Socialism has gained ground among democrats at a feverish pitch, and “mere socialism” and “democratic socialism” do not convey the tenor of the movement. The Democratic Socialists of America (DSA) wants not just bigger government: the majority of its governing board would like to completely dismantle our governing institutions and replace them with a communist state. While the DSA is formally independent, it doesn’t field candidates as a party. Instead, it essentially operates as a faction of the Democrats, who have long given cover to the far left. There are still plenty of moderate democrats who see the DSA as anathema and a threat to their electoral hopes.

New Ground On the Right

While the socialists’ ascendance among democrats is getting all the media coverage, a different trend is more remarkable: the outright embrace of socialist policies by an influential wing of the Republican Party. This despite the GOP’s rhetorical tradition as the party of “small government”, which of course it has failed to live up to. Pay no attention to the House resolution condemning socialism “in all its forms”, which was narrowly passed this week. The bill does put opposing representatives on record as having failed to condemn socialism. Otherwise it’s fairly meaningless, especially in the context of “GOP socialism”, which has gone largely unrecognized or willfully ignored by most republicans. In any case, the resolution is more focused on calling for the enactment of the SAVE America Act (Voter ID) than on socialism itself.

The government equity stakes launched by the Trump Administration are but one manifestation of this statist philosophical trap into which republicans began to stumble several years ago: “Common Good Capitalism” (CGC). Vice President Marco Rubio is widely credited with coining the name in a 2019 speech at Catholic University. In policy terms, it overlaps with MAGA dogma in several areas, but not all. Oren Cass, who is the “chief economist” of American Compass (and he is not an economist), was probably most instrumental in the development of CGC. It’s not all socialism, of course. Every ideological offshoot has its nuances. While often cited for its compatibility with religious policy motives, it’s nevertheless a mishmash of populist-nationalist, postliberal “DO SOMETHING” ideas that would grant a far greater role for the state in economic and social affairs. There are variations of CGC: Senator Josh Hawley calls his own version “covenant capitalism”, which suggests an even heavier emphasis on themes of family and faith.

Burned At the Equity Stake

Veronique de Rugy calls out GOP hypocrisy regarding socialism and state ownership of the means of production in a recent article “The GOP Is Warning About Socialism While Quietly Embracing It”. Trump’s aggressive effort to acquire equity stakes is now at 30 companies plus a giant Venezuelan oil development interest held by … the Pentagon? (A defense bill pending in the Senate would authorize the Department of War to take equity stakes in key contractors, but this deal seems to have happened without it.) I’m passionately opposed to all these government equity stakes and a federal sovereign wealth fund. I’ve discussed it on this blog several times (here and here, for example).

De Rugy covers several failings of state ownership in private companies:

• Concentrated power over economic decisions in the hands of shifting partisan interests. Influence here extends well beyond the government’s share of ownership;
• Every government policy tool influences the value of its equity stake, creating conflicts of interest between government, private shareholders, and taxpayers;
• Irresponsible use of public funding in a time of severe fiscal imbalance;
• Inefficient allocation of capital to politically-favored and often boneheaded uses; efficient uses tend not to require public money;
• These firms might well be too state-invested and state-controlled to fail, so taxpayer bailouts become a much greater possibility.

Government equity stakes ultimately provide a subsidy to select firms and penalize others based on political considerations. They offer some of the worst shortfalls of central planning. And if there is spare change rattling around at the Treasury, which is unlikely, it would be better deployed in paying down the existing federal debt. That gets you an immediate and ongoing reduction in now burgeoning interest costs, less rate risk as debt rolls over, and it avoids reliance on the tenuous equity returns on shares of companies subject to heavy government control.

Cloaked Collectivism

Trump’s equity stakes fit seamlessly with the policy agenda of CGC. The following is taken from the web site of the Common Good Capitalism Movement:

“Common Good Capitalism is when in a free market economy individuals and organizations freely choose to give priority to the common good and second priority to profit or mission. They can act alone. Or they can join in an association with competitors to reach agreements to voluntarily raise the level labor, environmental, and social playing field beyond what governments have demanded of them while continuing to compete as a secondary priority.”

