Democracy and the Appeal of Socialism

Economist Bryan Caplan wonders why socialism ever developed any broad appeal, given the weaknesses of the idea of the “New Socialist Man”:

The classic argument against socialism is that it gives people bad incentives. What’s the point of working, conserving, saving, quality control, and/or taking out the garbage if they don’t pay? The classic socialist reply is that capitalism creates the selfishness it purports to benevolently channel. Socialism will give birth to a “New Socialist Man” who loves his neighbor as himself….

I’ve always considered the New Socialist Man position to be not just weak, but absurd. Ever heard of Darwin? People are selfish because of billions of years of evolution, not capitalism. End of story…

I take hindsight bias seriously. Many mistakes really are hard to see until you actually make them. But socialism wasn’t one of them.

If the possibility of radically altering human nature were the only rationale for socialism, Bryan’s point would be compelling. As he notes, early critics of socialism quickly pointed out many of the perverse incentives it would create. You don’t have to be a sophisticated economist to realize that most people are self-interested most of the time, and that they are unlikely to work hard if there is no reward for doing so. However, the theory of the “new socialist man” was never the only version of socialism, and not always the most influential.

Democratic socialism was a crucial alternative rationale for state ownership of the economy. Even if people remain selfish, bringing the economy under the control of a democratic government could still greatly improve the lot of the working class. Unlike capitalists who pursue only their own profit, democratically elected politicians have to serve the interests of the majority of voters – even if the politicos are power-hungry weasels who only care about their self-interest. If they don’t serve the needs of the people, the people will vote them out. And elected leaders can in turn create good incentives for the bureaucrats, workers, and lower-ranking officials who actually run government-owned industries. Again, if they fail to do this, the people will throw the bums out.

There are many, many problems with the theory of democratic socialism. But notice that it doesn’t assume any reduction in human selfishness. To the contrary, it holds that selfish voters vote for policies that benefit them, and selfish politicians will have to do their bidding. Something like this idea was espoused by mainstream socialist parties in early 20th century Britain, Germany, and elsewhere (though they also occasionally claimed that socialism would reduce selfishness as well). Even totalitarian communist regimes paid some lip service to the theory, which is why they all constantly claimed to be “democratic” and held ritualistic elections where only government-approved candidates could run.

I’m not going to give a detailed critique of democratic socialism here. Suffice to say that it is vulnerable to the sorts of criticisms that I outlined in this post: voters have incentives to be rationally ignorant about policy; even a democratic government won’t be able to acquire the information it needs to efficiently run large parts of the economy; interest groups can easily “capture” the government and use its power to benefit themselves at the expense of the general public. There are other compelling objections to it as well.

The key point for present purposes is that most of these objections are relatively nonobvious, especially to the vast majority of voters who haven’t studied basic economics. Even many otherwise sophisticated intellectuals have a weak understanding of economics as well, and that was probably even more true during the heyday of socialism’s popularity than today.

It’s easy to assume that the debate over democratic socialism is of only historical interest. Even on the political left, very few people still claim that the democratic socialist argument justifies government control of the entire economy. I see that as genuine progress, even though the debate over socialism is not completely over.

But we still have a long way to go. While few today use the democratic socialist argument as a justification for full-blown socialism, many on both the left and the right use very similar arguments to justify central planning of large parts the economy and society, include vast sectors such as education and health care. Every politically aware person has probably heard something like it used as a justification for all sorts of government interventions.

If the democratic socialist argument is a poor rationale for government control over 80 to 90% of the economy, we should consider the possibility that it’s an almost equally weak justification for government control of the 35-60% of GDP that the state spends in most democratic societies today.

UPDATE: Commenter “JR” perceptively points out that my criticisms of democratic socialism “sound more like critiques of democratic theory in general than democratic socialism in particular.” He’s right. The democratic socialist argument is an extension of the more general standard argument for democracy, which is part of its appeal. The main rationale for democracy is that it gives government strong incentives to serve the interests of the people. The democratic socialist argument is that the economy should be controlled by a democratic government, because that will ensure that it will be structured to benefit the majority of voters rather than a small class of capitalists. Thus, the main shortcomings of democratic socialism are likely to be especially severe forms of the flaws of democracy as such. For reasons I discussed here, these flaws become much more severe if the size and scope of government is large.