From the Communist Manifesto to Social Democracy
Are social-based economies the future, or a dream waiting to become a nightmare?
Ever since the days of the “Communist Manifesto” by Karl Marx and Frederich Engels, the world has wondered if a social-based economy would become a new way of living. Achieving a society where total equality and secured social benefits would be secured was something millions could only imagine. Throughout history, people such as Castro and Lenin established regimes where the state implemented systems and institutions that planned to give its citizens financial and social stability. They, however, ended up giving sole power to the government and the elite over what was being produced by the working class. Modern economic and political outcomes in countries such as Cuba and Venezuela have left Communism with more than just a bad reputation. Nonetheless, contemporary politics in the Western world have surprisingly shifted towards the left, proposing ideas that resemble those once proposed by Marx and Engels. But is an economic system based on the needs and equality of the working class even possible?
The international community feared social and Marxist systems; people associated them with disparity and totalitarian regimes, but what are they? According to the Merriam-Webster dictionary¹, Communism consists of the equal distribution of the production of economic goods produced by the working class. The theory is considered the last stage of society, according to Marx. Socialism, on the other hand, was described by the author as a transitional period leading to Communism. Neither system aimed to be corrupt and ineffective. But the Marxist system turned out to be the perfect tool for some of the most restrictive regimes in history.
The Birth of Real Tangible Communism
Vladimir Lenin established the first communist system in history after the Russian Revolution in 1917. The country, tired of a monarchy, ultimately entered a clash of ideals that created the foundation of Russian principles for years to come. In 1921, Lenin implemented the first Marxist-State, the policies established included the total ownership and control of all the social and economic activities and the distribution of goods to its workers². The world saw in awe how powerful the Soviet Union grew. Inevitably, the West started to fear the Soviet way of handling things. Meanwhile, Socialism transformed into something different. Marx’s transitional definition no longer applied to countries who wanted to try out leftist policies.
In simple terms, Socialism based its ideas on collective ownership, either through a state-controlled agency or a worker cooperative. Therefore, Socialist economies discouraged all private ownership. Goods and services were produced only for their usefulness, not to create the need for a demand-based market for products to be sold at a profit. This system also discouraged accumulation, which is assumed to be the root cause of wealth imbalance across society. Examples of these types of economies in the 21st century include China, Cuba, and North Korea³. Modern Socialist models started to introduce capitalism to their economies, but back in the days of the birth of the left, totalitarianism was still a side effect of theories like Socialism.
The Soviet Union and Communism
Back in Russia, Bolshevik leader, and Marxist follower, Vladimir Lenin rose to power after the October Revolution and as a result, Russia became the first nation with a Communist government. In late November of that year, leftist Socialist revolutionaries defeated the Bolshevik government through a political election. However, despite the known promises of “bread, land and peace”⁴, Lenin came into power by promising the Russian people that another monarchy would never take place in the Soviet Union, but his violent regime proved that the days of totalitarianism were not over. After Lenin’s death, Joseph Stalin rose into power and then executed a series of five-year plans with the purpose to better the economic welfare of the USSR. The plans focused first on the enlargement of the industrial and agricultural sectors, followed by the development of the military sector. As a result, the Soviets saw an economic growth of 5.5 percent⁵. The Soviet Union saw its economy flourish from the late twenties to the early seventies.
Despite the country’s position as a global power, the last years of the Cold War took a toll on the USSR’s economy, as it slowed down to approximately 2.5 percent in the ’80s⁶. It’s then-leader Mikhail Gorbachev established the Perestroika, an attempt to save the Communist motherland by decentralizing the Russian economy while also opening it to foreign trade. Gorbachev saw no other option but to copy the strategies that had brought prosperity to nations like The United States and The United Kingdom after economic disasters. While some admired their new leader and his strategies to help and open their beloved nation to the world, others thought that Gorbachev had fallen a victim to Capitalism.
