Editor’s Note: This is an excerpt from a fuller essay, “Democratic Capitalism Exceeds Socialism In Economic Efficiency As Well As In Morality,” by Ayaan Hirsi Ali. It is published by the Hoover Institution as part of a new initiative, Socialism and Free-Market Capitalism: The Human Prosperity Project.
Many Americans—particularly but not exclusively the young—remain intrigued by socialism. Indeed, a 2019 survey found that socialism is as popular as capitalism among young American adults. Well-known political figures such as Senator Bernie Sanders and Representative Alexandria Ocasio-Cortez describe themselves as “democratic socialists” and advocate tens of trillions of dollars in new spending programs along with a massive expansion of state power over citizens’ lives. In academic circles, too, the debate surrounding the merits of socialism continues.
A little less than thirty years after the Soviet Union was formally dissolved, capitalism is nearly everywhere on the defensive, both in academia and in the realm of public discourse. Yet no system offers better opportunities for the downtrodden to rise and improve their living standards than democratic capitalism.
The socialism of the twentieth century was primarily economic in orientation: it rejected capitalism and favored state control over the economy. Individuals had to submit to central economic planning. Conceptually, this socialism did not see individual human beings as having inherent dignity. Instead, it divided society into two clashing, competing classes: the group that was economically oppressive (the capitalists) and the group that were economically oppressed (the workers). In this worldview, individualism as a concept became not merely meaningless but suspect.
The neosocialism that I see taking root today also rejects capitalism as a system, and, just as in the socialism of old, the individual and his own moral contributions are devalued. What matters, once again, is the group (the collective tribe) to which an individual belongs. Again, these collective groups are either oppressive or oppressed, and an individual’s moral worth is determined by looking at the group or groups to which he belongs.
Capitalism, with its emphasis on individualism, meritocracy, and colorblindness, is not compatible with this worldview. Much of today’s debate is therefore being waged on grounds not of the efficiency or inefficiency of capitalism but of capitalism’s alleged immorality. One of today’s most influential public voices, Robin DiAngelo, author of White Fragility, rejects capitalism as follows: “Capitalism is so bound up with racism . . . capitalism is dependent on inequality, on an underclass. If the model is profit over everything else, you’re not going to look at your policies to see what is most racially equitable.”
I aim to defend the superiority of democratic capitalism over both the old socialism and neosocialism—not only for its economic efficiency, but also for its moral superiority and the possibilities it provides for humans to flourish. I caution young Americans that before they embrace neosocialism, they consider carefully not only its superficial attractions but also its fundamental drawbacks. Those who value individualism, meritocracy, and equality of opportunity will find these things in a capitalist system, as long as it provides educational opportunities to all.
Memories of a Socialist Illusion
To me, socialism is more than just an academic concept. When I was around six or seven years old, I lived in Mogadishu, Somalia, with my mother. Much of her daily life consisted of standing in line for hours on end to receive the daily ration of food allotted by the government. At the time, the Somalian state, if one can call it that, had implemented Marxist economics, to the extent that this was possible. To every family the state apportioned a certain quantity of food: sugar, flour, oil, and so on. In the government rations, there was hardly any meat or eggs, as these were deemed to be luxury goods. A person received what the authorities decided was strictly necessary, not what the person wanted.
My first experience of socialism was, therefore, one of enduring long lines in the hot sun, without shelters or panels to cover us. My mother and grandmother felt a sense of bafflement, indignity, and powerlessness as a result of this daily grind. In terms of power relationships, the lines served an important function: they emphasized the powerlessness of the individual and the power of the collective over even the smallest food rations. The recipient had no control over what she would be handed. You had to obey political authorities to receive anything at all, however modest. This was the Marxist form of order—even if, because of Somalia’s pastoral traditions and low degree of industrialization, rationing was dictated as much by the imperative to limit food consumption as it was by “scientific socialism.”
Scientific socialism as implemented by Somalia’s government did not result in equality and justice. On the contrary, it was the people with the strongest political connections to the government and to influential clans who were most empowered. A system that claimed to empower the marginalized and dispossessed showed an astonishing lack of compassion for precisely the least-connected people. Somalia’s communist regime brutally repressed dissidents, as did other authoritarian socialist regimes of the twentieth century. Yet in school, my fellow students and I sang songs of praise for the system, surrounded by large pictures of Marx, Lenin, and Siad Barre.
Today this type of orthodox socialism still appears to have its defenders, despite the fact that it failed in Somalia just as it has failed more recently in Venezuela, a once-rich country now engulfed in hunger and chaos because of similar pathologies of corruption and inefficiency that arose inevitably from state control of economic life.
