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The off-year elections are over. After winning two key governorships and many other races, Democrats are happier than Republicans. And pundits are ascribing a lot of economic meaning to the outcome. In New York City, Zohran Mamdani, a self-proclaimed “democratic socialist,” will be the new mayor. This led President Donald Trump to say that New Yorkers must “choose between communism and common sense.” That is more nonsense than common sense. Mamdani is no communist, despite what Trump thinks that means. But what then exactly is a “democratic socialist” — a mantle also claimed by this year’s Minneapolis mayoral also-ran Omar Fateh, several members of that city’s city council, along with several U.S. senators and members of Congress? More broadly, what distinguishes a communist from a socialist from a democratic socialist? And with some on the left as willing to sling epithets as some conservatives, are Trump and some of his MAGA followers really “fascists”? There are so many pitfalls in such categorizing that I, myself, in teaching economics and giving public talks since 1981, have always avoided using such terms by themselves. The problem is that they are loaded with unintended implications, which, taken alone, mean so many different things to different people that they are virtually worthless in discussions of institutions and policies in the public square. Others, however, continue to use them. If you wish to understand both uses and pitfalls of categorizing such economic and political “isms,” or ideologies, start with brief definitions: “Communism” is an economic system in which government both owns all productive property and makes all decisions about how resources, including labor, are allocated. Individuals and families may have personal “possessions” but not anything that might be used in a business. Real-world communist regimes often have had a “cult of personality” centered on a general allegiance to a be-all, end-all, know-all charismatic, dictatorial leader like Joseph Stalin, Mao Tse Tung, Fidel Castro or Kim Il Sung, but there are exceptions. Note that “fascist” regimes, such as in Germany, Italy and Spain during World War II, also operated under much the same personality structure. “Capitalism” is an economic system characterized by private ownership of productive or business property. Resources are allocated by free markets in which self-interest fosters competition. Government is limited to defense, public order and administration of a legal system setting minimal rules within which markets in goods and services operate. “Libertarianism” is a political philosophy advocating strict (or extreme) capitalism, with very minimal state intervention in markets or the private lives of citizens, and privatization of common goods regardless of any real economic or market incentive or fairness of allocation. “Socialism” is an economic system in which government owns and operates all important or large-scale industries and infrastructure — “the commanding heights of the economy.” Key resource allocation decisions are made by central planning. Households may have small businesses involving skilled trades or individual shops limited by regulation. “Fascism” is more difficult to define economically but generally means mass political movements that emphasize extreme nationalism, militarism, and the supremacy of the nation over the individual. As with communism, they often involve government ownership of key infrastructure or industry, and regulation of markets, but not as a defining characteristic. Fascist regimes often have had key charismatic and autocratic leaders such as Adolf Hitler, Benito Mussolini or Francisco Franco, as noted above. Which brings us to “democratic socialism,” as espoused by Mamdani, Fateh and others who still identify as Democrats in the general sense if not for politically pragmatic reasons. Here, we have an economic and political philosophy that supports political democracy as practiced in the U.S., and some form of socially owned and oriented resources. Ownership of industry is not important, but having extensive policies to reduce poverty, racial, gender or other discrimination, and to redistribute income from richer to poorer households are. In some cases, government involvement in markets is suggested, such as Mamdani’s proposed city-owned grocery stores that would compete with private ones in selected neighborhoods. Making such definitions and categorizing real world governments and economies is difficult. Many readers will find something lacking in one or the other of the definitions above. Many will find them incorrect in some way, but elaborating creates increasingly numerous exceptions to definitions. Are Social Security, SNAP and Medicare forms of socialism? What about the federal government taking ownership stakes in U.S. Steel and Intel? Is MAGA a cult of personality? And so on. Note that differences inherently appear on more than one axis. How resources are allocated is key, but so is political governance. One school of communist thought argues that cultural and social factors — rather than just control of capital — must be included. Some economists, including myself, who generally favor letting market forces determine resource-use decisions, also think that differences in institutions and culture play roles in determining why some economies meet the needs and wants of their human members more efficiently than others. One can go on in finding such apparent anomalies. These “ism” terms are often used as epithets. Using them frequently clouds rather than clarifies policy discussions. That is why, in teaching and giving talks, I have never used them alone. Using them invites poor argumentation. Someone will argue, “Socialism means A, B, C, D and E. Candidate One advocates B. Therefore that candidate is a socialist and necessarily wants to introduce A, C, D and E. This is the failure that Trump makes in demagoguing Mamdani’s social positions. It gets even worse. Capitalism means A, L, M, N, O and Z. Candidate Two advocates M and N and therefore also wants extreme fringe positions A and Z. No! Money-making private enterprises can, do and should exist with some form of public incentivization. Thinking that government should act to ensure broad access to health care for all does not mean one wants complete abolition of all private practice of medicine. Advocating use of emissions taxes or tradeable permits rather than mandating specific pollution control technologies does not mean that one wants to rape the earth. Establishment of government-fostered systems for health, disability and old age benefits does not mean one wants to abolish private property. Moreover, there are no hard and fast rules linking particular categories of governance to economic systems. Yes, real world communist and fascist regimes had brutal dictators. But Taiwan, Singapore and South Korea had vibrant market economies under one-person rule even though decades passed before they became democracies. Socialist Norway essentially outlawed private medical care. The post-war socialist government of the Netherlands nationalized the “commanding height” of public transportation down to the level of an inter-village transit system owned by the father of a friend of mine, even though it was only seven small buses. Yet no one can argue that either nation was not a democracy. Ditto for socialist Sweden and the United Kingdom under Labour governments that nationalized railroads, steel, mining, shipbuilding and electricity generation without becoming anti-democratic. The military government of Brazil, from 1964-1981, was a brutal dictatorship for many years. It also oversaw an economic miracle expansion in iron ore, steel, petroleum, petrochemicals and hydroelectric power, all under government ownership and stemming from central planning. Yet private-sector auto, truck and tractor manufacturing, housing construction and soybean farming burgeoned. Yes, there was government-directed and subsidized credit for offices and low-income residential construction even as political prisoners were being tortured with repeated rape and with electrical shocks to genitals. The government was military and authoritarian, but there was no cult of personality. Six charisma-free, largely faceless generals succeeded each other quietly with nary one speech to an enthralled crowd. China under Mao was as complete a communist economy and dictatorship as one could imagine. The state controlled all aspects of people’s public and private lives leading to the near complete neutralization of the individual. Now, contemporary China bursts with private, profit-seeking businesses producing on a prodigious scale and developing world-class new technology at a breakneck pace. Yet governance in China remains firmly in the grip of the Chinese Communist Party with even less of a pro-democracy movement than in the early years of Vladimir Putin’s regime in Russia. Many Republicans raged at Franklin Roosevelt’s socialistic ventures like Social Security or hydroelectric dams coupled with government-directed economic development on the Tennessee and Columbia rivers and elsewhere. Legislation establishing the Securities and Exchange Commission to regulate practices in financial markets or the National Labor Relations Act that legitimized the organizing of labor unions were deemed socialistic even as democracy was strong. Many in the Trump administration and some on the Supreme Court now would dial back some government economic roles. Trump Is demanding stakes in private companies like Intel and decreeing all sorts of economic measures. ICE is practicing Soviet-style roundups of immigrants and dissidents. Yet, so far at least, we live in a democracy with a mixed-market economy. Two socio-political thinkers, Max Weber and Frances Fukuyama, both now discredited by many, have authored insights on political and economic issues that may be worth revisiting. But that is the subject of another column. St. Paul economist and writer Edward Lotterman can be reached at stpaul@edlotterman.com.
