Is There a Future for Social Democracy?

Karl Marx was right! That was the valuable lesson that Thomas Piketty unwittingly delivered with his celebrated book, Capital in the Twenty-first Century.¹ While Piketty should be credited with bringing inequality back into the popular spotlight, his most significant contribution was the powerful empirical proof that the historic trajectory of capitalism was, in the final analysis, to reward the owners of capital and beggar those who produce it.

For the post-World War II generations, a different “truth” was fostered. The period of relative prosperity (roughly defined as the growth of broad-based living standards in close step with robust productivity growth) that endured into the early 1970s was believed to be a new, permanent feature of capitalism. Attached to this belief was a confidence that the policy tools afforded by the economic doctrines of John Maynard Keynes would guarantee that this prosperity would continue.

But this “truth” was challenged by the explosion of inequality that began and persisted over the subsequent forty years and beyond.

Looked at from the perspective of Piketty’s data, centuries of growing global inequality is broken only by the Great Depression and the later post-war interlude, what the French call les trente glorieuses-- the 30 presumably happy years of economic levelling. In light of the historic arc, they are exceptions to the rule.

In the decade before World War II, there was a dramatic collapse of economic growth and a shifting of resources to the various governments’ temporary employment-maintenance programs. These two factors slowed the persistent concentration of wealth channeled toward the highest tiers. The 1930s were a time of desperate efforts to restore collapsing mass demand and to answer the utter despair of the unemployed through projects that were, in effect, modestly redistributive. Throughout the world, preparing for and conducting war soon replaced these projects, substituting military spending and the military absorption of the unemployed (and their subsequent slaughter) for the earlier welfare-centered economic stimulation.

But the post-war period was an entirely different matter. A proper explanation of the post-war anomaly remains contested.

It is only in recent years (and bolstered by the work of Piketty and his colleagues) that the notion of capitalism’s fundamental tendency toward inequality seeped back into the mainstream and commanded attention. The recent memory of post-war “prosperity” leads many to falsely view the most recent era of mounting inequality, tattering social safety nets, crumbling infrastructure, forced austerity, debt, and falling living standards as a mere “correction” of the profligacies and inefficiencies of the earlier period. To Piketty’s credit, his unequalled research into the historical long-term global tendencies of capitalist economies demonstrates the opposite. Twenty-first century capitalism and its massive inequalities constitutes the capitalist norm and not a correction.

Piketty and Social Democracy

If it is true that, except under temporary, extraordinary circumstances, capitalism uniformly produces and reproduces wealth and income inequality, then Piketty’s findings present the social democratic left with great, seemingly insurmountable challenges. Understanding social democracy, broadly speaking, as an ideology that accepts capitalism as either reformable or as a possible institutional platform for the gradual transformation of the social order into something different, the prospects for its success would seem dim at best². Capital’s overwhelming domination of today’s political institutions and the monopolization of the channels of mass influence would likely foreclose any new gains from collaborating with or conceding capitalism.

The last quarter of the twentieth century and our twenty-first century experience find social democracy declining nearly everywhere in both effectiveness and popular legitimacy. With its “golden era” coinciding with the post-war “golden era” of crisis-free economic growth, social democracy not only failed to advance a substantive agenda after the crisis-ridden decade of the 1970s, but actually surrendered the gains won in the past.

Toward the end of the last century, the traditional hosts of social democratic ideology-- the US Democrats, the UK Labour Party, the French, Italian Socialists (and Communists), and most similar parties-- cast the classic tenets of social democracy into history’s dustbin, embracing the dominance of markets, private-over-public initiatives, growth over redistribution (“a rising tide lifts all boats”), the inefficiency of the public sector, and homage to the market as a rational and moral calculator.

As the public soon found most social democratic thinking a cheap imitation of conservatism, the traditional social democratic parties sought a new “progressivism” based upon promoting civil inclusion over aggressively fighting for economic and political inclusion. Unlike economic inclusion, civil inclusion-- the embracing of individual diversity and civil tolerance-- does not address economic inequality; it requires no change in the balance of power between capital and labor; it makes no consequential demands or sacrifices on the rich and powerful; and it requires no redistribution of material assets.

