A Middle Way: Socialism, Capitalism, and Social Democracy 

NB: This piece is rough, something I threw together quickly for a young friend. But I thought I would share it anyway.

It’s valuable, when staking out a position, to play the Devil’s Advocate—to take the opposing point of view and present it as strongly as you possibly can. Why? Because such an exercise raises real issues with one’s own position, ones that commonly require one to make modifications.  

I wrote a piece a few years ago called something like “It’s Time We Progressives Started Using the S Word to Describe Ourselves.” I thought of this as a bold choice because the S word, Socialist or Socialism, is to many Americans a derogatory term on the level of, say, Satanist. Here was my thinking: Right-wingers hurl this term as generalized invective, even if they haven’t a clue what it means. The same thing was once true of the term Puritan. It dates to the late sixteenth century, when it was used by Catholics and Anglicans as a pejorative term to describe Protestants who wanted to remove the last vestiges of Catholicism from the established English Church. Henry VIII had disbanded the monasteries and seized Church properties and created a new Protestant Church of England, or Anglican Church, with himself, rather than the Pope, at its head. Some Protestants didn’t think that the Anglicans had gone far enough. They wanted an end to fancy ecclesiastical vestments; to the hierarchy of Cardinals and Archbishops; to ostentatious and expensive places of worship, with their gold chalices and stained-glass windows and elaborate artwork. They wanted local, congregational control over the ministry, and they wanted people to be able to read the scriptures for themselves, in vernacular translations. In other words, they wanted to purify the Church even more. They were scorned as Puritans but took the label on with pride, and in the late 1640s, they effected, in England, what is known as The Puritan Revolution, beheaded the king (Charles I), and established rule by Parliament, with Oliver Cromwell at its head. My argument in that essay was that we folk on the left side of the political spectrum in the U.S. should follow the model provided by the Puritans and accept the label Socialist with pride. 

Socialism and Communism 

Now, playing the Devil’s Advocate, we should look at the best possible case that we can make against Socialism. But before we can do that, we need to understand what Socialism is. There were many Socialist movements and experiments before Karl Marx, but Marx and his partner Friedrich Engels were the people who did most to establish a systematic theory of Socialism. So, let’s start with them. Their theory of Socialism was so transformative as to merit a new name—Communism, which they borrowed from previous Socialist uprisings and, in particular, from the workers’ revolution in France in the late 18th century that led to the establishment of the Paris Commune. Here’s the Marxist theory in a nutshell: 

Key to the Marxist critique of Capitalism is the Labor Theory of Value, which states that the value of something comes mostly from the labor applied to it. Take some sand, apply heat to it, pour off the melted silicon and leave behind the impurities, stretch and fold it, and you end up with glass. Sand is almost worthless. Glass is quite valuable. Its value comes from the labor applied to the raw materials. The Capitalist—the one who owns the mine or the factory—is someone who is able to marshal Labor and ownership of Capital, that is, of resources like raw materials and tools, to make products. The Capitalist makes profits by buying cheaply and selling dearly, in competition with other Capitalists. In the extreme case, he (The Capitalist was almost always a he) eliminates the competition entirely or almost entirely. He becomes a monopolist. The Capitalist, Marx argued, steals the bulk of the value produced by laborers. The value of the product—the glass—over and above what workers are paid is called Surplus Value. Contrast this with artisanal craftsmanship, in which the laborer keeps the value of his or her own work (perhaps after having paid fees to a Guild). If I am a medieval goldsmith or cooper (a barrel maker), I keep all the value of the labor applied to my raw materials (after those Guild fees)—gold or wood. In other words, Capitalism is theft from workers of this Surplus Value.

Marx and other Socialists looked around them at the society created by the industrial revolution—by the creation of mills and mines—with its breathtaking inequities and exploitation (twelve-hour workdays, child labor, horrific working conditions, poverty wages, etc.) and theorized that INEVITABLY, this horrific system would break. Capitalism carries the seeds of its own destruction, they rightly thought, upon observing the Capitalism of their day. Eventually, in modern, Capitalist, post-agrarian societies, the exploited working class, the Proletariat, would rise up against the ownership class, the Bourgeoisie, and take over the means of production. Marx was a materialist, and he saw economic forces as deterministic. Following this inevitable Communist revolution, workers, not Capitalists, would own the means of production. And that’s what Socialism means. It’s worker ownership of the means of production. Now, according to Marx, after the inevitable Communist revolution, there would be a practical need to organize economic affairs to the benefit the workers, what others, including Engels and Lenin, called a Dictatorship of the Proletariat. Marx is vague about how government immediately following the Communist Revolution is supposed to occur, but this period of the Dictatorship of the Proletariat, with leaders operating in the interests of workers, would eventually evolve into a classless society that would take from each according to his or her ability and give to each according to his or her needs. (One form this classless society might take would be Syndicalism, in which independent groups, or syndicates, of workers would own and operate via democratic processes, their own factories, mines, and other production centers.) In the meantime, until that classless society was realized, the Dictatorship of the Proletariat would act to ensure that everyone’s basic needs, for housing, food, healthcare, education, etc., were met.  

