Social-democracy in the '90s

Submitted by Matthew on 25 November, 2010 - 9:38 Author: Martin Thomas

The social-democratic governments in Australia and Spain have lost office this year, after 14 years governing Spain and 13 years in Australia. France’s 14 years of a Socialist Party president – ten of them with a Socialist prime minister too – ended in 1995.

Tony Blair and his group see these social democracies, Australia’s especially, as a model for their New Labour. Yet in all these countries the working class and the labour movement are worse off than they were before the long period of social-democratic rule.
Social-democratic governments have always turned against militant workers. They have always subordinated working-class interests to ‘national’ capitalist interests, in war and in crisis. Yet their long-term trend was always to increase welfare provision and public regulation of the economy, however slowly, however inadequately, however bureaucratically.

These new social-democratic governments of the 1980s and 1990s were different. They privatised, deregulated, cut taxes for the rich and for business, and systematically extended means-testing of welfare benefits. They explicitly supported the free market as the basic rule of the economy, with public intervention only to deal with pockets of “market failure”. Their approach – called economic rationalism in Australia, “economic liberalism” in France, or Rogernomics under New Zealand’s 1984-90 Labour government – paralleled Thatcherism.

In France (1981), Spain (1982), Australia (1983) and New Zealand (1984), the social-democratic governments took over in countries long dominated by right-wing governments with a state-interventionist, protectionist, nationalist economic regime including a measure of paternalistic welfare provision (greater in New Zealand, smaller in Spain). And they did so in a capitalist world radically changed from the 1930s and ‘40s, when those economic regimes were shaped.

In the 1930s and ‘40s, the world was divided into trading blocs, with tariff barriers. Transport and communications were relatively much more expensive than today, especially for countries like Australia and New Zealand, far distant from their main trade partner, Britain. Industrial development everywhere was based round the heavy industries of coal, iron and steel. Every government had an incentive, and during World War 2 a compulsion, to use state power to develop its own relatively self-contained industrial base. International flows of capital were small and tightly-controlled.

Over the 1950s and ‘60s, this international regime changed, bit by bit. Tariffs were cut. Colonial empires were dismantled. The European Community developed. The multinational corporations ranged more widely across in the world, in manufacturing now as well as raw-materials industries (mining and agriculture).

Then in 1971 the USA abandoned the dollar’s fixed exchange rate against gold, the cornerstone of the US-hegemonised, controlled, capitalist internationalism of the 1950s and ‘60s. It was pushed into this decision by the huge accumulation of dollars held overseas after being spent on the Vietnam war, and by the long-term decline of the US’s industrial supremacy.

Two possible roads were open for world capitalism: a return to the trading blocs of the 1930s, or a much more anarchic and uncontrolled international free market. Falteringly, and not without deviations towards the trading-bloc regime, it has moved on the free-market road. Since the early 1980s, international capital movements have multiplied and speeded up by a factor of thousands.

Meanwhile, transport and communications had become relatively cheaper. A new industrial revolution based on microelectronics pushed the heavy industries of coal, iron and steel out of the centre of economic life.

The French government of 1981 was the last hurrah of the old social democracy, As Mitterand won the presidency, workers danced in the streets and cracked open bottles of champagne in the factories. He abolished the death penalty and the Gaullist state security court called off plans to build a nuclear power station, and declared an amnesty for many categories of prisoners.
Thirty-six banks were nationalised, along with five large private companies. Public spending was increased by 27%, the minimum wage upped by 10%, the legal working week was cut to 39 hours.

But capital fled. Unemployment grew - to over two million by November 1981. Inflation reached 14%. France ran a big trade deficit. In June 1982, Mitterand made a complete about-turn. Wages were frozen. The government embarked on austerity measures which, the Economist noted, "even Mrs Thatcher might appreciate." Public spending was cut, especially on health (but not on the military). By 1984, France had the highest youth unemployment in the industrialised world. It would soon be overtaken – by social-democratic Spain, which now has 23% jobless.

The Spanish Socialist Party had won the elections of 1982. It immediately set about holding down wages, reducing unemployment benefit, and cutting thousands of jobs in the steel industry. There was working class resistance - and mass action by students and school students - including short general strikes but the government survived.

