The moment the social-democratic compact was destroyed
But when communism collapsed – both as an economic system and as an ideology – it knocked the legs out from under the social-democratic stool. Suddenly faced with the need to invent a new, equally inclusive, equally universalist ideology, the left proved unequal to the task. And at the same time, the leaders of an already ascendant right interpreted the collapse of communism as a signal (and an opportunity) to roll back social democracy in favor of the market.
The embrace of this agenda in much of the West was mistaken for the following three reasons, argues Daron Acemoglu:
- It ignored the contribution that the welfare state, labor-market institutions, and government investments in research and development had made to post-war growth;
- It failed to anticipate that dismantling social-democratic institutions would weaken democracy itself, by further empowering incumbent politicians and the wealthy;
- It ignored the lessons of the interwar years, when the absence of broad-based economic opportunities and strong safety nets had created the conditions for the rise of left- and right-wing extremism.
The Fall of the Berlin Wall and Social Democracy
By: Daron Acemoglu – MIT
Beware of the slide into socialism
An opposite view is put forth by Ryan McMaken of Mises Institute: Even though the West won the debate over whether capitalism or communism leads to economic prosperity, Western economies slid towards socialism after the fall of the Berlin wall.
But the US isn’t as far from the socialist end of the spectrum as many think. After all, the United States is itself already far down the road of the typical Western welfare state. Contrary to the persistent myth that the United States is some sort of laissez-faire free-for-all, the US welfare state in terms of social spending is already comparable to that of Canada, Australia, the Netherlands, and Switzerland. If the Netherlands is “socialist,” then so is the United States.
Thirty years after the reunification and the part of the country that used to be East Germany is still lagging behind economically the rest of Germany. This fact should be a reminder of the lasting economic damage non-capitalist regimes can create.
The Berlin Wall Reminds Us of What Happens After We “Smash Capitalism”
By: Ryan McMaken – Mises Institute
