Socialism and social democracy

From a comment on a Facebook post by Max Sawicky, asking about the difference between socialism and social democracy (sadly, I think the context was one of the internecine disputes in which the left has long specialised, though the right has now caught up and surpassed us).

Socialism and social democracy

I’ve switched back and forth between the two terms, with a more or less constant understanding of their meaning. For me, “social democracy” refers to the actual policy program advocated and to a significant extent implemented by social democratic parties in the mid-20th century: free and universal health care and education, a social welfare system sufficiently broad and generous to eliminate poverty, full employment and strong unions, in the context of a mixed economy. “Socialism” refers to a fundamental transformation of the capitalist system incorporating and going beyond the social democratic program to end large-scale capital and dependence on wage labour.

That is, as I use the terms, social democracy refers to a contemporary policy program and socialism to a utopian aspiration. During the period of neoliberal dominance, , I described myself as a social democrat, defending the achievements of the 20th century and trying to extend them where possible. Now that there is an opening for the future, we need the kind of utopian vision I associated with “socialism”.

48 thoughts on “Socialism and social democracy

  1. I see socialism as large scale nationalisation which mainly occurred after WW2 in the absurd idea the economy would be better off.

    I see social democracy as merely making capitalism much better.Competitive markets, hard Keynesian economic policies alah Farrell and Quiggin, a needs based social welfare net etc

  2. We need socialism with capitalist characteristics. Bill Kelty and others in the union movement thought they could get there via universal superannuation in which workers controlled half the boards of management. They didn’t anticipate the collapse of trade union power. We need to revive the idea of employees having equity in the firms that employ them but not as part of a union control agenda. Simply as part of a fairness argument that employees have just as much of a stake in a company as shareholders, if not more.

    Add to that, instead of the highly divisive universal basic income, the idea of universal wealth accounts. Every Australian receives, each year, from the government, a share of a sovereign wealth fund which invests in the stock exchange. Over time, every Australian will become a significant owner of capital simply by being a citizen.

    Yes I know, it’s pie-in-the-sky. But it won’t be once the practical implications of artificial intelligence start to be appreciated in 20 years time.

  3. I have misplaced your arguments for free and universal education and would appreciate a citation to the case you have developed for them. In particular, these arguments need to overcome the objections of standard welfare economics (creating deadweight losses, distributional unfairness to those on low incomes who don’t pursue higher education) which seem to me to be compelling.

  4. @Ken_L

    In part agree with you Ken. You could distill your argument down to: ‘thanks to superannuation, we’re all capitalists now’. However, it also seems weird to me that more workers aren’t compensated with shares from the companies they work in. For unskilled workers who lose their jobs to robots/AI, it makes sense they can gain income from shares I.e. owning those robots/AI.

  5. @Anthony Creating shares to give to employees would dilute the existing shareholding and could be in breach of the company’s fiduciary responsibilities to existing shareholders. Better that they or their superfund use cash to buy on market.

  6. At the moment, I am reading “The Serpent and the Stag” – by John Pearson. It is subtitled “The Saga of England’s Powerful and Glamorous Cavandish Family From the Age of Henry the Eighth to the Present.” I agree with “powerful” but “glamorous” is not the second adjective I would use. The Cavendish family are notable as their fortune has persisted to the present day. The current head of the family is the 12th Duke of Devonshire.

    Without reciting the story, beginning with Bess of Hardwick, it is worth trying to figure out the “causes” of accretions of wealth like this. Initially, we are tempted to figure out and attribute individual causes. What was it about the individuals and what did they do? What contributed to the gathering of wealth? If we distill it down we find, in no particular order;

    (a) luck;
    (b) skill;
    (c) persistence;
    (d) alliances; (marriages, social alliances, political alliances)
    (e) corruption;

    … and as the tale goes on, more luck, more alliances, more corruption in interweaving cycles.

    But when we get to about (d) and (e) we already realise we are dealing with a system (comprised of a set of sub-systems) which demonstrates emergent outcomes. Some of these emergent outcomes appear to be systemic; conditioned by the system itself. Others we might attribute to exogenous factors and even to “free will” or individual agency.

