxism and socialism the less toxic brand i suppose of it have always argued that class interests transcend national boundaries and they create a secular religion and then in extremis and they disparage therefore they call the alternative to their theories uh cocaine or opium nested marks but in extremism when their backs are up against the wall whatever system it is whether it's national socialism in germany or whether it's soviet communism remember what happened hitler thought he could get rid of the catholic faith he couldn't do it stalin had almost abolished and destroyed christianity orthodoxy and soviet union yet it lingered on and finally an extremist people were allowed say during the russia the german invasion to continue to worship it's funny that after he came out of the self-imposed exile after the shock of operation barbarossa the first thing that stalin did was drop the word comrade and start addressing everybody about the mother land and they owed mother russia their allegiance in other words even the most diehard extreme socialist remember uh at least believed that religion and nationalism were stronger human impulses than was this sort of abstract idea that workers of the world would unite across national boundaries victor in this current moment movements like brexit uh the rise of populism and nationalism elsewhere how do they interact with socialism in your view because we seem to see both sort of on the rise at the same time we see a rise in populism and nationalism and an increased interest in socialism in the united states of all places and i'm sure elsewhere we'll get to that in general in particular in the united states but i'm curious how you see those two things happening simultaneously or do you think i'm wrong i think you're right i think in the eu there was this idea that there was going to be a new european man this meal was written when kissinger got wind of that he said who do i call the is there a president of europe and the point being is that for all of the rhetoric of the eu there was no ability to create a new european man based on common class of affinities and even whether it's today been transmogrified into global warming or abortion on demand whatever the particular cultural issue is nationalist concerns are much stronger and so the eu is now being i guess quadricepted in the sense that the southern europeans have real differences over finance as uh spain portugal greece and italy with the deutsche bank the eastern europeans have very nationalist concerns about illegal immigration that are not shared by western european brexit of course where a lot of british thought people thought you know i have more common affinities with people who have long residents within the confines of the united kingdom and speak english and have a proud military tradition than i do with the belgians or the italians or the czechs and in the case of the united states we were very dissatisfied with the nato-dash eu configuratory obligations and i would just notice um there is a rule throughout history that socialism tends to enter the uh in i guess i guess the word would be weakened the ability for defense because there's this formula that every every uh drachma that's spent on hoplite armor comes at the expense of social of social activism and welfare or every tank or every airplane and so whether it's the grand french army of 1940 people ask themselves why did the why did an army that stopped the germans at bergan a mere 20 years later collapse in six weeks it's the same question people ask in late fourth century greece when the moscones and people said how did we stop 180 to 250 000 persians at salamis with a very poor city-state and we let 30 000 of these crazy macedonians come in and the answer was well his cr he said people weren't paid to vote in those days as they are at athens and the theoretic fund didn't dominate and we didn't have all these social programs so that's been the problem with social let me see it today with eu they cannot meet their two percent contributions germany i think is 1.3 and people usually follow what germany does and the and the excuse apparently is that if we were to rearm at a very minimal level then we would be taking mother's milk out of children's and things children's mouths or whatever but it always has to be an either or uh dialectic with the socials can i just jump in russ if i may yeah go ahead i i feel as if we need to draw a pretty clear distinction early on between socialism on the one side which implies a significant violation of the rights of private property up to and including complete expropriation and post-war phenomena uh christian democracy uh social democracy uh and indeed uh the welfare state which emerged uh in the mid-twentieth century because i think a lot of confusion in the united states arises from conflating these things and one of the arguments i make in my paper is that as far as one can see when when young americans say they're in favor of socialism they're not actually in favor of the expropriation of the means of production and the state control of the commanding heights of the economy which would be uh i think a strict uh interpretation of socialism they are essentially saying and i get this from listening to interviews with people like alexandria ocasio-cortez we would like the united states to have a welfare state and a tax system more akin to that of of western europe and i think when you ask the question victor why did the germans not pay a higher share of their their contribution a higher share of the nato budget it doesn't really have much to do with socialism because christian democrats as much as social democrats have tended to keep defense spending down and free ride on american defense