The Decline of Social Democracy

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The salient characteristic of social democracy today is its collapsing electoral appeal. In the past two years, social democrats have lost elections in the United Kingdom, the United States, Germany, Canada and Italy to challengers from the left and right. In Australia, after an era of unmatched Labor supremacy – when every Australian Government was Labor led – the Party has lost elections in Western Australia, Victoria, New South Wales, Queensland and narrowly avoided a Federal humiliation after winning an emphatic victory in 2007.

This sad string of defeats and setbacks pose a singular question for Labor: does social democracy, the Party’s core mission, still capture the reasons for Party membership, the appeal to an electoral majority, and the plan to create an equitable Australia using the levers of the State? If the answer is ‘no,’ and social democracy is deficient, then the Party must accept that ‘it’s time’ to move on. Yesterday’s energetic ideology has become today’s stale orthodoxy.

‘Social Democracy’ has no single meaning – it is a bargain: in exchange for accepting the legitimacy of markets, the State intervenes to prevent unnecessary hardships; the State protects individuals from the vicissitudes of life; and the State, markets and individuals collaboratively realise all the capabilities essential to a human’s dignity. Social democrats reject both the fecklessness of Stalin–esque communism, and the recklessness of Herbert Hoover–esque free markets. Instead, social democrats strive for balance – pursuing sweeping reforms like universal health insurance, universal pension systems, universal access to education, universal civil rights; universal labour rights, free markets and free trade. This ‘settlement’ is presented as progress, the means to secure individual ‘agency’: a person’s right to freedom from oppression, their freedom to choose, and their right to bear the responsibility on which that freedom depends. In the postwar period, the United States, the United Kingdom, France, West–Germany, Sweden, Italy, Austria, Denmark, Finland and Norway all modeled themselves on the “optimistic image of reformist social democracy”; all faithfully implemented the social democratic bargain; all made great strides in reducing inequality, all created opportunity; and all benefited from the strong leadership of committed social democrats like Atlee, Beven, Beveridge, Gaitskell, Crossland, Brandt, Kennedy, Johnson, Mitterand and Kreisky. These leaders – social democracy’s all–stars – made the social democratic position their political centre–of–gravity. They popularised the social democratic philosophy; and they inspired countless millions to identity with the reformist cause.

In this global zeitgeist, when countries the world over were becoming social democracies, fate required the Australian Labor Party to adopt a social democratic hue. The first leader to recognise this inevitability was Gough Whitlam, the ‘father’ of the modern Labor Party. Whitlam gained the Labor leadership after the cataclysm of 1966 election defeat – the last election when Labor presented itself as a genuine Socialist Party. After a catastrophic defeat unequalled in its history, in its seventeenth year of continuous opposition, in the earliest years of his leadership, Whitlam started the interminable battle to divorce Labor from the obscurantism of men like Joe Chamberlain, Jim Cairns and Arthur Calwell – men committed to the mindless pursuit of ‘the democratic socialisation of industry, production, distribution and exchange’ regardless of fact, circumstance or context.

Whitlam was a reformist – he targeted Labor’s urge to nationalise monopolies, control private enterprise, bar foreign competition, and control the price of labour because they had limited popular appeal and little practical effect for the Australia he sought to lead. As Graham Freudenberg explained in the first edition of Voice, the Australia of 1972 had its perfect microcosm in Whitlam’s own electorate:

‘Werriwa had the most immigrants, the highest birth rates, the worst housing shortage, the most distant hospitals, the neediest public health, the fewest schools, the most inadequate transport, the poorest public amenities [and] the least sewerage.’

All these failures were failures of the State – every one an example of the State’s inability to empower people through the equitable provision of services. To suggest their correction was in nationalisation was to condemn Labor to a bleak future riddled with irrelevance. So Whitlam took aim at the Platform, condemning it for its banality.

At the time, Party critics responded by attacking Whitlam for not providing what he never promised: a road map to socialism. That suited Whitlam politically: he was deliberately tilting Labor towards its revisionist tradition – the winning tradition Lenin condemned as belonging a ‘liberal–bourgeois party.’