    Capitalism (or the proto-capitalism of the Elizabethan era) is not the only system which demonstrates unequal outcomes and accretions of wealth and power. Or should that be “power and wealth”? We only have to look at preceding feudalism or succeeding communism (state capitalism) to see that.

    Corruption runs the gamut from individual to systemic dishonesty. The use of power and wealth to secure special deals from the monarch or state to, in turn, secure more power and wealth is a standard mode of operation (while providing some service or advantage to the monarch or state).

    Even deeper than corruption, there are the underpinning assumptions (justifying ideology) backed up, inevitably, by power. The deepest underpinning assumption which socialism really needs to challenge is the one that “individuals should be able to own a real lot of stuff with no upper limit”. This, in a sense, is the sacrosanct assumption of capitalism and indeed of some other systems before it. Why should this assumption go unchallenged? Clearly high levels of inequality are the corollary of this assumption when it is successfully put into operation. And equally clearly, under unfettered capitalism this assumption can be and is successfully put into operation by skillful, lucky and unscrupulous individuals and families. Given the work of economists like Stiglitz and Pikkety (and quite a few before them) there can be no question now. This system is neither efficient nor fair.

  7. @rog
    Hi Rog, companies do pay employees in shares – think of how often CEOs also get paid in shares for good company performance. But even if giving those shares was against the company’s fiduciary duty, a company could give pseudo-shares (dividends, no equity, no voting rights). Or, give employees the first opportunity to buy new shares before they are offered to the public.

  8. @Ikonoclast

    Nice list and points. Can I add a another factor- ability to adapt to wider societal evolution/opportunity/change.

    One of the things that capitalism I think to its credit, or perhaps neoliberalism, does seem to embrace is the apocryphal saying of Heraclitus “change is the only constant”. While H may not have actually said this he certainly seems to have said much that is operationally identical

    Anyway capitalism seems to embrace it as in the form of lauding ‘creative destruction’ for better and worse whereas socialism seems more flaky on the matter.

    An interesting manifestation of change can be seen in the value of the stockmarket. While this keeps rising any given portofolio wont necessarily because of ‘inevitable’ change e.g. the rise and fall of technologies and companies and exhaustion of resources.

    More generally while modern neoliberalism is loathsome it has interesting ideas worth considering but which socialism to my knowledge had yet to take on board. This seems to be one of them in that socialism seems to be aimed at a Utopia –

    which isnt much better defined than the vague christian Heaven compared to Islam which seems to have tried to address this what next question in a more concrete fashion – the Houri etc. ).

  9. The Trump Turnbull mode harkens back to the Haarz Mountains labour camp of WW2 and right down to the presentation which is sly and dishonest. The government waited till after the by election to present a number of obnoxious policies including the elevation of the laughably named Xtian Porter, the IPA MYEFO and renewed TPC negotiations aimed at ending the requirement for local labour content for foreign entities involved in projects here ( and they had the front to go after Dastyari?).

    We follow closely what goes down Trump’s USA, of course.

    In the end, the IPA idea is solely about human commodification, while socialism and social democracy involves inclusion and the notion of the economy as tool for human betterment rather than as a means for imposing hierarchy and control, basically crude feudalism.

  10. While I could certainly quibble with the dichotomy specified by PrQ above between ‘social democracy’ and ‘socialism’ on historical grounds — the first ostensibly revolutionary socialist parties often self-described as ‘social democratic’ (the RSDLP being the most impressive example) in practice, certainly since the end of WW2 the dichotomy advanced above by PrQ has been well accepted.

    And speaking personally, I sonetimes self-describe as a Left Social-Democrat to avoid being confused with bog-standard Labourites or Neoliberals, Blairites etc …

    It seems to me that the principal challenges to humanity poverty, inequality and looming environmental catastrophe cannot be addressed on timelines of value to the intended beneficiaries other than through an aggressive and insistent challenge to current usage from a communitarian and humanistic paradigm. That certainly begins from a robust defence and enlargement of the programs cited by PrQ in his opening discussion, but with a view not merely of ameliorating distress, but of empowering the producers to act expressly and collectively in the interests of the whole of jurisdictions, and to the extent practicable, in concert with other jurisdictions sharing their outlook. It’s in this sense that what PrQ calls utopian is germane, IMO.