spending so i i prefer it if we try to kind of keep that distinction clear because i'm not sure that we're really talking about socialism a lot of the time in the united states we're just talking about should taxes on the rich be higher should there be universal and free at the point of of service health care that kind of stuff and to me that's not socialism and it was never how socialism was understood by the people who set it out as an ideology in the 19th uh in the 19th century i just very briefly like to respond i think that may or may not be true but there's a trajectory that socialism and evidence i'm not a determinist but it seems to always want more of from the individual and more shared property i'm looking out the window at a san joaquin valley vineyards and i'll give you one example of what i mean in 1936 there was something called the raisin administrative committee and that was to help the farmers find a market and basically it said this you don't own the products on your own vineyard you don't know in fact it's a felony for you to dry your own raisins and sell them they belong to the us government and so when you uh harvest them we take them and we stack them in a a big lot and they're called the reserve raisins and then we determine how many can be sold in the united states and the rest will be given away or sold cheaply below the cost for cattle feed or brandy or overseas or poverty program and anybody who tries to sell those raisins and acts as if they owned them will be charged with a felony that's still in operation today and so a bunch of bureaucrats determine uh and i did this for 30 years they determined even though they didn't plant the grapes they don't own the property they say but they were going to put me in jail if i decided to harvest them and say they were my own property i'll give you one more quick example i decided i didn't like the 110 degree summer so i wanted to build a swimming pool and i went to get a permit and the county said to me you don't really we're not going to give you that permit because you don't really own your roadside i said what do you mean he said well in about 50 years we want to widen mountain view avenue so we want to take 30 feet for uh 300 yards in front of your frontage and i said well that's my property are you going to compensate me not if you want to get a permit so maybe we will in the future but if you want a permit right now you have to deed over this property to me and i could go on about the abuse of imminent domain so you're right that maybe we don't have that final sense of a lack of private property but i think the idea of an individual autonomous citizen with absolute freedom over his own goods and services and property has been highly reduced and redefined the interesting thing to me victor and sorry to cut across across you russ again is that that kind of administrative logic and an indeed abuse of eminent domain goes back a long way in american history and in in many ways what's striking to me about the history of the united states is that it's happened really without the underpinning of the socialist ideology i bet you the the bureaucrats who you've dealt with in in california don't think of themselves as a socialist so that they may do um going back through the the history of the united states in the in the 20th century the encroachment of the federal government as well as of state governments on the rights of individuals hasn't really been driven by socialism in the way that socialism drove uh countries to the left in europe and indeed in much of the rest of the world let's not forget that after 1917 the most extreme version of socialism which aspired to create a communist society became extraordinarily prevalent not just in in the soviet union but uh all over asia in in parts of latin america even in parts of africa and the caribbean but the united states is kind of outlier here because really socialism has not been a successful political brand in american history and the stuff you're talking about i think comes from a different source which is the strange way the administrative state expands its bureaucratic reach without necessarily a powerful ideological or certainly not a socialist ideological rationale well what i'm suggesting is that when the right or the capitalist interest says that i want imminent domain because i want to tear out this part of downtown fresno or la and i'm not doing it because there's a public need for a highway or a bridge or a reservoir or pipeline but i want to do it to encourage economic development and i feel that these 50 little small businesses can be liquidated because i'm going to build a radisson hotel with a big parking lot it'll be further it'll be good for the economic development and that is you you're quite right in the tradition of crony capitalism but the people who support it and the bureaucrats who welcome it uh tend to be more liberal and it's very weird how capitalists work they give a very uh socialist argument and they call it capitalism and then they employ the administrative people who believe there is a role to expropriate property not for necessarily the ostensible common good but for a more abstract idea of the general welfare and that's what we see all the time we see a lot of capitalists acting as if they're socialists i'm predicated on the idea that a lot of people are socialists that are in government will support them well milton friedman like to point out that most business uh leaders were not capitalists they were capitalists for the other industries but their own was special and needed you know this subsidy or that to make it work right uh and the idea that they are taking advantage of the natural impulses of others is um kind of the essence