acemoglu17_ Alex WongGetty Images_bernie sanders

Social Democracy Beats Democratic Socialism

Feb 17, 2020 Daron Acemoglu

Now that US Senator Bernie Sanders has emerged as a leading contender for the Democratic Party's presidential nomination, his brand of democratic socialism warrants closer scrutiny. Simply put, it is neither a close approximation of the "Nordic model" that Sanders often invokes nor a solution to what ails the American economy.

CAMBRIDGE – It used to be an unwritten rule of US politics that a socialist could never qualify for high national office. But now a self-proclaimed “democratic socialist,” US Senator Bernie Sanders, is the leading candidate for the Democratic presidential nomination. Should America embrace the change?

Democrats have made the primaries about much more than US President Donald Trump. Sanders’s momentum reflects a yearning for radical solutions to serious structural economic problems. In the decades after World War II, the US economy became steadily more productive, and wages for all workers – regardless of education – grew by over 2% per year, on average. But that is no longer the case today.

Over the last four decades, productivity growth has been lackluster, economic growth has slowed, and an increasing share of the gains have gone to capital owners and the highly educated. Meanwhile, median wages have stagnated, and the real (inflation-adjusted) wages of workers with a high-school education or less have actually fallen. Just a few companies (and their owners) dominate much of the economy. The top 0.1% of the income distribution captures more than 11% of national income, up from around just 2.5% in the 1970s.

We hope you're enjoying Project Syndicate.

To continue reading, subscribe now.

Already have an account? Log in

Support High-Quality Commentary

US President-elect Joe Biden may have promised a “return to normalcy,” but the truth is that there is no going back. The world is changing in fundamental ways, and the actions the world takes in the next few years will be critical to lay the groundwork for a sustainable, secure, and prosperous future.

For more than 25 years, Project Syndicate has been guided by a simple credo: All people deserve access to a broad range of views by the world’s foremost leaders and thinkers on the issues, events, and forces shaping their lives. At a time of unprecedented uncertainty, that mission is more important than ever – and we remain committed to fulfilling it.

But there is no doubt that we, like so many other media organizations nowadays, are under growing strain. If you are in a position to support us, please subscribe now.

As a subscriber, you will enjoy unlimited access to our On Point suite of long reads and book reviews, Say More contributor interviews, The Year Ahead magazine, the full PS archive, and much more. You will also directly support our mission of delivering the highest-quality commentary on the world's most pressing issues to as wide an audience as possible.

By helping us to build a truly open world of ideas, every PS subscriber makes a real difference. Thank you.

Subscribe Now

The Fall of the Berlin Wall and Social Democracy
Mlenny/Getty Images

The Fall of the Berlin Wall and Social Democracy

Daron Acemoglu
The fall of the Berlin Wall heralded not only the collapse of communism in Europe, but also the destruction of a broader – and far more constructive – social-democratic compact. To prevent a return to extremism and instability, that compact must be refashioned for the twenty-first century.
reflects on how the end of communism in Europe also ended the West's highly successful post-war economic model.

5
Elizabeth Warren’s Bold Ideas Don’t Go Far Enough
Scott Eisen/Getty Images

Elizabeth Warren’s Bold Ideas Don’t Go Far Enough

Daron Acemoglu explains why restoring productivity and wage growth will require less automation and more worker power.

16

new comment has been posted. new comments have been posted.

0 Comments on this paragraph, 25 in all 25 Comments on this article

Phillip Hansen May 5, 2020

Here, it seems that the major issue is the disparity between the understanding of social democracy and democratic socialism. When considering different plurals of democracy and their descriptors it is important to isolate the descriptor and drill down into it in order to understand who is using it and for what purpose as each descriptor of democracy tells its own story of what that particular form of democracy is. This process of drilling down opens the opportunity for debating the value of the descriptor within the scholarly community and the wider public in general. These ideas are explored in greater depth here: (https://www.researchgate.net/publication/325504277_2234_Descriptions_of_Democracy). It is evident here that, although both types of democracy would at face value appear very similar, the the author prioritises one form over the other. It is interesting to note how the author refers to the idea of a crisis of economic democracy, and how it can be fixed with the implementation of social democracy, rather than democratic socialism. This idea of looking to other forms of democracy to fix one's own 'crisis' is something that has been an interest to the scholarly community over the last half decade, and is explored in greater depth here: (https://www.researchgate.net/publication/277691269_The_Crisis_of_Democracy_Which_Crisis_Which_Democracy).
A new reply to this comment has been posted.
Curtis Carpenter Mar 7, 2020

I think a majority of Sander's supporters are what Engles defined (in the 1847 "Draft of a Communist Confession of Faith") as "bourgeois socialists:"

"The (bourgeois socialists) consists of adherents of present-day society who have been frightened for its future by the evils to which it necessarily gives rise. What they want, therefore, is to maintain this society while getting rid of the evils which are an inherent part of it. To this end, some propose mere welfare measures – while others come forward with grandiose systems of reform which, under the pretense of re-organizing society, are in fact intended to preserve the foundations, and hence the life, of existing society."

