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The perils of democratic socialism

It's surprising how many people advocating socialism do not know how to define it. For them, it's summed up by one word: free. Socialism would provide free college, free healthcare, free retirement income, guaranteed work and a decent living. In a socialist world no one would be left behind because the government would assure income equality. After all, why should those who are rich not share their wealth with the poor, the underprivileged and racially disenfranchised?

So, what is socialism? In a nutshell, it’s the supremacy of the State over the individual. It's when the government takes ownership of the means of production and promises to redistribute wealth in what is claimed to be a fair-minded way. On the surface this appears to be an attractive solution to poverty and fiscal insecurity, but for now let's consider the philosophical view of Karl Marx, whose economic theories impact us even to this day.

The basic economic axiom of Marxism is that the poor are poor because the rich are rich. Capitalists are the oppressors: the poor are their victims. Because the rich will not share their wealth voluntarily, the only just course is to confiscate private property and let the State redistribute wealth and benefits. Through tight controls and the monitoring of the economy, justice and equality are able to prevail. Capitalism, we are told, is based on greed: socialism is based on need. Mothers were to work outside the home so that government-approved schools could raise their children who, in reality, belonged to the State. The family unit was no longer to be seen as a fully independent, economic unit of society: communal housing had to replace private housing. The goal was a classless society with no kings and servants, no owners and workers, no rich and poor and no wives and husbands shaping the world view of their children.

Those who studied Communist-era Russian history could see why, initially, Marxism was so attractive to the Russian people. They had suffered terribly under the tsars, who had enslaved them and treated them harshly with total disregard for their suffering and abject poverty. To many minds the Bolsheviks were fighting for the common people, who were entitled to at least some measure of decent living conditions and security. But, it was not to be. The promises evaporated in the top-heavy Communist bureaucracy, with the State controlling all wages and determining which jobs were given to whom while corruption multiplied. State-run businesses collapsed under the weight of inefficiency and disinterested workers, and the bureaucrats who promised liberation became thieves.

We're now being told that democratic socialism would correct these weaknesses. This dogma promotes the idea that the State can take over companies and wealth incrementally, and once it's installed democratically by the will of the people they will see the 'value' of this form of government and will want it. One of the biggest arguments in favour of democratic socialism is that it brings wage and price controls: it's not subject to the 'competitive bidding' that capitalism inspires. The government can make value judgements and subsidise various goods even if they are not selling and would otherwise disappear in a capitalist economy. Government control would also not allow the wealthy (the top 1 percent) to have more than the other 99 percent combined. But there are reasons why socialism, even of the democratic variety, cannot keep its promises for very long. Though well intended, if followed through to beyond a certain period of time it will fail because it builds a ladder to a place that does not exist. In other words, it talks about distributing wealth but it has no way to create it.

Sweden is often upheld as an example of democratic socialism done correctly, but it's actually an example of the failed policies of socialism. The historian of ideas, Johan Norberg, has pointed out that by the early 1980s Sweden was a country made wealthy by capitalism, limited government and low taxes, its people enjoying a high standard of living. With wealth to spare the country decided to experiment with socialism, increasing the size of government and distributing free goods and services paid for by higher taxation. As a result, businesses began leaving Sweden because the country was no longer hospitable to innovative growth and competition. Its standard of living began to decline and the money accumulated by capitalist policies began to dry up. By the 1990s Sweden found it necessary to make changes in order to avoid economic ruin. The government encouraged private property ownership, lowered taxes, cut regulations and even partially privatised social security. With open bidding in the public sector the economy began to recover, and today Sweden's economy is largely market-driven.

Venezuela is another country that used its wealth gained by capitalism to transition to socialism. This oil-rich country elected a socialist leader in their regular election cycle who held out the promise of widespread wealth and equality. The people thought the promises of socialism were too good to pass up, being told that it was unfair that businesses were wealthy and the common people poor. At the time Hugo Chávez was elected Venezuela was prospering. The country had a growing middle class and economic stability. True to his promise Chávez slowly transformed Venezuela into a socialist country, taking control of the means of production as well as huge tracts of land owned by British companies. Many businesses were nationalised, with Chávez sometimes paying off the companies and at other times just taking them.

At first this nation had full employment, guaranteed salaries and national healthcare. Ecstatic socialists around the world lauded the changes, considering them perfect examples of how democratic socialism could work. But now, Venezuela's economy has collapsed and people are scrounging for food. Adults can afford protein-rich food only twice a month: malnutrition and starvation are everywhere. Criminals break into houses searching for food, and if people criticise the regime they are persecuted or killed. Those who can obtain passports or visas are leaving, willing to depart their homes and relatives in order to make a living once again.

Venezuela didn't default economically. Rather, the government printed more money, creating inflation of more than two million percent. Once a country embraces socialism there is no easy way back. There is, after all, no end to money – simply print more – but as Germany learned after World War 1, printing more money to pay a national debt can be only a temporary answer before economic disaster. Of course, Chávez became very wealthy, as did members of his family. After he died of cancer in 2013 his daughter, Maria Gabriela, had a net worth of $4.2 billion. His successor, Nicholas Maduro, has become wealthy also. Greed and corruption are widespread. The elite who control the economy are doing very well in the midst of a country that is scrounging, starving and dying.

So where did the US Federal Reserve obtain the $2.2 trillion to compensate workers and businesses that were shut down during the Covid-19 pandemic? The money was simply created by fiat. The word comes from a Latin term that means “let it be done” and as the word implies, the money was simply created out of thin air by the Federal Reserve's decree that it exist. It was created digitally without anything to back it up except people's faith in their government. The Federal Reserve prints very little actual money: printed money is only a fraction of the total money the government owns. The ability to create billions or trillions of dollars by fiat reminds us that money itself has no real value: its value is always based on trust. Even gold has no special value, except that throughout the centuries people have assigned value to it. The Knights of Malta stamped Non Aes, sed Fides (not the metal, but trust) on their coins.

One wonders what form of currency will be adopted in the Millennial Kingdom. Perhaps there won’t be any at all. Whatever the case may be, since Jesus Himself will rule and reign from Jerusalem, we know that all things will be equitable, fair and just. What a day that will be.

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