Before I go into today’s topic,I want to mention an editorial in today’s (3/21/17) Wall Street Journal by Bret Stephens. It is entitled, ” ‘Other People’s Babies’ “, and can be found in its entirety at https://www.wsj.com/articles/other-peoples-babies-1490050955. Basically, he expands on the points I made in the post on legal immigration, what it adds to our society, and how important it is to prevent a demographic disaster, like that facing Japan, Russia, Italy and others, where the population is aging and will be shrinking. Try growing GDP or financing old age entitlements in that scenario!

Turning now to political and economic systems, this is just a broad outline to make sure we are all on the same page. The two are different animals, at least most of the time. Sometimes we get them confused and intertwined in our minds, so this is an attempt to make sure they are separated. Except when they are not, as in a communist or fascist dictatorship!

Political systems are all about who has the power to make the rules that everyone has to live under. The rules themselves can be about economics, religion, human rights, how we live, any or all aspects of our lives. They can be democracies, monarchies, aristocracies, oligarchies, theocracies, plutocracies, empires, tribes, dictatorships, etc.

Economic systems are how we go about satisfying our physical needs and desires within a society. Economics has existed ever since humans began cooperating with one another, by division of labor between hunters and gatherers. Economic systems include barter, tribal, feudal, mercantilist, free market, capitalism, socialism, communism, etc.

Since we are dealing with 7 billion humans, we will never have a political or economic system that gets universal agreement. Therefore, no system is perfect. But clearly, some are better than others. The most important question to ask is this: Since any system will result in some mistakes (especially in hindsight), does the system have a built-in mechanism to self-correct, or can it only change through violent overthrow? Since most people in power tend to cling to that power, and rarely, if ever, acknowledge mistakes, the only way of correcting the mistakes in systems other than democracy is removal of the ruler, not usually a pretty sight.

Winston Churchill is reputed to have said, “Democracy is the worst form of government, except for all the others”. Democracies make mistakes, but they have the ability to self-correct. And the ultimate power of who makes the rules resides in the population who lives under the rules. We in the United States live in a representative democracy–with 320 million souls, direct democracy where everyone debates and votes on every rule is an impossibility. But we get to choose our President, our Governors, and Mayors, our Senators, Congressmen, state and city legislators.

Hybrid political systems also exist–constitutional monarchies that function as a democracy, purported democracies that function as a theocracy, Empires that functioned as a collection of tribal societies.

Economic systems can also be hybrids. Capitalism can be blended with some socialism to produce welfare capitalism. Blended systems also produced the economic aspects of fascist states–National Socialism.

Then political and economic systems can play mix and match. You can have democratic capitalism or democratic socialism. You can have monarchical mercantilism or monarchical free market capitalism. The worst case, we can all agree, is when the political system is a dictatorship that forces an unpopular or ineffective economic system on the nation–communism or fascism, for example.

This is all pretty simple, well-known stuff, right? So why am I writing about it? Because I have found that too many people get tied up in knots of confusion when discussing them. Friends on the right tend to confuse socialism with a loss of democracy. Friends on the left confuse capitalism with plutocracy. Capitalism can be changed to socialism, or vice-versa, as long as the political system is democratic. The Obama Administration, in writing 80,000 pages of new business regulation moved a few feet toward socialism, where the state controls economic activity, just as the democratically elected Trump Administration can roll those back again. You may agree with one side or the other, but the point is that the changes can be made peacefully, and changed back again in the future, also peacefully.

The next post will follow up with more on economics.

14 thoughts on “Political and Economic Systems

  1. Hey Bob, I am enjoying your blog and look forward to your saying something I can disagree with. But nothing so far.

    One topic that could generate an interesting thread that will deal with a bunch of current issues as well is Growth. As I understand the world, productivity is ultimately the key to sustaining growth which touches on population (more of your immigration theme), education, technology, regulation, incentives (i.e. taxes for positive and negative effects) and probably a bunch of other issues I have not thought of. Plus if we can even sort out a little of how they tie together and inter-relate, you will be performing a true service in clarifying thought!