Senator Sanders himself is, I suspect, far more authentic in his claim of advocacy for Democratic Socialism than his supporters -- but he is also a realist regarding the U.S. economic and political system. Off the stump, I don't doubt that his focus would be on much more of a social democratic approach to the (very real) structural problems we have. By aiming far left, I think he's hoping he can move the country to just barely center-left.
A new reply to this comment has been posted.
Andrés Arell-Báez Feb 28, 2020

It sounds exactly as Bernie Sanders, right?
A new reply to this comment has been posted.
Stefano Barazzetta Feb 25, 2020

All this Op Ed is a gigantic straw man.
Where exactly is Sanders saying that firms, and means of production in general, should be all nationalized?
And, by the way, when analyzing European social democracies you conveniently omit to mention significant examples that don't fit with your narrative:
- Swedish (Vattenfall) and Norwegian (Equinor) energy companies are basically nationalized, and are doing a fantastic work
- German corporate governance model provides strong powers to workers representatives, and last time I checked Germany was a very strong economy..
More intellectual honesty, please.
- B Davern Feb 25, 2020
  
  Straw man indeed. I kept yearning for one specific example or reference back to Bernie Sanders, but none came. The schism between Acemoglu's representation of Sanders's platform and Senator Sanders's actual voting history in Congress can only be measured in light years. I smell an academic using his tools to defend his emotions. I prefer to think that than the alternative; that Acemoglu is a priest for some ancient dead religion.
  - B Davern Feb 25, 2020
    
    "Isms" don't exist in real life and presidents in the US do not rule autonomously. It is time to increase the sample size of the voices involved in making major decisions. The few who are making the decisions today are failing to even identify the biggest threats.
    
    Therefore the time has come to disperse power again. To argue that the same old decision making Star Chamber can fix this sorry state of affairs, what seems to be Acemoglu's position, is just painful at this point. NO! The same old will not address our biggest threats, the same old decision makers won't even acknowledge them.
    A new reply to this comment has been posted.
  A new reply to this comment has been posted.
A new reply to this comment has been posted.
Thomas Holz Feb 25, 2020

Despite calling himself a democratic socialist, doesn’t Bernie Sanders in 2020 seem to be more of a social Democrat?
A new reply to this comment has been posted.
Esen Gurtunca Feb 24, 2020

It is an established fact that regulation in the U.S. does not work-economic literature testifies to this. Regulation results in more complications and less accountability. Note that the chiefs of the new tech firms want to be regulated. Why do you wonder...
A new reply to this comment has been posted.
Ilkka Tahvanainen Feb 23, 2020

Not adequate analysis on political systems concerning historical progress as movements in Nordic countries. What actual government is in power does not explain by date why law took place, push for reform to take place has been longer process and become result in time even in government has changed. More complexy analysis might be needed to avoid eclectic analysis of history.
A new reply to this comment has been posted.
Robert REYNOLDS Feb 23, 2020

Well Daron, I feel that there are many people who will choose to disagree with you. No matter how skillfully you choose to 'paint the lily', or attempt to 'turn a sow's ear into a silk purse', this system that you so eloquently attempt to defend and justify, has created more and more homeless people in my country, denied people health care and a decent education and increased the gap between the rich and poor.

As a consequence, I for one will do everything I can to ensure that this pathological strain of capitalism, also known as free-market economics, is destroyed. I want to live long enough to be able to dance on its grave.
A new reply to this comment has been posted.
Joe Ryan Feb 23, 2020

In the spirit of distinguishing terms, Prof. Acemoglu might have been clearer where he used the term "capital" in writing, "an increasing share of the gains have gone to capital owners and the highly educated." The term's meaning has relevance for the partisan debate.

