'Democratic Socialism': A Myth and an Oxymoron

Except for the stubbornly ignorant, led by U.S. senator Bernie Sanders and his fashionista acolyte Alexandria Ocasio-Cortez, Democratic Party candidate for the U.S. House of Representatives, the rest of us understand that socialism is an abomination.

What is not well understood is how the social construct of a pure democracy cannot redeem any feature of socialism.  Instead, it would hasten the arrival of collective totalitarianism.

Before Karl Marx, from Robert Owens's utopian experiment to the early 19th-century musings of French intellectuals, notably Charles Fourier, was the promise of a pure economic democracy, where the means of production are owned and managed by "the people."  Marx was purposely ambiguous about who would own the means of production once the class struggle displaced the bourgeoisie.  In the Communist Manifesto, the people foment the uprising, but the state eventually displaces the people.  Das Kapital sidestepped the issue completely.

While seductively egalitarian, the fatal construct of "the people," in the context of unstructured governance, is its inherent nature as a scattered, untethered co-operative, more attuned to taking instead of making, neither leading nor managing anything.  You know what follows in that vacuum: the collectivist centralized state.

Pure democracy doesn't exist, except a variant in small towns and villages – typically, the legendary New England town meeting.  But town meeting democracy is more romance than reality – shadowed by elected representatives, a town council, or board of selectmen, who choose the town manager and all other department managers.  Pure democracy happens only once or twice a year, when the citizens have a direct vote for their selectmen, municipal and school budgets, and a variety of warrant articles ranging from plastic shopping bag bans to purchasing a new fire truck to waterworks and sewer plant bonds.  But the board of selectmen and their town manager do all of the day-to-day work.

How would "the people" organize enterprises to produce industrial and consumer goods or deliver transportation and energy, let alone toilet paper, flour, and drinking water?  They wouldn't.  That's the whole point of the collapse of Venezuela, where socialism really means a corrupt collective run by a narrow military junta, where productive enterprises have been stolen by the state, and then extinguished.  And nothing works, for anyone.

We have our own "reformed equity capital" experiments called employee stock ownership plans, a U.S. retirement plan invention in the late 1970s (ESOPs).  Pure ESOPs don't work.  Why?  Because no one can decide who really runs the company.  Who makes decisions about product design, manufacturing investment, production scheduling, inventory management, supply chain efficiencies, pricing, and customer policies?

The rank-and-file worker-owners represented by self-centered union leaders would make decisions about wages and working conditions, usually at levels threatening profitability and productivity – not exactly the recipe for attracting investment capital.  Any other decision-making about productivity and cost management would be impossible in a pure democracy, where the illusion of authority and clashing self-interests would lead to unresolved disagreements and impasse, and then internal civil war.

Without representative management authority and leadership, who would be the critical decision-makers needed every day to run any enterprise?  Would the people-owners vote on every decision, large or trivial?  Who would organize and present decisions to be voted upon?  A delegation of worker-owners, named by popular referendum without engineering, computer, accounting, marketing, or logistics skills?

Perhaps the most famous ESOP failure was South Bend Lathe, freely admitted by social justice labor lawyer Norman Kurland.

Kurland highlighted four perquisites for a successful ESOP, none of which existed at South Bend Lathe:

1. A management/entrepreneurial team capable of competing in the global marketplace and commanding respect from the banking community, organized labor, and suppliers and customers

2. A detailed feasibility study of the company and prospects for the future

3. A willingness on the part of organized labor to adopt an innovative productivity-oriented labor contract, based on sharing the ownership risks and future gains from the "ownership system" while holding the line on inflationary or nonproductive "wage system" gains

4. Access to sufficient capital credit, at low interest rates to meet up to 100 percent of the capitalization needs of the company as an independent operating unit

Notice Kurland's focus on "banking community" and "sufficient capital credit."  No kidding: Where in any socialist construct, "democratic" or otherwise, would capital exist?  It wouldn't.  Moreover, without market prices, how would one determine the value of ESOP shares?  Who would bail out an entire economy of failed ESOPs?

"The people," who cannot lead or manage anything, would become disenfranchised as the governing elite expropriate property; punish any attempts to maintain, let alone restore private capital; and forcefully replace free markets with central planning.  Free speech would be crushed from anyone who opposes the central committee.  And because subjugation is not the natural order, a totalitarian police state would be imposed to sustain centralized control.

Friedrich Hayek's 1940s The Road to Serfdom wasn't a condemnation of pure socialism per se.  A purebred capitalist, he didn't fear pure socialism, as it was a hypothetical.  Hayek's thesis, and greatest fear, was that capitalism's nemesis is totalitarianism.

Hayek's warnings were about socialist principles brutally corrupted into totalitarian central planning and control, always necessary, as "power to the people" is only a simple, cruel, and unworkable slogan.

As Hayek demonstrated, financial and human capital flee, the money supply dries up, commodities become scarce, commerce shrinks, and poverty soon becomes the overwhelming norm.

Capital flight is the only rational response to chaos and confiscation – if flight can be managed before the junta seizes all forms of wealth.  Capital flight is the first response to a dysfunctional pure democracy, or mob rule and anarchy by any other name.  Flight and expropriation overwhelm any motive for capital renewal, let alone reformation by entrepreneurs, who also flee or are imprisoned as enemies of "the people."

The supreme irony of socialism is that it needs capital to work; however, new investments would be the stuff of condemned historical anachronisms, whose former purpose was to oppress the masses.  This is why Margaret Thatcher's quip "the problem with socialism is that you eventually run out of other peoples' money" is so true: without capital, economic growth and justice have no sustainable sponsor.

Government-owned enterprises would likewise be starved for capital – roadways, subways, water and sewer systems.  Also, public utilities would wither.  Municipal finance would have no exchange and no investors; the dearth of bond markets soon enough would lead to derelict infrastructure everywhere. 

Thus, pure democracy is a myth, albeit dangerous, especially the socialist variety – just another fraud, intoxicating the gullible.

So much for power to the people, where Nancy Pelosi's crumbs would be an illusive luxury.