Meanderings of Post-Industrial Social Democracy

Social democracy is still a significant political force in Europe. How long it will continue to be so is uncertain.

This is a lightly edited transcript of a talk sponsored by DSA’s International Committee subcommittee on Europe. A recording of the talk can be viewed here.

Social Democracy is a political current which has to be understood in its historical development through the past 150 years. It was a product of industrial capitalism, grew up with its development through the capital-labor dialectic, and fell into crisis with the deindustrialization of advanced capitalism. This was no terminal crisis, but a non-linear trend of declining membership and electorate. What followed was a motley set of attempts at navigating a changed capitalist world and its geopolitics, moving between market adaptations and re-affirmations of equality and solidarity, with variable results. Now it is standing in front of the climate crisis, a challenge and social reform opportunity much larger and more fateful than the Depression of the 1930s.

Social democracy originated in Europe and has always had its center there, but its example has had a growing global attraction. The Socialist International, from which a group of its old European core has left in the last ten years, has full membership parties in 81 countries, 36 of which have joined in the twenty-first century. In Europe, as I speak, social democrats are governing all four Nordic countries, the Iberian peninsula, Albania, North Macedonia, and are about to take office in Germany. Social democracy is still a significant political force.

The Welfare State and Democratic Socialism

The main achievement of social democracy is the welfare state, with some help in continental Europe from fear of communism and from Christian Democracy. The most developed welfare states, the Nordics, owed their beginning to the anti-Depression class compromises between social democracy and autonomous farmers’ parties, but their post-World War II developments were rather pure social democratic accomplishments.

Developed welfare states were much more than Keynesian economic policies and social benefits. The welfare states were answers to the existential social questions and demands of the working class under industrial capitalism. Demands for rights, dignity, and respect – as the Internationale sang it, “We have been naught, we shall be all” – were answered by social citizenship, public services, social entitlements, decent housing, job security, employment and workplace rights, access to higher education, gender equality, and daycare. Insofar as it was social democratic, the welfare state was an embodiment of class and civic solidarity – under the restrained but powerful reign of capital.

In the course of capitalist and welfare state development, two crucial questions arose in the period after 1945. First was the liberal question: Now that our society is affluent, are public social policies still needed? The winning social democratic answer was: Yes, now we can really afford to provide everybody with good life chances and security in times of need.

Second was the social democratic question. After the great expansion of welfare states in the 1960s, many social democrats asked whether the welfare state was the final goal of the social democratic labor movement. In several social democracies, in particular the Nordics, the Austrian, and the French, the answer was No.

Social democracy started as a movement for socialism. Over the years, the meaning of “socialism” became more and more distant, its meaning vague and blurred. But it did not disappear. As “democratic socialism” it was in the minds of parts of the leading and activist generation of social democratic parties around 1970, and was discussed in the letters between Willy Brandt, Bruno Kreisky, and Olof Palme in the 1970s. For all its nebulousness, the notion of democratic socialism still carried some idea of another kind of society being possible and desirable. It had been re-actualized by the massive labor struggles and left movements in France, Italy and other countries in 1968-69, and by the socially radicalized anti-imperialist youth of the period. It had a material base in the development of industrial capitalism according to the Marxian analysis, in the tendency of the capital-labor dialectic to strengthen labor’s force of resistance. The late 1960s and early 1970s were the peak of European industrial working class size, unionization, industrial militancy, labor party voting, and contained the lowest level of economic inequality under capitalism.

In the 1970s and early 1980s there was a corresponding radicalization of social democracy, manifested in the French front de classes (“class front”), the Program commun (Common Program) of the socialists and the communists, and the “rupture with capitalism” goal of the early Mitterand presidency. In Sweden, the social democratic trade union confederation adopted a program for the gradual socialization of the Swedish economy through mandated “wage-earner funds,” together with achieving the most far-reaching legal trade union rights, making all enterprise changes objects of employer-union negotiation. In Denmark and Norway, social democratic projects of “economic and workplace democracy” encroaching on capital’s power were launched. In Germany, “humanization of work” and extension of co-determination were put on the agenda.