Naturally, in 1991 the once-powerful and centralized Soviet Union fell, and the now Russian federation with its new leader, Boris Yeltsin, had no option but to establish a capitalist economic model. Yeltsin began privatizing large enterprises, (most of which were based on oil and natural resources) and by the middle of 1994 seventy percent of the economy was now owned by Russian “oligarchs” that ultimately promised to help finance Yeltsin’s re-election campaign⁷. Corruption became the new normal when it came to Russia’s new capitalist economy, a factor that largely contributed to its current financial instability. A lack of government transparency produced economic inequality. The World Bank data shows Russia’s GINI Index of almost 4⁸ (a higher Index indicates more social and economic inequality). Modern events such as the 2008 economic crisis, Russia’s dependency on their oil industry, and economic sanctions imposed by the West after the Ukraine crisis in 2014⁹, also contributed to the decay of its economy. According to the World Bank, Russia’s Gross Domestic Product is estimated to be around 103.87 billion dollars¹⁰, which positions the once-powerful Soviet Union behind economies like Brazil and Italy. Russians demonstrated to the international community that Marx’s ideals for a perfect society were simply unrealistic.
The Birth of the New Left
Many countries, attempted a communist model which ultimately failed at achieving successful results. China, for example, saw itself forced to switch into a capitalist economy to keep up with the western world. It seemed as if nations had no option but to choose between a firm left and strong right, but a system that implemented the best from both Capitalist and Marxist models was born. Social Democracy originated in Germany in the later years of the 1800s with Otto von Bismarck, the country’s first-ever chancellor. The movement spread throughout Western Europe as the counter-theory to totalitarian Communism and the result of both World Wars¹¹. As a result of this new theory, countries like Norway, Finland, Denmark, and Sweden decided not ready to give up on a social-based economic system just yet. The Nordic Model was created as an alternative to the purely capitalist or communist regimes previously established by the international community. After the Second World War, these countries began to independently build the foundations of their economies for years to come. When the ultimate demise of the Soviet military occurred, the Scandinavian countries could now realign their economies with that of their European counterparts¹². The new economic, political, and social systems implemented consisted of secured social benefits, as well as a free market economy to ensure economic growth and prosperity for the people of these nations.
Sweden, for example, established its social-democratic policies after years of economic prosperity. The country imposed a high taxation system, approximately 55% to its middle-class ¹³. In exchange, it gave its citizens universal healthcare and education, as well as stable unions and paid parental leave among other social benefits. The result was a nation that did not have to worry about its basic needs. A nation that instead, could focus only on jobs that gave them a sense of fulfillment, just like Marx would have liked. According to data by the World Bank, the results of an equal working class are easily demonstrated on the Nordic country’s GINI Index of 29.2. Despite Sweden’s smaller GDP of 556.086 billion dollars¹⁴, neither the United States with its capitalist economy nor the Russian Federation with its prior communist system achieved what Sweden could. Social and economic equality for its citizens.
Sweden’s social and economic prosperity over capitalist superpowers such as the United States or communist initiators such as Russia can be easily demonstrated by data provided by the World Bank. For example, when it comes to the percentage of school enrollment, Swedes lead the way with an astonishing growth of 126.575%, while both Russia and The United States have only had an estimated growth of 102%¹⁵. Per capita, Sweden’s 55,490 USD Gross Domestic Product closely resembles that of America’s 63,080 USD. In comparison, Russia’s economic instability resulted in a poor performing GDP of 10,230 USD¹⁶. Finally, Swedes get to live more fulfilling, happy and longer lives as their life expectancy is at an estimated 82 years of age. Americans and Russians on the other hand, live less. As U.S citizens live an approximate of 78 years, Russians on the other hand only live to the age of 72¹⁷. Despite the criticism of many scholars who describe the Nordic model as unrealistic, Sweden demonstrated that an economic and social model where the needs of the people come first is possible.
