How socialism saved America

Socialism saved the United States. It rescued it from the disastrous social and economic effects of COVID-19. It is both stunning and comforting that Democrats and Republicans in the Senate and House quickly embraced socialism, however temporarily, and passed the Coronavirus Aid, Relief and Economic Security (CARES) Act last March. The law pumped unprecedented sums of money to prop-up the country’s economy. So far, this adoption has had mostly positive effects on economic growth and employment and none of the dreaded ill-effects, such as promoting lazy citizens who would increasingly depend on government hand-outs.

The total CARES Act’s budget was $2 trillion, which amounts to 45 percent of the 2019 federal budget. It was spent to:

—help distressed businesses ($500B); 

—support small business ($350B);

—give money to individuals ($300B);  

—pay unemployment insurance ($250B);

—aid state and local government (($150B);  

—support health ($148B);

—fortify FEMA (Federal Emergency Management Agency) ($45B); and 

—help agriculture ($35B).

An additional $900 billion was budgeted in December 2020 for similar initiatives, and the Biden administration wants to spend another $1.9 trillion on similar policies.

Imagine this: The U.S. government – the most visible leader of capitalism in the world –distributes money, like manna from heaven, to help businesses stay operating and pay wages, and to aid individuals pay some of their heating and grocery bills. Such swift distribution of large sums of money would make even socialist countries like Norway and Sweden hesitant, and communist leaders like Vladimir Putin uneasy. Yet the U.S. didn’t think twice about becoming socialist. When threatened by the raging fire of COVID-19 almost all lawmakers rushed to extinguish it.

How did this adoption of socialism come about? What exactly made both parties work hand-in-hand to combat the threat? Of course, the COVID-19 virus was a critical factor. But it has also been the realization by many Americans from all walks of life and political persuasions that unless the country can function as a safe social system, the social fabric would tear down. Unless every day Americans can feel safe from the virus when, for example, going out to dine, attending a party, visiting relatives or when they go to work, then many facets of society break down, and the existence of the social system itself becomes threatened. The basis for this has been an implicit understanding and acceptance that socialism is social and capitalism is capital, that caring for others is the basis of society in which a focus on money or capital helps society thrive. 

This renders false the dichotomy between socialism and capitalism that many people, especially on the Hill, like to use. When society – as in socialism – is healthy, so is its capital — as in capitalism. The two are not opposites. In some ways they are complementary. In the right proportion, they can create a more wholesome society than one based only on either of the two. I know. I have lived in a very socialistic country and in a very capitalistic country and found those extremes lacking. 

It is clear that in the U.S. of the past year the proportion included more socialism and less capitalism, as more people and lawmakers realized that by helping their fellow Americans, the would be helping themselves. It’s regrettable that it took a pandemic and associated loss of life and increased misery to teach us this lesson.  

But the critical question is what is the proper proportion of socialism and capitalism for the U.S.? This is open for healthy debate and determination at the voting booths. For example: 

• How much should the U.S. invest in reducing inequality to decrease riots and deep social divisions as well as related threats to individual life and prosperity? 

• How much should banks such as Bank of America and JPMorgan Chase invest in lending to struggling minorities and small businesses – even at some short-term losses – in order for those communities and small businesses to get on their feet and return to the bank later to take loans that would make long-term profits for those banks? 

• How much should landlords help struggling tenants who lost jobs during the pandemic with their rents until they get on their economic feet?

• What should be the roles of the federal and local governments in determining the socialism/capitalism mix? 

Admittedly, the above policies cost a lot of money — money that the U.S. treasury must borrow and pay interest on. The sums are both awesome and scary. But the alternative – sinking lives and continued economic distress – is far worse.

The U.S. experience with extreme measures of socialism in the past year has been largely positive. It saved its economy and arguably many lives. To some extent, such a learning experience is self-reinforcing. Democrats and Republicans practiced socialism and many liked the results. They witnessed that aspects of socialism can benefit society. This amounts to a reset in how socialism is perceived. As a result, it is fair to conclude that the mix of socialism and capitalism governing the American society is being reset. 

Avraham Shama is the former dean of the College of Business at the University of Texas, The Pan-American. He is professor emeritus at the Anderson School of Management at the University of New Mexico.