Paul Krugman has a piece today that is aimed squarely at Americans and their prejudices regarding Europe. But his point that social democracy and good economic performance are not mutually incompatible could be backed up with more evidence than his simple US-EU15 comparison. Within the EU15, the Scandinavians and Germans are fairly obviously doing better than average. And when comparing EU-15 growth rates over time, the fact that jumps out is how rapid were the growth rates experienced during the 1950s and 1960s, when the welfare state was being constructed and consolidated.
There is also a vast literature demonstrating that social democracy, far from undermining the market, increases political support for it; and that income inequality makes ordinary people hostile to trade, immigration, and markets generally.