Saturday, November 7, 2015

Bernie’s “Socialism” is just Good Old Fashioned Keynesian Social Democracy

It is usually very hard to get excited about the left-wing politicians anywhere in the West these days, but the rise of the US presidential candidate Bernie Sanders is quite refreshing.

It is predictable that all the usual right-wing halfwits are screaming the accusation of “socialism” against Sanders – as if this means Marxism or Communism or a total command economy. It’s nonsense, of course.

Bernie is just a good old fashioned European social democrat in American form, as we can see in this video.

He rejects Marxism and Communism, and believes in a mixed economy with strong macroeconomic interventions and remedial programs to address the worst aspects of capitalism. That is in line with the finest tradition of John Maynard Keynes.

For Keynes, the most serious flaws in capitalism were as follows:
“The outstanding faults of the economic society in which we live are its failure to provide for full employment and its arbitrary and inequitable distribution of wealth and incomes.” (Keynes 1936: 372).
Of course, we could add all sorts of other problems to this that are peculiar to the unusually harsh American version of capitalism: lack of universal health care, highly expensive college education, not enough social security, and so on.

Unfortunately, I think – on pragmatic grounds – that Bernie Sanders would really do better to call himself a Keynesian social democrat, not a socialist. It would communicate so much more effectively what he, in fact, is in political terms.

It would also make it easier to defend himself against charges of the sort we see in the video below.

Bill O’Reilly – shining example of right-wing American idiocy – obviously thinks immediately of Marxism and communism whenever he thinks of “socialism.” Quite possibly he thinks all of Western Europe is “communist” from the way he talks.

If your opponents are so stupid as to think in these terms, it would be better – simply on tactical grounds – for Bernie Sanders to defend his policy position as Keynesian social democracy, in the finest tradition of Roosevelt and Truman.

Keynes, J. M. 1936. The General Theory of Employment, Interest, and Money, Macmillan, London.


  1. Social Democracy history is connected to socialist movement so I think that It isn't a mistake calling to Sanders "socialist" (Keynes wasn't social-democrat politically, he was conservative and very aristocratic).

    Not all socialists (and communists) support "planned economy and total state property".

    1. "Keynes wasn't social-democrat politically, he was conservative and very aristocratic"

      This is B.S.

      I've had this argument with very ignorant people before and you, quite frankly, sound like one.

      See here:

      Keynes self-identified as a “progressive” liberal.

      Keynes tells us himself in his essay “Am I a Liberal?” (1925) that he explicitly rejected both conservatism and Labour party politics.

      Even worse for your position, Keynes was even comfortable with his position being called "liberal socialism":

    2. -On the one hand, I'm thankful for links and references.

      -In second part I'd rather not insult.

      -I think that's not opposite of my opinion. Keynes was sceptic with "democratization" of the economy and he supported a elitist vision although it was compatible with some social policies (he wasn't the first). Or that was my impression to read some sentences from "Am I a Liberal?".

      -On the other hand you must consider that liberalism have had got several meanings in Europe (it's not strange that you could find liberal parties with programmes are similar to conservative and democristian programmes).

      -It's truth that social-democracy (like demochristian) parties (after IIWW) applied some keynesian policies (in Economy) but I think that political philosophy was very different (I think so).

      PD: I'm sorry for my porr english, it's not my native language and I'm trying to improve it.

    3. I'm the previous anonymous, I just want to say to you that I'm not trying to affront to Keynes (I think that he gave important contributtions in economy field), I tryed to explain his political view (or my impresion about their words).

  2. Bernie isn't going to win the nomination and will humbly give his support to HRC. It is good to see these ideas discussed in broader circles though.

  3. O'Reilly isn't even worth citing.
    That said, Bernie's ideas are silly and ill thought out pander programs for favored constituencies (free university for all etc) .
    Your claim about healthcare is misleading. Everyone gets care. What is crazy is who ends up paying and who does not. But that is a separate issue from actual care.
    I'll take him over Hillary though, he more closely approximates an honest and decent human being than she does.

