As a long time small "o" objectivist, libertarian, fan of capitalism etc., I've come to the conclusion at the age of 59 that it just isn't that simple. I'd like it to be simple, but it isn't. None of the ideologies get it right.
The fly in the ointment is that while human beans have the capability of being logical and rational, they don't have the propensity for it. The reality is that what we do most of the time is make heuristic estimates, and those estimates are skewed by situational and built-in genetic biases. We often don't see how off-target and biased we are until the error is quite large. And that's where objectivism, libertarianism, and capitalism break down a bit (and for other reasons too.)
So I've pretty much concluded that we will inevitably be stuck with a mix of freedom and capitalism along with a chunk of paternalism and socialism. I do, however, think the mix should skew heavily towards the freedom and capitalism side of things. If you take away too much freedom with socialism, communism, or totalitarianism, you crush the human spirit and the creativity and productivity that it brings to the world. That's why China has injected some capitalism into its ostensibly communist system. You must preserve a big chunk of freedom if you want prosperity. The real debate is not over this fact. The real debate is over how much you should preserve.
And please, lets not kid ourselves when comparing governements and countries. The Netherlands spends less than 2% of GDP on national defense. Think of what could be done for the personal wealth and well being of U.S. citizens if they weren't footing the bill for our HUGE military machine. Also think how vulnerable the Netherlands would be were it not for the U.S. having that huge military machine.
Lets also not forget that the combined government spending of the U.S. (federal, state, and local) as a percentage of GDP is greater than that of the Netherlands and that the Netherlands has been reducing their spending as a percentage of GDP over the years. So which is the more democratic/socialist of the two? Further, China's National government spends a lot less money as a percentage of GDP than either the U.S. or the Netherlands. It is about half!!
So things just aren't as simple and straightforward as we often seem to pretend that they are.