Marx’s method is often called Dialectical Materialism. The phrase comes from the German philosopher Hegel, who posed a method for philosophy called the Dialectic, which involved a Thesis, an Antithesis, and a Synthesis. In Marxist theory, material causes (the discontent of exploited workers under Capitalism) will inevitably, deterministically bring about change. The negation of workers’ rights in the appropriation of the value that they create will inevitably bring about the negation of the negation in the form of the workers’ revolution. The process will be as follows: Capitalism (thesis), Class Struggle and Communist Revolution (antithesis), Dictatorship of the Proletariat Leading to a Classless Society (synthesis).  

The Rightwing Critique of Marxist Socialism 

The rightwing critique of Marxist Socialism, and in particular, of the Marxist Leninism that took root in Russia, is basically that it’s either a cover story for dictatorship or is hopelessly naïve and doesn’t reflect or embody an understanding of human nature and of economic forces. Here, I will make the right-wingers’ case and try to do this as charitably as is possible. 

A Dictatorship of the Proletariat, or any Socialist government, will inevitably be disastrous—will become a totalitarian state and eventually fail, because of five fundamental issues: 

Self-Interest Leading to Totalitarianism. Despite its utopian aims, a Dictatorship of the Proletariat will put a few people in power. Power would become even more concentrated than in a Capitalist society, in this case, in the hands of those supposedly acting in lieu of and for the benefit of the workers. Because it is human nature to act in one’s own self-interests (a fundamental Capitalist tenet), the new leaders would exploit workers even more than Capitalists did, and be, in effect, just plain dictators. Welcome to the new boss, worse than the old boss. And this is what happened in Russia. By the time of Stalin, one leader was in effect a monarch. This is the process that Orwell satirizes in Animal Farm, where the pigs, having created their version of National, or State, Socialism, writ small, issue a degree that “All animals are created equal, but some animals are more equal than others.” (Oddly, in contradiction to Marxist theory, the Russian revolution occurred in an almost entirely pre-Capitalist, feudal, agrarian state rather than in a Capitalist industrial one. The Communist revolutions that Marx predicted for actual industrialist, bourgeois societies like Germany and Great Britain didn’t materialize [pun intended], for reasons we’ll look at later.)  

Insufficient Information for Wise Decision Making. A distant government will not understand local conditions, conditions on the ground, and so it will make stupid decisions, ones based on incomplete understanding. Individuals—dictators of any stripe—are simply too stupid and too ignorant (stupidity and ignorance are distinct but related attributes). So, for example, the attempted collectivization of farms in Stalin’s Russia for the benefit of workers in general led to massive famine and tens of millions of deaths.  

Lack of a Built-in Mechanism for Self-Correction. In Capitalist societies, competition in free markets leads to several kinds of self-correction. If farmers produce too much milk, demand will be less than supply, and prices will drop because some farmers will sell their milk more cheaply rather than write it all off. Some farmers will turn to other work, and supply will stabilize to meet demand. If farmers are producing too little milk, demand will drive prices up, and this will encourage others to go into dairy production. So, market processes that are smarter than individuals are operate automatically to ensure that prices and supply are roughly at optimal levels. The self-correcting mechanism of the market is what the British economist Adam Smith described in his bible of Capitalism, The Wealth of Nations, as the “invisible hand.” (The corrections are often quite painful, but Capitalists don’t like to talk abou that. Shhhhh.) This mechanism for automatic self-correction is disastrously absent in National Socialist states, with their price-setting and production-setting and government monopolies on production.

Substitution of Dictatorial Law and Regulation for the Self-Correction Mechanisms of the Market. In a free society, market forces lead to stability—to equilibria. So, for example, in pre-industrial America, it was an advantage for families to have a lot of children—more hands to work the family farm, but as people moved to cities and the society became industrialized, having more children became a burden. The government didn’t step in to ensure that those extra children were clothed and fed, so people simply stopped having as many. This is a natural means of population control, freely adopted. But in a Socialist or Communist society in which the basic needs of all children are met, free riders (see below) can have as many children as they want to have without having to worry about whether they could meet the needs of those children, and to fix the free rider problem, the government has to step in and start dictating how many children people could have, as China did with its One Child Policy. In such ways, totalitarian dictates supplant automatic, market-based self-correction.  

