Who’s Afraid of Ocasio-Cortez?

Having subscribed to the doctrine of “disaster capitalism,” critics of Western democratic socialism fear a storming of the Winter Palace, simply because that is what they would do.

By Stuart Whatley

Tagged DemocratsPhilosophyPolicyprogressivismRepublicanssocialism

When Aleksandr Solzhenitsyn’s The Gulag Archipelago appeared in English in 1973, its revelations about the horrors of Stalinism were not exactly new, but they lent momentum to a rightward political shift that was already underway. The left had made a tactical mistake. After the Soviet invasion of Prague in 1968, the late historian Tony Judt recounts, the “traditional ‘progressive’ insistence on treating attacks on Communism as implicit threats to all socially-ameliorative goals … [had begun] to work against itself.” Socialists, social democrats, and other progressives were forced to admit that, at least in the Soviet case, “centralized planning” really had led to “centralized killing.”

Since then, redbaiting has remained a tried and true tactic for critics of state intervention in the economy. When Alexandria Ocasio-Cortez calls for Medicare for All, she is labeled “Mini Maduro,” in reference to the Venezuelan kleptocrat who has bankrupted his country through political clientelism. When younger voters tell pollsters that they have more favorable views toward “socialism” than “capitalism,” they are dismissed for “having few or no memories of communism.” (Never mind that the same generational dynamic also explains the free-market turn of the 1970s and ‘80s, when a growing cohort of voters had no memory of the previous era of unregulated capitalism and its culmination in the Great Depression.)

As a rhetorical device, smearing leftists as raving mad Bolsheviks has proved effective, particularly in the United States, where socialists and social democrats have long been denied higher office. Claiming the mantle of common sense, advocates of market liberalism have managed to pull a redbait and switch. Not only have they masked their own dogmatism by imputing ideology onto their opponents. They have also persuaded a substantial share of the electorate to entrust society’s economic, social, and political welfare to self-regulating “free markets”—a utopian ideal that has never actually existed, nor ever could.

In the real world, the market liberalism favored by today’s Republican Party (as well as many centrist Democrats) is far more ideologically freighted than the economic vision put forward by Ocasio-Cortez’s Democratic Socialists of America. Whereas the DSA advocates a mixed economy that includes markets for consumer goods, the GOP’s 2016 platform expressly states that, “Government cannot create prosperity.” The implication is that the state has no beneficial role to play in the economy whatsoever, and that one must choose between “capitalism” and “socialism.” The choice is false, of course; and by insisting on it, today’s market liberals are rather of a piece with Marxists.

What would “socialism” in the United States or other Western democracies actually look like? Its critics prefer to offer answers from the Soviet Union, rather than from Western democracies’ own histories. Having subscribed to the doctrine of “disaster capitalism,” they fear a storming of the Winter Palace, simply because that is what they would do.

Yet as Jed Purdy and others have pointed out, today’s “socialists” are actually social democrats in the tradition of the New Dealers or the Swedish Social Democratic Party (SAP). In the narrower context of the West, it is they who represent “really existing socialism.” And as we’ll see, theirs is a doctrine that has acquitted itself well as a corrective to bankrupt ideologies.

In practice, the socialist impulse in Western democracies has tended toward pragmatism. The New Deal, for starters, was less of an attempt at central planning, and more of what the historian Richard Hofstadter described as a “chaos of experimentation.” Some New Dealers did have utopian aspirations; but, more to the point, they were willing to try different alternatives to see what would stick. They had their differences. Yet as Columbia University historian Alan Brinkley explains, they all subscribed to a “broad assumption … that the nation’s greatest problems were rooted in the structure of modern industrial capitalism.” And they all agreed that “it was the mission of government to deal somehow with the flaws in that structure.”

“Somehow” is the operative word, for it implies that the means were not predetermined—as they are under collectivization or market fundamentalism—but rather subject to democratic deliberation and changing circumstances. In the event, the Roosevelt Administration would succeed in establishing social security, the right to collective bargaining (under the Wagner Act), public-works and infrastructure programs, new banking regulations, and much else. Its labor policies alone brought union membership up from less than three million in 1933 to 10.5 million in 1941. And yet, in the end, the New Deal did not pose a significant challenge to the structure of the economy.

