Who’s Afraid of a Little Socialism?
- From Warren to Sanders to the millennials, socialism is popular
- If the Nordic countries are the model, would that be so bad?
- Or would the outcome be more like nonstop-crisis Argentina?
- A volatile state of play 355 days before Election Day 2020
- The No. 1 money move to prepare for the 2020 vote.
“President Warren? Bwa-ha-ha-ha-ha-ha-ha!” a reader writes after we spun our “Civil War 2023” scenario on Tuesday, with a hypothetical future president.
“Why,” asks another, “did you pick Elizabeth Warren?”
Because why not? She’s among the Democrats’ front-runners.
On foreign policy, she’s mostly been a blank slate. So it’s not hard to imagine she’d surround herself with elite advisers who’d lead her down the primrose path into another overseas quagmire war — inadvertently setting off armed conflict at home per our scenario.
And on domestic policy, she seems like the candidate — at this moment, anyway — who does the most to scare the bejeebers out of folks worried about the onset of socialism. So in that regard we were being deliberately provocative. (Made you write in, didn’t it?)
As if to affirm the reasons we chose her for our thought experiment, we see this morning she’s buying commercial time on CNBC to bash billionaires…
For the record, Warren doesn’t like the socialist label. "I believe in markets. Markets that work," she told CBS News earlier this year. Then again, if the shoe fits…
We hate getting political here in The 5, but sometimes we’re pulled into the muck anyway.
One day in 2011, when a reader urged us to eschew politics and stick to “coldhearted financial research,” our fearless leader Addison Wiggin replied, “Politics are the problem, and you ignore them at your peril.”
Warren, of course, is hardly a shoo-in for the Democrats’ nomination. The state of play looks, in fact, extremely volatile. The Democrat donor class that rigged the process for Hillary Clinton and against Bernie Sanders in 2016 is getting nervous about 2020 — if not outright panicked.
Why else would “centrist” figures like former New York Mayor Michael Bloomberg and former Massachusetts Gov. Deval Patrick be looking to enter the race at this late stage?
Probably because all the current favorites of the Dem establishment have issues. Joe Biden is looking senescent. Kamala Harris flamed out early. Pete Buttigieg is mayor of a city where the police force’s relationship with people of color is so bad he might be less popular with black voters than Donald Trump.
[Your editor ran a TV newsroom in South Bend 20-odd years ago when Buttigieg was still a teenager. I’m not surprised.]
Meanwhile, socialism is looking more and more popular.
Not only is Warren’s candidacy catching fire, but Sanders is still hanging tough. In the U.S. House, a freshman cohort of avowed socialists — “the Squad,” as they’re known — is informally led by Rep. Alexandria Ocasio-Cortez (D-New York).
Elsewhere, you might have seen the headline a couple weeks ago about a poll showing 70% of millennials willing to vote for a socialist.
What you didn’t see is this: Demographers say 2019 is the year millennials will surpass boomers as the largest living adult generation!
One problem with the term “socialism” these days is that it means whatever the person using it wants it to mean.
We don’t see anyone using it in the classic sense of the term — state ownership of the means of production. Not even self-described socialist Bernie Sanders proposes nationalizing whole industries — as happened in, say, Great Britain just after World War II.
So the people who use the term favorably usually mean a European welfare-state system of free or heavily subsidized health care, higher education and so on.
Given the disaster of crony-capitalist health care and higher ed in this country, with high and rising costs that far outstrip the overall inflation rate, it’s little wonder this brand of “socialism” is catching on, especially with young adults.
The most vocal self-described “democratic socialists” point to the Nordic countries as a model to follow. If only we Americans were so lucky!
“I think that countries like Denmark and Sweden do very well,” Sanders told an audience in Iowa this spring.
Over the summer, a JPMorgan Chase analyst named Michael Cembalest took a deep dive into the policies and economic performance of Sweden, Norway, Denmark and Finland. Just for kicks, he threw in the Netherlands, too. He analyzed data from the World Bank, the Organization for Economic Cooperation and Development and other groups.
Cembalest concluded that relative to the United States, those five governments have stronger protections of property rights and exert less control over private enterprise.
“While Nordic countries have higher taxes and greater redistribution of wealth, Nordics are just as business-friendly as the U.S. if not more so,” he wrote. “Examples include greater business freedoms, freer trade, more oligopolies and less of an impact on competition from state control over the economy.”
For the heck of it, your editor examined all those countries on the World Bank’s rankings of how easy it is to start a business — because as we’ve said for years, it’s new businesses that are the key to job creation.
The United States ranks a pitiful 55th among the countries of the world. All five of the countries Cembalest studied rank higher. (New Zealand is No. 1.)
“Sweden in fact is pretty much as ‘capitalistic’ as is the United States,” economist Deirdre McCloskey wrote this year in National Review.
“In many fields,” a Swedish diplomat told her, “we have more private ownership compared to other European countries and to America. About 80% of all new schools are privately run, as are the railroads and the subway system.”
Nor is there a bailout culture, McCloskey pointed out: “When Saab Autos began its descent into bankruptcy, no Swede suggested that the government give the company billions on the security of its worthless stock. When Volvo became a Chinese company, no Swede objected. Compare the determination of the Bush and Obama administrations in proudly capitalist America to socialize General Motors and Chrysler — Chrysler for the second time.”
In fact, some of Warren’s and Sanders’ most radical proposals look nothing like the Nordic countries.
For instance, Warren’s proposal to impose a 2% tax on anyone’s net worth over $50 million?
“The Nordic countries tried direct wealth taxes,” wrote Charles Lane in The Washington Post this summer; “all but Norway abandoned them because of widespread implementation problems.”
