Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.
Bob Kuttner has written a powerful and poignant article raising the question of whether capitalism is compatible with democracy – or at least a version of democracy that lives up to the American ideals of equal opportunity and government of, by, and for the people.  The New Deal of the late 1930s and 1940s created a form of government-regulated capitalism that for 40 years (until 1980) produced a thriving working and middle class, as well as an economy where income and wealth inequality were stabilized, if not narrowed. However, in the last 40 years, the U.S. economy has evolved into a new form of hyper-capitalism (some call it vulture capitalism) that has destroyed the ability of many workers to thrive. (See my previous post for more detail.)
This post presents Kuttner’s thoughts on where we need to go from here to restore our democracy and create more equitable economic and political systems. It’s a bit long, so just read the bolded parts if it’s too much, but do read Kuttner’s conclusions at the end.
Kuttner writes that we need to reverse the deregulation and privatization of important public services and public goods. Health insurance is one example:
- Deregulation allowed the transformation of health insurance from non-profit Blue Cross Blue Shield programs into for-profit insurance corporations. This is a key reason the U.S. health care system is the most expensive in the world with some of the worst outcomes.
- Private insurers have been allowed to provide Medicare coverage. This has resulted in increased costs and a bewildering array of choices that often confuse and manipulate seniors. This privatization of Medicare ultimately makes health care more complex, confusing, and costly for seniors, thereby undermining confidence in Medicare and our government.
The overall result of this deregulation and privatization is that health insurance plans are so complex that it takes hundreds of pages to explain their benefits and limitations; no consumer fully understands what they are getting or can shop intelligently among plans.
Other examples of harmful deregulation and privatization include:
- Drug companies that are allowed to charged exorbitant, unregulated prices in the U.S. that are almost always much higher than in Canada and other countries.
- Deregulation of the airlines that allows fares and fees to fluctuate widely. It is also the reason it costs so much more to fly to closer but less frequent destinations than for longer trips to bigger cities.
- Privatization of housing subsidies has resulted in the grafting of some incremental public objectives onto a capitalistic, for-profit system run by landlords, developers, and financiers. The results have been both totally inadequate and dramatically inefficient.
Weak regulation has allowed private sector capitalists to aggressively promote products that have caused serious harm to public health, often while lying about their ill effects. Examples include cigarettes and other tobacco products, oxycontin (the prescription, addictive opioid), and fossil fuels and other products that have polluted our air and water. The promotion of fossil fuels, of course, has far-reaching effects that go well beyond public health.
In summary, the privatization and deregulation promoted by capitalists are not improvements or solutions to problems, they are problems. They have provided windfall profits to private investors as evidenced by unprecedented and growing economic inequality. Meanwhile consumers pay added costs and get degraded services, while the values and principles our democracy was founded on are debased. Successful privatization requires strong, effective public oversight to ensure that public goals and values are met, but this rarely happens. Important public goods, such as water and sewer systems, roads and bridges, parking on public property, etc. should not be privatized – as they have been – without strong regulation and reasonable provisions for terminating the privatization contract if goals are not achieved.
Attempts to remedy or ameliorate the problems of capitalism with incremental reforms or weak regulations (some have even argued for self-regulation by private companies) are not only ineffective, they also make service systems, government programs, and even markets for consumer goods convoluted, complex, confusing, and unfair. They create enormous, expensive, administrative bureaucracies that attempt to implement regulations or remedies. The resulting complexities benefit the capitalists and not workers or consumers. Perhaps the classic example of complexity that benefits wealthy individuals and corporations is our tax code. The exemptions, deductions, special provisions, and other loopholes benefit the capitalists to such an extent that average workers and middle-class households are paying a much higher portion of their incomes in taxes than the wealthy.
Delivery of services by the public sector, i.e., government, is not only fairer and more compassionate than delivery by the private sector, it is also more efficient, effective, and streamlined. The profit motive adds costs (i.e., profits, advertising, and administrative overhead) and incentivizes cost-cutting through denying services and cutting corners on quality. The private sector has no incentive to treat customers equitably; its only goal is to maximize profits.
Kuttner notes that “the history of the past century proves again and again, when market forces [i.e., capitalism] overwhelm the security and livelihood of working people, they are far more likely to turn to ultra-nationalism and fascism” than to collective action through democratic advocacy or labor unions. (page 11) This is particularly likely if there are demagogic “leaders” or “information” sources pushing them in that direction. The result typically is a rise in racism and xenophobia, as well as plutocratic control of the economy and policy making by wealthy individuals and corporations through the politicians they buy with campaign spending or otherwise.
