There's A Difference Between Democratic Socialism And Social Democracy, And It Matters

Most of us have heard Bernie Sanders refer to himself as a democratic socialist. For liberals, this term conjures up images of Scandinavian countries like Denmark, Sweden, and the Netherlands, with their free education, universal healthcare, and paid parental leave. We label the Dutch as democratic socialists, and the Dutch are frequently given the title of “happiest people on earth.” So it seems obvious to liberals that there is a “correct” way to do socialism. Other countries have managed it, so why can’t we?

But when conservatives hear the term “democratic socialist,” they think of Venezuela, a once oil-rich country that gave socialism a try and in the process lost over 60% of its GDP. (For comparison, during the U.S. Great Depression, GDP fell by 28%.) Last year Venezuela experienced 2 million percent inflation. What is happening in Venezuela is a nightmare beyond what most of us can comprehend, and certainly not something any of us want for the United States.

I recently got into an argument online about the topic of socialism. It had come up in a friend’s Facebook thread as we were talking about the costs of healthcare, the out-of-control salaries of drug company executives, and how we need something closer to a single-payer system. A man popped into the thread to tell us that this is socialism and “Do we want to end up like Venezuela?!” I found this intensely frustrating because I have a friend who moved to the Netherlands and regularly shares stories of her enviable positive experiences in what to me was clearly a well-run socialist country.

I argued that Venezuela, the Soviet Union, China, Cuba, are not good examples of socialism because in each of those cases, corruption among the governing class caused the governments to devolve into something closer to authoritarianism. With socialism, I thought, everyone is supposed to benefit. If only the governing class benefits and everyone else suffers and there is no democratic system to change that, well, that is clearly not democratic socialism and why in the world are conservatives so determined to misunderstand this concept? Ugh, it’s not that hard.

But I felt a nagging in my stomach. I needed to know—what is the exact difference between Venezuela and the Netherlands? Why did one succeed and the other fail so disastrously? And given that American government is so rife with corruption, what makes me think our version of socialism wouldn’t end up like Venezuela’s? Whose understanding of socialism is correct—the right’s or the left’s? And does it make a difference when you call it democratic socialism?

An episode of the podcast Freakonomics helped answer my questions.

“The Nordic economies are not socialist democracies. They call themselves social democracies,” said Jeffrey Sachs, Professor at Columbia University and director of the Center for Sustainable Development at Columbia University. “That’s a very big difference. They do not call themselves socialist, in general, because most of the production, most of the businesses in the economy, are private, corporate ownership. But what they do, which is quite different from the United States, is that they collect far more in total tax revenues, and then use those additional revenues to provide far more public services than the United States provides.”

Democratic socialism. Socialist democracies. Social democracies. The first two are the same thing and not what we want. When we say “democratic socialism” or “socialist democracy,” we’re effectively saying “socialism, chosen by the people.”

What Sachs says we should call Scandinavian countries instead is “social democracies with mixed economies.” It may sound like an obsessively nitpicky distinction, but the difference matters.

It’s worth pointing out that Jeffrey Sachs isn’t just a stuffy old academic. He’s walked this walk. For decades, he has advised governments around the world on how best to emerge from poverty or to switch from communism to a market economy. He has personally witnessed what type of government tends to work best for the largest number of people. He especially wants people to understand this concept of “mixed economy” in the context of social democracy.

“[It] means that an economy has a market system, including private ownership and trade, market functions, and supply and demand. But it also has government—government that may run the schools or may provide for health care or the police and the fire department and so on. That’s a mixed economy.”

This is not the same as pure socialism. We need to stop using the word socialism. According to Sachs, “a socialist economy, in the traditional usage of economics and in political history — though it’s a term that has been used for all sorts of things — generally means an economy organized around social ownership, which might mean state ownership, or it could mean a cooperative ownership, or in some views it has meant worker ownership, or in other interpretations, citizens’ ownership. But the idea is that it’s some kind of social ownership of the means of production.”

This clearly does not describe the Nordic economies liberals so often reference when we discuss socialism. These countries are not socialist. They’re not even democratically socialist. Each of them has the mixed economy Sachs describes, and are much closer to the ideal of most liberals.

Another point the podcast delved into was that even though we may think of Venezuela as socialist, in a few critical ways, the description doesn’t quite fit them either. In socialism, property is meant to be owned communally. In Venezuela, the government took total ownership of everything and then horrendously mismanaged it. Leaders exerted authoritarian control, enriching themselves at the expense of their people. Experts don’t agree on what to call Venezuela’s disastrous economy. The country held supposedly democratic elections, but many experts and political leaders aren’t buying the outcome as legit, including the U.S.

What we call things matters. Nuance matters. I’m embarrassed that I misunderstood the distinction between democratic socialism and social democracy to the point that I was arguing online about it and even asking myself, “Am I a socialist?” Among today’s youth, socialism is as popular as capitalism. But when someone says they have a favorable view of socialism, what kind of government are they picturing? If they’re picturing Nordic countries, then they aren’t really talking about socialism. They’re talking about social democracies with mixed economies. And there’s a big difference.