By the early 1940s, the Congress of Industrial Organizations, the United Auto Workers, and other leading labor organizations had begun to advance a new vision of “industrial democracy” based on cooperative arrangements between workers and employers. The hope was to forge a new socioeconomic compact through “industrial councils,” where representatives of labor, industry, and government would decide on industry-wide policies and standards, and force industrial manufacturers to switch from civilian to wartime production. But after the attack on Pearl Harbor, U.S. industry no longer needed any prodding to back the war effort, and so labor’s pitch lost much of its appeal. The major unions had to settle for a much weaker deal: In exchange for a pledge not to strike during the course of the war, all workers at unionized factories would become union members automatically.

Labor’s concessions during the 1940s would come to be viewed by many on the left as an act of lumpen betrayal. But as Brinkley shows in The End of Reform, even the most radical reformers scarcely could have hoped for more “in the conservative climate of the 1940s and 1950s.” At any rate, workers were left with the great post-war settlement: a government commitment to maintaining “full employment” through the Keynesian management of aggregate demand and consumption-led growth. By the end of the New Deal era, Brinkley writes, even “the principal labor organizations” had come to believe “in the capacity of American abundance to smooth over questions of class and power by creating a nation of consumers.”

To advance the goal of full employment after the war, the National Resources Planning Board (NRPB), an agency that had first emerged out of the 1933 National Industrial Recovery Act, published a massive report detailing how the federal government could establish a minimum benchmark of economic security for all workers. Among other things, the NRPB called for something like a federal jobs guarantee, broader social-insurance coverage, and publicly provisioned health-care and educational programs. Yet on larger structural issues such as market concentration and the relationship between capital and labor, it demurred.

Many of the NRPB’s proposals would eventually make headway in the form of Pell Grants, Medicare/Medicaid/Obamacare, the Children’s Health Insurance Program (CHIP), the Supplemental Nutrition Assistance Program (SNAP), and other programs that are now largely taken for granted. But when its policy roadmap was released in 1943, it drew visceral reactions from both the right and the center. None other than The New York Times accused the NRPB of aping Bismarck, whose “state insurance systems … laid the foundation for the German welfare state that ended in naziism.”

As we’ve seen, that level of hysteria has long since been the default response to any critique of capitalism, broadly defined. Yet the liberal economist Stuart Chase was right to look back at the New Deal era in 1945 and conclude that it had been a time of “partial remedies,” not “fundamental cures.” Such is the nature of social democracy in practice.

Like New Deal liberalism, Western European social democracy (or welfare capitalism) also evolved into what Judt, in Postwar, describes as a “truly post-ideological” program, “a practice in lifelong search of a theory.” Its leading exponent was Sweden, where the social democrats have been the predominant political force since the SAP first came to power in 1932. Far from having taken the “road to serfdom,” Sweden holds a perfect score—100 out of 100—in Freedom House’s 2018 global freedom rankings. (By comparison, the United States received an 86; and Denmark, which Fox Business anchor Trish Regan recently likened to Venezuela (at 26), received a 97.)

In 1938, representatives from Swedish trade unions and industry held an historic summit in the coastal city of Saltsjöbaden, where they agreed to centralize the process of collective bargaining. The result, according to the economic historians Avner Offer and Gabriel Söderberg, was highly efficient. By rejecting “raw market outcomes,” Offer and Söderberg write in The Nobel Factor, Swedish employers and workers made shop-floor disputes and other forms of “industrial unrest … a thing of the past.”

Then, in 1951, Sweden’s social democrats adopted the principle of a “solidarity wage,” which held that equal work deserves equal pay, regardless of the firm. In practice, the combination of wage solidarity, centralized bargaining, and active labor-market policies meant that if less profitable firms could not afford the market wage, they either had to improve their efficiency or shut down. Workers, meanwhile, were “encouraged … to move from low to high productivity activities,” Offer and Söderberg write.

Despite these interventions into the labor market, Judt reminds us that, “Throughout Scandinavia, but in Sweden especially, the private ownership and exploitation of the means of production were never put into question.” The earlier social democrats of the nineteenth century had indeed been Marxists who favored the nationalization of the means of production. But the form of social democracy that came to fruition in Western Europe, like the New Deal liberalism of the United States, had evolved, and would continue to do so within the context of a mixed economy and a democratic political system.

And like the New Deal, European social democracy would remain a work in progress. When Swedish workers made their own push for “industrial democracy”—in the form of a “Workers’ Fund” financed by escalating taxes on corporate profits—they were no more successful than their American counterparts. Still, their ideas remain a part of the conversation. The concept of a “Workers’ Fund” is not unlike Yanis Varoufakis’s proposal for a universal basic dividend, or Matt Bruenig’s Social Wealth Fund. Successors to the NRPB’s federal job guarantee are now being taken up in earnest by Democratic congressional candidates. And the echoes of “industrial councils” can be heard in Senator Elizabeth Warren’s legislative proposal to give workers representation on corporate boards.

