Social Democracy, or Glorified Aristocrasy?

With inflation soaring in the 3rd world, and health-care prices at all time highs in places like America, it may seem easy to look towards Social-Democracies as a point of inspiration when looking to better our own economies. However, discussion around such topics often miss several key points when talking about the effects and impacts of social democracies, choosing to focus on rather arbitrary points, often perpetuating myths and misconceptions about how social democracies work, their merits and downsides as well as the general overarching nature of such an economic system. 

The point of this article will be to better inform it’s readers regarding social democracies, how they function, and the effects they have on the world. 

Defining Social Democracy and Relevant Examples

A social-democracy is an economic system in which a large wellfare state provides it’s citizens with their basic needs, typically with a free market system in place with a neo-liberal styled democracy. An important distinction to be made is between social democracy and socialism. Social democracy is not socialism. Socialism, specifically Marxist socialism, holds that socialism can not be achieved until and unless the means of production (essentially power over the economy,) has been seized by the working class (proletariat) and that the owning class (the bourgeoisie) has been completely repressed. Within a social democracy, the bourgeoisie is preserved and the proletariat is not given any special power. Even if the proletarian is to make progress in gaining concessions from the bourgeois within the confines of the preexisting bourgeois democracy, which is what social democracy advocates for, they likely come at a large cost and will slowly be stripped away overtime. 

Henceforth, we can not conflate socialism and social democracy as they operate within completely different frameworks. At most, their goals may be somewhat similar, but hold no other such similarities. 

As for examples regarding social-democracy, we may look to the countries of Europe to find such cases. For the purposes of this article, we will look over 3 main examples to illustrate the functionings of a social democracy; Norway, The United Kingdom and Denmark. 

The Underlying issues with Social-Democracy

On it’s surface, a social-democracy feels like the perfect balance between socialism and capitalism, achieving the efficiency often associated with a free market system while retaining the social benefits of a socialist setup. However in this concept of a ‘balance’ between socialism and capitalism lies a fundamental misunderstanding of how either economic system works. Within capitalism, you must achieve profit in order to continue to expand or survive. The need for profit is done away with in socialism, destroying the profit incentive which is how socialist countries can manage to provide their citizens with most everything they need. However, within a social democracy, the profit incentive is kept, meaning that a social-democracy must both provide for it’s own citizens while exploiting enough labor/resources to make a profit. In most countries, a profit can not be made through exploitation of it’s domestic workers or at least those workers and lands who are under the protection of the state. Therefore most countries or private firms operating within social democracies look towards poorer third world countries to turn a profit. Using cheap labor and resources they may now achieve high profit margins. However here, we see an issue. The social-democracy, while not exploiting it’s own people, does exploit the people of foreign nations. In essence, a social-democracy does not fix exploitation under capitalism but it merely delays it and transfers it from the populace of the original country, to a secondary poorer nation.
Additionally, the welfare state built by most social democracies is unlikely to last for a prolonged period of time and is prone to decay once the international standing of said nation is in decline or when left-leaning parties and unions are weakened. 

The Nordic Model

In recent years the so called ‘nordic countries’ (consisting of Denmark, Finland, Iceland, Norway and Sweden, the autonomous territories of the Faroe Islands and Greenland; and the autonomous region of Åland) have been praised for their unique social democratic set up which allows them to provide free health-care and a range of other benefits to their citizens. For analysis today, we have Norway and Denmark, the two largest economies within the Nordic region. These two economies illustrate wonderfully what exactly is wrong with the nordic model and how it is no better than a normal free-market system.

Norway

The country of Norway, being the largest economy of the Nordic countries, is often touted as a role model for other nations to follow. However, this role model status becomes rather questionable once you realize the various issues inherent to the Norwegian economy.
Firstly, their economy is largely built up on unsustainable oil exploitation mostly by SOE’s (State Owned Enterprises), primarily Equinor (formerly known as Statoil). While Equinor has made a commitment to become Carbon Neutral by the year 2050, this seems to be too little too late as enormous amounts of damage have already been done to the environment due to Equinor’s ventures. Additionally, this goal is seemingly increasing unlikely as they continue to exploit preexisting deposits of fossil fuels and seek to open up new drilling operations, expanding the amount of oil the produce until at least 2026. These extra drilling operations however are needed in order to ensure the firm stays competitive against it’s competition as their renewable sector makes significant losses. However, these losses pale in comparison to their profits, which are well into the tens of billions.
Secondly, the Norwegian government has shown immense disregard for the Sami people, ignoring their rights whenever profit is on the line. Currently a wind power station, that was illegally built on Sami land, has been ruled against by the Norwegian supreme court however no action has been taken and it’s seeming unlikely that any will be taken considering that Sami land has been repurposed for far worse things in the past such as even NATO bomb testing sights. 

