Monday, August 17, 2009


by Hanno

'Socialism' is a word that has re-emerged as a key political term, used the the recent Presidential election ("Do you think Obama is a Socialist?") and in the current health care debate. But what is Socialism? This is not an easy question, because it means different things.

To get to the old school meaning, we need to think about economics. There are three key features to an economy. First, are the means of production. These are the factories, workshops, or tools used to make the goods which allow any society to produce goods. Second, are the means of distribution, which allow for those goods to be brought to different places. Roads, rails, ships, etc. are examples of the means of distribution. In all but the most primitive economic system, there must be some means of getting the goods produced to the people who use them. Third, there are the means of exchange. These include banking systems, money, monetary system, etc. they are the means by which goods are exchanged for goods, or services are exchanged for goods.

These can be split up in a variety of ways. In Capitalism, these are held in private hands. Individuals, either as individual investors, or working in groups through an exchange system such as a stock market, own the means of production, and as a result, are allowed to keep any excess capital created by those means. This is also called 'private property.' In Socialism, these are held in some way in non-private hands. they can be held by the State, or by some collective, or in some other way. According to Marx, Socialism is the distribution of good 'according to one's ability.' That is, in Capitalism, the worker gets a share by how many hours he produces, (but economic forces at play limit this through competition for jobs). The people who own the factory, however, receive their share even though they may do little or no work. Maybe this is justified or not, I will not worry about such political questions. In Marx's vision, everyone receives their share based 0n how much they produce.

There is no pure capitalism, at least not anymore. And there never was a pure Socialism. And whether the systems that called themselves 'Socialist' were actually Socialistic is up for grabs. Typically, in the USA, when competition fails, some sort of non-capitalistic framework of ownership is used. Roads are a good example. Bridges work, too. And Louisiana's Huey Long shows us the problem.

There was a private company that built a long bridge across Lake Pontchartrain, and it had a monopoly, and charged accordingly. It made money owning the means of distribution. Because it had a monopoly, there was no competition. So instead of the efficient transmission of goods, something only competition can ensure, there was the most inefficient transfer possible. Now consider another company thinking of getting in on the action. They would like to share in those huge profits. Excellent. Capitalism in action. But as soon as they build the bridge, they will compete with the original company. And when there is competition, profits die. So instead of sharing in the huge profits the first company was making, a second company would destroy them. So while Capitalism provides excellent incentives to build the first bridge, it provides little or no incentive to build another, thus preserving the monopoly.

That is, until Huey build a bridge right next to the private one, charged no toll, drove the private one out of business, and bought the now bankrupt bridge next to his public one. And now goods and people can cross free of charge, aiding commerce, not hindering it. That public ownership of the means of distribution is socialist. But its all a matter of degree. The degree to which you support public ownership of the means of production, distribution and exchange, the more socialist you are. Everyone with half a brain supports some non-private ownership of some of these things. And everyone with half a brain supports some private ownership of these things, too.

The army, public utilities, health care in the army, social security, roads, airports, public education are just a few of the things we currently do not have in private hands. We did so because leaving them in private hands failed to do what we think is necessary or good.


Derek said...

The causeway is still a toll bridge. Maybe Long originally made it free, but there is a toll now. State capitalism at work?

Derek said...
This comment has been removed by the author.
Hanno said...

I'm pretty sure the original state road was not a toll road, but a historian of may say otherwise. Public toll roads are still public (ie, they are not in private hands).

Less clear are utilities where private individuals can own shares. Still, it is not pure capitalism, as they cannot charge whatever the market will bare, or Fannie and Freddie, where the state backs the institutions up and provides capital, but private individuals can buy shares and share in profits.

Hanno said...

That causeway is not the one Huey built. It was made in 1956.

The private syndicate charging 8 dollars a toll, was the Watson-Williams Bridge. Huey offered a different plan, and told the syndicate that even if they build their bridge, when Huey was governor, he would build his own free one. That became the Rigolets Bridge (U.S. 90). See T. Harry Williams, Huey Long pp. 227-232, or

Anonymous said...

I like the idea of representing Socialism as in 'degrees' of influence or its existence in degrees. I know each bsns desires the end-state of a pure monopoly, but competiton (with several noteable exceptions Electric Company-State Sponsored monoploy) keeps many from achieveing this end-state.