The Interdependence of Public and Private Sector: Debunking the Myth of the Socialism-Capitalism Polemic
In the recent election cycle, it appears that some candidates picked up quite a few extra votes simply by calling the other candidate a socialist. In all cases, the accusation was spurious; or better: moot. For in fact, we are every single one of us socialist, although perhaps not about all the same things. Similarly, we are all capitalist, although perhaps not about all the same things. There is no contradiction in saying this, simply because socialism and capitalism are two ways of managing the economy that are to be used in complementary fashion. For there is no prosperous and stable economy without both a healthy public and private sector. The public sector corresponds roughly with what we call “socialist”, while the private sector corresponds roughly with what we call “capitalist”, the interrelating dynamics of which are explained below.
Most of us are so confused about the matter that ‘socialism’, on those occasions when we rail against it, means nothing more than all the things we don’t like about government, i.e. the public sector. Similarly, ‘capitalism’, on those occasions we rail against it, means nothing other than whatever it is that we don’t like about “business”, or the private sector.
Examples of “socialist” things we typically complain about should be carefully compared to things just as socialist that we typically don’t complain about – at least not for being socialist – in order to see the confusion and hypocrisy in full relief. Here are the things “anti-socialists” typically complain about: social security, universal health care, income taxes, public schools, the postal service, international accords, regulations, etc. Now here are some actually socialist things one almost never hears anti-socialists complain about: municipal and state police departments, public libraries and parks, the U.S. military, town zoning laws, town planning boards, full employment initiatives, etc. These two lists may swap members from time to time through history according to the prodding of demagogues and according to geographic region, but the blindness of not admitting that the socialism we like is socialist remains a steady feature of those who rail against socialism.
Similarly, examples of “capitalist” things we typically complain about should be carefully compared to things just as capitalist that we typically don’t complain about – at least not for being capitalist – in order to see the confusion and hypocrisy in full relief. Here are the things “anti-capitalists” typically complain about: big companies, transnational corporations, the stock market, unemployment, etc. Now here are some actually capitalist things one almost never hears anti-capitalists complain about: small businesses, the liberty to choose one’s own career path, affordability and availability of most goods and services, the constant influx of technological and artistic innovation to improve and add meaning to our lives, etc. These two lists may swap members from time to time through history according to the prodding of demagogues and according to geographic region, but the blindness of not admitting that the capitalism we like is capitalist remains a steady feature of those who rail against capitalism.
Socialism is economy insofar as it is executed, managed, or regulated by the public sector, while capitalism is economy insofar as it is executed or managed entrepreneurially, i.e. in the private sector.
Just as humans cannot invent the life of an individual tree, planning out all the details of its trunk, branches, twigs, and leaves, along with the entirety of its growth and seasonal cycles, neither can we invent the economy at large. Yet just as we with careful study and timely interventions can prune a tree so as to maximize its health and productivity, so, too, can we successfully manage the economy.
Moreover, just as there is no such thing as economy at large entirely invented by and in the public sector – which is the impossible extreme of socialism; neither could there exist economy at large entirely unmanaged and unregulated by us – which is the impossible extreme of capitalism: a universal and unmitigated black market.
To be sure, the black market exists at the fringes and between the gaps of the economy and is not all bad. Some of it is just new growth destined to be incorporated into the economy at large. But its existence at large outside the reach of lawful monitoring and intervention makes it prone to causing chaos and ruin, as we all know, such that we could not wish it to be the form of the economy at large even if it were possible.
Neither what I have depicted here as extreme socialism nor extreme capitalism can exist in the world because it is anthropologically impossible for them to do so. It’s just not the way human culture works.
As human economy developed through the hunter-gatherer stage to, in some places, the horticultural stage, and, in others, the pastoral stage, according to the opportunism of which natural kinds useful to human survival were available for domestication, there was yet no accrual of wealth, since these were all subsistence economies. But as horticulturalism and pastoralism became more efficient and began to produce more and more surplus food, humans began to trade away some of that surplus for imperishable goods, which could be amassed as accrued wealth. Eventually, first here and there and finally altogether, horticulture and pastoralism merged; the confluence of this with routine overproduction to produce accrued wealth marks the advent of the agricultural economy.
The agricultural economy constitutes an improvement of human life in some ways and a liability in others but was a necessity due to increasing human population density, which required ever more efficiency to procure our prosperous survival. Increasing economic efficiency needs an infrastructure to maintain it, things in the class of what Adam Smith called “public goods”; a gameboard, as it were, with a set of rules to be constantly monitored and enforced. Creation and management of the economic infrastructure requires a duly guarded and maintained concentration of wealth. This constitutes the public sector. As long as agricultural society was at a scale small enough to avoid the emergence of mass mutual anonymity, much of the infrastructure was provided by motivation of the natural moral sentiments of entrepreneurs. But as society grows to become more anonymous, the laws and institutions of the public sector must become more formalized. The likelihood of alienation in anonymous society is high, and alienation spoils higher moral sentiment, which in earlier times had sustained us.
