The death of social democracy

Submitted by Anon on 30 June, 1998 - 3:36

There is an extensive Marxist literature on what I would call “betrayal”. This began in the lifetime of Marx and Engels; it continued in the 1890s when Kautsky accused Eduard Bernstein of betraying Marxism with his call for revisionism; later Lenin attacked the “renegade Kautsky” for his parliamentarianism and failure to endorse the Bolshevik revolution of 1917; subsequently it was Trotsky who, from the 1920s on, as one of the key figures in the Left Opposition, attacked and vilified Stalin for betraying the Russian Revolution. This literature in the Left Opposition tradition reached its culmination in the 1930s with the publication of The Revolution Betrayed.

There is a new burgeoning “literature of betrayal” emerging. It is not to be found to the same degree from the Marxist left. It is taking place within social democracy itself. A number of writers within the social democratic tradition are writing something new and quite fundamental — that modern social democracy is no longer genuine social democracy. What passes for social democracy is really a “betrayal” of social democracy. Let me cite two examples.

Roy Hattersley — a centrist within the Labour Party, who as Deputy Leader, fought a fight against the “hard left” — has just written a book. It is about the history of the Labour Party and the current state of the party under Blair — he calls it, quite deliberately, a “prejudiced history”.

It is the work, as one reviewer put it, of a very disappointed man. But why is he disappointed? It is because, after so many years of being in the political wilderness, the New Labour Party, with its massive majority, is doing nothing for its natural constituency. It has betrayed the social democratic project. It has given up on redistribution. Its economic policies are now dominated and shaped by the Treasury. If it now has a natural constituency it is not the trade unions and the organised working class but the suburban middle class.

According to Hattersley — and this is true — Blair now argues, along with many others inside the Labour Party, that the formation of the Party was a mistake. If the twentieth century is to be a century of “radicalism” as Blair calls it, then the Party has to break with its previous traditions, from social democracy, and become a liberal democratic organisation.

Another example is the American Robert Reich. He has written a number of books. In the early ’80s he wrote about the political economy of American decline, arguing that if America was to overcome its decline it had to pursue a social democratic, interventionist, state industrial policy.

He later argued that America could not escape the logic of economic globalisation, and had to compete within an increasingly competitive world economy. However the government — and here were his high hopes for Clinton — should take measures to counter the effects of globalisation through retraining and redistribution. In other words a policy of globalisation with a social-democratic face.

Reich is an interesting figure not just because of what he wrote as a left economist but because he became Secretary of Labour. From that position Reich hoped to implement a number of these social policies. He hoped Clinton would implement these policies — remember Clinton was regarded as the first expression of social-democracy in America for a long time. Like Hattersley, Reich is a very disappointed man.

The good society which he hoped would emerge from the Clinton administration — state intervention into the economy, protection of the poor, strengthening of the welfare state, creation of a genuine national health service — did not come about. Why? Because Wall Street has come to dominate the Democratic Party. Financial stringency is the name of the game. America effectively has no industrial policy. Indeed inequality has grown under Clinton. Corporate profits are up. The social fabric continues to disintegrate under the pressures of neo-liberal policies at home, forced by America’s greater integration into the world economy.
There may be different experiences in Europe. However what Hattersley and Reich are saying tells us a great deal about the broader times through which we are passing. I would argue, alongside Hattersley and Reich, that social democracy may have a past but it has effectively — as an historical project — no future.

This does not mean that there will not be parties calling themselves social democratic or Labour Parties. It does not mean that such organisations cannot be elected but in large part they will be elected because they not social democratic. As politicians they have recognised this and now believe that social democracy, or Liberalism as it is called in America, is a vote loser, not a vote getter. To become elected and electable in the modern capitalist age one has to abandon the old policies of social democracy and adopt a new “Third Way”. They are admitting that social democracy is over. Unfortunately, many on the left do not recognise what people like Hattersley and Reich, Clinton and Blair do.

What was social democracy and why did it flourish after the Second World War? Classical social democracy was associated with Marxism. The German Marxist party — whose programme was written by Engels in the 1890s — called itself a Social Democratic Party. The revolutionary party in Russia, whether Bolshevik or Menshevik, called itself social democratic. This implied that socialism would come through democracy, through the ballot box. Or alternatively, democracy, the granting of the vote to the working class, would lead inexorably to socialism.

