Won't You Please Consider Social Democracy?

A few years ago, as the Social Democrats went down to defeat in Germany, Hendrik Hertzberg wrote a touching tribute to Germany's oldest political party, which passed the most important tests of the 20th century with flying colors (the SPD resisted both Naziism and Communism in the face of intense pressure).  The SPD is particularly noteworthy, but the Social Democrats have played a major role in building the most successful countries of Europe.

Even in countries where the Social Democrats have not often been in government, their ideas have hugely influenced public policy.  Most of northern Europe is more or less social democratic.  So what makes social democracy so great?  Well, in my view, it strikes a desirable balance among the social institutions that we use to build a good society.  In a social democracy, a large public sector supplies public goods and redistributes wealth in such a way that the poorest in society are protected from abject poverty and are given opportunities to succeed.  This is why social mobility is much higher in social democracies than in liberal democracies—if you believe in equality of opportunity, you should take another look at social democracy.

But this is not statism—social democracies carve out a huge area of life free from government control.  This is presumably a major reason why they were so despised by the Nazis.  If you are pretty much any kind of minority, social democracy gives you the space to express yourself while treating you as a full equal.  In a social democracy, your sexuality is your own business.  Your religion is your own business.  Your political views are your own business.

The only thing that really isn't your own business is . . .  your own business.  Taxes are sky-high, and the private sector is undoubtedly crowded out to a significant degree.  In my view, the social democrats probably go too far in ignoring the benefits of the market system, and it is a good thing that their impulses have been kept in check by electoral competition with liberals.  I am a bigger fan of "flexicurity" than I am of the highly unionized and rigid labor markets that prevail across most of the social democracies.

But note that the social democracies are highly productive and wealthy, to a far greater degree than one might expect given the size and scope of their public sectors.  In a strange way, social democracy can facilitate entrepreneurship and market competition, because it makes competition and failure palatable.  And in fact, the social democracies routinely score very well on measures of economic freedom.  The market is allowed to function with relatively little interference, and then it is taxed at extortionate rates.  It turns out that this does not impair the economy as much as you might think.

And this underscores the real point:  markets are great, but we all recognize that they are arbitrary and amoral.  You can lose your livelihood because abundant natural gas is discovered in your country.  You can sink your wealth into a small business that then burns down, or becomes obsolete, or loses its customers when the neighborhood changes.  Your life is at the mercy of forces beyond your control.  And while imposing Darwinian natural selection on business firms is generally desirable, it would be monstrous to subject people to the same kind of selective pressure.

Social democracy promotes liberal values by protecting human freedom in most areas of life, and by allowing market forces to determine the allocation of resources.  But it tempers those forces as a way of injecting some degree of morality into our economic system.  And in so doing, it greatly facilitates both egalitarianism and the possibility for poor individuals to achieve prosperity.

In short, social democracy, nudged slightly toward liberalism, is the best social system we have devised, and the roster of liberalism-inflected social democracies reads like a Who's Who of the best societies on Earth:  Germany, Denmark, Norway, Sweden, the Netherlands, Canada.  Shouldn't we consider bringing social democracy to the United States of America?