of crony capitalism which i contrast with what i call the real thing um one of our viewers mike his argument russ i mean one of the reasons that schumpeter was pessimistic back in 1942 was that he felt that there was a tendency uh for the free market to produce if not monopoly then big businesses and and corporatist relationships between business and the state that that we're really undermining the free market as uh as a scheme of of organizing society yeah but he he was mainly i think in my memory talking about the the implicit economic power that arose from that kind of concentration this of course is a combination of business working with the power of of government as a very monopolistic uh entity well what's interesting about schumer is he he kind of gives four reasons why he thinks socialism can still win even in the united states one is that the at it at its at its best capitalism leads to creative destruction and that means that there are losers as well as winners that that there is this tendency for monopoly or at least big businesses to emerge but he also makes two great points which are really worth reminding people of uh the the third reason he gives is that capitalism creates educates and subsidizes a vested interest in social unrest which means left-leaning intellectuals and academics and then he adds that socialism is irresistible to to bureaucrats and elected politicians and so that nexus between uh big business and uh and uh and the bureaucracy i think is there in in schumpeter's argument as is and he sees this coming the fundamental hostility of academia of the intelligentsia to the free market i mean and if that was obvious in 1942 think how much further to the left the academy has got uh since the 1940s i mean if you took today's harvard professors back to the harvard of 1942 they'd be absolutely appalled because it wouldn't be nearly work enough so i think that was a really important part of schumpeter's argument that has turned out to be very true there's a virtually no intellectual support for the free market and a great deal of intellectual support for socialism in american universities today and the hoover institution looks increasingly like a little island uh in a sea of of left-wing ideology when you just look at the universities well one of the old arguments on that line was that academics resented that they weren't paid at the top of the pay scale uh that that mere entrepreneurs were compensated so much more and that obviously meant that the system wasn't just of course today academics are doing quite well partly i think due to the subsidies that the government gives us uh it's interesting that we have not become on average more uh capitalist what are your thoughts on that victor well i i think the the key to understanding higher education in america is to distinguish what they say and what they do if you look at the pay differential between a part-time teacher without benefits or tenure or paid to teach the same class as a full endeavor professor it's a greater disparity than a greeter at walmart and a district manager and then if you look at their the criticism of capitalism they really are crony capitalists rather than [Music] on the barricades by that i mean they have no moral hazard when they issue these student loans they expect the government to underwrite 1.4 trillion dollars of student debt and they have no obligation ethical moral housewife to say to their graduates we can determine take an exit test adjudicate calibrate that you're now better educated you're better able to earn a living have a family buy a house than you were before you came to college although maybe statistics suggest that's true and we're going to uh cut costs so that you won't go into debt but once the moral hazard has shifted to the government then there's no incentive to discourage anything from a latte bar to a rock climbing wall in the student center to uh 16 diversity and inclusion czars and then finally uh which is really kind of disturbing is that when we pile up these endowments and they're all taxing delta deductible and they're getting into 17 18 20 40 50 million billion billion dollars of endowments then they really the taxpayer is underwriting in a coney capitals fashion what administrators and full professors and and all of these people are doing and they're not subject to the laws of the market maybe this covet virus and the quarantine and skype and what we're doing today will give some market reality to them because obviously there's going to be someone who says i can download nobel prize winning lectures and hire somebody very cheaply to correct papers and cobble together a skype class and maybe get it accredited and i won't have to charge a harvard or yale student stay home at 60 or 70 000 a year and i think the universities are going to be very worried about that because inadvertently they might be subject to the laws of supply and demand and market value neil do you want to comment on that well i do think that if one's trying to explain why in polling it's the youngest age group of of americans who have the most positive view of of socialism the least positive view of of capitalism and that's a very striking feature of recent polling then you have to attribute at least some of this to education and if you look at the ways in which the major universities teach modern history it is very striking how few courses are available on the realities of socialism whereas there are all kinds of courses that tend to call themselves the history of capitalism that in close inspection are in fact pretty much socialist in their uh in their doctrine so i think there's a huge skew in the way economic history in particular is being taught in major universities and there