Senator Bernie Sanders currently runs as a democratic candidate for the president of the United States – his election platform is democratic socialism. The problem is that no-one seems to know what the term means. Chair of Democratic National Committee and Hillary Clinton could not define democratic socialism. Young college students might not be able to define democratic socialism but they seem to love it as they tend to more easily fall for new ideas and concepts (the trendy ones, of course). And Sanders’ program sounds quite “humanistic”: Tax the rich to help the poor; initiate more welfare programs; provide free medical care1; and make education free for all young people whether they plan to graduate or not. But is it feasible?
In evaluating Sanders’ democratic socialism, it is critical to pinpoint institutional changes required in support of his policies and to identify philosophical premises upon which those changes depend. Those – and not policies they generate – are precisely what defines the substance of Sanders’ democratic socialism.
Sanders’ speeches reveal that his doctrine rests on three premises and two institutional requirements. The premises are: (1) a just society based on the equality of outcome exists and is desirable, (2) human reason can discover the rules required to bring about such a society, and (3) the political elite should enforce those formal rules from the top-down. These premises are traceable to the French socialists pre-dating Karl Marx. Just like Sanders today, French socialists saw the community as an organic whole that has a predetermined outcome (a flexible concept that may be modified with changes in the leadership).
Two major institutional features of democratic socialism are: (1) governmental controls of the economy, and (2) the acceptance of private property rights. Those institutional features have some likeness to the left-wing social-democracies in Europe, which should not be exaggerated. Institutional features of democratic socialism are specific to the American institutions from the womb of which they emerge. For this reason, a brief discussion of both institutional features of democratic socialism is in order.
Democratic Socialism Requires a Culture of Dependence on the State. The undeniable economic success of capitalism in raising the standard of living in the United States makes it difficult for the political and intellectual elite to use the efficiency argument in seeking more governmental controls. This elite needed to find a cause that might justify to American voters increasing governmental controls of the economy. And it found such a cause in the income inequalities of American capitalism. Thanks to those inequalities in the distribution of income, the political and intellectual elite has been able to criticize capitalism on the grounds of its immorality rather than efficiency. To make the system more just, people are told that the state has to redistribute incomes. Of course, each and every redistributive policy also means a larger role for government in the economy.
The support for redistributive policies comes from a segment of the population which feels that market competition is unfair to them. Blaming others for one’s failure to compete in free markets is a predictable response to all inequalities. As individuals grow accustomed to the benefits, they support political parties favoring redistributional policies. Redistributive policies are then a process that generates ever growing support from one election to another. Eventually, the culture of dependence on the state replaces the society of free and responsible individuals.
Redistributive policies have short-run and long-run costs. The economic cost of redistribution is the immediate erosion of the link between performance and rewards, the major pillar of American economic might. The long-run costs are a slow transformation of the capitalist culture of self-responsibility and self-determination into the socialist culture of dependence on the state.
Democratic Socialism Requires Attenuated Private Property Rights. The backbone of the American legal tradition is that the primary function of private property is to serve the subjective preferences of property owners. That is, the owner has the right to choose what to do with an asset, how to use it, who is to be given access to it, and the price at which he/she is willing to sell it. The ownership then creates a strong link between one’s decision how to use the assets and bearing the consequences of that decision. Clearly, the value of any good to a person depends on the bundle of rights to do things with that good. The value of a car to me is less if I have no right to resell it. I pay more to join a country club if my teenage kids are allowed to play golf there. I will pay more for a worker I can fire at no cost. In short, private ownership provides incentives for owners to seek the most-valuable uses for their assets.
Socialism in the last century used brute force to replace private property rights and free exchange with state ownership and economic planning. Sanders’ democratic socialism is more seductive. It is ‘bribing’ people to accept voluntarily the erosion in private property rights and free markets. How?
The acceptance of private property rights by democratic socialism creates a conflict between the attainment of a predetermined outcome and the efficiency-friendly incentive effects of private property rights. A way to resolve the conflict is to attenuate private property rights via laws and regulations. Those law and regulations (reducing the right of employers to fire workers at will; giving tenants some rights at the expense of apartment owners) are then justified by reference to preferred or more just income distribution. In the process, rules and regulations that attenuate private property rights in resources transfer some decision making rights in those resources from their owners to public decision makers and/or non-owners. Those transfers of rights interfere with the subjective preferences of interacting individuals, which obstructs information about the choice-influenced alternative costs of resources. In the end, the attenuation of private property rights impedes the flow of resources from lower- to higher-valued uses. It then affects the economic efficiency today as well as incentives for the production of wealth tomorrow.
Equality of opportunity in capitalism may be a dream yet to be attained, but is certainly not more of a dream than the equality of outcome in Sanders’ (or any other) socialism. The important difference between the two systems is in the consequences for individual liberties in pursuing their respective goals, not in the pious wish of attaining them.
The future of the United States (and the West) depends on “We, the People”. So, let me conclude by paraphrasing four Western Intellectual leaders.
The triumph of socialism depends on free men doing nothing (Edmund Burke)
The problem with socialism is that you eventually run out of other people’s money (Margaret Thatcher)
I have never understood why it is ‘greed’ to want to keep the money you have earned but not greed to want to take somebody else’s money (Thomas Sowell)
Capitalism without failure is like religion without sin (Allan Meltzer).
1In 1982 while visiting the former USSR with a group of high school teachers, a Russian boasted about their free medical care. I asked her whether their doctors and nurses are paid