Socialism versus Social Democracy


An essay by Dr Joe Sampson for Social Action Australia, 2022.

I will use the Macquarie Dictionary definitions of “Socialism” and “Social Democracy” as a starting point in my essay.  The Macquarie Dictionary defines “Socialism” as a theory or system of social organization which advocates the vesting of ownership of the means of production, capital, land, etc. in the community as a whole”.  The Macquarie Dictionary defines “Social Democracy” as a belief in, or a social system based on a limited form of Socialism achieved by gradual reform through electoral and parliamentary procedures”.  As Socialism and Social Democracy are contrasted with Capitalism I give the Macquarie Dictionary definition of “Capitalism”, which is “a system in which the means of production, distribution and exchange are in large measure privately owned”.

Using such definitions the Australian Labor Party would be regarded as a Social Democratic party ;  in its constitution it states “The Australian Labor Party is a Democratic Socialist party”; it goes on to say that the ALP “has the objective of the democratic socialisation of industry, production, distribution and exchange to the extent necessary to eliminate exploitation and other anti-social features in these fields”.   As the ALP advocates a limited form of ownership by the government (and hence by implication the community) it is not fully Socialist.  Similarly the Australian Greens would be regarded as a Social Democratic party. The term “Democratic Socialist” is sometimes used interchangeably with “Social Democrat” and also with “Welfare Capitalist”; so the Social Democratic state is regarded as a half way house between a total Socialist state and a laissez-faire Capitalist state.

The dictionary definition can be expanded to say that Social Democracy is a mixed economy system , in which some of means of production are privately owned, some are publicly owned and where the state heavily regulates the economy and has an active welfare system (including providing health, education and pensions) in place to correct for the worst problems inherent in Capitalism like inequality, cyclic instability, or the profit motive encouraging people to do things against the public interest.

Modern socialism began in early 19th century Britain and France as a reaction against the excesses of 18th and 19th Century Capitalism.  As a result a number of Socialist parties arose in various countries.  While some advocated overthrow of the State and total or almost total nationalisation and called themselves Communist parties other parties advocated the coming into power of Socialist parties  by parliamentary means and eventually came to advocate only partial nationalisation and were known as Social Democratic parties.

Proponents of Social Democracy say that it combines the best features of Socialism and Capitalism.  Total Socialists criticise Social Democracy saying that as it allows some Capitalism it is not stable.  Proponents of Capitalism say that it is the most productive system; in the Australian Liberal Party document entitled “Our Beliefs” it is stated that “wherever possible, Government should not compete with an efficient private sector; and that businesses and individuals – not Government are the true creators of wealth and employment”.  This Liberal Party statement is not accurate – Government enterprises can create wealth.  While Social Democrats believe that Capitalism can be humanised with economic and social interventions (such as regulations and social welfare programs) that promote equality and social justice, Socialists say that Capitalism can never be sufficiently humanised and that equality in a Capitalist society is not possible.  Socialists see exploitation as central to Capitalism whereas Anthony Crosland in “The Future of Socialism” (1956) argued that under modern Capitalism the old style exploitative relationship of owner/manager versus worker has been replaced by the practice of scientific management with ownership divorced from control and professional managers were more interested in efficient running of businesses rather than exploitation.  Social Democrats aim to create policies within a Capitalist system that curb inequality, poverty and oppression of underprivileged  groups but Socialists say that these issues can never be fully resolved under Capitalism.  While Social Democrats maintain that Capitalism and democracy are compatible Socialists believe that Capitalism is inherently incompatible with democracy and believe that true democracy can be achieved only under Socialism. 

One criticism of Socialism is that Socialist models are inefficient (e.g. in the Soviet Union there was sometimes a shortage of goods in shops).  Some critics argue that countries where the means of production are nationalised are less prosperous than those where the the means of production are in private hands.(e.g. in 1991 the GDP per capita in the Soviet Union was 36% of that of the USA). Others argue that Socialism reduces work incentives (because workers do not receive rewards for work well done) and reduce efficiency through the elimination of the profit and loss mechanism and a free price system and reliance on central planning.  They also argue that Socialism stagnates technology due to competition being stifled.  Some critics say that Socialism is undemocratic because it does not allow people to set up their own businesses.

