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.