Socialism: The Newest Old Idea That Won’t Work

By Matthew Mitchell & Steven Globerman

Friday, September 04, 2026

 

“It is characteristic of the unlearned,” observed Calvin Coolidge in 1919, “that they are forever proposing something which is old, and because it has recently come to their own attention, supposing it to be new.”

 

“I think what is so unique and refreshing about Donald Trump’s economic policies,” says Vice President J.D. Vance in 2026, “is that it is not the same old economic ideas that you would have heard 30, 40 years ago.”

 

Vance is right to a point. It’s hard to imagine Bill Clinton directing the federal government to take ownership stakes—totaling $26.7 billion—in 30 private companies. Or Ronald Reagan hiking the average U.S. tariff rate to Sudanese levels, thereby imposing thousands of dollars of additional taxes on American families. George H.W. Bush would have never claimed a “golden share” in U.S. Steel, gaining a say in a private company’s board membership, factory locations, capital investment, employment, worker pay, and naming rights. And, it is safe to say that no past president would direct the Pentagon to go into the oil business with an accused money launderer and an unelected Venezuelan socialist.

 

Thirty years ago, the consensus in Washington (they actually called it the “Washington Consensus”) was that governments should not direct private economic activity.

 

But forget about past Washington leaders. Thirty years ago, Moscow’s leaders like Boris Yeltsin had already rejected state control of the economy. Having pressed a third of the planet into their experiment in central planning, public ownership of the means of production, and suppression of private economic choice, even the socialists had to admit it didn’t turn out well.  

 

While Trump has positioned himself as an anti-socialist, he’s perfectly content to use socialist tools—including ownership of the means of production, price controls, and central planning—to direct the U.S. economy.

 

But Trump isn’t the only American politician to dust off socialist central planning and think he has found something shiny and new. In the Democratic Party, a new crop of self-described socialists, from mayors Zohran Mamdani in New York and Katie Wilson in Seattle to state representatives Chris Rabb in Pennsylvania and Donavan McKinney in Michigan, have shown surprising electoral strength.

 

At the annual gathering of the Democratic Socialists of America in Chicago, co-chair Ashik Siddique captured the excitement, declaring: “I never thought this would be possible in my lifetime.”

 

The avowed socialists’ plans are in some ways less radical than Trump’s. Mamdani is trying to freeze rents on New York City’s roughly 960,000 rent-stabilized apartments. He wants a $30-per-hour minimum wage. He wants five city-owned grocery stores that would be exempt from rent and property taxes, fare-free city buses, and universal childcare for children up to 5 years old. And he wants to pay for all of this by raising the city’s business tax rate, adding a 2 percent surtax on the top 1 percent of income earners, and imposing an annual luxury property tax targeting wealthy, part-time residents.

 

Neither Trump nor his DSA comrades are trying to turn the U.S. into Mao’s China or Stalin’s USSR. But both seem oblivious to the dangers of blurring public and private interests.

 

Mamdani’s grocery stores and Trump’s government-backed firms will compete with private firms for customers, capital, and labor. They will enjoy extraordinary advantages, including financial subsidies that draw on the government’s power to coerce money from taxpayers and preferential regulations that raise their rivals’ costs and limit honest competition.  

 

The private firms that will compete with these ventures are understandably unhappy. As Ed Hirs, an energy economist at the University of Houston told the Wall Street Journal about Trump’s Venezuela venture: “Why is the U.S. subsidizing and building a major competitor to the U.S. oil patch?” In New York, hundreds of minority business owners who run bodegas and grocery stores are suing to stop Mamdani’s city stores. As their lawyer, Mark Jaffe put it, “You cannot expect hard-working small business owners to compete with a supermarket that isn’t going to pay rent, won’t have to pay an electric bill and won’t have to buy their products at full price.”

 

Unlike truly private firms, government-backed firms profit from their connections to government officials, rather than by earning customers. With the government having a vested interest in their survival, they have less incentive to economize on their use of inputs to improve efficiency.

 

And like modern bureaucrats, their managers are incentivized to grow the bureaucracies they oversee. Investors will not have to be convinced that their plans are sound, since taxpayers will be dragooned into investing whether they like it or not. Meanwhile, this favoritism will encourage other firms to expend scarce resources to obtain their own favorable treatment from government.

 

Unfortunately, the costs of government intervention in markets are often hidden. Rent control keeps rent low but it also reduces the quantity and quality of rentable units, exacerbating the housing crisis. Predictably, the public typically blames landlords rather than politicians for this outcome. Tariffs do little to eliminate bilateral trade deficits (a non-problem to begin with), but they invariably raise the cost of living. And when they do, tariff men blame the retailers and not their own tariffs.   

 

Government-backed firms can appear to turn a profit for years, even decades. They are often aided by private creditors willing to lend to them on good terms given their government backing. But this apparent success can be deceiving. One reason is that privileged firms tend to be less productive than non-privileged firms. More subtly, privileged firms draw resources away from more innovative and productive firms, making an entire economy more sclerotic over time.

 

A flourishing economy, as the Nobel Laureate Edmund Phelps explained in his 2013 book Mass Flourishing, “is an economy with a considerable degree of dynamism—that is, the will and the capacity and aspiration to innovate.” It is this dynamic competition that made the U.S. economy the envy of the world. But as open and competitive markets give way to hand-picked, taxpayer- and regulator-supported winners, Americans will end up with less innovation, slower growth, and ultimately a lower standard of living. To see how this might turn out, Phelps suggests we look to the stagnating corporatist economies of southern Europe.  

 

There are cultural and political consequences to these government-granted privileges, too. The more the government picks winners and losers, the less it can claim to serve the general welfare of all. And the more firms, industries, and products succeed on the basis of government favor, the easier it will be for future politicians to say, “You didn’t build that.”

 

None of what the DSA or Trump is offering is refreshing; it’s stale. It would be truly refreshing if policymakers recognized the difference between public and private interests and moved to disentangle them.