Goodbye social democracy. Hello economic democracy.

by Bill Kerry

Following the latest convulsions of capitalism in the last year many progressives in Britain are now hoping for the restoration of social democracy as the guiding light for progressive politics. In the Labour Party the left seems to be stirring, mainly in the form of Compass, and to the left of Labour there is renewed talk of working together on yet another reformist united electoral front. Among the Liberal Democrats the social wing of that party seems to be in the ascendant. The democratic reform of capitalism, so rudely interrupted in 1979, can now resume and through re-legitimised state intervention, regulation and slightly more progressive taxation, social injustice and the inefficiencies of capitalism can be dealt with.

Whilst welcoming a reinvigorated social democratic impulse, I would like to explore briefly what I see as the some of the limits of social democracy and what I think needs to be added.

Some history

In the early 20th century, the Labour movement committed itself to a gradualist, political and parliamentary path to transforming British society – a welfarist and social democratic path. It rejected Marxist notions and it also rejected co-operativism or at least assigned it a very junior role. The choice of social democracy was, given the influences of the time, the obvious choice. The large German Social Democratic Party was much admired, the Russian Communist experiment much feared and misunderstood. Also, the British working class was steadily deserting the Liberal party for the Labour party at the ballot box so all seemed set for a smooth acquisition of electoral power and a peaceful transformation of British society.

Realising that social democracy was the product of a certain time, we should also look at the situation on the ground in early 21st century Britain.

An unequal struggle

After 30 years of free market dominance, nationally and globally, we must face facts that the interests of the private sector and its political and media allies are now so powerful, so entrenched, that the political game has changed forever. Governments now routinely accommodate the needs of big business whilst the media portrays the functioning of the welfare state almost entirely in the negative. Far from being the New Jerusalem, it is now seen, probably by a majority, as a hugely expensive support system that at best tries to help but fails the deserving cases and, at worst, caters too often for various categories of the “undeserving poor”. Promoting social democracy these days is picking a fight on extremely hostile terrain.

Where’s the vision?

In the context of this unequal struggle, social democratic politics looks destined to be an everlasting defensive task. Social democrats, even if they are elected, will spend all their time defending modest social gains from a rapacious private sector, seeking the financial comfort of running services previously built up and paid for by tax-payers, and from a hostile media largely controlled by people who sincerely wish the welfare state was dismantled altogether. As an entirely defensive project, social democracy will have little in the way of vision to inspire the support it needs to survive.

If social democrats do not take the chances presented by this moment in time to develop and enrich their political creed beyond a call for a mixed economy, higher taxes and generous social transfer payments then it will forever remain a defensive and, ultimately, defeatist political idea – one that says raw capitalism will always be with us and we can only hope to ameliorate its worst effects rather than transform it.

Social democracy needs economic democracy

Social democratic thinking still too often seems stuck in the 20th century tax and spend paradigm. It does not currently recognise the need to fundamentally change the ownership and nature of economic activity in order to narrow the gap between rich and poor and address questions of global warming and sustainability. As The Spirit Level, by Richard Wilkinson and Kate Pickett, comprehensively demonstrates it is greater income equality that is the essential pre-condition for a better and more sustainable society. Income differences arise in the workplace and that is where they should be addressed.

Whilst every re-distributive tax and benefit must continue to be defended, this alone cannot provide a vision of the good society. To remain relevant and to avoid subsiding into a wholly backward-looking and defensive set of ideas social democracy in the 21st century must embrace economic democracy at its core. We need to set about transforming our economy rather than promulgating a set of policies for accommodating whatever form capitalism comes up with next. Progressives must now campaign for the competitive economy to be replaced by the co-operative economy – that can be the vision social democracy currently lacks.