Capital is control over a firm. It may be "securitized" by documenting ownership of a variety of salable assets. But the sale value of capital is only an indication of the monetary value of controlling the firm, its assets, its contracts, its activities, its outputs, etc. (By the way, assets go far beyond capital goods. Look at the range of items included as "capital" in Piketty's "Capital in the Twenty-First Century," page 48. I read elsewhere that the value of intangibles may be over half the value of capital in many important firms, if only for purposes of tax planning. Also, while a firm controls the capital goods it uses, it may not own them.)

The policy debate has implications for control over firms, particularly large firms with many stakeholders. One side of the debate is based on the ideology of capitalism, "laissez faire," which asserts that any involvement in direction of firms by others besides the capitalist owners – such as by employees, governments, or "society" – is illegitimate and socially harmful.

The other side of the debate asserts the opposite, that society as a whole has a right to intervene in the direction of at least some aspects of the activities of firms with many stakeholders, and may benefit from it. This is "socialism."

One way of conceptualizing this is that a "socialist form of government" is the same for economics as a "republican form of government" is for politics: they both implement the idea that the public has a right to act in its self-interest. This contrasts with old-regime monarchies for politics and fundamentalist laissez-faire theories in economics, both of which deny rights to "the public." This way of putting things is reflected in the term "democratizing the economy" (although the term is also sometimes used to mean moving towards more equality in individuals' private ownership of capital).

Socialism doesn't require society to "nationalize industry" or to do anything in particular, any more than laissez faire requires a capitalist to do any particular thing. What the policy debate is precisely about is what are the best things for society to do, where the laissez-faire answer is "only what capitalists ask for" (which is not exactly nothing).

At least implicitly, the debate always takes place in the context of capitalism, which has dominated U.S. society for generations, and of socialism, which is at least equally accepted within the mixed U.S. economy (much of which is not capitalist at all). So, it would be nice to express preferences about policies without stigmatizing the terms. And for that, some clarity about what they mean would probably help. Maybe the paragraphs above could contribute to that.
A new reply to this comment has been posted.
Eric Einhorn Feb 23, 2020

Excellent concise summary of the Nordic model (which has important national variations). Two elements just mentioned in passing: strong labor movement that negotiates for most wage earners. Strong education system that provides good vocational and academic education. Moreover it requires adults to maintain or improve their working skills.
The challenge has been to maintain the system in an "open" economic/political system, manage immigration and integration, and to meet new challenges like environmental changes, demography and ageing, etc.
A new reply to this comment has been posted.
New Cavendish Feb 23, 2020

A very useful argument. I had thought that Sandes's use of the "democratic socialist" label for his programs was simple misbranding and that what he really meant was social democracy. Perhaps I was wrong and he really means the whole democratic-socialist-cooperative romantic dream. If so, that's all the more reason to oppose him. One side note to this article: it is important in considering European precedents to look not only at the Scanidavian social democrats but also the Christian Democrats in the rest of the EU: Christian Democracy, though now somewhat discredited by the experience of Italy in particular, has a number of very useful concepts, notably solidarity and subsidiarity, which have become the foundation of the EU and also provide good guidance to how to achieve humane, functional capitalism.
A new reply to this comment has been posted.
Prashant Kotak Feb 20, 2020

The People's Front of Judea vs The Judean People's Front.
- B Davern Feb 25, 2020
  
  Splitters!
  A new reply to this comment has been posted.
A new reply to this comment has been posted.
Prashant Kotak Feb 20, 2020

Which assumes that the market can, in fact, be regulated in a tech dominated, globalised world. So prove it then. Because the problem is untangling the chains of networks of ownerships, liabilities and responsibilities in a digitally borderless world stuffed with 'virtual assets', entities that are supposedly eventually abstractions over real entities, but more often than not are abstractions over other virtual entities. I'm asking the question: what is the basis for believing that these global chains can be unpicked, and thereafter tracked globally, without violating basis freedoms, so that fair governance is possible.
So as a starter, prove how you would identify the creators of Bitcoin, decide if they created a product or a service or a currency or something else altogether, put a value on their holdings, determine the tax that should apply to them, and in which jurisdiction, and how you would police this globally. And while you are about it, also come up with a scheme for tracking and governance in a world with a million private currencies.
A new reply to this comment has been posted.
j. von Hettlingen Feb 19, 2020

