{"id":12152,"date":"2013-05-19T08:39:00","date_gmt":"2013-05-19T08:39:00","guid":{"rendered":"https:\/\/www.kohelet.org.il\/?post_type=article&p=12152"},"modified":"2026-07-16T08:40:53","modified_gmt":"2026-07-16T08:40:53","slug":"how-history-has-judged-social-democracy","status":"publish","type":"article","link":"https:\/\/www.kohelet.org.il\/en\/article\/how-history-has-judged-social-democracy\/","title":{"rendered":"How History has Judged Social Democracy"},"content":{"rendered":"\n

Emmanuel Navon<\/em><\/p>\n\n\n\n

“Social democracy” is a key concept in Israeli politics, yet we hardly ever bother to find out where a social democratic governmental model is implemented and what are the socio-economic trends which follow a regime committed to provide citizens with cradle-to-grave services. It turns out that while Israel wants to become Europe, European countries have realized for some time that the social-democratic fantasy leads to bankruptcy and social crises.<\/strong><\/p>\n\n\n\n

In Israeli political, media and academic discourse, the term \u201csocial democracy\u201d has a positive connotation, while \u201cneo-liberalism\u201d has a negative one. Economic liberalism is typically portrayed by Israeli media and academia as cruel and extreme, while social democracy is presented as moderate and just. <\/p>\n\n\n\n

MK Shelly Yachimovich is a significant contributor to making the term \u201csocial democracy\u201d bon ton. She views the European countries which are allegedly social democratic as a model Israel ought to emulate. This is, however, ironic for two reasons: Firstly, in 1985 it was the Israeli Labor party that led the economic recovery program which was by all metrics a neo-liberal plan. Secondly, the European countries have given up on the social democratic system a long time ago, and the few countries still holding on to it are stuck in a loop of zero growth and high rates of unemployment.<\/p>\n\n\n\n

Adding the adjective \u201cdemocratic\u201d to a noun should always raise suspicion. Countries which define themselves as “democratic republics” – such as the former German Democratic Republic in East Germany – do so precisely because they are not<\/em> democratic. In fact, the very term “social-democracy” was coined because the Russian revolution created a socialist dictatorship that called itself a popular democracy. The European socialists wanted to differentiate themselves from the Soviet regime, and so called themselves “social democrats”. Instead of revolution, they sought to bring about a gradual transition from capitalism to socialism through passing legislation and participating in elections.<\/p>\n\n\n\n

Welfare States Backtrack<\/strong><\/p>\n\n\n\n

After World War II, Western European countries expanded government involvement in the economy, and provided new social services such as health insurance and pensions. Conservative parties played a significant role in building the welfare state. In Germany, Ludwig Erhard built the Soziale Marktwirtschaft<\/em> (social market economy) on behalf of the Christian party, and the Social Democratic Party first rose to power only in 1969. In France, the conservative Charles de Gaulle established national insurance (social security). In Britain, the Labor Party played a leading role in the partial implementation of the social-democratic model.<\/p>\n\n\n\n

Social democracy as a distinct worldview and system of government has never actually been implemented, since there is no example of a state that is both socialist and democratic. In Europe, the government’s role in the economy was expanded and social legislation was enacted, but no transition from capitalism to socialism took place. In practice, a Keynesian model was implemented, the purpose of which is not to dismantle capitalism but to save it from itself.<\/p>\n\n\n\n

The European welfare state entered a crisis beginning in the 1970s, due to “stagflation” (a combination of low growth and high inflation), an aging population, and globalization. These phenomena forced European countries to cut their spending and unleash market forces in order to encourage growth. Britain led the reforms in the 1980s under the conservative Margaret Thatcher, and Germany in the 1990s under the social-democratic Gerhard Schr\u00f6der.<\/p>\n\n\n\n

Thus, the social-democratic model was only partially implemented in Western Europe, and not necessarily by social-democratic parties. It did indeed contribute to the economic and social achievements of the 1950s and 1960s, but the economic crisis and structural changes that occurred in the 1970s turned it into a burden. Only the countries that freed themselves from it (such as Britain and Germany) returned to a path of growth and budgetary balance.<\/p>\n\n\n\n

The Decline of Social-Democratic France<\/strong><\/p>\n\n\n\n

France, as a counter example, never carried out the necessary reforms. As a result, France has experienced a continuous budgetary deficit since 1974 and suffers from near zero growth and high unemployment. High taxes strangle the economy, but the state needs them to fund a bloated public administration. In 1981, the socialists rose to power and tried to save (and expand) the social-democratic model. They nationalized companies, raised taxes, and increased government spending. These policies caused a massive exodus of wealth, lowered France’s credit scores and put French companies at risk within Europe’s economic community and financial systems.<\/p>\n\n\n\n

