Government and Money

Yesterday we discussed the Preamble of the Constitution, which clearly states that the purpose of government is, among other things, to “promote the general welfare.” We concluded that the United States of America is a democracy, a form of government in which the country is run by freely elected representatives of the people.

The opposite of a democracy is an oligarchy, a system of government in which a few wealthy people hold power over the larger group.

It’s important to distinguish between our form of government and our economic system. In the United States, our economic system is capitalism, defined as follows by Dictionary.com:

an economic system in which investment in and ownership of the means of production, distribution, and exchange of wealth is made and maintained chiefly by private individuals or corporations, esp. as contrasted to cooperatively or state-owned means of wealth.

The polar opposite of capitalism is socialism, defined as follows:

a theory or system of social organization that advocates the vesting of the ownership and control of the means of production and distribution, of capital, land, etc., in the community as a whole.

Although these are distinctly different concepts, they are intimately entwined: to function properly—and to “promote the general welfare”—a government must spend money—a lot of money. Exactly how much it should spend and for what purposes are issues that are at the heart of the debates between the two major parties in the United States.

It is not the purpose of capitalism to promote the general welfare—and it doesn’t. Capitalism is designed to enrich those who invest in it. Pure socialism doesn’t work either as a means of promoting the general good, as is evident from the most cursory look at the history of China or the Soviet Union. Regardless of how it’s acquired or distributed, money is a tool used by those in power to implement their goals and strategies. Deciding what those goals and strategies should be—that’s the job of government.

Clearly, there’s no such thing as a “pure” democracy; in a great society, there will always be a few who clearly have a great deal more power than most. Likewise, those who have attempted to set up pure oligarchies have virtually always been defeated by revolution—the historical means of returning power to the people.

Clearly, there’s no such thing “pure” capitalism; to sustain any kind of government, the state must have some control over money. Nor can there be a viable system of pure socialism, which fails to distinguish between users and producers. Somehow, the system must allow for greater rewards to those who work the hardest.

Politically, what we have in America is an inspired system of compromise between democracy and oligarchy: a few people are a lot more powerful than most of us and can make decisions the impact the whole country—but we get to decide who they are.

Economically, what we have in America is an evolutionary compromise between capitalism and socialism: companies and businesses are privately owned, but the government has control of a lot of the money, which it spends, among other things, to “promote the general welfare.”

So as we go forward in our debates about government and the economy, let’s be clear about our terminology. “Democracy” and “capitalism” are not the same thing; “socialism” is not the opposite of democracy but rather the opposite of “capitalism.” When we elect representatives in government, we aren’t electing “capitalists” or “socialists”; rather, we’re electing men and women who we hope will have the knowledge, wisdom, and experience to find compromises that will “promote the general welfare.”

And as members of a democratic society, we should expect them to be transparent about what they are doing and why.