Communism, Socialism, Neo-Socialism, Fascism. Nazism, Cronyism, and Libertarianism

by Richard "Chip" Peterson, PhD,     first draft,Apr.24, revised May 27, 2010

    Some people say President Obama is a Socialist, others say he is following Hitler's Nazi policies. While I believe he is his own person, in his autobiographical books, he admits that he was intrigued by Marxism when he was a young man. Also, many of the key people on his White House staff have formerly had associations with Communist (Van Jones) or Socialist (Carol Browner) organizations. Because of the apparent or actual influence of these various "isms" on the President and White House decision makers, it behooves the rest of us to know something about their philosophies.


    Historically, socialist lines of thought tended to develop in the 19th century. During the industrial revolution, some people prospered greatly and others, often those in the laboring classes, survived on meager rations. Socialist philosophies tended to take the view that those who owned the "means of production" exploited those who did not. Furthermore, they developed a "labor theory of value" that said that all wealth was derived from the work effort of workers. Thus, major tenants of most socialist philosophies is that there should be social control and ownership of the means of production (i.e. capital goods used in production). Socialists also tend to favor policies designed to redistribute and equalize incomes, so that all workers would obtain a more equal share of economic goods. Labor unions have traditionally supported these policies since they promise to improve the welfare of "the working class" at the expense of the "propertied class." Class identifications and class warfare calls are often popular with people who have socialist leanings. Socialists have been able to take control of democratically elected governments by promising to improve the lot of the poor and middle class people, including labor unions, at the expense of the propertied classes.  

    When socialists have taken control of governments, they have tended to favor the nationalization of industry (the means of production) so industry would be owned by "the state" instead of individuals. While present day European versions of socialism do not nationalize all productive activities, they still tend to nationalize many key industries--and only since World War II  have some European countries given up direct government ownership and control of steel companies, railroads, utilities, and many other economic entities. Many non-European countries still nationalize key industries (such as oil in Saudi Arabia) and some South American countries even now are embarking upon a new wave of nationalization (natural gas and electric power in Bolivia, oil in Ecuador, and many things, including idle agricultural land in Venezuela). In addition, socialist governments frequently expand social welfare programs greatly so everyone will receive goods and services paid for by the government and they promise to pay for those programs with taxes upon "the rich." 

    Frequently, when a socialist government seizes power, it is initially able to win elections by making many promises to the lower and middle classes that it promises to pay for with taxes on the rich and privileged. However, the imposition of those taxes and regulations may induce capital flight and cause the wealthier people to flee the country-- thereby depressing  the economy. Thus, in advance of a possible economic weakening, or in its early phases, many socialist governments take extraordinary steps to retain power. Because they feel their ideology justifies their continuing rule, and many socialist leaders seem to relish the perquisites of power, many socialist governments seem to be reluctant to relinquish that power. Cuba is still ruled by the same Communists who took over in 1957, while Chile's communists were forced from power only via a military takeover. In Venezuela, Bolivia and Ecuador, socialist leaders have tried to establish long-running power by packing the supreme court and modifying the constitution so that leaders can be reelected for more terms than were previously authorized. A similar approach has been taken by Ortega in Nicaragua who plans to run for reelection in 2010 even though when he was first elected, his country's  constitution called for Presidential terms to be limited to one term at a time. Also, in Honduras, former President Zapata had to be removed from power forcibly and somewhat prematurely to prevent him from ignoring his supreme court and legislature in an attempt to extend his term of office by changing the country's constitution. The sorry history of many socialist governments is that once they obtain power, they will go to great lengths to retain power--packing supreme courts and electoral ballots and modifying constitutions to justify their continued exercise of power in a country. 

    Unfortunately, because central planners are not motivated, or are not economically smart enough to make wise investments (political investment motivations are often not consistent with economically successful investments, and, furthermore, even the best investment plans are limited by the fact that no one person or committee can know the future with certainty), socialist countries have often stagnated economically--or, at the least, have grown more slowly than countries that allow the private sector of the economy to make most capital investment decisions. While economic inequality may be  less in socialist countries , overall gains in economic welfare also tend to be less--so people may end up with more equal shares of a much smaller pie--and be less well off in absolute terms than if they had lived in a less socialistic society with more private enterprise--and a greater ability for people to profit from their innovation, investment, and other productive efforts. 

