Many Americans, especially progressives, are now “socialists.” The rise of Bernie Sanders has had much to do with it. Yet, when I hear them talk, I keep hearing Inigo Montoya, “You keep using that word. I do not think it means what you think it means.”
According to Marxian theory, Socialism is a transitional economic system between capitalism and communism. Capitalism (i.e., private property ownership and the distribution of goods and services through market exchange) will run its course and one day a classless society with no private property will evolve. The workers will hold things in common and goods will be distributed according to need.
Some Marxists believed they could accelerate this evolution through violent revolution and imposition of communist principles. We saw that tactic attempted several times in the last century. Others believed economic evolution should run its course. People could work for greater social justice within the system as they methodically brought every aspect of the economy under the control of the government, eventually ending private ownership of the means of production. From there, it would be just a few more steps to the communist utopia. This transitional system is socialism.
Socialists called themselves “social democrats,” or “democratic socialists,” advocating “social democracy.” The emphasis here is democracy. Since communism is the inevitable outcome, there is no need to short circuit the process through violent revolution. People will choose their way into communism.
During the last century, it certainly became clear that relying on markets and philanthropy alone was not an optimal strategy for a just and flourishing society. Government has assumed control of some functions to ensure the broader welfare of citizens in all of today’s capitalist societies. These functions have been “socialized.” But the broader context is still private property and market systems. “Socializing” selected functions is not a tactical progression toward communism. This is welfare capitalism. We were on our way to socialism.
However, a funny thing happened to socialism along the way through the last century. It was mugged by reality. It has become clear that socialism is fatally flawed. Market systems provide a real-time feedback loop of information, matching ever-changing demands with an ever-changing supply. Markets empower countless strangers to benefit each other through specialization and exchange. There is simply no way a centralized entity can manage the production of goods and services. Assuming those with the sufficient information could be trusted to have the wisdom and ethical courage to make optimal decisions, the endlessly churn of supply and demand makes sufficient information utterly impossible. (Other insurmountable barriers exist but that is for another day.) The “inevitable” road to communism was wrong.
Most political parties variously named “democratic socialist” or “social democrats,” have become advocates for expanding welfare capitalism. For precisely this reason, the word “socialist” has fallen out of favor in many regions. So in short, we have learned that neither pure libertarianism nor socialism is workable. We are all welfare-capitalist now: We rely primarily on private ownership and market exchange, and quibble about what societal functions might be better if socialized.
So let us look for a minute a Bernie Sanders, the “socialist” icon for hipster intellectuals. Sanders talks of making America more like Denmark – or the Nordic economic model. Are Nordic countries socialist? Finnish-American journalist, Anu Partanen, author of The Nordic Theory of Everything: In Search of a Better Life, recently noted:
The problem is the way Sanders has talked about it [Nordic economic model.] The way he’s embraced the term socialist has reinforced the American misunderstanding that universal social policies always require sacrifice for the good of others, and that such policies are anathema to the entrepreneurial, individualistic American spirit. It’s actually the other way around. For people to support a Nordic-style approach is not an act of altruism but of self-promotion. It’s also the future.
In an age when more and more people are working as entrepreneurs or on short-term projects, and when global competition is requiring all citizens to be better prepared to handle economic turbulence, every nation needs to ensure that its people have the education, health care, and other support structures they need to take risks, start businesses, and build a better future for themselves and for their country. It’s simply a matter of keeping up with the times.
In a recent address at Harvard University, Denmark’s prime minster, Lars Løkke Rasmussen, made this observation:
I know that some people in the US associate the Nordic model with some sort of socialism. Therefore, I would like to make one thing clear. Denmark is far from a socialist planned economy. Denmark is a market economy. … The Nordic model is an expanded welfare state which provides a high level of security to its citizens, but it is also a successful market economy with much freedom to pursue your dreams and live your life as you wish.
Are you getting that? A robust welfare system is a means to a robust market economy! And that raises another issue: markets.
Paraphrasing Partanen, progressive Americans see Nordic social policies as anathema to market capitalism. They argue that allowing corporations to rig the system in the favor of a few, allegedly an inherent feature of capitalism, is social injustice. It makes no sense. If corporations are rigging the system, then it is not truly a market! The socialist answer would be for the government to assume ownership of corporations. If you just want to end inordinate privilege for big-business, then what you are advocating is – wait for it – freer markets!
