Social Question

Strauss's avatar

Can there be a situation where over-regulation of a free capitalist economy lead to economic socialism?

Asked by Strauss (20539points) April 29th, 2010

With the recent economic downturn, there has been a lot of talk in the media about Glass-Steagall Act and the effect of its repeal in 1999. What happens if capitalism is unregulated? Can over-regulation change a capitalist economy to a socialist economy?
To disambiguate, I am asking this question concerning economies, or economic systems rather than political systems or forms of government.

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23 Answers

marinelife's avatar

I think that the amount of regulation necessary would be unlikely.

Also, it would have to actively take wealth and redistribute it, which goes beyond any contemplated regulation.

CMaz's avatar

The price we have to pay in an over populated world.

gorillapaws's avatar

Yes, if that regulation happens to be seizing full ownership of the major US companies. Short of this, it’s just policing the financial markets just like we do with the meat packers or the lead paint guys, or the asbestos insulation people. Completely unregulated markets quickly degenerate into things that are bad for everyone except for a very small handful.

wonderingwhy's avatar

No regulation will probably generate monopolies. Regulation to the point of making it socialist, no, because at the point it becomes socialist it’s no longer capitalist, though you could certainly overweight the balance from one side to the other.

tedd's avatar

Regulation is unrelated to socialism.

Socialism is where the government takes control of the private market and is essentially “everyones boss.” Its purist form is communism, of which really the only pure communist state still in existence is North Korea.

The negative effect that too much regulation CAN have, is to hinder the market and its growth.

But the Glass- Steagle act is widely believed to be a good thing.

the100thmonkey's avatar

Strictly speaking, there is no such thing as a “socialist” economy.

cazzie's avatar

Regulation is NOT unrelated to socialism. Regulation is a shade of socialism. It’s a measure the government takes to ensure the wellbeing of the entire population.

When a government regulates, it doesn’t take over an entire industry, it just acts as a watchdog. The US has versions of this already, but they’re too ignored and small in many cases and then the capitalists rape and run. (any one listening to the Goldman Saks Senate Hearing?)

Your question can NOT be asked and have economy and government mutually exclusive. That is exactly what socialism IS, is when the government itself gets involved in regulating and running, by way of SOE’s (state owned enterprises), businesses and influencing economic markets in that way.

mattbrowne's avatar

The regulation would have to be at least 100 times stricter including the denial of the right to own factories and farms and the denial to pay a doctor more than a janitor. This is what happened in East Germany and it’s socialism.

A social market economy isn’t.

In fact, I would argue that poorly regulated financial markets (as we’ve seen before the current crisis) for the most part a special form of economic socialism: keeping the profits yet socializing the risk. Which is exactly what happened. The taxpayer was asked to help the casino on Wall Street because the alternative would have been even worse.

cazzie's avatar

What happened in East Germany was it became part of the Soviet Block and it was a communist state.

Strauss's avatar

@cazzie Wasn’t that socialism? (small “s”).

cazzie's avatar

No, it was communism. Nobody got to vote on it.

Strauss's avatar

I believe if we talk about the ability to vote on it we’re getting away from the economics and into the politics. I think Communism (with a capital “C”) would refer to the political system and socialism (small “s”) to the economic system, to the extent that they can be differentiated.

gorillapaws's avatar

I thought under socialism doctors make more than janitors but they are both government employees. And also that you can have private business too: restaurants, bookstores, art galleries etc. (just not major industries).

And then in communism, everyone makes the same thing.

cazzie's avatar

East Germany was an extension of the Stalinist principals from the USSR. They used their power after the war to meld together, of all things, the two political parties that were seen as least responsible for the war, the Communist party and the Democratic party. Odd bedfellows, no? But there you go. It’s sovereignty was questionable through out it’s existence and it’s collapse in 89 was mostly blamed on the fact that the USSR was simply draining it’s resources to it’s own ends. It was Communist in political and economic structure.

Oh, regarding that ‘draining resources’ bit… it was justified by the USSR saying it was ‘war reparation’, of course.

mattbrowne's avatar

East Germany was ruled by the Socialist Unity Party (abbr. SED). They used the term socialism more often than communism. Here’s a good link

“Socialism and communism are ideological doctrines that have many similarities as well as many differences. It is difficult to discern the true differences between socialism and communism, as various societies have tried different types of both systems in myriad forms, and many ideologues with different agendas have defined both systems in biased terms. Some general points distinguishing the two concepts, however, can still be identified.