     To some extent, one doesn't have to look far to see much of the "socialist" philosophy. According to internet citations, in a 1944 speech, Norman Thomas, who was a 6-time candidate for President of the U.S. on the Socialist Party ticket said, "The American People will never knowingly adopt socialism. But, under the name of 'liberalism,' they will adopt every fragment of the socialist program, until one day America will be a socialist nation, without knowing how it happened." He went on to say " I no longer need to run as a Presidential Candidate for the Socialist Party. The Democrat Party has adopted our platform." 

Communism and Marxism

    In the mid 19th century, Karl Marx developed a social system that he thought would be the end stage of socialism. In his idealized Utopia,  all class distinctions would no longer exist and all property would be communally owned, and subject to centralized community control. Marx envisioned a classless, (no propertied class versus working class distinctions, etc.), stateless (no national boundary restrictions--which is why there is a Communist International movement), oppression free, democratically controlled society. It would be characterized by central planning with common ownership of all means of production and no private ownership of capital. All incomes would be equal after any inequalities were addressed by redistribution of incomes. In fact, Marx stated in his seminal "book," Communist Manifesto, "the theory of the Communists may be summed up in the single sentence: Abolition of private property."

    A popular slogan of the Communists was: "From each according to his abilities and to each according to his needs " suggested that the government should take economic resources from those who were most productive to give to those who still had needs.

    In his Communist Manifesto, Marx advanced a 10 point program of specific policy recommendations. As stated in a direct translation [Penguin's Signet Classics 1998 edition, as cited by Dr. Paul Kengor in his internet statement, "A Manifesto on the 'Manifesto'"], they are the following:

"Abolition of all property in land and application of all rents of land to public purposes.

"A heavy progressive or graduated income tax

"Abolition of all right of inheritance

"Confiscation of all property of emigrants and rebels

"Centralization of credit in the hands of the state, by means of a national bank with state capital an an exclusive monopoly

"Centralization of the means of communication and transport in the hands of the state

"Extension of factories and instruments of production owned by the state; the bringing into production of waste lands, and the improvement of the soil generally in accordance with a common plan

"Equal obligation of all to work...

"...gradual abolition of all the distinction between town and country by a more equitable distribution of the population over the country

"Free education for all children in public schools..."

    It is clear that these policies would require centralized governmental control with great power given to the state. It also is clear that the communist objectives of controlling communication and education would likely be for the purpose of brainwashing and controlling the thoughts of citizens of the state, so they would accept the centralization of power.   

    Unfortunately, in practice, Communism has not come close to realizing its lofty ideals. If people cannot gain from their individual effort but can do just as well by being slackers who can gain from the effort of others, they often will do so. Thus, communist systems are often unproductive and, worse, often employ force to try to get workers to work harder or do what the self-appointed leaders want them to do. As a result, communist countries have tended to stagnate economically and the average citizen has done poorly as a result, since no one has an incentive either to be personally productive--beyond the point needed to escape punishment or banishment--and no individual has an incentive to accumulate and employ capital productively. Furthermore, since the leaders who do allocate capital cannot see the future and are politically rather than economically motivated, often capital is wasted in large scale projects that use dinosaur technology and that do not provide for market needs. For instance, if managers of a nail factory in Communist Russia were to be rewarded based upon the weight of its output, the factory  would tend to produce spikes, whereas if they  were rewarded based upon the numbers of nails it produced, it would tend to produce tacks. There was no market assessment of the value of output so Communist Russian stores were often stocked with unusable sizes of clothing, etc. 

    Furthermore, the class system in Communist systems did not fade away as the new leaders who have seized power in the name of a "'communist' or 'socialist'  revolution" have often  profited exorbitantly at the expense of the common people they control. Milovan Djilas wrote a book about The New Class in Yugoslavia which consisted of the new Communist leaders, who lived well at the expense of the people. Russian communist leaders had their dachas and their seaside resorts and their chauffeured  limousines and servants, paid for by the people. North Korean Communist leaders lived extremely well while starving millions of their people to death, and Chinese Communist leaders live in "the new Forbidden City" which is a walled enclosure with luxury accommodations that exists next to the original "Forbidden City" where past Chinese emperors used to live--while their children are the new "princelings" that have the inside track to permits that allow them to achieve economic success.  

    Additionally, communists have used brutal suppression to eliminate classes of people who might challenge their drive for complete centralized control. In Russia, Stalin starved many millions of Ukrainian Kulaks, i.e. private farm owners, to death when they resisted the seizure and collectivization of their farms by the Communists. Stalin also sentenced many dissidents and others to death or to his system of forced labor camps, gulags, during the course of his administration. In China, Mao's communists immediately lined up and shot many millions of landlords, and also teachers and local government administrators, as soon as he took power. He seized the land of the landlords and did not want any influential people to remain who might resist his attempt to seize absolute power. Subsequently he forced people to work in "collective" farms and operations that were not economically productive, so millions more of his subjects died during his "Great Leap Forward." Even now, no one dares to be a dissident in communist North Korea, and millions have recently been starved to death in that communist country.