That sounds so nice! Be very, very good and generous to everyone, at your owners’ expense, and then join hands with your competitors. Then we’ll either buy-in or simply leave you alone. Sure they will!

The GOP is enamored with the vacuous concept of “common good” for electoral purposes. It’s certainly alluring to populist instincts. Thus, many republicans have come to believe in an array of policies that incorporate practices involving more than a small degree of statism. It’s partly based on the myth of a shrinking middle class and that the affordability of the American dream is out of reach for many Americans.

Pieces of a Platform

So let‘s review a few positions and tenets now associated with CGC. These appear in no particular order, but several are intended by their advocates to encourage American self-sufficiency and national security:

• Industrial policy is promoted by CGC devotees as a tool for achieving the common good. They favor interventions that would favor small businesses, and they believe active industrial policy can promote job growth, national self-reliance, and national security. Equity stakes in private companies fall under this heading, which may include coercive reviews or approvals for certain business activities. Industrial policy is a form of central economic planning, and it often boils down to the picking of winners and losers by the state.
• Protectionism, including tariffs, presumed to encourage reindustrialization and high-wage job growth, self-sufficiency, and national security. This is the wrong approach, and it too is a form of statist central economic planning. Its proponents don’t seem to realize that Trump’s tariffs represent a huge tax increase on consumers as well as firms that rely on imported inputs.
• “Stakeholder capitalism“, they say, is necessary to ensure that businesses weigh not only the interests of their owners, but more importantly their workers and “communities”, broadly defined. No one should expect firms pursuing such ends to maximize value, and buyers should not expect them to produce superior products. Codified stakeholder capitalism would represent an abrogation of the property rights of actual shareholders. The identification of “stakeholders” has no limiting principle, so it’s an open invitation to loot.
• Data center derangement has crept into the talking points made by many republicans and the CGC faithful. This is mostly run-of-the mill anti-development activism, not socialism per se. Plain old NIMBYism can be a visceral response to almost any development, and an honest aesthetic revulsion, but data center developers are more than willing to negotiate compromises that bring massive benefits to communities. Almost everything you hear about the external costs inflicted by data center is fictitious. Should data center opponents prevail in slowing the buildout of information infrastructure, it would be a blow to prospects for U.S. leadership in AI, economic growth, competitiveness, and national security. I think more moderate voices within the CGC movement recognize these dangers.
• Price controls just might be put to broader use in the hope of serving the “common good”: living wage arguments have been welcomed into the CGC intellectual milieu, despite the unproductive and often destructive results of minimum wage legislation. Trump has been railing against the oil companies for supposedly profiting off American consumers. Probably just jawboning, but price ceilings might not be out of the question. Commodity price ceilings seem to be only a mild flirtation of CGC, so let’s hope Trump doesn’t normalize the idea. However, Trump and Josh Hawley have proposed capping credit card interest rates, a sure path to limiting the availability of credit to the most credit-challenged consumers. You can quibble here, but the revocation of pricing authority is every bit as much a taking as a levy on asset values.
• CGC is union-friendly, which is unusual for a movement dominated by republicans. It insists that broad-based collective bargaining will promote more prosperous and stable families. I support the right to collective bargaining for all except public employees, and with the qualification that workers should have complete freedom of representation. However, unions raise business costs and introduce rigidities that ultimately make unionized firms less competitive and less innovative, so the hoped-for stability is likely to be short-lived for many workers.
