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Brooks Wilson's Economics Blog: Economic Systems (Repost)

Tuesday, October 20, 2009

Economic Systems (Repost)

Radio talk show hosts, blogs, and other forms of news dissemination, noting the growth of government in the first two months of the Obama administration have been calling President Obama a socialist. I even heard one talk show host refer to his supporters as Obamunists. Such complaints made their way through a New York Times reporter to the president, who gave a dismissive answer. Joe Curl writing for the Washington Post in "Obama makes Oval Office call to reporters," explains that President Obama has become concerned that his answer was inadequate.
President Obama was so concerned that he had appeared to dismiss a question from New York Times reporters about whether he was a socialist that he called the newspaper from the Oval Office to clarify his policies. "It was hard for me to believe that you were entirely serious about that socialist question," he told reporters, who had interviewed the president aboard Air Force One on Friday.
Below I have provided definitions of several economic systems and a little information about the economists providing the definitions.You can decide which system best describes the collection of policies thus far expressed by the Obama administration.

From the Concise Encyclopedia of Economics, in an article titled "Socialism," Robert Heilbroner defines socialism.
Socialism—defined as a centrally planned economy in which the government controls all means of production—was the tragic failure of the twentieth century. Born of a commitment to remedy the economic and moral defects of capitalism, it has far surpassed capitalism in both economic malfunction and moral cruelty.
The "About the Author" section of the article states,
Robert Heilbroner, a socialist for most of his adult life, was the Norman Thomas Professor of Economics (emeritus) at the New School for Social Research and author of the best-seller The Worldly Philosophers. He died in 2005.
Milton Friedman the Nobel Prize Laureate in Economics who supported capitalism in the popular press in Capitalism and Freedom (The University of Chicago Press, 1962, pg. 5.) writes,
As it developed in the late eighteenth and early nineteenth centuries, the intellectual movement that went under the name of liberalism emphasized freedom as the ultimate goal and the individual as the ultimate entity in society. The kind of economic organization that provides economic freedom directly, namely competitive capitalism, also promotes political freedom because it separates economic power from political power and in this way enables the one to offset the other. History suggests only that capitalism is a necessary condition for political freedom. Clearly it is not a sufficient condition.
Robert Hessen, who writes on business and economic history, and is a senior research fellow at Stanford University’s Hoover Institution writes in the Concise Encyclopedia of Economics ("Capitalism") that
Capitalism,” a term of disparagement coined by socialists in the mid-nineteenth century, is a misnomer for “economic individualism,” which Adam Smith earlier called “the obvious and simple system of natural liberty” (Wealth of Nations).
Sheldon Richman, the editor of The Freeman: Ideas on Liberty at the Foundation for Economic Education, writes for the Concise Encyclopedia of Economics ("Fascism")
As an economic system, fascism is socialism with a capitalist veneer.

Where socialism sought totalitarian control of a society’s economic processes through direct state operation of the means of production, fascism sought that control indirectly, through domination of nominally private owners. Where socialism nationalized property explicitly, fascism did so implicitly, by requiring owners to use their property in the “national interest”—that is, as the autocratic authority conceived it.
George Reisman, writing for the Mises Daily in "What is Interventionism?," describes interventionism,
Interventionism is any act of government that both represents the initiation of physical force and, at the same time, stops short of imposing an all-round socialist economic system, in which production takes place entirely, or at least characteristically, at the initiative of the government. In contrast to socialism, interventionism is a system in which production continues to take place characteristically, at the initiative of private individuals, including private corporations, and is motivated by the desire to earn private profit. Interventionism exists in the framework of a market economy, though, as von Mises puts it, such a market economy is a hampered market economy.


  1. Justin Martin20/10/09 9:01 PM

    With the outlook of Obama's said "recovery plan" I see many aspects of socialism, but most of these are blown way out of proportion by the media. I believe the economy would fail greatly like it has in the past with this method, but at the same time you can have a little govenment control and obtain a balanced economy for the nation. Capitalism is been great to the nation but has also put alot of people in the poor house and unable to stray away from that, if implements could be made with interventionism to help curve the wealth circle to those who are struggling would be a good plan if controlled correctly

  2. The president has not even serve half of his term and there already name callin him. How is he a socialism how has all plans for the economy are failures when half of his plans has not been went into effect.How is our society is taking more control of the plans he have in stored. Use of capitalism could be a good thing onle under certain circumstances as long as it is control. People shoild be able to have more control of the Property Rights to have exercise control of over scarce resources.

  3. LaToya Brinkley21/10/09 4:54 PM

    Socialism—defined as a centrally planned economy in which the government controls all means of production. I understand that in the past there has been failures in certain aspects with the "recovery plan". I believe that the Obama administration has social tendencies but not complete socialism. The government would be controlling aspects in health plans, but the benefit would be helping ones who can't help themselves at this particular point in time. You must know where you came from to know where you are going so I too believe that if there's a balance of government control and individual control there would be a better outcome than the tragic failure of the 20th century.