Why Socialism Fails
Broadly speaking, socialism typically refers to the ownership of things in common, rather than private ownership; it has been defined as “a form of social organization that prioritizes the common ownership of property and the collective control of economic production.” Quite optimistically, Michael Newman argues in Socialism: A Very Short Introduction that “the most fundamental characteristic of socialism is its commitment to the creation of an egalitarian society.” Some early socialists were more anarchist or individualist than others, but all these thinkers favored a reorganization of society along what they believed would be more equitable lines.
Generally, socialists of all persuasions share a critical view of industrial capitalism and its emphasis on private property, but socialists have differed (both in the nineteenth century and today) on the proposed remedy. Therefore, as Roger Scruton reminds us, the work of socialists is more frequently distinguished by its critique of capitalism than by its detailed description of what socialism should look like and how it should work. Among revolutionary socialists, socialism as it existed in the Soviet Union is frequently theorized as a transitional state, ultimately culminating in a communist utopia.
For decades, theory aside, economic socialism inflicted extraordinary misery on hundreds of millions of people in Eastern Europe and the former Soviet republics. The puzzle confronting us in 2020 is why, with so much empirical evidence on the rise and fall of authoritarian socialism, there is even a conversation on this topic, other than classroom discussions meant to inform students about some of the darkest pages of human history.
Socialists lost the broad economic argument in the twentieth century because socialist systems (command economies) did not work. Why? In a capitalist economy, market prices, in a framework of private property, coordinate economic activity. Companies use prices to see which goods, products, and services are needed and where, at what time, and in what quantities. Firms compete, on the basis of market prices, to deliver these goods as efficiently as possible. Firms that miscalculate run the risk of bankruptcy. The most efficient and competitive firms—those that best meet the needs of the public—survive and thrive.
In a socialist system, however, there are no market pricing signals. This creates chaos throughout the economy. Economists in the West who participated in the “socialist calculation debate” of the 1920s and 1930s, including Friedrich Hayek, predicted this crucial flaw in socialism theoretically before it became painfully clear empirically. In a socialist system, unlike in a market system, orders to produce come from the top, frequently in the form of quotas. Yet in the absence of a market pricing mechanism to determine profit and loss, poorly performing organizations tend to persist under socialism: there is no bankruptcy to cull them. The public good suffers as a result. Crucially, in the absence of genuine private property, there may be little incentive to work hard if one cannot keep the fruits of one’s labor. Why cultivate a field carefully if you cannot benefit from the harvest?
Although socialism is capable of centrally driven technological innovation, in the absence of market pricing signals a socialist system cannot distribute technological or scientific blessings to the mass of the people in a way that increases their living standards in a sustained way.
Socialist systems are command economies that tell people to obey central economic plans, even if they have other ideas. Under socialism, you may wish to start a business, or you may have an idea for a new technology—too bad. You must do as you are told. Authoritarian socialism does not adapt to your wishes. Socialist economic planning depends on authoritarian measures to compel people to obey central directives. As a result, a “black economy” of smuggled goods frequently arises to meet the real needs that the central plan fails to fulfill.
Human Activity in Motion
Unlike socialist societies, societies with political freedom, alongside a capitalist or free enterprise system in the economic realm, have a prodigious capacity to adapt. A capitalist system is constantly in motion to satisfy the wants and needs of millions of diverse individuals. Every day a capitalist system balances trial and error to evaluate new technologies, new ways of doing things, new ways of improving technologies, and new ways of running businesses.
Because of competition, a business under capitalism survives only to the extent it offers consumers a product they enjoy or need at a reasonable price, whether cars, food, lumber, or clothing. And this is true even for hospital systems and medical providers, which vie for the business of patients for, say, safe and successful surgeries.
Under a system of crony capitalism, businesses may rely on improper political connections to create cumbersome regulations that block competition. However, in a country with a functioning rule of law, a free press, and an informed public, and where corrupt officials are prosecuted, intense scrutiny of such practices can mitigate this systemic risk.
Pure laissez-faire capitalism is a thing of the past. In centuries past during the early phases of industrialization there were indeed inhumane working conditions, ones that should not be forgotten. People worked in unsafe spaces. Over time, however, capitalist societies adapted and introduced safety measures, sickness benefits, pensions, and other forms of social insurance. New technologies reduced risks for workers. Social reformers pressed political leaders to abolish child labor, and universal education was introduced. The wealth created by the capitalist system made these reforms easier to implement. Working conditions in socialist countries were frequently more brutal, with fewer worker protections and environmental safeguards.