These projects evaporated in the course of the 1980s. They were launched when labor under developed capitalism was already standing at a tipping point of drastic weakening. The beginning of deindustrialization, outsourcing of production, and globalized capital flows threatened national capacities for economic policy. The progressive social democrats were completely unprepared for the brutal multi-pronged counter-offensive unleashed by capital, its ideologues and politicians. Nevertheless, the attempts at advancing in the direction of democratic socialism are noteworthy examples of modern social democratic hopes and ambitions, with which later developments may be compared and contrasted.

Embracing Defeat, Neoliberalism with a Human Mask, and its Unveiling

The second half the 1970s shook the world economy, and national Keynesianisms could no longer deliver. The British Labour Prime Minister James Callaghan threw in his towel early, telling his party conference in 1976, that

The cosy world we were told would go on forever, where full employment would be guaran­teed by a stroke of the Chancellor’s pen, cutting taxes, deficit spending, that cosy world is gone…we must ask ourselves unflinchingly what is the cause of high unemployment. Quite simply and unequivocally, it is caused by paying ourselves more than the value of what we produce…We used to think that you could spend your way out of a recession, and increase employ­ment by cutting taxes and boosting Government spending. I tell you in all candour that that option no longer exists…

In other words, by the middle of the 1970s European working-class strength and militancy were squeezing the capitalist rate of profit. If no exit door could be seen, or even imagined, neither among the striking workers nor in the social democratic leadership, the only solution was to force down, or at least hold back, capital’s labor costs. The decade from the mid-1970s to the mid-1980s was a wave-breaker, reverting the forward march of labor and the twentieth century process of economic equalization, and exalting capitalism and unfolding a cult of individual success.

Social democracy changed track in a way similar to that of the Japanese elite after their World War II defeat. It embraced defeat, aligned itself with the victor, followed its leadership, adopted its norms and institutions. In psychology a similar phenomenon is known as the Stockholm Syndrome, after a hostage-taking bank robbery in 1973, where the hostages bonded with their captors. The victor over social democracy was neoliberalism. Social democrats now disavowed their own achievements and helped undermine their institutions, keeping behind only a few lofty, disembodied “values.”

The crucial document of neoliberal “Third Way” social democracy is a joint declaration in 1998 at the height of its influence by Tony Blair and Gerhard Schröder called Europe: The Third Way/Die Neue Mitte. After an introduction it starts with a catalogue of concessions to right-wing accusations. The chief ideologue of the Third Way, Anthony Giddens, accused traditional social democrats of “an obsession with inequality.” Giddens went as far as to call the welfare state “undemocratic” because it depended “upon a top-down distribution of benefits. As the Blair-Schröder paper argues,

The means of achieving social justice became identified with ever higher levels of public spending …. The belief that the state should address damaging market failures all too often led to a disproportionate expansion of the government’s reach and the bureaucracy that went with it…The ability of national governments to fine-tune the economy in order to secure growth and jobs has been exaggerated…

The declaration went on to uphold “modern social democracy,” which above all stands up for “economic dynamism and the unleashing of creativity and innovation.”

Modern social democrats recognize that in the right circumstances, tax reform and tax cuts can play a critical part in meeting their wider social objectives. For instance, corporate tax cuts can raise profitability and strengthen the incentives to invest…Modern social democrats want to transform the safety net of entitlements into a springboard of individual responsibility…The labour market needs a low-wage sector in order to make low-skilled jobs available…

While welfare state building was a matter of class and civic solidarity, the neoliberal adaptation was focused on market competitiveness, of individuals on the labor market as well on states competing in the global economy, and also on building a big European market.