Kuttner writes that “The signal disgrace of our era is the ease with which the corporate center-right has gone along with Trump and the Republican efforts to destroy what remains of democracy.” (page 14) He also notes that since 1980 “much of the Democratic Party has been so compromised and bedded down with Wall Street that displaced middle- and working-class people are skeptical that Democrats and liberal remedies can make much of a difference in their lives.” (page 13)
To ameliorate the economic hardship and insecurity of working Americans, Kuttner recommends providing public supports for workers and families, while resisting and reversing privatization and deregulation. Public supports should include paid family leave, cash support for families with children, subsidies for child care, easier access to good health insurance, regulation of drug prices, and free tuition at community colleges – all parts of the original Build Back Better bill proposed by President Biden and most Democrats in Congress.
Republicans will try to brand these programs as socialism and they do have a socialistic flavor when compared to our current, very individualistic, hyper-capitalism. However, they are immensely popular with the U.S. public and exist in all other wealthy countries. Moreover, socialism doesn’t elicit the negative reaction that it used to; 70% of millennials (i.e., people born between 1980 and 1995 who are 26 to 40 years old now) have a positive view of socialism. While Republicans will try to conflate socialism with communism, keep in mind that in communism the government owns all property and businesses. Not even the most aggressive policy proposals of Senator Sanders (a socialist) take any step in that direction. Also keep in mind that the branding of public policies as socialism was used by white supremacists in the post-Civil War years as their rationale for keeping Blacks from voting. Therefore, calling Democrats’ proposals socialism has racist undertones. (See this previous post for more detail.)
To reverse the scourge that the current version of hyper-capitalism has clearly become, we need to assert strong public control of our economy. Strong oversight and regulation of employers to protect workers and of companies to protect consumers are essential.
Promotion of the public good as the primary goal of government will drive workplaces and the economy to be fairer and more efficient, and to treat people with decency and respect. Think about how different our health care system would be if the public good was foremost instead of maximizing profits. Think about how different our financial system would be if we had public banks (as North Dakota does) and basic banking functions through the post office (as we once did). Think about having public broadband Internet service, which Chattanooga and Europe have, that is cheaper and higher speed than what most of us get in the U.S. Think about patent-free drugs that aren’t controlled and priced by monopolies. Think about the original Health Maintenance Organizations (HMOs) of the early 1970s that were cooperatively owned and run. Think about Medicare for all, especially without the distortions of the private insurers who’ve been allowed to offer complicating alternatives to Medicare. Think about savings and loan banks and health and other insurance companies that were non-profit, mutually-owned (by customers), and prevalent up until the 1970s. Think about publicly-owned, high-quality, mixed-income housing that is a major part of the housing market in Vienna, Austria.
Kuttner concludes that “Saving democracy, the planet, and decent lives for regular people requires moving beyond capitalism. To be an effective liberal today, you need to be a socialist.” (page 2) He states, “I’ve come around to this view gradually, not because my values have changed but because reality has changed.” (page 4)
He notes that our history has shown that the social democracy  of the New Deal did not stand up to the test of time. It deteriorated into a capitalistic welfare system with a supposed safety net that was politically vulnerable and, therefore, eroded over time. This produced today’s grossly inequitable U.S. economy where many workers and their families simply cannot survive on the compensation they are given.
Therefore, he concludes that the U.S. must move to democratic socialism  where there is substantial public or social control or ownership of important functions in our society that serve the public and the public good. This is necessary to dethrone capitalism as the dominant system of our society. Otherwise, as we’ve experienced, capitalism in a democracy will evolve into hyper-capitalism that serves wealthy individuals and corporations but leaves everyone else behind.
 Kuttner, R., 12/1/21, “Capitalism vs. liberty,” The American Prospect (https://prospect.org/politics/capitalism-vs-liberty/)
 Social democracy is a system of government that attempts to assert values to similar socialism, but within a capitalist framework. The people have a say in government, but the capitalistic, money-based, competitive economy means that a public safety net is needed to help people whose low-paying jobs do not support subsistence.
 Democratic socialism is defined as having a socialist economy in which the means of production are socially and collectively owned or controlled, alongside a liberal democratic political system of government.