    1. " and ill thought out pander programs for favored constituencies (free university for all etc) .

      Ken B, you can make that argument against ANY policy by ANY politician. We can also complain that it panders to some "favored constituency."

      In this particular case, young people who are qualified to go to university -- especially the poor -- are absolutely deserving of cheaper or even free education.

      Our whole civilisation is dependent on such people: they provide the new generation of scientists, engineers, doctors, neuroscientists, dentists, linguists, psychologists, historians etc.

      They have been driven into deep debt in the US by the cost of education. Excessive private debt is the cancer eating away at Western economies. We need to take measures to fix it as soon as possible.

    2. No, this is absurd. Aside from leading to too many people getting useless degrees, why should the average taxpayer pay for someone from an affluent family to get a degree that will earn him a large salary? We need more tax lawyers you think? This program is nothing but welfare for the upper middle class.

    3. Yes, you have a point. I am happy to admit my position does need revision:

      (1) for the super-rich and very rich, I would not support free education or subsidised education.

      But I would defend it for the poor and even most middle class people. The middle class is being shattered across the Western world. Many of them are not simply not as wealthy as some people think. This would be an important to help the middle class.

      (2) as for leading to too many useless degrees, there is an says solution to this: stop people from doing multiple degrees for free and offer better subsidies or free degrees in those areas that really are more important and were your country faces a skills shortage: e.g., for scientists, engineers, doctors, neuroscientists, dentists, or whatever.

      Finally, you underestimate how university degrees -- even, I'll grant you, frivolous Humanities ones -- are becoming more important in getting people employment these days.

      As Bernie says, "college degree is the new high school diploma."

  4. I found this by accident. Funny.

    1. Yes indeed, funny. But in the grand scheme of things a trivial point against the Bern.

    2. Against his character agreed. But a body blow to his policies. His people use Uber because it gives them a good service they value. So do many schlubs with no connections and a tight budget. Bernie would deprive these schlubs of that benefit, a benefit his people demonstrate to be of value, for the benefit of the cartel owners whose business Uber challenges.
      Saying Uber is unregulated is false too. Like any company it is subject to many regulations (many of which are perfectly sensible). What he means is the lack of arbitrary rules he or others can use to block Uber to the benefit of those cartels, and the politicians they fund.

  5. In regards to your comment of "highly expensive college education" are you familiar with the paper titled "Credit Supply & the Rise in College Tuition" that was put out by the FRB of New York?

    1. No, I'm not. A am guessing it shows how college education costs have driven people into deep private debt?

  6. In the first video, B.S talks about Nordic model . One thing about those countries is that their population is low, compared to U.S. Would policies of welfare state work in big and populous countries like US ??

    Also about minimum wages, which is one of the key concept of welfare state. I have read arguments that minimum wages reduce employment.Switzerland and Hong Kong didn't had minimum wage law but when laws introduced in latter in 1997 the unemployment increased to 7.3% in 2003 from 1.4% in 1991 when there were no laws . European countries have higher minimum wage rate than US and they correspondingly have higher unemployment rate fraction of job growth rate compared to US. Also rate of unemployment rate of
    blacks increased after the introduction of minimum wages laws in 1938 in U.S.. The Labour force participation of blacks was higher compared to whites in late Nineteenth century to past middle of twentieth century. Taking 1948 as a normal year (due to wartime inflation), the black teenagers unemployment that year was lower than it was to be anytime during boom years.
    ( Thomas sowell - Basic Economics - A citizen's guide to economy.)
    What's your opinion LK ?

    1. (1) "In the first video, B.S talks about Nordic model . One thing about those countries is that their population is low, compared to U.S. Would policies of welfare state work in big and populous countries like US ??

      Hmm... And yet Germany and France and the UK with large populations have successful welfare states too. This seems to utterly refute you.

      (2) People who think minimum wage laws only ever raise unemployment are simply asserting an analytic a priori model that applies to a purely imaginary world.

      The question whether any particular minimum wage law tends to cause unemployment in the real world is an empirical question.

