What is Democratic Socialism?

What is Democratic Socialism?

Part I

What is Democratic Socialism?  When one examines the vagaries of the website of the Democratic Socialists of America,* one can only conclude that Democratic Socialism is nonsense. Unfortunately, given the

tendency of the young and inexperienced to respond to impulse, it can be rather dangerous nonsense. It is my pleasure to document this statement by showing why their grand platitudes are meaningless, yet their conclusions are anything but harmless.

* see https://www.dsausa.org/about-us/what-is-democratic-socialism/#govt.

Let us imagine that divorce were such a disaster that it broke up families, put vulnerable children at risk for severe emotional problems, put mothers and children at risk from deadbeat husbands who predictably failed to meet their alimony obligations, and on and on.  Those of us who have a social conscience would have to organize to solve the problem. Because married couples are not sufficiently responsible to manage the marriage institution successfully, our advocacy group, possibly with an eye to becoming a political party later, would manage the problem for them.  

The decision to cancel a marriage has social implications, so we would advocate for an end to the practice of permitting individual couples to choose whether or not to continue their marriage. That decision would be made democratically to meet public needs, not to cater to the preferences and desires of the few. We would radically transform the marital system through greater social democracy so that ordinary Americans can participate in the many decisions that affect our lives. We will not explain to the public how we intend to implement our democratic procedures for ending or forbidding an end to the social abuse of private marital arrangements. But the public may be aware that the key marital decisions will be made democratically (publicly) rather than privately.

The above kind of reasoning is at the core of the advocacy of the Democratic Socialists of America. But let us consider the specific argumentation of the DSA website as applied to private property rather than private marital arrangements. We begin with the DSA’s answer to the question “What is Democratic Socialism”? I now quote directly from the website:

_______________________

“What is Democratic Socialism?

“Democratic socialists believe that both the economy and society should be run democratically—to meet public needs, not to make profits for a few. To achieve a more just society, many structures of our government and economy must be radically transformed through greater economic and social democracy so that ordinary Americans can participate in the many decisions that affect our lives.”

____________________

It is no less ridiculous to posit that society could “democratically” solve the problems of private firms and corporations than to assert that it could democratically solve the problems of the marriages of private individuals. But let us look carefully at some of the specifics of the problem. Quoting again from the DSA website we learn from the first point of DSA advocacy the following:

__________________________________

Doesn’t socialism mean that the government will own and run everything?

“Democratic socialists do not want to create an all-powerful government bureaucracy. But we do not want big corporate bureaucracies to control our society either. Rather, we believe that social and economic decisions should be made by those whom they most affect.

“Today, corporate executives who answer only to themselves and a few wealthy stockholders make basic economic decisions affecting millions of people. Resources are used to make money for capitalists rather than to meet human needs. We believe that the workers and consumers who are affected by economic institutions should own and control them.

“Social ownership could take many forms, such as worker-owned cooperatives or publicly owned enterprises managed by workers and consumer representatives. Democratic socialists favor as much decentralization as possible. While the large concentrations of capital in industries such as energy and steel may necessitate some form of state ownership, many consumer-goods industries might be best run as cooperatives.”

“Democratic socialists have long rejected the belief that the whole economy should be centrally planned. While we believe that democratic planning can shape major social investments like mass transit, housing, and energy, market mechanisms are needed to determine the demand for many consumer goods.”

__________________________________

Let us think for just a moment about the grandiloquent assertions of this first section of the DSA website and observe what they can or cannot mean. Consider the first two statements: “Democratic socialists do not want to create an all-powerful government bureaucracy. But we do not want big corporate bureaucracies to control our society either.”