Predictably, Warren’s critics have falsely described her proposal as a “plan to nationalize … everything.” Like good Leninists, they cannot help but think that she views herself as a revolutionary agent of historical necessity; that there can be no alternatives between “socialism” and “capitalism.” Yet if Western market interventionists subscribe to any historical view of political economy at all, it is not that of Lenin or Marx, but rather Karl Polanyi.

In his landmark 1944 study, The Great Transformation, Polanyi describes how modern “commercial society” was socially engineered into existence over the course of the Industrial Revolution. Central to that process was the transformation of human activity into commoditized labor, starting in England. This would entail not just social and legal changes, but a radical reconception of the human condition.

In the early nineteenth century, factories needed workers, but there was not yet a market for labor. The answer was to create one through brute force, by abolishing the implicit “right to live” that had been extended to poor agricultural laborers throughout the feudal age. With the passage of the Poor Laws Amendment of 1834, rural parishes would no longer provide their charges with wage subsidies or relief from indigence. The able-bodied would thenceforth be driven by the “all-powerful pangs of hunger” to offer their labor at whatever price the market would bear.

As Polanyi makes clear, this process would have proved unsustainable if not for the adoption of “protective counter-moves … to check the action of the market relative to labor, land, and money.” For the first time in documented history, he observed, “social relations” had become “embedded in the economic system” instead of the “economy being embedded in social relations.” Against this backdrop, he defined socialism as a political effort “to transcend the self-regulating market by consciously subordinating it to a democratic society.”

As we’ve seen, Polanyi’s definition fits with the “really existing socialist” policies that Western democracies have gradually adopted over time. Some interventions have made marked improvements in people’s lives, as well as in the functioning of the economy; some have shored up a self-destructive status quo; and some have done both. Obamacare, for example, did away with discrimination against pre-existing conditions, and extended health coverage to millions more Americans; but it also reinforced a fundamentally flawed system based on private insurers.

On the whole, these policies have fallen well short of what their proponents had hoped for. But that is because the prerogative of socialism in Western democracies has been to subordinate the economy to society; not to subordinate society itself. The same cannot be said for the form of market liberalism that emerged out of the 1970s, when the “full employment”/price stability balance broke down. As the historian Daniel Stedman Jones notes, Friedrich Hayek, Milton Friedman, and other neoliberals (their term) “presented the market as the means both to deliver social goods and to deliver the ends, the good life itself.”

In Masters of the Universe, Stedman Jones shows how post-war neoliberal thought has devolved from reasonably sophisticated origins into the ideological juvenilia that it is today. Whereas New Deal liberalism and European social democracy started from positions of idealism and moderated upon contact with political realities, neoliberalism has become ever more simplistic and polemical over time. Or, to use the late Eric Hobsbawm’s rendering, it became a political theology.

For example, Stedman Jones points out that during the 1940s, neoliberal thinkers were “fairly positive about the need for social and welfare safety nets,” as well as being “clear in their criticisms of both classical liberalism and what they perceived as the excesses of laissez-faire.” But in time, neoliberal thinking came to be defined by an uncritical “belief in the superiority of markets—or, more reductively, corporations,” and a “distrust of state authority, intervention, and bureaucracy.”

The policy implications of this theology are well known. After repeated debt-financed tax cuts, the U.S. federal budget deficit this year will surpass $1 trillion, and income and wealth inequalities have reached historic heights. After decades of financial deregulation, by Republican and Democratic administrations alike, the economy has gone through the largest recession since the Great Depression, while becoming ever more lopsided with the weight of a bloated—and largely worthless—financial sector. And after a half-century of union bashing, the labor movement is at a historic nadir, and the real (inflation-adjusted) median household income is the same as it was 20 years ago.

Nevertheless, proponents of market liberalism continue to push for deregulation and de-unionization, deficit-financed tax cuts, reductions in social spending, and “free markets” for public goods such as education and health care. Most Republican members of Congress have signed a pledge committing never to raise taxes—effectively abnegating their constitutional duty to “provide for the common defense and general Welfare of the United States.” In doing so, they have shown that market liberalism is not just a political theology, but an eschatology.

Between socialists offering “practical remedies” to mounting economic problems and market liberals offering the same old “fundamental cure” that they always have, it should be obvious by now who the real Bolsheviks are.

Read more about DemocratsPhilosophyPolicyprogressivismRepublicanssocialism

Stuart Whatley is Deputy Editor at Project Syndicate.

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