    Inevitably, this entails a process of reforming, manipulating and transforming the usages attending social property, rather than the the pronouncement of swingeing expropriations. N the end, it is not legal title to property that matters, but the social character of the encumbrances on their use that defines a social order — what are effectively the claims of the commons, and the claims of individuals.

    Some facets of the system are best operated as state monopolies, whereas at the other end of the scale, individuals are most fit (subject to regulation) to offer certain goods and services. In between those things, a dialog between state- and quasi-state agency on the one hand, and private stakeholders on the other is apt.

    In recent years, I have come to believe that something very much like a UBI should be an important tool in securing and underpinning dignity and inclusion in any social order approaching a just society. I regard this, in the context of the general provision of key public goods (education, health, transport, housing, security etc) as likely to be the simplest and most effective way to ensure that nobody is too greatly disadvantaged by structural changes and thus most likely to facilitate positive engagement and human cultural development, laying the foundations for a truly global and socialist world.

  11. @Gaston Ümlaut

    Primary and secondary education are complicated because you might wish to override parental preferences and offer transfers directly to children.

    But for tertiary education yes it does because it involves offering services that are costly to provide to people who value these services at less than the cost. There is a deadweight loss.

  12. The problem is not to simply understand the world but to change it. All very well to make distinctions between socialism and social democracy while treating these as static entities, as things. The more important question to me is, what is the relationship between your method and analysis of the political economy and your proposals to change it in some way? Socialism cannot be reduced to a single policy (such as nationalising certain enterprises, or worker participation), and cannot be relegated to something called a ‘vision’ — there must be some working connections between the vision or aspiration for a future (and better) society, and the methods we apply to analysing and understanding the world, that lead us to practical and achievable policies that will deliver that better society.

  13. hc

    In order for there to be a loss, we would have to be able to measure the value of education by some standard that also measures what people pay. Since they pay in money and time, and the value is realised in many different forms of welfare – individual and collective – this we cannot do. So the concept of loss in any meaningful sense simply does not apply.

  14. It’s interesting that the one true insight displayed by climate deniers is the realisation that mitigating climate change will entail abandonment of capitalism as we know it. Hence their frenzied resistance to science. Interesting also that much of the reality-based community rejects this banal insight.

    It’s high time those seeking to avoid extinction jettisoned the notion that effective climate action can happily co-exist with the existing imperial capitalist world order. The question should be what is to replace it, as the OP invites us to do.

  15. scarlett o’hara, when asked why she steals from the poor replied

    “i steal (as you say), from the poor because it’s easier and safer.”

    the world is in constant change but that phrase covers an unchanged constant.

  16. @Ikonoclast
    “The deepest underpinning assumption which socialism really needs to challenge is the one that “individuals should be able to own a real lot of stuff with no upper limit”.”

    A Modest Proposal to Fix the World
    by Ian Welsh
    2017 May 1

    “Fire every non-commission employee making more than seven times the median national income (all income included).

    Put a 100 percent tax on all income over seven times the median, no exceptions for any type of income.

    Put a 100 percent tax on on all inheritances over 50 times the median (that’s enough of a head-start on life for winning the lucky sperm contest).

    Promote those who were earning less.

    Secret: The people running the economy are not the best, and if they are brightest, we need stupider people. I base this on their results.

    Going forward, the top income level will increase, as a percentage, equal to the average income of the bottom five percent and the median income.

    This will sort out a lot of problems quickly. (…)

    When the people running something are complete f(***)-ups, you take away their power. That means their position, and as money is power, their obscene wealth. You replace them with someone else. It is that simple.

    Eat the rich, or the rich will eat you.

    And they have been dining well.”

  17. It’s perplexing to me and frankly a little scary some left leaning economists’ readiness to welcome authoritarian policies. What happened to the individual knows best? Remember that core principle of economics from first year?

    The vast majority of employees prefer wages to an equity stake in their companies. Otherwise they would purchase shares of their employer or a similar company on the ASX, as they already do through superannuation.