really aren't enough courses on the realities of uh the soviet union uh the realities for that matter of of mao is china uh and and indeed i think that's the reason that we've got this category error amongst millennials and generation z they think socialism is sweden and i think as i try to argue in the paper that that that's just a complete misunderstanding uh of sweden but also of of socialism i mean the interesting thing about sweden is that when at the height of swedish social democracy they really did try to violate property rights they were prevented from doing so uh and and the rule of law was upheld and beyond that point that the tide of socialism uh retreated in sweden and if you look at sweden today and i did some homework on this for the paper it ranks ninth in the world economic forum's competitiveness ranking 12th in the world bank's ease of doing business rankings and 19th in the heritage foundation's economic freedom ranking so if sweden is associated with state then it doesn't really have any meaning anymore as a word because in truth uh sweden's actually a place where where capitalism is very dynamic yeah the fiscal system is certainly doing more redistribution uh than it does in the united states but i think it's a complete mistake to to say that that's socialism and if we just use socialism to mean higher tax rates i think we're going to lose sight of the very very important historical lesson which is that when socialist regimes are established and are able to violate private property rights on a much larger scale than you're talking about victor i mean this is not just a question of uh preventing you from building your swimming pool when they actually come and confiscate the land and tell you you're gone uh indeed shoot you because you're a former landowner that's what they did in the soviet union that's what they did in the maoist revolution after 1949. they expropriated and shot the landowners if we forget that that's the core dynamic of socialism that's what grew out of marx and lennon and marx engels and lenin then i think there's going to be this ongoing confusion about the dangerous nature of socialism socialism wherever it's been tried in the sense that it was intended by marx has produced lawlessness either extreme authoritarian regimes or chaotic regimes anarchic regimes take your pick cuba or venezuela which would you prefer and i far rather when people talk about socialism we point them at cuba and venezuela than at sweden which is no more socialist in in reality than than the uk or really the united states i mean california and sweden i mean come on but i think i think the question i want to take a question from one of our viewers mike mike asked is it possible to combine capitalism with a strong social safety net that assures that every resident has at least a roof food security health care and in the 21st century reliable electricity high speed internet and high quality educational opportunity so my question for both of you will start with you victor is that because that's socialism with the human face there's no uh re-education camps of mao no famine promise there it's maybe a little more it's sweden with a big little bigger safety net does that does our discussion of say cuban and venezuela have anything to do with what looms if we were to expand uh the size of government the united states is just a is there a point where the for the frog gets boiled enough that it tran transforms into something more hideous or is it can we prevent that i mean i'm against both of those i'm in socialism and a dramatically larger government but a lot of young people as as neil has has argued correctly i think or with that when they say socialism they just mean a more activist government what's wrong with that victor i mean do the lessons of socialism apply there outside of the you know your raisins well i don't think there's anything wrong with it i think that if you looked at the u.s economy say in january or of december of last year we had a record low minority unemployment we had about 3.5 3.4 unemployment pretty good gdp we were and yet we had a pretty generous social net to the extent that we were running still massive budget deficits for social programs so the key is that to pay for the socialist agenda you need to have incentives i think we kind of squared that circle pretty well between encouraging capitalism and socialism but remember there were a lot of people that were unhappy about it and niels talked about the youth and why was that why did people say why am i unhappy and i think we had forgotten a couple of things and it came from two sources of dissent the first were and we can see it on the streets of seattle and portland we have had a entire generation of young people and neil's right they were indoctrinated half of them went to college but when you saddle that number of people with 1.4 trillion dollars in student debt and then you give them a veneer of education that they're articulate but they're really ignorant because they don't have the inductive method of thinking they're not inculcated without they don't have an arsenal or two box of facts or data about the past or present or the natural world and then you turn them loose on society and they say to themselves well my grandfather at my age was married they had two children uh three children they had a house they had cars they didn't have any debt what happened to me who did this to me and they're articulate enough where they've been trained enough to know that there's methods of explaining exegesis that can explain that this at the same time we had this globalized project and it was wonderful in the beginning i mean it gave eyeglasses to people in that the amazon and antibiotics the