The Democratic Socialists of America deserve more attention. Bernie Sanders should not be ignored. Nor should the strong support for socialism among the younger generations. It’s time to take a closer look at the future according to the Democratic Socialists. In this first quick take, we examine the Democratic Socialists in their own words.1
Democratic Socialists: Who Should Run the Economy and Society?
Foundationally, Democratic Socialists “believe that both the economy and society should be run . . . to meet public needs, not to make profits for a few.” We won’t debate their aspiration. But that aspiration assumes that our economy and society are not already run to meet public needs. It assumes that society and the economy are both run to make profits for a few. Are the Democratic Socialists correct?
What do the Democratic Socialists mean? Who should direct society? Who should run the economy? Here’s what they have in mind. They claim that they do not want “an all-powerful government 
bureaucracy” in charge. And certainly “we do not want big corporate bureaucracies” at the helm either. Instead, society and economic decisions “should be made by those whom [those decisions] most affect.”
Let’s defer for a moment on whether the group of people consisting of “those whom they most affect” in practice is distinguishable from an all-powerful government bureaucracy.” This is obviously no small matter and we address it at the end of this short piece. For now we focus on the group who the Democratic Socialists definitively exclude: the “big corporate bureaucracies.”
Democratic Socialists: Corporate Bureaucracies Fail to Meet Human Needs
Here’s why corporate bureaucracies and corporate executives must not be allowed to make decisions affecting society and the economy:
“Today, corporate executives who answer only to themselves and a few wealthy stockholders make basic economic decisions affecting millions of people. Resources are used to make money for capitalists rather than to meet human needs.”
There are two key assumptions behind the Democratic Socialists’ claim. First, corporate executives are not responsible to the general members of society. Democratic Socialists claim that corporate executives are only responsive to “themselves and the few wealthy stockholders.” Second, corporations deploy their resources only to make money for “capitalists” and not to meet the needs of the general members of society. Therefore, the Democratic Socialists maintain, social and economic decisions must be made by those who are affected.
Preliminarily, we note that even if both assumptions are correct, the Democratic Socialists’ solution does not necessarily follow. There are other possible structural outcomes. But we think their analysis of the problem is simply wrong. And, given their dependent solution which would completely reshape society, their analysis is dangerously wrong.
Beneficial Voluntary Exchanges – The Heart of Economic Decision-Making
Corporate executives, and all businesspersons making “basic economic decisions,” are responsive first and foremost to consumers. A product or service is produced by the corporation for sale or consumption by a consumer. An exchange occurs: the product for money.
This exchange happens only because each of the parties expects a benefit. If the purchasing consumer does not receive the anticipated benefit on an initial exchange, he will refuse to make a subsequent exchange. In that case, the product or service provider’s business fails.
Exchanges Must be Mutually Beneficial
Every transaction involves an exchange that must be mutually beneficial. Corporate executives, and all businesspersons, must provide a product or service that is desired by the purchaser. Corporate executives must deploy their resources to create such products and services. Indeed, the sine qua non for their acquisition and utilization of resources is to enter these exchanges.
The purchaser in any exchange expects a benefit. The types of possible benefits are innumerable. From securing essential wants to satisfying any desire. In every case, a specific type of benefit is expected from the acquired good. And the benefit received must at least equal (as perceived by the consumer) the price paid.
Corporate Profit or Loss is Irrelevant to the Consumer’s Decision
The purchaser does not decide what he will pay based upon the product’s creation cost to the corporation. Rather, the acquirer pays a price based upon his perceived value of the acquired goods. He is concerned only with the value to him of what he purchases.
If the corporation’s “cost” exceeds the buyer’s perceived value, the buyer will not reimburse the corporation for the excess. Nor is the buyer’s purchase decision altered because that cost might be lower than the product value to him. Indeed, the price he is willing to pay is determined solely by whether he sees value for the product at the proposed price. And in some instances, he will negotiate a better price.
It’s All About Value to the Consumer
Thus, from the purchaser’s perspective it’s all about the perceived value. He desires a product because it meets a perceived need. And that product provides value to him, at the transacted price, because he perceives that it meets his need. If it fails to meet that need, he will not make any subsequent purchases of the product.
Critically, from the corporation’s perspective, the corporation must create a product that actually provides value to the purchaser. This must be true in every transaction. Therefore, in every transaction the corporation must use its resources to meet the human need of the purchaser. In every transaction the corporation is responsible to meet the need of society or its individual members.
Democratic Socialists’ Upset is Not About Meeting Human Needs – It is About “Profit”
Democratic Socialists are therefore confused. The economic decisions of corporations (businesspersons) are made to create value for the product consumers. Corporations meet human needs in every exchange instance. It’s just that simple. And if the analysis ended there, who would complain? This value creation process is wildly successful. There is really no debate about that.
So, let’s strip aside this incorrect concern that human needs are not met, because they are met. The two assumptions behind the Democratic Socialists’ conclusion are incorrect. What then is left of the Democratic Socialists’ argument? Simply, they are upset because corporations “make money”. They are upset because that extra “money” is a necessary outcome in order for the “capitalists” to take the risk of the business endeavor ab initio. If they don’t take that risk, then human needs are not met.
Democratic Socialists are hung up, and offended, by the fact that corporations can sell products for a price in excess of the product cost. They fail to explain why that is a relevant consideration to the goal of meeting human needs. Why? Because they can’t. If the product purchaser perceives value at the final transacted price, the human need is met, and the analysis is over.
The Democratic Socialists’ argument is philosophically confused. They don’t like that exchange profits go to the risk takers. They mask their disapproval of profit generation and proceeds distribution behind a false claim of failure to satisfy human needs. The two positions are unrelated. It’s OK to advocate for a philosophy that abhors profit. But that claim has merit only if it’s assumptions are correct. Here, they are not.
Democratic Socialism – A Massive Government Bureaucracy, Indeed
For the Democratic Socialists, they really want to do away with profit. For them, profit must be so awful that the entire ownership of the so-called “economic institutions” (which really means all productive businesses) must be re-envisioned. They must be owned and directed by “workers and consumers representatives” which is really just government in one form or another.
Democratic Socialists must believe that these “representatives” will somehow be able to better meet human needs. And this, despite the fact that in every historical instance where that was tried, failure ensued. We would suggest a flight to the Soviet Union, but it might be difficult to land.
We hope that people, those young people in particular who seem stridently attracted to Democratic Socialism, will think beneath the words. The portion of the Democratic Socialist platform described here is incorrect on the most fundamental basis. We’ll take a crack in later pieces at some other planks of their approach.
Footnotes
- All quotes attributed to the Democratic Socialists come from their website. See https://www.dsausa.org/
