Lecture 11: Democratic Socialism and Communism

Overview

• Explore differences between democratic socialism and communism.
• Compare these systems with free market economies.
• Analyze politicians' stance on democratic socialism in the US.
• Compare idealized forms: Free enterprise vs. Democratic socialism.

Theoretical Background

• Free Enterprise:

  • Ideal form involves no government intervention.
  • Voluntary exchanges and wealth-creating activities.

• Democratic Socialism:

  • Collective decision-making on production and sharing of goods.
  • Equal voting on economic decisions.

• Crony Capitalism vs. Communism:

  • Crony Capitalism involves government picking winners and losers.
  • Communism is complete government control over economy and politics.

Politicians' Views

• US politicians, regardless of party, often support markets and free enterprise.
• Quotes from Beto O'Rourke, Kamala Harris, Elizabeth Warren, Pete Buttigieg, and Donald Trump highlight this.
• Bernie Sanders’ perspective on democratic socialism and reference to Scandinavia.

Misunderstanding Democratic Socialism

• Scandinavian countries like Denmark, Sweden, and Norway are not socialist; they are capitalist with a large welfare state.
• Government does not own means of production in these countries.

Controlled Experiments

• Economic Performance Comparison:
  • Taiwan/Hong Kong vs. China:
    • Economic freedom correlates with higher per capita output.
  • North vs. South Korea:
    • Vast differences in standard of living and economic output.
  • East vs. West Germany:
    • West Germany’s economy grew faster under capitalism.
  • Venezuela vs. Chile:
    • Socialist policies in Venezuela led to economic decline.
  • Zimbabwe vs. Botswana:
    • Free enterprise in Botswana resulted in higher economic growth.

Outcomes and Analysis

• Consistent patterns where free enterprise systems result in higher economic growth and standard of living.
• Sweden, Denmark, Norway, Finland:
  • Not socialist; rather, capitalist economies with welfare states.
  • Welfare state ensures minimum needs, funded by high taxation.

Key Takeaways

• Free enterprise allows for wealth creation which meets basic human needs.
• Welfare states balance wealth creation with social safety nets.
• Historical evidence favors free enterprise for higher standards of living.
• When assessing economic systems, focus on outcomes rather than intentions.

Conclusion

• Economic freedom leads to better standards of living.
• Welfare states achieve social goals without rejecting capitalism.
• The debate includes balancing economic opportunity with social equity.