Thirdly, the nation’s truly massive wealth fund has been known to invest in stocks of companies that rely heavily on child labour.  Jan Tore Sanner, the Financial Minister of Norway responded thusly,

“The framework has been gradually updated, based on learning, experience and the development of norms. By excluding a company, we lose the ability to influence through dialogue and voting. Ownership can be a powerful force.” 

Sanner’s defense is very obviously attempting to cover up the funds actions, which were clearly in violation of their mandate. If voting and dialogue worked, those firms would not be employing child labour. Additionally, such firms often employ child labour not out of pure malice but instead out of a profit incentive, therefore, it is against the interest of investors to attempt to lower these profits. So, we have no reason to believe that the Norwegian government would attempt to pull a maneuver that would drastically lower their own gains from the company when they most likely only chose to invest in said company in the first place due to their large profits. 

This disregard for the rights of foreign workers was shown yet again when majority state owned telecommunications provider Telenor began working with Bangladeshi firms which employed child labour and other such labour practises.

Lastly, wealth inequality is still a very prevalent issue within Norway, despite what it’s reputation may make you think. Even though it’s not quite as bad as other countries, it’s still an incredibly important issue with about the top 10% of households holding 53% of the nations net wealth. 

These are a only handful of the countless examples of exploitation and economic disparity that Norway must 

Denmark

Denmark holds the position of the second largest Nordic economy, however, it has a vastly different economical set up to Norway. Unable to exploit natural resources like oil or gas, the Danish economy relies a lot more heavily on trade and transport to maintain itself, leading to a vastly different strategy being employed by Denmark in order to maintain their position in the global economy.
Most notably, the Danish government relies far less heavily on SOE’s, instead having a multitude of privately owned companies that rank among the largest in the world. For example, there is the Maersk group, the largest company operating in Denmark which contributes up to 15% of the countries GDP. It claims to be dedicated to all the same values as Denmark, to peace, equality and liberty, however this gentle facade fades the moment profit is at stake. The company, through US subsidiaries, has actively been fighting reforms to US aid systems that would help millions starving in 3rd world countries in order to protect their bottom line. This can only be done due to the way US lobbying systems work, allowing for companies to essentially throw large amounts of money at legislators to do what they want. 

This trend of skin deep “progressiveness” in companies is incredibly common within not only Denmark but social democracies as a whole, with money hungry enterprises not wanting to lose public favor, thus disguising their practices with veneers of ‘goodness’ and generally well intentioned and vague morals. This doesn’t only manifest through lobbying against generally beneficial legislation to protect your profits, but also labor rights violations, something which the Maersk Group has shown time and time again. 

United Kingdom

The final example, the United Kingdom, is of a social-democracy in decay. The once strong labor movements in the United Kingdom have slowly been dying out as a result of the ruling classes slowly chipping away at their power and regaining concessions taken from them. However, this failure of the working class to maintain power in a social democracy is not unique, nor is it anything surprising. Looking at the recent shifts in the British political landscape one of the most the first thing you’d notice is that the conservative party has been in power since 2010, ever since Tony Blair’s disastrous rebranding of the Labour Party as a more neo-liberal party, removing the party’s official commitment to socialism in it’s manifesto and seeking to liberalize many of it’s pro-worker policies, Labour has consistently been losing elections to the Conservatives. However, it is important to understand that these switches between parties brought little to no difference within foreign affairs or economic policy other than the size and condition of the wellfare state. Economic exploitation of third world countries was the same under Labour as it was under the Tories. 

Moving onto examples of the crumbling British welfare state, first is the NHS. It is quite fitting that the NHS, the greatest accomplishment of the British welfare state is also one of the first to fall victim to it, with a concerning trend towards outsourcing care to for-profit companies. This privatization has been linked to an increase in avoidable deaths with NHS spending being cut over the last few years and costs from these private contractors yet to peak, the already strained system is looking at a very bleak future. And it’s not looking much better for benefits, with routine spending cuts and threats of cuts. 

Conclusion

The system of a social-democracy is, at it’s core, simply a more concealed capitalism. It can not ignore the fact that under capitalism some form of exploitation is needed in order to produce profit. However, it can move the point of exploitation down the line, from a domestic market to a foreign one, giving modern superpowers the ability to appear as paragons of truth and justice while maintaining their economic exploitation of 3rd world countries under it all.