       Because socialist systems and communist systems have not been economically very successful, many present day socialists have changed their policies in order to achieve their ends. Like a wolf in sheep's clothing, they try to achieve their goals of income redistribution and government control of the means of production in a way that will disguise their ultimate objectives. As a result, they may allow private property to exist and individuals to make investment decisions. However, if an investment is successful, they try to expropriate a large share of the profits through various systems of taxation, most notably, the progressive income tax and the corporate income tax. Then they can redistribute those tax revenues to other people through various government programs--shades of "from each according to his ability and to each according to his needs." In addition, while they allow private property to remain in private hands, they have learned that the value and use of private property can be controlled by governmental regulations. They also may attempt to seize the private property so it can be redirected to a politically favored use (as with the infamous Keho vs. New London decision a few years back where the city of New London, Connecticut  seized private homes so they could be sold to private industrial developers)    

     It cannot be stressed enough that private property can essentially be socialized by government regulation. Suppose a community wanted a park on a seashore. They could rezone a property so no industrial or residential development was allowed upon that plot of land. A property owner, who could no longer profit by developing such a property, might then leave it idle and the community would have the seashore property it desired. To ensure that it would serve the community's purpose, it could also pass a law requiring that private property owners of seashore properties allow individuals to have access to the seashore. Coastal access is required  in California and zoning restrictions have been used to suppress coastal property development along the East Coast. Also, since the "spotted owl" was declared an endangered species, landowners in California have not been allowed to cut trees in their old growth forests so those forests are preserved as nice camping and hiking spots for other people.  Closer to home, in Texas, farmers may not be allowed to pump water out of playa lakes on their land since migrating birds might want to stop over on the lakes at some time. Furthermore, if the Colorado River shiner is declared an endangered species, farmers may not be allowed to irrigate their fields with underground water in certain watersheds. Without adequate water, crop yields will often be reduced or non-existent--which will reduce the value of farmland. The more government restrictions that are placed upon private property use, the less the value of the property because ultimately, some of the restrictions will keep the property from being used in its highest valued use. 

    Because the current national administration is a big supporter of government regulation and of redistributive income tax and social welfare policies, it is best described as a "neo-socialist" administration. It lets private property exist but it seeks to control its use and tax any profits made through its use in order to further the government's  social objectives. However, it may have overreached even neo-socialist policies in its recent health care initiative. It seems that providing free health care according to one's needs while taxing the rich to pay for the extra costs is not far removed from the statement--"to each according to one's needs and from each according to one's ability."

Nazism and Fascism

    The National Socialist party of Germany under Hitler advanced a philosophy that is also known as Nazism. That philosophy was basically a socialist philosophy within the context of a national state. Instead of seeking to advance socialism around the world, the Nazis focused upon the national state. They believed that the state organization should be controlled by an elite that pursued socialist ends. The state should be organized in a hierarchical fashion where instructions came down from the top. Some people refer to the hierarchical form as a corporate  form. Because the Nazis obtained support from many large companies that  expected to be favored by the state, and were allowed to retain private property, the German Nazi state is sometimes called a fascist state even though its basic philosophy was derived from the socialist philosophy--as embodied in its "National Socialist" moniker. 

    Fascism is characterized by an authoritarian national political ideology that operates through a hierarchical system of control over the population. It espouses a collectivist agenda and rejects individualism. It claims to have a merit based aristocracy rather than an hereditary aristocracy, and, thereby, to end class conflict. It rejects individualism, since individuals should act as the state requires. It does not necessarily require state ownership of capital, just state direction as to how resources should be used--so that capital cannot be used to exploit the working class. and create class conflict. In theory fascism would place privately owned capital under state control, or expropriate private property so the state could own it collectively In practice, in both Hitler's  Germany and in Mussolini's Italy, large business enterprises with state ties continued to exist as long as they cooperated with the controlling interests in the government. 

    Fascism differs from socialism (and communism) in that it focuses on the national state and it does not require the seizure of all the means of production--as long as the productive facilities are made to serve national goals, as determined by a hierarchical "elite." 


