What Is Socialism? Why I Changed the Subtitle of My Previous Post

© 2020, Farok J. Contractor, Rutgers Business School

In commenting about the Indian economy and its relation to International Business in my previous post, I had initially used the term “socialist somnolence” in the subtitle to describe the Indian business environment as it existed decades ago. Some elements of that past linger, as I described, although India is quite open to business and entrepreneurship today.

Now, I am dismayed to realize that the term “socialism” is being used in the US, as well as in other countries, as a political epithet. The irony is that no consensus on the definition of the term has been established. In reality, there exists a large range or spectrum of government interventions in the lives of ordinary citizens and business, in different countries:

1) Complete government control with no private business allowed [former USSR = Union of Soviet “Socialist” Republics]

2) Private firms allowed but with tight government controls/surveillance and state-owned enterprises representing half the economy [China today]

3) Private business and entrepreneurship dominate, but with considerable lingering regulatory and bureaucratic interference from the government [India today]

4) Government plays almost no role in business enterprises, but education, healthcare, and other social services are robust and provided free. Taxes are also high, especially for high income earners. [Denmark or Sweden today]

5) Government regulation is moderate. Taxes are well below rich country averages, or near lowest for corporations. Government social services and the “safety net” for unfortunate or low-income citizens is weak. Higher education has to be mostly self-funded by students and their families. Healthcare is private,[1] but muddled and absurdly expensive.[2] [USA today]

By no stretch of the imagination, except perhaps in the mind of a propagandist, can the US be described as “socialist.” Similarly, India has come a long way from its overregulated past, although bureaucracy is still onerous, labor laws are outdated, and the rule-of-law is very weak, as I described in my previous post.

The kind of “socialism” I encountered as a young executive in the Tata Group in 1970s India was far more debilitating than today’s overall optimistic business environment in that country. Yet, many obstacles to business still carry over from the past. In those days, I made many trips to New Delhi with my Tata Managing Director, begging the government to allow us to proceed with a project that would employ up to 1,100 people, bring development and capital to an economically “backward” area, and earn millions in foreign exchange from export sales. But the government at the time refused permission for more than two years.

Why? In the ideological climate of the 1970s, all business – especially big business – was viewed with suspicion. Today, the Modi government espouses the gospel of “Ease of Doing Business,” and conditions for business investment have greatly eased. But the habits of the bureaucracy have changed only somewhat. Corruption persists. Outdated laws still hamper economic activity, holding back India’s bright potential.

India can no longer be considered a “socialist” country. But it is like a beautiful butterfly that is struggling to get out of its chrysalis while still partially trapped in it.

Notes

[1] For US retirees over age 65, the government healthcare program called “Medicare” provides only basic coverage. Most enrollees add supplemental private insurance and pay premiums out of their own pockets.

[2] The US spends more than twice as much per resident each year than other advanced economies.

2 thoughts on “What Is Socialism? Why I Changed the Subtitle of My Previous Post

  1. Thanks for shedding light on a much-maligned concept. Today’s political discourse has turned ordinary concepts on their head. Today the USA is
    more of a socialistic country than Trumpians care to admit, and China is much more capitalist than the Party can admit. It’s called convergence. Good job and thanks for making intelligent comments about a world in disarray.

    Liked by 1 person

    1. Thanks, Tagi.

      Yes, having visited China more than two dozen times, I can confirm (your observation) that the instincts of the ordinary Chinese are more rabidly capitalist than the average American.

      But that is no surprise. The Silk Road is more than 2,000 years old, and the Chinese have been trading and bartering with the Roman Empire, India, and the Middle East for millennia. Hence, the capitalist experience and instincts.

      And recall, at that time there was no patent system (introduced only 250 years or so ago), so that the very idea of “intellectual property protection” finds no tradition in China.

      Like

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