Let’s properly define the often misused word “socialism”.
According to the Merriam-Webster Dictionary, the primary definition of socialism is “any of various economic and political theories advocating collective or governmental ownership and administration of the means of production and distribution of goods”.
The secondary definition of socialism is “a system of society or group living in which there is no private property”.
A tertiary definition is “a stage of society in Marxist theory transitional between capitalism and communism and distinguished by unequal distribution of goods and pay according to work done”.
This last definition is truly the problem with socialism. Being rewarded or compensated the same as everyone else whether you work hard or do not work at all kills incentive and innovation. Not that most successful people do the things they do for the money. In fact, I posit that successful people do not do what they do strictly for the money.
However, the byproduct of leading a successful life is being compensated handsomely for it.
That said, it is a misnomer to say that the government giving out “free money” in the form of welfare or a “stimulus package” is socialism. It’s actually welfare or welfarism.
The point of my providing the proper definition of socialism and pointing out that what we Americans typically call socialism is actually welfarism is not the point of my post, but in order to properly identify and call out a systemic problem, one must understand what the problem is by calling it by its proper name and proper definition, but I digress…
The recently passed coronavirus stimulus is not socialism, it’s welfarism and a very poor version of it at that.
This package does nothing to truly help those that it is supposed to help.
Let me preface what I am about to say by saying that I am not opposed to the federal government doing something to blunt the economic impact that the measures to limit the spread of the coronavirus is creating.
The service industry jobs being devastated by layoffs because bars, restaurants, gyms, sporting events, and other commercial endeavors that bring large groups of people together in close proximity to each other are now closed, cancelled, or postponed (obviously an effort to implement measures out of an extreme abundance of caution), are clearly having a deleterious effect on all of us.
However, this stimulus package does not do anything to help the self-employed, independent contractors, gig-workers (e.g. musicians and live-audience entertainers), and part-time workers. These estimated 57 million American workers are not provided for in this legislation at all (Guynn, 2020).
Source: USA Today: https://www.usatoday.com/story/money/2020/03/23/coronavirus-stimulus-self-employed-workers-seek-relief/2892919001/
This legislation also potentially shortchanges the Americans it was ostensibly drafted to help. The aforementioned service industry workers.
The current situation could be optimistically short or go on for a tragically long period of time. $1200 is not a lot of money to someone who likely was not making a lot of money to begin with. In many parts of the country, $1200 doesn’t even cover a month’s rent or a mortgage payment.
Of course, this pittance that provides a modicum of assistance is not exactly about providing assistance to American workers, so much as it is about buying votes and indirectly benefitting the political donor class as well as the politicians themselves. These $1200 payments are worth 100 times that much in terms of political capital in an election year.
Former Chicago mayor and White House Chief of Staff (under President Barack Obama) Rahm Emmanuel once said “never let a good crisis go to waste” and he is right.
I’m not concurring with Emmanuel’s statement from a normative standpoint, but rather from a descriptive perspective.
On the political stage (politicians being the consummate opportunists they tend to be as a group), a crisis is a prime opportunity to gather political capital. This coronavirus outbreak is no different.
As token a gesture as this stimulus package is for ordinary Americans (as putting tangible benefits directly into the hands of people creates a lasting impression), it makes it appear that the politicians are doing something profound and taking drastic measures. Of course, most people unfortunately never look at the bigger picture.
Direct payments to citizens who otherwise would not be contributing to economic activity actually benefits big business.
There is a reason welfarism exists in this country. Putting money into the hands of low income people ensures that it goes almost instantly into the economy via the big retailers. So there is truth in the stimulative effect of direct government payments to out of work Americans. However, this effect is almost always fleetingly short-term for individuals and more beneficial to business and the more affluent over the long-term.
There is a reason that individuals making $99,000 a year or more and households making $198,000 a year are not going to receive stimulus payments. Besides the obvious lack of need, more affluent Americans are unlikely to simply spend their payments immediately into the economy, but will put it in a savings account or invest it. This kind of behavior enables an individual or family to build sustainable affluence, ergo, it is not the kind of behavior that direct payment stimulus packages is meant to encourage, and therein lies the problem.
I do not wish to minimize what the direct payments to American workers will mean to them in a difficult situation. There is more good than harm in this legislation in this regard. However, the downside to collectivist solutions like this stimulus package is that it stifles individual initiative in times of crisis and develops dependence upon the magnanimity of the politicos and their machinations.
For my readers who are looking forward to their stimulus payment, keep this sobering thought in mind and stay safe.
-The Rational Ram