A bimonthly magazine on international affairs, edited in Germany's capital

The End Is Not Nigh

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Social democratic parties have been in retreat. But contrary to appearances 
in Germany, the United Kingdom, and elsewhere, they can be part of the future if they address issues of economic competence and identity politics.

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© Friedrich Ebert Stiftung e.V.

Social democratic parties and governments are undeniably operating under uncertain and volatile conditions today. Even leaving aside one of the most severe financial crises in the West’s history, capitalism itself is undergoing major structural change: the rate of technological innovation and the decline of industrial-era mass production imply that advanced economies are on the brink of a “third” disruptive industrial revolution, undermining established political and economic institutions. Moreover, fiscal pressures unleashed by the 2008 financial crisis are placing unprecedented strain on public finances, welfare systems, and the future shape of the state. Crisis aftershocks are accentuating the impact of long-term demographic trends, from an aging society to declining fertility rates. The global context is being further reshaped by the rising power of emerging economies and the relative decline of the West.

These “capitalist crises” should be fertile ground for social democratic parties. Counter-intuitively, however, the crises appear to have benefited the center-right and the populist far right, both of which have adeptly exploited the politics of austerity. The moderate right does this by redefining center-left parties as profligate and economically incompetent. Those moderate parties are themselves being challenged, however, by the rise of populist parties even further to the right, particularly in Northern Europe, that deftly exploit voters’ anxieties and insecurities about the increasingly globalized society they inhabit. In last year’s Danish elections, for example, it was the right-wing People’s Party rather than the Conservative moderates that drove former Prime Minister Helle Thorning-Schmidt’s left coalition from power.

The shattering of confidence in global capitalism and the return of state intervention to the center of political debate has done little to revive support for the left. The 2014 European Parliament elections could hardly have been worse for the center-left, resulting in its lowest representation since 1979. In Germany, the SPD has recorded its worst results since the 1890s, despite a very modest improvement in the last federal elections. In Spain, the Spanish Socialist Workers’ Party (PSOE) did poorly. The Irish Labour Party’s vote halved from 14 to seven percent. In the Netherlands, the Labor Party (PvDA) polled less than ten percent. In France, where the left has returned to government, its future looks far from auspicious.

In 2010 and 2015, British Labour suffered some of its worst defeats since 1918. In Sweden, the “heartland” of European social democracy, the center-left lost two consecutive parliamentary elections for the first time in over a century, before scraping back into power last year. Italy provides the only robust evidence for European center-left optimism: Prime Minister Matteo Renzi’s Democratic Party obtained more than forty percent of the vote in the 2014 elections. However, Italian politics are notoriously volatile, and Renzi’s recent setback in regional elections have placed the left a long way from building a viable political coalition in Italy.

European center-left parties’ electoral underperformance can be explained by weak and unpopular leadership; inability to present a credible alternative, especially on economic management; and the cost of internal divisions in unstable coalition governments. It is not just that social democrats are losing elections, however. In the face of growing economic turmoil and escalating government debt, many now question whether social democracy is even capable of revival. The center-left, these critics argue, lacks a persuasive electoral or ideological program and has no credible governing strategy. It is in fact possible that we are witnessing the eclipse of social democracy in its entirety.

Structural Causes

These problems are compounded by structural shifts that are eating away at social democratic parties’ support base, as economic and social change reshape the center-left’s electoral coalition. As the structural environment changes, social democratic ideas that were largely accepted in most Western European countries in the aftermath of the World War II become increasingly open to challenge. The welfare state’s universalism and commitment to addressing unmet material needs has shifted to a focus on enforcing the rules of contribution and responsibility. The perceived legitimacy of center-left beliefs and values is apparently weakening.

Two broad historical shifts have challenged social democrats since the end of the Cold War. The first is globalization, characterized not only by worldwide market integration but also by deregulation and liberalization, significantly emboldening capital at the expense of labor and democratic governments. The second is the structural weakening of democratic politics relative to markets and other social forces, which raises serious questions for a movement such as social democracy, whose existence depends on articulating “the primacy of politics.”

Both the liberalization of global trade and the weakening of politics have a crucial impact. Globalization has revolutionized economics and politics, with major consequences for traditional institutions. But while it has created unprecedented gains in economic growth and living standards, the benefits have not been evenly distributed. Moreover, globalization no longer seems capable of generating gains for those outside the economic and political elite. As a result, there is a strong political backlash against it, expressed most visibly in hostility to liberal migration regimes and to European integration. Cosmopolitanism is now challenged by rising xenophobia, motivated by new insecurities about national identity and belonging.

