I spent my previous post explaining that orthodox socialism is effectively dead and what remains is really different variations on societies that effectively accept the market as the standard frame. Here, I would like to explain, in part, why the Bernie Sanders approach to market-based socialism (after the death of socialism) is not the right way forward.
As I stated in the previous post, this Americanized “socialism” is definitely of the half-hearted variety. Strong socialism would mean government ownership of the means of production. To my knowledge, Bernie Sanders does not yearn for the state to generally own production. If anything, the left has learned that actually owning and running things is a big hassle and entails getting blamed when things are done poorly. Instead, Sanders simply wants to tax business at a very high rate and tell it what to do whenever the government would like to dictate, such as with wages, labor conditions, maternity/paternity leave, etc. This model fits with what has come to be referred to as either “democratic socialism” or “social democracy.”
Now, why do I think the Sanders approach is a bad idea? There are several problems, but I want to focus on accountability and maturity.
My first critique relates to democratic socialism’s methodology. The old socialists had to actually run factories, manage workforces, and deliver goods the public wanted and needed. Generally speaking, they were not very good at that job. The variety, quality, accessibility, and desirability of goods they produced was often poor. You need only speak to the clients of those systems to know this. The social democrats seek to solve that problem by permitting the operation of private business while exerting control over it in an ideological fashion. We already do this to some degree with our extensive regulatory state, but Sanders proposes a much higher degree of regulation and interference.
Such a relationship encourages the state to be largely unaccountable. The state is permitted to impose whatever costs it wishes while simultaneously having essentially no responsibility to actually deliver goods and services. The result is the exertion of power in a wishful and largely infantile fashion. It is undisciplined and irresponsible desire made public policy. “Give me what I want and you worry about the consequences that follow.”
Imposing the Will of the Public
More deeply, I question the easy assumption that the state has a right to act in this fashion. One of the reasons I am passionate about teaching politics is that I am eager to convince students to think about whether such exercises of power are really legitimate. Okay, let’s imagine that I have a business located within a society and which produces a product which has value. What is it about that situation that gives the government the right to place a nearly unlimited potential set of demands upon me? I look back to the HHS mandate, which sought to provide contraception to all female employees by simply requiring employers to provide it. Here’s a novel idea for the state: why not impose the taxes directly upon the public and pay for the contraception out of the collected funds? If the state wants the result, then let it pay the cost of achieving it and bear the public’s anger if it bridles at the price.
It makes little sense to say that simply because a business operates within a community it should have to meet the many conditions government would seek to impose upon it. May we demand that a business not generate adverse costs for the community, such as pollution? Absolutely. The Friedmans and Hayeks of the world agree with that view.
But let’s scale back to the individual worker level. May we insist that an enterprise serve a nutritious lunch that follows some version of the dietary pyramid? No. Why? Because employees are adult human beings who do all kinds of things, such as making contracts, purchasing automobiles, raising children, etc. Certainly, they can figure out their own lunch situation. The same applies to many other aspects of life. Would we like to simply dictate that some person or organization with money and resources provide for our needs? Sure. But that’s not really a free, adult way of doing things.
The Price of High Taxation
In addition to the problem of allowing the government to simply impose the will of a public upon the productive sector (as long as some mysterious source foots the bill), there is the issue of taxation. Ideally, taxation should apply as broadly as possible at as low a rate as possible. The eager consumers of Bernie-nomics likely have it in their minds that they will continue to pay very little in taxes, while the fortunes of the dodgy and suspect CEOs of the world offer an endless bounty that may be tapped to cover all needs.
Somehow, American progressives seem to have developed the idea that both great progress and a moral statement can be made largely by placing high taxes on wealthy persons and businesses. The difficulties with that approach are almost too many to catalog. But consider a few.
For one thing, there isn’t enough money available. There are some spectacular fortunes out there, but once you start dividing them up by the hundreds of millions and consider the negative impact on incentives, you realize that Margaret Thatcher is correct to say that you eventually run out of other people’s money. Generally speaking, European entitlements tend to require European taxation, something that is largely alien to modern Americans.
But also take into account that individuals and businesses are mobile. They can move. This is why the high-tax dreams of so many progressive mayors often fail. The big money moves outside the city limits. The same can happen with a state or even a nation. Corporate inversions threatened to turn American companies into Irish ones, for example, with substantial benefit in terms of lower taxation. The recent U.S. corporate tax reform was needed in large part to keep corporate earnings from living permanently offshore instead of being brought back home to swell our own coffers.
What policymakers like Bernie Sanders need to understand is that taxation is a price like any other price. If people or organizations are not willing to pay it, then they will pay a lower price offered by another provider. Nations, in reality, are just like states, cities, and even businesses. They provide value at a certain rate. If that price is too high, then people and organizations go shopping.
What About Scandinavian “Socialism”?
What about the Scandinavian countries with their purportedly wonderful experience with market-based socialism (which, again, is not really socialism at all)? First, the enhanced welfare states of the Nordic countries owe something (as do all of our welfare programs) to an earlier time in which we were demographically blessed. After World War II, we had an abundance of children to sustain an elderly population that was much smaller. When the math is on your side and you have a very large, young, healthy, and working population, then you can afford to provide more for those in need. Unfortunately, if you look at something like social security, we are coming to a place of having two people working for each beneficiary, as opposed to a time when you might have more like ten to 12 people working for each beneficiary.
Second, and following the first, the Scandinavian countries are no longer pursuing democratic socialism with the vigor they once did. The reasons are simple: sustainability and affordability. Finally, though not conclusively, Scandinavian countries face the same issue as the rest of us, which is international competition. The old model may have been a demographic blip in an age of Western families reproducing below replacement levels.
There are other reasons to combat Bernie Sanders’ brand of social democracy, but the ones I’ve offered make the evaluation a bit more sober. The reality is that his policy is more of an anesthesia to ease the pain of modern life as opposed to a tonic designed to improve our prognosis.
What we need to do is to make it easy to do business, easy to work, easy to hire and fire, easy to pay taxes, and easy to collect them. We also need to figure where it makes sense to have government spend and where it doesn’t. It’s no accident that the things individuals pay for themselves, such as technology and elective medical procedures (like LASIK), continue to get better and cheaper, while those that the government subsidizes (like education and health care) become incredibly expensive and without the rate of improvement.
*This post has been adapted from an earlier item on my personal blog.