In New Zealand between 1984 and ’90, Labour cut tariffs; privatised telecom, Air New Zealand, the State Insurance Office and the Post Office bank; halved top income tax rates, cut corporation tax, and introduced VAT; opened the financial system to the international markets; and made the central bank independent of elected control, with a mandate to cut inflation before all else.
Australian Labor had cut tariff protection from 24% in 1983 to less than 10% in 1995. The country’s manufacturing jobs have been cut by one-quarter, and unemployment is now 8.5% (25% amongst youth). The Commonwealth Bank, Qantas, and other enterprises have been privatised; air travel and other industries have been deregulated; private competition has been introduced into telecom. Top tax rates have been slashed, means-testing of welfare has been extended, and free university replaced by loans, to be repaid by a graduate tax. Australia’s exposure to international capital flows has increased dramatically. The stock of Australian direct investment abroad rose from $5.5 billion in 1982 to $106 billion in 1994; the country’s gross foreign debt ballooned to $202 billion.

The social-democrats would say that they were doing essential “modernisation” in a way that minimised the damage to the poor. Nowhere, it is true, did they introduce vicious anti-union laws like those of Britain’s Tories. And they brought in some reforms. Spain’s legislated autonomy for the Basque country and Catalonia. New Zealand’s banned all ships with nuclear weapons from its waters. Australia’s restored Medicare, introduced Aboriginal land rights, and defended multiculturalism and Asian immigration against the right. In fact, Hawke or Keating (from Australia) or Lange (from New Zealand), would probably be sacked for leftism if they sat in Blair’s Shadow Cabinet.

Yet everywhere the social-democratic governments left the rich richer, the poor poorer, and masses unemployed. They cultivated friendships with big business and claimed to represent the “middle class”. Everywhere they left the working class not only worse off, but in a worse condition of organisation and spirit. In Australia, trade union membership has dropped from 50% to 33% of the workforce.

The social-democratic “lesser evil” has not avoided the Tory “greater evil”, but opened the door for it. Since 1990 New Zealand’s National (Tory) party has attacked union rights – reducing the level of unionisation from 45% to 20% in the space of four years – and cut welfare so that only the very poor receive free or subsidised health care or other benefits. What was once the world’s first welfare state now depends on charity “food banks” to feed its poor.

Everywhere, workers resisted the new social democracy. Everywhere the resistance was pi ecemeal and defeated. And – what is worst from the point of view of Marxists who never expected much from social democracy – working-class disillusionment with the social-democrats has flowed not into left-wing alternatives but into political disengagement, especially among youth. In New Zealand, Labour’s right wing policies led in 1989 to a split – Jim Anderton’s New Labour – which took with it the majority of the Labour Party’s active membership and the support of some trade unions. But it is only a partial exception to the rule. New Labour has gone into an alliance with middle-class splinter groups (the Democrats and the Liberals), and even negotiated with the right-wing New Zealand First party.

Part of the problem is that the new world regime of capitalism leaves little space for reform politics short of an internationalist revolutionary assault on finance capital. It leaves more than the social-democratic leaders, haunted by the memories of the economic failures and the working-class militancy, believe, but it leaves little. The Financial Times aptly summed up the conversion in 1990 of the Swedish social democrats, previously the most confident of the “old” model, to “new” social democracy: “Under immense pressure from overseas financial opinion that forced up interest rates...and led to a huge outflow of capital from Sweden, the Swedish government is having to abandon a long-held commitment to full employment and the welfare state. The international money markets have become the arbiters of Sweden’s future, not the Social Democratic ideologues.” Social democracy, as long as it remains social democracy, has no choice but to collapse into old-fashioned “Liberal-Labour” politics.

The most obvious candidates to fill a gap to the left of social democracy, the Communist Parties, have dwindled over this period. This is a crisis accelerated by the collapse of Stalinism in 1989, but it began long before. The Italian CP (renamed, like several of them), now finds itself in a strong position, but it is (and has been for a long time) extremely right wing: the Italian CP was in favour of privatisation in the 1970s!

In fact, in France, in Spain, and in Portugal, the Socialist parties owed their success not to any deep, long-established roots in the working class, but to their ability to outflank the Communist Parties (and the smaller revolutionary groups) as the political follow-on from the big struggles and radicalisations of the late 1960s and early ‘70s.

In France, the Socialist Party had got only 5.1% of the vote in the 1969 presidential poll, while the CP got 21.5%. In Portugal, Spain and Greece, the Socialist Parties became big parliamentary parties in the 1970s which emerged in the 1970s in a period of big struggles and transition from dictatorship to bourgeois democracy. In the preceding decades, these parties had been small illegal groups; and the main organised force in the clandestine anti-fascist (or anti-dictatorship) resistance had been the Stalinists, not the Socialists. In France and Italy the Stalinists had been the main working-class parties ever since the World War Two resistance.

Nor had the Socialist Parties the same links to the trade union movement as the Labour Party in Britain (or Australia). Although some union federations have loose alliances with the Socialist Parties (the UGT in Spain, the CFDT in France), they have no organisational link: the unions did not set up the Socialist Parties, nor do they have delegates to their various committees. And all these countries have other union federations, the largest usually CP-dominated.