    As for a national wealth fund, why not simply tax people less and let them invest the funds how they see fit? The last thing anyone should want is bureaucrats to be playing the stock market with other people’s money or politicians deciding how best to allocate the proceeds according to the political winds of the day.

    If redistribution, or “fairness”, is the objective then why not just reallocate through the tax and transfer system? Individuals can then do whatever they like with the money.

  18. hc

    Basic welfare economics assumes a measure which does not exist. Then “measures” with it. For apples, this sometimes works, if one takes an elastic view. For education it does not. Money is not utility.

  19. @S

    “What happened to the individual knows best? ”

    It was based on the fantasical idea that individuals are rational agents and it is quite clear, from what we know know about the way the human brain works, that this is not true.

  20. Here’s a slightly more expansive statement, with more on the question of how to support those who don’t go on to post-school education

    In framing the discussion though, it’s important to get away from the idea (of which I detect a hint in hc’s comment) that post-school education (often referred to in this context as “higher education”) is for a limited elite, and that financial support is regressive. That’s just a minimla update of John Howard’s nostalgia for the days when a Year 10 education was all that working class kids needed. (Nearly) every young person needs to finish high school and go on to post-school education and training.

  21. Pr Q said:

    For me, “social democracy” refers to the actual policy program advocated and to a significant extent implemented by social democratic parties in the mid-20th the context of a mixed economy.

    During the period of neoliberal dominance, I described myself as a social democrat, defending the achievements of the 20th century and trying to extend them where possible. Now that there is an opening for the future, we need the kind of utopian vision I associated with “socialism”.

    I’m not sure that calling oneself a “socialist” is the best way of branding a progressive economic movement. There are nasty historical connotations, such as Union of Soviet Socialist Republic (USSR) and the National Socialist German Workers Party (NSDAP).

    Contemporary associations are not much better. Hugo Chavez Bolivarian Revolution (slogan: “Motherland, socialism or Death”) has turned Venezuelas functioning economy into a garbage sifting site.

    Also, in Western jurisdictions, the socialist movements are dominated by Left cultural identity demonologists. For them “socialism” is all a “who, whom” vendetta against straight white males. The International Socialists (IS aka Trotskyites) seem to care nothing for traditional socialism, or Trotsky for that matter. But they are perpetually outraged by the persistence of organizations dominated by straight white males. The Black Lives Matter and #MeToo movements are just a foretaste of the perpetual purge.

    Is that really the kind of political company Pr Q wants to keep?

    I am impressed with the Dengs reconstruction of thr Communist Party of China (CPC) which called for a “socialist market economy”, basically a non-ideological programme of “four modernisations” anchored to a sort of Confucian national team spirit. Who could disagree with that? They certainly have a track record of getting good things done at home and not making a nuisance of themselves abroad.

    More generally, I side with Marx who insisted “no blueprints” for the future, just signposts pointing the way forward. (Also with Marx on “Moi, je ne suis pas marxiste”

    FWIW I call myself a “conservative social democrat” precisely because it is an ideological empty vessel that can carry a variety of changing policy mixes. Whilst maintaining a solid connection to tried and true ancestral values.

    Conservative social democracy turns down the ideological heat. The next 20 years are fraught with global catastrophic risk on economic, ecologic and ethnic dimensions. We want to dampen expectations, not raise false hopes which will cause social division when things invariably don’t go according to plan.

    Just keep things on an even keel and all pull together. A “blood, sweat and tears” message is indicated. Maybe thats why the Dunkirk period is getting a cinematic revival.

  22. I was not persuaded by either of the links you provide. Currently, higher education is delivered to people who value it at the margin less than its cost. This reflects the approx 2/3 subsidy. This discrepancy – and the associated deadweight losses – would increase with free-provision. The majority of people who derive great benefits from higher education in universities come from the middle class – this reflects their upbringing and the impact of private school educations. But “free” education is funded by all so there is a regressive transfer from poor to wealthy.

