Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche


A Capitalist Case for Bernie Sanders

Much of the support for Bernie Sanders seems to come from those uncomfortable with capitalism or at least its current incarnation. Sanders’ followers usually justify their support for him for a desire for a system that values people over profits.

Yet it is possible to make a strong case for Mr. Sanders and his political vision from a purely capitalist, profit-oriented perspective. In fact, it is even possible to use stock market comparison to make a case for Sanders. Sanders has even praised European welfare states on nationwide TV in the U.S.—a bold move for an American politician.

Sanders’ goal is to create a European-style welfare state in America or to at least bring many of the fixtures of one, such as single payer health insurance, to America. That would seem like a socialist goal, but here’s something interesting: Such welfare states can be very good for capitalism and the stock market.

Germany’s Stocks Outperform America’s

The oldest and most successful of the European welfare states is Germany, which has had social security and national health insurance in some form since 1889. Germany, as observers probably know, is also very successful economically. Its companies and stocks also seem to do better than ours.

On July 22, 2015, the main German stock index, the DAX, had a one-year return of 18.35% and a year to date return of 17.49%, according to Bloomberg Business. On the same day, the main U.S. index, the S&P 500, offered investors a one-year return of 8.77% and a year to date return of 3.83% in the middle of one of the greatest bull markets in American history. Meanwhile, the British FTSE had a one-year return of 1.95% and a year to date return of 3.82%.


The DAX shows us that the German economy is stronger and healthier than ours, and that’s the not the only indication. Germany also runs a regular trade surplus, meaning it exports more than it imports and has every year since 1952. Its trade surplus is currently estimated around €19.2 billion ($20.98 billion). America currently has a balance of trade of -$40.3 billion, meaning it imports more than it exports.

German Companies Doing Better Than Americans

Some individual German companies are doing very well; shares of Germany’s largest automaker, Volkswagen AG (OTC: VLKAF), were trading at $220 on July 21, 2015. Meanwhile, shares of General Motors (NYSE: GM) were trading at $30 and Ford Motor (NYSE: F) at $14.42.

Germany’s auto industry is among the fastest growing in the world, while America’s is a basket case. Volkswagen is moving to position itself as the world’s largest carmaker, while GM and Ford struggle to remain relevant in their own country.

What We Can Learn from Germany

That means we should certainly take a look at Germany and see what it is doing right. Germany has also adopted many of the socialist policies Sanders would like to see, and its economy is the envy of the world. As I noted elsewhere, Germany has more affordable housing than the U.S. has.

It should also give Bernie Sanders’ critics pause because it seems there is a correlation between economic success and a robust welfare state. Some of our conventional wisdom about welfare being for business might be just plain wrong.

One reason why the welfare state could be good for business is that in Germany, the state takes care of many things that companies have to in the U.S. Volkswagen does not have to worry about its employees’ healthcare because the government handles it. Ford has to pay for health insurance and an expensive pension system for its U.S. workers.

Is Bernie Good for Business?

That means Sanders could, surprise, actually be a pro-business candidate. His agenda could actually be very good for business rather than bad for it. For example, his plans to increase the minimum wage to $15 an hour would give Americans more money to spend, while his scheme to spend $1 trillion on infrastructure would benefit business with contracts and better transportation infrastructure.


Sanders’ plans to create a single payer health insurance system could help companies reduce their human resources expense by eliminating the need to offer health insurance. Imagine the savings if every corporation in America were to shut down its human resources department.

By raising the issue of a European-style welfare state in American politics, Sanders might be doing American business a big favor. He could be laying the groundwork for economic and other policies that will make it easier and more profitable to do business on this side of the Atlantic.




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