Can Social Democracy Save Capitalism – Again?

Zohran Mamdani’s inauguration this week as New York City mayor is a moment of reckoning for those who care about preserving the American way of life. As a matter of policy, Mamdani mostly represents a continuation of the lifestyle and identity Leftism of recent decades, rather than a turn to traditional socialism. Yet it’s a telling indicator that his pseudo-socialist message has resonated so deeply with many young New Yorkers, tracking a broader shift toward urban radicalism.

It is a challenge, and an opportunity, for reformers in government and business: unless policies address the fundamental economic crises shaping this socialist surge, our market system, particularly in cities, will weaken in the face of collectivist urges. Capitalism can only be saved by addressing issues like housing affordability, lack of upward mobility, and a dearth of good jobs. In doing so, the forgotten midcentury model known as social democracy offers a promising blueprint.

The social-democratic model rescued capitalism from overthrow in the last century, in both Europe and America. The model’s origins lay with fiercely anti-Communist politicians like Karl Kautsky and Eduard Bernstein in Germany. In the United States, it took shape as the New Deal tradition, running from FDR even to Richard Nixon.

Conservatives, then as now, framed social-democratic and New Deal initiatives as a “communist plot.” The very opposite was true: measures like Social Security, Medicare, and the Wagner Act (which legalized and encouraged labor organizing at a national level) were intended to mitigate socially destabilizing inequality and thus served to ultimately preserve the enterprise system.

The key is to try to make the system work better for the asset-poor majority and create more wealth to distribute. By contrast, even in our supposedly populist age, the predominant conservative response to capitalism’s crises is to offer free-market bromides. Figures like Phil Gramm refuse to even acknowledge massive and growing inequality, and debilitating concentrations of wealth, treating complaints about such phenomena as a kind of Leftist plot. Others point to heart-warming cases of ordinary workers getting rich through shares in companies like AutoZone, Nvidia or Microsoft, even though such cases represent a sliver of the population.

Chanting mantas from Adam Smith or Ronald Reagan won’t save capitalism from the Leftist tide. In a few short years, the Democratic Socialists of America have gathered strength not just in New York but Seattle, Los Angeles, Portland, and other cities. The coalition they are putting together is broad, including economically stressed young professionals, poor recent immigrants, and the pre-existing welfare class. The critical force was a shift among younger voters who drove record turnouts for Mamdani and backed him by over 70%.

Instead of meeting the challenge with libertarian rhetoric beloved by academic economists, the best option will be to adopt, and expand, social-democratic policies that have existed within the context of the market system, and are widely supported by the public across the board.

Read the rest of this piece at UnHerd

Joel Kotkin is the author of The Coming of Neo-Feudalism: A Warning to the Global Middle Class. He is the Roger Hobbs Presidential Fellow in Urban Futures at Chapman University and and directs the Center for Demographics and Policy there. He is Senior Research Fellow at the Civitas Institute at the University of Texas in Austin. Learn more at joelkotkin.com and follow him on Twitter @joelkotkin.

Photo: LBJ Library, Lyndon B. Johnson signing legislation on Liberty Island, NYC from Wikipedia. Public Domain.