  4. Natasha King22/10/09 2:02 PM

    Socialism as it is defined, centrally planned economy that is controlled by the government, is what seems to be the Obama Presidency. First of all, he wanted to bail out the auto industry but only if the government gains control. Secondly, he is pushing for a government run healthcare system. What's next?

  5. I agree with others when they say that the Obama adminstration has social aspects but to call him a complete socialist is absurd.Obama and his adminstration are trying to implement plans that will help jump start the economy. But the ones that he is trying to help are the ones opposing his plans. Both parties are trying so hard to be in control that they have forgotten about what is best for the American people.

  6. Laura Brown23/10/09 9:40 AM

    Laura Brown

    I believe Obama's policies are socialistic in character or maybe even a little of "fascism" by the definition. His policies are geared toward government being involved in everthing and even controlling everything. This is not capitalism. The government cannot "fix" the economy. By government getting involved and taking over businesses, health care etc, our freedom is diminished. Competition is what makes the economy strong and stimulates growth. Without competition, or "spreading the wealth" takes away the motivation and drive necessary for people to better themselves and create a stagnate economy. Why work hard if you are going have the same as everyone else anyway. Through Obama's administration money is being spent that does not even exist and will never will we overcome this? Let the markets take care of themselves through capitalism...let the businesses file bankruptcy and start over and get back to work. I think that capitalism is what has made our country great and yes, there is a need for government to regulate and assist, but less government is better for the economy.

  7. Ashley Slaughter25/10/09 9:28 AM

    It is hard for me to label President Obama as a socialist when he has not even served a full year as President. I will agree to the fact that I think that some of his plans and ideas for our country just aren't going to work, such as his plans which involve goverment invovlement. As Laura stated in the comment above, I too believe that the government cannot go around solving all of the problems in our economy. Although I would not necessarily call him a complete socialist due to this belief.

  8. Kristie DeMaria25/10/09 8:00 PM

    I do believe that Obama's policies lean toward socialism. His health care policy forces people to buy it whether they want to or not. He has put into place caps on the amount of bonuses that certain companies are allowed to give. By giiving bail outs and not letting big businesses fail, the government then has an amount of control over those businesses.They are actually disrupting the vary nature and balance of capitalism by not letting a business stand on it's own.

  9. Shanikqua Webster said...
    According to the definition of socialism, I do see that some of President Obama's policies are geared towards socialism. I also believe that the media and his critics are going way to far with this issue. He hasnt been in office a year and some people just will not give him a chance. I believe he will find the balence to get America back on track. We can not sit around and let the richer get richer and the poorer get poorer. There has to be a balence.

  10. libby sullivan26/10/09 10:53 PM

    The foolishness of labeling President Obama's policies "socialist" or "fascist" lies in the fact that it requires one to completely see America's current economic condition in a vaccuum. ANY presidential policy decision is affected by virtually countless factors, all occurring at once and many of them at odds. The current economy requires forward-thinking, oftentimes "out of the box" solutions. If Wall Street hadn't completely collapsed and the auto industry was thriving, of course the president could follow "business as usual capitalism." However, Obama was handed a hornet's nest of economic quandries, and while some of his solutions may seem unorthodox, calling them socialist is either pure ignorance or a simplistic attempt to smear the man.

  11. Obama's policies are a little socialistic makeup as stated in the Blog. The Government is controlling many of the means of production. his policies deal with the government being involved in almost everything and having a controlling part of role in many things. By the Government having a controlling part in businesses, health care, America's alternatives are losing ground. Competition is the core of our economy. America needs competition to motivate and compel people to improved themselves.

  12. Davenport,

    I have to say I do agree that socialism would be a great down fall of America. I also agree that it also hepl with a little og government control with regulations. For instance health care, I do not believe in social medicine. Being in the insurance industry I do see where there could be some control with regulations of prescription cost and medical treatments. Social medicine is not the way but regulations could be.

  13. Jennifer Molina28/10/09 11:22 PM

    Calling Obama an out-right socialist figure might be a little far stretched this early in the game. He hasn't even served a full year of Presidency yet. However, I think his health care plan has socialism written on the front page. I'm sorry but I do not want to see this plan be put into action. I don't want to pay for your hospital trip, and I am sure you would not want to pay for mine. This is merely my personal opinion of the health care bill.

  14. Taylor Drapela8/11/09 8:23 PM

    I will start off by saying that the media does throw a lot of stuff out of proportion, and gets rumors that aren't true about Obama spread around. However, ignoring what the media tells you, the plans that Obama is putting out there like a government run health care system is leading towards socialism. He is trying to help our economy, but involving the government in areas such as health care and bailing out the auto industry is socialism. The government is not supposed to get involved in these affairs. It is up to the people of the United States to see that it succeeds or fails. I don't think that Obama, or US citizens realize this. Obama may not be a 100% die-hard socialist, but I think he unknowingly tends to lead towards socialistic answers to solving the problems in our economy. Sadly, in the long run, this will do nothing but hurt it.

  15. brittnie white29/4/10 11:02 PM

    some of pres Obama's viewpoints might lean a little toward socialism, but i don't think he's a socialist