    You likely have more and better ideas but you asked at one point so here you are.
    Cheers, Bruce

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    1. Bruce. Thanks for your thoughts and interest. I agree with what you’ve said wholeheartedly. I will address economic issues in the next several blogs, and hope I can do justice to your concerns about policies and growth. These are core issues about governing our nation, as are national security and foreign policy. Some (but by no means all) of the social issues are highly emotional, highly divisive, and capture the news media, but don’t have the importance to our nation’s future as does the economy.

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  2. Bob,

    This was an valuable introduction, nicely expressed. Looking forward to blogs to follow.

    As a small aside, at least one author has pointed out that it’s no longer true that, “with 320 million souls, direct democracy where everyone debates and votes on every rule is an impossibility.” It may have been true before computers and social media, but it’s no longer true. For the first time in world history, a nation really could have every citizen vote on every matter. The author’s suggestion: Enlarge the size of the House and Senate by making everyone a member of Congress. Unfortunately, the book suggesting this true form of democracy was a semi-comical re-evaluation of the entire US Constitution, entitled ME, THE PEOPLE: One Man’s Selfless Quest to Rewrite the Constitution of the United States of America, by Kevin Bleyer. Bleyer was a writer for both The Daily Show with Jon Stewart and Politically Incorrect with Bill Maher. I believe I presented this book at one of our FANS breakfasts.

    Paul I. Meyer

    3534 7th Avenue

    San Diego, CA 92103-5009

    Phone: (619) 295-1534

    Email: paulmeyer@cox.net

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    1. Paul,
      Thanks for your compliment and comments. Your point about computers, communications, and social media deserves some thought. The opportunities for hacking and compromising any vote would be significant, and those who had no computer (or computer abilities) or wireless communication would be disenfranchised. There should be fixes to those problems, however. Worth thinking about.

      Bob

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      1. I don’t worry about hacking. I worry about the 320 million souls not being able to properly and impartially understand complex legislation. Quite frankly, I worry about the 535 souls we have in charge of that now not being able to properly and impartially understand complex legislation. I’d love to see a constitutional amendment requiring bills to have a single topic, a minimum length of time between introduction and vote, and maybe even a max word count!

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      2. Good points. The current problem is the people we have elected to make our laws. They also make the rules and procedures about how they make rules–how to propose, to debated, to amend and to vote upon. Our elections have become very much a personality/popularity contest like Junior High School Student Council. While the whole voting populace bears the responsibility, the quality of coverage by the media could influence that, and choose not to do so.

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  3. Bob–

    I have two comments…the first regarding the WSJ column to which you referred.

    If maintaining Social Security, Medicare, etc etc requires the US to constantly grow and grow…when does that stop? I am not against population growth, but before we advocate that as a cure to problems with our entitlement systems, we need to examine the underlying causes. After all, all of these programs were originally sold as “insurance” programs. Insurance companies do not require policyholder growth to avoid bankruptcy (note that I wrote “avoid bankruptcy” as opposed to “per share growth”)…and by the same token neither should the government.

    The real underlying problems to my mind are twofold…first, when started, these programs were bankrupt as they ran on a cash flow model as opposed to an actuarial model. As such, initial recipients of social security benefits received the benefits even though they never contributed “premiums”. Secondly, the administrators of these programs did not project out longer life expectancies or earlier retirement dates despite trends starting many decades ago…either because they were some combination or dumb and blind, or because they purposely obfuscated these trends and the required changes in premiums, as they knew the citizens would kill the programs if they understood their financial implications.

    So now, we should attempt to offset these trends to try to staunch the financial cliff that these programs represent? How long should we keep this obfuscation going? When does the accelerating treadmill stop?

    Second comment later!!