The Freerider Problem, or Lack of Incentives. Socialist governments operate equitably in workers’ interests—e.g., to supply them with basic necessities such as jobs and healthcare and housing and food. But if government is going to make sure that I have a job for life and free healthcare and a roof over my head and food in my belly despite what I do—if I am going to be equal to others in what is provided to me, no matter what I do, there will be no incentive for me to work harder. This is known as the free rider problem. In a Capitalist system, each person has to work hard in his or her own self-interest, and the society as a whole ends up benefitting from that. Friends I’ve had who lived in the former Soviet Union always tell stories about how nothing worked, how everything was shoddy, badly made or badly implemented. Sure, you had free healthcare, but the doctor had no incentive to treat you well, for he or she was a sole provider—you didn’t have an option—and that doctor was going to take home the same paycheck regardless of whether he or she gave a damn about giving you the treatment you needed. This is the problem that George Orwell satirizes in 1984, when Winston is trying to smoke a Victory Cigarette, produced by The Party. The cigarette is so badly made that Winston has to hold it tilted upward and draw on it hard because otherwise, the tobacco will fall out the end of it.  

A Middle Way 

So, all that might sound like a pretty damning indictment of Socialism, but bear in mind that what I have just described is what happens in National Socialist states. Remember that Socialism is accurately defined as WORKER ownership of the means of production. By that definition, the Soviet Union, in which the GOVERNMENT owned the means of production, was NOT a Socialist state and, in fact, no Socialist state has yet existed! 

At this point, I would like to pose a question: Why did the Communist revolutions that Marx predicted, that he considered inevitable, not occur in modern Capitalist nation states like German, Great Britain, and the United States? The answer, of course, is that those states passed laws to ameliorate the worst excesses of Capitalism: child labor laws, protections of workers’ rights to unionize and engage in collective bargaining, universal public education, workplace safety regulations, Social Security, national health systems (in the U.S., Medicaid and Medicare), and so on. In other words, Capitalism saved itself from itself. 

In the United States, however, wealth and income inequality have skyrocketed. Since the mid-1970s, wages have remained almost flat while productivity (the amount of value produced per worker) has increased by 80 percent. Where did all that Surplus Value from increased worker productivity go? Well, it went into the pockets of the ownership class. That’s why, right now, at a time when food and housing prices are soaring in the U.S., sales of luxury goods like yachts and 400-thousand-dollar watches are soaring. The U.S. still has not joined the rest of the civilized world in implementing single-payer national healthcare, and millions of Americans go without proper medical and dental care. A quarter of children in the U.S., the richest country in the world, live in poverty and suffer food insecurity. And all these problems continue to get worse. What’s to be done about all this? 

Well, we can follow the Nordic Model and adopt a Social Democratic system. (I use the term Social Democracy instead of Democratic Socialism in approval of the policies of the German Social Democratic Party, or SDP). In the Nordic Model, followed by countries like Denmark, the Netherlands, Finland, and Germany, self-correcting market mechanisms, incentives, and competition still operate, but equity is ensured by high progressive taxation coupled with superb social welfare programs funded by those progressive taxes.  

I’m a big believer in existence proofs. In study after study, the people of countries that follow the Nordic Model are the happiest and healthiest in the world.  

So, I believe that we should adopt the model that has proved to be most successful and that we should work toward Syndicalism by instituting tax and other incentives for expansion of Employee Stock Ownership Plans and increased board representation by workers.  

Long ago, Aristotle, who was wrong about so many things, got something right. In his Nicomachean Ethics and other work dealing with ethical issues, he advanced a position that has come to be known as the Golden Mean—a heuristic, or rule of thumb, in ethics, to seek a middle path. Take your pleasures, but don’t become a slave to them. Have pride in yourself, but don’t be vain and self-centered. Seek a temperate middle ground. Social Democracy is that ground.  


About Bob Shepherd

interests: curriculum design, educational technology, learning, linguistics, hermeneutics, rhetoric, philosophy (Continental philosophy, Existentialism, metaphysics, philosophy of language, philosophy of mind, epistemology, ethics), classical and jazz guitar, poetry, the short story, archaeology and cultural anthropology, history of religion, prehistory, veganism, sustainability, Anglo-Saxon literature and language, systems for emergent quality control, heuristics for innovation
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