It was sheer desperation that made John McCain and his allies pull out the lethal weapons in the last days of the campaign and start calling Barack Obama a “socialist.” There’s no greater curse.
They claimed Obama’s economic proposals — higher taxes for the rich, more aid for the poor, increased intervention in the markets — amount to a stealth plan for confiscating property and redistributing wealth. Electing Obama, they suggested, would plunge America into a dark new era of alien, un-American customs.
The Obama campaign laughed it off. The Illinois senator’s proposals add up to little more than a restoration — timid and partial — of the economic consensus that governed America through much of the 20th century. For five decades, from Franklin Roosevelt’s inauguration through the Truman, Eisenhower, Kennedy, Johnson, Nixon, Ford and Carter administrations, Americans lived happily with rules that most took for granted: a steeply progressive income tax, strong protections for labor unions, an expansive welfare system and intrusive government regulation of much of the economy, from banking to trucking. The republic did not fall; rather, those were peak years of the American century.
But McCain wasn’t entirely wrong. The consensus that Obama hopes to recapture is pretty close to what most socialists mean by socialism. On the other hand, it’s not what Americans usually mean by socialism. We’re accustomed to thinking of the word “socialism” as a synonym for secret police, bread lines and prison camps. We imagine modern history as a struggle between totalitarian communism and democratic capitalism, with capitalism — the pure, laissez faire kind, we assume — the winner by a knockout.
America is different. Democratic socialism emerged here at the same time it was spreading through Europe. The year 1897 saw the founding of what became the Socialist Party of America, led by Eugene Debs. This newspaper was launched that same spring as a voice of the new movement. But while the Forward became a dominant voice in the Jewish community, Debs and socialism languished on the margins of America.
The harshest blow to socialism’s hopes — yet also, paradoxically, its great triumph — was Franklin Roosevelt’s co-opting of socialist ideas for his New Deal. Socialism’s principles entered the American mainstream, even though the name remained anathema. What others call socialism Americans call New Deal liberalism.
Whatever its name, socialist thinking thrived in America for a half-century. The government undertook vast projects like the Tennessee Valley Authority and the Interstate Highway System. Organized labor became a partner in policy-making. Welfare became a humane, reliable safety net for the poor. Medicare and Medicaid were launched.
Much has been written about the eclipse of liberalism, the rise of the right and the impact of the Reagan revolution. Most important is the economic sphere, where free-market fundamentalism has largely supplanted Roosevelt’s New Deal. Liberals react to the shift with endless hand-wringing about greed and the decline of humane values. The right retorts that the magic hand of the market makes the economy grow, creating more for everyone.
Now, finally, the reality is hitting home: In the long run, laissez faire capitalism actually doesn’t work. Sure, we got to party for a while, but under our feet the market revolution was unraveling an economy that had been doing quite well before the free-market fundamentalists took over.
Between World War II and 1973, the New Deal’s glory days, with regulation vigorous and high-income tax rates topping 70%, Americans enjoyed three relatively stable decades of brisk growth. A true middle class was born, and affluence transformed all levels of society. Then came Reaganism, kicking off three decades of virtual growth punctuated by a series of ever-harsher bailouts, bubbles and busts. Instead of creating wealth, we created an illusion of wealth, borrowing trillions of dollars and spreading them around so we could feel rich. Far from fostering genuine growth, we shipped productive industry and real jobs overseas, leaving workers here to flip burgers and run up debts.
Lowering the taxes of the wealthy, supposedly meant to generate investment and new jobs, instead spawned a generation of billionaires and an orgy of conspicuous consumption.
We should have known better. However elegant it looked on paper, the ideology of the free-market fundamentalists defied common sense. It seems incredible that anyone could seriously believe you can hand pots of money to a lucky few and expect them to invest wisely and nurture general prosperity, as opposed to hoarding or splurging on jewelry. And yet believe they do, despite all the evidence.
Every culture since ancient times has passed on its own tale of great wealth breeding madness. But we’re still learning. The latest evidence: a new report in The Washington Post that banks receiving the first round of federal bailout money — meant to spur renewed lending — are instead using more than half to pay shareholders their quarterly dividend. Much of the rest is going to buy up smaller banks. Yes, they should be lending, reviving commerce, but someone just gave them a pot of money. The magic hand, it seems, has sticky fingers.