Advocates of “socialism” must express their support for a set of institutions, not a set of desired outcomes.

Steven Horwitz is Economics Editor at Lib​er​tar​i​an​ism​.org and Distinguished Professor of Free Enterprise at Ball State University. Horwitz has written extensively on Austrian economics, Hayekian political economy, monetary theory and history, and macroeconomics.

At the Washington Post, Elizabeth Bruenig has written two recent columns suggesting that Americans should consider some form of socialism as a remedy for the problems that ail capitalism, and perhaps society more broadly. In the second column, she bemoaned the response to the first, accusing many of her critics of not responding in good faith. Her complaint focused on two things: 1) how quickly they brought up the Soviet Union or Venezuela as examples of socialism, presuming that’s what she wanted and 2) their attempts to deny that the Nordic countries are meaningfully socialist.

I will address both of those points below, but I also what to note that there is much missing from Bruenig’s columns that could go a long way toward making her argument in better faith. Her refusal to engage with the best criticisms of socialism is a major example.

The overarching problem with Bruenig’s two‐​column argument is her inability to fairly define capitalism and specifically define socialism. What we get in terms of capitalism in the first piece is this:

[C]apitalism…encourages and requires fierce individualism, self‐​interested disregard for the other, and resentment of arrangements into which one deposits more than he or she withdraws. (As a business‐​savvy friend once remarked: Nobody gets rich off of bilateral transactions where everybody knows what they’re doing.) Capitalism is an ideology that is far more encompassing than it admits, and one that turns every relationship into a calculable exchange. Bodies, time, energy, creativity, love — all become commodities to be priced and sold. Alienation reigns. There is no room for sustained contemplation and little interest in public morality; everything collapses down to the level of the atomized individual.

It takes some chutzpah to define capitalism that way then complain your critics are arguing in bad faith, given what a bad‐​faith explanation of capitalism that is. I could spend this whole space picking apart that definition claim by claim, especially its ignorance about the nature of exchange. It might be easier to ask folks who have lived under nominally socialist regimes whether that paragraph better describes their lives under socialism or capitalism. I’m pretty sure it’s the former, not the latter.

Her argument that capitalism commodifies everything has been dealt with at length in Jason Brennan and Peter Jaworski’s recent book. One major social institution with the most intimate of human relationships has been dramatically removed from the realm of “calculable exchange” thanks to capitalism, namely the family. I point out in my own book that the wealth that capitalism brought, thanks to the way it changed the nature of work, transformed the family from a site of economic production to one of consumption, humanizing it in the process.

For centuries, the family was a small firm and its members were treated as contributors to its productivity. Family relationships were very much based on what Deirdre McCloskey has called the virtue of Prudence. Thanks to capitalism, production was transferred to the market, opening up space in the family for emotional and psychological desires and diminishing the role of “calculable exchange” in defining its relationships. It was the advent of capitalism and the wealth its changes brought that transformed the family from being centrally about Prudence to being far more about the virtue of Love. The resulting effects on the lives of women and children were enormously positive, as they were for same‐​sex couples more recently. As I’ve argued, it was capitalism that humanized the most deeply interpersonal of all human institutions – the family.

Her definition of socialism is equally problematic as it defines her system in terms of its goals, not its structure:

I would support a kind of socialism that would be democratic and aimed primarily at decommodifying labor, reducing the vast inequality brought about by capitalism, and breaking capital’s stranglehold over politics and culture.

The problem with both of her definitions/​descriptions is that they do not specify the institutional framework that marks either system. They are descriptions of the (supposed) results of each system without ever telling us how each is supposed to work. How, exactly, in the case of socialism are those results to be achieved? Without specifying the relevant institutions and, more important, examining whether those institutions are robust to human ignorance and knavery, we have nothing more than wishful thinking, or what Mike Munger has called “unicorn governance.”

By ignoring these questions of institutions and their robustness, and by defining socialism in terms of its desired outcomes, Bruenig is able to skirt around the most fundamental questions in the long history of the debates over socialism. Over the course of the Socialist Calculation Debate of the interwar years, the critics of socialism took socialists at their word with respect to their desire to eliminate market relationships and replace them with social and economic planning. The critics then argued that in the absence of the private property necessary for markets and exchange, there would be no way to have market prices and therefore no way to compare the value of different goods. As a result, planners would have no way of knowing if resources were being used wisely and they would, in the words of Ludwig von Mises, “stumble around in the dark” trying to figure out what to produce and, especially, how to produce it.

Mises, Hayek, and the other critics of socialism also did something that Bruenig refuses to do: argue in good faith. They accepted the claim of the socialists that the socialists really did want to make the world a more prosperous and just place. What they questioned is whether the means socialists wished to adopt were able to achieve those laudable goals. These social scientific questions are left unasked by Bruenig, who simply seems to assume that her version of “socialism” can do all of the wonderful things it promises, while capitalism will continue to produce her imagined horrors. Without specifying the relevant institutions, socialism is left to mean more or less whatever she wants it to mean, with the result being that she can claim the Nordic economies but distance herself from the Soviet Union and Venezuela among others.

And it’s precisely this refusal to discuss how institutions might work that blinds her to the more sophisticated point raised by the examples of totalitarianism and poverty associated with socialism. Critics of her first column who accused her of desiring or intending to create nightmare societies like those should rightfully be dismissed as arguing in bad faith. The better point about those countries is to ask why it seems so often the case that impoverishment and totalitarianism appear as unintended consequences of perhaps well‐​meaning attempts to supplant markets with planning. Although the assumption might be a false one, one can assume that socialist revolutionaries from the Bolsheviks to Mao to Chavez really did think their policies would make their societies more prosperous and just. The fascinating question is why those societies ended up precisely the opposite.

