You Don’t Know What Socialism is, Don’t Worry, Nobody Else Does Either

Mike Hogan
Mar 4 · 9 min read

These days in American politics there is an awful lot of talk and mention of Socialism. But the most interesting (and alarming) part of it all: no one seems to understand what Socialism actually is…

Right-wing pundits will have you believe that Socialism is simply Welfare and Taxation. And in true to form propaganda, as is such in the psychological phenomenon known as the “Big Lie”, they have repeated this false claim so frequently that it seems to have not only taken hold in the minds of the general public, but caused some politicians on the Left to embrace this erroneous shroud or version of Socialism as an identity- in order to appeal to an ever growing number of disenfranchised young people demystified by Capitalism, and who also don’t know what Socialism actually is…

Let’s be extremely clear on the first assumption. The Welfare State is a Capitalist policy, and it always has been. The first Welfare System was created with the intentions of embracing Capitalism; and it was the social insurance legislation enacted in 1883 in Imperial Germany by its chancellor, Otto Von Bismarck, with aims of gaining working class support that might otherwise go to his rivals (the Social Democratic Party of Germany), during a time where the feudal power of his empire was transitioning toward common market Capitalism arising in the industrial age- an era that was also witnessing the fall of Monarchies, as Democracies, Communism (and Fascism) slowly and competitively took their place in the modern world.

Furthermore in historical irony, in the United States, Welfare evolved from one of the worst failures or epic disasters of Capitalism, the complete collapse of the American Economy during the Great Depression of the 1930s.

Already established State Relief programs of the time were so overwhelmed that the Federal Government had to step in with the establishment of a National Welfare System (a series of programs dubbed, The New Deal), providing federal aid for the elderly, poor and other dependents. In essence, The New Deal saved Capitalism from itself.

By all accounts Welfare has been crucial to Capatilism’s success; as the most prosperous countries, with the strongest economies in the world, all devote at least 15 to 30 percent of GDP to Social Spending; and no nation has ever experienced enough growth to join the list of the most highly productive elite economies in the world without instituting some significant form of Social Insurance or Welfare (OECD).

Basic economics shows a decreasing marginal propensity to spend; meaning, redistribution of wealth to the poor creates a higher rate of increased spending, as in, a poor person is more likely to spend an extra dollar than a rich person, who is much more likely to save that extra dollar, because the utility of that extra dollar is so much greater for the poor person.

Think of it this way, that second or third ice cream cone (or car) just isn’t as enjoyable (or important) as the first. So as we see a greater wealth concentration at the top, we see less spending (or consumerism).

So if anything, Welfare Programs have served to rescue, preserve and enable Capitalism far more than they have ever hurt it. And it is a profound testament to what needs to be done to address Capitalism’s biggest problem today: Income Inequality.

Income Inequality in the U.S.

While it might be true that a particular Socialist economic system offers some form of Welfare, it does not by any means indicate that Socialism ‘must’ incorporate a Public Welfare System, and it certainly doesn’t mean that ‘Welfare is Socialism’.

Neither of these ideas are dependent upon the other.

The second assumption of what makes Socialism is even more ridiculous: Taxation of the Wealthy (the Progressive Tax); or more commonly as it is coupled with the first erroneous welfare-assumption: “the robbing of the rich to give handouts to the poor” .

To be clear here, we are talking about Income Tax.

The idea and implementation of the Progressive Tax has been around for a very long time, long before the time of Karl Marx, the Father of Communism (born in 1818), or any form of (or attempt of) a Socialist or Communist economy/nation (as the first was the founding of the Soviet Union in 1922, after the fall of the Russian Empire in 1917).

The inception of the Progressive Income Tax dates all the way back to 1798. Again, introduced in a Monarchy resting on the laurels of Capitalism during the industrial age, and that was slowly and begrudgingly shifting toward Democracy. The tax was enacted by prime minister, William Pitt, to increase tax revenues as a means to fund British opposition to the ongoing French Revolution (an event in the 1790s that dismantled a prominent Monarchy and thrust major European powers further into the age of Democracy).

In the United States, the Revenue Act of 1862 introduced the first Progressive Tax system (which included some of the first excise/retail taxes as well), and it was signed by President Abraham Lincoln for a similar reason it was enacted in Britain nearly a century earlier, to fund a war (the Civil War).

So if you don’t like taxes- don’t blame Socialism- blame War.

This assumption really grinds the logical gears, not only because Progressive Income Taxes are probably one of the only factors playing a positive role in the losing battle to reducing Income Inequality; but the idea that it, or taxes in general, are a Socialist concoction is so ridiculously backwards.

If you’re a hard-line conservative you might want to sit down for this one: in a truly Socialist economy there is little or no Income Tax at all, that’s right- in fact- there is very little need for any kind of tax on the public whatsoever.

And this leads us to what Socialism actually is; by definition Socialism can be classified as: “a system or condition of society in which the means of production are owned and controlled by the state”.

This means that the profits from government controlled industry foot the bill for government programs and spending- not tax revenues.

