I'm Not Making Any Progress In Trying To Understand The Bernie Sanders Phenomenon

A few days ago I asked if someone could explain the Bernie Sanders phenomenon to me, and commenter Justin Ferraro actually took me up on my request.  After giving a series of reasons, his conclusion is that Sanders supporters are just "normal people with brains."

Unfortunately, having read Justin's comment, I'm still scratching my head at the Sanders phenomenon, particularly the explicit willingness to embrace socialism by name even after the series of unmitigated disasters that it has inflicted on humanity in the last century and now the current one.  So, a few thoughts are in order.

I think Justin's main point is his first one, which is that somehow the Soviet Union was not real socialism and if we just execute correctly it will work this time.

Just as the USSR was a sham of a communist country it is also a failure of socialism, which is doomed, like any other economic system, if it exists within an authoritarian framework. American socialism, rooted in democracy, protection of workers, and representation of the people, is a vastly different (if equally maligned idea).

Well, we do have numerous examples of socialist systems implemented by democratically-elected governments.  The current prime example is Venezuela, with Bolivia and Ecuador not far behind.  Then there's Nazi Germany, although I'm not sure that Justin would embrace it as "socialist" despite the Nazis' own use of the term and their adoption of the economic model of extensive government ownership and/or control of industry.  Of course, despite the initial rise to power through democratic elections, each of these examples then more or less took forcible control of the election process to prevent political competitors from ever regaining power.

More importantly, what exactly is socialism without an "authoritarian framework"?  Isn't the very essence of socialism the forcible prevention of consensual economic transactions?  This asset cannot be owned, bought or sold (or only under restrictive conditions specified by the government) because if that is allowed some people will become wealthy and others will not.  The whole idea is to prevent people from enhancing their wealth by trading privately owned property.  That can only be accomplished by government force.

Justin does hold up current day Western Europe as the example of successful execution of socialism:

[T]he fact that [the Manhattan Contrarian] ignores the incredible, demonstrable success of socialist ideas in Western Europe is completely inexcusable.

I guess we'll just have to disagree about that one.  As far as I observe, Western Europe has hugely backed off the main principles of socialism during my lifetime.  When I was younger, governments in places like the UK, France, Italy and Spain owned huge swaths of the economy, mostly (but far from entirely) sold off since.  And of course, the waves of privatization led to substantial economic revivals.  Today these countries don't so much have public ownership of the economy as large welfare states, many consuming 50% and more of GDP in government spending.  Is that the current official definition of "socialism"?  Look at a chart of government spending as a percent of GDP by country and it's easy to see that those that spend the most have languishing economies with all or nearly all growth stamped out: France (56%), Greece (52%),  Italy (50%), Portugal (49%).  All these countries have lower per capita GDP than the U.S., and with no growth, no ability to catch up.  How does that help the middle class?  The UK has cut government spending by several points of GDP in the last few years and has seen economic growth revive.  The strongest economies in the world have dramatically lower government spending (e.g., Switzerland - 34%; Singapore - 17%!).  And then there's the issue that the coddling welfare states have brought plummeting birth rates and incipient population declines.  Are the Western European welfare states sustainable?  This issue will play out over a long time horizon, likely the next 20 to 40 years, but my prediction is that the current situation is not sustainable.  It's what I've called the "socialist death spiral."    An incentive structure has been created where it's in everybody's interest to maximize receipt of state benefits, work less, retire early, and have fewer children.  But we have less income inequality! (at far lower levels of income).  Is that how we define "demonstrable success"?  It's not how I would define it.

And let me mention a couple more of Justin's points.  One is the issue of "big money in politics":

[Sanders] wishes to combat a system that allows unlimited money from corporate interests to directly fund political campaigns, thus decisively wresting any vestiges of government control from the feeble hands of the individual citizen.

Go to Sanders' site, and sure enough he has a section on "Getting Big Money Out Of Politics."  That section talks about the evil Koch brothers and about a "constitutional amendment to overturn the Supreme Court’s Citizens United decision" -- I guess that means doing away with the First Amendment.  But here's my question.  Suppose you give government complete control over all money-raising to support political speech.  Then consider the phenomenon of the Clinton $500,000 speeches and the hundreds of millions raised by the Clinton Foundation, largely from the biggest corporations and wealthy foreign governments -- all completely outside the campaign regulatory process.  Can't everybody else then just copy that model?  So now we've done away with the First Amendment, only to find a completely cynical end run.  And how then do you do away with this end run?  Perhaps by making it illegal to pay anybody a large amount of money or to give any money to "charity"?  Well, that would be socialism all right.

And finally, here's something else that Justin thinks Sanders would do away with:

A system of unregulated, speculative finance that contributes nothing to society and in fact threatens to upturn it completely by triggering economic disaster.

I won't try to stand up for every aspect of our system of finance, but still, I'm fascinated by the fact that some people think it is "unregulated," and also that it "contributes nothing to society."   On the "unregulated" front, I do happen to have a copy of the Dodd-Frank legislation here on my desk, and it's almost too heavy to pick up, about 2000 pages in this printing.  That's just the statute, not the regulations, which are a multiple of the size, and still coming out today five years after the law was enacted.  I can say with great assurance that Justin has not read the Dodd-Frank law and regulations, because nobody has.  It's not physically possible to read it all in a lifetime, and if you could, you could not remember enough of it when you're done to be able even to give a comprehensible summary.  That's why we need hundreds of expensive lawyers, each to become expert in one little sub-part of the law.  And of course, Dodd-Frank itself is just a small part of the many statutes and regulations that cover the financial industry in this country.  Wasn't Dodd-Frank supposed to be the ultimate be-all-end-all answer to the supposed problem of "under-regulation" of the financial businesses in the U.S.?   What it actually demonstrates is the limits of the regulatory model.  The human brain is not capable of learning and complying with this much dense verbiage.  And Justin calls this "unregulated"!  By the way, all this "regulation" has little or nothing to do with market bubbles or their prevention, and even in the world of Dodd-Frank and twenty more such laws there will be more of them as surely as night follows day.

And finally we have the contention that our system of finance "contributes nothing to society."  Really?  I'll definitely have to have subsequent posts on this, but come on.  Our system of finance provides intermediation between millions of investors all over the world and tens of millions of homeowners to enable a housing stock far beyond anything previously known in the world.  Our system of finance enables vast saving for retirement independent of the government and use of those savings to finance factories, farms, offices and shopping centers around the world.  Our system of finance has created the venture and start-up culture that brought us the computer and the smart phone and the internet.  Our system of finance makes it so that a farmer can sell his crop before he plants it (to a speculator!) and be free of the wild price swings that regularly wiped farmers out in past generations.  Our system of finance makes it possible to go to just about any country and charge purchases on a card or withdraw local currency from an ATM with remarkably small losses in the exchange (a fraction of what the exchange losses were when I was younger).  Are there market bubbles that burst from time to time?  Sure.  They are a very small price to pay for the tremendous benefits of our modern financial system.  Really, I just can't get over that some people think the system "contributes nothing." 

UPDATE, September 11:  Word comes from Venezuela via Bloomberg News that opposition leader Leopoldo Lopez has been sentenced to 14 years in military jail for "inciting violence" in connection with his campaign in the 2014 "elections."  The sentence follows a year-long trial held in secret.  Question:  Is this the "authoritarian" or "non-authoritarian" version of socialism?