Great article by Dr. Samuel Gregg, Research Director at Acton Institute:
The first cost is, ironically enough, a breakdown in solidarity. As observed by the German free market economist and intellectual architect of West Germanys postwar economic miracle, Wilhelm Rpke, the claim that the nation pays disguises the economic reality that when it comes to welfare benefits we are really asking all our neighbors, and often very rudely, to pay and give us a bit more. Over time, it becomes harder to tell whos giving and whos receiving. In 2009, one German academic described this as having produced a situation which he likened to fiscal kleptocracy throughout the EU.
A second cost of social democracy is a steady dulling of productivity and competitiveness. Growth rates in West European economies have been slowing down since the early 1970s. Social democratic policies arent the only cause of this, but to the extent they reduce labor force participation, such policies encourage perfectly able and economically productive people to stop working before they need or even want to.
In 2010, for example, French employees worked an average of 620 hours a year, compared to 870 in America. This gave America an edge in globalized competition over France. Productivity and growth-rates are also negatively affected by the higher costs associated with the extensive labor market regulation throughout Western Europe that prioritizes job security. This undermines businesses ability to adapt quickly to change.