people in chad and the western means of the production were xerox across but somehow we got into this matrix that the country the states and the cities with a window on asia from seattle to la jolla and a window on europe from boston to washington or maybe even miami they uh they felt well all of a sudden people in law and business and the corporate world and media and academia we have a market now eight billion people seven billion people and the people in the interior who had muscular labor or who were entrepreneurial and they had a craft or a production that could be xerox abroad much cheaper whether it was making wine or peaches in mexico or a laid workers work to be outsourced to korea whatever it was then they didn't do too well and we considered we confused cause and effect so we basically said to them and i'm talking now just to interrupt about the constituents that voted for donald trump on the right or bernie sanders on the left we basically confused cause and effect we said to the trump supporter of the midwest well you're a meth head or you're dysfunctional and you didn't learn to code or you didn't keep up with the global economy and we said to the people on the left well nobody told you to go to college we didn't say you've been had by college and they sold you a bed but a bill of goods with less information given to you about what your major will earn you and the debt that you incur than when you sign up to buy a car from a car agency they they inform you of the moral and financial hazard far more honestly than any university does so that there was a lot of discontent and that that's where we are right now and the the cure for was i think to unfetter and unregulate to some degree the economy to get up to near three percent gdp full employment and and that would ma and then to prune away programs that have a failed record and enhance ones that don't and i think we're pretty much there and then you know i just finished very quickly is that i don't like these uh either or comparisons but the united states has about 330 million people 50 million of them were not born in the united states they're residents now in my state california our state 26 to 27 of the population was not born in the united states and yet we have a gdp of over 20 trillion dollars with 330 million people and europe has about 450 million people it has a gt gdp of about i think 18 trillion annual gdp and i think it's per capita income now they're going to argue they have all kinds of different problems but i think they're not as they're not as significant as ours and their per capita income is about 20 000 less a year than ours so whatever we're doing i think we've aired a little bit more on the capitalist entrepreneurial side and i i take seriously neil's excellent point says that california i think is more socialist but i think it's still an outlier and we've aired a little bit more on the capital side than europe has and it's it's rewarded us for that reason that we're material richer we can't and that's just using gdp when i go to europe and i look i always ask myself how many square feet or the lower middle classes and the poor allowed in europe to live in are impossible to live in how many air conditioners in the window do i see how many televisions how many cars and i look at where i am now and i'm living in a town with a per capita income is 14 000 a year and this southern fresno county has a poor per capita in income than appalachia and yet when i look at apartments and i look at the square footage and the price and the number of new cars america whatever it is we have a consumer uh culture that's far far richer than europe in terms of satisfying the appetites of the lower middle classes do you want to respond to that well yeah i do i mean i think it's dangerous to make comparisons that that are quite uh as broad brush as that the us does have a massive resource advantage and and uh and a space advantage over europe where population density is is is far higher uh but i'd like to to coach the the thing a little bit differently ultimately we know what happens to go back to the the listeners question when you raise uh direct taxation and you gradually increase uh the state's uh share of of gdp and you and you increase the amount of redistribution that happens because we've ran this experiment before and what's startling to me about the current debate in the united states is that essentially the democratic party is is campaigning now to do one of the biggest tax and spend extravaganzas in american history i mean not only are they going to raise taxes starting with the corporate income tax but probably moving on to capital gains tax but they're going to increase spending and an even larger scale could be three could be five trillion dollars of of new spending now we know from past experience where that's where this leads because even the us has tried this before it's not that we need to go looking to europe for insights if the core goal of uh progressivism social democracy whatever you want to call it is to use the fiscal system uh to increase the number of benefits that are paid expand the provision of health care spend more on education spend on infrastructure and at the same time increase taxation especially on high income earners and on corporations it's absolutely obvious what's going to happen uh you're going to end up with lower growth and at some point you're going to have higher inflation and if you don't have the higher inflation then you're going to run into the nasty fiscal arithmetic of excessive debt because we've already been going in this direction for years actually uh going in this direction at least since the financial crisis if not earlier and i and i think that that's a whole