• Another tenet of CGC is to restrict legal immigration, despite the aging U.S. population, an insolvent pay–as-you-go public retirement system, and birth rates below replacement levels. Imposing sharp limits on immigration is a nationalist position, or even nativist, though some notorious socialists were and are both nativistic and nationalistic. Either way, this is an intrusive, statist position, and it is often xenophobic. But to be clear, I am not arguing for open borders or any form of illegal entry. Rather, I advocate for liberalized legal immigration based on merit.
• To its credit, CGC is more oriented toward “sound money” and an independent Federal Reserve than is the Trump Administration. Trump almost seems to prefer replacing Fed authority with money printing at the whim of the executive, and in support of a far broader economic role for the state.
• CGC calls for restrictions on certain private financial decisions, such as outlawing share buybacks and private equity. This would represent another intrusion into private affairs. This is connected to CGC’s disdain for the “financialization” of the American economy. The ban would come on top of Trump’s 1% tax of share repurchases and prohibition of buybacks by defense contractors. However, there is evidence that legalizing share repurchases tends to stimulate corporate investment by redirecting investor funds from “mature firms” to newer, relatively cash-strapped firms having unfunded growth opportunities. An implication is that prohibiting buybacks is more like shooting yourself in the foot. It would be another coercive intrusion into the private sphere, a “taking” of private decision-making authority and a form of social control.
• The CGC movement would like to use the tax code to achieve social objectives such as family formation. These steps would include higher per-child tax credits, subsidies (family income supports), and private business mandates (e.g., required paid parental leave). I‘m all for family formation, but whether you call this socialist or authoritarian, these incentives should remain private, not subject to the whims of the state.
• Investment incentives: I’m loath to criticize policies that improve investment incentives, such as immediate expensing of investments of physical capital. On the other hand, were it not for the existence of a distortionary tax system that double-taxes corporate income, business tax breaks would be wholly unnecessary. So let’s start with the root problem by reforming business taxation, not doubling down on distortions. Furthermore, the reliance on so-called tax subsidies represents another avenue through which government manipulates the character of economic activity, with impacts that persist for years. Central planning!
• Perceptions of the “national interest” are always in flux, shaped by current politics and those holding power. But among CGC adherents, their view of today’s national interest must always take priority over market efficiency. This is used to justify a wide range of policies: tariffs, equity stakes, manufacturing subsidies, often based on claims that a fictitious “China Shock” has hollowed out American manufacturing. Please… this is a weak excuse for state intervention. And though the argument might not be uniquely inspired by socialism, the “national interest” makes a convenient talking point for any socialist.
• Finally, MAGA and CGC have somewhat divergent views on regulation and intervention. MAGA, despite its embrace of government planning and its apparent rejection of fiscal conservatism, at least continues its efforts to reduce regulatory burdens on the private sector. In some cases, CGC might do that too, but CGC embraces a variety of interventions under a variety of circumstances to change business incentives or safeguard against what they judge to be violations against public welfare. CGC’s approach to managing the business environment might include antitrust actions, efforts to discourage plant or office closures, and restrictions on certain business practices such as H-1B visas and non-compete agreements. This is in addition to items discussed above, like discouraging “financialization”, strict oversight of private equity, enforcing a balanced labor bargaining environment, and fostering representation of stakeholders in corporate decision-making.

