The Fallacy of Democratic Socialism

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By Yazid Suleiman 

“You cannot legislate the poor into prosperity by legislating the wealthy out of prosperity… you cannot multiply wealth by dividing it”

Adrian Rogers

Socialism, as an ideology, has persisted through many failures and iterations. Socialists and socialism, going by different labels, have blamed each failed iteration as not being the ‘real’ or ‘true’ socialist, or as not being socialist enough. If only real and true socialism were to be put in place, it is claimed, then all of humanity’s problems will be solved; and all shall live happily ever after in a utopian brotherhood of equal comrades – with some more equal than others of course.

Modern social democrats have replaced the label but maintained the ideologies and spirit of socialism. Indeed, the ‘democratic’ part of the label is meant to cleanse and offset the negative connotation attached to ‘socialism’. A critical misunderstanding here is that the opposite of socialism is capitalism, not democracy. Democracy cannot rise, endure, or flourish without the liberty and prosperity brought about by capitalism. Democracy hinges on capitalism-born prosperity.

Socialism and democracy are incompatible. Democracy requires freedom and liberty. Socialism is all about wholesale obliteration of freedom and liberty. The political repression, economic corrosion, and social decay in socialist societies are a result of systems inherent within socialism under a unified political, economic and social superstructure, giving no room for freedom. 

The fatal danger of collectivist ideologies socialists espouse is not alleviated but rather exacerbated by votes due to more collectivist demands by concentrated interest groups. The desecration of votes is perpetrated by politicians in order to win elections. The most fatal of these promises have the most benign labels – universal basic income, universal healthcare, free education etc. Whatever the logical and scientific basis, any and all opposition to these programs is labelled greed and moral bankruptcy.

The basic principle of modern democratic socialists hinges on consumption, not production or productivity. Indeed, the democratic socialists disdain discussing production or productivity, only redistribution of wealth. Consumption power measured in monetary terms, is regarded as stolen property from those with far less consumption power. This yardstick has taken center stage in the democratic socialist determination of economic, social and political planning. So, the charge becomes that a billionaire must have stolen from employees or the corporation from taxpayers. The unseen value of the product or service or innovation is entirely ignored. 

The argument is never on shutting or even shrinking the corporations or firing the billionaires; just the redistribution of their wealth. This goes to point that the socialists understand the value provided by the corporations but choose to ignore it in pursuit of their nirvana, where everyone has a right to be wealthy no matter the productivity or value of service he or she provides to society and fellow citizens.

Voting for a Living

The desecration of voting transforms it from an instrument of freedom of choice and expression to an instrument of oppression and division. From Hillary Clinton’s ‘basket of deplorables’ to Joe Biden’s ‘you ain’t black’ comments on the campaign trail, attacks from the Left, centered on individuals with views and voting against the socialist slide, have descended into outright suppression and smear campaigns in the media. The thin veil of moral superiority and name-calling barely hides the collectivist identity politics. Voting is now a socialism-only, one-way, no-questions-asked road to comrade-land. Voting for a living is now being etched into the rock of society as a virtuous principle to live by. If you don’t vote that way, you are a bigot.

‘Voting for a living’ is the idea that the wealth of productive individuals and corporations must be redistributed amongst the rest of the population, who vote for a living – a lifestyle they choose must be accommodated by politicians they have voted into office. This utopian idea that one can live any lifestyle of choice by voting for it to be provided by law overturns the basic tenets of society where it is no one’s duty to feed another involuntarily nor have the fruits of one’s labor usurped by force. 

As stated above, the debate on production and productivity is passionately disdained by the Left. It is espoused that whatever a citizen’s productivity or productive value to society, he or she deserves wealth even by usurping that of productive citizens. Any opposition to that is greed and immorality. A citizen or corporation is morally bankrupt unless they cleanse themselves by giving out their wealth. 

A deafening silence hollows out on whether the productive, both individuals and corporations, should stop providing the value they provide to society. To date, only the need for ‘the rich’ to distribute their wealth is heard. The need to produce, be productive or innovative is never heard. Regulations are now the instrument of choice used to hamstring and extort corporations and individuals.

Consumption and Production

‘Voting for a living’ unleashes a flood of legislative and political sophistries in order to, quite literally, shake down productive individuals and corporations to appease non-productive individuals who vote for a living – demanding their wishes be turned into rights. Adopting Keynesian pseudo-science as the ideological platform to usher in socialism will inevitably lead to destruction of wealth.

As stated by Say, supply creates its own demand. Production creates its own consumption. Stifling production necessarily leads to lower consumption. The focus on consumption and demand shifts the economy from a path of innovation and prosperity onto a path of decline and stagnation via two destructive paths: disincentivizing productivity and devaluing wealth.

Disincentives in production feed into consumption by incentivizing non-productive consumption – a fiat consumption. The balance between production and consumption is checked by wealth earned in production. A drop in production necessitates a counter-balance in consumption, thus keeping the system in check unless in cases of external shocks.  

Decoupling consumption from production necessitates the creation of free money and credit and thus destruction of wealth. This leads to interest rates falling too low into negative territory. Negative interest rates are an abomination economics no matter how much social democrats shriek about morality and helping people. Negative interest rates destroy the economy by directing cheap credit to zombie firms to create consumables. By definition, too low or negative interest rates channels money into  redundant, uninnovative firms with stagnant production systems and little risk. Innovation requires risk-taking and, hence, higher than normal interest rates.

Today’s Left is destroying the voting system by ushering in draconian socialist utopian dreams and destroying the foundation, i.e capitalism, that enables the democracy they so abuse. Capitalism builds and upholds democracy. Undoing capitalism in the hopes of marrying democracy with socialism is delusional. Ushering in capitalism necessitates freedoms and liberties. The destruction wrought by today’s socialists will only lead to the annihilation of their own movement altogether, because freedom once ushered is difficult to roll back.

Yazid Suleiman is an economist and consultant. His areas of expertise in economics are banking, finance, macroeconomics, and international economics.


The views expressed on austriancenter.com are not necessarily those of the Austrian Economics Center.

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