Embracing democratic socialism

Be on the right side of history and start wishing capitalism goodbye

What is democratic socialism?

There is just one New Year’s Resolution worth having in 2019: become a democratic socialist.

If you already are one, congratulations! This post may be preaching to the choir but I’m sure you’ll enjoy it anyway and will at least give you some good arguments against those who are still in denial (which sadly includes many on the left). If you’re not, keep reading and if these arguments don’t convince you, then perhaps nothing ever will.

What is democratic socialism?

The best way to describe democratic socialism is to start by what it’s not: communism. If you’re the kind that instantly has a mini heart attack by even a fleeting mention of the word “socialism”, relax, we’re not nostalgic for a return of the Soviet Union nor are we here to provide lame apologies for the disaster that is Venezuela (more on this later). With that out of the way, let’s explain in detail. Democratic socialism is the economic system whereby the means of production are owned and directly controlled by the people who work it. The keyword here is directly. Whereas communism attempted to do this by having the state take control of these means (which proved disastrous), social democracy seeks no intermediary. Imagine an economy where every business was a worker-owned cooperative and workplaces guaranteed similar democratic rights to their workers as citizens are guaranteed in the public sphere. That’s basically it.

Democratic socialism might sound similar to social democracy but in practice, social democracy remains capitalist: there is no fundamental difference in the corporate ownership structure in social democratic countries to liberal capitalist ones. The main difference is that social democratic societies tend to provide a wider array of public services (a welfare state and state-owned firms) as well as take a more active role in preventing market excesses (regulation). They also encourage strong trade unions to give voice to workers in the workplace; in fact, many social democratic parties were born from the late 19th century and 20th century labor movements. Social democratic systems like the Nordic Model therefore sit in a muddled middle ground between socialism and capitalism, incorporating the capitalist ownership structure but with strong and active states that help ensure a socially just society.

The problem with social democracy, however, is fourfold. For starters, welfare states are expensive. Very expensive. Many social democratic countries have tax revenues that approach or even exceed 50% of GDP, reflecting the scale of the welfare state needed to maintain a socially just society. And in the era of shrinking, and aging populations, the ability of social democratic societies to maintain existing levels of social provision is increasingly questionable. Indeed, if these welfare states were less generous than they are, the benefits of redistribution would largely disappear. According to the OECD, for example, pre-transfers income inequality in these countries is nearly as bad as in the liberal capitalist states. A second and related consideration is that these welfare states can be dismantled; often very quickly as the experience of the UK in the post-Thatcher years shows. Social democracy only tapers over the excesses of capitalism (at considerable cost) but does not eliminate the problem entirely.

A third consideration is that the institution that exists in most countries to protect workers interests, unions, can’t do the job alone. Many economists have now come around to accepting that unions are a positive force in business-labor relations, and that they contribute significantly to fairer distribution of income. However, union power can also be significantly dismantled by right-wing governments as happened during the Thatcher years when unions were blamed for being excessively militant and contributing to Britain’s economic malaise during the 1970s. Anti-union efforts, described euphemistically as “right-to-work” legislation, has also been on the rise in the US, where governments often actively oppose unionization votes as happened recently in a Volkswagen plant in Tennessee. Alternatively, some countries like Germany legally require employee representation on boards which is great; not surprisingly, Germany is known for its highly cooperative relationship between government, businesses, and unions and that has not prevented it from being one of the most competitive, dynamic economies in the world. Never forget to remind your right-wing friends about this, especially if they drive a German car.

Fourth, employee representation is good but it only allows employees to be minority on boards. Furthermore, they still don’t have ownership shares which mean government is needed to redistribute income through high levels of taxation. And while this redistribution has a positive impact on income inequality, it doesn’t do much about wealth inequality which is far worse. According to the OECD, wealth inequality within members states is more than twice as bad as income inequality. What’s more surprising is that many social democratic countries like the Netherlands, Germany, and Norway don’t do particularly well in this regard: in all three countries the richest 10% of households own more than half the country’s wealth and in the case of Netherlands and Germany, their wealth inequality is even worse than liberal capitalist Britain’s. Ultimately the criticism of social democracy is that it does not address the corporate root of inequality because the capitalist mode of production is by definition unjust. Democratic socialism addresses inequality at the firm level, not at the taxes/transfers stage which is not only cheaper but more empowering for its citizens. And which is likely to result in a fairer distribution of wealth, not just income.