    I favour the conventional position. There are some externalities from education so it should be subsidized. But not made free which provides bigger extra costs than benefits. Cash transfers to those less well-off may not go to education even though this is where substantial spillovers arise. hence I think means-tested scholarships should accompany the existence of subsidies in higher education and education in schools should be available free with the option of electing to have a private education.

    I am unsure of your argument that everyone benefits from higher education in universities or in TAFEs so that there is a case for universally free provision. But I am more confident in claiming that many students now attending universities generate almost zero social value from doing so. Many of these students should be in the workforce or attending TAFEs. I don’t think it is a good idea to turn universities into TAFEs though that is now happening.

  23. @Anthony Allowing execs options as part of their salary package has been a contentious issue and is influenced by company performance (in publicly listed companies).

  24. I would not bother yoking long-term progressive Left ideology to egalitarian vocational tertiary education. Within a decade or so the notion of spending five or so years at university acquiring a life-long professional qualifications for a job that will be soon be vacuumed up by a cloud-based AI will have a naive and threadbare look.

    Already most graduates are, quite correctly, gloomy about long-term career prospects. No doubt from bitter experience with the “gig economy” and “job portfolio” resumes. But also they see the robot writing on the wall.

    That’s not to say universities are another legacy industry heading for the robot knackery. I think they can be re-branded as 21 century finishing schools, where young people can acquire some sort of civilizational inheritance, be mentored by wise old heads and meet potential mates.

    That is after all what Plato’s gymnasium was set up for. Forward to the past is my motto.

    The Lefts best ideological selling point is the fact that the Internet of Things is a natural commons and therefore should be owned (but not managed) by the public. The robots will of course administer the IoT. We humans should not worry our pretty little heads with it.

  25. @Julie Thomas
    Government are people too. The difference is they use other people’s resources to increase their own utility. I was a very left leaning, tax and spend type of person before my time in government. But the things I saw go there swung my politics much further to the right. The incentives for government are all wrong. The less they have at their discretion the better.

  26. hc @ #25 said:

    But I am more confident in claiming that many students now attending universities generate almost zero social value.

    I assume that should be read as “zero [net] social value”, when the publicly funded 2/3 fee subsidy and the opportunity cost of 3 years out of the workforce is offset against any putative gains tertiary education has generated in their productivity.

    But I would go further than this and state with confidence that, in a substantial fraction of students, tertiary education is of negative social value, after taking into account subsidised fees, employment downtime and the Mark Twain effect:

    “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.”

  27. may :
    but isn’t “leveraging” using other peoples money?

    Sure but its the individual’s choice to invest, nobody is compelling them to do it. The investor’s interests are also much better aligned with the corporate interests than they are with government.

  28. But “free” education is funded by all so there is a regressive transfer from poor to wealthy.

    Err, no: this is dodgy. Uni kids in their own right have no money, by-and-large. Their parents have money, but the kids have no legal claim to it. A person with no legal claim to assets is by many definitions “poor”, and giving a poor person money is a transfer to the poor, no.

    So you’re going to need a more-sophisticated analysis.

    [this is also why having the centrelink independence age at 25 is indefensible in any consistent framework.]

  29. @S

    Other people’s resources? lol private property is theft just as much as tax is theft and using other people’s property.

    And you know what I’ve worked in small business and the things I saw there reinforced my understanding that emphasising and incentivising the selfish and greedy nature of human behaviour is all wrong. The less encouragement that is provided for people to act as ‘individuals’ the better.

    There is such a thing as society.

  30. @S

    It is true that government is by people and so it follows that the ‘vibe’ that influences people will influence the way that ‘government’ functions.

    Given the toxic and wrong ‘vibe’ that has over the past decades been influencing people to think of themselves as individuals who when operating as self interested rational beings make the best decisions and the claims that there is no such thing as a society that needs to be nurtured and developed for the common good, then it is entirely probable that government will not be making good decisions.

    But this is not necessarily the way government can or should function.

    And you say that it is the individuals choice to invest but this choice is not a free choice or a rational choice it is influenced by the vibe and the lies that are told to individuals to encourage them to invest. Like gambling.

