What is Socialism?

Socialism has been a popular word in US politics since 2015 and the rise of Senator Bernie Sanders. Yet, there is little clarity on what it actually means. That’s because we have three different meanings for one word. What socialism actually is, what Sanders– and his supporters– claim it is, and what they actually want when they say they support socialism. 

Real socialism– ie the USSR and Venezuela 

First off, we have real socialism– think the Soviet gulags, the Iron Curtain and Berlin Wall, Cuban refugees, and Venezuelans eating dogs and cats to avoid starvation. What I mean by real socialism is simple enough: a dictatorship of the proletariat, the nationalization of the means of production, the labor theory of value, the rejection of market prices, and the central planning of economic activity. It was these principles that created “really existing socialism” in the USSR and Eastern Europe.

Capitalism with generous welfare– ie Scandinavia 

Next, we have what Sanders claims to advocate for. He says he advocates for democratic socialism like seen in Denmark, Finland, and Sweden. That’s nonsense. None of these countries can be classified as socialist– democratic or not– unless socialism just means whatever you like. Nor do any of these countries share much with Sanders policy agenda.

They lack minimum wages. They have regressive tax systems– see their significant VAT taxes– to fund their welfare state. Nordic healthcare systems are closer to Joe Biden’s public option than to Bernie’s radical Medicare for All proposal. Denmark and Finland have more billionaires per capita. They have significantly lower inheritance taxes for the very rich. Even their abortions laws are stricter than what progressives want! I could go on and on but at the end of the day there is little Sanders or his allies would actually like about Scandinavia. Their actual policies come much closer to the neoliberal agenda as defined by economist Scott Sumner: “free markets of classical liberalism with the income transfers of modern liberalism”.

deregulation of prices and market access, sharply lower MTRs on high-income people, freer trade, and welfare reform. Many other countries saw even greater neoliberal policy reforms, as once-numerous state-owned enterprises were mostly privatized.

Essentially, these Scandinavian countries take America’s support for the market economy and augment it with a more robust welfare system. They tried Bernie Sanders style “socialism” in the past and turned their back on it. And, as the cherry on top, both a former Swedish and Danish Prime Minister has called Sanders out for how he describes their countries. The International Secretary for Sweden’s Social Democrats even said Sanders was too far left for his party. 

Bernie Sandersism– ie Southern Europe 

Finally, we have what Sanders actually advocates for. When Sanders talks about his vision for America, he isn’t talking about Denmark and Sweden. He’s talking about France, Italy, Spain, Greece. The Scandinavian countries lack mainstream hard left parties which advocate a political agenda like what Sanders advocates. Instead, even Social Democrats in Scandinavia have adopted a pro-market orientation. That’s not true of southern Europe. 

While they share a generous welfare state with Scandinavia– if not more generous in some respects– they have a significantly more controlled economy. While Denmark, Finland, Sweden, and Norway are the 8, 20, 22, and 28 freest economies according to the Heritage Economic Freedom Index, Spain, France, Italy, and Greece are the 58, 64, 74, and 100. To put that in perspective, the US ranks 17. Southern Europe has essentially taken the Scandinavian model and stripped it of the economic engine that makes it work. 

Shockingly, these awful policies haven’t done well for these countries. Stagnant economies, high unemployment, even higher youth unemployment, financial crises, and regular political instability and riots have been their hallmark.

Exit quote: “Yep, he’d [Bernie Sanders] hate Denmark with its affinity for market solutions” – economist Wojtek Kopczuk

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