Bruenig’s blind spot to this way of thinking about the issue is directly related to the absence of any meaningful social science in her discussion. If people like Mises and Hayek are right in arguing that attempting to substitute planning for markets, even with the best of intentions, will leave planners unable to figure out what to do and how to do it, it should not surprise us that the result is poverty. Having been granted extensive powers on the premise that they would be used for prosperity and justice, and realizing they can’t, the planners are faced with either giving up those powers or using them for other purposes. Once those powers are in place, they will attract those with a comparative advantage in acquiring and using such powers in less beneficial ways. This is the argument Hayek made in his famous chapter “How the Worst Get on Top.” Totalitarianism and poverty are, contra Bruenig, predictable consequences of attempts to substitute planning, even democratic planning, for the market. In this way, Soviet Russia and Venezuela are relevant to a case for socialism understood as a form of economic planning.

But what of the Nordic countries? Bruenig’s first piece, as she admits, never named any examples of the kind of socialism she was defending, but her critics (rightly) assumed she was thinking of the Nordic model. And in the second column, she makes that defense more explicit. She also argues that those who claim the Nordic model isn’t really socialism should then probably not be so vehement in their objections to it.

She has a point, but it’s a bit more complex. In the absence of an institutionally‐​specific definition of socialism, and given socialism’s long history as a defense of economic planning instead of the “anarchy of production” of the market, it’s not silly at all to claim that the Nordic countries are “capitalism with a large welfare state.” These countries remain clearly market economies, and many have less government regulation in some areas than does the US. Even if state ownership plays a larger role, those state‐​owned enterprises interact with each other in markets mostly characterized by private property, exchange, and prices. Those who manage state‐​owned enterprises in such countries are able to avoid the worst problems of socialism precisely because they can take advantage of those prices, as well as prices on the world economy, to guide their choices. In addition, it is the very productivity of the private sector in those countries, and here in the US, that enables them to afford a large role for government in the areas they have it. It’s capitalism that makes possible both the Nordic welfare state and the US military machine. So on that score, the critics are right to note that those countries aren’t really socialist.

However, the empirical evidence on the effects of economic freedom suggest that the reason that the Nordic model delivers on some of the goals Bruenig wants is precisely because they are quite “capitalist” compared to the rest of the world. We know from the Economic Freedom of the World Index that the most economically free countries are also the best off economically. As the Fraser Institute reports in its summary of that index:

Nations in the top quartile of economic freedom had an average per‐​capita GDP of $42,463 in 2015, compared to $6,036 for bottom quartile nations (PPP constant 2011 US$). In the top quartile, the average income of the poorest 10% was $11,998, compared to $1,124 in the bottom quartile in 2015 (PPP constant 2011 US$). Interestingly, the average income of the poorest 10% in the most economically free nations is almost twice the average per capita income in the least free nations. Life expectancy is 80.7 years in the top quartile compared to 64.4 years in the bottom quartile.

The Nordic countries and their large welfare states, of course, all rank in the top quartile on the economic freedom index. By any serious definition, they are not examples of the success of socialism but rather examples of what we can afford when we choose markets over socialism.

But it’s also the case that the more “capitalist” an economy is, the better its citizens do along a number of non‐​economic dimensions. Antony Davies and James Harrigan summarize that research:

On average, people in countries that are more economically free enjoy higher incomes, suffer less unemployment and less poverty, experience less child labor, less gender inequality, less income inequality, less deforestation, and better air quality. Yes, even the environment is healthier where economic freedom is greater.

The empirical evidence not only bears little resemblance to Bruenig’s bad‐​faith description of the results of capitalism, it strongly suggests that the desirable features of the Nordic economies are the result of not going anywhere near the economic planning associated with socialism.

There’s a really good debate to be had about whether or not a large welfare state really serves the needs of its citizens well. (As I argued in my previous column here, the research on family leave in Denmark suggests maybe not.) Contemporary debates about the universal basic income and related ideas here in the US are also relevant. But none of this is really about “socialism.” The evidence on that score is clear: the economic freedom associated with capitalism is simply better than the interference with markets that characterizes socialism when it comes to providing pretty much all of the things people, including critics of capitalism, claim to value.

If Bruenig wants to have a serious, good‐​faith debate about socialism, she’s going to have to play by her own stated values. That means not only confronting the social‐​scientific theory and evidence about markets and planning, but responding to the best arguments about the relevance of countries like the Soviet Union and Venezuela.

To some extent, this is a battle over words. Bruenig presumably wants the word “socialism” so she doesn’t have to admit that capitalism actually works and makes possible not just the means she thinks are necessary to her socialist ends (e.g., a larger welfare state and related policies) but that it also directly promotes those ends. At the very least, more accurately describing her desired outcome as “social democracy” rather than “socialism” might move this conversation forward, as the former recognizes that the countries she wishes to emulate are not socialist in any meaningful sense of that word’s long history. Moving away from much more contested words like “socialism” and “capitalism” and instead specifying the set of institutions that she thinks are the means to her ends, and engaging the decades‐​long debate over their effectiveness, would both clarify this debate enormously and achieve her goal of mutual good faith.