What is Democratic Socialism and Can It Work in the US?

What is democratic socialism? As it turns out, that depends on who you ask. If you ask a left leaning Christian, it is the form of government Jesus endorses in the New Testament. (I respectfully disagree.) If you ask a young democratic socialist from the US, you’re not liable to get much of a straight answer. Most responses involve phrases like, “more generous safety net,” “more kindness,” and more “being together.” This is mainly due to the fact that their definition of democratic socialism comes from the popular, self-proclaimed democratic socialist, Bernie Sanders. Sanders’ definition of democratic socialism amounts to a collection of vague ideological statements, such as: (directly from his website)

“Democratic socialism means that we must create an economy that works for all, not just the very wealthy.”

“Democratic socialism means that we must reform a political system in America today which is not only grossly unfair but, in many respects, corrupt.”

“It means that we create a government that works for all of us, not just powerful special interests.”

“It means that economic rights must be an essential part of what America stands for.”

“It means that health care should be a right of all people, not a privilege.”

and catch phrases…

Sanders does point out that he is opposed to the primary tenet of socialism, “I don’t believe government should own the means of production, but I do believe that the middle class and the working families who produce the wealth of America deserve a fair deal.”

Sanders then points to the Nordic countries of Denmark, Sweden and Finland. On the other hand, Sanders does not feel that we should note other socialist countries such as China, Cuba, or Venezuela.

As a side note, if you are under the impression that the citizens of Nordic countries are far better off than US citizens when it comes to healthcare, education, and income equality, I invite you to check out my article, The US Could Learn a Thing or Two from Denmark. It’s not my idea of a utopia by a long shot.

No wonder young people are confused. They aren’t even provided an accurate definition of terms.

So, as boring as definitions are- let’s just go ahead and be clear:

Socialism: a political and economic theory of social organization that advocates that the means of production, distribution, and exchange should be owned or regulated by the community as a whole.

Democratic socialism: is a political ideology that advocates political democracy alongside social ownership of the means of production, often with emphasis on democratic management of enterprises within a socialist economic system. The term “democratic socialism” is sometimes used synonymously with “socialism”; the adjective “democratic” is often added to distinguish it from the Leninist, Stalinist and Maoist types of socialism, which are widely viewed as being non-democratic in practice.

– Notice that the ONLY difference between socialism and democratic socialism is that the people elect leaders through a democratic process. It should also be noted, that while Venezuela (for instance) is not where Bernie would prefer us look as an example of democratic socialism- indeed, Venezuela democratically elected their leadership.

Social Democracy: is a political, social and economic ideology that supports economic and social interventions to promote social justice within the framework of a capitalistic economy, as well as a policy regime involving a commitment to representative democracy, measures for income redistribution, and regulation of the economy in the general interest and welfare state provisions. Social democracy aims to create the conditions for capitalism to lead to greater democratic, egalitarian and solidaristic outcomes; and is often associated with the set of socioeconomic policies that became prominent in Northern and Western Europe- particularly the Nordic model and the Nordic countries- during the latter half of the 20th century.

Notice anything interesting? Like the fact that Bernie Sanders isn’t actually a democratic socialist? His views are much more in line with social democracy, which incidentally, describes the social structure of the countries that he would prefer us look at- the Nordic countries.

Why, then, doesn’t Bernie label himself a social democrat? The answer is that he doesn’t want to adopt the social democratic economy, which is a brand of free-market capitalism. This mix of free trade that coexists with a large welfare state is called the Nordic Model. In a lecture at Harvard’s Kennedy School of Government, the prime minister of Denmark said,

“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.”

Sanders doesn’t associate himself with this model because it includes many policies that democratic socialists detest.

