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Liberal Democracy versus Democratic Socialism versus Social Democracy

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The presidential primary campaign of Bernie Sanders for the Democratic Party nomination and the election of Alexandria Ocasio-Cortez to Congress from New York have once again raised the issue of the desirability for and the possibility of a system of “democratic socialism.”

For many of their critics and opponents the operative word is “socialism” in their vision of a new and better America. Sanders and Ocasio-Cortez insist that they are being forced to carry the unwanted and unjustifiable ideological baggage of the “other” socialism that prevailed in countries such as the Soviet Union that were based on a system of dictatorship and authoritarianism.

Theirs, they assure us, is a kinder and gentler socialism that is compatible with and built on the premise of democracy and the duly electing will of “the people.” Democratic socialism has nothing to do with 20th-century communism and the “dictatorship of the proletariat,” they say, which ended up brutalizing millions of innocent men, women, and children.

Praising the socialism of the communist countries

Both conservative and libertarian critics of Bernie Sanders have joyfully dug up and displayed on the Internet and social media a huge trove of video clips showing Sanders praising the social and economic achievements of the communist regimes in Soviet Russia, Cuba, and Nicaragua.

He is shown saying that long lines for the essentials of everyday life in those countries is better than paying for what you want in capitalist societies. Under capitalism, Sanders declared, only the wealthy are able to buy what they want, while under breadline communism everyone gets an equal share of what the central planners deem is needed by “the masses.”

The leaders of those socialist countries are all honest and honorable men who left a very positive impression on Bernie Sanders’s sensitive appreciation for the betterment of his fellow man. No mention, it seems, was ever made by him about the tyranny, terror, or mass murders by his collectivist comrades in arms in the communist workers’ paradises that he visited.

But now, he insists that his views and values have nothing to do with the system or the realities of dictatorial socialist revolutions. However, he continues to add, let’s not forget the good in those societies with their free health care for all, education at no cost, and a sense of fairness and social justice, even if some in those socialist governments might not have always been “democratic” in their ruling ways.

Instead, Sanders states that the systems he has in mind when referring to democratic socialism are in countries such as Denmark or Sweden, with their policies of social and redistributive justice and government control of business, without any of the embarrassments of those “other” socialist regimes of the past that he once hailed as supplying positive lessons from which to learn to make a better America.

Socialism and communism: Common ends, different means

Originally, in the nineteenth century, “socialism” and “communism” were often used interchangeably, merely as synonyms for the same general idea — the end to private ownership of the means of production, replaced with communal ownership and more conscious centralized planning of economic and social life.

Socialists in that earlier time may have had different visions of the specific characteristics of the collectivist society of the future, but a rejection of private ownership and a belief in communal ownership for a more socially equitable distribution of what would be produced was shared by all socialists and communists.

In the late nineteenth and early twentieth centuries a cleavage did emerge between socialists and communists, but it had to do with means and not ends. In Western European countries such as Germany and France, the “democratic” socialists increasingly rejected the arguments of their narrower Marxist Russian cousins who were more and more adamant that change could come only through violent, revolutionary means. The German Social Democrats said that the same ends as those wanted by the Russian revolutionary socialists could be achieved through democratic means.

This distinction was reinforced after the October Revolution of 1917 that brought Lenin and his followers to power. Consider this expression of the difference between socialists and communists, taken from an article in the 1929 edition of the Encyclopedia Britannica written by G.D.H. Cole, who was a well-known British socialist:

Socialism is essentially a doctrine and a movement aiming at the collective organization of the community in the interests of the mass of the people by means of common ownership and collective control of the means of production and exchange….

The distinction between socialism, as represented by the various socialist and labor parties of Europe and the New World, and communism, as represented by the Russians and minority groups in other countries, is one of tactics and strategy rather than objective. Communism is indeed only socialism pursued by revolutionary means and making its revolutionary method a canon of faith.

Thus, in the eyes of socialists and communists, for most of their shared history well into the twentieth century, the desired destination — collectivist ownership and central planning — was the same. What they differed over was the political method of reaching that end-state: democracy or dictatorship, ballot boxes or bullets. But either way, the market economy and private enterprise would be relegated to the “dustbin of history,” to use one of Karl Marx’s phrases.

Western socialists and central planning 

It would be unfair and historically inaccurate not to emphasize that there were many “democratic socialists” in Western countries, both between the two World Wars and during the Cold War years, who refused to support or clandestinely collaborate with the Marxist masters in Moscow. They were sincerely devoted to the ideals of a society of civil liberties (freedom of speech and the press, freedom of religion, and individual autonomy over personal affairs) and democratic politics.

They placed those values above achieving socialism by violent means if it entailed losing them. And many of them were truly repulsed by the brutality and cruelty of the Soviet regime and other countries in which communist dictatorships had come to power.

But that does not change the fact that the goal was to end, whether democratically or violently, personal choice and freedom of association over many if not all things generally covered under the headings of supply and demand, production, and consumption. The government was to become the paternalistic overseer of the forms and content of much of everyday life through the nationalization of the means of production and central planning.

