Andy Stern’s Liberal Fascism

Andy Stern, the head of the SEIU and one of President Obama’s biggest supporters has a shockingly honest piece in The Wall Street Journal calling for the United States to mimic China’s model of state-run economic development. Say what you will about Stern’s piece, it’s probably the most honest description of where the American left wants this country to go.

Let’s ignore the fact that China, while having improved its human rights record somewhat, is still a single-party totalitarian society that routinely arrests political dissenters, engages in torture of political prisoners, and censors the free exchange of information. Even beyond all those horribles, China is no model for the United States.

Here’s what Stern has to say about China:

. . .I was part of a U.S.-China dialogue—a trip organized by the China-United States Exchange Foundation and the Center for American Progress—with high-ranking Chinese government officials, both past and present. For me, the tension resulting from the chorus of American criticism paled in significance compared to reading the emerging outline of China’s 12th five-year plan. The aims: a 7% annual economic growth rate; a $640 billion investment in renewable energy; construction of six million homes; and expanding next-generation IT, clean-energy vehicles, biotechnology, high-end manufacturing and environmental protection—all while promoting social equity and rural development.

Some Americans are drawing lessons from this. Last month, the China Daily quoted Orville Schell, who directs the Center on U.S.-China Relations at the Asia Society, as saying: “I think we have come to realize the ability to plan is exactly what is missing in America.” The article also noted that Robert Engle, who won a Nobel Prize in 2003 for economics, has said that while China is making five-year plans for the next generation, Americans are planning only for the next election.

There are times when I think that it’s hyperbole to accuse the left of being closet socialists, when that attack is over the top. Then I see something like this. Here is the head of one of the Democratic Party’s most important constituency, a friend and informal advisor to President Barack Obama, saying that America should start adopting a five-year plan. Stern doesn’t even try to hide his arguments, or finesse them as does Sinophile Thomas Friedman. He goes right out and says that America should emulate a country that is 100% controlled by the Communist Party.

Liberal Fascism Is Right

Stern’s argument is the same argument that has been made time and time again about totalitarian states. The phrase “Mussolini made the trains run on time” came from somewhere—and as Jonah Goldberg demonstrated in his important and utterly misunderstood book Liberal Fascism, the statist intelligentsia of the 1920s and 1930s saw Fascist Italy as a model for the rest of the world. Stern’s love letter to Communist China is in the same vein.

In the 1930s, American journalist Walter Duranty of The New York Times covered for the crimes of Stalin’s Soviet Union, and held Stalinism as a model for the West to follow. He won the Pulitzer Prize for his work. Stern is just following in Duranty’s footsteps.

Stern argues that free-market capitalism has failed, and that the state-run model as exemplified by China is superior. Anyone who believes that has some screws loose—China’s development is not a model for anyone, not even the Chinese. Yes, the Chinese have boosted their economy and are rapidly industrializing and becoming a 21st Century powerhouse. But their fortune is not due to their model of government. If anything, within my lifetime we are likely to see a catastrophic economic collapse unless China fundamentally reforms.

Clean energy vehicles? Look at China’s high speed rail system—the one held up as a model by Sinophiles like Andy Stern and Thomas Friedman. It is not only massively over-budget, but what has been completed is shoddily constructed and unsafe. This has already lead to fatal accidents and a reexamination of the whole project.

Environmental protection? The environmental ruin of China provides more evidence why the China model is not one to emulate. Beijing and other major Chinese cities are filled with smog, and the government has been attempting to hide the truth about how bad China’s air is from its own citizens. The construction of the Three Gorges Dam caused massive environmental and cultural damage, but the Chinese government steamrolled it through. There’s no Chinese equivalent of the Sierra Club to lobby against the government on projects, at least nothing with anywhere near the power of the American environmental lobby. Is that a model that Stern would like the U.S. to adopt?

Economic equality? China’s level of corruption is endemic, as Freedom House notes in its Index of Economic Freedom. Bribery is all too common in China at all levels. The Chinese system is a system where the politically well-connected receive the spoils, and the rest mire through. Now, for someone like Andy Stern, who is part of the politically well-connected set, that’s not a bug, it’s a feature. But for those not part of the political elite, Chinese-style corruption is the antithesis of economic equality.

And that’s just the tip of the iceberg. China is rapidly industrializing in the way that the post-World War II Soviet Union rapidly industrialized. The Chinese government is not as totalitarian as the Soviets were, but the result will be the same. China can produce all the “five-year plans” that it wants—just as the Soviet Gosplan did for decades. But the 20th Century was filled with the littered husks of governments that tried and failed to execute state-run central planning and failed. Even the ones that didn’t practice Stalinism failed. They failed not because they weren’t good enough at central planning, they failed because central planning of an economy doesn’t work.

