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Religion & Liberty: Volume 30, Number 3

My life under democratic socialism

Democratic socialism has had a global resurgence. As many as 70% of millennials say they are “likely” to vote for a socialist candidate. The problem is that the youth of today – and for that matter Bernie Sanders – do not know what democratic socialism looks like. 

I do know. I lived it. And it was not pleasant.

Back in 1979, the state owned the energy, steel, coal mining, shipbuilding, automobile, and virtually every other important industry you can imagine. My first car, which I bought used in 1985 was made by the then-nationalised automaker and has been described aptly by one source as “the worst car of all time.” People had to wait months to have a telephone installed. I would regularly do my homework by candlelight, because there was no electricity. 

These privations did not take place in the Soviet Union, Cuba, or Venezuela. They occurred in the United Kingdom. (That first car was a 1978 Austin Allegro.) They resulted from decades of policies which the Labour Party described as democratic and socialist – the very policies many today wish to enact across the transatlantic region.

Of course, there was more to postwar British socialism than state-owned companies. As in many communist countries, the government placed currency controls on industry, investors, and foreign-bound tourists. As late as the 1960s, UK citizens were prohibited from going on holiday with more than £50 of foreign currency. 

Not only did the government control foreign exchange, it also controlled wage and price increases. In 1976, the UK’s so-called incomes policy restricted pay increases to £6 a week – with no allowance for productivity, performance, supply, or demand. And rent control more or less completely destroyed the market for rented houses. It was under these policies that inflation rose to 27%. 

Like the modern-day United States, the 1970s in the UK were a time beset by civil conflict. In the so-called Winter of Discontent of 1978-1979 – when every industry seemed to be on strike – the dead went unburied, and the garbage piled up on city streets. As many as 30 million working days were lost to strikes in 1979, a figure which has since fallen by a staggering 99%.

Britain did not fall to the same level of social dislocation as Venezuela, but it was on that path until Margaret Thatcher became prime minister. So, what did Thatcher do so differently? If you go to a typical state school in Britain, you will be told that Thatcher dramatically increased unemployment, destroyed large swaths of British industry, and fractured society. As with today’s description of socialism, there is more to the story.

Let us begin in good faith: The fact that unemployment rose and large amounts of industry were laid waste cannot be denied. For example, between 1979 and 1988, employment in the steel industry fell from 156,000 to 55,000. But let us add appropriate context: In 1967, the same industry employed 269,000 people. The decline of this and other industries predated Thatcher. And the amount of steel produced increased considerably during her years in 10 Downing Street. Employment in manufacturing fell as productivity rose – a condition known as increased productivity, a building block of prosperity.

It is also forgotten that Thatcher was unlucky. The combination of inefficient, heavily subsidised, nationalised industries and inflation so high it had never been seen in peacetime was difficult enough to deal with. As a Protestant Christian with a strong work ethic, she was privately devastated by these high levels of unemployment. But when oil was discovered in the North Sea at the same time, the value of sterling rose significantly, making UK exports less competitive and causing even more job losses. 

When politicians such as Sanders and Alexandria Ocasio-Cortez say that they want socialism, they always point to Sweden. If you want higher taxes, then perhaps Sweden is the country to emulate. However, Sanders and company need to know that Sweden and its Scandinavian neighbours are not socialist countries – at least, not today. A democratic socialist country does the kind of things that the UK did before Thatcher (and which Sanders, et. al., advocate today): The state controlled markets to the point of emasculation. Sweden, by contrast, has almost total free trade, lower corporate tax rates than the U.S., no wealth tax, and no minimum wage. Yes, the Swedes have high marginal tax rates, but their tax and welfare systems do not redistribute much more than the UK’s present welfare state. A number of economic freedom indices suggest that, on several dimensions, Scandinavian countries are less socialist than the U.S. And it cannot be considered progressive that Sweden’s high Value Added Tax ensures that the less-well-off shoulder a large share of the nation’s tax burden.

Before Thatcher, the UK followed many of the policies that the Left in the U.S. supports. From 1979 to 2000, governments under PMs Thatcher, John Major, and Tony Blair undid the damage – though, in truth, reform of the state in the UK began a little before the Labour government left office in 1979. Again, with shades of Venezuela, the IMF had to bail out the British government in 1976 and, as part of the bargain, it forced policies on the Labour government that its successors continued.

Under Thatcher and her successors, Britons became free to buy foreign exchange and invest abroad. So many companies were privatised that the concept itself became a British export. Top marginal tax rates were reduced from a punitive 98%, and a range of other free-market measures revived the stagnant economy.

Alas, what Thatcher did not do was reform the welfare state, schooling, or the National Health Service. Her successors, both Conservative and Labour, restructured welfare and schooling to some extent. But our NHS today remains run largely like our steel industry of old. This is unlike Sweden, where both private and local authorities provide a significant share of the nation’s healthcare.

Friedrich von Hayek suggested that the proponents of socialism cannot agree on what central planning should look like. Young people can understand this if they have ever tried to get a large group to agree on eating at one restaurant. Extrapolating that to every facet of society makes clear how centralization gins up conflict. The increasing politicization of society and disagreement over desired outcomes – and, let us be frank, battles over power at the top – create social unrest. As it happens, various cultural and historical reasons explain why small, homogenous, Scandinavian countries have such high levels of social capital – conditions that do not exist in large, multicultural nations that are already fragmenting, like the United States.

However, the evidence from the Left in the U.S. is that self-identified “democratic socialists” do not really know what socialism looks like. I do. It is not something I wish to experience again. 

(Photo credit: Paul Townsend. This photo has been cropped. CC BY-SA 2.0.)

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Philip Booth is Professor of Finance, Public Policy and Ethics, St. Mary’s University, Twickenham, which is the UK's largest Catholic university. He is also a senior academic fellow at the Institute of Economic Affairs (IEA).