Few on the American left want full-blown, expropriate-the-means-of-production, centrally-planned socialism. Instead, most want "social democracy": a welfare state built atop a capitalist economy. Keep the market system that creates wealth, but redistribute more of it to ensure healthcare, education, retirement security, and other social goods. Sounds great. But social democracies tend to expand until they undermine the economic system that pays for it all.

The typical scenario is that a country with a thriving market economy decides to provide a safety net: unemployment insurance, basic healthcare, old-age pensions. The economy is strong, tax revenues are robust, and the programs seem affordable.

But every program creates a constituency that fights to protect and expand it. Politicians quickly learn that promising new benefits wins votes, while cutting existing ones loses them. "Why not expand healthcare, lower the retirement age, make college free?" Each expansion seems reasonable in isolation. After all, we can afford it.

But funding these expansions requires more revenue, so governments must choose between cutting benefits, raising taxes, borrowing, or inflating the currency. Cutting benefits is political suicide - recipients are concentrated and vocal, while taxpayers are diffuse and less organized. Raising taxes risks immediate backlash. Borrowing works until lenders lose confidence and demand higher interest rates, eventually making debt financing the biggest item in the budget. So, governments increasingly turn to inflation, which shrinks savings and distorts prices. Growth slows, then stagnates.

In the 1970s, Sweden expanded its welfare state aggressively, with government spending reaching nearly 70% of GDP. The result was economic stagnation, capital flight, and fiscal crisis. By the 1990s, the country was forced to reverse course - cutting benefits, privatizing services, reducing taxes, and introducing market reforms.

France went the tax route. After implementing a wealth tax in 1982, talent and capital fled to lower-tax countries and companies shifted operations overseas. The tax base shrank, but benefit obligations kept growing as an aging population demanded more healthcare and pensions. When the government finally repealed the tax in 2017, officials admitted it had cost more in lost revenue and economic activity than it ever collected.

Argentina chose debt. After years of borrowing to maintain a dollar peg, interest payments crowded out social spending. The result in 2001 was catastrophic default, a banking freeze, mass protests, and five presidents in two weeks.

Venezuela opted for inflation. Starting with a relatively prosperous oil economy, successive governments expanded social programs funded by oil revenues. When oil prices fell, rather than cutting programs, the government printed money and seized private businesses. The result was hyperinflation, economic collapse, and mass emigration.

Social democracy isn’t impossible, but maintaining balance is extraordinarily difficult. The political incentives all push toward expansion. It's easy to add benefits when times are good, nearly impossible to cut them when times are bad. The economic costs (discouraged investment, foregone innovation, gradual capital flight, currency debasement) accumulate slowly and invisibly while the political benefits are immediate and visible.

Without constraints and a population willing to live within them, the trajectory is predictable: start with a modest safety net, expand it during good times, find it unaffordable during bad times - but by then you've already weakened the economy that was supposed to fund it. Once government starts handing out "free" services, demand becomes insatiable. Politicians who can see no further than the next election will find ways to fund those demands - through taxes, borrowing, or inflation - until economic reality forces them to stop. By then, the golden goose may already be dead.