Tuesday, 4 September 2012

What Happened to Social Democracy?

Anyone who has followed the current economic and financial crisis in Europe knows that social democratic governments and parties have consistently lined up on the side of the banks and the rich in the ongoing political conflict. The policies they have implemented while in government have been nearly identical to those advanced by the traditional right wing parties and governments. In several counties, the social democrats have formed political alliances to govern with the right wing parties. What is going on here?

It is hard to get answers from social democrats who hold office. The leaders of the larger trade unions make excuses or remain silent. Those who have traditionally voted for these parties, or taken out memberships, are mystified. But you can find some answers in a new book edited by Bryan Evans and Ingo Schmidt: Social Democracy After the Cold War, recently published by Athabasca University Press.

The Third Way  - revised
I can remember when Sweden was referred to as the “Third Way” – the alternative to the Anglo-American version of unfettered and rapacious capitalism and the totalitarian version of state socialism that was the Soviet Union. Sweden was a deeply democratic country with the great majority of workers in trade unions, a solid base of democratic social organizations, where the Social Democratic Workers Party formed the government between 1932 and 1976. With a progressive system of taxation, they had created a society with a comprehensive, universal welfare state that had all but eliminated poverty.

Now the Third Way is identified with the neoliberal package of policies implemented by the same social democratic parties. This includes greatly reduced taxes on corporations and the rich, major cuts to universal social programs, privatization of state-owned enterprises, deregulation of the economy and the backing of the “free trade” treaties as advocated by the largest corporations and financial institutions. US President Bill Clinton and British Prime Minister Tony Blair led the way in deregulating the financial sector and refusing to regulate the new derivatives markets, directly leading to the financial collapse and the Great Recession which began in 2008.

Social democratic parties as we know them emerged after 1919 with a split in the broad working class  movement. Parties which backed the new Soviet Union formed the Third International Workingmen’s Association. They wanted to replace the capitalist system with a government of the working class, implementing a socialist alternative. The remaining parties stayed in the revised Second International. While some of these parties hoped to create a socialist society through the electoral route, most sought simply to reform the system, to create a “capitalism with a human face.”

The high point for this reformist social democratic vision was the period between 1945 and 1975. The world economy was booming, workers were expanding the trade union movement, and governments were introducing the new welfare state. This boom period ended when Paul Volker and the central bankers raised interest rates and created the major world recession of 1980-2. The election of Margaret Thatcher’s government in 1979 and Ronald Reagan’s presidency in 1980 turned the tide, leading an all out war against the Swedish Third Way.