A few weeks ago Merriam-Webster Dictionary announced its most popular word of 2012 — a tie between capitalism and socialism.
This is both telling and unfortunate, as it symbolizes the country’s simplistic political imagination and faulty rhetoric about our political economy.
Too often, our political commentary falsely presents capitalism and socialism as a choice with a single winner in a game of two — the capitalists versus socialists, like a football game hinging on electoral field goal kickers. Close observers of the nation’s history, however, know that our economy and democracy thrive best with an evolving mix of socialism and capitalism.
A continuing puzzle
Both the Declaration of Independence and Adam Smith’s “An Inquiry in the Nature and Causes of the Wealth of Nations” were published in 1776. Rather than a zero sum competition between socialism and capitalism, the nation’s founders and Smith embraced elements of a mixed economy. Since then, the question of how to balance cultural values of meritocracy and social egalitarianism is a puzzle we continue to address.
The past century illustrated that upward economic mobility and the associated American dream are enhanced and furthered by healthy doses of public and private sector involvement and investments in things like education, food security, health insurance, civil rights, housing and infrastructure. Over time, we all do better when more do better.
However, the Hollywoodized rags-to-riches individual capitalist story of the American dream and economic mobility is like a proverbial rabbit leading greyhounds around a track. It’s there, but remains unreachable for most people — especially those born into poverty and those without a college education.
President John F. Kennedy’s aphorism “a rising tide lifts all boats” was originally used to justify federal spending on hydroelectric dams. Subsequently, supporters of supply-side economics have cited Kennedy’s metaphor as grounds for reducing the top tax rates on the wealthy wherein some of gains of the rich would eventually trickle-down. Yet the most recent economic data reveals only limited trickling.
Under President Barack Obama, the top 1 percent of earners (those who earn more than $352,000 per year) took in 93 percent of the additional income created since the end of the recession. Meanwhile, only 45 percent of income increases went to the top 1 percent during the Bill Clinton-era economic recovery. In the George W. Bush-era recovery, the figure was 65 percent.
Increased income doesn’t translate into upward mobility
According to a 2012 University of Michigan study, 84 percent of Americans have higher inflation-adjusted incomes than their parents, and 50 percent have accumulated more wealth than their parents at the same age. Yet increased income and wealth in absolute numbers does not translate into upward mobility, as defined by moving up income classes.
In fact, despite the country’s mantra of economic opportunity, economic mobility rates are higher in most European countries compared to the United States. What does this mean for a country that (unlike feudal Europe) was explicitly founded on the notion that one’s future is not solely determined by one’s last name?
Strengthening incentives to save and expanding educational opportunities will improve upward economic mobility in the United States. But those efforts require public and private sector cooperation — not a false competition between socialism and capitalism. It is abundantly clear that elements of both are essential to raise the economic tide. So far 2013 seems slightly more promising. Perhaps compromise will be the Merriam-Webster Dictionary’s word of the year.
President Kennedy might have been correct that a rising tide lifts all boats. But you have to have a boat.
Matt Lindstrom is the Edward L. Henry professor of political science at the College of St. Benedict and St. John’s University, where he also directs the Eugene McCarthy Center for Public Policy and Civic Engagement at St. John’s University.
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