The thing that is poorly understood by most US citizens is economic history. And there is a good reason for this. It's not taught at the high school level, and a college student can even obtain an advanced degree in economics without having read one book on the subject. Economic history is almost completely ignored by leading academic journals and the mainstream press. What matters instead is minute-to-minute market data, minute-to-minute recording of price movements, the movements of short- and long-term interest rates, and mathematical models that concentrate this and similar information into a beam of light pointed in the direction of the very near future. The emphasis on micro-economic features of market forces and players by journalists and academics has resulted in a public that imagines the existence of great and fixed differences between socialism and capitalism.
But if one makes the effort to examine the economic history of the past 200 years, two things become apparent. One, socialism, as it was understood in the 19th century (which is based on the classic labor theory of value—workers are the source of wealth, a formulation promoted by a capitalist and stock market investor, not a commie) and capitalism, as it was understood and practiced in the 19th century (laissez faire—leave "me the hell" alone), began a fusion process around the time of the great market crash of 1873 (the remains of this financial catastrophe are still visible in Everett, Washington). And two, that the US is, in its current state, nominally capitalist and in reality socialist.
Some might say I'm talking crazy. The US is celebrated as a capitalist success story. It has high wages, an automobile infrastructure that far surpasses the pyramids of ancient Egypt, and impressive home-ownership rates. But not one of these defining features of classic American culture have anything to do with capitalism in its original leave-me-alone sense.
All, if examined closely—and in the historical context ignored by the journalists and professionals of contemporary economic thinking (also known as the neo-classical school)—have a solid socialist foundation. Relatively high wages, fossil fuel infrastructure, and mass home-ownership could not be realized by laissez faire capitalism. Their realization was made possible by what the historical theorist Moishe Postone described as the "interventionist state" that, after World War II, assumed the role of "the primary agent of distribution." This intervention state takes the form of the New Deal projects (massive infrastructure investment, financial regulations, and the promotion of home-ownership) that constituted, in the 1930s, America's socialist response to the one that defined the USSR, which Postone called a "command economy." Both the USA and the USSR were not sharply different, but had significant interpenetrating features. They also had as their origin labor's response to leave-me-the-hell-alone capitalists of the 19th century. The politics of the Red Scare moment in the US was all about obscuring the links between the versions of socialism that replaced laissez faire.
In this post, we will begin with exactly why high-income societies in the West exist at all. Meaning, why did wages rise sharply, especially after the Second World War? The answer from the historical record: The old or neo-classical economic thinking that the labor markets were exactly the same as capital markets and goods markets was dismantled by the Depression-era economist John Maynard Keynes, the first major mainstream critic of laissez faire. (From Keynes's work and thought we get, on one side, post-Keynesians like Steve Keen and, on the other, neo-Keynsians like Janet Yellen—my thought, admittedly, is aligned with the former for the simple reason that, as with Marx, on the left, and Joseph Schumpeter, on the right, it takes history seriously.) Now, labor markets, for a number of reasons, are distinct from the goods and finance markets. For one, it does not automatically direct or lead the other markets. It must follow them. This fact, which, of course, has class implications that neo-classical economics worked hard to ignore, is important to grasp. It has several macro-economic and historical implications.
That the labor market follows, rather than triangulates, the others—meaning, that it expands and contracts according developments in those markets—makes the leading markets vulnerable to violent deflation implosions (falling prices caused by, on one side, a lack of demand for goods, and on the other, a high demand for cash or liquidity to pay off debts incurred during a period of investment or expansion). Keynes recognized this. And the solution was to empower the labor market, so that it did two important things: stabilize the market into a virtuous triangle, and, two, provide a secure source of demand from workers, who, by the nature of their condition (living paycheck to paycheck), have a much higher marginal propensity to spend than people who do not live one paycheck to the next.
This kind of policy, now known by those who bother to read the history of economics, is Keynesian economics. Demand (the means to buy manufactured goods) and also full employment (and both are intimately connected) must be major concerns for government policy and action/intervention. Even to this day Trump is Keynesian in the sense that he is worried and goes on and on about full employment. It may shock most Americans, but that was not at all a issue for leave-me-alone capitalism or late-19th century economics. But it is through-and-through a socialist one.
And there other socialisms. All over the place. You live and breath the stuff non-stop. And its not just our roads or schools or 30-year mortgages (the subject of the third post in this series) but also the huge military budget (military Keynesianism) and the bank bailouts (Keynesian finance). If you remove Stalin from your standard socialist imaginary and replace him with the face Franklin Delano Roosevelt, you will have an idea that is consistent with historical developments of the last 140 years. Both men owe their political projects to critiques of capitalism that emerged in the century they were born in.