Social Democracy in the West
Capitalism has always been seen as a system that could always be implemented when economies seemed to go downhill. But while Capitalism may seem great on a larger scale, the reality is that economic growth is not always guaranteed to most working-class families. Nowadays, modern economies reward skills more than in the past, and lots of people have not upskilled quickly enough. Free markets deliver fair-enough outcomes, so long as everyone has the education and training needed. Unfortunately, in these capitalist economies, quality education comes at a great cost¹⁸. Naturally, Socially Democratic ideas such as Medicare for All, paid parental leave and other social benefits have been proposed by members of the Democratic party in the United States. Most candidates from this party support a raise to the minimum wage to $15 an hour, as well as tuition-free colleges and universities. However, to afford these great proposals, politicians plan to raise taxes as well as to create new ones. And while implementing these ideas in the U.S might seem impossible, the fact that Socialist proposals are now discussed in one of the major parties of what was once known as the greatest Capitalist country in the world, is impressive.
The world has had a series of trials and errors when it came to the possibility of creating a system based on the needs and equality of the working class. Communism’s greatest flaw was its apparent greatness in paper and its inevitable doom in practice. Whether one agrees with it or not, capitalism brought economic prosperity to nations across the world, but it’s establishment naturally came with social and financial inequality for the working class. A social-based economic system, however, could be possible if implemented correctly. We must learn from Sweden, and its Nordic neighbors, how to turn a famously known theory, into tangible and real policy.
¹ “Communism.” Merriam-Webster.com Dictionary, Merriam-Webster, https://www.merriam-webster.com/dictionary/communism. Accessed 13 Mar. 2020.
² ⁴ ⁵ ⁶Johnston, Matthew “Why the USSR Collapsed Economically.” Investopedia, 1 Dec. 2019, www.investopedia.com/articles/investing/021716/why-ussr-collapsed-economically.asp
³ Shobhit, Seth. “Socialist Economies: How China, Cuba, And North Korea Work.” Investopedia, 15 Aug. 2014, www.investopedia.com/articles/investing/081514/socialist-economies-how-china-cuba-and-north-korea-work.asp.
⁷ ⁹ Johnston, Matthew. “The Post-Soviet Union Russian Economy.” Investopedia, 25 June 2019, www.investopedia.com/articles/investing/012116/russian-economy-collapse-soviet-union.asp
⁸ World Bank. “World Gini Index Indicator.” World Development Indicators, The World Bank Group, 2018, data.worldbank.org/indicator/SI.POV.GINI?locations=SE-RU-US-MX
¹⁰ World Bank, “World GDP Indicator.” World Development Indicators, The World Bank Group, 2018, https://data.worldbank.org/?locations=SE-RU-US
¹¹ Sacks, Adam J. “Why the Early German Socialists Opposed the World’s First Modern Welfare State.” Jacobin, 5 Dec. 2019, www.jacobinmag.com/2019/12/otto-von-bismarck-germany-social-democratic-party-spd.
¹² Schmidt, William E. “Scandinavia Rethinks Itself.” The New York Times, 23 Feb. 1992, www.nytimes.com/1992/02/23/weekinreview/in-a-post-cold-war-era-scandinavia-rethinks-itself.html
¹³ Dorman, Jeffry. Forbes, 8 July 2018, www.forbes.com/sites/jeffreydorfman/2018/07/08/sorry-bernie-bros-but-nordic-countries-are-not-socialist/#1b538f2174ad
¹⁴ ¹⁶ World Bank, “World GDP Indicator.” World Development Indicators, The World Bank Group, 2018, https://data.worldbank.org/?locations=SE-RU-US
¹⁵ World Bank, “World School Enrollment Indicator.” World Development Indicators, The World Bank Group, 2017
¹⁷ World Bank, “World Life Expectancy Indicator.” World Development Indicators, The World Bank Group, 2018, https://data.worldbank.org/indicator/SP.DYN.LE00.IN?locations=SE-RU-US
¹⁸ Reeves, Richard. “Capitalism used to promise a better future. Can it still do that?” The Guardian, 22 May 2019, www.theguardian.com/commentisfree/2019/may/22/capitalism-broken-better-future-can-it-do-that
