Wednesday, August 22, 2018

Socialism is as socialism does

A new Gallup poll found that a majority of Democrats have a positive attitude towards socialism. This recent trend probably appeared on your radar during Bernie Sanders’ presidential run or in the wake of Alexandria Ocasio-Cortez’s primary win. Both identify as democratic socialists. The term “democratic socialism” is confusing because it’s used in (at least) two different and incompatible ways.

1) It’s a system where (a) state officials centrally plan and control how the means of production are allocated among alternative uses and production processes, and (b) the state also preserves liberal democratic freedoms. The first part (a) is what makes “democratic socialism” a kind of socialism. In market societies, the means of production are allocated by private owners responding to competitive market prices, which function as indicators of relative scarcity. But socialists don’t like markets. More specifically, they don’t like the alienation and exploitation that they think markets promote, especially in the labor market. That’s why they thought that doing (a) would promote (b).

But socialists also think markets promote economic waste. They think that using central planners — perhaps held accountable to some form of democratic decision-making — to allocate resources will out-perform a competitive system of profit and loss where private owners allocate resources in response to price signals. (By the way, a great work of historical fiction that illustrates this idea in the context of the former Soviet Union is Red Plenty, by Francis Spufford.) Collective ownership and control over the means of production, therefore, is supposed to be, according to socialists, both morally and economically better than private ownership and control over the means of production.

The problem is that countries where modes of social organization based on collective ownership and control have been attempted have done quite badly — both in terms of economic consequences and in terms of liberal democratic freedoms. I have in mind countries like the former Soviet Union (and satellites), China (especially during the Great Leap Forward), Vietnam and Cambodia (before, at least, the mid/late 80s), Laos (before, at least, the early 90s). Today, the economies of Cuba, North Korea and Venezuela are mostly state run. China still has lots of state control, but the activity in “special economic zones” is responsible for the highest percentage of its GDP.

There’s a kind of technical argument in economics for why centrally planned economies do so badly. For now I’ll just say that, as much as we know anything in the social sciences, we know that markets allocate resources better, more efficiently and in ways that promote people’s welfare better.

But it also turned out that these countries have done very poorly in terms of securing liberal democratic freedoms. States that secured and maintained control over the means of production found that, in order to do this, they needed to use lots of coercion and found themselves regularly interfering with liberal freedoms (like religion, speech and movement).

2) Alternatively, “democratic socialism” is a system where there are robust private ownership rights in the means of production, which are allocated among alternative uses according to a competitive price system, but there is also a robust system of redistribution of benefits to address the needs of those less well-off in society. In these countries, the state taxes its citizens and corporations, perhaps quite a lot, in order to provide these welfare benefits, and also targets interventions to protect the vulnerable. But, for the most part, the competitive price system, based on private ownership and control, rather than the collective or the state, determines how the means of production are allocated.

I think that this is probably what most people mean by “democratic socialism” these days, though they tend to under-appreciate how market-oriented social democratic countries are. These countries have lots of market interventions, but their markets aren’t planned centrally. Private individuals, rather than the state, own the means of production. A decentralized price system determines how owners will allocate them among competing investment projects. For the most part, profits and losses are left to impersonal market forces.

Countries that are “democratic socialist” in this sense have done quite well! I’m thinking of the Scandinavian countries (Sweden, Denmark and Finland), and countries like Germany, the UK, Ireland, Canada, Australia and New Zealand. But, in the economic sense, these countries don’t have socialist systems. All of these countries do at least as well, or better, protecting market liberties as the US does on every country ranking I’ve seen (here’s one that’s very transparent about its methodology). Their governments intervene in the economy to redistribute economic benefits, but not in ways that seriously impede the functioning of the price system. Call these countries what they are: not any kind of socialism; rather, more-or-less-regulated capitalism with generous welfare systems. I understand that doesn’t roll off the tongue in the nice way “democratic socialism” does. But at least it’s accurate. How about “welfare-state capitalism” or “property-owning democracy”?

Because, I don’t understand the sense in which these countries are supposed to be socialist when the state doesn’t plan the economy. People on the left seem to like the label because they still identify ideologically with socialism’s lofty ideals (many of them, somehow, while non-ironically wearing Che t-shirts!). They give mere lip service to socialism. Meanwhile, people on the right are generally happy to paint their political opponents with the label because they want to tarnish them with the terrible history of socialist economies and their ideology tends to make them confuse cases where the state intervenes in a genuine market with cases where state decision-making substitutes for a market. But they can’t have it both ways.



Kyle Swan
Department of Philosophy
Sacramento State