“Socialism” “Versus” “Democracy”
Why “Capitalism” is not the opposite of “Dictatorship”, and why Russia and the US are, unfortunately, closer than you think.
Most of the political disagreement between East and West, especially Russia and the United States over the last century, came down to “Communism is Oppression, Capitalism is Democracy”. Meanwhile, outright dictatorships are happy to employ capitalism, just as China comfortably employs obviously capitalist structures and has companies operating on capitalist terms both inside and outside the country, while calling itself communist. In addition to this already confusing conflation, Communism gets mixed up with Socialism, and Socialism gets mixed up with Social Democracy, leaving everyone in confusion, and turning a lot of political discourse into a madhouse of people shouting past each other, using the same words but meaning something entirely different.
I would like to show where this confusion comes from, demonstrate a few of the actual dimensions at play, and hopefully clean up the discussion a little. I will try to abstain to make arguments in favor or against one system, or one country, because frankly, none of the extremes are ideal — it is only that some systems currently fail less badly than others. Your mileage may vary.
Capitalism and Democracy
Let’s begin with the definitions, straight from the search engine. Emphasis mine. I promise, it will get more interesting as you read on.
Capitalism is an economic system based upon private ownership of the means of production and their operation for profit.
Democracy, in modern usage, has three senses all for a system of government where the citizens exercise power by voting.
It is quite clear that those definitions are entirely independent. One is an economic system, the other is a governance system. If you try to draw this as a graph, these two end up being separate, independent axes:
This means, you can, and do, have governments at all four — not two, but four — extremes. For example, many dictatorships, like Pinochet’s Chile in the 80s, were or are completely comfortable being capitalist. They occupy the upper left corner of this graph. North-Korea still occupies the lower left. (The other countries on the following graph are not placed with scientific accuracy, and one could argue about the location at length*. I will talk about the US, Soviet Union and China a bit later on.)
What is that “???” in the image? Is it maybe, as is claimed so often by the media, “socialist”? Let’s look at what socialism is:
1. Any of various theories or systems of social organization in which the means of producing and distributing goods is owned collectively or by a centralized government that often plans and controls the economy
2. The stage in Marxist-Leninist theory intermediate between capitalism and communism, in which collective ownership of the economy under the dictatorship of the proletariat has not yet been successfully achieved.
That’s a lot of Socialisms right there. Not only are there two different definitions for it, depending on who you talk to, but even the first one is not one system, but a set of systems differing in their opinions about two separate aspects:
- collective or government ownership
- planned economy
What the first definition doesn’t include is any mention of the governance system. You are free to have a democracy, a dictatorship, an oligarchy, a king, or any combination thereof. Just like under capitalism.
How does this compare with capitalism though? What does capitalism say about planning? Well, nothing. What Americans mostly imply, when they talk about “capitalism”, is free-market capitalism: the ownership is private, and there is no government control of the economy. This is not the only option.
Free Market and Private Ownership
As an old economics professor of mine used to say, “Capitalism is like a game of soccer, with the market as its playing field. A soccer game without any rules would not work very well, and would be not too fun to watch.” In practice, completely unregulated markets rarely, if ever, are a real option: most governments in the world, including the US, control the private means of production through regulations, incentives, subsidies, bail-outs and more. This is necessary to prevent undesirable or even catastrophic fluctuation of the market like the pork cycle, that stem from the inevitable shortsightedness of the individual players. In some countries, all of their production facilities and public services are owned by the state, other countries retain some functions, e.g. utilities and postal services, in government hand, while privatizing others — and some privatize as much as they can. Here some examples:
The axes don’t look completely independent: right now, the combination of private means of production and central planning is not used by any country that I know of. This is obviously a very far-fetched, but not an entirely nonsensical proposition: when you have a central prediction and planning authority, for example a statistic forecast service agency (or, in the future, an AI), that can tell you, a private owner of manufacturing equipment, what product fits your means of production next year the best, by evaluating all available options in the country, it might be a good idea to listen — even if you do not have a government to begin with (for example, in an anarchy).
China occupies a peculiar position: they employ a combination of collective (government) and private ownership — while also allowing a free market to play out, especially outside of the country. Especially the thousands upon thousands of small businesses are overwhelmingly privately owned — often, those businesses are who you actually buy your newest, cheapest products on Amazon from. The government is supporting their larger companies, but let’s be honest: so does the USA, through subsidies and occasional bail-outs (see the banking disaster of 2008). This is why the US does not truly occupy the position of true free, unregulated market and private ownership that it would like to see itself in**.
So far we have only explored one version of the meaning of socialism. What about the second one? Let’s recapitulate:
Socialism: 2. The stage in Marxist-Leninist theory intermediate between capitalism and communism, in which collective ownership of the economy under the dictatorship of the proletariat has not yet been successfully achieved.
What on Earth is “dictatorship of the proletariat”? The Marxist theory argues, that any form of government in a stratified society represents a dictatorship of one class over the other. The proletariat — the working class, at the time when the theory was created, constituted the vast majority of people. I.e., any democracy at that time would have been a dictatorship of the proletariat simply by the fact that most decisions would have favored the majority — the workers. Thus, despite the cryptic wording, communism would also qualify as a direct democracy. Surprised? Let’s look at the definition of communism then.
Communism is the philosophical, social, political, and economic ideology and movement whose ultimate goal is the establishment of the communist society, which is a socioeconomic order structured upon the common ownership of the means of production and the absence of social classes, money and the state.
