With the rise in popularity of social democracy (a highly regulated market economy), Samuel Gregg has some words of warning against the system. “[T]he briefest of surveys of European social democracy’s history,” he writes in a new article for the Stream, “illustrates how these policies invariably induce the type of slow-motion decline that’s turned much of today’s European Union into the sick man of the global economy.” Americans looking to Bernie Sanders for a social democratic answer to their problems should think twice.
Gregg discusses European social democracy:
If one was to describe the European social democratic project today, it might be summarized as enveloping citizens from birth to death in a web of protections and benefits that seek to shield people from life’s uncertainties, especially the turmoil often associated with market economies.
This translates into things like government-provided healthcare, state-funded public education, extensive labor market regulation, and generous welfare for the poor, disabled, and elderly. All this is provided and managed by a government and large public sector that also seeks to smooth the economy’s ups-and-downs through tools such as deficit-spending and targeted subsidies. Amidst these arrangements, private property and market-mechanisms such as free exchange are maintained in place, albeit with considerable restrictions.
It’s easy to see why social democratic policies took root in Western Europe. Given the horrors of World War II and the opprobrium attached to “capitalism” (which not just the left but also many on the right and even some Catholic and Protestant conservatives blamed for the continent’s problems), the case for free markets was always going to be a hard sell in postwar Western Europe. Many, including some Christian Democrats, also saw social democratic policies as a means of reducing support for Western European Communist parties — which, we shouldn’t forget, regularly received 25 percent or more of the vote in countries like France and Italy until the late 1980s.
The difficulty, however, with social democrat policies is that they contain several political and economic time-bombs. These become harder and harder to defuse as time passes.