Meanwhile, “The Nordic countries’ use of co-pays and deductibles in health care may be especially eye-opening to anyone considering Sanders’s Medicare-for-all plan… His plan offers an all-encompassing, government-funded zero-co-pay, zero-deductible suite of benefits, from dental checkups to major surgery — which no Nordic nation provides.”
So here’s our biggest fear: The American-style “socialists” will get their way, and we’ll end up with the worst of all worlds.
We’ll have the Nordics’ high taxes and wealth redistribution piled on top of America’s red tape and increasingly sketchy private-property protections.
What country might that look like? Cembalest went back to the data. He looked for a toxic stew of high tax rates, high government spending, heavy hiring-and-firing regulations, routine state interventions in markets and limits on capital inflows and outflows.
“I couldn’t find any country that ticked all these democratic socialist boxes, but I did find one that came close: Argentina… which has seen the largest relative standard of living decline in the world since 1900 and which is on the brink of political and economic chaos again in 2019.”
It’s more than the “brink” since Cembalest’s report: Hours after a new left-leaning president was elected last month, “the central bank imposed significantly stricter controls on the purchase of U.S. dollars,” said a dispatch by Al-Jazeera.
“As of Monday [Oct. 28], a maximum of $200 a month could be purchased via a bank account, or $100 in cash. That is down from the previously imposed limit of $10,000.
“The bank said the measures were an attempt to preserve the country's reserves, which have been depleting as it shores up the value of the Argentine peso.”
Yikes. Feels like the lead-up to another corralito — an infamous episode in 2001 when bank accounts were frozen and the peso devalued 75% against the dollar.
Then again, maybe 2020 won’t be the year of the socialist after all. But that doesn’t exactly give us the warm fuzzies.
It’s our long-standing policy to put no faith in politicians — and we make no exception for Donald Trump. The office of the president is too powerful — far more powerful than the Constitution laid out — for anyone to be trusted with the job.
We get the willies at the thought of all the possible outcomes — whether it’s another term for Trump… or a corporate Democrat with the banksters’ seal of approval… or a full-on socialist.
Then there’s the possibility of a third-party candidacy that catches on… and if it does, it will almost surely be denounced by the Establishment as the work of “the Russians” busily “sowing discord.”
Or what about an election that’s still contested after Election Day?
We’re already living in a time where political “legitimacy” is a contested thing in Washington.
Rolling Stone writer Matt Taibbi has covered third-world coups in his day. “They’re insane, random and terrifying, like watching sports, except your political future depends on the score.
“The kickoff begins when a key official decides to buck the executive. From that moment, government becomes a high-speed head-counting exercise. Who’s got the power plant, the airport, the police in the capital? How many department chiefs are answering their phones? Who’s writing tonight’s newscast?”
Between Team Trump and his deep state opponents, “we are speeding toward a situation when someone in one of these camps refuses to obey a major decree, arrest order or court decision, at which point Americans will get to experience the joys of their political futures being decided by phone calls to generals and police chiefs.”
Throw in the possibility of a contested election result, and who knows?
None of the election outcomes we’ve described is guaranteed. How can you possibly prepare your portfolio for all of these possibilities?
That’s the topic of a special event we’ve planned for you coming up next week. It’s called “2020 Survival Summit: The No. 1 Money Move to Prepare for the 2020 Elections.”
It’s set for next Tuesday, Nov. 19, at 7:00 p.m. EST.
We’ve been teasing this event for several days now. Today, you finally have a chance to sign up. Access is completely FREE.
The aforementioned Addison Wiggin, executive publisher here at Agora Financial, is taking part. So is Agora founder Bill Bonner.
As you might know, Bill and Addison co-authored the New York Times business best-sellers Financial Reckoning Day and Empire of Debt… but that’s more than a decade in the past. A new “collaboration” is a rare and special thing.
Today we can also pull back the curtain on our other guests — two more Agora Financial luminaries.
One of them is our macro maven Jim Rickards, author of a blockbuster quartet of books since 2011. I think the first two, Currency Wars and The Death of Money, were truly groundbreaking. They foreshadowed events that are now unfolding before our eyes.
Finally, we’ve lined up Rich Dad Poor Dad sensation Robert Kiyosaki. Mr. Kiyosaki achieved immense wealth as an investor and entrepreneur by defying the financial establishment’s conventional wisdom… and in some two dozen books he’s offered a road map to millions looking to do the same.
Your host for this event is Peter Coyne, publisher of our Paradigm Press unit (and the fellow who recruited Jim and Robert to our ranks).
Again, it’s all set for next Tuesday, Nov. 19, at 7:00 p.m. EST. If you do nothing else moneywise before the end of this year, I urge you to watch this one-of-a-kind briefing.
The 5 Min. Forecast
P.S. Whelp, we’ve done our second single-topic episode of The 5 this week. But as was the case Tuesday, there’s nothing going on in the economy or the markets today that can’t wait till tomorrow.
P.P.S. An unsettling thought about that poll showing 7 in 10 millennials willing to vote for a socialist.
From a summary at The Hill: “The survey found that millennials do not have as many negative connotations about socialism and communism as older generations who lived through the Cold War.”
Which makes sense, I suppose. But it’s concerning, no?
Again, no guarantees of a socialist victory on Nov. 3, 2020. But it’s not too soon to start thinking about the possibility — and taking steps to prepare.
No matter the outcome and no matter where you stand, you need to see our special “2020 Survival Summit: The No. 1 Money Move to Prepare for the 2020 Elections.”
It’s only five days away now — next Tuesday at 7:00 p.m. EST. Access is completely free, and there’s no obligation. Sign up at this link and you’re in.