For 2016, the Heritage Economic Freedom Index ranks Sweden, Denmark and the US in the top 15% of 178 countries in total Economic Freedom. Although both Sweden and Denmark rank lower than the US in the categories of large government spending and taxation (meaning they have larger government spending and taxes than the US), they score higher than the US in the rule of law, regulatory efficiency, and open markets (meaning they have more property rights than US citizens, their judicial system is more effective, and that they have less regulated trade and their market is more open than the US.)

How does Sanders’ policy differ from the Nordic Model?

The Tax Foundation’s article “How Danish is Bernie Sanders Tax Plan” provides an excellent side by side comparison which reveals that Sanders’ tax plan is far removed from the Nordic Model. For starters, Denmark’s tax revenue is higher than any other developed nation. Sanders’ plan increases revenue, but nowhere near Nordic levels. Even though Nordic individual taxes are the highest, Sanders’ plan is actually more progressive resulting in a 13% higher rate in the top tax bracket than Denmark. Nordic countries have massive taxes on consumption called VAT taxes. Sanders’ plan does not include a VAT tax. Nordic countries levy lower corporate tax rates than any other country- which is business friendly. Sanders on the other hand, had no plan to decrease the US corporate tax rate, which is among the highest. When it comes to international taxation, the Danish system is territorial- meaning domestic corporations don’t pay domestic taxes on foreign income. Sanders’ plan calls for a fully worldwide tax system, which is the exact opposite of the Nordic system.

As mentioned earlier, Nordic countries have freer trade markets than the US. Sanders is strongly opposed to free trade. Sanders is considered “protectionist” in terms of his trade stance. He and President Trump agree in this aspect.

Nordic countries do not have a government imposed minimum wage. Instead unions and employers “bargain” on a minimum wage that varies on an occupational basis. Sanders’ notoriously backs a $15 “living wage.”

In the 90’s Sweden adopted a universal school choice program that is almost identical to the “voucher program” discussed here in the US. Sanders is strongly opposed to this.

Here’s a biggie- Sweden requires a balanced budget over the business cycle. Since their reform, Sweden’s debt has fallen from 70% of GDP to 40% of GDP. In 2015, US debt was 104.17% of GDP. Sanders has expressed no interest in constraining spending and taxation policies with a balanced budget requirement.

Even if Sanders’ plan was to emulate the Nordic Model in every way, there are enormous differences between the US and Nordic countries that would prevent such a system from working in the US. As Megan McArdle stated in her article, “US Can’t Import the Scandinavian Model”, “… ‘tiny population nestled atop huge fossil fuel deposits’ is probably not a strategy that the U.S. can emulate.” But that’s just the tip of the iceberg.

When it comes to the Nordic Model- size matters. The entire population of all the Nordic countries combined is roughly equal to the population of Texas. The Nordic Model benefits from a combination of several factors that are much easier for smaller populations to achieve than large populations. These points are explained very well in Lyman Stone’s article, “Are Small Populations a Nordic Handicap or Nordic Help.” I’ll summarize.

It is much easier to have a homogeneous population when you are small. (The US is the polar opposite of homogeneous.). Nordic countries have urban-capital dominance, which is much easier to achieve in smaller populations. (Again, the US is opposite. The “politics” of the largest cities are not the shared politics of the nation as a whole. Big cities vote notoriously Democrat, no matter what the rest of the country votes.) It is much easier for smaller populations to create uniform philosophical and cultural inheritance. (Again, US philosophies and cultures are diverse.) Smaller populations can more easily avoid being drawn into wars. (The US subsidizes everyone’s defense, so this would be impossible to emulate without massive changes being made.) What it all boils down to, is that the US has absolutely nothing in common with Nordic countries.

Scandinavian (and European) countries don’t spend a fraction of what the US spends on defense. In fact, Germany has essentially halted defense spending (at barely 1% of GDP). Why? Because the US has provided them with a massive “security shield” since the existence of NATO. These countries funnel the money that they would have to spend on defense into their social welfare programs. Without the US, these countries wouldn’t have the extra money to pour into welfare. If the US goes Nordic, is there anyone out there to subsidize us all? You can read more about this element in this article from the Cato Institute, “US Defense Spending Subsidizes European Free-Riding Welfare States.”