Whitlam’s revolution resulted from mixing the old Labor tradition with contemporary needs; leading to a policy program that struck the golden trifecta: popular with the Party, popular with the people; and right for the nation. The policies themselves – free healthcare through Medibank, assistance to all schools based on need, universally accessible welfare – were all groundbreaking. Whitlam expressed the complete case for social democracy:

‘…in modern communities, even the wealthiest family cannot provide its members with the best education, with the best medical treatment, the best environment, unaided by the community. …This concept of equality – what I call positive equality – does not have as its goal equality of personal income.’

This new philosophy indelibly impressed into the public’s mind Labor’s rebirth. The Party was now seen as forward looking, optimistic, courageous, dynamic, and representative. Above all, it was seen as Labor: providing protection from the calamities of life, empowering people in their own lives, and creating stronger communities in which to live.

Politically, the electorate responded to Labor’s new direction. The 1972 and 1974 election victories, Labor’s first back–to–back victories since 1943 and 1946, proved that the new approach – not austere Marxism or irresponsible capitalism – appealed to both Labor’s traditional working class base, and to the liberal middle classes that for so long were turned off by Labor’s perchance for nationalisation. Ever since, every successful Labor Leader (State and Federal) has won using the same electoral coalition, using some version of the original Whitlam bargain. The string of election victories federally in the 1980s, and in the states and territories in the 1990s, heralded the most successful era for the Party in its long history. With robust majorities Labor accomplished universal healthcare, universally accessible tertiary education, universal retirement income, expanded public housing, a federally funded vocational education system, a competitive telecommunications industry, a national rail gauge and a national highway system. On the revenue side of the ledger, equally impressive results: progressive personal tax rates, a capital gains tax, a fringe benefits tax, a wide corporate tax base, a resource rent tax and a system of dividend imputations.

Even this catalogue of modern Labor’s record does not do it justice because, although the bulk of these reforms were planned for in the late 1960s and the 1970s, they were implemented in the 1980s and 1990s – an era when globally social democracy was in retreat. Then, Thatcherism and Reaganomics reigned supreme; the left was being turfed from power across Europe and North America; and social democrats were considered an out of touch effete among key electoral constituencies. For Labor to win, when most of its brethren were losing, showed global leadership. By the late 1990s it was clear that Australian Labor was ahead of its time. What Labor achieved with Whitlam, Hawke and Keating, British Labour could not match until the ascension of Tony Blair; the US Democrats could not equal until the arrival of Bill Clinton; and the European left could not provide until the emergence of Gerhard Schroeder, Romana Prodi, Göran Persson and Wim Kok. All these leaders won after discarding useless orthodoxies; all staved off unviability and achieved electability after subjecting their parties to brutal reconciliations with reality.

The collective courage of these leaders – leaders with preference for power, not impotence – meant that at a meta–level the forty–year project to create an active State – to use its taxation and welfare powers to redistribute wealth, to have it bear responsibility for equal societies, to guarantee individual opportunity – succeeded. Now tax revenue as a proportion of GDP in the OECD is 34.8%, up from a paltry 25.8% in 1965. Public social expenditure (health, welfare, education) is 19.2%, up from 15.6% in 1980. In Australia tax revenues as a proportion of GDP is 27.1%, up from 20.5% in 1965; social expenditure is 16%, up from 10.3% in 1980. It is telling that even though former Prime Minister John Howard campaigned like a conservative, he coexisted with the social democratic settlement: he would not touch Medicare; he would not dismantle HECS, he would not abandon the principle of progressive taxation, he would enlarge the role of the Commonwealth vis–a–vis the State; and he would allow the proportion of Federal tax collected in Australia to rise from 28.7% in 1996, to 29.5% in 2007 – his last year in office.