The neoliberal embrace had an obvious appeal to the arriviste and aspiring middle classes, offering some cosmetics on pure, stony-faced neoliberalism. Blair and Schröder did mention social justice, after all, even though the only lesson drawn from it was that social democratic concern with it had been flawed. The turn also resonated with tendencies to dissolution of the labor movement, the drastic weakening of the trade unions by the capitalist offensive, the disintegration of deindustrialized working-class communities, the mutation of labor parties into professional electoral machines. It also coincided with generational and class shifts in social democratic leadership – the generation which came after Olof Palme, the so-called “grandchildren” of Willy Brandt and Bruno Kreisky. The turn worked electorally for a short while in the European 1990s and early 2000s, in the East as well as the West. To most electorates, after the first bite of undiluted neoliberalism anything else appeared better.

Third Way market adaptation was undone by two factors. First, the accelerating inequality and crisis proneness of the new financially driven capitalism brought a withdrawal of support and soon an electoral protest of the losers and the abandoned in the new competitive games. Secondly, there came a blowback from the unannounced return of imperial militarism, with interventions in the civil wars in ex-Yugoslavia and a whole set of invasions of the so-called Middle East, from Afghanistan to Libya. Blowback both in the sense of anger against the meaningless devastation caused and by the mass migrations fleeing from it, which came to change the political landscape of Europe, spawned the rise of new xenophobic parties. For his mendacious campaigning for the invasion of Iraq, Tony Blair turned from Third Way posterboy to the most despised politician in Britain, and finally to an unelectable social democratic candidate for the new leadership post of the European Union.

In Eastern Europe, the swift conversion of the ex-communists to neoliberal social democracy proved disastrous after spells of unexpected office in the second half of the 1990s and early 2000s. In East-Central Europe the new social democracies were kicked out into seemingly permanent marginalization, thriving only in the poorest and most corrupt countries of the Balkans. Neoliberal social democracy laid the basis for the reign of authoritarian and culturally reactionary but socially attentive right-wing parties.

The embrace of neoliberalism led to a series of historical defeats for social democracy in its Western European heartland. Four parties have been more or less wiped out or dwarfed: the Italian, Greek, French, and Dutch parties. But social democracy’s viability is significantly determined by national electoral systems. Under the Westminster system, a labor party that makes it to the head table as one of the two main parties has a good chance of sooner or later winning the electoral lottery. With proportional representation, a once-big labor party may keep a pivotal position in the party system and get the upper hand in coalition/alliance negotiations. For example, the Nordic social democracies are now all well below 30% of the vote but remain central in very fragmented party systems.

After their failed attempts at neoliberal market adaptation, after the financial crash in 2008, and after the 2012 World Economic Forum recognized mounting inequality as a worrying foreboding of socio-political instability, European social democracies have tended to return to egalitarianism and defense of the welfare state. This is explicit in the recent governmental declarations in Germany and the Nordic countries – except Sweden, where social democracy has become dependent on the country’s most aggressively neoliberal party, its historical coalition partner the Center Party (formerly the Farmers’ League). Restoring a corroded welfare state can be politically very difficult. For example, the extraordinary opening of good parts of the Swedish education and care sectors to international venture capital registered in tax havens – more similar to the elite political economy of countries like Liberia than to European democracies – has become entrenched in the new post-industrial bourgeois power and lobbying system.

The Challenge of the Climate Crisis – and a Missed Opportunity

The now universal recognition of the need for a profound transformation of the existing socio-economic system has offered an opportunity for a socialist or social democratic vision of a new, different society. It seems that this opportunity is being missed, like the chances of stopping a severe deterioration of planetary life from climate warming.