Classical social democracy split. In Germany some sided with their own government, the bourgeoisie, in the war effort, bringing about a fundamental crisis in the movement.
One way of understanding this movement is as an outgrowth of Marxism and then as a split within Marxism. The relevance of this to my argument is this. I would say that social democracy has been very much a response to the world crisis which opened in 1914 and culminated with the end of the Second World War in 1945.

Orthodox writers have referred to this as the period of a “thirty years’ war”, in which world and European capitalism in particular could not solve its own contradictions. War at one end of the period, another war at the other end. In between the Bolshevik revolution, the instability of the ’20s, and the great depression of the 1930s. This was a period of capitalist decline marked by the inability of capital to accumulate or to control the geographical area under capital, notably Russia. There was no possibility of resolving these problems without resort to repressive methods as represented by fascism.

The decline was accelerated, and to some degree expressed, by the growth of the USSR which was seen by many to encapsulate the success of planning in the 1930s. When the capitalist world was in depression the USSR was industrialising. While capitalism was stagnating and experiencing mass unemployment the Soviet Union appeared to be a beacon of hope in a hopeless world.

The Second World War only accelerated the decline of capitalism and the drift towards planning around the world. By 1945 the world was at a crossroads. The future was either going to be revolution — or Communism as they understood it to be, embodied by the USSR — or the reconstruction of capitalism.

Upon what social foundation was capitalism to be refounded after the end of the Second World War? How was the decline of capitalism to be contained? How was the spread of communism to be halted? How was the example of planning in the Soviet Union to be countered? Social-democracy, in the modern form, was the response.

After the Second World War social democracy, for the first time in history, promised a genuine alternative to either a free market or communism. It was a response to save capitalism from its own contradictions. It was more than just the Labour Party in Britain, it was a strategy throughout the industrialised world. To save the system, the system had to reform itself. This was the period of Keynesianism, implying state intervention, nationalisation of large-scale industries, the introduction in a more accelerated form of the welfare state, a greater degree of upward mobility, new social forms of protection for weaker groups in society — in short, national planning. All this necessitated an industrial policy. Full employment required the state to intervene in the economy and to maintain industrial employment. Attlee, Wilson, and the early Callaghan, all subscribed to this broad social-democratic programme.

Social democracy presupposed the United States would underwrite it. The prime objective of the United States in the post-war period was to implement as many reforms as was necessary in certain countries — in industrial capitalist countries where there was a large working class, in particular — in order to save the system. The Marshall Plan was in essence a social democratic project which argued for full employment, and the need for state intervention. Many social democratic organisations were very enthusiastic about it.

It was the basis of the close alliance between the United States and social democracy. The other reason for the alliance was the existence of the Soviet Union. Social democracy could not have existed without the US nor without a certain relationship with Stalinism. Stalinism embodied a serious economic alternative to a mixed economy and a threat to democratic values in the west. As long as it existed social democracy was secure.

At what point did social democracy begin to decay and decline? It did not happen overnight. It did not begin with Blair or Clinton. It coincided with the economic crisis of the 1970s. This was in turn connected to the relative decline of the United States caused by financial and competitive crisis and the cost imposed upon the States by the Vietnam War. The crisis of American power and empire meant America could no longer act in the way it had done since 1947, as general stabiliser, global policeman, as global economic supporter to the international system.

This led to the dollar going off the gold standard, and the USA abandoning the Bretton Woods system, in 1971. This process was accelerated by the oil crisis of 1973. By the mid-1970s there was a clear change in the nature and management of the global economy. This was partly also the result of full employment over the very long term, as the policy raised fundamental problems for the long-term accumulation of capital.

The changes led, in ideological terms, to a crisis in Keynesianism as a strategy of managing the capitalist economy — another way of saying a crisis of social democracy. The attacks on Keynes began to be mounted in the mid-1970s by a number of neo-Conservative and right wing think tanks in Britain in the USA.

By the end of the 1970s the social-democratic/Keynesian current had effectively disintegrated. Monetarism was becoming the dominant ideology. Even before Thatcher or Reagan were elected it was now argued around the world that the main objective of economic policy was not full employment but to contain inflation. This was another way of saying that full employment had led to a lack of discipline and erosion of capital’s ability to control. The emphasis on inflation meant emphasising the forms of economic control over labour. This had deep consequences for the management of the capitalist economy, industrial strategy and for the balance of economic power between industrial and finance capital. Finance was now going to be the dominant factor in determining economic policy.

