What happened in the Nordics is that for the most part of the 1900's, there was a shared border with a huge imperialist and expansionist superpower, trying to convince the world that their economic and social models were superior. It often did it with some very dirty and violent tricks and supported its sympathizers around the world. Especially in neighboring countries.
In order to keep the people from revolting and gaining permanent global competitive advantage by murdering the factory owners, lenders and their families and stealing their property disregarding any repayment plans - the moderate socialists (who saw that the socialist system would be built organically without violence) and the right wing owner & trader classes made an alliance to fringe the hard-core communists.
Bargains were made and benefits established as all parties knew that every satisfied social democrat was much better than a soviet-devout communist. In Finland, there was a very bloody civil war right in the beginning of independence (where the communists lost), two big gunfights in the WW2 and decades of soviet pressure to turn communist.
The social programs and safety nets were established to ensure the survival of capitalism and private property. The problem being solved with reducing economic inequality was not "poverty" like PG claims, but threat of violent revolutions by people who felt unfairness.
The Soviet Union is gone now and thus the left wing these days has much less bargaining power. These are interesting times.