Why Socialism Fails on a Large Scale, and Why Capitalism, Despite Its Flaws, Uplifts More Lives

Socialism, in theory, promises equality and fairness for all. But in practice, especially when applied on a large, national scale, it has repeatedly failed to deliver sustainable prosperity, economic freedom, or individual opportunity. From the former Soviet Union to present-day Venezuela, centralized economies have often collapsed under the weight of inefficiency, lack of innovation, and political oppression.

The Soviet Union, once held up as the model of socialist planning, suffered from chronic shortages, low productivity, and systemic corruption. Its eventual collapse in 1991 marked not only the failure of a political regime but also the implosion of a centrally planned economy that stifled competition and consumer choice. More recently, Venezuela, a country once rich in oil and potential, has spiraled into economic freefall. Price controls, nationalization of industries, and the erosion of property rights have led to hyperinflation, widespread poverty, and a mass exodus of citizens.

Socialism’s fundamental problem is its detachment from the basic incentives that drive innovation and productivity. Without the profit motive and private ownership, economic actors have little reason to improve, invest, or compete.

My own father, who is turning 90 this year, saw firsthand how devastating socialism was in his native Poland after World War II. Like other nations in the Soviet sphere of influence, Poland became a socialist country under communist rule, with a centrally planned economy and limited individual freedoms. He lived through the shortages, the suppression of speech and faith, and the iron grip of a state-run system. But he was one of the lucky ones, he escaped by literally “jumping ship” while in Germany, seeking political asylum, and eventually joining the U.S. Army in Germany. His story is a reminder that socialism, when implemented in real life, is not some utopian ideal, it is often a nightmare. The people promoting socialism in the United States today, in all likelihood, have no real understanding of what it’s actually like to live under such a system. They’ve never stood in ration lines, feared the government, or been punished for thinking freely.

By contrast, the United States operates under a predominantly capitalist system, which has created the largest economy in the world. It's true that wealth disparity has been a persistent feature of American society since our country was formed. However, the presence of inequality does not mean that the lives of those on the lower end of the economic spectrum are deteriorating. In fact, quite the opposite is often true.

Over the last several decades, there has been a significant improvement in the social and economic status of previously marginalized groups. Women and ethnic minorities have gained greater access to education, career opportunities, and political influence. The fact that inequality has risen within economically advanced nations like the U.S. does not mean that the poor are getting poorer, but rather, the wealthy are often getting wealthier at a faster pace. Importantly, poverty in the U.S. today looks drastically different than it did in generations past, with far higher standards of living, access to technology, and availability of basic services. See, U.S. Census Bureau, “Historical Income Tables: People,” https://www.census.gov/data/tables/time-series/demo/income-poverty/historical-income-people.html.

Globalization, another product of capitalism, has also played a crucial role in narrowing the gap between people in wealthy countries and those in developing regions. Market-driven growth and international trade have lifted more than 1.2 billion people out of extreme poverty since 1990, especially in countries like India, Vietnam, and parts of Africa and Southeast Asia (although COVID-19 put a damper on this progress). World Bank, “Poverty and Shared Prosperity Report 2020,” https://www.worldbank.org/en/publication/poverty-and-shared-prosperity.

At the same time, we must be clear-eyed and compassionate. A healthy society cannot ignore the needs of its most vulnerable citizens. Social programs that provide access to education, healthcare, housing, food assistance, and support for the elderly and disabled are critically important. These safety nets reflect the moral heart of a functioning society—and they can absolutely exist within a capitalist, democratic framework. In fact, some of the most successful nations in the world operate with strong market economies alongside generous social programs. The key is balance: empowering individuals and private enterprise while ensuring that no one is left behind.

But Wait—Isn’t That “Democratic Socialism”?

Many people who support universal healthcare, tuition-free college, or paid family leave are told they’re advocating for democratic socialism. But this is where terminology and ideology matters.

There is a critical distinction between democratic socialism and social democracy, and it’s one that often gets lost in American political discourse.

Social democracy refers to a capitalist economy that is regulated by the government and supplemented by strong social safety nets. Countries like Denmark, Sweden, and Norway fall into this category. They believe in free markets, private property, and economic freedom, while using progressive taxation to provide services like universal healthcare and education.