The first one simply avoids an obvious truth. Socialists and even all democrats are believers in the virtue, the importance, and the necessity of big government. The more you want to regulate the “multis”, which socialists love to hate, the more you build up government bureaucracies to design and implement government regulations.  The larger the organizations and the economy you want to regulate and control (democratically, of course), the more you are dependent on the agencies of government we call “bureaucracy.”  The second sentence says “we do not want big corporate bureaucracies to control our society either.”  Corporate bureaucracies are not big in any sense of the word compared to government bureaucracies. Moreover, what is said here about corporations is absolutely irresponsible; corporate bureaucracies do not control our society.  They are subject to governmental taxation which can take any portion of the resources with which corporations can control anything at all. They are subject to the laws of congress and the regulations of the governmental bureaucracy. The only response a corporation can have to governmental power is to leave the country and take its jobs with it. There may be hundreds of “multis”, but there are many thousands of smaller corporations and small businesses which have no ability to break the laws or defy the regulations of the federal and state governments. Even the multis are

seldom armed with military tanks, machine guns, fighter planes, or nuclear weapons which can be mobilized to control society. The government is somewhat better equipped to enforce its will. The assertion that corporations “control” our society is really a meaningless, ideological platitude.

For the workers to own the firm, the government would of course raise tax revenues from those who pay taxes and use that money to purchase the firms from their current (stockholder) owners.  One would confiscate the funds from private owners with which one would purchase their property. And one wonders whether those thus plundered would become adoring socialists?

No wonder socialism has always depended on a “dictatorship of the proletariat” to prevent a counter-revolution.

Part 2 

To those impressed with the assertions of the socialists that government will manage the economy with “democratic” methods (rather than central economic planning), one should refer to a large literature on the subject of bureaucracy (for an extensive review of that literature, see my book, Socialism). Beyond the ownership question is that of controlling the producing firms, be they publicly or privately owned. It inevitably comes down to a large, state bureaucracy to organize and guide the economy.  But bureaucracies have lives of their own and their realm of activity ultimately ends up beyond the control of the forces that created them. For a single, readable book on the tendencies of bureaucracy and “democratic planning,” the reader might refer to Hayek’s classic work, The Road to Serfdom.

Moving on to the next sentence, we see that democratic socialists “believe that social and economic decisions should be made by those whom they most affect.”  The core value of our free enterprise society, as designed by the founding fathers, is private property. Since socialists don’t like what a corporation or small business might do, as a single example, to our environment, they stipulate that, rather than pass laws about what can be dumped into our air or our water, we tell the corporation that decisions about the disposition of industrial effluents will be made at the ballot box!?  That’s a lot of decisions to take over socially. Would the DSA take over the decision processes of all the private firms – multis, corporations, and small businesses – democratically?  How? Through the ballot box?  Last year the IRS received about 32 million non-farm business tax returns. About 30% of these returns represent legal entities, and of course we must control farm businesses as well, since some of them are manned by capitalist farmers.

Trying to have any significant direct impact on private firms would require large government agencies, just as it did in the Soviet Union and the other communist countries. Naturally, you don’t have to own and control all firms. You can try to control all of them indirectly by controlling the key corporations directly. This was the idea in democratic West Europe where, for 100 odd years Marxists hoped to implement a democratic form of socialism by having the parliament of the country be in charge of the nationalization of some share of each country’s businesses.

How did it work? It worked so well that they abandoned the whole theory of socialism. They learned through disappointing experience that it was impossible that some subcommittee of the democratically elected parliament in charge of steel or aluminum production could really manage the governance tasks of whole industries. Governments are managed by politicians, of course, who typically know little of business. And if the politicians hired professional managers, they functioned just like Soviet managers: their salaries were not dependent on performance (profits), but on following the party line. And with the incentives built into socialism, productivity was so low that the citizen consumers were served by empty government department stores stocked only with empty shelves. In democratic Western Europe, however, they gave up on the whole system before the age of scarcity (empty shelves in stores) really ever arrived.  Real socialism (not just the modern version of free government “goodies” and income redistribution) disappeared in the last century. Socialists did not become extinct, but the world became bereft of real socialism. The modern version includes only subsidization, heavy industrial regulation and “modern” social policy. All of these I have addressed in other blogs on this website.

The rest of the material cited from the DSA website includes only two propositions that merit serious discussion. As we saw above, socialists argue as follows: “Resources are used to make money for capitalists rather than to meet human needs. We believe that the workers and consumers who are affected by economic institutions should own and control them.”