    In fascist systems, certain private enterprises may continue to exist as long as they support national goals of the leaders of the state. At the present time in the U.S., certain private enterprises are able to receive benefits from the government as long as they support the governmental leaders. The granting of governmental favors and largess to those who support the governmental leaders is best known by the term "cronyism." No overarching political philosophy is involved, just a form of  "I'll scratch your back if you'll scratch mine." Lobbyists from various industries associate with and financially support politicians and their expensive political campaigns and, in return, expect to receive favors from the governing authorities once they are elected.

    The U.S. system is characterized by cronyism of various types. Let us consider some of the ways that politicians use public monies and influence to reward their friends and political supporters once they obtain power in our government. The most direct way is to pay them a cash subsidy--perhaps by granting various welfare or support payments (including crop support payments) to different classes of their cronyistic supporters. 

    However, direct payments have an explicit price tag that can easily be determined, so often payoffs occur in different, less obvious, ways. Government contracts can be granted with the bidding requirements slanted to favor a cronyistic group. Specifications for government grants or awards can be set so that some favored groups, such as minorities or contractors with special capabilities, may more easily qualify for the job or benefit. Also,  explicit requirements (such as the Davis-Bacon Act requirements) can be used to reward supporters such as organized labor by inflating wage rates, or union participation can be required from government contractors. . Other laws can be passed that provide favored cronies with monopoly powers in certain areas that they can then use to exploit consumers by raising prices or cutting costs in order to enhance the crony's profits at the expense of consumers of the product or service in question.. 

    In addition, tax laws can be used to provide tax breaks for cronies who meet qualifying requirements. Tax deductions, tax exemptions and credits, and even certain overly generous depletion allowances may fall in that category, as are certain expense deduction allowances. Tax savings at the local level may entail tax holidays, or exemptions from taxation for certain periods of time. In general, tax savings are more valuable the higher the tax rate that would otherwise apply--which is one reason politicians often oppose a flat tax with low marginal tax rates, since recipients of tax favors will be more appreciative when the tax breaks awarded by politicians save them more money. Tax breaks also are more valuable to the granting government or politicians if, unlike a direct subsidy,  the voting public can not easily discern who will benefit from the break. 

    Regulatory exemptions can also be cost saving, just like tax exemptions. They may be particularly valuable if a firm has competitors who do not receive the same exemption, and thus may incur higher costs, or cannot enter certain markets. Sometimes these exemptions are written into national legislation in devious ways. I have seen Congressional favors granted to banks that were chartered in certain years and whose charter was below a certain geographic parallel. It was not possible to discern easily which bank was obtaining the congressional favor. However, that is obviously one reason that Congress often passes such lengthy bills, since in that way they can grant favors to their cronies with very few people besides the recipient knowing about it. 

    Finally, monopoly powers can be granted by government so the receiving corporation or individuals  have the exclusive right to operate in certain areas. If monopoly powers are used to limit the supply of a good or service, the supplier will be able to charge higher prices or economize on expenses and service availability, without fear of competition. in that case, individual consumers will ultimately bear the cost of higher prices or reduced services--without necessarily realizing that the costs were inflated as a result of government regulation. The postal service is an example of a monopoly in the U.S., as are some local utility provisions. Less directly, accrediting authorities of various types may be used to limit the availability of various service suppliers (plumbers, electricians, hairdressers, or even  doctors, or dentists at the state or local level). Also, the banning of various folk health remedies may enhance the demand for various pharmaceutical products. 

    In short, people, labor unions, and businesses  may support politicians in the hopes of achieving subsequent economic benefits from doing so. Because election campaigns are so expensive, and require so much manpower  (which labor unions and "community organizers" often provide) politicians often favor their cronies in the expectation that they will continue their mutually beneficial relationship (at taxpayers and consumers expense) in subsequent years and election campaigns. 

    Cronyism may also involve good old boy relationships, where people with old school ties favor similar people in hopes of receiving benefits from them later. Often, there is a revolving door between government and major business and financial firms. People in business may serve on temporary appointments in government and then subsequently  receive cushy business or banking jobs where they can exploit their contacts in government and use the things they have learned about how government works and how favors and grants are awarded by governmental entities. Former legislators may also receive high paying jobs in private industry or in sympathetic think-tanks (including labor union or public interest think tanks) after they lose their government positions. They will usually be paid very well in those positions because they  can often use their governmental contacts to lobby successfully on behalf of people and institutions with special interests for which they want  government support. Old school ties such as these may also explain why many Easterners who have gone to expensive "elitist" schools often wear their school ties (if male) or favor people who have graduated from the same school. 