Contrary to what some assume, these nations are not socialist. Danish Prime Minister Lars Løkke Rasmussen addressed this directly at Harvard in 2015:

“Denmark is far from a socialist planned economy. Denmark is a market economy.” See e.g. https://www.cato.org/blog/dont-cry-me-democratic-socialists.

Similarly, The Economist reported that Sweden, after overextending its welfare state in the 1980s and 1990s, was forced to implement market reforms, privatization, and fiscal restraint to restore economic growth. The Economist, “The Next Supermodel,” Feb. 2, 2013, https://www.economist.com/leaders/2013/02/02/the-next-supermodel.

By contrast, democratic socialism seeks to replace capitalism entirely—with a socialist economy governed by democratic means. The Democratic Socialists of America (DSA) describe their view this way:

"Capitalism is a system designed by the owning class to exploit the rest of us for their own profit. We must replace it with democratic socialism...”  DSA, “What is Democratic Socialism?”, https://www.dsausa.org/about-us/what-is-democratic-socialism/ .

In other words, democratic socialists support public or collective ownership of major industries, not just government-funded services. While they often reference Scandinavian countries, those countries do not support state control of the economy and do not identify as socialist.

The confusion is widespread. A 2018 Gallup poll found that only 17% of Americans define socialism as government ownership of the means of production. Most associated it with equality (23%), free services (6%), or being fair to everyone. See, generally, Gallup, “The Meaning of ‘Socialism’ to Americans Today,” August 13, 2018, https://news.gallup.com/opinion/polling-matters/243362/meaning-socialism-americans-today.aspx . However, Americans remain much more positive toward capitalism than socialism, and their ratings of each have been largely stable over the past decade-plus. Gallup,  “Socialism, Capitalism Ratings in U.S. Unchanged,” December 6, 2021, https://news.gallup.com/poll/357755/socialism-capitalism-ratings-unchanged.aspx

But if you support capitalism with strong public programs, you’re likely a social democrat, not a democratic socialist, like some of the recent politicians in the news, and that distinction is more than just semantics. It reflects fundamentally different views about the role of government, the power of markets, and the preservation of individual economic freedom. 

The Importance of Informed Voting

Recently, some American politicians have gained national attention by identifying as democratic socialists. While their messaging often focuses on compassion, fairness, and equity, it is essential for voters to understand what these candidates truly stand for beyond the sound bites and tag lines. The policies and principles behind democratic socialism go much deeper than offering free public services; by definition they involve reshaping or dismantling the capitalist system itself.

That’s why it’s more important than ever to do your research, understand the terms, examine voting records, and know who and what you're voting for. In a democracy, informed citizens are the strongest defense against ideology being sold as progress.

Can Democrat and Republican Both Support Social Democracy?

Absolutely. Both Republicans and Democrats can believe in and support the principles of social democracy, which blends free-market capitalism with compassionate governance. Supporting programs like Social Security, Medicare, public education, veteran care, infrastructure investment, and food assistance does not make someone a socialist; it makes them a supporter of a balanced, humane capitalist society.

Many Americans across the political spectrum, including conservatives, support responsible government programs that provide a safety net for the elderly, disabled, and struggling families. A Republican who believes in limited government and fiscal responsibility can also believe that a strong economy should serve everyone, especially those who need help the most. The same holds true for a Democrat who champions social justice but also respects the power of markets and innovation.

The crucial difference is that social democracy exists within and depends on capitalism, while democratic socialism seeks to replace it.

Final Thoughts

None of these issues are simple, and I don’t pretend to have all the answers. This article reflects my perspective, shaped by personal experience, especially the daughter of someone who escaped the grip of real socialism in postwar Poland and was given a new lease on life in a free, capitalist country.

We must always strive to improve our system and care for the vulnerable, but let’s not conflate well-meaning social programs with an ideology that, in practice, has often led to economic collapse and loss of freedom.

And how fortunate we are to live in a country where we can express differing views, challenge one another’s ideas, and speak freely without fear of persecution. That freedom, the freedom to disagree, is one of the greatest strengths of our democracy, and one we must never take for granted.