Mythology in Economics and Politics

The internet and social media have turned up the volume and amount of dialogue in our society, magnifying and promoting a spread of conspiracy theories and falsehoods as a substitute for facts and evidence. Once upon a time, myths and mythology operated as aboriginal explanations and rationales for phenomena occurring beyond the comprehension of mere mortals. Today, myths are on a path to be replaced by conspiracy theories promoted by loosely aligned networks such as QAnon.  

For ages, the United States has been cavalierly characterized as a capitalist society—until recently, as challenges have been raised by political candidates adopting the term socialist to their candidacies or platform proposals. This turn of events has delighted some and frustrated others. Defining capitalism and socialism and then reviewing a few constitutional provisions to determine how they conform to one or the other definition may clarify and, perhaps, limit both the mythology and conspiracy theories that tend to detract from rational discussion about them.

A common shorthand definition of capitalism reads:

an economic system characterized by individual or corporate control or dominion of the production of goods and services with their distribution mainly subject to marketplace dynamics.  Keep in mind that this intellectual parsing of capitalism ignores any mention of benefits to the society or polity as a whole.

Socialism may be similarly defined as

an economic system in which the entire society or polity equally owns the production of goods and services through an elected government with distribution of such goods and services subject to substantial state regulation for purposes of safety and equal opportunity for consumption.

The preamble to the US Constitution declares that the purpose, among others,  of the document is to provide for the common defense and promote the general welfare, implicitly denoting the rights of the elected government to exercise its authority to achieve those ends. In the main, achievement of those purposes is reflected in the power to tax. One mythical hallmark of capitalism often spoken asserts a right to private property, very often made in absolute terms.

By definition, taxation contravenes that absolutism. Further evidence of the relative right to private property is contained in the Constitution’s Fifth Amendment, which provides that no person may be deprived of private property for public use without just compensation. This is the sole constitutional reference to private property and, on its face, establishes the interest of the entire society in private property. This concept was furthered in the adoption of an income tax in 1916, which created the estate (death) tax to limit the transfer of wealth across generations and ensure the return of such property to the stream of commerce. 

As the definition of capitalism denotes, marketplace dynamics operate to deliver goods and services.  The myth of an “invisible hand’ as postulated by Adam Smith was the mythological force in this function.  Government regulation of market prices which were dramatically made visible due to war pressures have demonstrated the futility of Mr. Smith’s myth.

Congress was granted [Art. IV, Sec. 3] exclusive authority to “dispose of and make all needful rules and regulations” of property belonging to the United States. This provision spawned westward expansion following the Louisiana Purchase and the Land Grant Act of 1862.

Characterizing the United States as a capitalist nation is, then, a misnomer. Another example of less-than-capitalist thought is the document’s grant of authority to Congress to establish post offices and build postal roads, a business exclusive to the central government. Functionally, therefore, the new central government was, from its initiation to the present time, a participant in the nation’s agricultural and industrial development, operating in partnership with entrepreneurs. Private property or ownership of property was not an absolute precept but a conditional one guaranteed by the state. In addition, government support of infrastructure, such as President Eisenhower’s campaign foran interstate highway system, created a vast paradigm for interstate commerce.  This view supports those who believe that the entire population of a society or polity contributes to the common weal from smaller to larger extents and, in this way, is the ultimate owner of the nation’s production of goods and services.

In a recent New York Times interview (April 20, 2019), Joseph Stiglitz, President Clinton’s chairman of the Council of Economic Advisers, discussed a forthcoming book titled People, Power, and Profits: Progressive Capitalism for an Age of Discontent. Among his proposals, Stiglitz described utilization of a “social contract” to stimulate economic activity employing a “combination of market forces and government nudges . . . to help the poorest among us.” Additionally, he envisioned a public option to improve competition in a number of selected areas, such as health care and retirement programs.

The issue presented by the growing gap in wealth reflects the manner and means of the distribution of the common wealth in particular via the tax system. Myths and conspiracy ideation constrain achievement of distributive justice and the vision for a more fair and equitable participation in the commonwealth.  Time to get past both mythologies and conspiracies to promote the general welfare.

 

 



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