Daron Acemoglu says Bernie Sanders, a self-proclaimed “democratic socialist,” has improved his standing in national polls since his victory in the New Hampshire primary, raising the possibility that he could amass a commanding delegate lead on Super Tuesday in two weeks. Sanders’s “momentum reflects a yearning for radical solutions to serious structural economic problems.” But the question is whether the US “should embrace” the change.
The author believes democratic socialism will not “offer a cure” for the grievances the US is grappling with. Its adherents see “market economy as inherently unfair, un-equalizing, and incorrigible,” and seek to “cut that system’s most important lifeline: private ownership of the means of production.” They reject the idea that “firms and all of their equipment and machinery rest in the hands of a small group of owners,” and would “prefer ‘economic democracy,’ whereby companies would be controlled either by their workers or by an administrative structure operated by the state.”
Instead of adopting the “Soviet-style brand,” democratic socialists have “their envisioned system,” which can be “achieved wholly by democratic means.” The author says, “the most recent attempts to socialize production (in Latin America) have relied on anti-democratic arrangements. And that points to another problem with the current debate in the US: democratic socialism has been conflated with social democracy. And, unfortunately, Sanders has contributed to this confusion.”
In the 1970s, Bernie Sanders advocated for the nationalisation of most major industries, including energy companies, factories, and banks, when he was a leading member of a self-described "radical political party". In 1988, as newly-married, he made a 10-day visit to the Soviet Union during his honeymoon. He had kind words for left-wing dictatorships when he was young. In February 2019, he refused to describe Venezuela’s Nicolás Maduro as a “dictator.”
Sanders’s supporters are anxious to downgrade his self-described socialism into something more politically palatable — like Great Society liberalism, or perhaps, at most, a Nordic-style welfare state. But he, like his British soulmate, the – still ruling – Labour Party leader, Jeremy Corbyn, are seen as the left of Europe’s moderate social democrats.
Critics say Sanders’s platform is more radical than the Labour Party’s 2019 election manifesto. He wants government to absorb a much higher share of GDP, intervene even more heavily in sectors such as health care, and attack capital more aggressively than Labour would do under Corbyn. It is noteworthy that the Labour agenda was broadly recognised as a “leftward leap” in a country whose politics are already well to the left than in the US.
Sanders’s claim that he just wants the US to be more like Denmark or Sweden earned scorn from former Swedish prime minister, Carl Bildt, who in February 2019 took to Twitter and warned that his brand of socialism is not the key to creating a great society as Sanders and Alexandria Ocasio-Cortez seem to think.
Sweden once tried a version of what Sanders proposed – to transfer a sizable chunk of corporate ownership and managerial control to workers. In the late 1960s, “Swedish and Danish trade unions, under the influence of more radical left-wing forces, embraced democratic socialism and started demanding economic democracy and direct control of profits.” This “workplace democracy” they advocated, was eventually abandoned, and the Swedes returned to their tradition of social democracy.
Between 1991-1994 while in office as prime minister, Bildt cut capital gains taxes to 30 % and corporate taxes to 28 %. He also privatised several state-owned industries, deregulated multiple sectors of the economy, which allowed people to invest portions of their pension, and introduced school choice policies, improving the country’s education system.
After Bildt, Sweden, which had completely lost its host of entrepreneurs due to business taxes that sometimes exceeded the 100 % mark, once again flourished. Even his Social Democrat successor, Ingvar Carlsson took over his agenda, because the old model – the one that Sanders embraces – poisoned labour relations, and depressed both investment and productivity growth.
According to the author, “when intellectual and political currents deviated from the market-based social-democratic compact, things generally didn’t work out too well.” The other way round, “when free-market intellectual currents led to rightward deviations from the social-democratic compact, the results were just as bad. Inequality widened amid equally tepid productivity performance, while social safety nets were left in tatters.”
It is always wise to find a middle way, which is “not market fundamentalism or democratic socialism, but social democracy.” It requires “effective regulation to rein in concentrated market power” and to give workers “a greater voice.” Moreover public services and the safety net “need to be strengthened.” Most of all the US needs a new technology policy to ensure that the trajectory of economic development is in everyone’s interest.”
The question is whether Bernie Sanders can explain the American public the difference between social democracy and "democratic socialism," because with the latter, he will have no chance of beating Trump.
A new reply to this comment has been posted.
john kim Feb 19, 2020

The U.S is not already a market economy. The core of the market economy is the price mechanism. But Fed has already destroyed it. Since the 2010s, the central banks have implemented quantitative easing, and there is no free market already. If tax and nationalization can undermine the market economy, asset bubbles by the central bank can also ruin the market economy. And that happened already.
A new reply to this comment has been posted.
Michael Public Feb 18, 2020

A straw man analysis. For example, taxing the billionaires does not amount to abolishing the billionaires. Consider, would rather be 70% as wealthy as Bill/Bezos/Buffet, or rather, prefer to conclude that since they are going to tax you it not worth the effort of starting a company? Think about for 1 second.
- David Donald Feb 18, 2020
  
