Part 5 of a series entitled Global Ideology and Human Value by Sunny Lee, Founder and President at CGPS (Center for Global Peace and Security), and Director at IKUPD (Institute for Korea-U.S. Political Development), Washington DC.
Welfare systems signify that socialist frameworks eagerly promote universal access to healthcare, education, and social services as individual’s fundamental rights as government provides and guarantees.
Such an appropriate balance between individual responsibility and collective welfare initiates a sustainable policy for the effectiveness of welfare systems in both socialist and capitalist societies. For example, socialist and social democratic parties in Europe have strengthened welfare systems, while developing countries would take advantage of socialism for not only economic independence but also anti-monopoly struggles.
Communism originated to overcome capitalism’s critical handicaps, but ironically it has revealed much worse dilemmas by authoritarian centered governments. Conversely it also shows that when communist countries properly adapt capitalist policy, it can propel national prosperity like China and Vietnam. Nonetheless, social welfare programs in communist countries wouldn’t be much accountable to improve living conditions, tending to socialism with variable welfare systems. In contrast, an overwhelming free market economy in capitalism has caused a monopoly system beyond government’s control while aggravating social status between the rich and poor. If the government wouldn’t succeed in ameliorating such an extreme gap, it might induce a decline of national competition.
If advantageous benefits and positive influence of two sides can be combined, two ideologies would create a real utopia in the human society with distinct outcomes for countries that appropriately adapt them. Communism can apply the positive function of capitalism to boost an individual’s economic prosperity and freedom based on human rights. Capitalism also can explore better chances for people through social welfare policies and programs to reinforce an individual’s higher level of living standards. Subsequently, lubricant as well as adhesive of two ideologies can be boosted by the government’s pertinent social welfare progress.
The Heritage Index and the Legatum Prosperity Index suggest empirical data that countries with capitalist policies trend towards wealth and prosperity, while socialist policies by communist-centered governments often result in economic inefficiency and scarcity. In particular, private ownership and market competition would be catalysts for innovation and individual freedom, boasting high GDP per capita and guaranteeing quality of life with a strong background of overall national prosperity. Not only Singapore and Taiwan but also Switzerland and New Zealand are the best examples of economic growth fueled by capitalist policies.
Furthermore, the prosperity of Nordic countries such as Sweden, Finland, Denmark, and Norway comes from social democracy by compromising capitalism and communism. They fully explore socialist economies by utilizing market policies to enhance the welfare of their citizens. For example, Norway is the most successful case symbolizing the welfare model of Northern Europe. 2026 GDP per capita with $126,177 indicates Norway as the 3rd wealthiest country in the world and the unemployment rate has been lowest as well.
Socialism and National Prosperity
Countries based on socialist governance with state ownership and central planning such as North Korea, Venezuela, Zimbabwe, and Cuba have severely deteriorated their economic conditions, ignoring external factors like international sanctions. Because of the centralized planning inherent in socialism, such a dynamic price mechanism absolutely lacks as impeding economic development that capitalistic markets regulate supply and demand. As a result, the absence of a market-derived system leads to drastic misallocations of resources and societal hardships. In drastic contrast, capitalist economies flourish competition and choice, driving continual innovation and improvement in goods and services while creating healthy consumer marketplaces.
The Hoover Institution’s Socialism and Free-Market Capitalism: The Human Prosperity Project investigates an objective manner with the outstanding record. It critically assesses the consequences for human welfare, individual liberty, and social interactions. Various economic systems range from socialism to free-market capitalism for hybrid systems on human prosperity more broadly. It provides empirical examinations of the disparate outcomes between capitalist and socialist systems, suggesting the effects of progressive government policy through a mixed economic system like European social democracy.
Socialism surely strives to impact on national prosperity with a goal to promote equality and fairness but its effectiveness is still ambiguous. Although socialism seeks to eliminate class disparities and ensure equitable distribution of resources, it mainly fails to achieve sustainable prosperity, leading to economic inefficiencies and shortages. Socialism excessively involves significant state control over the economy, stifling innovation and reducing productivity through bureaucratic inefficiencies which hamper national prosperity. In contrast, capitalism creates welfare policies to improve living standards, superior to socialist models planning economic growth by government intervention and control.
At this point, the traditional concept of socialism has been replaced by advanced social democratic countries that fulfill social welfare systems and succeed in exploring national competition. They blend capitalist economies with socialist principles, emphasizing social welfare and democratic governance. The economic model would be combined with free-market capitalism on the background of strong social safety nets. In particular, public services in the fields of healthcare, education and even worker’s compensation aim for open access and equitable opportunities for all citizens. There are outstanding examples of social democracy in Nordic area such as Sweden, Denmark, Norway, Finland, and Iceland. Germany, France, Italy, and the United Kingdom in Western Europe also embody social democratic principles in their political system to boost national prosperity.
