Social Democracy

Have you ever wondered why Scandinavian countries are doing so well? According to many, the reason for their success is that their politics and economy are based on a political ideology, a model that does not reject capitalism while at the same time is a form of socialism. It sounds contradictory, but social democracy is an ideology that does just that. 

Social Democracy Social Democracy

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Table of contents

    Meaning of social democracy

    Social Democracy Protestors holding a flag that reads democratic socialists of America StudySmarterFig. 1 Democratic Socialists occupy Wall Street

    Social democracy is an ideology which supports socio-economic interventions that promote social justice within a liberal-democratic system of government and a mixed economy. As such, social democrats have three main assumptions:

    • Capitalism, while distributing wealth in a way that results in inequality, is the only reliable way to generate wealth.

    • In order to make up for the way capitalism results in inequality, the state should intervene in economic and social matters.

    • Social change should happen through gradual, legal, and peaceful processes.

    As a result of these assumptions, social democrats between in a compromise between free-market capitalism and state intervention. So, unlike Communists, social democrats do not consider capitalism to be contradictory to socialism.

    While social justice is an important concept in social democracy, social democrats tend to favour equality of welfare and equality of opportunity over equality of outcome. Equality of welfare means that they accept that in society we cannot ever have true equality and as such what we should aim for is that every person in a society has a basic standard of living. Equality of opportunity means that everyone should start from a level-playing field and have the same opportunities as each other without barriers for some and not others.

    Social democracy is a form of socialism that focuses on reconciling the free-market capitalism with state intervention and creating change gradually and peacefully.

    Market capitalism is a system where private individuals own the means of production and private enterprises drive the economy. It frees businesses while maintaining enough hold over them for the State to intervene if only to maintain the health of the free market.

    The idea of the welfare state originates from the European Labour movements of the 19th century. They believe that the State should intervene directly within society by providing free and universal services such as health and education, especially for those vulnerable sectors.

    Social democracy ideology

    Social democracy is an ideology that is rooted in Socialism and as such it agrees on many of the key principles, especially ideas of Common Humanity and Equality (Socialism). But it has also developed its own ideas, particularly in the mid-1900s when it shifted towards the humanisation of capitalism. . While there has been diversity within the movement, there are three key policies that social democrats support:

    • A mixed economic model. This means some key strategic industries being state-owned with the rest of industry being private. For example, utilities.

    • Keynesianism as an economic strategy.

    • The welfare state as a means of redistributing wealth, usually funded through progressive taxation. They often call this social justice.

    Progressive taxation is when different amounts of income will be taxed at different rates. For example, in the UK the first £12,570 you earn will be taxed at 0% and the money you earn between £12,571 to £50,270 will be taxed at 20%.

    It is through these policies, social democrats argue, that society can achieve greater equality and achieve social justice. However, these key ideas and policies tend to clash with some forms of socialism, especially communism.

    Keynesianism, or Keynesian economics, is an economic strategy and theory based on the ideas of John Maynard Keynes. He believed that government spending and taxation can be used by governments to maintain steady growth, low levels of unemployment, and prevent big fluctuations in the market.

    Social democracy and communism

    Two of the biggest and most opposing sides of Socialism are social democracy and Communism. While they share some similarities, mainly around their ideas of Common Humanity, there are also significant differences.

    The two most important differences between social democracy and Communism are their view on capitalism and their plan for social change. Social democrats tend to view capitalism as a necessary evil that can be 'humanised' through government regulation. Whereas communists tend to think that capitalism is just evil and needs to be replaced with a centrally planned collectivised economy.

    Social democrats also think that social change should happen gradually, legally, and peacefully. Whereas communists think that in order to transform society the proletariat must rise up in a revolution, even a violent one if necessary.

    The proletariat is what communists, especially Marxists, use to refer to the working class to lower classes in society which are most marginalised.

    These are the main differences between social democracy and communism, but you can see in the table below that there are many more differences which set the two ideologies apart.


    Social Democracy


    Economic model

    Mixed economy

    State-planned economy


    Equality of opportunity and equality of welfare

    Equality of outcome

    Social change

    Gradual and legal change


    View of socialism

    Ethical socialism

    Scientific socialism

    View of capitalism

    Humanise capitalism

    Remove capitalism


    Reduce inequality between classes

    Abolish class


    Redistribution (welfare state)

    Common ownership

    Regime type

    Liberal democratic state

    Dictatorship of the proletariat

    Table 1 – Differences between Social Democracy and Communism.