So with a record this virtuous, with leaders this accomplished, and with achievements this envious – why should social democrats be worried? Because since 1999 the onward march of social democracy has been halted. In that year, 13 out of 15 European Governments were from the centre–left; Bill Clinton was U.S President; and Tony Blair was the most popular politician on the Planet. Locally, the ALP had secured a majority of the national two–party preferred vote one year earlier; Steve Bracks had liberated Victoria from the demagoguery of Jeff Kennett; and Bob Carr had won his first astonishing bid for reelection. Contrast that period with the Centre left’s recent performances: today only five European Governments are from the Centre–Left. In Britain, after thirteen years of a reformist Government, the 2010 election was the worst electoral result for Labour since 1918. In the United States, the impending prospect of a failed Presidency. In Germany, the humiliation of coming second to the Greens in the Social Democrat’s Ruhr heartland. In Scandinavia, constant defeats caused by far–right, Euro–sceptic, anti–immigration parties. In Australia, for the first time since 1941, a Federal Labor Government without a majority in the lower house. In New South Wales, the ALP’s traditional heartland, home to the most successful Labor leaders of the modern era, a Party flirting with minority status and recovering from its worst loss in two generations.

This string of global and local defeats is no coincidence. Even with a calamitous financial crisis that resulted from laissez faire economics, even with massive State intervention and weak oppositions; the Centre–left is losing. It is losing in countries that suffered through the global financial crisis, and in countries that survived it; it is losing from Government and Opposition alike; and as David Milliband recently pointed out, it is losing regardless of electoral system – proportional representation or majoritarian. Faced with defeat after defeat in country after country, when the great need for social democratic reform is obvious, there is a hard question to be answered: will the historic achievements of the late twentieth century reform movements be seen as the high watermark of the social democratic project, or can the centre–left do more?

After discarding all local factors, after accounting for societal differences, and after rejecting the possibility that the Left is simply wrong, what is defeating social democracy is the common complaint of powerlessness: the perception that, compared to powerful markets and powerful Governments, individuals can no longer determine their own destinies. Instead their destinies are the result of forces beyond their control: unfair competition, unemployment, indebtedness and rising prices. Once, Government was considered a bulwark against these pressures: the means to disperse risk equally throughout society. Over time, after many virulent campaigns, after endless jeremiads against ‘welfare cheats’ and ‘dole bludgers,’ after the Hansonite backlash and the rise of the reckless right, social democracy was reframed to mean “statism”: a political system in which the state has centralized control over a society’s affair. The impression formed that social democrats were using the State to encourage welfare dependency, to promote passivity and to reward bad behavior. The State was painted as (at best) amoral – without care or concern for ‘normal’ behavior – or (at worst) immoral: actively encouraging people to deviate from normal behavior. Recent polling by the Scanlon Foundation and Monash University found that in 2010, only 31 per cent of respondents indicated confidence that the federal government will ‘almost always’ or ‘most times’ do what is right for the Australian people, compared with 48 percent in 2009 and 39 percent in 2007. Global polling by the international Centre–left think tank, Policy Network, confirms that State cynicism is native to many democracies: only 15 percent of people in the US, 16 percent in the UK, 21 percent in Germany and 27 percent in Sweden think the State is effective in standing up to vested interests. Many more think the State has been captured by those interests.

Battling the perception that the Centre–left is statist, not reformist, distracts social democrats from pursuing new reforms. This is social democracy’s second contemporary weakness: the conservative caricature. Social democrats are portrayed as being obsessed with the verities of the past rather than the assumptions of the future. The cliché is that social democrats only articulate what they are against – they never articulate what they are for. The right then responds by presenting themselves as the real change agents, only more sensible. Even Alexander Downer, during his slapstick leadership year, saw the boon in presenting the Liberal Party as ‘better’ progressives:

We progressive conservatives do not oppose change. The opponents of change are reactionaries. Progressive conservatives recognise the inevitability of change and the need to manage change in an appropriate way.