    Keep your blog going…

    Best
    Paul

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    1. Paul, thanks for reading my blog and for your comments. I agree that the passage of the laws establishing Social Security, Medicare, etc. were done without elementary actuarial calculations, and those politicians who had any understanding were kicking the can down the road–i.e., saying that when the inevitable funding shortfalls materialized, they would no longer be in office, seeking re-election. The fixes to Social Security are pretty obvious–start slowly raising the retirement age at which full benefits start, get rid of early retirement at reduced benefits, invest the funds more effectively, raise the payroll tax rate slightly, raise the cap on payroll taxation above $105,000 earned, etc. All of these need a centrist position and negotiations with compromise to be implemented. But if it is hard to get that done with a growing population and wage-earning base, it would be impossible with a shrinking one.

      I look forward to reading your next comment.

      Bob

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      1. Bob–

        Sorry, but Oxford’s definition of communism is a “theory or system of social organization” and for socialism is “A political and economic theory of social organization…”. How do you get political than that. And as a matter or practicality, if the government owns all and production and selling organizations (and possibly homes, clothes, etc)…please advise the chances of not having a dictatorship based either or expected outcomes, and./or actual history?

        Off too the gym!
        Best
        Paul

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      2. Fair point, Paul, but I beg to differ with Oxford. Communism is, I agree, both a social and political system, and therein lies the problem. Socialism is where I differ–you can have socialist dictatorships or democracies, monarchies or tribal leaders. Political systems are more about who makes the rules, and how do they get that power. Mind you, I don’t think socialism works very well, but we have examples of European nations that have democracy and socialism. Tellingly, several of those have moved somewhat away from socialism to a free-market economy as they saw the practical results of socialism.

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      3. The value of growth in society isn’t just about our ability to pay the bills for an ageing population, though that’s part of it. It’s about the health and energy of the fabric of society. I know a company isn’t necessarily a good comparable/microcosm for society at large, but a quick look on the inside of a stagnant or GDP-growth company vs. a growth company reveals that growth companies are just healthier environments. They’re more dynamic. They create more opportunities for the people in them to learn, grow, and change. And yes, they produce more wealth. A country needs some of those things, too. Look at the lack of societal mobility in some of the more stagnant economics of Western Europe like Spain, France, and Italy. The lack of growth and difficulties in the labor markets in those countries are driving much of the social unrest and malaise there. A rising tide lifts all boats, as they say.

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  4. OK…so here is my second comment.

    My sense is that definitions of political and economic systems are very much a function of the politics of the authors of said definitions. For example. the definitions of socialism and communism in Oxford are very similar and do not deal with political matters:

    Communism–A theory or system of social organization in which all property is owned by the community and each person contributes and receives according to their ability and needs.

    Socialism–A political and economic theory of social organization which advocates that the means of production, distribution, and exchange should be owned or regulated by the community as a whole.

    On the other hand, Oxford’s definition of fascism is highly political:

    Fascism—An authoritarian and nationalistic right-wing system of government and social organization.

    I find it interesting that the definitions of socialism and communism do not use the term “left-wing” while the definition of fascism clearly references “right-wing”. Furthermore, the definition of communism makes not reference to “authoritarian” or “nationalistic”. I guess that neither of those words apply to states/former states such as the Soviet Union, China, Cuba, the states of eastern Europe (1945-early 1980’s), Vietnam, etc etc etc.

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    1. Paul–again, great comment. The definitions of communism and socialism do differ, in that socialism allows private ownership of homes, clothes, autos, etc.–just not the means of producing or selling them. They do avoid mixing with political issues, where as the definition of fascism is more a definition of a political system and doesn’t really describe the economics. But all of this is really what my post is about–people confuse political organizations and economic systems in their writings and speech, sometimes inadvertently and sometimes deliberately. Solving real problems in the world is easier when we mentally separate the two as much as we can.

      Bob
      B

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