set of different issues that don't have much to do with socialism we saw in the 1970s where those policies led as the marginal tax rates rose ever higher on both sides of the atlantic as it happened in the u.s too and you ended up with the stagflationary mess of the 1970s there's a reason milton friedman rose to prominence at that time by pointing out why this couldn't really have ended any other way to me it's slightly depressing to see uh the the rising probability let me just say that we're going to rerun this experiment expecting it to have a different outcome and it won't have a different outcome i would just add that i think they call it gorge the beast and so that they increase spending to such a degree that it has uh desirable effects on cuts and one of them will be defense and we won't we won't be capable of even spending three and a half percent of gdp on defense and they see that as a good thing i don't think europe even with a larger population and a large gp is going to it feels that it can afford to spend two percent to protect itself and it's it exists because the united states spends about 33 percent of the nato budget without it it wouldn't exist at least it would have to make massive cuts in social benefits or raise taxes even more but you're right that we've tried this thing before with that and they're advocating remember a wealth tax and an increase in the uh upper income tax rate in california it's 13.3 for upper income i think we have one percent of the population in california paying our five percent paying about 55 percent of the income tax they want to raise it to 16 and when you couple that with the new proposed biden attacks obamacare tax payroll taxes on a large part of your income you're easily getting up to 55 percent of your income and unlike the regu the pre-reagan years that's income without a lot of deductions and so that is one of the purposes is to spend so much money that it forces a vast redistribute but a perceived redistribution and income i think we got to remember what the psychology is about it toppil said that unfortunately most people would prefer to be equal and poor than unequal and better off and jealous it was he's here that said the two most powerful emotions in the human experience were jealousy and envy and he defined the difference but they it was the idea that someone else better off than you is a more important concern than you being better off and that's that historically responds of trying to cover socialism there's some innate human desire to make sure that someone either through accident or inheritance or harder or intelligence or anything doesn't look better than you do and people can appeal to that natural instinct and it's as you said we've been through this again before so why would we do it again because it's because we're human and it's a natural instinct to repeat this quality well you both have picked on the democrats um it's not like the republicans have been so fiscally prudent either recently or much in the past i just see government getting larger we have had times with lower high tax rates and decent amounts of growth neil you know it's possible i'm not as pessimistic as you are just that the absolute size of government's the problem but it could be but i want to turn we've got a few minutes left i'd like to turn to the the non-monetary non-growth aspects of this uh i want to think about you know this is called the human prosperity project our our project but you know prosperity isn't just about financial well-being uh it's about the meaning and agency and responsibility and dignity that we get from our economic system socialists tend to see the capital system is cruel and rapacious i see it as a form of cooperation that's uncoordinated from the top socialists see socialism as a way that we can all share equally i see it as a way that corruption becomes rampant through centralization uh cronyism and lobbying we get rewarded uh and for me although i think socialism will lower perhaps our standard of living i'm more worried about it what it does to the intangible aspects of of life and i'd like you to both comment that if you'd like uh beyond the material you know the the the the systems that you've been criticizing in cuba venezuela the soviet union when when these processes go to their extreme it's not just that the people there are poor uh they don't get much consolation in those systems from the fact that everybody's like them in fact they're people at the top who are doing great and more than that the actual the daily fabrical life is fundamentally corrupted in those countries so talk about the non-material part of this and it is am i being overly worried that the welfare state will turn into such a a dramatic change in our in our way of life beyond just the material you know if you could comment on that yeah i think it's pretty clear from the history of the authentically socialist systems that they were characterized not only by ultimately uh inefficiencies uh and distortions in economic activity uh but but just as much by the kind of moral corrosion that you're talking about and uh i think if anybody needed reminding of what it was like in the soviet union it was quite worth watching the dramatization of the chernobyl uh disaster which is one of the few television series i've watched in the last 20 years from beginning to end for all the liberals sure it took it captured the fundamental mendacity of life uh under under real existing socialism everybody lied and ultimately those lies led to a disaster uh i'd like to add another point russ before we run out of time which we haven't touched on but it's extremely important and that is the metamorphosis of marxism in the academy initially uh into something