That’s quite an all-in-one package: it includes an (or rather two) economic, a social and a political (governance) axis. (Yes, I am dropping the philosophical axis under the table on purpose. Please bear with me, this article is already longer than intended***.)
We have already looked at communism’s governance location. In its ideal form, it qualifies as a direct democracy, or an anarchy (the whole “absence of state” thing). The ownership of the means of production is — similar to socialism — communal. In case of communism this would mean that workers share the rights to their equipment. The absence of money would make a “free market” of any kind impossible — so some kind of planning has to take place. (Since there is, in the idealized form, no government, this obviously has to happen by collective, public vote of the relevant group. Or an AI.)
Let’s ignore the viability of that proposition for the moment****. There is one other axis we haven’t looked at yet, because it didn’t appear in any of the other definitions. What is the social axis?
The social axis is somewhat related to the means of production, but is not identical with it: It includes healthcare, education, and basic social support. Even if your school, or your hospital is private: who pays the bill? What if you are poor and can’t afford it? What happens when you are old and can not work?
The two extreme arguments can be (kindly) summarized as follows:
- Social: Everybody deserves to be healthy, to have an education, and to have basic human dignity, independently of his wealth, birth status or abilities. To enable this, everybody has to contribute some of the fruits of his labor to the common cause.
- Individualistic: I have worked hard for my money, it is my right to keep it all. If I am generous, I will donate to a charity. Everyone who tries hard enough can rise to riches if unhampered by the burden of helping everybody else.
Note that this is an entirely separate affair from any of the previous three. Even in the most capitalist society with zero government involvement there could be, say an insurance company / slash / charity providing such a service. Its other service is, of course, making sure that the few well-offs don’t have to live in a sea of the poor, the sick and the uneducated. (At a certain point it simply doesn’t matter how many guards and guns you own, unless your guards are willing to kill everyone who is not you or them.)
So what does this axis look like, in the real world?
The social axis
I will plot it against the governance axis, for clarity *****.
This graph looks awfully similar to our very first graph, but something is different. First of all, what is the matter with Switzerland in this picture? Switzerland is the land of Capital, the land of banks. One of the few countries that has privatized every public service, every utility, every rail… everything. If anyone is capitalist, it is Switzerland. They also got the public vote, the arguably most democratic (but not necessarily the most efficient) form of government on Earth. They try to impose as few regulations as possible. They just rejected the minimum wage with an overwhelming majority. What on Earth is doing there, right there next to the ideal image of the communist Soviet Union?
The answer is simple: the social axis is utterly independent of the other two. Switzerland has one of the most extensive social frameworks in the world. They truly put a floor under your feet. Apart from the universal health insurance and accessible public education (though it is not without its flaws), with pension insurance and the AHV — if there is nothing left and you are broke on the street, and no-one else is taking care of you, your municipality —the city or village that you “belong to” — where you were born, or the one that gave you citizenship when you moved there as a foreigner (and where every citizen had a say on your citizenship rights) — has to help you. The fervently democratic and capitalist Switzerland is also fervently social. (But please do note that the last stage only applies to Swiss citizens.)
Of course, this is not the only oddity about this graph. Something else is different, too. Let’s compare it with the first one again, directly.
Obviously, I labelled the axes this way around in the social graph, because there would be fewer flags to move (and fewer mistakes to make). Note how the position of most countries in this graph stays the same******, while DPRK, the Soviet Union, Russia and the US flip. Why?
The glib answer is “because the first graph was sloppy”, with multiple axes pressed into the “capitalism vs. ???” axis, only marginally better than the meaningless sentence re-iterated by the public that goaded me to write this article. But the truth is, once again, the graphs looks like that, because the economic and the social axes are unrelated.
Let’s look at Russia and the US as an example: the US and the West have worked hard in the 1980s/90s at making Soviet Russia less “communist”. Indeed, they succeeded at making it more like the United States, but not in the sense that most of us had hoped — in fact, not in the only way that would have made the country better: it did not become any more democratic. Despite Russia “flipping” in regard to Soviet Union’s economic and social stance, one thing has not changed at all: it is still just as autocratic as in the last few decades of the Soviet Union, or rather somewhat worse (but still better than some other candidates on our list).
Meanwhile, Germany is both moderately free-market, moderately capitalist, moderately social, and moderately democratic, so its position on the graph stays exactly the same. It is, indeed, very much unlike Nazi Germany that is frequently used as a scarecrow to dissuade people from social democracy as an option: Nazi Germany was a democracy only in name, and had an oppressive one-party government, just like North Korea, or Soviet Russia at the time.
So what form of government do Switzerland and Germany employ, that lets them be both capitalist and social?
Here you go:
Social democracy is a political, social and economic ideology that supports economic and social interventions to promote social justice within the framework of a liberal democratic polity and capitalist economy.
The reason why this is not “socialism”, in any way, shape or form, is painfully obvious if you have been following along: It is a system based on a capitalist economy — regulated as little as possible, and as much as necessary, just like in the supposedly free-market countries. It simply has a different location on the social axis, because it answers the question in regard to its poor and sick differently. As we have seen with the example of Switzerland, it doesn’t make the country any less capitalist (it does not take away the means of production from private ownership) — nor does it make it any less democratic.
And so next time someone tries to sell you a load of BS about “socialist” countries in Europe, or tries to make a one-dimensional argument… just send him the link to this article. Thank you for your time.