The economic crisis that began in 2007-2008 demonstrates emphatically the inadequacy of such a narrow approach. Millions of people were and are directly or indirectly wounded by the economic chaos generated by a global financial collapse and by its collateral damage. Social democracy had no answer and was justly rewarded for its policy bankruptcy. The traditional bearers of the banner were drastically diminished in popular support, in some cases, reduced to irrelevancy.

Understandably, an effort was made to invigorate social democracy by shoring up its economic program, adopting a critical stance toward markets-- especially financial markets, advocating regulation of capital, imposing progressive taxation, strengthening the social nets-- in short, returning to elements of the social democratic agenda of the post-war “golden era.”

In the face of the discrediting of the traditional parties, new parties, political alliances, or formations arose-- like SYRIZA, PODEMOS, and the Bernie Sanders movement.

But the twenty-first century was not the 1950s with its war reconstruction, the Marshall Plan, massive increases in military spending, Cold War compacts, its unleashed wave of consumerism, strong unions, and most importantly, a powerful revolutionary current to which social democracy could leverage its offer of moderation toward capital. There is no useful role for social democracy in the eyes of 21st century capitalists.

Twenty-first century capital-- absent a life-and-death struggle against socialism-- is merciless and ruthless, offering no compromise or social compact with social democracy. The youthful leaders of SYRIZA learned this lesson when they sought to reason with the custodians of European capital. They experienced the harsh aggression of financial predators, reducing SYRIZA militants to compliant middle-managers of Greek capitalism.

Sanders and his loyalists are being similarly schooled in the realities of the Democratic Party and US capitalism in the twenty-first century. The Democratic Party is owned by monopoly capital, and monopoly capital has no intention of surrendering its property rights to anyone else.

The Last Gasps of Social Democracy?

The hope for finding an effective strategy between resignation to capitalism and revolutionary socialism will always inspire utopian schemes. Social democracy will always survive for those frightened by the prospect of eliminating the scourge of capitalism, but appalled by its pillage of working people. Despite the failings of the latest incarnations, there are new theories waiting in the wings, new models of social democracy.

Beyond his celebrated book, Thomas Piketty has championed a social democratic agenda to address the persisting inequalities deeply embedded in capitalism. In a new book, Chronicles, he returns to these inequalities in the context of current events as addressed in a collection of columns he wrote for Libération and Le Monde. To his credit, he still adheres closely to his central thesis: “During the postwar decades, we mistakenly believed that we’d moved on to a new stage of capitalism, a sort of capitalism without capital. In reality, it was only a passing phase… In the long run, patrimonial capitalism is the only kind that can exist.”³

But if “patrimonial” capital (i.e., capital that persistently churns out inequality) is “the only kind that can exist,” how can there be enduring capitalism without obscene inequality? That-- put simply-- is the paradox of Piketty.

Indeed, that is the paradox of social democracy.

To anyone who has read Capital in the Twenty-first Century, Piketty’s answer to inequality is a colossal disappointment: We must have a global wealth tax. Magically, therefore, we could have both capitalism and less inequality. Of course Piketty does not tell us how we can overpower or coax “patrimonial” capitalism into accepting such a tax.

His answers in Chronicles, written specifically to address the crisis in the European Union, are more specific: The EU should be “federalized, tighter, centralized” so that the existing debt and tax structures could then also be federalized. To his way of thinking, a more tightly structured, integrated, and centrally ruled EU could overcome national disparities and-- not surprisingly-- institute a union-wide wealth tax!

But this answer is even more paradoxical. Would anyone believe that a union constructed to institutionalize, to protect and promote “patrimonial” capital would, by strengthening and centralizing that union, be more inclined to have its predatory character tamed? Would the EU, constructed upon the pillars of free markets, privatization, and the sanctity of profits, be more likely to surrender the fruits of free markets, privatization, and the sanctity of profits if given even greater power?