that had nothing to do with economics whatsoever or at least barely the metamorphosis of it into identity politics uh critical race theory uh bogus notions of social justice uh and a whole set of uh a very distinctive ideas that really have nothing to do with uh with with socialism but but offer an alternative sense of collectivism based not on class but predominantly on race but also in sexual orientation and the rise in in the universities of the united states of ideas like intersectionality has created a whole new set of problems for those of us who believe uh in the the fundamentals of individual liberty uh not only liberty economically but liberty politically and in a civil sense and i'm i'm almost as troubled as as as uh by the the resurgence of social democracy and uh and tax and spend progressivism uh by this because i think this uh emphasis on identity to use a term that you used earlier of tribal identity or of uh intersectional identity is very very corrosive not only of uh of individual liberty but but also of of of national or patriotic identity you used tribal earlier in in that connection but the point about nationalism was precisely that it transcended traditional tribal loyalties and created a possibility of national unity on a very large scale that has been crucial to the success of the united states since its foundation and i think the radical left's new form of socialism which is the identity politics cancel culture variant is just as threatening actually as the old socialism we've been mostly talking about yeah i think very quickly i think cultural marxism as a sort of founder of gramski i think the idea was that with the industrial revolution and the modern welfare state here in the united states that you were not going to get socialism with a strictly economic appeal there were two there was upper mobility and there was a material appetite that was being satisfied so what's happened is we are redefining victims not by economic means or clouds but by race and we do that because race is a static idea it's not fluid when you when you have people doing well then they they go from one class to another and you lose constituents but under this new identity politics lebron james may have 20 mercedes and jaguars who live in the great and negated the state and you know be worth a half a billion dollars or oprah but he's a victim and he said you know i don't feel like i can walk out well he's in much less danger of walking out with his security team than a guy in youngstown ohio on forklift is so the idea was that the left said to themselves the system is so insidious of free market capitalism that we're losing constituents so now we're going to turn to this idea that you're going to be part of the other for life and barack obama from his colorama mansion in dc or his 20 12 14 million dollar estate on martha's vineyard will forever be a victim as michelle has said she said that you know michelle obama said i can't even go to a supermarket without somebody reaching wanting me to reach and pick up something for her or that when barack walks out who knows what's going to happen to him well so it was a very brilliant transformation in the status of the victim of capitalism because it's fixed it can't be changed so i know that as somebody who spent 22 years in the california state university system and i served on a lot of hiring committees with affirmative action i finally to get people in foreign language we were hiring aristocrats from chile or argentina or brazil or spain or portugal and then we were having them come in and they were upper upper middle class but they qualified as a victimized minority of you know a united states history of racism and we instantly bestowed on them uh the title of victim for life it was a very cynical uh process and that's what's happening it's a very good point because once you substitute substitute race for class then that victimization it creates a cynicism because people look at certain material foundational principles of one's life and they say well based on the person's house or their income they've done very well but are they they're still a victim of our system and i think that's that's hard to do because if we know anything from the 20th century the slow progress but undeniable progress in the united states we have divorced particular races from poverty there's no necessary connection the per capita income of greek americans or asian americans is much higher than so-called white america and so i think the left hit on something and they've redefined marxism and socialism and victimization and victimizers but maybe can i add a very brief point i i've we've i've had 137 questions as we've been talking and i've been trying to keep an eye on them and a number of them have have prompted me to make the following observation that the people who believe in in a free society capitalism if you want to use the the pejorative term of free markets uh are not indifferent to the uh the poor and not indifferent to the unfortunate actually one of the things that motivates us is the belief that the system that we favor would in fact do more uh for those the people than the the supposedly more just socialist or social democratic alternatives one reason that i feel quite passionately conservative is a sense that the left is deeply hypocritical and does not sincerely intend to help the people who are at the bottom of the income distribution and doesn't in fact do practically much for the poorest african-americans in the most deprived parts of the country it's the hypocrisy of socialism that ultimately is its most disgusting feature uh the champagne socialists that i remember first encountering as an undergraduate at oxford who loved to start to stand