One point that is frequently raised to distinguish socialism from communism is that socialism generally refers to an economic system, while communism generally refers to both an economic and a political system. As an economic system, socialism seeks to manage the economy through deliberate and collective social control. Communism, however, seeks to manage both the economy and the society by ensuring that property is owned collectively, and that control over the distribution of property is centralized in order to achieve both classlessness and statelessness.”

cazzie's avatar

@mattbrowne They used the term, but they also called themselves the ‘DEMOCRATIC Republic’.... it was a ruse. East Germany was a puppet of the Soviet system. It was Communism, of the worst sort, because they were being stripped of resources under the guise of War Reparations. They were not autonomous and hardly even a State of their own.

Your wisegeek link is very good, though. But East Germany was still not socialist.

cazzie's avatar

Oh, hey… even Wiki agrees with me… I just look it up… here…
The German Democratic Republic – GDR (Deutsche Demokratische Republik or DDR in German, informally called East Germany by the West) was the communist state established in 1949.

mattbrowne's avatar

@cazzie – Yes, the East German party preferring the term socialism does not mean the country wasn’t communist. It was, although not of the worst sort. There was no Stalin. They abolished the death penalty. There was psychological torture, but no physical torture in their prisons. The GDR achieved the highest gross domestic product per capita in all communist countries during the cold war. And despite the fact that the Soviets stripped everything. The East Germans established a very sophisticated black market and barter trade.

It was very bad, but I don’t agree with your assessment “of the worst sort”.

cazzie's avatar

No.. I didn’t mean that the East Germans were responsible for the type of communism that ran their country. Quite the opposite. You’re German, aren’t you? Yeah,, I think I just got that.

What I meant was that they were held to and controlled by the USSR a great deal, and that was sad, because their own leadership seemed to have quite progressive ideas and forged partnerships with industry that would have seen the country thrive, as their Western counterpart did. And how AWFUL it must have been, for Western Germans see fellow countryman taken and used like that. How many people were taken to serve in USSR? So much of their factory equipment and infrastructure were dismantled and moved to Russia as well.
I mean no disrespect. You live there. I’m sure you had history class, right?

mattbrowne's avatar

@cazzie – Well, certain East Germans were responsible, but the communists were a minority. The Soviets put them in charge. In 1953 the people started a rebellion and it was crushed. Yes, I’m a West German born in 1962. I made one trip to East Berlin in 1980 nine years before the Wall came down and I also met East Germans in 1986 in Hungary, a country they were allowed to visit. They felt confident that I wasn’t Stasi and told me that the majority of East Germans thought communism was nonsense but they had to play along if they didn’t want to get in serious trouble. But then then came Gorbachev.

I was a graduate student in the US when the Wall came down. I watched in on CNN.

Ron_C's avatar

@cazzie you should be careful when you call government cooperation with industry progressive because that is exactly how fascism works. Mussolini appointed in heads of the largest companies in the provinces to lead those provinces. The trains ran on time but Mussolini was killed in the streets by the people he oppressed.

As to regulation leading to socialism, I very much doubt that. We have proof that the lack of regulation leads to run-a-way capitalism. It isn’t the benign capitalism of finding out what your neighbors want and selling it to them. It is the capitalism of hostile takeovers, massive accumulations of wealth at the expense of the middle class that created it, and of the idea that privatizing the commons is good for the country. What could be more harmful and immoral than health care for profit or private prisons to house the unjustly accused or people forced into crime.

We are losing our democracy at an alarming rate and we have right-wing leadership that is cheering the loss of freedom, privacy, and wealth.

the100thmonkey's avatar

@Ron_C – the working class creates the wealth. The middle class manages it.

Ron_C's avatar

@the100thmonkey where I come from, the middle class are the working class. Middle class can be a CNC machine operator or a Family Practice doctor or physician’s assistant.

Now we also have working poor, the people that work in Walmart and McDonald’s for example.

Both my boss and I are in the middle class because there is a pretty wide range between a beginning living wage and the beginning of the wealthy class.

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