Can social democracy save capitalism — again? But don’t count on the Left

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.

What the young Left promotes, however, is not genuine social democracy. As Michael Lind has argued in these pages, the Mamdani agenda isn’t about growing the pie and empowering workers relative to capital so they can get a larger share of it through wages — the wage-based predistribution that was at the heart of the New Deal. Rather, Mamdani is mostly pursuing the same old post-tax redistribution that neoliberal progressives have long favored: free buses, public grocery stores, and subsidized pre-K education allow businesses to keep on paying low wages while putting the costs on the taxpayer’s tab.

The public budget ends up covering the transportation and schools that, in turn, allow the service-industry worker to get to her low-wage job. But such measures don’t fundamentally grow the economy, create new opportunities, or alter the balance of bargaining power between the asset-poor and the asset-rich.

The Mamdani agenda supplements this with the identity-obsessed social deregulation that has become characteristic of blue-city governance. For example, he’s pledged to underwrite legal defense for migrants targeted by ICE — another pro-employer measure, since illegal migration creates a shadow army of cheap and vulnerable labor for the DoorDash economy. And he wants to legalize prostitution, allow homeless encampments, and create so-called safe injection sites for drug addicts: measures that, again, will not alter the balance of bargaining power between workers and capital, but will blight working-class and minority neighborhoods in the name of “emancipation.”

The late DSA founder Michael Harrington (I took his course in Marxism at Columbia while still in high school) would barely recognize his offspring. To be sure, Harrington favored industrial policy and antitrust action (like both Joe Biden and Donald Trump). But he also detested Communism and its Third Worldist offshoots. He supported the right of Israel to exist and defend itself. And he didn’t think democratic socialism should mean the breakdown of social norms, all contra today’s urban Left.

Social democrats have traditionally embraced  patriotism, family, freedom of speech, self-government, and personal property. But today’s DSA prefers Third Worldist rhetoric. It embraces the Marxian radicalism of Kwame Nkrumah, after whom Mamdani got his second name, as well as Che Guevara, Fidel Castro, Hugo Chavez, and even Islamists supportive of Hamas.

That this version of “socialism” has the wind in its backs should be read as a symptom of a deeper social crisis. What is now widely described as “late-stage” capitalism by hopeful Leftist ideologues seems to  disturbingly mirror Marx’s bleak assessment of capitalism’s future as a repressive and impoverishing force for most people. If a decisive share of people in America (and Europe) experience the market system in this form, it will be a boon to the Mamdani agenda — and, on the opposite end of the spectrum, to hard racialists on the Right.

The depth of the problem can be discerned in the ever-greater concentration of assets, notably in housing. Today housing affordability stands at the lowest level for which there are data series (up to 60 years). A new Institute for Family Studies report found that since 1970, the share of young adults who own the home they live in has declined from 50% to as low as 25%.

At the same time, this same generation faces diminishing economic prospects, declining earnings and a job market getting tougher, even for college graduates. This could be further exacerbated  by the rise of artificial intelligence, at least in the short run. Oligarchs like Mark Andreessen and free-market advocates like Phil Gramm naturally insist that AI “will bring prosperity” to the masses. But 82% of Millennials fear AI will reduce their compensation.

Even geeks may find out that they are vulnerable to what economists refer to as “skills-based technological change.” According to McKinsey, at least 12 million Americans will be forced to find new work by 2030. Companies like Amazon are consciously employing technology to reduce their workforces, laying off 30,000 workers while enjoying record profits. There seems to be a corporate race to see who can lay off the most people, while wages for those still working have increasingly stagnated.

Here’s how you build a constituency for resentment Leftism. Already barely half of all people under 30, according to one survey, have full-time jobs, while many simply drop out of the workforce. Europe has, if anything, a larger cohort of the young and disengaged.

Meanwhile, the ultra-rich are invested in a future shaped by a kind of technological elitism, spending fortunes on making designer babies and finding ways to live forever. Some, like Google co-founder Larry Page, even conceive of intelligent robots not only taking jobs, but insist that digital life is the natural and desirable next step in “cosmic evolution.”