Democratic Socialism in summary

But I like capitalism. Markets work. You’re writing this blog post on a computer created by a private company sold in a free market of goods.

For starters, capitalism is not synonymous with markets. Markets predate capitalism by several millennia: since the very time human beings exchanged any good or service between themselves. Only by understanding that markets (even relatively free ones) can exist without capitalism can you begin to understand what capitalism is: an economic system whereby the means of production are owned by private individuals for the pursuit of profit. Usually their profit, not yours. Just take a look at what happened after the UK and US governments waged war on their trade unions and deregulated labor markets: income inequality skyrocketed given that the owners of capital became free to increasingly distribute profits among themselves. During the 1960s and 70s, the average ratio of CEO-to-worker pay was around 20. Today it is an almost bewildering level of 312 notwithstanding that workers today are even more educated and skilled than they were nearly four decades ago. This is not a coincidence, nor is it the result of globalization making Western workers compete with third world workers as many economists (mostly liberal ones) have argued. It is the result of a deliberate policy of governments stacking bargaining power against workers.

Democratic socialism and markets are not mutually exclusive. Employee-owned firms (EOFs) would compete in the exact same ways as private-owned business do today. This is not a pipe dream: they already do. The UK’s second largest department store chain, John Lewis, is employee-owned. Huawei, the world’s second-largest smartphone maker is also one. Spain’s Mondragon Corporation is a confederation of worker co-ops in a myriad of industries that is one of the country’s top multinationals. The UK Employee Ownership Index, a stock index which tracks the performance of firms with at least 3% worker ownership has vastly outperformed (by a factor of four) the main FTSE index since it started in 1995. The idea that an EOF is necessarily inefficient, or cannot compete with big private firms is simply a myth. If you haven’t heard of many EOF’s it’s most likely because their CEOs aren’t self-absorbed narcissists who appear in the media for all the wrong reasons, like giving themselves million-dollar bonuses on years where they laid off thousands of their staff. Nor do they get golden parachutes when they get fired.

So if you’re reading this on a Huawei smartphone that you bought from John Lewis, don’t thank capitalism. Thank socialism. And if you’re reading it on anything else bought anywhere else, there’s no reason why it could not have come from an employee-owned firm.

What’s wrong with business owners and CEOs earning millions? They deserved it. What incentive would there be to do business if risk didn’t generate reward?

For starters, it is an almost undisputed empirical fact that CEO pay does not correspond to CEO performance. The percentage of CEOs that actually make a measurable contribution to their firm that cannot be attributed to other factors (such as market conditions) is actually a drop in the bucket in the universe of CEOs. If anything, the sheer complexity of the modern, global capitalist firm is such that its success depends less and less on the contribution of one individual, or a small group of senior executives and board members. Yet these are the people who reap the rewards since they are the ones that determine how the company’s profits will be distributed. Back in the day, trade unions ensured that workers would get a fair share of these profits under pain of strike action or other disruptions. Having had union power largely dismantled in the 1980s, workers in liberal capitalist countries no longer have any way to have their interests represented in a company’s remuneration policy. Unsurprisingly, the relationship between union membership and inequality is almost perfectly inverse.

Sadly, liberal capitalism does a great job of pretending this is not the case, by over-glorying underachievers (insert literally any Wall Street CEO before 2008) and turning the rare breed of truly gifted entrepreneurs into god-like figures (like Steve Jobs). While some liberal capitalist countries pay some lip service to the need to restrain executive pay, rarely do this translate into actual legislation for fears that it will stifle business activity. Quite simply put, liberal capitalist states have no stomach to challenge corporate interests. Don’t believe me? Consider that not a single senior executive from a US or UK bank was ever prosecuted as a result of the 2008 global financial crisis despite the ample evidence of fraud committed on a massive institutional scale (the few cases like Bernie Madoff, were as a result of individual rather than institutional frauds).