Scandinavians, free markets, and socialism

Bernie Sanders declares that his ideal democratic socialist society is to be seen in Sweden and Denmark. The only problem is that many in those countries and a number of American and other European critics of socialism vocally insist that what is in those countries is not socialism. They say that the economic systems in Sweden and Denmark are functioning and highly competitive market economies with, admittedly, significant social-welfare safety nets. Thus, they are market-based welfare states, and not examples of the socialist “better world” Sanders wants for America.

As Swedish classical liberal Johan Norberg expressed it not long ago,

I don’t think the American Left knows that Sweden is the country of pension reform, school vouchers, free trade, low corporate taxes and no taxes on property, gifts and inheritance. Sweden affords its big welfare state because it is more free-market and free trade than other countries. So if they want to redistribute wealth, they also have to deregulate the economy drastically to create that wealth….

We do have a bigger welfare state than the U.S., higher taxes than the U.S., but in other areas, when it comes to free markets, when it comes to competition, when it comes to free trade, Sweden is actually more free-market.

But notice Norberg’s wording. Sweden is a free-market economy, but with a bigger welfare state than that of the United States. Sweden had tried a more comprehensively government-controlling socialist-style system but had reversed paths to more market-oriented relationships because of the negative consequences from central planning.

So, is a free-market society compatible with a sizable welfare state? According to some, at least. Said libertarian commentator John Stossel, in one of his columns, “Next time you hear democratic socialists talk about how socialist Sweden is, remind them that the big welfare state is funded by Swedes’ free-market practices, not their socialist ones.”

Sweden and social democracy

But wait! So Sweden is a free-market, liberal democracy with
extensive redistributive welfare programs? Well, not according to Daron Acemoglu, professor of economics at MIT in Massachusetts. In his article “Social Democracy Beats Democratic Socialism” (Project Syndicate, February 17, 2020), we are told that Bernie Sanders’s call for “democratic socialism” is the wrong road for America or other countries to follow. It entails too heavy and direct a hand of government over the social and economic affairs of a nation’s citizenry.

What America needs is Sweden’s version of “social democracy,” which is not a liberal free-market system. If you are getting confused, don’t worry, you are not alone. In the late nineteenth century and into the twentieth, “social democracy” was what German democratic socialists called their version of socialism, which was to lead to both a centrally planned and a more highly redistributive political system.

Historically, social democracy, then, was democratic socialism. But no longer, not according to Daron Acemoglu:

Social democracy refers to the policy framework that emerged and took hold in Europe, especially in the Nordic countries, over the course of the twentieth century. It, too, is focused on reining in the excesses of the market economy, reducing inequality, and improving living standards for the less fortunate…. Simply put, European social democracy is a system for regulating the market economy, not for supplanting it….

What is needed, then, is not market fundamentalism or democratic socialism, but social democracy…. The market must be regulated, not sidelined.

Democratic socialism or social democracy?

Bernie Sanders calls for democratic socialism, which will control the economy through planning and regulation, as well as by widely redistributing wealth by expropriating most of what is owned by “the rich”; but that is not the “bad” Soviet-style socialism because it will not be (at least at the start!) a dictatorship. America will be just like Sweden and Denmark.

But, wait a minute! Johan Norberg and John Stossel tell us that those Scandinavian countries do not have democratic socialism. They are functioning, vibrant competitive free-market economies producing so much wealth that they are able to support welfare-state programs that are larger than those in America.

But hold it one more time! Daron Acemoglu insists that what Sweden has is not Sanders’s democratic socialism or a system of freewheeling “market fundamentalism.” Instead, Sweden has “social democracy,” which widely regulates markets and competition, redistributes wealth for greater income equality, and cares for the disadvantaged.

Sweden: Free market or central planning?

The reality, it seems, at least from what I’ve read and tried to understand, is that Sweden and Denmark are not what Bernie Sanders considers them to be and wants to see implemented under the label of “democratic socialism.” His dream is for something far, far closer to the centrally controlled and commanded economic system that was seen in the communist countries from which he rhetorically now tries to distance himself.

But neither is Sweden a truly free-market economy, in spite of what Norberg and Stossel say is the case, again on the basis of what I’ve tried to glean from various readings. It is, in fact, a “mixed economy” with degrees of competitive openness, but with significant government regulation and oversight, and with an extensive redistributive welfare state. It seems closer, again from my understanding, to Daron Acemoglu’s system of “social democracy.”

Acemoglu’s social democracy historically grew out of something similar to Sanders’s idea of democratic socialism. While the democratic socialists of the early and middle decades of the twentieth century, as we saw, opposed Soviet-style tyranny as a political basis for implementing socialism, they still believed in a socialist centrally planned economy and wanted to establish one.

Great Britain: Planning versus freedom

That is what was attempted in Great Britain in the immediate aftermath of the Second World War under the newly installed Labour Party government. British economist John Jewkes (1902–1988) detailed the meaning and consequences of the attempt to implement democratic socialism in his book Ordeal by Planning (1948; revised and enlarged edition in 1968 under the title The New Ordeal by Planning).