The Socialist Parties outstripped the CPs with often radical rhetoric, free from the taint of Stalinism. But the revolutionary left, too, has declined or stagnated, and so has the militant working-class constituency on which the revolutionary left naturally bases itself. The biggest revolutionary groups in Italy and Portugal, which once numbered many thousands, have shrivelled and disappeared; in Spain there is hardly any far left at all now. In France, Lutte Ouvriere, despite winning a tremendous 1.6 million votes in the 1995 presidential election, says that its periphery has dwindled, and the other revolutionary groups are in worse shape.

Part of the reason is that all revolutionary groups missed chances in the 1970s – thus making it the revival of social democracy easier, or at least more unchallenged. All the groups were ultra-left, in one way or another; all grossly underestimated the political strength of social democracy. One of the main lessons of the 1970s is that even with an appalling record, and even without the historical and organisational links to the working class of the British Labour Party, social democracy is a much tougher force than many on the left believed in the 1970s. While it may not be appropriate for revolutionaries to work inside those parties, an united front approach to win workers away from them is vital: it won’t happen automatically, or in the heat of the struggle alone. Even the “new” social democracy, with its openly pro-market policies, cannot simply be by-passed. The New Zealand Labour Party, for example, has been explaining how it “went a bit too far to the right” in the 1980s, singing some old tunes again, and regaining some support.

A second reason is the working-class defeats in industrial struggle over the 1980s – none, in the countries of “new social democratic” governments as devastating as the British miners’ defeat of 1984-5, but cumulatively substantial.

A third reason is a shift in the whole political culture. For a hundred years, from the origins of the modern socialist labour movement to the 1980s, there were manifest, mainstream political developments which signalled (or seemed to signal) to socialists that history was moving our way: the growth of trade unions and labour parties; the extension of state welfare; the expansion of state enterprise and economic control; the Russian revolution; the industrial success of the Soviet Union; the Stalinist revolutions in Yugoslavia, China, Vietnam and other countries after World War 2. There were Trotskyists who criticised social-democratic reforms, who argued that Stalinism was the negation of socialism, and who proposed a working-class, libertarian concept of socialism very different from a simple extrapolation of the mainstream “socialistic” trends. But the great majority of people who became socialists, even if they would move to Trotskyism, must have started off with a vague, instinctive identification with mainstream “socialistic” and “revolutionary” contestation of the established order, clarifying their ideas later. The Trotskyists had no choice but to swim in the streams of mainstream “socialism”; and many of them swallowed a lot of the stream they swam in.

Now those signals have gone. Young people becoming aware of politics see Stalinism in collapse and discredit, social-democratic parties proposing only packages of counter-reform slightly different from the open capitalist parties, and small revolutionary groups with what must seem to them to be obscure variants of the old socialism abandoned by the social-democrats and Stalinists. No wonder many of them conclude that politics offers no hope.

The turning point perhaps was 1975-6. The old social-democratic policies were shown to be unable even to soften modern capitalist crises. Revolutionaries triumphed in Cambodia and Vietnam – and launched mass terror and slaughter in Cambodia, repression in Vietnam which sent thousands risking their lives in frail little boats to escape across the seas. Then the Chinese government publicly opted for the “capitalist road”. The Maoist revolutionary groups – organisations many thousands strong, and some with a working-class following in Italy, Germany, Portugal, Spain, and France – collapsed ignominiously.

The pro-capitalist direction of the East European revolutions of 1989-91 was in part a product of the shift in political culture – over the 1980s, almost all the ideologues of the anti-Stalinist resistance had become pro-capitalist, where in the 1970s or earlier they would have been socialistic – and they also became a factor in pushing the shift further, discrediting the whole language of socialism for millions of people.

Class struggle will revive, because it is built into the relations of wage-labour and capital. Socialist ideas will revive, because they are rooted in the logic of the class struggle. But for the present, we are, in some respects, back in a period like that which Karl Marx had to deal with for his entire life after the revolutions of 1848 – when revolution was discredited, socialist ideas were eclipsed, workers everywhere were dominated by openly bourgeois politics, and even trade-union struggle was feeble. Marx used that period to lay the ideological basis for a new socialist political culture.

The revolutionary left must do the same now, going back to the original ideas of Marx, Engels, Lenin, Luxemburg, Trotsky, and others, clearing away the encrustations of the decades when socialist culture was dominated by Stalinism and social democracy, renewing and revising the ideas in the light of new conditions. The human need for hope for a better society, hope to escape the capitalist world of mass unemployment, poverty, and alienation, cannot be long suppressed. The new social democrats offer no hope. We must.

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