      In the world, we find mixed evidence. And even if it did in some cases cause more unemployment, that would NOT invalidate the moral case for a minimum wage, because unemployment is mostly a function of government fiscal policy and we could easily fix the problem of higher unemployment that resulted from a minimum wage with effective government fiscal policy and job programs:

    2. The size of the effect absolutely would matter to the moral argument. Consequences matter.
      But if your point is that I need a solid justification to interfere with the private arrangements of people I don't know, whether their sexual arrangements, their chess playing arrangements, or their employment arrangements, then I agree and applaud your respect for the autonomy of others. That IS what you meant, right? 😉

    3. (1) "The size of the effect absolutely would matter to the moral argument. Consequences matter. "

      Yes, Ken B, of course it would.

      But I've seen no empirical evidence showing -- nor is there any theoretical reason to think -- minimum wage laws would cause huge unemployment nor catastrophic unemployment.

      At most, the anti-minimum wage law economists can point to empirical studies that show a statistically significant higher level of unemployment that is either ridiculously trivial/minimal or a few percentage points higher.

      But that just vindicates my position: whatever higher unemployment results could be totally swamped and overcome by effective fiscal policy and if necessary a jobs program.

      (2) sounds like you second point is flippant.. which is fair enough.

      But if not, then, yes, you do need a good justification to interfere with the private arrangements of people. On this issue I have one: unemployment is a waste of productive labour and contributes to all sorts of social problems.

    4. Not flippant at all, I just know that you meant only the other moral considerations. The ones Libertarians ignore. My point is we can't ignore either. Which is why the effect size matters.
      Your justification is odd, since it justifies actions to reduce unemployment, which a minimum wage is not in general. It's a justification for stimulus broadly defined, but we are not debating that.
      Let me summarize our differences. I want to let markets work, and have government directly help those who need help. You want to regulate markets into perfection, to obviate much of the need for help.

      My plan works better than yours. We agree on the need for a welfare state and countercyclical action.

    5. (1) "Your justification is odd, since it justifies actions to reduce unemployment, which a minimum wage is not in general. It's a justification for stimulus broadly defined, but we are not debating that.

      Yes, you are right. My mistake and I freely admit it. My mind wondered from minimum wage laws to fiscal stimulus.

      My moral defence of minimum wage laws (which I point out to you concedes a great deal that I do not even need to concede) is here:

      On more of the empirical evidence on minimum wage laws which actually supports my position, see LachMinsky's comment below.

      (2) on the charge that I want "perfection", oh, come on, Ken B, this is a silly straw man.

      I freely admit my favoured position is not "perfect" and might have some downsides, but on balance I think it can defended as better than other alternatives.

      This is just like the justification for vaccination (though you might disagree on this too): yes, there are occasionally rare adverse reactions, but on the whole it works well for most people probably the vast majority, and the greater good makes such programs justified. In time, we can hope our science -- with individual genetically tailored medicine -- might eliminate even these rare adverse reactions.

    6. Again with vaccinations the rates matter. Adverse reaction rates are low, bad effects of non-vaccination serious and harm others (such as those who cannot be vaccinated.)

      As for perfection: look at the tuition thing. You want to interfere in the *market* for degrees, then interfere again in the market to curb a problem, then doubtless again. These kinds of direct interventions never stay small, are impossible long term, and waste resources.

  7. The notion that there is a linear, negative effect of minimum wages on employment is old and outdated.

    If there was, the findings of David Card and Alan Krueger's case study of wages in the fast food industry (which encompasses many low-margin franchises) in 1994 and Arindrajit Dube and Michael Reich's expansion of their study in 2010 to all contiguous counties with differing wage levels in New Jersey (with both studies looking at nearly a decade and a half of data) would make no sense. They found small, gradual increases in the minimum wage either boosted employment or had no adverse effects.

    The experience of Britain, which saw unemployment fall after introducing a national minimum wage in 1999 and saw earnings boosted not only in the bottom 5% of workers but also further up the income scale would also make no sense.