Socialists have counter-argued that Socialism does not necessarily imply central planning and is consistent with a market economy.  Some Socialists have argued that a certain degree of efficiency should be sacrificed for the sake of economic equality or other social goals.  For example they compare Cuba with the U.S.A. – while the former has a much lower GNP per capita than the latter it has free medical care while the latter has not.  They further argue that market systems have a natural tendency toward monopoly or oligopoly in major industries, leading to a distortion of prices, and that a public monopoly is better than a private one.  Also, they claim that a Socialist approach can mitigate the role of externalities in pricing (e.g. pollution, climate change).  Some Socialists have made the case for Socialism being better to able to manage the environment than Capitalism.

The forms of government in Communist Party states such as the Soviet Union under Stalin, China under Mao Zedong, Eastern Europe, etc. were Socialist according to their rulers because all or most of the economy was under government control.  Critics said that their governments were not truly Socialist as they were not run by the community but rather the Communist Party.  A number of critics have said that Communist Party states were oppressive totalitarian states with mass executions, forced collectivisation, gulags and were inefficient with famines and regular shortages of goods under their centralised planned economies.  These states were either one party states or states in which only the Communist Party had any real power.  One can advocate a Socialist system in which there is a multi party democracy with freedom of speech;  i.e. a democratic Socialism rather than an authoritarian Socialism; Gorbachev was moving towards such a system with his concept of Glasnost.

In Australia the ALP and Greens promote Social Democracy, which involves a mixed economy whereas the Liberals and Nationals while also in favour of a mixed economy favour more power to the Capitalists.  These four parties capture a large part of the vote. Minor parties such as One Nation still favour a mixed economy.  There are a few Socialist parties which very small numbers of people support, e.g. at the recent Victorian election the Socialists got only about 1% of the vote.  

In recent decades in Australia Labor governments both at state and federal level have privatised a lot of government enterprises whereas the Greens have opposed privatisation, which means that the Greens are closer to total Socialism than the ALP. The Liberals have also privatised a lot of public enterprises.  Polls have consistently shown that most Australians oppose privatisation, including a majority of Labor voters and a majority of Liberal voters. 

Bernie Sanders and Jeremy Corbyn both self identify as Democratic Socialists.  Corbyn would have moved the UK closer to a Socialist society by renationalising British Rail and the energy companies.  Bernie Sanders said “To me socialism doesn’t mean state ownership of everything, by any means, ; it means creating a nation, and a world in which all human beings have a decent standard of living”; he also said: “I think that democratic socialism means the government has got to play a very important role in making sure that as a right of citizenship all of our people have healthcare; that as a right, all of our kids, regardless of income, have quality childcare, are able to go to college without going deeply into debt; that it means we do not allow large corporations and moneyed interests to destroy our environment; that we create a government in which it is not dominated by big money interests.”

Proponents of Socialism, Social Democracy and Capitalism all say that their system is the best for obtaining high standards of living, health, education and social justice.  What does the evidence say?  The countries with the highest quality of life were announced by the not-for-profit organisation Social Progress Imperative in 2016.were.Scandinavian nations, which are Social Democracies,  scored highly in the "Social Progress Index," but more surprising are the very large countries which came lower down the list — suggesting that a strong GDP per capita is not the only gauge for a high standard of living.  Despite this, all of the top 19 countries are developed nations — so having a strong economy clearly has an impact.  The "Social Progress Index" collates the scores of three main indexes: (i) Basic Human Needs, which includes medical care, sanitation, and shelter; (ii) Foundations of Wellbeing, which covers education, access to technology, and life expectancy; (iii)Opportunity, which looks at personal rights, freedom of choice, and general tolerance.  The index then adds the three different factors together, before giving each nation a score out of 100.  The ranking of the countries was:

  1. Finland; 2. Canada; 3. Denmark; 4. Australia; 5. Switzerland; 6. Sweden; 7. Norway; 8. Netherlands; 9. United Kingdom; 10. Iceland; equal 10th. New Zealand; 12. Ireland; 13. Austria; 14. Japan; 15. Germany; 16. Belgium; 17. Spain;18. France; 19. United States of America.

All these countries have multi party democracies with mixed economies with varying degrees of private ownership and of public ownership with both Social Democratic and Capitalist political parties.  None of the five Communist Party countries, which all call themselves Socialist, are on this list.  So the evidence seems to be that countries with Social Democratic or Capitalist parties have higher quality of life than countries with Socialist parties in power.

But then some people might say that these nineteen countries would fare better with democratically elected Socialist parties in power and that the Communist Party countries all have undemocratic Socialist parties in power.


Social Democracy (Wikipedia article)

Socialism (Wikipedia article)