The Nordic and German social democracies don’t see the climate crisis that way. From their recent electoral programs, coalition government declarations, and the party congress of the Swedish party, a common view emerges. The crisis is mainly conceived of as a technical problem in the course of being solved by renewable energy and new industrial technology, and is seen as a continuation of existing politics. They set national goals for a substantial reduction of emissions by 2030 and carbon neutrality by 2045. A green industrial revolution is beginning, and in all five countries this is seen as a great opportunity for national industry and business and a kind of international political leadership role, even for small countries like Denmark and Finland. Nowhere is it framed in a program of wide-ranging social reforms, unlike the Green New Deal advanced by the progressives of the US Democratic Party. Instead, the Northern European social democrats are euphoric about national competitiveness, job creation, and international leadership.

The Danish governmental declaration says: “The world market for green transition is only getting bigger…It is a unique opportunity for Danish business, which shall be exploited.“

The Finnish: “The world of the 2020s needs trailblazers. An ecologically sustainable Finland will show the way …”

The Norwegian: “Emissions cuts shall be the core of the strategy for growth, exports and job creation…Norwegian petroleum industry shall be developed, not dismantled…Permits to search for oil and gas shall still be given.”

In her inauguration speech this November, the new leader of the Swedish social democrats told the party congress: “There is a climate race between the countries of the world, and right now Sweden is running in the leading group…We see now the beginning of a green industrial revolution in Sweden.”

The incoming German coalition of Social Democrats, Greens, and Liberals has the strongest climate focus, to be run by a new ministry of climate and economy under a Green minister. Climate protection is put in a framework of “modernization” of the state and the country, and is aiming at the goal of no more than 1.5 degrees of warming. To what extent the program is actually on track for that is not yet clear. The transport sector is largely shielded from short term transformation, the exit from coal should only “ideally” occur in 2030, and until renewable energy for carbon neutrality is available, new gas power stations will be built. The coalition agreement says that the “social market economy” will be decarbonized into a “social-ecological market economy,” and that it sees “the road to a CO2-neutral world as a great chance for the industrial position of Germany.”

For the coalition, the “transformation of the economy” is not a social question but one of technology and investment. The social policy part of the coalition declaration includes some corrections of the worst inegalitarian effects of the Schröder government, namely a new substantial minimum wage and a less harsh system of welfare benefits. But the upgrading of labor rights the SPD promised in its electoral program was abandoned, and there will be no higher taxes and redistribution. Understandably, the main organizations of German capital have received the coalition agreement quite positively.

The Northern European social democratic dream of a new industrial dawn is a missed opportunity for social reform. But it should also be seen as an eye-opener to the complexity of climate politics and to the variety of visions and courses of action available or conceivable. The alternatives are by no means limited to capitalist apocalypse or anti-capitalist rescue. In their book Creating an Ecological Society, Fred Magdoff and Chris Williams claim that “Capitalism has no off switch, no method for changing its basic methods of operation.” But profits can be made with a range of technologies, from the plantation hoe to renewable energy and carbon dioxide capture, and by switching from one to the other. The Glasgow Financial Alliance for Net Zero, a formidable mobilization of Western finance capital, claims to have over $130 trillion of private capital “committed to transforming the economy for net zero.”

The most likely scenario of currently prevailing climate politics seems to be a muddling through to an increasingly inhospitable and ecologically unjust, but still survivable planetary environment. In this decades-long crisis process, space and possibilities are available for a variety of political projects and societal transformations. For the time being, the most elaborate strategies appear to be those of green industrial capitalism in the Global North and of a global capitalism run by Western financial capital. So far, social democracy has abdicated from any project of radical reform, hoping only to survive as managers of the lucky enclaves of green capitalism.

There is an alternative scenario of crisis politics, less probable but not inconceivable, of a radical disruption of politics as usual, following from new climate emergencies out of the roster of probabilities listed by climate scientists, and driven by Fridays for Future and other radical movements. What processes of game change might possibly come out of such disruptions has not received much attention yet. However, even if they do not succeed, today’s youth of the climate movement are likely to be the torchbearers of human hope for the rest of this century, in a world of mounting anger and despair under the advancing ravages of planetary warming and of persistent inequalities. How much social democracy will remain is uncertain.