The face of greed: former Lehman Brothers CEO Richard Fuld

The myth that without the promise of vast rewards there would be no entrepreneurship also needs to be debunked. For started, the odds of any new business owner making vast amounts of wealth throughout their lifetime is so low that it’s not even a realistic proposition: about half of all new businesses fail in the first five years, and only a trickle of them ever grow beyond SME size. We have become so infatuated by corporate success stories that we forget that these are the exception, not the rule, and that no aspiring entrepreneur will stop pursing his dream if he could only make millions rather than billions. Unfortunately for most people, they won’t even get a chance to start a business: for this you still need capital and most people will never be able to save enough throughout their lifetimes. Even if they “stop splurging on avocado toasts” as one Australian real estate mogul infamously claimed (it was later revealed that his first real estate deal was made possible thanks to a loan from his grandfather).

A democratic socialist society would not inhibit entrepreneurship, in fact, it would encourage it. When the capital-creation process is undertaken by a minority who is then allowed to accumulate capital with minimal impediments, you end up with a lower share of capital for everybody else. This explains why the rate of return on capital tends to outpace that of economic growth in the long run which is the driving force of inequality, as Thomas Piketty explained in Capital in the Twenty-First Century. In traditional capitalist societies, one way around this problem for people who lacked savings was homeownership. This allows people to use their homes as collateral for a loan to start a business. Even that option is increasingly out of the question given the surge in house prices in many Western countries and the consequent decline in homeownership rates.

Little wonder than the US is currently suffering from its lowest new business creation rates in recent history, and the gap between the rate of firm creation and firm death is lower than ever. The average age of existing firms is also rising, which points that established businesses are reaping the spoils of liberal economic policy, at the expense of startups. But if this were not the case, there is no practical or moral reason why a society should prioritize the well-being of its entrepreneur class over its employees. The grand majority of working-age adults in any capitalist society are and will be employees, not employers. Libertarians drool over the utopia of a “nation of small-business owners” but in practice this in unfeasible since these small businesses would need to employ a lot of people if they wanted to expand and benefit from economies of scale. Hence the folly of orienting economic policy entirely to benefit the interests of employers at the expense of employees. It ignores the fact that most people will live their lives receiving their pay checks rather than handing them out.

But look at how much human progress has been attained thanks to capitalism in the last two centuries. You leftists love to complain but things have never been better.

Methinks you’ve been reading too much Steven Pinker and too little economic history. First of all, the exact same argument could be made by an apologist of mercantilism in the late 18th century. At that point in history most European states had gotten demonstrably wealthier than they had ever been and it had been through an economic system that largely benefitted monopolists and gold hoarders. Only in benefit of hindsight do we find it obvious that it was far from an ideal economic system, but at the time it had the same kind of sway on the governments of the great European powers as capitalism does today.

Mercantilism was the best economic system… until something better came along

If there is one phenomenon to thank for human progress in the last 200 years, it is not capitalism but science and technology, and that has existed independently of capitalism. Both the spinning jenny and the steam engine predated the publication of Adam Smith’s The Wealth of Nations in 1776, which in itself was not the beginning of capitalism but rather, the beginning of the critique of mercantilism. In practice, capitalism really didn’t start on a specific date but was a decades-long process that gradually deepened as new legislation was passed that repealed the mercantilist system bit by bit. For example, Britain’s Joint Stock Law of 1844 created the modern corporation as we know it (with limited liability added a decade later). In 1845 the Corn Laws that had been one of the bedrocks of mercantilist trade protectionism were also repealed. By this time the power loom, the railroad, and the telegraph had been invented. None of them were invented by private corporations under a capitalist system. Most other great inventions of the 19th century and early 20th century like the telephone and the airplane were conceived by individual inventors, not by corporations. Bell Telephone was created after Alexander Graham Bell patented the telephone; it did not finance its invention.

If anything, modern liberal capitalism has stifled invention, rather than encouraged it. Can you think of any major invention since the 1980s that has been as singularly ground-breaking as those of the industrial revolution? Surely you might be thinking of all the wonderful information technologies that has been spawned since, like the smartphone. But while it’s true that the first commercially successful smartphone was conceived by a private company (Apple), nearly all the component technologies that made it possible were government-funded. Furthermore, our modern culture of mass consumerism prioritizes superfluous innovation, case in point, why millions more is spent on R&D to combat baldness than malaria. When economics Noble Laureate Robert Solow famously said “You can see the computer age everywhere but in the productivity statistics” in 1987 he was puzzled by something that should be obvious today: hardly any of these technologies are really driving human attainment.