But here’s a fundamental truth, courtesy of Don Boudreaux in a 2024 letter to the National Review Institute’s then-President Lindsay Craig, regarding Oren Cass‘ advocacy for CGC:

“… one of the merits of the liberal market order is that it allows each of us to pursue our individual ends absent any need to agree on, or to aim for, anything called the ‘common good.’ …

“… Because of the diversity of individuals’ particular interests, ends, and understandings of ‘the good,’ to impose any specific ‘common good’ goal of the sort that Mr. Cass favors necessarily requires coercing the majority of people to abandon their own ends in order to assist in the pursuit of the particular ends enforced by those who currently hold political power.”

If not socialism, many of the positions listed above are at odds with the ideals of small government, individual liberty, and free market capitalism. But it’s not the least unfair to say many of them veer into socialism. The extent to which the collectivist mindset, often disguised as mere populism, has permeated republican circles is rather astonishing. I should be happy they haven’t proposed anything as socially suicidal as a wealth tax… yet!

Vance and Rubio

In leadership circles, Trump has areas of agreement as well as departures from CGC, but it’s a different story among his most likely successors to the helm of the party and the presidency. Vice President J.D. Vance is an ardent critic of capitalism, and strongly believes that the state must intervene to correct the “failures” of the market economy. I empathize with his outrage over the plant closures and economic decline that have afflicted certain communities. He experienced the effects himself growing up, but his current diagnosis assigns blame to the market order. He does not acknowledge that buyer preferences and high costs made operating those plants unviable in the first place. Market competition can both reward and punish, but it is a process that ultimately improves the general welfare. Government planning is wholly incapable of replacing the market process, and government (and taxpayers) cannot be called upon to preserve former income levels or even a former way of life.

Vance has a beef with the pursuit of measured economic growth. In his view, it comes at the expense of the traditional values he most cherishes. For example, unpaid household work is not counted in official GDP statistics, nor is elder care at home. Therefore, says Vance, the statistics themselves contain a bias against single-income and multi-generational households. Those measurement issues have long been acknowledged by economists, but he goes so far as to suggest that policy should ignore the official statistics. He has slammed holiday shifts for retail workers as exploitive. And he believes that trade deficits represent a threat to the nation (complete nonsense) and strongly supports tariffs on imports of foreign goods.

Marco Rubio is another potential CGC contender for the presidency in 2028, and he’s given credit for bringing CGC into broad discussion within the GOP. His version strikes me as hewing closer to MAGA principles than Vance does. Rubio’s take on GCG is quite focused on national security and Sino-American trade and relations. He is strongly for tight control of immigration. He supports deregulation and free market principles, with qualifications. But he also says free markets must guarantee “dignified work” to all working or job-seeking Americans at decent wages. What exactly does “dignified work” mean? And how does one simply wave away frictions in the job market that will always persist. What does “decent wages” mean? Is Rubio suggesting a mandated living wage?

Rubio statements are riddled with misconceptions about economic and technological issues. For example, his anti-trade arguments are just as moronic as Trump’s; his emphasis on redirecting activity toward production in the “physical economy” is vapid (except perhaps in markets with implications for national security); he supports more industrial policy despite a history of central planning failures; his comparison of stock buybacks to dividend income for shareholders is daft; he holds a childish view of internet development as a social media phenomenon; and far too broadly, he characterizes U.S. innovation as historically driven by defense and public-private partnerships. On the whole, Rubio might seem to have a healthier market orientation than Vance, but he still talks like an interventionist in many respects.

Conclusion

The whole CGC attack on free markets reflects a poor understanding of basic economics. It requires massive value judgements that stand in contrast to the values that emerge from the impersonal, voluntary interactions of many participants in free markets. Just as damning is CGC’s failure to recognize the many opportunities for rent seeking and corruption are enabled by government intervention. But to drive all this home, I’ll close with another quote from Don Boudreaux, which I took from a 2023 post on his blog:

“In reality, the best economic system for promoting the common good is what I, in these discussions, call ‘capitalism unprefixed’ – that is, capitalism as understood and championed by people such as Hayek and Friedman. Not only is there no need for government to interfere with capitalism unprefixed in order to ensure that the common good is served, such interference is far too likely to bestow unearned benefits on politically favored groups, or to satisfy the particular ideological preferences of politically influential intellectuals, all at the larger expense – material and nonmaterial – of the people as a whole.

“If ‘common good capitalism’ means anything other than capitalism unprefixed, its pursuit necessarily requires government to elevate the particular preferences of some individuals over those of other individuals – a move that mocks the meaning of ‘common good’ as understood by true liberals.

“In short, ‘common good capitalism’ implies the ability of ‘common good capitalists’ to determine which particular ends are, and which aren’t, consistent with the common good, and the right of these ‘capitalists’ to commandeer the state to impose their determination on everyone.“