    Examples of Social Democracy

    Social democracy has inspired different models of government throughout history, the most influential being in Europe, more specifically in the Scandinavian countries. In fact, from social democracy came the so-called "Nordic model", which is the type of political model that Scandinavian countries have adopted

    Here is a short list of some countries with well-represented social democratic parties:

    • Brazil: Brazilian Social Democracy Party.

    • Chile: Social Democratic Radical Party.

    • Costa Rica: National Liberation Party.

    • Denmark: Social Democratic Party.

    • Spain: Spanish Social Democratic Union.

    • Finland: Social Democratic Party of Finland.

    • Norway: Labour Party.

    • Sweden: Social Democratic Party of Sweden.

    In many countries the symbol of social democracy is a red rose, symbolising anti-authoritarianism.

    Countries practising social democracy

    As stated earlier, the Nordic model is perhaps the most well-known example of social democracy being practised in modern countries. As such, Denmark and Finland are excellent examples of social democracy and how it has been implemented today.

    Denmark and social democracy

    Since 2019, Denmark has had a minority government in which all parties are Social Democrats. Denmark is one of the most famous social democracies, in fact, some argue that they were the first. This is perhaps best illustrated in their robust welfare system. All Danish citizens and residents have access to the Students Grant and Loan Scheme, free healthcare, and family subsidy benefits, regardless of income. There is also accessible childcare and the cost of this is based on income. Denmark also spends the most money on social services in the European Union.

    Social Democracy Front page of Social Demokraten the newspaper of the social democrat party of Denmark StudySmarterFig. 2 Front page of the newspaper for Social-Demokraten; the Social Democrat Party of Denmark.

    Denmark also has high levels of government spending, with one in every third worker being employed by the government. They also have key industries that are state-owned, with financial assets worth 130% of their GDP and 52.% for the value of state-owned enterprises.

    Finland and social democracy

    Finland is another famous social democracy that utilises the 'Nordic Model. Finnish social security is based on the idea of everyone having a minimum income. As such, benefits such as child support, childcare, and pensions are available to all Finish residents and benefits are available to ensure income for the unemployed and disabled.

    Famously, in 2017-2018 Denmark was the first country to conduct a universal basic income experiment which gave 2,000 unemployed people €560 with no strings attached. This increased employment and well-being for participants.

    Finland also shows characteristics of a mixed economy. For example, there are 64 state-owned enterprises, such as the major Finnish airline Finnair. They have a progressive state income tax, as well as high tax rates for corporate, and capital gains. After benefits are taken into account Finland had the second highest tax rates in the OECD in 2022.

    Social Democracy - Key takeaways

    • Social democracy is an ideology that postulates the transformation from a capitalist socio-economic system to a more socialist model gradually and peacefully.
    • The social democracy ideology advocates for a mixed economy, Keynesianism, and the welfare state.
    • Social democracy and communism are very different forms of socialism, and they have different views of capitalism and social change methods.
    • Social democracy has inspired different models of government throughout history, especially in the so-called "Nordic model".


    1. Matt Bruenig, Nordic Socialism Is Realer Than You Think, 2017.
    2. OECD, Taxing Wages - Finland, 2022.
    3. Table 1 – Differences between Social Democracy and Communism.
    4. Fig. 1 Democratic Socialist occupy Wall Street 2011 ( by David Shankbone ( licensed by CC-BY-3.0 ( on Wikimedia Commons.
    Frequently Asked Questions about Social Democracy

    What is social democracy in simple terms?

    Social democracy is a form of socialism that focuses on reconciling the free-market capitalism with state intervention and creating change gradually and peacefully.

    What is the origin of social democracy?

    It originates from the philosophical roots of socialism and Marxism, but it broke away from these, especially in the mid-1900s.

    What are the characteristics of social democracy?

    The three key characteristics of social democracy are a mixed economic model, Keynesianism, and the welfare state.

    What is the symbol of social democracy?

    The symbol of social democracy is a red rose, which symbolises "anti-authoritarianism."

    What do social democrats believe?

    Social democrats believe that they can find a comprise between capitalism and state intervention and that any social change should be done legally and gradually. 

    Test your knowledge with multiple choice flashcards

    What is the origin of socialist democracy?

    What do social democrats and Marxists disagree on?

    What is the role of the state in social democracy?


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