Even if one accepts the fallacious idea of material progress being thanks to capitalism, there is no guarantee that it is the best system for the future. Will liberal capitalism solve the very climate crisis that it created? Probably not. Will liberal capitalism remain the ideal economic system in the age in which automation and AI will replace large swathes of the workforce? Definitely not. Is it not a good idea to start thinking of what should come next rather than wait for a calamity to realize how wrong we were?

Aren’t you worried that this is simply a slippery slope to authoritarianism? Look how communism turned out despite its utopian intentions. Look what happened to Venezuela. In contrast, look at China after it embraced capitalism.

Ok, it’s time to make it clear again: democratic socialism is not communism and it’s not Venezuela. It does not advocate central planning. It does not lead to the state taking over the means of production, except in industries that are prone to market failures (like railroads), or produce social goods or services (like education and healthcare). In many Western countries these are already in state hands anyway which means that in practice, the level of state control of the economy would be little different from today’s (capitalist) social democratic states. Communism made a mockery of socialism because society never owned the means of production: the state did, usually for the benefit of its party leadership and nomenklatura (top bureaucrats and party cronies). And in Venezuelan socialism the mass distribution of oil wealth to the poor was used to prop up support for the Chavez/Maduro regime. This worked well when oil prices were high, but the true authoritarian face of the regime became apparent after 2014 when the country entered crisis. If anything, crony-socialist Venezuela took to the extreme one of the classic recipes of neoliberal economic policymaking for the developing world, which proved disastrous: do not produce at home what you can import from abroad for cheaper.

Any intelligent leftist should immediately disown these forms of authoritarian socialism, and make it clear that democratic socialism is even more democratic than liberal democracy, where your democratic rights end the moment you step into your workplace. In fact, workplaces are mini-totalitarian states where basic rights such as free speech and diversity of opinion are constantly stifled. People who do not tow the company line are blacklisted or fired. Sociopaths and sycophants progress to senior management, not unlike how they do in Stalinist regimes. Any cursory glance at your LinkedIn wall should be evidence of how severely limited the range of opinion is because everybody is too afraid to think different. Democratic socialism not only wants to have workers own the means of production; we want democracy in the workplace too. Fire your boss if he or she is an asshole or imbecile. Vote for your CEO. Have a say in managerial decisions. If even the most ignorant peasant can vote for a country’s president (by far a more important position than any CEO), why can’t the lowliest worker choose their managers? There is overwhelming evidence that the more democratic a workplace is, the more workers will feel they have a personal stake in its success and consequently work harder. A democratic socialist workplace will be more efficient, more productive, and certainly a happier and more rewarding place to work in. Why isn’t achieving this a worthwhile pursuit?

It is a strange irony that in liberal capitalist states, society has insisted on more democratic rights like accountability and transparency in the public sphere while undermining them in the private sphere. The backlash against the government spy scandal in 2013, for example, can be contrasted with the meek response to the hoarding of personal information by Google, Facebook, and other social media sites; this despite that peeping governments can be voted out of power, but you have no say on these companies’ privacy policies. There is also the problem that income inequality caused by liberal capitalist policies erodes democracy because economic elites have much more leverage over policymaking. Powerful lobbyists have instant access to politician’s ears. You do not. And when you allow companies almost limitless financing of political campaigns (as has been allowed in the US ever since the 2010 Citizens United Supreme Court decision), you end up with a generation of politicians who are nothing more than puppets to their corporate overlords. Remind you of the modern Republican party in the US or the Tories in the UK? It should.

When hyper-capitalism and plutocracy become indistinguishable

What about China? Surely China is the example of how capitalism is far superior to the Maoist socialist system that existed before that, a system that led to the disastrous “Great Leap Forward” that caused mass famines that killed millions. Well, for starters, pretty much everything is better than Maoism! But while China has embraced capitalism, it is a far different beast from the type of capitalism we are used to in the West. Almost every large, successful Chinese firm is majority-owned by the state, the finance sector is also state-directed and lends on the basis of national priorities rather than market needs, and the Chinese government pursues an active industrial policy that consistently “picks winners”; something that almost all liberal economists find repulsive and consistently argue against. According to the Index of Economic Freedom by the Heritage Foundation (a libertarian think-tank), China ranks 110th out of 180 in economic freedom, just below Gabon. So if you’re going to use China as an example of state-led development and industrial policy, by all means! Its growth has outpaced all the liberal capitalist states by a mile, and pulled more people out of poverty than any other country in the history of humanity. But as an example of successful free market capitalism, it is a far cry.