At the same time, just as globalization and liberalization place new strains on the social and economic fabric of western states, political institutions appear less capable of dealing with these adversities. A 24-hour media cycle and the scrutiny of social media have made politics more transparent, but also more vulnerable to attack. The public mistrust of politicians and political institutions has weakened their legitimacy, as evidenced in lower turnouts at national elections. Voters demand quick results, even though achieving political change too often requires what the German sociologist Max Weber once described as “the strong and slow boring of hard boards.” Moreover, confidence in EU institutions has never been lower. As governments confront increasingly global challenges, they lack transnational mechanisms that can deal with interdependence while ensuring democratic legitimacy and consent.

The decline of social democratic politics, combined with the rise of globalization and the weakening of representative democracy, have long-term implications for the future of social democracy throughout Europe, as well as for Europe’s political left.

Current Weaknesses

What, then, are the structural weaknesses that undermine the performance of social democratic parties? Shortly before the turn of the millennium, the late sociologist Ralf Dahrendorf famously wrote of the “end of the social democratic century.” For him, the Third Way and other “revisionist” projects were merely desperate, and largely fruitless, efforts to remain relevant in a transformed political landscape. This view resonates with those who believe that social democracy’s mission has been accomplished, given that today’s center-left programs form part of any mainstream political menu. Hence, there is no longer anything specific or challenging about social democracy to the status quo.

Social and demographic change, however, pose major questions about the future sustainability and structure of the European welfare state, and concerns have mounted over migration’s social impact across the EU, despite the economic and cultural benefits that migrants bring to member states.

The widening gap between rich and poor increases the likelihood that migration will become a major political issue. Rising levels of unemployment influence attitudes toward intra-European immigrants. As the economic crisis recedes, a “new” Europe is experiencing important and in some instances troubling political developments and tensions. The EU’s eastward expansion, combined with Southern Europe’s economic stagnation, has emboldened new political forces that threaten the mainstream political system.

Populist parties, especially right-wing populists, have used these tensions to achieve electoral success. Many of these parties, including those on the left, derive their support from citizens alienated from the EU. Their disaffection is the product of the EU’s apparent lack of democratic accountability, the encouragement of the uncontrolled free movement of labor, and the imposition of austerity. Indeed, austerity has driven support for both the populist left and right; in the south, voters have leaned toward parties determined to scale back austerity; meanwhile, many in the north feel they have already paid the price for southern profligacy.

With the notable exception of Greece and Spain, however, the left in the EU has failed to capitalize on the crisis as the right has done. The performance of Green parties exemplifies this trend: the only country where Green parties have recently been successful was in Portugal, with the Unitarian Democratic Coalition and the Ecologist Party The Greens winning a combined share of the vote of nearly twenty percent. This fits with the broader pattern of the growth of the radical left in Europe’s South. The wider picture of Green performance in Europe is one of stagnation. Most countries have seen no change in the number of Green members of parliament.

More importantly, the rise of radical and populist parties is fracturing support for traditional social democratic parties. The growth of the populists is challenging the hegemony that center-left parties have sustained in Europe since World War II. Although there are more right-leaning governments in Europe than left-leaning ones, centrist political parties are increasingly forced to work together in coalition. Though once considered temporary and the by-product of electoral arithmetic, coalitions that span the two wings of the center are increasingly seen as the norm. And in the future, they might be fundamental in holding back the populist tide. The European political landscape has been transformed dramatically.

What Next?

Europe’s social democrats are facing an increasingly bleak future in the face of repeated electoral defeats, but they should not lose hope. After all, the world still needs the values and programs that center-left parties espouse.

So what should be the priorities for renewing social democracy? More recently, traditional parties such as the British Labour party and the Democrats in the United States have witnessed the rise of new insurgent movements from the left: in America this is associated with the presidential candidacy of Bernie Sanders, and in the UK with the rise to power of Jeremy Corbyn as Labour leader. (Post-Brexit, he faced a coup, with “civil war” ensuing in the Labour Party.) Both figures are symbols of growing disillusionment with the political establishment, and of a desire for social democratic and socialist parties to return to their roots representing the powerless and dispossessed. It is widely believed by their supporters that these two leaders can counter the increasing threat of populist forces in western democracies. What is less clear is whether the left insurgency can formulate a coherent agenda for governing given the serious constraints all progressive parties face, from growing antipathy toward redistribution to popular anger against mass migration.

