“Are you a capitalist or a socialist?”
This question assumes that capitalism and socialism are mutually exclusive. It assumes that we can only choose capitalism OR socialism. Before I challenge this assumption, I want to be clear that this is not a straw-man argument. This question is being asked of many elected American leaders in 2026, and the question is a verbatim quote of Texas Rep. Roger Williams in the House Financial Services Committee in 2019. I just saw it expressed again in a YouTube video entitled “The Simple Question Socialism Couldn’t Answer” posted on August 7, 2026.
The assumption of mutual exclusivity allows public officials to get away with asking a question as misleading as “When did you stop beating your wife?” The assumption itself is an accusation. Public officials get away with this because we rarely examine the meaning of capitalism or socialism, or the possibility that they are mutually beneficial rather than mutually exclusive.
Americans experience a mixture of socialism and capitalism every day as part of our normal lives. Some goods cannot be delivered effectively through the market mechanism such as city streets and sidewalks. So we collect taxes to build and maintain this shared good, rather than charging people for every block that they drive or walk. In the United States, we call these shared goods “public.” The term dates back to our breakaway from Britain: we declared this country a republic, rather than a kingdom. As in ancient Rome, ‘republic’ is a contraction of the term “res publica,” which means that ‘things belong to the people’ rather than the king.
As a republic, we can own things individually or collectively. When it is most efficient, we choose to own them collectively, like city streets.
The recent idea of socialism
The term socialism was only possible after the word ‘society’ was redefined. ‘Society’ used to only mean the wealthy people at court. That old usage still exists in the ‘society pages’ of newspapers that announce million-dollar weddings. By 1805, once the whole people became politically important in the movement towards democracies, the word ‘society’ was re-defined to mean the whole population. Reformers coined the term ‘socialist’ to refer to policies that benefit the whole society.
Furthermore in Europe, the terms ‘public’ and ‘republic’ were not so appealing because the Republic of France attempted to subjugate the continent under Napoleon. When a new order was established by the Congress of Vienna in 1815, many of the restored countries became constitutional monarchies: Spain, Belgium, the Netherlands, Luxembourg, and Denmark. During the 19th century, this shift to constitutional monarchies extended to most of the rest: Britain, Sweden, Austria-Hungary, Italy, and Prussia. So the term ‘republic’ did not express the idea of democratic, answerable government in Europe.
Meanwhile the need to reform capitalism was urgent in the 1830s and 1840s. Early capitalism was totally unregulated, unstable, and brutal. Humans were sold as property. Children were forced to work in dangerous factories and mines. Major financial panics happened every 20 years: 1837, 1853, 1873, 1893. Like steam engines, early capitalism was unstable and explosive.
Calls for reform ranged from regulating the markets (as Adam Smith advocated) to abolishing the market system entirely (as Karl Marx recommended). Abolition of the whole market economy should be called communism. But the idea seemed too threatening, so Lenin used the softer term ‘socialism’ when the Bolsheviks established the USSR in 1917. Calling it the Union of Soviet Socialist Republics was a marketing term (yeah, ironic).
Most socialists wanted to reform capitalism, not abolish it. The Swedish Social Democratic Party transformed that country from a feudal, famine-prone backwater into a very modern society. Starting in the 1890s, Americans also implemented regulation and shared-benefit programs: the FDA, paved streets, universal public education, public health agencies. Private urban railroads became public transit. Private water and sewer companies became public utilities. Americans used the term ‘public’ to refer to our shared-benefit institutions, because of our founding concept of ourselves as a people-governed republic. In Europe those same reforms were called socialist, or specifically ‘democratic socialist’ to differentiate them from the ‘revolutionary socialists’ of the USSR.
Living with confused terminology
Because of our long conflict with the Soviets, Americans conflate the terms ‘socialist’ and ‘communist.’ Many embrace Vladimir Lenin’s misleading claim that the two words mean the same thing. To reduce the confusion a little, we should specify ‘revolutionary socialism’ or just use the term ‘communism’ to refer to the argument for total abolition of property and capitalism. In contrast, we need to specify ‘democratic socialism’ to refer to the policies advocated by Eugene Debs, Hjalmar Branting, Bernie Sanders, and Zohran Mamdani.
Karl Kautsky made this distinction in 1937. Democratic socialism co-exists with capitalism, because you need a market economy to tax, in order to fund public roads, public schools, and public health. In the Wealth of Nations, Adam Smith defined much of capitalism by explaining how a nation could build wealth. Note that Smith was not talking about individuals becoming wealthy: he was talking about whole nations becoming wealthy. It is right there in the title of the book. Smith argued for liberating entrepreneurs and markets from aristocratic control, to enable market competition. Smith also argued for government regulation of markets in order to maintain competitiveness and prevent monopolies. In the early 20th century the U.S. developed agencies and regulations to promote healthy capitalism by breaking up monopolies; preventing new ones by denying too many corporate mergers; by taxing extreme wealth to benefit the whole society; and by regulating food and medicine. From 1947 to 1973, this “welfare-state” system in the U.S. reduced inequality AND grew the national economy at the same time. What Adam Smith called regulation in 1776 would be called socialism in Europe by 1876. And, as Smith argued, regulation keeps a capitalist economy competitive and healthy.
Who benefits from confused terminology?
