Social Democracy vs. Capitalism: Sweden and the U.S.

Posted on November 25, 2010 by

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Capitalism and Democracy are very different. Often people make the argument for market capitalism while begging the question of the “goodness” of Democracy and denying its link to Socialism, Fascism, and other forms of tyrannical rule. In a democracy one person gets one vote and only one outcome occurs. In a market we get varying votes and assert out preferences with the fruits of our labor and we get many outcomes and the ability to express the intensity we feel for desired outcomes. If ten percent of a population uses a certain product in a market setting then its production is almost guaranteed. If ten percent of society wants a product in a democratic setting then it is almost guaranteed not to be produced. In a Democracy it is either or, based on votes, whereas markets pander to niches. Democracy is inferior to markets and has been responsible for some of the world’s harshest wars, worst dictators, and biggest tragedies. We shouldn’t work to expand Democracy by creating an “Economic Democracy” that would naturally lead to less choices but retract democracy.

I suppose we could look to Sweden as an example of a “good” form of Social Democracy if not for the fact that they openly practiced Eugenics from 1934 to 1974. This happened just 2 years after the progressive “Social Democrats” were elected. Before the election of Social Democrats there was a prosperous reign of free markets. Sweden was also neutral during both World Wars which added immensely to its prosperity as other countries destroyed each other. The “center right” came to power in 1976 which was the first time in 44 years Sweden wasn’t under the power of Social Democratic rule. It wouldn’t be until the late 80’s and 90’s that Sweden could finally retract the forms of socialism that comes with democracy enough to become prosperous.

Stefan Karlsson explains Sweden’s recovery from the stagnating policies of the Social Democrats:

Apart from the already mentioned reforms of reduced marginal tax rates and abolished currency controls, deregulated bank lending and significantly lower inflation, this included privatizations of several state-owned companies and deregulation of several key sectors, including the retail sector, the telecommunications sector and the airline industry. Also, when the massive budget deficit was eliminated, even the Social Democrats realized the need for deep spending cuts, which together with the typical cyclical decline in the burden of spending during booms helped reduce the extremely bloated burden of government spending somewhat.

Then, of course, Social Democrats from around the world began touting Sweden and other Scandinavian countries as a success for “Socialism” when clearly that is not the case. The Heritage Freedom index ranks Switzerland at number six, The United States at number eight, Denmark at number nine, Finland at seventeen, Sweden at twenty-one, and Norway at thirty-seven. The only Scandinavian country that is ranked in a category below “mostly free” is Norway which is ranked as “moderately free.” These countries are far from the rankings of more socialist countries like Zimbabwe and the People’s Republic of Congo (both above 160).

If Capitalism is the private ownership of the means of production and Socialism is the public ownership of the means of production then we can clearly see that Democracy, if allowed to control all property, would be a form of Socialism. In fact, if the control of property is subject to a democratic vote (whether in a republic or pure democracy) AND the property in question is a means of production then this would constitute Socialism. By this definition our country has socialized defense, partially socialized medicine (much before the “affordability” act was passed), socialized education (K-12, except for homeschooling and private schools), partially socialized banking, socialized first class mail, socialized road production, etc. The list probably goes on a bit.

The list of what is socialized here in the United States is also a list of what is failing. K-12 Education is not meeting society’s needs and has no effective method of doing so except guesses (as profit seeking isn’t available). Our medicine and universities has been super inflated due to incredible influx of public money and government guarantees on loans which also happened in the housing market. We are at war with multiple countries, depleting out wealth incredibly and causing more “Blowback,” because of our socialized defense system. Our roads remain the deadliest form of transportation which are overproduced at the expense of mass transportation methods, another socialist flaw.

With all that said, we are a prosperous country because we have relatively free markets, as do most of the Scandinavian countries. To claim, however, that Democracy leads to prosperity is a blatant misrepresentation of reality. Private property leads to prosperity. Private property is also the only way to ensure human rights and human dignity. If property is democratically controlled — and right now I’m exceeding the scope of my argument – then the ability to speak, create, share, build, and manifest your dreams in reality become compromised and at the whim of a vote or ruler.

My conclusion? Scandinavian countries and the United States are marginally different and generally free. Democracy and Socialism are interchangeable enemies that restrict the variety and scope of a robust market. Social Democracy should be rejected for private property which by definition includes the private ownership of the means of production which is capitalism. This post is meant only to point out that democracy offers less choice for individuals due to its “either-or” nature rather than an explanation of the coordinating effects of the capitalism that comes with private ownership. For more on how socialism fails to coordinate the economy check out “Economic Calculation in a Socialist Commonwealth” by Ludwig von Mises.

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Posted in: Statist Logic