Successful Social Democracy and Welfare Model
Ironically, the new trend of socialism has brought numerous successes in most advanced democratic countries through a free-market economy and superior social welfare systems. The mainstream of social democracy started in Europe, which was developed and established through revisionist Marxism in the name of European socialism. It originally shares ideological roots with communism but eschews the typical concept of militancy and totalitarianism.
In particular, the Nordic welfare model compromises not only the social and economic policies but also outstanding background of social satisfaction, high GDP and top-ranking status in World Happiness Index. Different from strictly communist, the Nordic countries provide an example of socialist principles applied within a capitalist framework. High taxes fund extensive social programs including healthcare, education, and unemployment benefits, reflecting a new interpretation of socialist ideals and systems.
Social democracy is a political ideology that originally advocated a peaceful evolutionary transition of society from capitalism to socialism by using established political processes. In the second half of the 20th century, it generally espoused state regulation focusing on extensive social welfare programs rather than state ownership of the means of production in communist country. Authoritarian socialism transformed from communist countries indicates former Eastern bloc, while social democracy means a political and economic democracy towards social equality. It mainly aims to curb inequality, eliminate the oppression of underprivileged groups, eradicate poverty and uphold accessible public services. Economically, it also supports income redistribution, equal opportunity, and welfare policies that regulate the economy in the public interest.
As the best example, the Nordic welfare model has significantly succeeded in reducing poverty. The poverty rate in the United States for 2026 is projected to be around 11.1%, similar to the 2023 rate. Approximately 36.8 million Americans are expected to live below the federal poverty line. In contrast, poverty rates before taking account of the effects of taxes and transfers stood at 24.7% in Denmark, 31.9% in Finland, 21.6% in Iceland, 25.6% in Norway, and 26.5% in Sweden. However, after accounting for taxes and transfers, the poverty rates became 6%, 7.5%, 5.7%, 7.7% and 9.7% respectively in 2025. Compared to the United States, which has a poverty rate of pre-tax of 28.3% and post-tax of 17.4%, the effects of taxes and transfers on poverty in all the Nordic countries are substantially much bigger. Nonetheless, in comparison to France and Germany, the taxes and transfers are smaller on average.
First, it’s Sweden that the grand compromise was fully conducted by the Saltsjöbaden Agreement signed by employer and trade union associations in 1938. Sweden blends free-market capitalism with extensive social welfare programs as a model of social democracy. It follows the Nordic model, where high taxes fund public services including healthcare, education, and parental leave. The system seeks to reduce income inequality and improve quality of life by providing comprehensive welfare and infrastructure which have expanded until reaching a fulfilling social democratic consensus. However, it has recently shown the retrenchment of a remarkable welfare state by reduced social spending in real terms, tax cuts, deregulation and privatization in a weakening influence of organized labor.
Second, Norway has the most successful case that the government takes full charge of financial support in the fields of healthcare, education, housing, employment and even leisure. Norway is another symbol of Nordic social democracy, combining a capitalist economy with extensive welfare benefits and significant state ownership. Although capitalism drives national economic growth, the government owns major key industries such as energy. Moreover, public services are well-funded so that citizens benefit from low poverty levels and strong social safety nets. Social welfare assets mainly come from benefits of a free economic system as the 3rd oil-producing country in the world. The Norwegian state has also maintained large ownership positions with a giant amount of natural resources: for example, petroleum, natural gas, minerals, lumber, seafood and fresh water. Especially, the petroleum industry accounts for around a quarter of the country’s gross domestic product.
Third, it’s Finland going through a deep crisis which seriously affected the Nordic countries amid the dissolution of the Soviet Union and collapse of trade from the Eastern Bloc in 1990s. Finland’s universalistic welfare state based on the Nordic model and the social-democratic middle ground was weakened and even several social welfare policies were permanently dismantled. However, Finland knocked the European Union and committed more obligations as the Nordic country after fully adopting the euro as its official currency. Finland combines a capitalist economy with strong social welfare policies and egalitarian values. Social democratic principles guide Finland’s economic policy which provides free higher education and universal healthcare. As well, labor rights and gender equality are deeply embedded in society.
Fourth, it’s Denmark that the 2025 Corruption Perceptions Index (CPI) listed as the top first(89) and Finland(88) in the world. Denmark’s social welfare reforms emerged from the Kanslergade Agreement of 1933 as part of a compromise package to save its economy. Denmark was the first Nordic country which joined the European Union in the 1970s, reflecting different political approaches to it among the Nordic countries. In particular, Denmark features a high degree of private sector provision of public services and welfare, alongside strong social welfare system and progressive taxation. Denmark supports healthcare, education, and housing with public funds, although it remains a capitalist country.
Communist-Centered Government’s Social Welfare
Communism basically pursues the idealistic model of collective well-being such as eradication of poverty, worker’s rights and benefits, economic equality, and universal access to basic needs. Nonetheless, countries with communist-centered government systems have struggled far distance from these agendas to realize social welfare based on human rights. If they adapt not only the capitalist system but also substantial social welfare policy, their national crises will be largely resolved instead of economic decline or ideological collapse.