and engage in virtue signaling do nothing in practice for the people at the bottom of the social heap whom they never ever meet in reality uh the enterprise of of welfare social democracy usually traps people in the bottom quintile of the income distribution in various forms of dependency ensuring that social mobility is kept out of their reach and that's an extremely important point for us to emphasize it's the fact that socialism consistently fails to deliver improvements in the quality of life for the poor that it fails actually to deliver on its most fundamental claims that makes it to me especially abhorrent as an ideology we only have three minutes left but i i want to challenge both you i'm going to give you each a minute i don't think um i don't think our side the so-called free market side has done a very good job making that case now that that our system is going to work out better for the poor they look at the poor today with especially the working poor there's a whole group that can't find a job because they got a lousy education provided by a government school but there are plenty of people who are working poor who their prospects were advancing or not what they may have been in the past do you blame that on socialism or do you think we have to do a better job in creating real capitalism or do you think that their critics have a point i think we've done an extremely poor job uh to speak broadly of of conservatives not just in the united states uh but around the world of of making the case for free markets and and free institutions and individual liberty i think we got somewhat trapped in uh in the ideas of the 1980s uh and and we hold on to the uh the the prescriptions of the 1980s for too long and then were in some measure hijacked by uh by populists whose approach is not really i think entirely in sympathy uh with the first principles of conservatism i've been critical of republicans since the bush administration uh for their fiscal uh improvidence and bouts of of hypocrisy i've been concerned about uh the ways in which the republican party and the british conservative party have strayed from from the path of classical liberal principles uh in economics and in politics for many many years i wrote the great degeneration lamenting that this was a bipartisan undermining of the first principles of a free society i think the hoover institution has a an urgent top priority mission to revive the case for conservatism and free institutions in terms of what they do for the people at the bottom of the heap because if we're just seen to be representing the wealthy elite then we'll have no chance whatever uh of winning the argument which we can win against socialism and we don't deserve to win it i hope i'm sure condi rice is listening and uh you have time to say 10 seconds yeah absolutely you got 60 seconds victor maybe 75. go ahead well i think in a way that the opiate of the elite left is socialism because it's it's a psychological process that's very similar to medieval penance and exemption the idea that the center can be free of sins through a contract to build a church or something and by that i mean that if you look at the concrete life of many of the elite left where they put their children whether they have a wall around their home or not whether they believe in charter schools they don't they live the life of a european aristocrat of the 19th century or american mr proud and so they create this structure that they're carrying and they want to be with the other and they want to help the other through government socialist programs but it always sort of squares the circle of their own existence and so they really worried about the other maybe they would have their children tutor in east palo alto or maybe they put their kids in a redwood city school so they could the other could see them or maybe they would have a private mentorship with somebody of the underclass or maybe they would try to instead give to you know the sierra club they would try to help build a church in fresno or something but it's always abstract and it's it's geared to make people feel better and it's almost a religious experience for many people who are secular agnostic that and i think this drives a progressive movement today that all of these tech barons and all them really wealth in the country today if you look at the fortune 500 it's pretty much left-wing fortunes and they're people who do not they never live in their own lives in any way similar to the advocacy in fact they use it to be exempt from the ramifications of their own ideology and that they use that that is this this caring and this abstract socialism that really makes life more miserable for the people who they say they want to help but it makes them feel far better of dealing with the problem as i said in the abstract rather than the concrete well we'll close on that cheerful note uh victor davis hanson neil ferguson thank you so much for your time and for sharing your thoughts on such an important topic the next sessions in the human prosperity project speaker series are on october 15th we're going to have perspectives from germany china and hong kong with michael oslen and russell berman and then you can see on your screen i can't read it on mine for our next event after that and i want to thank everybody for participating and listening sorry we couldn't get to any of your questions but we had two extraordinary uh panelists with and uh thanks for joining us you

Channel: Hoover Institution

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Keywords: socialism, capitalism, free markets, freedom, innovations

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Length: 64min 15sec (3855 seconds)

Published: Thu Oct 01 2020