Admittedly, nothing is perfect. In the capitalist economy today, there are, for example, recurring questions surrounding working conditions in sweatshop factories and warehouses as well as in the gig economy. That is precisely where the agility and nimbleness of societies built on a system of free enterprise come in: such societies are able to adapt, and they do so.
Silenced by the “Woke”
Social democracy as it exists in the Scandinavian countries accepts the core premises of capitalism (the existence of corporations, private property, the free price mechanism, and a stable currency) alongside a relatively high level of taxation to finance redistributive social welfare programs. Crucially, social democrats accept freedom of expression, free and fair elections, the existence of political opposition, freedom of the press, and the rule of law. Scandinavian social democracy is not, however, what today’s American neosocialists desire to impose, some claims to the contrary notwithstanding. They condemn “the system” and say that it must go.
But speaking broadly, the debate on socialism has already happened, and one would think it had been long since resolved. Authoritarian socialism, in its quest for utopia, has been a human catastrophe with an immense death toll. Millions died for the cause, and millions more were killed, tortured, imprisoned, and impoverished. The names Mao Zedong, Pol Pot, and Stalin evoke in those who survived their prison camps and killing fields the same revulsion as a figure such as Hitler. All of this has been well documented, particularly after the Soviet Union fell and researchers got a glimpse of Communist Party archives.
Authoritarian socialism is lethal because it brooks no dissent. In every implementation of authoritarian socialism, individual freedom has been irrevocably compromised for a utopian and unattainable collective idea. The sheer number of failed socialist experiments raises unavoidable questions about politics, economics, justice, and human nature. Socialist grievance narratives, their claims to be helping the downtrodden, only made people’s lives more miserable. Why was this doomed enterprise so often attempted?
The neosocialism of 2020 has shifted gears from the more economically focused socialism of the twentieth century. Now it is enmeshed with the ideas of postmodernism and identity politics. This type of socialism rejects capitalism as immoral, along with notions of national borders and national sovereignty. It condemns American history, emphasizing only the darkest pages of the US experience, not the ideals to which the founding fathers aspired or which drew so many immigrants of all backgrounds over the years. “Woke” socialism is thus distinct from the socialism of Karl Marx and Friedrich Engels, which was heavily focused on economics and the workers’ struggle. Neosocialism carries an ostensible moral appeal for young people who may know little about history or the nature of socialism, or who are disenchanted with the current state of the world.
Nevertheless, although the new socialism differs from the Marxism of old, there are similarities. Once again, individual humans matter less than structural considerations in the effort to achieve a utopia—which, being unattainable, is never achieved.
The Marxism of old divided all people into two categories: the oppressors (the bourgeoisie who controlled the means of production) and the oppressed (the workers or proletariat). It did not matter how nice, kind, or charitable a person was individually; if he belonged to the bourgeoisie, he was condemned on the basis of his class identity. In a communist revolution, he was the enemy, against whom all means were justified.
A similar division appears in the woke politics of the late twentieth and early twenty-first centuries. People are viewed not as individuals to be judged on their own merits but as members of either oppressive or oppressed tribes. Nothing matters but some intrinsic identity of the person, frequently an immutable characteristic such as race. These concepts have flowed outward from academic institutions and law schools to become embraced by celebrities, political figures, and protesters.
I fear it will not be possible to defend capitalism, either intellectually or morally, in this climate of increasing orthodoxy that marginalizes or silences dissenting voices. As woke intolerance spreads ever further into universities, newsrooms, and even large corporations that are fearful of diverging from the new orthodoxy, capitalism as a set of ideas will be increasingly on the defensive, in spite of its moral and economic accomplishments.
The adherents of neosocialism have now racialized their worldview to such an extent that all white Americans have become morally suspect, while nonwhites are presented as victims of their exploitation. I posit, to the contrary, that the new socialists are the true racists and exploiters. They misrepresent American and Western history. They exploit immigrants, ethnic minorities, women, members of the LGBTQ community, and children and poison young, impressionable minds through indoctrination, distortions of reality, and empty promises. What have they achieved? More often than not, they hurt the very people they claim to be helping.
Democratic capitalism, in the framework of the rule of law and respect for individual rights, has benefited billions of human beings. It allows for gradual, incremental progress to remedy legitimate grievances as they arise. Until a better alternative can credibly be proposed, these are the institutions that we should celebrate—and defend.