In the United States the strategy of confusion was called ‘compassionate conservatism,’ the device former President George W. Bush used to win two national elections against the Democratic Party. In the United Kingdom it has was dubbed ‘the big society’ – Prime Minister David Cameron’s schema to detoxify the Tory Party brand and (sort of) win the 2010 election. Elsewhere, Nicolas Sarkozy, Stephen Harper and Angela Merkel at times have all cloaked themselves in the social democratic garb when survival required it, especially after the global financial crisis. Consider this statement by Mr Sarkozy:

“Globalisation… gave rise to a world in which everything was given to financial capital and almost nothing to labour…in which those who lived on unearned income left the workers far behind.”

This strategic repositioning confuses social democrats: is it an admission that social democrats were right all along? Or is it an admission that social democrats are now the right? Is the correct response ploughing on – further expanding the State – assuming inevitable right–wing acceptance? Or, instead, should social democrats question why our political opponents are comfortable with many of our policies? Are they that acceptable?

In Australia, social democrats are yet to consider these questions. Instead, the zeitgeist is to continue on, letting Government hover at approximately 35 percent of GDP; pledging no rapid expansion or contraction of the State; instead focussed on the reform of already established social democratic programs – the tax system, the health system, the pension system and the education system – so they become more ‘efficient,’ ‘productive,’ ‘affordable,’ and ‘accessible.’ These are worthy objectives but they are not inspiring ones: they demand managers, not leaders. They do not arouse tremendous passions, they do not encourage risk–taking, and they foster technocratic language, social democracy’s third contemporary weakness. Consider this excerpt from the launch of Labor’s Health and Hospitals reform program in 2010:

The Australian Government will take clear financial leadership in the hospital system, permanently funding 60 per cent of the efficient price of every public hospital service provided to public patients. We will fund 60 per cent of recurrent expenditure on research and training functions undertaken in public hospitals. We will fund 60 per cent of capital expenditure – both operating and planned new capital investment – to maintain and improve public hospital infrastructure…Over time, we will also pay up to 100 per cent of the efficient price of ‘primary care equivalent’ outpatient services provided to public hospital patients…In exchange for relieving pressures on State budgets, the Australian Government will require system–wide reforms to create a better integrated, unified national health and hospitals network, with national standards, national transparency and national accountability.

Contrast that statement with Gough Whitlam’s pronouncement on the need for Medicare:

“We will establish a universal health insurance scheme, not just because the Liberal system is grossly inadequate and inefficient, but we reject a system by which the more one earns the less one pays, a system by which a person on $20 000 pays only half as much as a person on $5000 a year.”

The first statement (131 words) wins the plaudits of economists; the second (57 words) wins the votes of electors. This is because of its clarity: it identifies precisely what social democrats will do, it identifies precisely why social democrats want to do it; and it identifies precisely why it should be done. Clarity is essential for support: it enables trust, it creates identity, it allows for differentiation, it is the only antidote for fear. Lack of clarity costs support: it creates confusion, it sows doubt, it muddles identity, it creates vacuums; and it leaves you at the mercy of events.

Today Labor is criticized for not finding clarity in its opposition years; for never resolving what it stood for; for never resolving priorities amongst its many worthy goals; for never creating strategies to win support; for never creating a language that encouraged identification; for never identifying constituencies to mobilise; and for never developing policies with long–term appeal. In short, it is criticised for never resolving the contemporary weakness of social democracy. This failure is cited as the main reason for Labor’s alleged disappointments in office. These criticisms, fashionable amongst the far left and extreme right, presume that Labor will only right its gait if it becomes either more vitriolic – eschewing nuance and embracing ‘morality’ – or more acquiescent: accepting the contours of completely free markets; making only charitable gestures towards its losers. Neither prescription is helpful because both understate Labor’s ambition. The Party has never sought, and will not accept, momentary tactical advantage; it demands nothing less than permanent control of the national agenda. Originally, that was achieved with the social democratic bargain; it provided Labor with ideas for a just Australia, and the means to implement them. Now, to escape the dual pincer of excessive statism and technocracy, Labor must slightly separate itself from its social democratic inclinations. The Party’s future is less centered on Government and more focussed on its decentralising tradition – the tradition that rejects concentrations of power in either the market or the State; and instead insists on control resting with individuals. This agenda is the freedom agenda.