What does all of this mean? Basically, Sanders wants to achieve the massive welfare state that the Nordic system provides, without the free market, capitalist system that supports it. Sanders can’t consider himself a social democrat because, although he loves the massive government and welfare state, he is opposed to the system that supports it- capitalism. When it comes down to it, there really isn’t an existing definition for what Bernie Sanders promotes. Hugh Whelchel notes in his article, “The Mirage of Democratic Socialism”,

“At best, it is a strange marriage between capitalism and socialism: a democratic government that significantly redistributes wealth, severely regulates markets, and then expects those same markets to pick up the tab.”

This is why Sanders, nor any other “democratic socialist” for that matter, can point to an example of any country that embodies the structure of their brand of democratic socialism. Frankly, it doesn’t exist.

The group,  Democratic Socialists of America, admits this. In the Q & A portion of their website you will find the question, “Why are there no models of democratic socialism?” This is their answer, “Although no country has fully instituted democratic socialism, the socialist parties and labor movements of other countries have won many victories for their people. We can learn from the comprehensive welfare state maintained by the Swedes, from Canada’s national health care system, France’s nationwide childcare program, and Nicaragua’s literacy programs. Lastly, we can learn from efforts initiated right here in the US, such as the community health centers created by the government in the 1960’s. They provided high quality family care, with community involvement in decision-making.”

Sounds great, huh? Just pick your favorite aspect from the social structure of every country and ignore the economic system that maintains it. Forget “best of both worlds,” we’ll choose “best of all worlds.” Bernie Sanders’ brand of “democratic socialism” is nothing but a mirage of welfare state, safety net ideology divorced from the free- market, capitalistic economies that support them, and ignorant of the Nordic- specific societal structure that makes them possible.

The U.S. Could Learn a Thing or Two From Denmark


We’ve all heard it- how much better Denmark is than the US on oh so many levels. I mean, take it from the Occupy Democrats meme below: Denmark has free healthcare, college,  and childcare. To make matters worse those lucky Danes have a whopping $20/hr minimum wage and only have to work 33 hours a week. The conclusion- the US has got to be doing it wrong. So please, by all means lets learn about how awesome Denmark’s system is!! Are you ready!! I’m so excited!!

Let’s start with that free college. It’s free, but Danes do not get the same freedom of choice when it comes to what subject they want to study. Their choices are limited to what fields the Ministry of Education think that Denmark needs more graduates in. Want to be a writer? A teacher? You better hope the Minister of Education sees a need for more of those.

Now on to minimum wage. Actually, Denmark doesn’t  have a “national” minimum wage, but we won’t split hairs. Due to union and other agreements they have an “effective” minimum wage of 110 DKK/hr (Danish Krone). The current exchange rate is 1 DKK= .15 USD. So, that’s $16.50 an hour- not $20, but still beats the heck out of the US minimum wage, right? Not so fast.

Denmark has a progressive tax structure, but the 2016 personal income tax rate listed on tradingeconomics.com is a whopping 55.8%. Talk about a chunk out of that paycheck! To add insult to injury, when you go shopping in Denmark, be ready to add a hefty 25% to your purchase (no matter what you’re buying) in the form of Denmark’s VAT tax. Want to buy a car? Get ready to shell out a 105% tax on your vehicle (up to a value of 82,800 DKK or $12,420 USD) and 180% tax on any value exceeding that 82,800 DKK mark- according to pwc Worldwide Tax Summaries. What did you pay for your last vehicle?

Do you want to own a TV, phone, or computer in Denmark? Be ready to fork over an additional 20% tax. Once you have your TV, phone, or computer you’ll probably want to be able to use it, right? Well then, you’re going to have to come up with extra cash to pay for your “licens” fee, which is the fee that you pay because you now have the ability (it doesn’t matter if you’ll actually tune in or not) to pick up the Denmark Radio signal. That amounts to 205 DKK per month.

