Competence/Incompetence v. Socialism/Capitalism
February 7, 2021
by William P. Meyers

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Competence Matters More Than Ideology

One wonders if the center will hold in the United States. The Great Depression that started in 1929 brought to this nation a new (to us) paradigm for government. Pure free-market capitalism had failed spectacularly, so social programs were tried, though nothing like a complete socialist system. Ever since the country has balanced around a center, adding social programs at times, trimming them back at other times. One could argue that this mixed capitalist-socialist system has worked pretty well, but that does not take into account other variables. After 1929 the nation did not return to any real prosperity until 1941. It is arguable that war spending, including sales of American goods to the other contestants in World War II, was the real key to prosperity. As New Deal advocates squared off in debates with Free Market Capitalists from the 1950s onward, each largely ignored the real secret of success. Our rivals, capitalist and communist alike, had been bombed back close to the stone age during the war. Our factories prospered, our capitalists prospered, and our workers and their unions all prospered together because President Franklin Roosevelt had correctly figured that the U.S. could take over the world if the British, French, Germans, Russians and Japanese beat up on each other enough before we entered the war.

Lessons of the past are mostly forgotten or ignored now, a sign of intellectual incompetence. The U.S. economy has had several industrial rivals for a few decades now, and in particular the Chinese economy has grown rapidly since 1990 and will likely be larger than the U.S. economy by 2030. The socialism versus capitalism debate has become more intense in the United States as the progressive wing of the Democratic Party has been more open to using the term socialist while the right wing of the Republican Party has maintained its traditional views.

Both sides point to examples that they say support their own views and discredit those of their opponents. I will focus on a few current situations to show that both sides have chosen the wrong dichotomy. The more important variable in economics and governance is competence. The spectrum from utter incompetence to maximal competence explains much more than socialist or capitalist ideology or practices.

American socialists and progressives like to point to Norway as their shining example. In a fact-based reality Norway is not a very good example for the idea that socialism is always the best system. It is nice for most people in Norway. Their living standard is among the highest in the world. But ascribing the success to socialism does not stand up to scrutiny. It is true it is more socialized than the U.S., including government ownership of key sectors such as healthcare, oil extraction, and the aluminum industry, with a much more equitable distribution of income. But, using stock value as a proxy, that leaves about 70% of capital in the hands of capitalists. Perhaps most important, Norway only has about 5.4 million people. Those people share an oil and gas industry that accounts for perhaps 20% of GDP and 40% of exports. Socialism in Norway appears to have helped, not hurt, a basically capitalist society. The key factor appears to be competence. Finding a good balance between socialism and capitalism shows societal and governmental competence, as well as a competent capitalist class.

Venezuela is typically pointed to by American conservatives as proof that socialism is a disaster. I agree it looks that way at first glance. There is more oil in Venezuela than in Norway. The amount of oil that can be extracted, per person, would be lower because there are some 29 million people in, or perhaps recently fled from, Venezuela. Long before Hugo Chavez took over in 1999 it was a poorer nation than Norway, though not doing badly for a former colony of Spain. Following the erection of the Chavez/Maduro system of socialism, the economy has gone downhill, eventually leaving its average citizen with an income about one-tenth of that of the average Norwegian. How could two nations with vast oil wealth, and socialism-friendly governance, end up in such different economic situations. Leftists in the U.S. argue the result comes from sabotage by the U.S. There is a better argument as to why socialism, in and of itself, is not to blame. The complex history and situation can be summed up in one word: incompetence. A dip in the price of oil at a crucial point in time did not help, but the main culprit in declining export revenue was the failure to maintain and efficiently operate the oil production sector. The management of the agricultural sector was also a disaster. An examination of why Chavez and Maduro, and the people they bossed around, were so incompetent is in order.

Turning from the bit players to the global giants, consider China and the United States. Soon their economies will be about the same size. Most people would characterize the U.S. as capitalist and China as socialist, but a close, objective look brings those simplifications into question. The very idea that they should be rivals, not team mates, should be subjected to questioning. But most people can fairly admit that both nations have shown a great deal of competence during their histories. My hypothesis is that to the extent it is a competition, being the nation that is most competent is more important than being the nation that is most socialist or capitalist.

Here two other variables must be introduced that weigh on the question of competence as much as socialism and capitalism. China is correctly viewed as the more authoritarian nation, the U.S. as the more democratic (though technically both are republics). It should be noted that the Communist Party of China (CPC) has approximately 92 million members. That is a small proportion of the full 1.4 billion Chinese, but is more than voted for either Joe Biden or Donald Trump in the 2020 election.

China likely had the world's largest economy at least as late as 1800. Despite a considerable degree of competence, its ruling class showed itself to be increasingly incompetent for the next century. By 1900 China was a minor power supervised by the Great Powers. It only managed to become independent again under Communist leadership in 1949. At first the CPC and its leadership showed great competence in putting the nation back together and pushing back against America, Britain, France and even Russia. But the economy stagnated in the 1960s as the Great Helmsman showed he was too senile to steer the boat properly. With the transition to Deng Xiaoping in 1978 competence again became a criteria for governance. Some of the better aspects of free markets were reintroduced. Governance and the economy improved together, but China was so far behind the already industrialized nations that it was not until the 1990s that the economy took on aspects of the growth machine we are now accustomed too.

Since the year 2000 the Chinese economy has grown much faster than that of the U.S. That shows competence, but it does not necessarily imply incompetence in the U.S. The U.S. economy and society have a different set of problems than China. The main failure since 2000 was the housing bubble and the resulting Great Recession. A secondary failure has been the undermining of employment and income for the working class. Both are largely failures of capitalism, though to some extent they were exacerbated by incompetent socialist policies. Failure to regulate capitalist free markets led to the housing bubble. One can ascribe the failure to banks, greedy individuals, the Fed, bureaucracies, Congress, or President Bush, but on the whole it was a systemic failure, a failure to coordinate by people who were, individually, competent. The nation would not have had to depend so heavily upon socialist food stamps and unemployment checks if more capitalists had been more careful with their capital leading up to the collapse of the house of cards.

Knowing how to mix socialist institutions with capitalist ones, and how to regulate both, is the ultimate test of a nations competence in the modern world. Nations start with difference resources, natural and cultural, and different levels of capital and infrastructure. Competence is not is applying a cookie cutter approach to situations with numerous variables that determine outcomes. Competence requires intelligence, a willingness to accept the facts, and the energy to pursue appropriate goals.

Incompetence takes many forms. A machine in a factory needs to be properly maintained whether the factory is owned by capitalist stockholders or its workforce or a socialist government. Not maintaining people and culture is just as incompetent as failing to maintain machines. Refusing to face the change that is all around us in the anthropocene epoch is incompetent whether government is authoritarian or democratic, socialist or capitalist.

In complex systems change often results in unintended consequences. The use of fossil fuels, resulting in great prosperity but also global warming, is just one big-picture example of this. Competence, at the highest levels, requires understanding complexity and doing the best job possible in predicting the future. If the predictions turn out to be off, competence requires quickly compensating for the deviation. And sometimes, competence is admitting the goals that were set in the past are not the goals we need to aim for now.