Within eighteen months of implementing the model (in 1983), the socialist government made a U-turn and returned to economic orthodoxy. Lionel Jospin’s socialist government (1997\u20132002) privatized more government companies than the conservative governments that preceded it. A year ago, the socialists rose to power in France once again. The current government promised voters that it would preserve the welfare state, but discovered to its dismay that the laws of economics still apply to France: the economy is in a slump, capital owners are emigrating from France, and unemployment has crossed the 10% threshold.<\/p>\n\n\n\n

Scandinavia’s Dark Shadow<\/strong><\/p>\n\n\n\n

The last argument left to die-hard social-democrats is that the model was and is a success in Scandinavian countries. Before more closely examining that argument on its merits, it would be well to familiarize ourselves with the dark side of Scandinavian “social-democratic” history.<\/p>\n\n\n\n

The belief in the state’s unlimited ability to shape a perfect society gave rise to an ugly reality in Scandinavia. Scandinavian social-democratic governments adopted and implemented the theory of eugenics: the “science” of improving race. Between 1936 and 1974, Scandinavian countries promoted a policy of sterilization aimed at “improving the population”. Many fell victim to this policy: 6,000 in Denmark, 40,000 in Norway, 60,000 in Sweden. It turns out that the attempt to engineer the economy and public welfare can lead into dark realms of “social engineering”, where individual rights are trampled by the state.<\/p>\n\n\n\n

But even without this embarrassing past, it is important to know that the Scandinavian social-democratic model no longer exists. True, in the 1970s and 1980s, Scandinavian governments reached very deep into their citizens’ pockets. Swedish government spending constituted 67% of GDP in 1993, and the income tax rate reached as high as 100% for the wealthiest. But the disappointing results were not long in coming: Sweden fell in the ranking of wealthy countries from 4th place in 1970 to 14th place in 1993. In 1993, average Swedes were less wealthy than their British or Italian counterparts. <\/p>\n\n\n\n

Privatized Scandinavia<\/strong><\/p>\n\n\n\n

Due to these dubious results, Sweden has since the early 1990s been reducing its spending and becoming less and less “social-democratic”. Its public expenditure was cut to a rate of 49% of GDP, and – for the information of Israeli social democrats – corporate tax in Sweden stands at 22%, lower than in the US. Thanks to these liberal reforms, the Swedish economy grew at an average of 2.7% per year in the years 1993\u20132010.

Sweden also sets an example of firm budgetary discipline, straight out of the liberal playbook. It lowered its debt from 70% of GDP in 1993 to 37% in 2010. During that same period, Sweden went from a budget deficit of 11% of GDP to a budget surplus of 0.3% of GDP. The government also adjusted the eligibility conditions for national insurance (social security) to account for the population’s aging.<\/p>\n\n\n\n

Moreover, Sweden respects free trade and does not use taxpayer money to rescue failing companies, even near “mythological” ones. The Swedish government let the Saab company go under and did not oppose the sale of Volvo to a Chinese company. Also, Sweden adopted Milton Freidman-style school vouchers. It allows private schools, which make up two-thirds of all Airbus in Sweden, to compete with government schools, leaving school choice in the hands of parents. Sweden isn’t only advanced in education: private companies compete in providing public health services as well.<\/p>\n\n\n\n

Denmark also adjusted its social-democrat model to the realities of the global economy and an aging population. It promoted privatization and outsourcing in government hospitals, and raised the age of retirement from 65 to 67 in 2006. Employers in Denmark can fire employees as easily as they can in the US, with the government providing benefits to those fired only to integrate them back into the workforce.<\/p>\n\n\n\n

The only Scandinavian country behaving as though no social-democratic lessons have been learned is Norway. But Norway can afford such huge amounts of spending thanks to its oil reserves. Norway is not a member of the European Union because it understandably does not want its income from oil to subsidize French agriculture and Airbus. <\/p>\n\n\n\n

Social-Democracy has Phased out of the World<\/strong><\/p>\n\n\n\n

In short, social democracy in Europe is a thing of the past. But the discourse in Israel is out of touch with the world, and has discovered social democracy precisely as Europe is giving up on it. As that continent has learned, progress and prosperity require human capital, initiative, maximal individual freedom and minimal government intervention. Instead of trying to copy the darkness social democracy spread in Europe, the nation of Israel would be better off serving as a light of freedom unto the nations. <\/p>\n\n\n\n

<\/p>\n\n\n\n

(First published in Hebrew on Mida<\/a>).<\/p>\n\n\n\n

<\/p>\n","protected":false},"excerpt":{"rendered":"Emmanuel Navon “Social democracy” is a key concept in Israeli politics, yet we hardly ever bother to find out where a social democratic governmental model is implemented and what are the socio-economic trends which follow a regime committed to provide citizens with cradle-to-grave services. 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