In the meantime and also to respond to the need for growing economic efficiency to adapt to the pressures of increasing human population, concentration of entrepreneurial wealth became vital to our continued progress. This of course necessitated growth in the public sector to monitor and regulate it. Without a robust public sector to balance it, a wealthy private sector alone could not sustain society and it would collapse by its own top-heavy weight. Plutocracy is an ugly thing, eventually even for plutocrats.
A healthy private sector owes its orderly and sustainable existence to an equally healthy public sector, which in turn is dependent on the private sector to prosper. Though dangerous, concentration of wealth in both sectors is necessary for continued human happiness and prosperity in a densely populated world.
The private sector has no honest interest in minimizing or eroding the public sector, nor does the public sector benefit from the cannibalization of the private sector. Both tendencies are suicidal to human interests. The public sector is not a necessary evil to be minimized, but a public good to be optimized.
It is not just socialist extremes we should be worried about, but libertarian extremes as well. Whereas the socialist-leaning focus their suspicion on private-sector excesses at the expense of monitoring the excesses of the public sector, libertarians do the opposite, at times verging on the denial of the legitimate roll the public sector has to play. The most extreme consider the self- interest logic of laissez-faire capitalism to apply to government itself, eschewing therefore the propriety of any moral oversight of the economy or government, relying on an invisible hand to somehow create a just balance between the competing self-interests among all individuals. They speak disparagingly of any form of group moral deliberation as a form of “collectivism”, and associate collectivism with leading us toward authoritarian government and the loss of liberties. In this country, they seek to dissolve federal action into state action, state action into municipal action, and municipal action into neighborhood action, all under the banner of anti-collectivism. To the extent they succeed in these efforts, each step of the way infrastructure in the form of human collaboration, the concentration of human effort, is lost, ultimately weakening our economy, since healthy economies do not fritter away their own productive structures.
Ultimately, the only action they seriously countenance is individual action; group action does not exist, properly speaking, except as the atomistic result of individual action. Moreover, the only motive they expect of the individual as rational is self-interest; in short, a brutal exaggeration and mis-characterization of Adam Smith’s vision of capitalism – a vision which included moral motivation and real social action irreducible to individual action.
This philosophy is a remnant of 19th century psychological egoism, which itself is based on a poor study of nature and organismic life. Without carefully observing organismic life, one might come to accept the sloppy assumption that since all organismic awareness is survival-oriented, therefore every individual organism ultimately seeks its own individual survival; and that all of its motivations are reducible to this impulse; and that therefore humans should do the same. But a cursory review of nature reveals that among the social organisms – of which homo sapiens is counted – a whole variety of survival impulses irreducible to individual survival typically override individual survival: genetic survival, progeny survival, pack survival etc.; so much so that self-sacrifice is a common feature of nature. Moreover, among humans what exactly constitutes one’s own self-interest at any one time varies wildly over two variables: scope and term. At times, the scope of my self-interest is wide, including my family, my friends, my community, etc. At other times it may be narrower. Similarly, at times my felt self-interest is long-term, and at other times shorter term. So it is impossible for me to consider self-interest as a constant, calculable force, much less as a sensible concept. The combined effect is that the very notion of psychological egoism: that self-interest is the one true clarion calling humans to productive activity economically and politically, turns out not even to have any definite meaning, and surely cannot be used as the basis of a case against genuine irreducible moral motivation and social agency in us.
Perhaps some of those expounding this philosophy are using it as a cover for justifying some vision of Ayn-Randish entrepreneurial heroism; that a certain few among us have created all the wealth our society now enjoys and should be lionized for it and not be so encumbered by the regulations and limitations of the public sector. The blind spot in this lament is a misunderstanding of wealth and how it is generated. Money represents work done; entrepreneurs, who have the privilege of managing so much wealth, only create a small part of it by their entrepreneurial efforts, including whatever innovation and risk-taking was involved. Kudos to them; but the larger part of that wealth, they must humbly recognize, was created by the myriad employees who produced the product, organized the workforce on so many levels, making so many sacrifices for the success of the endeavor. So the wealth is really generated by the people, and in a deeper moral sense resides in the people, etc. Entrepreneurial wealth is a privilege granted by society to make economic greatness possible. The rights entrepreneurs have to their wealth are not therefore absolute and unlimited, but contractual. The purpose of wealth concentration is for it to be managed productively for the sake of society as a whole. On their own, without an economic infrastructure supported by a robust public sector, entrepreneurs can have no stable and prosperous success. At best, they are like black market warlords whose days are numbered. They owe their wealth to society as a whole, which supports their legal right to entrepreneurial wealth as an incentive and compensation for the benefit they bring to society.
Next time people disparagingly call someone socialist, let them be told that they are, too, and that socialism and capitalism go together, and that our wellbeing as a species depends on their prosperous coexistence.