In reality, there is no such thing as "free markets." Market economies are based on the premise that absent fraud, misinformation, and externalities, people will make the best and most efficient decisions about what to consume and produce for their own needs, mediated through price information generated by supply and demand. Producers who produce well will be rewarded and those that do not will eventually fold. The reality is that there is always incomplete information and there are nearly always some externalities inherent in trade. Taxes and regulation are also necessary. But generally speaking, trade unencumbered by planners or by gamers of the system leads to higher living standards.
Big-business capitalists use political power to block competition and preserve economic power. They constrain markets. Writing 240 years ago, Adam Smith wrote, “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.” Free markets are the answer to powerful economic players conspiring with government to choke off competition and preserve their privileged status through subsidies, tariffs, and onerous legislation.
Socializing some aspects of society is not antithetical to market economics. We cannot deliver some social goods through markets, or at least not deliver them well. But we must have a robust market economy to generate the tax revenue to make socialized services sustainable. Denmark is the top rated country in the world on business and trade. The other Nordic countries are right behind them. This is not the Sanders model.
Sanders wants to institute protectionist policies, raise taxes on corporations (USA is already on the high side), set a minimum wage 50% higher than other developed countries, and do a host of other trade unfriendly measures. Meanwhile, taxes for all but the wealthiest will stay low (taxes in Nordic countries are high for everyone.) He wants to expand the safety net golden egg while strangling off the goose that lays it. He thrives on populist anti-market and anti-business sentiment. Curiously, Clinton is probably closer to the Nordic model, embracing an expanded and smarter welfare model, while championing (at least in the past) trade and business. Yet she dismisses Denmark as contrary to this vision. Partanen speculates Clinton knows her plans are more genuinely like Denmark than are Sanders’ but she avoids association with the Nordic model because of public misconceptions. I think that is true.
So why are so many supposedly well-educated people now calling themselves socialists? One big reason is surely economic illiteracy. Going back to at least the 1930s, conservatives warned of “socialism” with the advent of Social Security. Same with Great Society programs in the 1960s - now also with ACA and talk of single-payer healthcare. To some degree, left-leaners just decided to own the moniker. Simultaneously, enough libertarian-leaning folks falsely used free markets to rationalize away ANY government involvement in anything; so many lefties just owned this misconception of “free market.” What they want is a more robust version of welfare capitalism and less big-business domination. Economic illiteracy is my generous reading of why people call themselves socialist. But I have a less generous reading as well.
Americans are not wrong to abhor the specters of socialism and big government. In fact, as a proud Finn, I often like to remind my American friends that my countrymen in Finland fought two brutal wars against the Soviet Union to preserve Finland’s freedom and independence against socialism. No one wants to live in a society that doesn’t support individual liberty, entrepreneurship, and open markets. But the truth is that free-market capitalism and universal social policies go well together—this isn’t about big government, it’s about smart government. …
Like the Finns, countless Americans fought to keep America free from the totalitarian ideologies that emerged in the last century. They largely won. They considered it a legacy to pass to future generations of America and to the world. Rightfully so. So why would people seeking a more robust welfare state and less big-business domination call themselves socialists?
Inigo Montoya is wrong with regard to many of the new “socialists.” They know exactly what the word means! They know the emotion it stirs. The misuse is intentional. Calling yourself “socialist” is the left’s version of Trumpist politics: Stir up tribal rivalry with incendiary language. Raise a verbal middle finger to your opponents. When they call you on it, roll your eyes with incredulity that people would accuse you of advocating totalitarianism. “After all, we just want to improve the safety net end reign in corporate greed like any good social democrat.” So to my “socialist” friends who cannot fathom the origins of anger in Trump voters, part of the answer is staring at you in the mirror. Sow the wind and reap the whirlwind.
If your sole concern is fomenting tribal political battles, then the above is mostly irrelevant to you. Calling yourself a socialist is effective for your purposes. If you care about clarifying the truth in pursuit of a greater good for humanity, then you will use language that is faithful to what is being described. Whether through illiteracy or insolence, “socialism” fails that standard. You really need to stop using that word.