  Your point has been proven by the late James Mirrlees, who has shown that rational incentives not only support reasonable taxation at the outset, but tend toward accepting (by the very rich) a 100% wealth tax beyond a certain income ceiling. If the old rhetorical dance routine Acemoglu performs here (akin to Biden's core platform) - are not soon recognized generally as sophistry, the billionaires of the world will have to start planning for the disappearance of the consumer economy and a world in which economies center (as they did prior to the 19th century) on giving a few elite the longevity, homes, security, beauty, art and luxury transport they crave. But will Acemoglu and his other development economists see that as an efficient arrangement?
  A new reply to this comment has been posted.
A new reply to this comment has been posted.
David Donald Feb 18, 2020

Acemoglu's critique of Sander's activity is essentially that of a high priest criticizing a dedicated democrat. Sanders argues that government, an institution which the majority of the people can - technically - control, should work to benefit most of the people. Acemoglu argues that the higher, inscrutable economic magic (which brought back intolerable economic inequality and has nearly collapsed liberal democracy) shows democratic initiatives designed to benefit most people do not work. Acemoglu, writing from an elite institution, does admit that the unproven assertion that market efficiency benefits all actually is only proven to serve capital and the highly educated, so at least he is true to his own moral system by rationally arguing for his self-enrichment.

The argument that government can never provide a good service and that this must be done by profit-centered firms, is an argument that duty does not motivate correctly, but greed does. There is no empirical evidence for this assertion. Earlier failures of socially driven service providers can be blamed as much on lacking information as on poor motivation. The embrace of greed is merely a pseudo religious principle foisted off on the masses as science by the Thatchers and Reagans of the world, and this religion has brought down the New Deal and the Great Society that politicians working for the good of people nearly achieved. Sanders is old enough to have observed that destructive process, and is seeking to reverse it. If this is not done, Acemoglu can witness first hand in the United States 'Why Nations Fail'.
A new reply to this comment has been posted.
Zeid O. Feb 17, 2020

Mr. Acemoglu, like many others, seems to miss Sanders's main contribution, which rests on an acceptance that the system is flawed, more importantly, the idea that the system needs to be overhauled in order to continue. This is more of an ideological revolution than it is a revolution that tackles the details. Of course, the details are important, but in a country that has mostly resisted any change that goes beyond the very incremental, the fact that many other nominees have borrowed a lot of Sanders's call for change, not to mention his lead in the polls, is itself a success beyond what we would have ever dreamed of just a few years back.
A new reply to this comment has been posted.
Chandrashekar Tamirisa Feb 17, 2020

What does the Nordic Model for United States mean? (1) Of course, capitalism as in the Nordic countries (2) Continuation of 1-12 public school system with Child Care, Pre-K and K added (3) $0 in-state tuition in all public universities (4) universal, single payer health care including elder care (5) 1 year paid maternity leave for up to 2 children (6) Continuation of Social Security (7) 36 months of unemployment benefits contingent on employment seeking efforts and continuing education and retraining (8) public housing and food benefits for those below the poverty line.

How to pay for it?
(1) 6-tier progressive individual income tax structure on TOTAL compensation (meaning including perks and incentives, stock compensation and stock liquidation by corporate stakeholders) with no tax credits or deductions: 0 (up to $75000) - 10 ($75001 to 150000) - 20 (150001 to 250000) - 30 (250001 to 500000) - 40 (500001 to 750000) - 50% (above 750000).
(2) 15% flat corporate tax on net profits
(3) 10% sales tax
- Michael Public Feb 18, 2020
  
  History shows that taxing the income of the wealthy is futile, because wealth is accumulated of years or centuries. What works much better is taxing the assets. There should be a sliding scale tax on all assets, but since 10% own 90% it will mostly apply to them.
  A new reply to this comment has been posted.
A new reply to this comment has been posted.

https://prosyn.org/DBjxvky

Cookies and Privacy

Social Democracy Beats Democratic Socialism

To continue reading, subscribe now.

Support High-Quality Commentary

The Fall of the Berlin Wall and Social Democracy

Elizabeth Warren’s Bold Ideas Don’t Go Far Enough

New Comment

Email this piece to a friend

Contact us

Log in/Register

Cookies and Privacy

Social Democracy Beats Democratic Socialism

To continue reading, subscribe now.

Support High-Quality Commentary

Edit Newsletter Preferences

Set up Notification