The Soviet Union had minimal income tax rates. Venezuela, which is often paraded around by the Right as a prime example of the ills of Socialism, didn’t start collecting income tax until the late 1980s, when its Oil Industry, which supported and funded its government, started faltering. Cubans hadn’t paid a single tax from 1959 up until the 1990s. China instituted its first income tax legislation in 1980 as part of its embrace of Capatilism. In Saudi Arabia there is still no Income Tax on Saudi citizens at all.

Wait a minute, back that up, little or no income tax? That sounds more like a Capitalist wet dream — not Socialism.

One of the most common industries that support Socialist economies is in the energy sector- and has historically been the Oil Industry.

This is true for what is often heralded as the shining example of Utopian-Socialism by those on the Left (which is equally misguided), the Nordic Model. The only problem is that while these Scandinavian country’s economies are highly prosperous- they are not Socialist, that is a myth that probably started, not because their oil industry helps to partially fund their government (which as we can see is not much, as they don’t even register on the EIA graphic denoting oil dependency by nation below- with a minimum of 30%), but because these economies boast a large Welfare State and a highly Progressive Tax rate; and it’s worth mentioning these mixed economies in Scandinavia, containing both healthy doses of socialist and capitalist ideas, consistently rank among the top of the world in life satisfaction measures.

The meaning of Socialism is shifting in today’s political circles, we see this with the rise of the term Democratic Socialism, but it would be ridiculous to believe anyone, even the most zealous (and misguided), self-proclaimed Socialist activist of today, would want to make America a truly and completely Socialist Nation if they knew what that actually was; and it would be even more ridiculous to believe that we even could, as a nation, actually reverse course and achieve that at this point.

To insinuate this, is simply sensationalized fear-mongering, the likes of the ol’ Red-Scare. We’re way too far down the Capitalist rabbit-hole to ever eliminate competition and consumerism, and replace it with a Marxist society completely based on need rather than profit. It just won’t happen.

Even the most progressive propositions of the Left, such as Universal Healthcare and Free Education, are not technically Socialist ideas.

They are not proposing that the government buy and own all the hospitals and schools, and pharmacies, and the entirety of the private Medical and Education sectors, and employ all the doctors and teachers- and use those industries’ profits in order to fund government, no, that would be Socialism- what they are actually proposing is to re-purpose existing or create new Tax Revenues to pay for them- and this taxpayer money would be paid to the private sector, profits for Educators and Medical Professionals (Capitalism).

In a sense, we should call it “socialized-insurance”, not “socialized-medicine”, as the government would be controlling/owning the insurance industry. That is more closely related to what is being proposed, and Insurance (in principle) is basically a welfare state: we “all” pay into a program so that the “few” unfortunate people that are actually affected by certain risks are properly cared for, without breaking their bank.

In order to effectively ‘Socialize’ an industry it has to be able to turn a profit, thus creating revenue to fund the government.

Imagine for a moment if the United States government, instead of shelling out $598.5-Billion a year in military spending, simply bought Lockheed Martin, Boeing, Raytheon and all the largest and most profitable American weapons and defense suppliers, the whole industry. It’s no secret that these companies turn tremendous profits on government coin every single year, so owning and operating them would surely net positive for Uncle Sam.

Think of the potential tax revenue savings, no longer purchasing weapons and aircraft at cost, and the potential gains every time another $50-Billion dollar contract is inked with a foreign power. This might work, that is unless of course you have altruistic motives for the elimination of war profiteering.

If nothing else, this point illustrates something- we don’t consider the fact that the Military Industrial Complex that sees a tremendous amount of profits on government contract as Socialism. So why would we see the the government purchasing education or healthcare for its citizens as Socialist (or even wrong), while purchasing bombs as good, clean capitalism? There really is little difference.

At any rate- the long and short of it is - Capitalism does not need to be replaced, it has done a lot of good, and it is still the best economic system currently available; in fact, despite the constant barrage of dominant negativity in the news: “137,000 people were lifted out of extreme poverty today” could have been a global headline every single day for the past 25-years. Capitalism has achieved that, and it’d be hard to argue it did so without some of its best ideas or policies- like the Welfare State and the Progressive Tax.

But the reality is that Capitalism is not perfect, and as has proved true in the past, it runs into some serious problems every once in a while- but that doesn’t mean it needs to be replaced, it just needs some fixing from time to time -to continue to succeed.

In American politics, the meaning of Socialism has become vague, far removed from its origins, and its policies hard to distinguish- we are essentially re-inventing it- as it has come to represent some hybrid, some sort of bridge in the philosophical gap between Communism and Capitalism; but whatever it is, or how hard it is to pin down in a concrete definition, we can confidently say with absolute certainty, that the inference that the Welfare State and Progressive Tax are Socialist ideologies is just dead wrong.

Dialogue & Discourse

News and ideas worth talking about. Fundamentally informative and intelligently analytical. Clarity and truth working against tribalism.

Mike Hogan

Written by

Amateur Writer, Astronomer, Philosopher, Intellectual and Critical Thinker.

Dialogue & Discourse

News and ideas worth talking about. Fundamentally informative and intelligently analytical. Clarity and truth working against tribalism.