This is a time when we need fresh thinking on how to organize our society to a better job of serving our people. There are too many citizens who have lost faith in our government, in big business, and our other institutions. They have seen President Trump call our media “dishonest,” our justice system “rigged,” our climate policies a “hoax.” We need to think about what principles should shape and guide our society to do a better job of delivering on human needs.
I have been increasingly convinced that our society needs to move closer to the system known as “social democracy.” This is not to be confused with “socialism” or “communism.” Social democracy is the system that currently operates in Scandinavian countries as well as in several other European countries.
Defining Social Democracy
Social Democracy is an ideology that favors social, political and economic moves by the state for the explicit purpose of promoting social justice within a capitalist economy. Social democracy favors capitalism over socialism but recognizes the need to fix certain inadequacies of capitalism so that the economic system works better for more people.
I described the main inadequacies of current capitalism in my book Confronting Capitalism: Real Solutions for a Troubled Economic System (Wiley 2015). Among them are the persistence of poverty, the growing level of income inequality, the likely reduction of jobs as automation and artificial intelligence advance, companies failing to cover their “social costs,” environmental exploitation, the business cycle and economic instability, and others.
Social democracy requires a commitment to representative government. Citizens exercise voting rights on the principle of “one person, one vote.” Citizens can vote to pass desirable regulations such as a Food and Drug Act, an Environmental Protection Act, and so on. Citizens can vote for measures to reduce income inequality and to help the poor with food stamps, Social Security, and unemployment benefits. Citizens can vote for any measures that promise to improve the general welfare.
Our current system of representative democracy also needs improvement. We have moved far away from a “one citizen, one vote” system. The Supreme Court ruling on Citizens United led to the explosion of PACS and SuperPACs armed with so much spending money that they could determine elections. I published Democracy in Decline: Rebuilding Its Future (Sage 2016) to point out a host of distortions in our system of representative government. Among them is the growth of gerrymandering in designing Congressional voting districts, the growing power of lobbyists to influence our legislators, low voter literacy, turnout and engagement, two-party gridlock, conflict between the President and Congress, federal vs. states rights, and other issues.
I recognized that the growing wealth concentration created by capitalism was seeping into and poisoning our democracy. We need to think freshly about what respective jobs we want our government and our private enterprise system to perform for us.
Social democracy advocates an evolutionary and peaceful transition from free market capitalism. It rejects a revolutionary approach. Social democrats accept the predominance of private property and private enterprise to produce most of the goods and services needed by the citizens. Only a small number of essential utilities and public services might be necessary under public ownership. We have done this with our work in space and in building dams and managing public lands.
Social democracy is associated with Keynesian economics. It holds that the state can intervene in economic downturns to turn on the public spending spigot to prop up the economy. It calls for an independent Federal Reserve Board that tries to kickstart a sluggish economy and compress a booming economy in danger of leading to a bust. Social democracy favors a smooth working economy unplagued by the classic business cycle. Keynes thought that enlightened capitalism can get rid of the business cycle and mass unemployment.
Social democracy favors policies aimed at reducing poverty, inequality, and oppression of underprivileged groups. It favors providing universally accessible public services like education, health care, care for the elderly, child care, and workers’ compensation. Danish citizens get free college tuition, health care for life, ten months of paid maternity leave, and a guaranteed retirement income. Social democrats welcome the labor movement and trade unions as tools for supporting the collective bargaining rights for workers and extending wage, benefit and working conditions improvements. It would also favor a voice in large companies to share views on the welfare of employees and other company stakeholders.
Social democracy has been called the Third Way in that it steers midway between neoliberalism and socialism. Neoliberalism represents a 20th century revival of a 19th century set of ideas of free trade, deregulation, privatization, fiscal austerity, and smaller government. Neoliberalism favors a larger role of the private sector in the economy and society. It focuses on the idea that economic growth is produced through providing maximum incentives to businesses to pursue unrestrained economic advantage. Its metric is economic growth, not equitable distribution of the income resulting from that growth. The two modern political leaders in this ideology were Ronald Reagan and Margaret Thrasher. The two main theorists of neoliberalism were Professors Friedrich von Hayek and Milton Friedman. The main advocate of neoliberalism today is the Republican Party.
Social Democrats, on the other hand, have a preference for paying higher taxes and receiving better medical care and lower college cost than paying lower taxes and receiving poorer medical care and higher college cost. They have a preference for most of the higher taxes to fall on the rich.
The main countries that have embraced social democracy are the Nordic countries. The United Nations published in 2018 a global report ranking the happiest countries in the world. The top five, in order, were (1) Finland, (2) Norway, (3) Denmark, (4) Iceland and (5) Switzerland. They were followed by four more countries with happy populations – (6) Netherlands, (7) Canada, (8) New Zealand, and (9) Sweden. All have adopted many principles of social democracy with their heavy emphasis on good education, good health, good maternity, and good retirement. The correlation of high happiness with social democracy needs to be noted.
What about the U.S? The U.S. ranked as number 18 in happiness in this 2018 study. In 2007, it ranked as number 3. The slide was partially due to growing obesity, the opioid crisis, job loss, and widespread depression with the high cost of health care and college education. Whether U.S. citizens would score higher in happiness if the country moved toward more social democracy, is an interesting question.
So will it be Social Democracy or Free Market Economics? Will our citizens be better off with a Social Democratic philosophy or a Free Market philosophy? The answer is in the hands of our citizens