On social democracy

This is an open topic for a more wide ranging, free form discussion on both the merits and limitations of social democracy. Before going deeper, I just want to first acknowledge that for the short and medium term social democracies with market allocation are obviously the thing we need in the world and strengthening them is required to solve the imminent climate crisis. But I also want to open some problems that exist with social democratic capitalism and invite others to contribute!

First off, what is the role of imperialism? Economic imperialism too. The Nordic social democracies always benefited from Western imperialism, even if they themselves weren’t the main ones leading it. Poor countries tend to export raw materials, and things that have really bad terms of trade. In decades past, they pushed for things like producer cartels to try to address some of that, but ultimately for a country to be “developed”, they have to have a greater capacity to meet their own basic needs, and they have to get to the point where they are exporting products with good terms of trade. That means that they have to develop enterprises of their own, which by definition would displace exports from already developed countries. The coups, the dictatorship, the IMF, neoliberalism, austerity, the massive external debt in poor countries, that has all benefited Nordic social democracy, even if Nordic countries were leading imperialists. The French had a strong social democracy when they were attacking Vietnam with western support, among other places, which was a huge issue in France at the time among people on the left. The Communist Party in France at the time wasn’t always very good on issues like imperialism in poor countries. You could (always had) social democracy along with various forms of imperialism. In effect, you exploit poor countries and more equitably distribute the spoils. Is that setup democratic on the whole, or just somewhat democratic among those splitting up the spoils? So, where is the connection between imperialism and economic imperialism, and capitalism (social democratic or neoliberal, doesn’t matter)? There is a finite amount of resources in the world, resource consumption and pollution generation are highly inequitable, and the international economy is now utterly dominated by huge oligopolies, so how do you maintain consumption habits and make endogenous economic development a reality in developing countries without resulting in radical changes in developed countries? Conversely, how do you maintain the current system as is, and living standards in the West largely as is, without effectively doing away with democracy in poor countries?

On the issue of planning, it would be crucial to draw a distinction between authoritarian planning and more democratic planning. This involves the question of tacit knowledge, which was a point of focus for Hayek in the socialist calculation debate. Here is a huge problem though, often neglected; the environmental crisis. Can you pass tacit knowledge through markets? Can you pass ecological information through markets? Is there an environmental crisis and is it not true that most environmental impacts are not priced? Therefore, the scale of what is not measured in markets is increasingly important. Are there not clear limits as far as monetizing these impacts? So, how do you solve this in an economy where planning plays a small role? What informational challenges confront individual consumers and produces in such a context? If the notion is that consumers and enterprises are given total freedom, how exactly do you deal with limits to growth? If a large enterprise pollutes a bunch and if we can only pollute so much, does that not impact smaller enterprises? So, how do you resolve that without planning? And how do you deal with a worldwide environmental crisis without planning, as developed countries will in fact have to work out who consumes less and why within their jurisdictions. Given how corrupt and inequitable societies are now, does that not require pretty radical changes itself? How could that be realized in a decentralized (social democratic) market economy?

One last thing I want to address is money creation. Banks do not take into account non-market impacts, and if they did, they would have to radically change their behavior. How exactly could they make investments that they could assume are sustainable when they don’t have the knowledge of what other banks are doing? Banks have the power to create money, and the creation of money increases consumption and use of natural resources, and result in the generation of pollutants. So, if we acknowledge that we have to consume resources and produce pollutants at a level that is sustainable, and our consumption and pollution generation has to decline, how exactly do you do that with private banking, and private banking that isn’t itself pretty much planned and coordinated on a huge geographical scale? This isn’t a small problem, and I don’t see how it could possibly be dealt with within the current capitalist system.

To me, economic planning is a given. The question is how democratic and bottom up the planning will be. We should look carefully at the struggles of planning in the past, and then think about how the massive improvements in informational technology allow for a much better and more efficient planning mechanism now. The socialist calculation debate would have been radically different if we had the computer technology of today. Authoritarianism degrades the information that is needed for effective economic planning. The planning should be democratic. But, we have to get real about what the environmental crisis means in regards to this discussion, as well as how social democracies are always limited if they insist on keeping market economy as their basis in the long term.


Also: please feel free to link articles about social democracy that you feel are interesting!

Howdy, Antti! Wonderful little post you’ve written here, and a nice criticism of social democracy; I might have to steal a couple of arguments from here! For the time being, I’ll leave some comments on two points that I feel can be beneficial to the overall discussion.

…where is the connection between imperialism and economic imperialism, and capitalism (social democratic or neoliberal, doesn’t matter)?

Assuming this isn’t a rhetorical question, I think although imperialism isn’t inherent to capitalism, its what it leads to when you give people power within capitalist firms. By incentivizing profit motives and biasing against goods with greater social benefits, you drive people to do some pretty bad things (like imperialism).

We should look carefully at the struggles of planning in the past, and then think about how the massive improvements in informational technology allow for a much better and more efficient planning mechanism now. The socialist calculation debate would have been radically different if we had the computer technology of today.

I’m not entirely sure if simply pointing to our advances in technology is much of a good argument in relation to the economic calculation problem; what I’ve found that really matters is the specific systems & back-ups put into place in terms of planning. Of course, the ECP was mainly attacking central planning so I doubt it would apply much to parecon, but its a common talking point I see from a lot of leftists against the ECP and its a bit bothersome for me.

Other than that, great post!

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There is much that can be said about social democracy. I would offer this brief evaluation:

  1. Social democracy is a substantial improvement on neoliberal capitalism. Social democratic capitalism delivers outcomes that are an improvement over those of neoliberal capitalism in every important category. To deny, or belittle this is to deny facts.

  2. Moreover, in many places the fight for social democratic reforms is of great importance, and those who ALSO want to move onto an entirely new kind of economic system must participate wholeheartedly in fights for social democratic reforms, and not belittle those efforts and campaigns…

  3. Unfortunately social democracy will not fully achieve any of our economic goals – economic democracy, economic justice, environmental sustainability, variety, and solidarity. It will come closer than neoliberal capitalism will, but will invariably come up short.

  4. Social democracy is also an unstable economic formation. Its fundamental institutions continue to rely on greed and competition rather than equitable cooperation while attempting to mitigate the damage those institutions cause. Therefore, while a social democratic economy can progress toward more economic democracy, more economic justice, and more environmental sustainability; it can also regress toward a more neoliberal form of capitalism… Moreover, this is precisely what has happened over the past 40 years in every country that had developed a more social democratic form of capitalism during the second half of the 20th century.

  5. There is a DIFFERENT economic system that IS capable of achieving all our economic goals fully, a participatory economy. Moreover, since a participatory economy is a system based on equitable cooperation it does not harbor forces which are always a danger of leading it to regress back toward the economics of greed and competition.


Very good summary, thank you Robin!

This recent blog post by Matt Bruenig was also interesting viewpoint on basic functions of the welfare state:


Great post Antti. What do you think about submitting this as an article for the site?

I agree with Antti. The article by Matt Bruenig is very interesting and very good.