Social Democracy and Globalisation

1. Social Democracy and Globalisation

2. Bernstein • “The Communist Manifesto was correct …but…we see the privileges of the capitalist bourgeoisie yielding…to democratic organizations … In my judgment…success lies in a steady [peaceful] advance…[rather]…than in…a catastrophic crash.”

3. What is Social democracy? • Part of the socialist tradition, it encapsulates the politics and ideas of much of the mainstream left (today often termed the ‘centre-left) in Europe, and to some extent beyond. • “a hybrid political tradition composed of socialism and liberalism....inspired by socialist ideals but heavily conditioned by its political environment and incorporating liberal values. The social democratic project may be defined as the attempt to reconcile socialism with liberal politics and capitalist society.”S. Padgett & W. Paterson A History of Social Democracy in Postwar Europe (1991), p. 1. • Labour can be seen as part of the tradition; strong tradition in Scandinavia in particular.

4. Ideological Foundations: Relation to Marxism Relates to Marxism in terms of its origins. Specifically, rooted in the ‘revisionist’ ideas of the German Socialist Bernstein. Bernstein questioned Marx’s predictions and assumptions. The material circumstances of the mass of people in society were not ever more impoverished, as Marx suggested. Indeed real wages were rising; (early welfare reforms in Germany, replicated in UK by 1906-14 Liberal Government) Social structures were more complex than Marx expected. Instead of a simple bipolar class structure, the middle class and petty bourgeoisie endured and grew.

5. Political strategy: Reformism The institutions of liberal democracy were more flexible, adaptable to class conflict than Marx had anticipated. Marx had seen the liberal democratic state as an expression of bourgeois class rule. Bernstein noted that as the 20th century approached, the w/c was successfully mobilising via unions and parties which worked within capitalist society and achieved real change/reform. E.g. German social democrats (SPD), later British Labour and the Scandinavian social democratic parties followed a decade or two later) Key distinction from classical Marxism – asserts the possibility of egalitarian reform within capitalism The parliamentary road to socialism. Reformism not revolution.

6. Core elements of the Political economy of post-1945 social democracy Paterson & Thomas’ 5 tenets. The Social Democratic Parties of Western Europe (1977) • -         Political liberalism • -         Mixed economy • -         Keynesianism • -         Equality • -         The Welfare State These 5 tenets have remained important to social democratic parties since 1945, despite the fact that Social democratic parties have changed significantly.

7. KEYNESIAN ECONOMIC MANAGEMENT The Keynesian approach revolves around the idea of placing a primary emphasis upon the objective of full employment – secured by maintaining the level of aggregate demand in the economy. Activist macroeconomic (especially fiscal) policy – taxing and spending to redistribute wealth. Crosland - Keynesianism had fundamentally transformed and ‘social democratised’ capitalism. Redistributing wealth (through tax system, welfare state, and incomes policies) towards lower wage employees with a high propensity to spend their wages on consumer goods. This could be justified not only in terms of both economic efficiency and social justice.

8. Keynesianism, Bretton Woods and IPE • By Keynes’ own admission, his national economic management techniques could only ‘work’ in a context of capital controls – and the regulated Bretton Woods international economic system – designed by Keynes himself in 1945. • The ‘Bretton Woods’ institutions helped deliver the era of ‘embedded liberalism’, the international political economy offered social democratic governments considerable room to manoeuvre. See Sassoon 100 Years of Socialism. • controls on trade and financial flows allowed governments to pursue ‘Keynesian’ domestic policy goals, most notably full employment. could tailor their fiscal and monetary policies to domestic needs • autonomy under ‘embedded liberalism’ should not be over-stated • The system did not remove the necessity to adjust macroeconomic policy in response to balance of payments deficits or surpluses

9. Crisis of Bretton Woods – Crisis of Social Democracy? • as financial deregulation and international capital mobility advanced in the 70s & 80s Social Democratic Governments ability to control national economic space was reduced • As the Bretton Woods order collapsed in the 1970s, Left governments faced grave crises, and experienced the harshness of international economic constraints • UK – Labour and the 1976 IMF crisis • France – 1983 Mitterrand’s ‘U-turn’, retreat from Keynesianism

10. Competing interpretations of the implications of globalisation for social democracy(module guide, pp. 44-5) • Gray - the end of Social democracy (see False Dawn) • Giddens – globalisation has changed the context of social democracy. The end of Keynesianism (but not social democracy). (see The Third Way) • C. Pierson, Garrett, Vandenbroucke, – changed the IPE context of social democratic political economy, but social democratic policies, perhaps even Keynesian ones, remain viable.

11. Social Democracy in Neo-liberal Times (see Glyn’s edited book) • ‘supply side’ agenda e.g. deregulated labour markets • Increased role for market forces and private sector. • Shifting balance between state and market. • Cause – prevailing (neo-liberal) political economic orthodoxy – recall the ideas of Hayek/Friedman • Prioritising macro-economic stability (at the expense of full employment?) • Cause – need for credibility with financial markets

12. Is Globalisation undermining social democratic welfare provision? • More targeted (often means tested) welfare provision – less universalism, e.g. full employment. • Cause: fiscal (tax and public spending) constraints • Tax constraint due to globalisation – mobile capital, threat of exit, therefore need to limit taxation. ‘Race to bottom’ • but these can be over-stated, (see Swank 2002) • Does globalisation constrain tax raising powers? (Swank, Mosley, Garrett – to some extent – but not that much!). • Often welfare state retrenchment has more to do with demographics (ageing societies) than globalisation. (see Herman Schwartz ‘Round up the usual suspects’)

13. Conclusions • No uniform crisis of social democracy caused by globalisation • Different trajectories in different country cases • Some common shifts, notably the need to accept more of the neo-liberal economic policy agenda • Required in the context of global financial markets • Rather than eradicating social democracy (Gray), this has changed the strategies and policies of social democracy (C. Pierson, Garrett). • Egalitarianism and full employment can still be pursued, albeit under increasingly constrained international political economic conditions