Socialism's Love Affair With Capitalism's Money

By Dee Dee Bass Wilbon and Deana Bass Williams

Socialism is once again wooing Americans for capitalism's money. Lately, it has come disguised as "democratic" socialism.

Adding the word "democratic" to socialism does not change what it is. Socialism still means collective or government control over major industries and resources, with wealth redistributed in the name of economic equality.

Capitalism, by contrast, is built on private ownership, competition, investment and, yes, the pursuit of profit.

America has never been a purely capitalist economy. We have Social Security, Medicare, public schools and a social safety net. That is not the same as replacing private enterprise with government control.

The distinction matters because we have seen this experiment before. Venezuela. Cuba. The results have not been encouraging.

Democratic Socialists often point to Sweden and Denmark as proof that socialism works. The people who actually run those countries are less enthusiastic about that description. Former Danish Prime Minister Lars Løkke Rasmussen put it plainly, "Denmark is far from a socialist planned economy. Denmark is a market economy."

Exactly.

The Nordic model is a capitalist economy with a large welfare state. It is financed by high taxes, including a 25% value-added tax in Denmark and Sweden. Denmark also imposes a substantial registration tax on automobiles. These are not economies where government simply provides everything. They are market economies that tax citizens heavily to fund extensive public benefits.

Democratic Socialists seem to believe America's billionaires can pay for everything.

The math is not mathing.

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The United States has roughly 900 billionaires with a combined net worth of about $6.75 trillion. Confiscating 75% of that wealth would produce roughly $5 trillion, once. Much of that wealth is tied up in businesses and stocks, not sitting in cash. A massive wealth tax could force stock sell-offs, reduce investment and encourage capital to move elsewhere.

Meanwhile, federal and state governments already spend more than $1 trillion annually on major health, nutrition, housing, education and income-support programs. The billionaire money would eventually run out. The need would not.

Margaret Thatcher had the right idea when she said, "The problem with socialism is that you eventually run out of other people's money."

New York City offers another cautionary tale. Democratic Socialist Mayor Zohran Mamdani's agenda promises a larger government role in housing, health care and other basic needs, funded in part by higher taxes on wealthy New Yorkers and businesses.

It sounds generous. But capital is mobile. Businesses can move. Investors can look elsewhere. The people who create jobs are not an infinite ATM.

Model showing how free markets has improved livelihoods and lives.

And capitalism has done something its critics too often ignore. Over the past two centuries, the share of the world's population living in extreme poverty has fallen dramatically as economies grew, trade expanded, technology advanced and markets created opportunity. The result has been billions of people living longer, healthier and more prosperous lives.

Capitalism is not perfect. Monopolies should be challenged to encourage competition. Fraud should be prosecuted. Consumers and workers deserve protection.

But the existence of problems within capitalism is not proof that socialism is the solution.

The Democratic Socialists of America still promotes "radical" reforms including defunding the police and the Green New Deal as a transition to "a freer, more just life."

Democrats and all Americans should examine those promises carefully. "Free" health care, "free" housing and "free" college are not free. Taxpayers, businesses, workers or future generations pay the bill.

We marvel at the naivety of Democratic Socialists. Noble ideals are one thing. Building those ideals on an economic model that has repeatedly failed is another. You cannot redistribute wealth forever without someone continuing to create it. Eventually, the bill comes due. And no amount of wishing makes the math work. 

Dee Dee Bass Wilbon and Deana Bass Williams are partners at Bass Public Affairs (BPA). Linked here is a BPA primer, The Wealth Distribution Myth.