All this nurtures the politics of resentment and redistribution. A new Wall Street Journal-NORC poll found that the share of those who see a good chance of improving their standard of living fell to 25%, a record low in surveys dating to 1987. Nearly 70% of people said they believe the American Dream — that if you work hard, you will get ahead — no longer holds true or never did, the highest level in nearly 15 years of surveys. Negativity was particularly pronounced among Democrats, with 90% holding a negative view of the future, almost twice as much as among Republicans.

So support for mass redistribution grows. Even in the United States, the majority of young people now embrace socialism as a better model. There’s growing US support for expanded government and greater income redistribution, with the majority under 40 strongly in favor of limiting wealth. Perhaps even more remarkable, one survey found that a majority favors restricting incomes, with a large portion seeking limits under $1 million annually.

This is a perfect environment for demagogues of various stripes. Mamdani and his ilk, as I’ve argued, are mainly dabbling in Third Worldist and identity-based resentment politics, not authentic social-democratic reform. But in the absence of the real thing, the corrosive Mamdani version — blue-city misrule on overdrive, featuring minority entitlement, anti-Israel antics, green degrowth hysteria — can have great popular appeal among two credible voting blocs: stressed educated whites and often hard-pressed recent immigrants.

Ultimately, we may face a situation somewhat akin to Weimar Germany, with radical politics driven by what historian Eric Weisz identified  as “the proletarianization of the middle class.”  Just as the Industrial Revolution, particularly in its early stages, created Marx’s revolutionary proletariat, we are rapidly creating a vast new constituency for radicalism. Over time, we may find that no power on earth is more fearsome than what one Marxist scholar described as “the swelling population of college graduates caught in a vise of low-paying jobs.”

Social democracy — the real thing, not its Mamdani mirage — is part of the answer.

The brilliance of social democracy lay in its broad national appeal. Lyndon Johnson, a Texas New Dealer, used his power to bring electricity to his native, and historically poor, southern part of the Lone Star State. Projects like the Tennessee Valley Authority and the Hoover Dam powered once-remote parts of the south and southwest. Throughout America, we still admire, and benefit materially, from the social-democratic achievements of the New Deal-era Works Progress Administration.

Although there is much dispute as to the New Deal’s economic effects in ending the Depression, America’s experiment in social democracy created a nation strong enough both to win World War II and ensure mass prosperity afterward — the so-called “30 glorious years.” In more recent times, the social-democratic policies of California’s Gov. Pat Brown, through massive investment in education and infrastructure, laid the foundation for California’s late-20th-century ascendancy, a legacy that still benefits millions of people in the Golden State.

Something of the same spirit is needed today, if not the exact same policies. No, universal basic income isn’t it. That’s another form of what Marx called “the proletarian alms bag”: it doesn’t fundamentally empower working people, it doesn’t boost their wages and autonomy in the workplace or their agency in the marketplace. UBI merely blunts the misery (the useless eaters can spend it on palliative weed and porn, is how many of its advocates in the tech world really think).

But this approach is not sustainable, even for the oligarchs, particularly in a stagnating economy.

It makes sense, even for capitalists, to look into a modern revision of the old social-democratic playbook with its focus on policies that would bring more opportunities to the now struggling middle and working class. What’s necessary, at its core, is a restoration of America as a builder country — of houses, advanced-manufacturing products, healthier foods and cheaper electricity. This would mean significant reform of our current costly, ineffective education system, and an emphasis on skills training. It’s an approach that worked well for decades in northern Europe, and would meet the country’s debilitating lack of trained technicians, artisans and mechanics. It would also encourage new development in areas, like some inner cities and the periphery, where price is less of a factor and locals are largely in favor of it. Modern social democrats might use government as a prod, but they’d also look to the genius of the market, as we did so brilliantly in becoming last century’s “Arsenal of Democracy.”

Of course, like all political philosophies, social democracy can warp over time and needs persistent reform and rethinking. But given the choice between authoritarian Third Worldist pseudo-socialism and an untenable, and unsustainable, elite economy, maybe it’s time to give social democracy another chance.

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