“Socialism” for Profit

You know how much I rail when politicians and their constituency use single word descriptions of complex socio-economic policies. “He’s pushing the country towards socialism” or “Capitalism has proven it doesn’t work” are prime examples of people searching for simplicity, extinguishing the mildest of hopes that would get them to explore the reality of the mix of structures that reflect any modern national power. We absolutely know that social security, free public education for all children, product/environmental contamination restrictions and financial regulation (as badly as that has worked) are part of our American landscape and have been for many decades. Damn socialism! We really do need to stop educating our children, don’t we? Or have are schools deteriorated so much that we effectively already have?

But some of our mythology, an apparent aversion to certain labels and words, fails at a deeper level if you look at simple criteria measuring our quality of life. Who would hold North Korean communism up as a model for anybody? Did anybody actually think the Soviet model worked that much better? And is China capitalist (even more than we are?) or is it socialist? They have fewer economic and environmental laws than we do… or they enforce a whole lot fewer of such restrictions.

A more interesting examination may be in our own Western world – Norway. This country has been pretty far left of center for decades now. They are actually one of the largest oil-exporting nations on earth ($68 billion worth last year), and despite a microscopic population (4.6 million), they produce a disproportion impact on the global economy. With the second highest per capita income on earth (way above the U.S.), they have all of those “socialist” things – universal health care, cradle-to-grave welfare, long mandatory vacation time and short working hours that would make any American from slight center left to totally right wing grimace.

Their oil money is a state operation. All oil profits go into their sovereign wealth fund, and it is one of the largest such funds on earth - $300 billion. Yes, the economy hit that fund like a ton of bricks (23% decline), but instead of pulling back, its key investment managers took about $60 billion from that fund and bought stock in Norwegian companies. Yes, their real estate market took a 15% nosedive, but, surprise, surprise, Norwegian real estate is back on the rise.

Norway was never a spendthrift nation. They wince at the U.S.’ generating a deficit this year equal to 12.9% of our GDP and incurring a total $11 trillion debt that equals 65% of the value of our entire economy. They actually pride themselves on being modest in their government spending, while maintaining their social programs. The May 14^th NY Times: “Norway’s relative frugality stands in stark contrast to Britain, which spent most of its North Sea oil revenue — and more — during the boom years. Government spending rose to 47 percent of G.D.P., from 42 percent in 2003. By comparison, public spending in Norway fell to 40 percent from 48 percent of G.D.P.”

So the construction cranes that have been stilled all over the world, even in oil-rich sheikdoms, because of this managed depression, are still steadily working to implement large construction projects that began before the meltdown. Public projects roll merrily along as well. With growth (3% of GDP) in the midst of global contraction, a government that is entirely debt-free (it actually has an $11 billion surplus), it’s hard not be jealous of this little Scandinavian nation. Okay, they found surplus oil by the tankerful and made a fortune, but as noted above, Britain had similar riches and is still in deep financial turmoil. The U.S., which was the largest oil-producing nation until the 1960s, spent that oil money (in private hands) decades ago.

With about 2% of the Norwegian economy in banking (which unlike neighbor Iceland, has real regulations over this sector), the financial crisis was a tiny blip on their economic radar. They really don’t understand how a big country like the U.S. could have embraced the subprime derivative market or why we would feel secure in an economy where America made 40% of its total corporate profitability last year from the financial sector. The only freeze in Norway comes in their bitterly cold winters – local credit is flowing well, thank you.

So we don’t have the luxury of a small homogeneous population with a massive revenue source from heaven. We have to generate our revenues from diverse segments of our commercial endeavors. But our “stupid financial dog tricks” – the hubris of “unregulated capital markets” always doing what’s best for the country by acting in their own self-interests – is and has been profoundly delusional. If we think that adding labels and moving towards “socialism” or “away from capitalism” or “towards overregulation” or applying the failed doctrine of “trickle-down economics” or moving “towards greater capitalism” or embracing “freer markets” will solve our problems or denigrate the choices our leaders make, we are sad “under-thinkers.”

Our leaders will continue to make mistakes, perhaps generate an overall triumph or not. The one “true thing” is that applying simplistic labels to complex issues is part of the problem and most definitely not a part of the solution, left, right or center.

I’m Peter Dekom, and I approve this message.