Clearly, there is more “wish list” in Chronicles than policy map. He joins the ranks of the neo-utopians⁴ who hope for a revival of social democracy through strategies that call for capital to concede its domination simply through moral suasion or dazzling intellect. Other neo-utopians like Yanis Varoufakis share Piketty’s commitment to globalism and supranational organizations, but with little acknowledgement that these policies and institutions are the product of powerful elites indisposed to heed the wise council of intellectuals. The EU, like the global market, is a construct born from the womb of Piketty’s “patrimonial” capitalism. The midwives will not surrender to clever ideas or an appeal for political “democratization.”

The State and Modern Monetary Theory

Others believe that they have found the social democratic holy grail in Modern Monetary Theory.⁵ William Mitchell and Thomas Fazi advocate this approach in their recent book, Reclaiming the State.⁶ Interestingly, they take the opposite tack to Piketty. Rather than calling for a strengthening of supranational institutions towards a global taxing body, they advocate a return to state projects free of supranational fetters. For Mitchell and Fazi, “reclaiming the state” is a necessary condition of reviving the social democratic project.

The title’s subscript gives away the game: “A Progressive Vision of Sovereignty for a Post-Neoliberal World.” It is not a vision for a post-capitalist world or a socialist world, but for a “post-neoliberal world,” a world like the world before the dominance of the unfettered, market-dominated, deregulated, private-ownership-worshiping capitalism that emerged in the 1970s. There is more than a hint of nostalgia for that earlier time, with the sincere hope that Modern Monetary Theory would open the door to radical reforms of capitalism-- capital controls, a new international framework, job guarantees, nationalization of “natural monopolies” and banks, the outlaw of non-productive financial transactions, and other measures.

In truth, the Mitchell and Fazi book is impressive. The first section, The Great Transformation Redux: From Keynesianism to Neoliberalism-- and Beyond, is a serious and well researched description of the course of capitalism from the end of World War II to the present. The authors fully recognize the important changes that events, parties, and persons made in that critical period. They also address some of the theories purporting to explain the changes without advocating strongly for one over another. For those reasons alone, the book is strongly recommended. No understanding of today’s capitalism is possible without a comprehensive understanding of the seventy-five years that preceded it.

But the history offered, though richly recounted, lacks a central motif, an underlying logic, linking and explaining developments. It is not enough to string together a list of factors that may, to a greater or lesser degree, shape the dramatic changes between the confident economic celebration of the fifties and sixties and the intractable problems of the 1970s. Despite a number of suggestive hints, the question “but why?” looms over the analysis. Without a deeper explanation, the account courts becoming a naked “just-so” story.

But more seriously, there is virtually no reference to the Soviet Union, the clash of post-war ideologies, the Cold War, or the threatening growth of the socialist world in size and influence (there is no citation for the Soviet Union in the index-- or to socialism for that matter). To discuss the post-war period without referencing the impact of Communism is like explaining the decline of the Roman Empire without reference to the rise of the Goths or of Christianity; it’s like explaining the US revolution without referencing the rivalries between Britain and France; or it’s like an explanation of the US Civil War without mention of slavery. It is at best incomplete; at worst, distorted.

US and European post-war social, political, and economic history arguably is the history of relations with Communism, domestically and internationally. Yet it is a commonplace for left and leftish academics to largely ignore the role of the Soviet Union, the Socialist world, and Communist Parties as though they were a mere sideshow.

The US and Western European left, especially in the universities, never accepted the reality that theory and practice were necessarily and inescapably located in political space by their proximity to twentieth-century Leninism. Consequently, the non-Leninist left failed to grasp the impact of state-sponsored anti-Communism in determining that space.

The left never appreciated that Western social democracy was not triumphant in the post-war decades, but permitted to taste political power by a capitalist ruling class in need of allies in the struggle against Communism.