This all sounds great, but it’s too radical. How are you going to change the ownership structure of every company in the country? This is insane.

Just like capitalism didn’t have a start date, but was a decades-long process, so too the transition into democratic socialism would not be instantaneous. Doctor Zhivago will not go back to his stately home only to see it turned into tenements by revolutionary Soviet councils. The government will not need to expropriate anything. Rather, there are subtle ways in which this process can be achieved over time. One solution which already forms part of the economic agenda of the UK’s opposition Labour Party (as conceived by the Shadow Chancellor John McDonnell) is to give employers of all firms the right of first refusal at any change in ownership or closure of a firm. This means that any firm whose owners decide to sell or close it must first offer it to its employees (with the government lending them the money if need be). How can anyone object to this?

This “Right To Own” policy is great since it involves firms that owners no longer want to control, but what about all other firms? Another subtle strategy involves the tax system. If, for example, a government charges a 35% corporate tax rate (like the US), why not set aside part of this tax into an employee share buyback scheme? For example, Apple’s $71bn in operating profits in 2018, if taxed at 35%, would result in nearly $25bn in taxes. This constitutes about 3.5% of Apple’s $700b market capitalization. Setting aside just over $14bn would buy 2% of Apple’s stock value to put in an employee trust while the remaining $11bn would be paid as normal tax revenue. In 26 years, Apple would be an employee-owned firm! Again, how can anyone object to this? It involves no additional obligations for the firm: the firm must pay 35% of its operating profits regardless. What the government does with that money, whether take it as tax income or to finance employee share buybacks is none of the firm’s business.

If this sounds too extreme, consider that in many shareholder capitalist systems like the US and UK, a large part of shares are already owned by employees in the form of pension savings, life insurance, and mutual fund investments. Unfortunately, they have no voice or vote in the privately-owned funds that manage these investments, much less in the companies where these funds invest in. In other words, private investment funds use your savings to have equity stakes in private companies yet they are the ones who are allowed to appoint representatives on company boards as well as receive any dividends from these investments, all the while charging you ever higher fees for their services. As my friend and legal scholar Ewan McGaughey explains in this piece for Harvard Law School, there has been a deliberate effort by liberal capitalist governments to “smash and scatter” these personal savings so as to ensure that individual savers never have the clout to challenge institutional investors in a way that was possible when savings were organized collectively. There is no moral reason why employees should not receive full ownership rights of their savings, and have that ownership represented properly on corporate boards. Only the amorality of liberal capitalism allows and defends this. With mutual funds and private pension funds now accounting for around 30% of total share ownership in the US, this would instantly give a huge boost to employee ownership with not even a single dollar changing hands.

Also note that employee-ownership does not preclude the existence of large, private shareholders. The firm need only have its employees control 51% of its capital to own it; whether one person owns the other 49% is irrelevant. An entrepreneur can still have a large stake in a company, all this means is that they no longer have the controlling stake. Most Anglo-Saxon listed firms already operate under this logic, with ownership largely spread across multiple minority shareholders, none of which have a controlling stake. In short, you can still make considerable amounts of money in a democratic socialist economy. Entrepreneurship will not be penalized; it simply will not be infinitely rewarded because a firm’s success depends not just on its leadership but its entire staff. And if you couldn’t grow a business in 26 years to become rich, well, you probably never would have…

Isn’t it easier simply to reform capitalism rather than dismantle it altogether? Especially with the threat of far-right populism today, this is not the time for radical ideas.

And guess why far-right populism has emerged? Because of the failure of the post-Thatcher/Reagan liberal capitalist consensus, a consensus precisely because the exact same economic policies were adopted by parties on the right and on the left. In its endorsement of Tony Blair’s second electoral run in 2001, The Economist called him “the true conservative”, superimposing his face on a profile of Thatcher. Much of the legislation that deregulated the banking industry and that directly led to the 2008 global financial crisis was undertaken by the Clinton administration will full complicity of the Democratic party, such as the repeal in 1999 of the Glass-Steagall Act that was set up after the Great Depression. This liberal capitalist consensus has been directly responsible for stagnating wages, rising inequality, declining social mobility and a general sense that the system is rigged in favor of economic elites. This economic discontent has also fed into (and been fed by) other problems that have fueled right-wing populist discourse such as anti-immigration xenophobia.