    Cronyism is practiced by both major political parties in the U.S. The cronies differ somewhat, but many are the same. Labor unions are more often favored by Democrats, while the Defense Establishment may be favored more by Republicans. However, the largest investment banks and commercial banks are among the largest contributors to both parties (particularly to Obama in the last election, where most of the largest investment and commercial banks  ranked high among his largest contributors), and regularly expect to receive favors from both parties. At present, their influence seems to be stifling true financial reform. (See my statement on how government crated the Great Recession and isn't solving it). 


    All of the political systems mentioned so far are characterized, in practice, by strong governmental control of individuals' lives, property, economic opportunities and finances. Usually, the people who obtain political power  try to use their power to favor themselves and their friends at the expense of the general population. The general population may pay for the perquisites of the favored through higher prices on goods, higher taxes, or through direct regulation of their permitted economic activities and their personal freedoms. Libertarians are repelled by this process since it ultimately hurts the ordinary citizen. 

    In a famous quote early in the 19th century, Britain's Lord Acton said, "Power corrupts and absolute power corrupts absolutely." The founding fathers of the United States were very aware of this fact because most were astute students of Roman, Greek, European, and British history under various forms of government. 

    Consequently they concluded, as George Washington articulated that; "government is force'" and that like a fire government can be useful if the fire is kept under control and confined to a hearth where it can provide warmth and heat food, but that, just like a fire that gets out of control and burns a house down, excessive government can be harmful. 

    Because of their fear that excessive government power could harm the citizens, in our republican system of government that our founding fathers established, the people have individual sovereignty and can, if they wish, delegate some of their power to government. The government, in turn,  is supposed to be responsive to the people rather than to subordinate the people to the sovereign reign of the government. The founding fathers of the U.S. went to great pains in their new U.S. Constitution to limit the power that the federal government could exercise over the lives of the citizens. They separated judicial, legislative, and executive powers to prevent overreaching by any one branch of government. They provided for periodic elections to prevent any one legislative or executive group from exercising overbearing power. They allowed the legislature to impeach members of the executive or judicial branches of government. They allowed the executive to veto bills arising from the legislative branch,, and they let the Supreme Court determine if laws passed, and interpreted by the courts, were consistent with the U.S. Constitution or not. They allowed for the Constitution to be amended--but only through an elaborate amendment process designed to protect the rights of minorities. Furthermore, in order to insure passage of the U.S. Constitution they proceeded with and passed the Bill of Rights--the first ten amendments to the Constitution-- to explicitly guarantee individual rights and liberties and to establish that the Federal Governments powers were to be limited to those enunciated in the Constitution, while the states or the people retained all rights not explicitly granted to the Federal Government. The founding fathers did not provide for an income tax and did not explicitly authorize a federal bank, since they wanted money to be specie (hard metal) rather than potentially worthless paper currency that was "not worth a continental" [paper currency used during the revolutionary war that had lost most of its value due to overissuance].

    The founding father's of the U.S. were well aware of Adam Smith's then-recent tome, The Wealth of Nations, which extolled the benefits of free markets. Consequently, they tried to maintain free markets by limiting the ability of the Federal Government to interfere with those markets within the U.S. and preventing the states from interfering with interstate commerce or pursuing separate tariff policies.

    Libertarians derive their political philosophy from the philosophy of the founding fathers of the United States.  They believe that all government powers should be derived from the consent of the governed. They believe that government should be small and limited so as not to interfere with individuals' sovereignty. While they believe in civil order and a strong homeland defense, they believe that individual crimes, prohibited by government and enforced by civil authorities, should be limited to those crimes that harm or defraud other people, and that if no harm is done to others, government should leave people alone. Like George Washington, they believe that the U.S. "should avoid foreign entanglements" unless such relations are essential to the defense of the homeland.. Libertarians believe in free markets and in minimal government interference in private economic affairs. They have noted that when the government tries to regulate free markets, as it did during the era of alcohol prohibition, there will be a tendency for bribery and political corruption to result, and for "outlaw" organizations to develop. They also oppose most government created and sanctioned monopolies (an exception is that our nation's founding fathers provided for patent rights so people could be rewarded for innovating). As long as competition is permitted, consumers will usually be better off through the working of free market forces than through the operation of government owned or regulated monopolies. 

    In short, Libertarians have observed the abuses of governmental power that our founding fathers saw in their readings of history and that have persisted to the present day under one or more of the various "isms." Consequently, like Supreme Court Justice Scalia,  they favor an "originalist" view of the U.S. Constitution (which involves taking the Constitution at its word and according to its original intent unless it has been amended), minimal government interference in individuals' lives, and the maximum use of free markets and competition to limit abusive power.









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