Is Democratic Socialism Better than other Types of Socialism? July 13, 2019 by Dan Mitchell

I’ve repeatedly warned about the downsides of socialism, calling it “evil and stupid,” as well as a “dreary failure.”

Though these debates can be frustrating because of vague definitions.

Some people, when they talk about socialism, are referring to government ownership, central planning, and price controls.

Others, by contrast, are referring to Scandinavia’s market-based welfare states.

And there’s also a distinction to be madebetween Marxist socialism and less totalitarian versions.

Speaking of which Joseph Stiglitz opined in the Washington Post about the benefits of so-called democratic socialism.

…no one in the United States is advocating a government takeover of coal mines or oil fields — not Ocasio-Cortez, not Sanders, not anybody. …the extremes of capitalism and its dysfunction have given rise to questions such as: Can capitalism be saved from itself? …American democratic socialists — or call them what you will — is simply advocating a model that embraces government’s important role in social protection and inclusion, environmental protection, and public investment in infrastructure, technology and education. They recognize the public’s regulatory role in preventing corporations from exploiting customers or workers… Millennials respond to the label “democratic socialist” in a pragmatic way. They say, if it means ensuring a decent life for all Americans, then we’re for it. …many of these ideas have the support of a majority of Americans, especially the young.

I don’t doubt that many people respond favorably to polling questions about getting things for free.

Even the young. Maybe especially the young.

Indeed, the desire to get something for nothing is the Achilles Heel of democracy.

But does any of that mean socialism works?

Professor Ilya Somin of George Mason Law School is appropriately skeptical.

He explains why socialism imposed by a democratically elected government won’t be any more successful than the totalitarian forms of socialism.

Historically, socialism—defined as government control over all or most of the economy—has led to mass murder, poverty, and oppression on an enormous scale. …The current horrible oppression in Venezuela…is just the latest iteration of the same pattern. …current advocates of democratic socialism argue that this awful record isn’t relevant to their proposals. …we are assured that latter-day socialists don’t actually mean to impose government control over the means of production. They just want greatly increased regulation and welfare state spending. Unfortunately, the…expansion of government power advocated by modern socialists is so great that it would put most of the economy under state control, even if much industry formally remained under private ownership. It goes far beyond any Scandinavian precedent. …The standard agenda favored by most democratic socialists –  single-payer health care, universal free college, and a guaranteed federal job for anyone who wants one—would cost some $42.5 trillion over a ten year period ($4.25 trillion per year). …many enterprises would officially remain under private ownership, implementation of the democratic socialist agenda would ensure that the federal government controls the lion’s share of actual economic resources.

Professor Somin warns that the Sanders/AOC agenda would push America way to the left of the Nordic nations.

Often, their agenda is analogized to the policies of Scandinavian nations, which have large welfare states, but remain relatively prosperous and free. …The democratic socialist agenda goes well beyond the Nordic nations advocates sometimes cite as models. While these countries have comparatively large welfare states, they combine them with low levels of regulation and high openness to international trade. To take just one example, none of the Nordic nations have a national government-mandated minimum wage. The Nordic nations actually come close to the United States (and occasionally even outscore it) on standard measures of economic liberty. Iceland (slightly ahead of the US) and Denmark (slightly behind) were statistically indistinguishable from the US in the latest Index of Economic Freedom ranking put out by the conservative Heritage Foundation. Finland and Sweden were only slightly lower. When Danish Prime Minister Lars Løkke Rasmussen tried to explain to Bernie Sanders that his country is not actually socialist, the latter should have listened.

I’ve made similar arguments about relatively high levels of economic liberty in Scandinavia, so I obviously think this is spot on.

Somin also speculates that democratic socialism in America may morph into totalitarian socialism. Which is what’s happened in Venezuela. And may happen to Greece.

I worry that he’s right, particularly since redistribution erodes societal capital.

Though I hope he’s wrong.

In any event, that’s a secondary issue. At least for now.

What matters today is that politicians are promising lots of freebies. Notwithstanding the “investment” argument made by Stiglitz and others, those new handouts will undermine prosperity.

And that’s true regardless of whether the additional spending is financed with new taxes or new debt (or printing money).