Conservatives in sheep’s clothing

The idea of “reforming capitalism” has its main appeal among those who have a vested interest in maintaining the current status quo, amid fears that a populist backlash will have an impact on their wealth. It is the discourse of “liberal” politicians, academics, philanthropists, and industrialists who insist that the very real problems facing the humanity can be cured merely by tweaking the economic system that caused them in the first place. Invariably, “market solutions” are proposed for market problems, true left-leaning parties and policies are smeared as being the slippery slope to Venezuela, and a discourse of diversity and social consciousness is adopted to make it seem like these companies care more than just profits.

And yet what we see is the private sphere becoming ever more dominant in public and social affairs. “Thought leadership” drafted by management consultancies and investment banks replaces independent, academic debate; “corporate social responsibility” and philanthropy replaces government social provisioning; and the icons of social movements like Colin Kaepernick end up being hired by big multi-nationals like Nike for their ad campaigns. At the same time, the discourse of identity politics attempts to shift the focus of attention of voters on both the left and the right. On the left it replaces the pursuit of communal interests by tribalist ones; the fact that low-income workers are being screwed regardless of race, gender, or sexual orientation should unite people rather than divide them. On the right, it keeps angry white nativists obsessed over issues like immigration, pushing them into the hands of a radical right that keeps them riled up over meaningless, symbolic policies like a border wall while bleeding the country white to favor its big business cronies.

Quite simply put, the liberal capitalist consensus is dead. It died in 2008 when the very bubble it created to sustain itself burst spectacularly, and with consequences that many Western countries continue to live with. When one of the intellectual paladins of this consensus, economist Nobel Laureate Robert Lucas bragged in 2003 that “central problem of depression-prevention has been solved”, he was reveling the very hubris of an economic ideology that, to this day, refuses to think it got anything wrong. That the right is increasingly embracing an even more radical alternative, libertarianism, should serve as a stark warning that reason and common sense will not come naturally to the defenders of the liberal capitalist consensus. They will double down. “Reforming” capitalism is therefore not the solution. The system needs replacement. And the only replacement that ensures that everything we love about democracy can be transferred to the economic realm is democratic socialism.

I’m still not convinced. I’ve believed in capitalism all my life. You’re saying that I’ve been wrong all this time.

Capitalism had its moment. It was the system that undoubtedly contributed to human progress (even though as I explained earlier, it was not its main driver) throughout the 19th and 20th centuries and it was better than the mercantilism than preceded it, as well as the brands of authoritarian socialism (Marxism-Leninism, Maoism) that arose later. And certainly, if the social democratic consensus that existed in the post-war years had persisted to this day, perhaps we wouldn’t even be having this conversation. Furthermore, perhaps we needed a crisis like that of 2008 to realize our folly. For many people, things at least seemed ok in the pre-crisis boom years even if the sources of that wellbeing, such as easy credit, were in retrospective very unstable. They merely glossed over the fact that incomes were stagnant and the rich were getting an even greater piece of the pie. After all, most liberal economists argued during those years that it didn’t matter is the rich’s slice got so much bigger than yours insofar as yours grew too. Now we know how wrong that view is, so much that even the institutions that promoted it like the IMF have since recognized how vital addressing inequality is after years of denial.

So, you can forgive yourself for having been wrong in the past. What is unforgivable is if despite the overwhelming evidence that the liberal capitalist model is fatally flawed, incapable of reform, and not conducive to satisfying humanity’s needs in the future you still hold on to it like a dogma of faith. Liberal capitalists (and particularly, liberal economists which are the most intellectually arrogant of the bunch) continue to pretend like theirs is the sole voice of reason, that talking the language of technocrats gives them an intellectual edge despite promoting empirically wrong ideas. The current trend of “rational optimism” pursued by apologists of the liberal capitalist system is very much this “you’re too stupid to realize that things have never been better, now let me cherry-pick 10 facts to prove you wrong”. But the game is over. People are right to feel that his is a system that has failed. Only the irrational fear of the world “socialism” is what keeps them from realizing this is the only alternative.