I am not cherry-picking examples of persistent confusion. On March 3, 2026, the Investopedia website published “Capitalism vs. Socialism: Comparing Economic Systems.” In the section ‘The Emergence and Growth of Socialism’ they describe how Marx and Engels published the Communist Manifesto in 1848. At no point do they explain why it was not called the Socialist Manifesto. They are different words for a reason: calling for reform means not calling for revolution. Calling for fair wages, competition, and schools is entirely different from calling for flipping the whole table and abolishing the entire market system.
Who benefits from perpetuating this confusion? Who benefits from disparaging the word ‘welfare’? Who benefits from lowering the top tax rate from 70% to 35%? Who benefits from lowering capital-gains tax to 15%? Who benefits from conflating the terms socialism and communism?
Are you doing better than your parents? Are you experiencing economic opportunity, or anxious uncertainty? Are you confident that you can afford your mortgage or your rent? Or your child’s college tuition?
For the richest 1% of Americans, the policies of the last 40 years have been great. Dismantling the ‘welfare state’ has been wonderful for them. They were not really suffering when they were paid 40X the salary of their lowest-paid employee, but they love being paid 1000X the lowest salary now, so that they can afford private jets, mansions, and yachts.
The main problem with allowing extreme inequality is that it is harming our whole society. All of us would live healthier lives with less anxiety about living expenses if we designed our economy to benefit the whole. That does not mean abolishing the capitalist part of our economy. In fact it means promoting the health of the capitalist system by preventing its abuses and maintaining competitiveness. Democratic socialism needs the tax-base to keep the roads paved, and keep the lights on.
American socialism also includes our modern military, police, and firefighters. The British used to have private militaries, including the army of the East India Company up to 1858. Police in the U.S. used to be bounty-hunters recapturing escaped slaves. By shifting to public funding, we shifted these agencies to public accountability. Recent attempts to privatize prisons, military logistics, and intelligence analysis have had poor results.
Better understanding leads to better questions
I began with that common but misleading question: “capitalism or socialism?” That question makes it impossible to explain our daily reality: the capitalist delivery truck parked on the public city street. In practice, Americans use socialism literally to support capitalism every day. When we reject the either/or assumption, we can see that America practices a rich mixture of mutually-supportive capitalism and democratic socialism, as do most modern countries across the world.
With this new understanding, several very useful questions arise:
1. How should we use capitalism and socialism to make our economy most healthy?
2. When and how should we shift the mix, or balance, between our capitalism and our socialism?
3. What indicators can we use to tell us when it is time to adjust that mixture?
Two brief examples might help explain these new questions.
Cutting right-wing red tape
Most Americans assume that regulations and red tape were created by the government to hamper economic growth. In the terms I have laid out here, we might assume that only socialists create red tape.
However, zoning was created by lawyers and wealthy landowners to protect their property-values from lower-class people. Zoning was upheld in the Euclid v. Ambler Supreme Court case in 1926, in which apartments were characterized as ‘parasites’ because apartment renters would supposedly leech off the public amenities that only single-family homeowners deserved
To this day, we call this 1920s-era zoning ‘segregated land uses.’ The only reason it was not overturned in the 1950s was because zoning-advocates did not explicitly state that they wanted to keep black people out of white neighborhoods.
Now, zoning is one of the primary red-tape obstacles in our housing crisis. Yes, it keeps property values high; so high that 85% of Californians cannot afford a new home. We need to cut this right-wing red tape. We need to de-segregate land uses and make housing affordable again.
Moving on from pork-barrel defense contractors
A second, totally different example: in 2006 NASA created the Commercial Orbital Transportation Services (COTS) program to lower the costs of supplying the International Space Station. This program was designed to shift the practice from government-run (socialist) launches to privately-run launches. NASA was tired of issuing cost-plus contracts to complacent corporations like Lockheed, Boeing, and Northrop-Grumman. With 50 years of launch experience, NASA believed that the costs and risks of launch could now be modeled, in which case the role of ground-to-orbit launches could now be run by private businesses.
Over the following 20 years, NASA has saved taxpayers billions of dollars by tendering only fixed-price contracts first for cargo, and then for crew launches to the ISS.
Better questions do not always lead to more socialism
In the two examples just given, the benefit comes from shifting away from flawed regulations and complacent monopolist defense contractors towards more competitive, market based delivery of housing and rocketry. If we ask the better question: “When and why should we shift the mix of socialism and capitalism?” the answers can go either way. The point is to figure out which works best, and to review that decision if conditions change.
Furthermore, the question of shared benefit is fundamentally American: this question is based directly on our commitment to being a republic. Should we return to the 70% tax of the richest that existed during the decades when American families could afford their homes? Or perhaps Eisenhower’s 91% top tax rate to pay down excessive national debt in the 1950s? Should we use higher taxes to pay for universal healthcare? Or should we keep letting poor households defer medical care or face medical debt bankruptcy? Should we have competitive aircraft production, or let a complacent Boeing monopoly build planes where the doors blow out?
Capitalism and Socialism
It is time to re-think socialism and capitalism as mutually supportive and mutually beneficial. This might seem like an odd line of thinking, but it helps explain our daily reality. It does not offer rigid answers. Instead, it offers useful questions about how we should govern our shared republic to benefit our whole society. If someone asks “Capitalist or Socialist?” we can cheerfully answer: “Yes! Both!”