Capitalism Triumphant?

Intellectually, there are two major challenges ahead that social democrats have to resolve relating to the politics of economic competence and the politics of identity. In the 1990s, Third Way center-left governments undermined themselves by getting too close to market liberalism. In the wake of the Berlin Wall’s collapse, they came to the inevitable conclusion that Western capitalism had triumphed: to gain office, social democratic parties had to run a market economy at least as efficiently as the right. The result was ideological capitulation. Many of the policy regimes and institutions developed in the immediate aftermath of World War II were swiftly abandoned.

This was not wholly misguided. Left parties did need to demonstrate they could manage the capitalist economy effectively, coming to terms with markets. Moreover, in a highly globalized economy, prescriptions arising from an earlier generation of Keynesian theory had to be revised. The problem was that by the time the financial crisis struck in 2007-08, the center-left appeared complicit in the policy decisions that led to the crash. In particular, social democrats had largely given up effective regulation and supervision of the financial sector, alongside any wider objective of strategic intervention to rebalance the economy. The left today needs to rethink its economic approach in order to create a fairer, more resilient, and sustainable capitalism, while clearly rejecting the claim that governments have no business intervening in markets.

Another object lesson is that opposition to austerity on its own is not enough to win power. Of course, premature cuts have weakened growth, jobs, and living standards. In southern Europe, the pursuit of austerity threatens to unleash a social catastrophe. However, center-left parties must show they would be competent managers of the economy, articulating a coherent plan to deal with debt – and not just net public sector debt over the economic cycle, but unsustainable financial sector and household debt. Social democrats have to show how they would govern in a world where there is less money around for state spending after the great recession and the impending threat of secular stagnation. This demands a strategy for regulating financial markets that promotes the public good, tackles systemic risks and reforms banks that are “too big to fail.” An industrial modernization plan would rebalance our economies away from their reliance on financial services toward knowledge-intensive sectors and manufacturing. In reforming the tax system, there ought to be a major clampdown on crossborder tax evasion and fraud and a restoration of the progressivity of tax, using redistribution to tackle new inequalities.

Questions of Identity

The second task relates to the politics of identity. Left parties must not be distracted from confronting deeper underlying political forces. Center-left parties are losing elections because the voters don’t trust politicians to protect their way of life against the impersonal forces of global change. Europe has pitched dramatically to the right – not only toward Christian Democratic and Conservative parties, but new forces adept at exploiting voters’ fears about economic insecurity, immigration, and hostility to the EU. In the heartlands of European social democracy, from the Nordic states to France and the Netherlands, right-wing populists are on the rise. In Austria, a hard right presidential candidate was within touching distance of power.

The left is losing, not just on the conventional politics of economic competence, but increasingly on the vexed politics of national identity. The temptation to raise the drawbridge against immigration ought to be resisted. Flirting with a restrictive immigration policy is superficially tempting when the populist right is winning, but imposing arbitrary limits would be economically damaging as well as politically unprincipled. Instead, low wage and vulnerable workers across the EU ought to be protected. Permitting the uncontrolled exploitation of low-cost labor in Eastern Europe has undermined the entire European project. More safeguards against temporary work and zero-hour contracts are needed.

The center-left must articulate its own vision of a cohesive society, backed by an understanding of sovereignty that accepts the nation-state is the central pillar of security and belonging. Only by securing the trust and allegiance of citizens within the nation-state can the center-left win the argument for international engagement and cooperation, the cornerstone of a liberal world order.

Social democracy in western Europe is not destined to decline in the years ahead. The electoral setbacks it has suffered since the 1990s have been serious, while the long-term deterioration in social democratic parties’ vote share is sobering. Yet social democrats can still draw on a wealth of arguments in remaking center-left politics, grounding the case for fairness and equality in a vision of an inclusive social and economic future. Making the plight of society’s least privileged resonate with the middle-class has always been vital for center-left politics, as has the task of ensuring that the burden of change and structural reform does not fall hardest on the most vulnerable in our societies. This endeavor is even more essential today, given the “new hard times” that Europe is living through.

Read more in the Berlin Policy Journal App – July/August 2016 issue.

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