You can be better than this. You can save face by saying that capitalism was the right system for a certain part of human history but that its time is up. You can say that there are many defendable aspects of liberal capitalism as well. Democratic socialist governments would do well to continue ensuring a conducive environment for entrepreneurship, maintain fiscal responsibility, keep inflation at manageable levels, and so on. Countries can still trade with each other, invest in each other, move people across their borders. These things are not tied to ideology, but to common sense and good policymaking. You do not need to stop believing in them. What you do need to stop believing is that democracy is compatible with liberal capitalism. And it is time to choose which of the two is more important for the kind of society you want to live in, and the kind of society you will inherit to your children and grandchildren.

Ok, I’m convinced, what do I do now?

Welcome to the club! If you want to actively spread the word, find out if there are democratic socialist groups in your country and join them, such as the Democratic Socialists of America (DSA). Unfortunately, in most countries there aren’t. But you can make a huge contribution by converting people to the cause, especially other leftists or centrists that still believe that this strand of socialism is too radical. Make them realize that democratic socialism calls for gradualist change, not radical revolution. Lay down the arguments in this post to convince them that their fears of employee-ownership or workplace democracy are unfounded. Today’s conservatives are probably a lost cause, particularly those who have been poisoned by the alt-right/alt-lite cesspool that stains the internet, courtesy of charlatans like Jordan Peterson, Dave Rubin, and Ben Shapiro among others — none of whom have any formal background in economics yet present themselves are having the final word on capitalism and socialism.

In a practical sense, the best thing you can do is to vote for parties that pursue democratic socialist policies, particularly with regards to the workplace. The UK’s Labour Party currently has the most far-reaching democratic socialist agenda of any major leftist party in the world, and it’s hard not to find it appealing even if Jeremy Corbyn’s pro-Brexit sentiment is disgraceful. Many of the newly voted-in Democrats in Congress are card-carrying democratic socialists, as is Bernie Sanders, a man who should have been the Democratic nominee in 2016 had his primary campaign not be sabotage by the liberal capitalist Democratic establishment. Sure, you may not agree with every policy in these parties’ agendas but it’s a huge step in the right direction. And after all, surely you’ve voted for parties in the past even if you weren’t 100% convinced by them. You voted for them simply because thought the alternatives were worse. It is unfortunate that many people who claim to be centrists tend to give the benefit of the doubt to the right in ways they never do to the left, in the sense that they end up voting for conservative politicians despite numerous objections. Perhaps it is time to start applying the opposite logic.

Who wouldn’t want this? Oh right, conservatives

It is likely that many of these politicians and parties which have a democratic socialist agenda will be labelled “populist”, something which also scares a lot of people. If (or rather when) the world’s first democratic socialist regime takes power, it will likely be a populist one. But populism in itself is not intrinsically good or bad. By today’s standards, Franklin D. Roosevelt and Clement Attlee (both of which set up their country’s welfare states) were populists. It is a testament of how far to the right that the center ground has shifted that anyone not pursuing an economically center-right agenda smothered in a technocratic discourse is labelled a populist by their opponents, both on the right and among the establishment left. This is not to say that bad populists from the left cannot emerge. Of course they can, and voters should be equally wary of them. But calling someone populist does nothing to delegitimize a candidate’s agenda. It is a vacuous term. Voters deserve more nuance than this.

I’m still not convinced.

Enjoy being on the wrong side of history. Remember that in 1776 when Adam Smith published The Wealth of Nations, capitalism was the radical, edgy, progressive idea that the mainstream mercantilist political class and economic elites insisted was impractical and doomed to failure. How wrong they were, and how wrong you will be too.

Update 28/1/19: Added a paragraph on wealth inequality within the OECD

Update 24/1/19: Added a paragraph on pensions and made some minor edits throughout.

Image Credit: National Review



Economist, Latin Americanist, Diogenesian cynic, author of The Glass Half Empty: Debunking the Myth of Progress in the 21st Century

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Rodrigo Aguilera

Economist, Latin Americanist, Diogenesian cynic, author of The Glass Half Empty: Debunking the Myth of Progress in the 21st Century