Why We Should Take the “Socialism” Part of Democratic Socialism Seriously

Commentary by Steven Horwitz on FEE.org:

The Tyranny of the Majority

The website of the Democratic Socialists of America is clear about their desire to eliminate the profit motive, or the very least to subordinate it to “the public interest” in a large number of sectors of the economy. A good number of democratic socialists would expand public ownership and control into many of those same sectors. And all of them seem to agree that democratic control is needed for major decisions about “social investment” as well as trade, monetary, and fiscal policy.

The question is whether—even if we assume that the process is as democratic as the democratic socialists desire—they can actually create a world of peace and prosperity given the degree to which they wish to abolish markets and profits. I will argue that the answer is no.

As is often the case with these sorts of proposals, the details of how more democratic control over economic decision-making would work are left vague, but if they are serious about the “democratic” part, it will necessarily involve the participation of as many people as possible, presumably through some sort of voting mechanism. If instead, such decisions were left in the hands of a small group, even if they were elected by people in general, it would risk reproducing the same alienation and exploitation of the masses supposedly committed by capitalists and their bought-off politicians today.

In a recent piece for The Atlantic, Conor Friedersdorf raised the important critical point that leaving economic decision-making to majority voting imperils the ability of those with minority tastes to acquire the things they desire. For example, if we let Americans vote on whether resources should be devoted to the medical needs of transgender people, would it happen? Would residents of Utah vote to make sure that those who wished to consume alcohol and caffeine could do so?

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The (In)Efficient Allocation of Resources

As important as Friedersdorf’s point is, there is an even deeper problem at the heart of the socialist part of the democratic socialist vision. If public ownership is expanded and the profit motive removed, this implies the elimination of markets as the way in which resources in those industries are allocated. It certainly eliminates markets for ownership of capital resources by eliminating private and tradeable ownership claims to firms.

The question facing democratic socialists is this: how, in the absence of market prices, profit and loss signals, and private ownership of the means of production will even the most purely motivated actors in a deeply democratic process know what their fellow citizens want and need and, what’s more important, how best to produce those goods and services?

Even if “the people” want to ensure that minority tastes and needs are accommodated, how will they know what those are? In a market economy, the exchange of private property generates prices that work to signal producers about what is wanted and how urgently. The ability of owners of private resources to risk those resources on their best guesses about what is wanted, and to have the feedback of profits and losses to inform them whether they judged correctly, is what enables us to figure out what people want.  And that’s true whether it’s the masses or more specialized tastes. Markets are processes of discovery by which we learn things we otherwise would not, and could not, know.

Those same prices and profits of the market help us figure out how best to make the things that people want. This part of what markets do is often overlooked by socialists of all stripes. They might be able to offer mechanisms by which consumers could communicate their desires so that “the people” could know what needs to be produced. Even then, however, socialists over-estimate how much of what we know can be effectively communicated in words and statistics.  [read more]

In other words, just call it socialism and forget the “democratic” part. The democratic part makes socialism sound more nice and friendly that it really is. You just want to give it a nice big hug while it stabs you in the back.