Corporations do indeed make money, and they do indeed pay taxes. They, along with small businesses, pay a lot of money in wages and salaries. The managers work for a salary (sometimes large, but also taxed) and corporate revenues flow out to many investors who from their stock market investments receive dividends and capital gains. Many Americans who own 401K retirement plans can count on them to finance their retirement. As part of the country’s financial system, corporations thus provide for many human needs.

Finally, the statement that workers and consumers should own and control firms because “they are affected” by them is as silly as saying that society should make the decisions about marriages because people outside marriage partnerships are affected by them. We are financial stakeholders because when a marriage ends and a deadbeat fails to pay alimony, we taxpayers must provide the safety net for the wives and children. Corporations are owned by private parties who purchase ownership (stocks) in them, and small businesses are owned by their proprietors. Society has plenty of weapons to control corporations so that they do not impose social costs on their fellow citizens. Abuses against society can be addressed by laws, regulations, taxes, policemen, government agencies, fines and financial penalties, jails for corporate abusers, taxes, and groups who belittle and demean corporations. To say that the people should own and control corporations is like tipping the phrase of Proudohn on its head.  He said “Property is Theft.”  No, theft is what socialists wish to do to acquire property.

Socialists may try to do some of the things discussed above to control the activities of private firms. All those efforts have failed in multiple countries. More

realistically, socialists may try to do only what they have been attempting in recent years.  On the one hand, they move forward with the regulation of industry (an effort President Trump is valiantly trying to reverse), the outcome of which is not foreseeable for individual sectors of the economy, but which can very well be predicted in general terms. Through excessive regulation the fettered economy loses responsiveness and resilience. Costs of compliance for individual firms of all types increase dramatically so that prices rise, profitability declines, employment is reduced, entrepreneurship and technical innovation wane, and industry begins to remind us of Soviet industry.

It isn’t really necessary to hogtie industry, although socialists, who have been trained to hate firms, profits, economic efficiency, and individual success, may desire to punish the general population by punishing its productivity. Of course there must be some regulation to avoid any abuses by the more devious managers, and

contracts must be enforced. But excessive regulation, designed by imprudent bureaucrats oblivious to efficiency and motivated by ideological considerations, must be curbed and undone. If one were to assume away such irrationality, there would still remain as the final weapon in the socialist arsenal, the core of socialist belief and passion – income redistribution. Even without further controls on industry, one may always tax private earnings, incomes, expenditures, etc.  We ignore that one may pursue such a tax and spend course until many of the firms are driven out of the country seeking a home under the jurisdiction of less greedy governments. Taxpayers as well become mobile when state governments continually increase their taxes. Thus, we observe the exodus from Maine to Florida and from California to Texas.  If the tax take from corporations and citizens is high enough, the socialists can still attempt to subsidize the individual from cradle to grave.

That leaves only the worry that socialists generally lack the facility for counting. The results of the midterm elections of 2018 gave us the youngest female member of congress in history, Alexandria Ocasio-Cortez, a Democratic Socialist.  Ms. Ocasio-Cortez exemplifies an inability to conceive of financial constraints in budgeting at the federal level. Socialists in general tend to legislate fiscal programs that will ultimately lead to the collapse of the budget. In advocating “Medicare for all”, Bernie Sanders and Ocasio-Cortez refer to a working paper, “The Costs of a National Single-Payer Healthcare System,” published by the Mercatus Center at George Mason University. The top line of the paper’s abstract says that the bill “would, under conservative estimates, increase federal budget commitments by approximately $32.6 trillion during its first 10 years of full implementation.” According to the paper, even doubling all “currently projected federal individual and corporate income tax collections would be insufficient to finance the added federal costs of the plan.”  When asked how we could afford such a plan, Ocasio-Cortez said we should “just pay for it.”*

_________________________________

*https://hotair.com/archives/2018/11/05/alexandria-ocasio-cortez-will-pay-proposals-puzzling/