For example, the economic crisis was a major factor in the dissolution of the Soviet Union and the transformation of Russia into a democratic federal state governed by the rule of law. It voluntarily abandoned the communist political system through a process of democratization, adopting various measures aimed at ensuring an adequate standard of living and improving the quality of life.
Moreover, some socialist countries with communist-centered government systems blend socialist principles with capitalist policies, creating mixed economies that reflect both systems. In particular, democratic socialist countries strive to balance economic efficiency with human welfare, placing greater value in collective responsibility and government oversight.
First, it is China which successfully adapted the capitalistic model. The Chinese Communist Party announced reforms aimed at providing rural citizens access to urban social programs in 2014. Since then, the Chinese government is actively working to enhance public welfare, improving access to essential services such as education, healthcare, and elderly care. As well, a new Social Assistance Law taking a practical effect in July 2026 aims to create more comprehensive welfare systems. Due to the huge scale of poverty and demographic shifts, the Chinese government has prioritized poverty eradication and implemented reforms to support marginalized citizens for overall national development.
Second, North Korea is the hardest communist country. It persists a centralized- command economy without legal private ownership so that social welfare or human rights wouldn’t be considerable. Although North Korea has focused on welfare socialism, its practical process is often hampered by the government’s prioritization of military expenditure over social services. North Korea implemented a significant wage reform with a tenfold increase after years of dreadful stagnation in late 2023. However, its actual impact on the daily lives of citizens wouldn’t occur and many people still struggle with basic needs in famine. In addition to human rights abuses, North Korea’s oppressive tactics complicate the welfare landscape that the government detracts from any potential improvements in social welfare.
Third, it is Vietnam following a socialist-oriented market economy. Although the Communist Party maintains political control, a mixed economy by public and private ownership explores strong socialist policies, especially in education and healthcare. As a result, Vietnam’s social welfare model has undergone significant achievements, focusing on inclusivity and reform in response to economic development and social challenges. Ongoing reforms also aim to strengthen social welfare policies by 2030, ensuring comprehensive support for all citizens.
Fourth, Cuba is one of the most iconic socialist states in the world. The communist-centered government conducts social welfare programs such as free education, free healthcare services and social security entirely financed by the government. However, the quality of these services have deteriorated over the years since the economic changes initiated in the late 1980s. The ongoing economic crisis has also brought shortages in food, medicine, and other essential services, diminishing the effectiveness of welfare programs. However, recent structural reforms aim to address these challenges, moving towards a more market-oriented economy.
Social Democracy and Vision
Compromise of communism and capitalism has been accomplished through social democracy which advocates for a political system to ensure democratic participation and civil liberties. It aims to reform capitalism by implementing social policies that promote welfare and reduce inequality with prominent opportunity. Such a prospective vision creates a society where all individuals can flourish human rights for better living conditions. As the practical process, economic security is viewed as a fundamental factor to democracy, balancing the interests of workers and businesses through fair policies and regulations.
The goals of socialism such as equality, fairness, and the welfare of workers can be achieved by holding two ideas together such as the socialist commitment to social justice and the democratic commitment to lawful change. Moreover, social democracy originally initiated a peaceful, evolutionary transition from capitalism to socialism. Instead of drastic revolution, social democrats pursue power through the moderate system and policy of government to reshape the economy in favor of ordinary people.
Consequently, state regulation rather than state ownership of the means of production would be fulfilled by combining extensive social welfare programs. At this point, social democracy effectively works with a market economy and private business, actively stepping in to correct unfairness, protect workers, and guarantee an upward standard of living for all based on social welfare. No matter what kind of political ideology, human society has eagerly explored better conditions of living and it motivates multiple complexes to reorganize society so that everybody really enjoys safe, happy, and prosperous living status.
For the best human value, there is an irresistible vision that a balanced capitalist economy with state regulation would satisfy the general interests for all: for example, state provision of welfare services, and redistribution of income and wealth. Such a democratic, collective motivation to promote freedom and equality results in social democracy with a welfare vision.
Author: Sunny Lee – Founder and President at CGPS (Center for Global Peace and Security), and Director at IKUPD (Institute for Korea – U.S. Political Development), Washington DC. Sunny Lee is the author of 115 academic books in politics (original English and in German, French, Russian, Polish, Dutch, Italian, Spanish, and Portuguese). She is a bestseller writer not only in politics but also in literature on Amazon. Her recent book is titled: “The Influence on Humankind’s Peace through Korean Reunification: Creating new paradigm in social science by interdisciplinary research.”
(The opinions expressed in this article are solely those of the author and do not necessarily reflect the views of World Geostrategic Insights).
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Part 1 Democracy and Human Value – Ideological Transformation for Human Society
Part 2 Liberalism and Neoliberalism – Capital Globalism and Individual Freedom
Part 3 Post -World War II Ideologies and the Enduring Legacy of Communism
Part 4 Global Economy and Capitalism: a Vision for Economic Prosperity