For an eye opening glimpse into the financials of an actual Dane- H. Roland J. has been so nice as to share his for one month in 2015 in his blog post, Denmark- The Paradise of Fools.

    • He has a monthly salary of 25,000 DKK or about $3,750 USD.
    • Then comes the first portion of his personal tax at 8%.
      • That amounts to 2,000 DKK or $300 USD leaving him with 23,000 DKK or $3,450 USD
    • He then subtracts his “bundfradrag” or “bottom deduction”, which for him for 2015 came out to 3,433 DKK per month of non-taxed income (besides the 8% it was already taxed). Let’s subtract that amount to put into his pocket and see what he has left to pay more taxes with- 19,567 DKK or $2935.05 USD.
    • His county tax was 24.9% leaving him with- 14,694.81 DKK or $2,204.22 USD
    • Time out!! If he, at this point, made more than 37,000 DKK per month, he would be subject to an additional 15% “topskat” tax. He doesn’t, so let’s continue.
    • He now pays a 4% “health tax”- leaving 13,784.32 DKK or $2,116.05 USD
    • This adds up to, in this man’s tax bracket, an income tax rate of 44%.
    • So, now he has 13,784.32 DKK or $2,116.05 USD left- before living expenses of course.
      • I already mentioned that when paying bills, they also must add in the 25% sales tax. He paid his bills with the “disposable” income that was not taxed (3,433 DKK) and ended up with 10.34 DKK or $1.55 USD left over.
    • This guy doesn’t want to pay for TV or phone so if you couldn’t live without those, you’d have even more to pony up.
    • He then pays the “afgift” or extra tax on all utilities. He uses his power bill to illustrate how that works:
      • His power bill was 994.64 DKK for a 3 month period, ($149.20 USD) in which he used 358 Kilowatt hours.-Charges from the electric company were 111.06 DKK plus 30 DKK for membership plus sales tax comes to 176.33 DKK ( $26.45 USD)
      • The electric company charges .37 DKK per kilowatt hour, but the state imposes an “electricity transportation afgift” at .21 DKK per kilowatt hour (almost as much as the electric company charges for the electricity!) making his electric afgift 80.89 DKK for the period.
      • THEN, the Denmark government adds a sales tax of 20% onto the afgift! So a government tax on a government tax, for those who are keeping tabs.
      • SO- of the 994.64 DKK he paid for electricity, only 141.06 DKK went to the actual electric company and the bloated 853.58 DKK went to the government!

Sorry, but so far, the words “Awesome Deal!” are NOT what is coming to my mind when I take a good look at Denmark. Regardless, I know there are many people out there saying, “But they get free healthcare and that makes it ALL worth it!!” Well, in case you haven’t noticed- that health care AIN’T “free”. This healthcare better be awesome! Is it?

One interesting fact to note is that in addition to the “free” government health care provided, Danes have the option of purchasing separate “private” insurance- sort of makes you wonder why this is even needed if the government health care is “all that”. Two additional facts: in Denmark your doctor must refer you to a specialist or you don’t see one and your doctor must refer you to the hospital or you don’t go. An American expat who now lives in Denmark explains her experience with the Danish health care system in her blog post, Free-Health Care in Denmark- My First Hand Experience. Her article is definitely NOT a Denmark health care bashing article, but actually just an honest recounting of her personal experience, which has been both good and bad.

She explains from the outset that health care is a straight up 8% line item deduction of gross pay. Denmark’s “free” health care option does not cover physicals, vision or dental care, and only partially covers mental health services if the government covers it at all. Danes pay full price for prescriptions until a personal threshold is reached after which they are progressively discounted. She notes that, “In nearly six years, I’ve never had my total yearly prescription cost in Denmark come in below that of my $10-$20 US co-pay.” (You can tell she hasn’t lived in the US for a while- I’d kill for a $10 co-pay!!) She has actually crunched the numbers and admits that she pays roughly 6 times as much for her “free” health care in Denmark than she did for her employer sponsored plan in the US.