‘Freedom’ is the enduring mission of the Australian Labor Party. It means having the power or right to act, speak, or think as one wants. Freedom belongs to neither the left or right wing – it is a status: you are either free or you are not. Labor wants people to be free: to have choice, to be in charge, to experience control, to feel secure. Labor’s strategy to win freedom is power. Powerful people withstand powerful forces that deny them their freedom. Powerful people have security; powerful people avoid deprivation, powerful people survive unemployment; and powerful people make choices. Labor means power: it has always sought it, it has always used it; and it has never regretted it. Labor’s unique insight into power is relativity: some people have more power than others – they are relatively more free. Because Labor wants freedom for all, power must be shared to secure everybody’s freedom. But power is not yielding – it is stubborn. It needs to be ‘organised, fought over, negotiated and resolved through compromise.’ Labor’s method of organisation is the collective: by acting jointly people have more power than if acting individually. They withstand market forces that deny them freedom; they withstand State actors that deny them freedom; and they withstand powerful individuals that deny them freedom. Securing freedom by winning power is Labor’s motivation; but winning power for its own sake, for the sake of the State, or for ourselves – has never been Labor’s goal. Instead power is for a purpose: in Australia that is the national interest. Australians will cede power, tolerate hardship, reject injustice and share opportunity if it benefits the whole community; not just some of it. That is the meaning of ‘fairness’ – Australia’s most enduring ethos.

Over many years, a perception has emerged in Australia and elsewhere, that too many actors within the market and within the State use power for their own interests, not the public’s interest. Tax ‘minimization’, super–profits, unearned bonuses, bailouts, payments to failed executives – all symbolize the principle of great power but no responsibility. With the rise of never–ending casual employment, the return of unequal pay, the end of housing affordability, the prospect of eroding living standards; and the fear of no retirement: people feel that the status quo favors the privileged, not the ordinary. This provides Labor with the opportunity to mobilise a broad constituency for the reform of malfunctioning markets – but only if accompanied by reforms for the malfunctioning State. That is what David Milliband means when he says that social democrats must present as ‘private sector reformers and public sector innovators’ – so we are seen as ‘socialists, not statists.’

Labor’s next program must avoid technocratic or statist design. Instead, it must reflect the principles of empowerment and responsibility: empowerment in dealings with the State, responsibility when participating in markets. Labor should be empowering parents in schools, building on the success of ‘My School,’ handing them more power over curriculum selection; staff selection; and school budgeting. Labor should be empowering the casually employed: giving 2.2 million Australians in long–term casual employment a statutory right to choose their preferred form of employment, provided that all choices are respected and no choice is discriminated against. Labor should be empowering consumers against monopolies: reinvigorating competition policy and pushing for new market entrants in the telecommunications, banking and retail sectors. Labor should be empowering small business against big business, promoting competition in public and private services; and finally encouraging openness, tolerance and acceptance in civil affairs.

This program enmeshes Labor’s belief in freedom, creativity, control, responsibility, community and common purpose with society’s modern needs. Pursuing it will lead to conflict with friend and foe alike – but Labor has no choice other than to fight. More power for all involves less power for some. Labor should not hesitate to diffuse power throughout society if circumstance requires it: Labor’s future is forever altering the balance of power between markets, the State and individuals; forever striving to empower people to make them truly free. At times, that requires State intervention, at times it requires market forces; but it always requires collective action and collective resolve, because the resulting outcome must be democratically chosen – not the accidental product of powerful forces left undisturbed. That is why freedom and empowerment is a Labor agenda: Labor is the only Party able to undertake the detailed planning, constant negotiation, repeated revision; and, above all, the persuasion necessary to popularise a policy program that diffuses power in markets and diffuses power in Government. By pursuing them, Labor starts to resemble the means to express the civil society’s collective resolve, and its desire for collective action; thus legitimising Labor’s power, and authorising Labor’s programme. If this creates conflict, so be it – a better Australia results. Above all, that is our purpose.