Nationalized industries and government production and distribution planning extended and enlarged the scarcities and shortages that had already been experienced during the war years, including lack of energy supplies for heating homes in the winter. Reduced consumer choices and sluggish and wasteful industry were then matched by the Labour government’s decision in the spring and summer of 1947 to introduce labor conscription to prevent workers from moving out of areas where the central planners wanted them to be employed and to relocate them to places where the planners needed them to be.

The democratic socialist ability to vote on those who would hold political office was shown to be inconsistent with the individual’s freedom of choice over what was to be produced, from whom and how much to buy, and the ability to decide on his place and type of work. Socialist planning and personal freedom were substitutes and not complements. More of one meant less of the other; they just did not go together when what people wanted and wanted to do was found to be inconsistent with the central plan social engineers were trying to impose on society.

The interventionist welfare state

By the late 1950s and into the 1960s, Western European social democrats had to grudgingly accept that traditional socialist planning did not work, threatened people’s everyday freedom, and could lose them elections. As a result, social democratic political parties moved away from campaign platforms promising nationalization and central planning.

Democratic socialism increasingly became Daron Acemoglu’s social democracy, that is, the highly regulated, interventionist state with extensive and expensive welfare states. Some nationalized industries were privatized, degrees of market freedom and competition were reintroduced or maintained, and taxes were modified to serve as incentives for work, saving, and investment for the economic growth and tax base needed to achieve the traditional socialist equalitarian redistributive ends through the welfare state.

Central planning was abandoned for the “managed” market economy. As British economist Vera Lutz (1912–1976) detailed in her book, Central Planning for the Market Economy (1969), the French variation on this theme came to be called “indicative planning.” The French government used taxes, subsidies, and regulatory incentives to indirectly induce private enterprise to move into the investing and manufacturing directions the political planners in Paris wanted, rather than directly controlling and commanding production and employment in the economy with a heavy hand.

Sovereignty of the individual

What none of the political and economic systems we have been discussing reflected or represented is the idea or reality of a free-market liberal society. Let us not forget the meaning of liberalism as a philosophy of individual rights and liberty that includes peaceful and honest ownership of private property, freedom of association (including freedom in all forms of production and exchange), and a constitutionally limited government with the duty to protect and secure people’s rights and liberty and not to violate them.

That was concisely explained by the liberal historian Hans Kohn (1891–1971), who was born in the old Austro-Hungarian Empire, fought in World War I, was a prisoner of war in Siberia during the Russian Revolution, lived for a time in the Middle East, and then left the “old world” in 1934 for the “new” in the United States, where he found a haven of liberty from the rising totalitarianism taking hold in the Central Europe from which he had originally come.

In his book Revolutions and Dictatorships (1939), Kohn contrasted the two fundamentally different forms of society and government:

Throughout history we find two fundamental attitudes concerning the relationship between the individual and the state. One attitude puts the state above the individual; the individual depends for the full realization of his faculties upon the state before whose authority he bows and to whose ends he is subservient.

The other attitude regards men not as the object, but as the subject of authority. The state is no end in itself, but a means for the self-realization of the individual, to the transformation of the society of men into a really humane society….

Liberty … in its negative sense protected the rights of the individual against the interference of the state … built [upon] the autonomy of the individual, or, as Kant called it, his dignity as an end in himself.

Self-governing individuals in a liberal democracy

To be an end in himself, the individual human being cannot be the tool or instrument in the compelled service of others, whether those others are private persons denying him his freedom, or those in political authority placed in that position by either bullets or ballots.

If we were to speak, in place of either democratic socialism or social democracy, of a name for the political order of human freedom with individuals as ends in themselves, we might refer to it as liberal democracy. It is “liberal” because it considers each and every individual human being as a self-governing person who is sovereign over his own life and who enters into voluntary and mutually agreed-upon associations with others for personal betterment as he defines it.

It is “democratic,” since self-governing individuals govern themselves politically as well, in that they elect those who are placed in the positions of securing and protecting their liberty under the power-restraining rules and limits of a strict constitutional order.

The modifier “liberal” makes clear that a democratic system of government is limited in its role and authority to preserving freedom, in comparison to any social democracy, which implies that a majority, or an elite claiming to speak for the majority, may abridge and usurp the liberty of some members of society to serve the coercive purposes of others, both in the marketplace and elsewhere.

We, therefore, need to revive the idea and ideal of a truly free-market-based liberal democracy over any socialist version of democracy that may be offered to us.

This article was originally published in the May 2020 edition of Future of Freedom.

The post Liberal Democracy versus Democratic Socialism versus Social Democracy appeared first on The Future of Freedom Foundation.

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About The Author

Richard M. Ebeling

The Future of Freedom Foundation was founded in 1989 by FFF president Jacob Hornberger with the aim of establishing an educational foundation that would advance an uncompromising case for libertarianism in the context of both foreign and domestic policy. The mission of The Future of Freedom Foundation is to advance freedom by providing an uncompromising moral and economic case for individual liberty, free markets, private property, and limited government. Visit

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