The crisis of social-democracy first manifested itself in Britain with Dennis Healey running to the IMF in the mid ’70s. In a way the Labour Party was voted out of power in 1979 not just because of the Winter of Discontent but because their strategy was beginning to collapse.
This did not just happen in Britain. Mitterrand was elected on a social democratic programme of state intervention, planning, and Keynesian expansionism in the early ’80s. By 1983 that strategy had completely fallen apart. This decline was accelerated by the neo-Conservative attack on all socialistic forms throughout the 1980s. Thatcher and Reagan represented a worldwide reaction against the period from 1945. Social democracy was already ruptured and haemorrhaging badly by the end of the 1980s.

Then came the events of 1989, the collapse of the Soviet Union, the disintegration of the revolutionary project in the Third World, the collapse of planning in the Third World, the collapse of planning in the industrial capitalist world. Globalisation became the name of the game and neo-liberal economics had triumphed around the world.
The collapse of the Soviet Union was important not only for the Communist Parties and for America — reversing the perception of America’s decline — but also for social democracy because of its peculiar and contradictory relationship with Stalinism.

Because of what happened in Eastern Europe and the Soviet Union it seemed clear to the bourgeoisie that there was no longer an alternative to capitalism, that “actually existing socialism” no longer worked. It was therefore no longer necessary to have a middle way between socialism and capitalism. There was an historical space in which reforms were no longer needed under capitalism to save capitalism from an alternative. The alternative no longer existed. The space was created for social democracy to evolve even further to the right. Social democracy had been kept to the left by the existence of the Communist Parties and what had existed in Eastern Europe. Social Democratic leaders no longer had to make any concessions to the left.

Party after party, after 1989, adjusted to the new realities. We could see this in New Zealand, Spain, Portugal, in Sweden — where the whole social democratic project virtually collapsed overnight — in Finland, in Germany and in France. In this period we begin to see the emergence of the so-called new Third Way. This is not a revitalised form of social democracy but an abandonment of social democracy altogether. The form of organisation and programme of Clinton and Blair is very easy for capital to adjust to. You could say that the Labour Party, for the first time in its history has become authentically the party of industrial capital both at home and abroad — on the European Union for instance. They are no longer pursuing policies which limit capital or capital accumulation. Even the parties themselves, which once had to mobilise support, are becoming authoritarian and dictatorial in nature.

Should these developments make us gloomy about the future? No. But not because the left is not in crisis. In many ways it clearly is. Stalinism has precipitated a more generalised crisis throughout the left. This would indicate that the left were implicitly or unconsciously dependent on the existence of planning in the Soviet Union and Eastern Europe, even though they may have been highly critical of what existed there. There is a general malaise on the left, but it is bound to be short-term for three reasons.

The collapse of what existed in Eastern Europe and the Soviet Union has generated a type of crisis on the left which the bourgeoisie has been very ready and skilful at exploiting. Nonetheless the end of the Cold War has led also to other things. There is no longer the same form of discipline and fear. The bourgeoisie can no longer point to the Soviet threat and to totalitarianism to frighten people into submission and acquiescence. Although at one level the collapse of the Soviet Union represented a victory for capital, it also presents more long term problems for capital. Believing there is no threat of revolution has led capital to pursue policies of the most savage character, and those are beginning to generate forms of social opposition around the world. Capitalists have become politically naive, because they think they have won. The new forms of social struggle are diverse. They could be direct trade union struggles, in the Asian Pacific and large parts of Latin America, or other forms. The greater inequalities which are coming with the new period of capitalist accumulation are ones which in turn are bound to generate forms of social resistance and working-class opposition.
The very fact that social democracy has abandoned social democracy means a space begins to open up for the left. This is bound to be filled. It may even by filled as a result of a split within social democracy itself and the reconstitution of something else.

The world economic crisis is now upon us. What happened in Asia is having reverberations around the world economy. We are beginning to enter a period of recession, of deep depression and stagnation around the world. It opens up possibilities for the left. It does not mean it is inevitable that the left is going to benefit. It depends on what the left does now.
The first thing that the left must do is drop the appalling sectarianism, intellectual narrow mindedness and anti-intellectualism which has now become its hallmark. Going to any political meeting on the far left today is a very depressing experience.

The left must also recognise that we are now living in very different times. Social-democracy cannot reconstitute itself. It cannot revive. It has no future in its old classical form.

If we are able to recognise this new reality we can see we have real chances where we had very few before.

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