And let me make a bold prediction—within my lifetime the Chinese system will either substantially reform or end up in a messy collapse that sends ripple effects across the globe. In fact, I don’t think that prediction is particularly bold, because that is what has happened every time a state has embraced central economic planning.

This Is What They Actually Believe

All of this supports Jonah Goldberg’s thesis in Liberal Fascism—not that American liberals want to strap on jackboots and invade Poland, but that American liberals have an ideological blind spot that causes them to embrace state control of the economy, which inevitably leads to totalitarianism. What liberals like Andy Stern miss is that the Chinese government has the power to implement “five-year plans” because it also has the power to arrest dissidents, attempt to culturally eradicate the Tibetan people, and censor the free expression of its citizens. Once you give the government virtually unfettered power to control the economic affairs of the people, you’ve given them virtually unfettered power to control everything else.

That’s the lesson of the 20th Century, the one that American liberals never seem to have grasped. You cannot get to Bismarck’s welfare state without eventually getting to Adolph Hitler. You cannot get a Mussolini that makes the trains run on time without getting a Mussolini that oppresses the people. You cannot have a Chinese economy without emulating the bad parts of China either. Political power in a controlled market is a zero-sum game—every bit of power and authority you give to the government has to be taken from somewhere else.

That’s why America should not emulate China. America should start emulating America. Our Founding Fathers figured out, centuries ago, that the best way to have a successful and prosperous country was to unleash the people and allow them to flourish. The Founding Fathers didn’t fully understand this concept at the time, but they got it right.

Stern argues that free-market capitalism is failing America. Bullshit. What is failing in America is the very model that Stern wants—a system where the government controls ever more functions of the economy. Over the last few decades the size and scope of government has grown at an almost exponential rate—but has life gotten better because of it? What parts of the economy are the biggest messes? We have an education system that’s a basket case and is harming the future of this country. The education system is controlled almost entirely by the government, either directly or indirectly. Our healthcare system is a mess. Who’s the biggest power in healthcare? It’s Uncle Sam, through Medicare and Medicaid and a whole host of other programs. Our financial system has lurched from one disaster to another. And contrary to the spin, the financial fatcats by and large supported President Obama and have been getting rich off of his largesse since he was elected.

No wonder Stern wants more of the same. His union has gotten fatter and more powerful under President Obama, and if the United States emulated China, Andy Stern would be even more powerful.

China is no model for the United States. China is no model for China. The fact that one of the most powerful figures in American liberalism in the Democratic Party would openly embrace central planning in such stark terms is shocking—even though it’s been clear for some time that’s what they believe in private.

The United Socialist States Of America

The United States of America is now a de facto socialist nation.

That may seem like hyperbole, but there’s more than enough evidence to suggest that it’s true. Look at the definition of socialism from that font of all knowledge: Wikipedia:

Socialism refers to a broad set of economic theories of social organization advocating public or state ownership and administration of the means of production and distribution of goods, and a society characterized by equality for all individuals, with a fair or egalitarian method of compensation.

Let’s assume that definition is roughly accurate. Does the U.S. fall under that definition?

Well, we now have a system in which the government has a controlling interest in several major sectors of the U.S. economy. Whether the banking system is officially nationalized or not is largely irrelevant—it has already been de facto nationalized. The U.S. government now has effective control over all of AIGs operations, right up to the the amount that it may pay its workers. At least for a huge swath of the financial sector, the government has effective control.

Now, President Obama has set his sights on the auto industry, essentially firing GM’s president. The fact that the President just ordered an official of a private company to step down should be deeply troubling to all. What if President Bush had demanded that the Democratic president of a major arms manufacturer resign? The left would have been in an uproar. Regardless of Wagoner’s competency, to have the President of the United States order a private company to fire an employee should not happen in our system. The government is now calling the shots at GM. This isn’t forced nationalization, but like AIG, GM and Chrysler are now de facto state-run enterprises.

The government now controls the means of production in two huge swaths of two major industries. Even if we have not arrived at full-scale socialism yet, we are at the very least perilously close.

Economist Arnold Kling calls the current state of affairs “Progressive Socialism“—although it is really another version of state socialism. Socialism doesn’t require the government to own all the means of production (as does Communism), but merely to have effective control over the economy. Right now, the Obama Administration is effectively in the driver’s seat of the U.S. economy. Looking at the markets, it’s quite clear that the aimless direction that Obama is taking us is destroying trillions of dollars of actual value.

