The Nation’s Youth Are Leaning Towards Socialism. Financial Professionals Are Forecasting Its Devastating Economic Damage.

Hunter Hastings
Dec 27, 2018 · 4 min read

If there was one idea that you could say dominates today’s Democratic Party, it could be summed up in one word: Socialism. Many Democrats, from Vermont Sen. Bernie Sanders to Massachusetts Sen. Elizabeth Warren, embrace some form of socialism, soft or hard.

But what, you might ask, would America look like under socialism? Now there’s an answer, and it isn’t pretty.

Taking the Democrats’ new fixation with socialist ideas seriously and coinciding with the 200th anniversary of Karl Marx’s birth, the president’s Council of Economic Advisers (CEA) decided to apply conventional economic analysis to the U.S. economy under socialism. It won’t be the happiest place on Earth.

The report, “The Opportunity Costs of Socialism,” warns that “socialism is making a comeback in American political discourse. Detailed policy proposals from self-declared socialists are gaining support in Congress and among much of the electorate.”

The numbers are pretty scary. According to the analysis, if the U.S. were to deploy Venezuelan-style socialist policies it would be a disaster.

Those policies, by the way, have been hailed by Sanders, Democratic candidate Alexandria Ocasio-Cortez, and dozens of other Democratic candidates this year who were endorsed by the socialist wing of the party. Much of the Democratic Party today has become enamored with socialism.

Indeed, a poll earlier this year by the American Action Forum found that 40% of Democrats say socialism is the best form of government. Another 10% say both socialism and capitalism are best. Meanwhile, 57% of Democrats said that socialism has a “positive impact” on society.

So it’s not at all unfair to ask what would happen here if we imposed Venezuela’s brand of socialism in the U.S.? After all, Venezuela is the most recent economy to go whole-hog socialist in this hemisphere since Nicaragua in the late 1970s. And as recently as the 1960s, its citizens were richer on a per capita basis than people in Great Britain.

How would their socialism work here?

Let’s start with reality. The Venezuela model would lead to nationalization of key industries, price and currency controls, rationing, poor health, political instability and widespread politicization of the rest of the economy.

Such policies would lead to a collapse of 40% in real GDP, or about $24,000 per person, according to the CEA report. And no, the CEA estimates are not based on some pie-in-the-sky model. They’re based on data from a wide body of research and studies that clearly and convincingly show less-free economies perform far worse than free economies.

Unfair, say socialist Democrats. Venezuela’s a failure. What about the “Third Way” socialism of Nordic countries like Sweden, Norway, Denmark and Finland? They’re all highly successful. They’re almost paradise.

Never mind that none of those countries today qualifies in any meaningful sense as “socialist.” Or that all of the Scandinavian countries have pulled back from their quasi-socialist experiments during the 1970s, and are instead now cutting government spending growth, privatizing social security, reducing their once-generous welfare programs, lowering taxes, and pursuing free-market policies in general.

Don’t take our word for it. Their own leaders admit as much. In 2015, after Sanders foolishly waxed rhapsodic about the Nordic socialist model, Danish Prime Minister Lars Lokke Rasumssen, speaking at Harvard, harshly corrected him: “I would like to make one thing clear,” he said, in remarks clearly aimed at Sanders. “Denmark is far from a socialist planned economy. Denmark is a market economy.”

The truth is, today Scandinavian nations are in many ways more free than the U.S. As we wrote in August: “They don’t have government ‘guaranteed jobs,’ there’s no mandated minimum wage, and they require citizens to pay more out-of-pocket for health care than the U.S. does today.

“What’s more, Sweden and Denmark under Obama ranked as more economically free than the U.S., according to the Heritage Foundation. Norway was just a few steps behind.”

And by the way, the average standard of living in Scandinavia is below that of the U.S.

Even so, let’s measure ourselves against Scandinavian policies at the peak of their Third Way experiment in the 1970s, their most “socialist” phase. The CEA says if those ‘70s-era policies were enacted here, they would result in a 9% reduction in real GDP, and a whopping 19% cut in household income after taxes and health-care spending.

Welcome to Scandinavia!

Meanwhile, on a more immediate level, Bernie Sanders has made quite a stir with his falsely named “Medicare-for-All” program, which is really just socialized medicine. By the way, it has nothing to do with our current fiscally unsound Medicare program at all, so don’t be fooled by the title.

What if we imposed socialized health care on Americans?

It would result in a 9% reduction in real GDP. It would also slash household income by 19%, after taxes and health-care spending. And it would lead to far worse care and rationing.

In sum, it is a fact, not an opinion, that socialist economies perform far worse than free-market or capitalist economies.

As the CEA said in its timely report, “The historical evidence suggests that the socialist program for the U.S. would make shortages, or otherwise degrade quality, of whatever product or service is put under a public monopoly. The pace of innovation would slow, and living standards generally would be lower. These are the opportunity costs of socialism from a modern American perspective.”

Hey, at least under socialism we would be equal in our misery. But is that what Americans, including rank-and-file Democrats, really want?


Originally published at Center for Individualism.

Center for Individualism

Leading the revival of Self-Reliance and Individualism

Hunter Hastings

Written by

Executive Director at Center For Individualism

Center for Individualism

Leading the revival of Self-Reliance and Individualism