She then admits that her initial experience with Denmark’s heath care was abysmal. Her doctor was absolutely horrible and misdiagnosed her twice. The last diagnosis could have ended up causing her “irreversible damage” had she not moved and had access to a better doctor. Of course, she is currently very happy with her new doctor so she has changed her mind about the quality of Denmark’s health care. She also notes that Danes have the opportunity to purchase private insurance (which I mentioned earlier) and that this insurance allows you to “jump queue” if you need to see a specialist with a long waiting list or need access to mental health services. This of course implies that, those who pay more, get to “cut line” in front of those who receive the “free” health care when it comes to seeing a specialist. Hmmm…

By the way, in Denmark there is no such thing as a malpractice suit. As of 1992, Danes cannot sue a doctor for malpractice. You’ll be hard pressed to find any article on this topic that gives anything other than a glowing account(like this one, How Denmark Dumped Medical Malpractice and Improved Patient Safety) of how this is revolutionizing health care by being in the best interest of both doctors and patients, but I’m skeptical and I’ll tell you why. First, instead of taking your case before a jury of your peers, you must submit a claim to “medical and legal experts” for review. These “experts” review your claim based on two criteria:

  1. The “specialist rule”: How did the treatment you received compare to care an experienced specialist would provide? If it wasn’t equal, you are entitled to compensation.
  2. “Fairness rule”: If you experienced a severe medical event that occurs less than 2% of the time, you are eligible for a “reward.”

#1 strikes me as extremely subjective and I suppose according to #2 if you aren’t a medical anomaly you’re out of luck. Sounds totally “fair”. But worry not! If you aren’t happy with the decision you can appeal- to a seven member board of doctors, patient representatives, an attorney, and two representatives of the Danish health care system. I’m sure it’s not as susceptible to corruption as it seems…

If we’re going to follow Denmark’s cue, Forbes points out that we’re going to need to let up on our business regulations and decentralize our government. Wait, Democrats are not for either of those things! US businesses migrate overseas every opportunity they get, but the Danes apparently realize that they can’t support their “entitlements” without making Denmark business friendly- so they do. Denmark businesses are far less regulated than US businesses.

Denmark’s government is less centralized than the US government. For example, Denmark taxes are astronomical, but only 3.76% of income taxes are national. The large portion of income tax comes in at the community level. So the taxes they are paying benefit their communities rather than being directed through Washington like ours.

This is all well and good, but some people out there are still saying this is all worth it if the poor are better off in Denmark. Are they? The poorest 10% in the US have adjusted incomes almost exactly the same as the poorest 10% of Danes. The poor in Denmark do not enjoy any higher standard of living than the poor in the US. However, the rich in Denmark definitely aren’t as rich as the rich in the US. But Denmark’s poverty rate is lower, you say!! Did you know that the US is the only country in the world that calculates poverty before benefits are received? (Debt.org)Unless you take this into account you are comparing apples and oranges.

We’ve gone through all of this, and I haven’t even mentioned the fact that Denmark only has a population of 5.7 million compared to the US’s population of 325.8 million. To say that the Denmark government operates on a smaller scale is the understatement of the century.

So, the next time someone tells you that the US needs to learn from Denmark, you can ask- what lessons specifically? Denmark’s crushing 55% income tax rate, whopping 25% VAT tax, taxes on utilities, taxes on the taxes on their utilities, monthly license fees for TV, computer, and phones? No covered dental or vision benefits and limited mental health benefits? Paying full price for prescriptions up to their government imposed “deductibles”? No legal recourse for medical malpractice? Lack of educational free will? Or perhaps they are referring to Denmark’s decentralized government and their relaxed business regulation?