    And to say that the investors interests are better aligned with the corporate interests than they are with government is not a rational argument; corporate interests are not a good thing for the individuals who make up the society and corporations do not have any commitment toward any community that aims to make the world a better place for everyone.

    Government does have this aim even if they do not always live up to it.

  31. @Julie Thomas
    And I suppose forcibly taking other people’s money to spend how you see fit isn’t selfish? You may be able to convince yourself that would be the mark of a good person but not me unfortunately.

    Private property is the sum return on people’s capital and labour.
    Its the result of consenting and mutually beneficial transactions between people. Taxes on the other hand, are often not consentual and the people spending them are largely unaccountable with little to no skin in the game. You talk about your small business experience like it’s a qualification, well most people in government have never even had a job in the private sector. Government should always be the last resort. It exists only to do the things that people can’t do themselves. It will never be a substitute for individuals being responsible for their own lives, including their failures.

  32. @S

    “forcibly” taking people’s money? You are free to move to a country where there is no taxation.This old-fashioned glibertarian nonsense is quite boring.

    All those silly claims and the whole fake philosophy have been thoroughly discredited and individuality will never be a substitute for individuals taking responsibility for their community, the common good and working toward becoming better less selfish and greedy individuals.

  33. …Private property is the sum return on people’s capital and labour.
    Its the result of consenting and mutually beneficial transactions between people. …

    It’s interesting to compare your views with the views of Gerald Grosvenor, the 6th Duke of Westminster. He is reported to have said: ‘Given the choice, I would rather not have been born wealthy, but I never think of giving it up. I can’t sell. It doesn’t belong to me.’ It has also been reported that he was asked by the Financial Times for his advice to young entrepreneurs and replied, ‘Make sure they have an ancestor who was a very close friend of William the Conqueror’.

  34. @S
    Bleat about censorship deleted. As with nearly every propertarian I’ve dealt with here, S doesn’t understand or respect other peoples’ property rights. If you want to complain about socialism and insult other commenters, do it on your own blog

  35. @John Quiggin

    Thanks JQ, the comment in question is out of moderation. Moderation may have been triggered by my use of the word ‘vibe’ more than once.

    S, the commentator with the simplistic 1980’s libertarian schitk may have been triggered by the same word, he seems like the sort of person who is easily triggered.

    And when triggered they really do illustrate the dysfunctionality of a personality constructed on the basis of self-interest improperly understood.

    Is Alexis de Tocqueville a white male and a part of western civilisation?

    And yet some people can’t seem to understand his explanation of self-interest properly understood which is that the common welfare is in fact a precondition for one’s own ultimate well-being.

    And S has a blog? I suppose he doesn’t get much of chance to trot out his same old same old arguments there.

  36. @Jack Strocchi

    The Dunkirk period, and WW2 in general, is getting a cinematic revival because cultural generals fight the last war, or rather the last war several wars ago, rather than face the realities of our next challenges.

    In WW2 mythology, it’s the last war where we (the West) were the good guys… except we weren’t, not even then. That whole period. WW1 prequels to WW2 sequels, demonstrated the tendency of capitalism to erupt in imperial war or in fascism and imperial war in an attempt to resolve its contradictions.

    Were the British in India any better than Nazis? We can ask the same questions of Belgium in the Congo, the British and French in the Middle East, the French in Indochina and so on.

    Of course, when I say we weren’t the good guys, people with standard Manichean thinking imagine I mean some other state or states were the good guys. No. States run by elites (aristocratic elites, capitalist elites, party elites, corporate elites) are never the good guys. They are always the bad guys. Your nostalgia for the traditions of elitism is a regressive dead-end.

  37. Jack Strocchi :
    …The Black Lives Matter and #MeToo movements are just a foretaste of the perpetual purge. …

    This statement is patently false; they have purged nobody.

  38. Good. Prof Quiggin is alert to conservative takes on classless access to education. Naff elitism.

  39. Ken_L,

    You would be warmed by the Amel Yachts story, crafted by the incredible Henri Amel.

    Amel was blind for an extended period of his career.[5]

    At the time of his death in 2005, Amel donated 12,000 of his 13,000 shares in Chantier Amel to the company’s employees. (from Wikipedia)

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