The Fall of Capitalism, The End of Freedom

Why should we care? The reason why the advent of American state socialism is such a problem is because political freedom and economic freedom are really two sides to the the same coin. As Janet Daley notes in The Telegraph an attack on capitalism is ultimately an attack on human freedom itself:

When we make the case for capitalism, we are defending the political principle of freedom, not arguing for one kind of rigid economic organisation over another. The debate is being hopelessly muddied by those late converts to free enterprise â€“ politicians like Mr Brown who believe that markets should only survive if they can be made to serve Left-wing purposes.

Capitalism is premised on individual agency. Socialism is premised on the power of the state. The second we give government—which has the legal ability to use force—all of our economic power, what do we really have left? In essence, socialism is really a more “enlightened” form of feudalism in which the serfs trade their freedom for the protection of the elites.

The United State should not fall into the trap of socialism. Socialism is not a workable economic model. The larger and more diverse the nation, the more quickly socialism fails. Industrious and homogenous Sweden can ride out the problems of strong government control longer than could the large and diverse United States. If we continue down this road, our economic collapse will only get worse.

The United States has become a de facto socialist state, and the crisis on Wall Street is a reaction to this untenable and unsustainable trend. If we want to preserve our quality of life, we cannot have our economy being run by the same Washington apparatchiks who have caused this crisis in the first place. Obama’s shift of the U.S. economy to a more centralized and socialized one will lead this country ever closer to disaster.

Socialism 2.0

Former Clinton-era Secretary of Labor Robert Reich argues in the TPMCafe that the bailout culture is “lemon socialism”:

America has embraced Lemon Socialism.

The federal government — that is, you and I and every other taxpayer — has taken ownership of giant home mortgagors Fannie and Freddie, which are by now basket cases. We’ve also put hundreds of millions into Wall Street banks, which are still flowing red ink and seem everyday to be in worse shape. We’ve bailed out the giant insurer AIG, which is failing. We’ve given GM and Chrysler the first installments of what are likely to turn into big bailouts. It’s hard to find anyone who will place a big bet on the future of these two. …

Put it all together and at this rate, the government — that is, taxpayers — will own much of the housing, auto, and financial sectors of the economy, those sectors that are failing fastest.

He’s right. With the Obama Administration seriously considering the nationalization of a large swath of the banking industry, the government is rapidly heading for a new kind of socialism. Call it “socialism 2.0”, in which the government takes failing industries and buys them out in order to artificially prop up a faltering economy. Injecting capital in a frozen market is not a bad idea. Nationalizing failing industries is not. What the Bush Administration did and the Obama Administration is continuing amounts to little more than throwing good money after bad.

Our economic problem is structural. We have too much debt. This chart says it all: America’s level of debt has simply skyrocketed. That is not only personal debt (mortgages, credit cards), that is government debt (Social Security liabilities, Medicare, government bonds). The current strategy has been to prop up that unsustainable level of debt. In the case of President Obama’s “stimulus” package, the effect is to dramatically increase federal debt in the hopes that we can spend our way out of recession.

The short version is that our strategy is to massively increase our debt to solve the problems created by our massive debt. That hardly seems like the most sane strategy.

If the United States were another country (say Argentina) and we were seeking IMF aid, we’d immediately be put on an austerity plan. Government spending would have to be cut to get the level of debt down. Nationalizing industries would be completely out of the question. Inflation would have to be kept in check to ensure that it didn’t spiral out of control.

The IMF has put other countries on such plans before, with the approval of the U.S. government. Now is a time for a taste of our own medicine. As hard is it is for some to imagine cutting government spending in a recession, we’ve made others do exactly that before. A problem caused by an unsustainable level of spending is not going to get better by spending even more. Getting our government under control is crucial to the long-term success of this country.

Reich is ultimately right on his point: we’re trying a half-assed form of socialism that will simply not work. By incentivizing failure at the same time we punish success with high corporate tax rates, the government is sending exactly the wrong signals. What this country needs is a stronger business climate, and that won’t come about unless there’s a shakeup in the business world.

Every dollar that goes to GM is a dollar that props up a failing regime. If we are to have a 21st Century economy, we cannot be in the business of making sure nobody fails. The process of “creative destruction” is crucial to a healthy economy. Socialism 2.0 is unlikely to be any more successful than Socialism 1.0 was—and until policymakers in Washington realize that, our economic problems are likely to only get worse.