Why Business Leaders Should Take Seriously the Marxist Threat

Mark Skousen, American Economist and Writer

“The philosophers have only interpreted the world in various ways. The point, however, is to change it.” – Karl Marx

Survey shows that young people are increasingly anti-business and attracted to “democratic socialism” and even radical Marxism. Note the rise in politicians who call themselves “socialists,” including Senator Bernie Sanders, Congresswoman Alexandria Ocacio-Cortez, and probably the next mayor of New York, Zohran Mamdani.

Granted, none of them advocate for the old extreme policies of nationalization and abolition of private property. Instead, they advocate for “socialist lite” , i.e. free education, socialized medicine, subsidized transportation, wage and rent controls, trade protectionism, aggressive regulations of business and the environment, mandatory diversity programs, and progressive taxation on the rich to pay for it all. In short: big intrusive government.

So who are the people attracted to socialism and its most advanced ideology, Marxism? It is a growing group of individuals disenfranchised by market capitalism: workers who have been laid off, minorities who have been discriminated against or treated unfairly by an overweening boss, poor and middle class workers who feel trapped by the rising cost of living, privileged youth who are fed up with the “system” and feel guilty being part of the leisurely class, college students who are brainwashed into thinking that economic growth leads to growing poverty and degradation of the environment; and most dangerously, periods of financial crises and deep recessions that leave companies bankrupt and workers unemployed.

Socialists are especially attracted to Karl Marx (1818-1883), the German philosophy and the most vociferous critic of capitalism. Marxists are prominent on college campuses, and have dominated departments in history, political science, sociology, anthropology, English literature, and even business and economics.

What can business leaders do to counter this pro-Marxist and anti-commerce attitude?

First, it needs to educate its employees and future employees (currently in colleges and universities), revealing the defects in socialist policies and the benefits of free enterprise, dispelling the myths about capitalism, and then offer a better alternative to democratic socialism, that is, a successful business that gives all employees a better life.

The Fundamental Problem of Socialism

One place to start is by explaining why socialist societies inevitably fail. Defenders argue that the Soviet Union, Cuba, and Venezuela failed because they didn’t pursue the right kind of socialism; however, the real problem with full-blown or even partial socialism is that they lack incentives to perform well, due to high taxes and stifling commercial regulations. Even Sweden, often referred to as the poster child of a good socialist country, had to back away from its bloated government in the early 1990s, and has partially privatized its Social Security system, adopted school choice, and lowered taxes. It is now ranked #12 in the world in the Economic Freedom Index.

Is Capitalism Any Better?

What complaints do Marxists and other critics make about market capitalism? They include: (1) growing income inequality, (2) damage to the environment, and (3) its alleged crisis-prone instability that can’t guarantee a decent job, wage or living conditions.

It is true that capitalism inherently rewards people who are better educated, work harder and are more entrepreneurial. Yet, the American dream is still alive if individuals seek a better education and take responsibility for their own actions. Unfortunately, welfare programs and other government policies often hinder the poor and minorities from advancing in society.

From the production side, capitalism has created greater quantity, quality and variety of goods and services over time compared to socialist economies which often lack the incentive to create new products. “Cheaper and better” should be the motto of all capitalists. The fact that everyone - rich or poor - has a smart phone today supports Andrew Carnegie’s statement that “Capitalism is about turning luxuries into necessities.” If you give people more freedom, their fortunes and economies will grow, and poverty will decline. As John Mackey, co-founder of Whole Foods Market, states, “Free enterprise capitalism has demonstrably lifted more people out of poverty than any other economic system.” And it has largely done so by improving the condition of all classes, both rich and poor.

Regarding the environment, the Economic Freedom Index demonstrates that more advanced capitalist economies suffer from less pollution and environmental damage than socialist countries.

Finally, it is true that capitalist nations have produced a boom-bust cycle and financial crises from time to time, but most of the ups and downs of the global economy are due to government mismanagement and unstable monetary policies between tight and easy money. If government can maintain a stable, non-inflationary policy, and live within its means, the economy is likely to grow steadily.

What Can Businesses Do to Counter the Marxist Doctrines and Socialist Agenda?

How do you get rid of a bad idea? With a better idea!

What is better than democratic socialism? Democratic capitalism! By that, I mean the “win, win, win” formula of the stakeholder philosophy as advocated by John Mackey and his “Conscious Capitalism” model. Under this model, all stakeholders win – customers, employees, executives, investors, suppliers, and the community.

One way to benefit workers and reduce their revolutionary zeal to overthrow capitalism, is to engage in profit-sharing plans and stock option programs. Henry Ford was the first to counter the Marxist argument that under capitalism, workers are exploited and alienated. In 1914, he announced a profit-sharing plan with his workers, more than doubling their income overnight. Workers could now afford to buy a Model T Ford for the first time. It made headlines around the globe. The Ford $5-a-day story has done much to repudiate Marxism in the United States.

Another way is to build up cash reserves and retained earnings so that when the tough times come and the firm is forced to lay off workers, company officials can offer generous severance packages and help them find other work.

It was Peter Drucker, the world’s #1 management guru in the 20th century, who argued that the large corporation is the “ideal social institution” in providing gainful employment, retirement, healthcare, and other benefits, far better than government, churches or non-profits can provide.

MIT managerial economist Shlomo Maital summarized it best when he wrote, “The health and wealth of a large number of individual businesses - small, medium and large - determine the economic health and wealth of a nation. When they succeed, managers create wealth, income and jobs for large numbers of people. When they fail, working people and their families suffer.”

Despite the lure of socialism, the verdict is in: Democratic socialism is all about sharing the poverty while democratic capitalism is about sharing the wealth. So which would you prefer?