    There is research that suggests instances where the minimum wage increases abruptly to a level above the median wage result in a short-term rise in unemployment, but this merely strengthens the argument for adjusting the minimum wage to the right level, not for the abolition of the minimum wage.

    Much depends on dynamic variables, such as how businesses are positioned in the labor market. If they exercise considerable monopsony power as buyers of labor, they can hold wages below the competitive rate--a wage floor can help to end this practice. Or how businesses respond to the increase--if they respond by taking measures to boost productivity, they may increase overall output and ultimately the overall level of employment. This is why the effects of minimum wages are, again, not linear in nature.

    David Card and Alan B. Krueger. "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania." The American Economic Review, Vol. 84, No. 4 (Sep., 1994), pp. 772-793.

    Arindrajit Dube, T. William Lester, and Michael Reich. (2010). “Minimum Wage Effects Across State
    Borders: Estimates Using Contiguous Counties.” IRLE Working Paper No. 157-07.

    PDF of Card and Krueger:

    PDF of Andrajit:

    1. Thanks lachminsky for your suggestion.
      Whether minimum wage work in some situation and not in other??
      (" When all is said and done, most empirical studies indicate that minimum wage reduce employment in general, and especially the employment of younger, less skilled and minority workers..........Even though most studies indicate that that unemployment tends to increase when minimum wages are imposed or increased, those few studies that tend to indicate otherwise are hailed as "refuted this "myth ", while the devastating criticism of defects of such studies by economists are ignored "
      Ref- Thomas Sowell - Basic Economics : A citizen guide to economy.)
      Some economist suggest that it works and some say that it doesn't. What you have to say?

    2. I say minimum wages can work but they can also go wrong, and that a lot depends on the local conditions of differing markets. I would personally prefer all minimum wages to be set by local authorities. Though I would say a national minimum wage could work if in general too many firms within a given country are holding wages below the optimal, 'competitive' rate. However, how you determine what that rate is is a tough policy question.

  8. I just read Bernie Sander's 12 point program, and some of the proposals do not seem convincing.

    For example.

    Sanders vows tax reform and wants to crack down on tax havens. But this is exactly the thing that every Western political candidate demands and promises, and like the rest of them, Sanders seems light on the specifics of how to do it. It's unreasonable to assume that legislators will somehow remove tax loopholes, as if they were not the ones who created them in the first place.

    What about simpler more effective and actionable proposals such as allowing people to fill their tax returns online or with a two minute phone call? Sweden allows that and that alone ensures rapid and complete tax collection.

    Simple solutions such as these get no attention because they do not offer the radical revolutionary rhetoric of elections.

  9. The rise of Bernie has been extremely exciting.

    While it's obvious, to those of who think and have some actual knowledge without just throwing terms around, that Bernie is not a socialist, and is a social democrat I admire him for just using Socialist.

    Every little thing is called Socialism, Obama has been called it since 2008, so in a way I think it's been brilliant of him to just say "forget it" basically and own it. It also lessens the stigma for anything socialist related. It was not too long ago liberal was a dirty word, forget social democracy. Sanders has gone a long way already to helping change this.

    1. But it is NOT socialism! Socialism prescribes public ownership of all property. We do not own, we simply share.

      Social Democracy is its offshoot, and is well established in Europe. I am almost sure that Bernie Sanders had his "educational formation" here in Europe.

      Capitalism is a an economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state.

      Where it has gone wrong is in not understanding that if not properly taxed, capitalism can become a giant gusher of income into personal wealth.

      Which has happened in the US where upper-income rates are fixed at 30% and there are myriad loopholes that allow for effective rates around half that amount.

      Let's get the "words" right, or we get the "ideas" wrong. There is nothing wrong with capitalism if we know how to regulate it by means of taxation ...

  10. Wrong use of the word "Socialism". Bernie is not preaching that word. He is preaching Social Democracy, which insists that Capitalism is necessary to foster a nation for fairness and impartiality. The opposite of which is being fostered in the US because of the lack of adequate upper-income taxation - which is reason we have the 1Percenter class of families.