To this day, non-Leninist theorists struggle with the contradiction that a social democratic program could be implemented in a state that is itself wholly captured by the capitalist class. A compromise with social democracy is made possible when the capitalist state is itself engaged in a life-or-death struggle with socialism. Accordingly, radical social democratic reforms that limit capital’s penetration, that retard or redress the march of inequality, or that shift the balance of power are only possible when the capitalist ruling class sees capitalism gravely under siege, a condition that social democracy, by its very definition, is unwilling to pursue to the demise of capitalism.

Mitchell and Fazi correctly identify supranational formations, institutions, and organs as obstacles to social change. Unlike Piketty and Varoufakis, they recognize that the EU, the IMF, the World Bank, the multilateral trade agreements, etc., are fundamentally created to strengthen the stranglehold of monopoly capital on the state. They are not impartial arbiters or equal-opportunity tools for shaping a progressive destiny.

They also grasp that a part of the globalization myth-- the claim that the state was in fatal decline-- is nonsense. Heavily promoted by academic leftists in the 1990s and into the twenty-first century, the rise of US exceptionalism, the US project of policing and dominating the world, and the 2007-2008 collapse, marked “paid” on the notion that the state was receding in power and significance. It’s noteworthy that as early as 1998, Linda Weiss demonstrably refuted this once fashionable position with her The Myth of the Powerless State.

Mitchell and Fazi fall on the right side of history with their defense of the resilience and centrality of the capitalist state.

But it is a capitalist state.

It is one thing to reclaim the state as the nucleus of capitalist social, political, and economic relations; it is quite another to reclaim the state from the tentacles of monopoly capitalism. Mitchell and Fazi succeed in achieving the former, but fail to open a path to the latter.

They are not alone in seeing Modern Monetary Theory (MMT) as a tonic for social democracy.⁷ They, like other liberals and social democrats, lament an opportunity lost when public policy is dictated by debt scolds. (“Debt scolds” are alarmist economists and policy makers who believe that debt is always dangerous, if not evil.)

Conservative Monetarists have fostered the notion that growing debt leads invariably to serious economic mayhem, a notion that constitutes a myth of tragic proportions in the eyes of Modern Monetary theorists. Put crudely, the Monetarist fear springs from a category mistake-- the conflation of contemporary state budgets (those not legitimized by precious metal reserves) and accrued debt with the budget and debts of an ordinary household. Unlike an individual household, a state’s central bank faces no natural or institutional limit on the issuance of credit and the incurrence of debt. The fears of the debt scolds are, therefore, unfounded.

And, they argue, embracing MMT can, as a result, break the stranglehold that debt-rating agencies, financial speculators, Monetarist pundits, and market-obsessed politicians have on government spending and social democratic programs.

But Mitchell and Fazi, like other MMT advocates, mistake the debt rating agencies, the financial speculators, the Monetarist pundits, and the market-obsessed politicians for honest intellectual brokers. They are not swayed by the avenues available to advance social democratic reforms. Their interest is in solely growing profits.

Clearly that point is driven home by the failure of prominent economists like Nobel laureate Paul Krugman who have loudly advocated against the austerity and fiscal abstinence of the Monetarist debt scolds for well over a decade. And to no avail. In the teeth of the gale winds unleashed by the 2007-2008 crash, capitalist policy makers steered the course of austerity, espousing a deep fear of debt-- every increase in government spending threatened catastrophe. Never mind that their fears were never realized.

The adherents of the continuing centrality of the state and MMT surely underestimate the death grip that the capitalist class has on all aspects of the state, especially over policy. Whether government spending may cross a dangerous threshold or not, whether MMT offers new life to the social democratic program, today’s capitalist rulers show no inclination to allow their hired politicians and servile journalists to engage or promulgate challenging ideas.

The growth of inequality (and the extreme concentration of wealth), the monopolization and subsequent conformity of the media, the continual erosion of the institutionally limited bourgeois democratic system, the deterioration of public education, and the other marks of the tightening grip of elites constitute a disappearing opportunity for social democracy.

It is not that social democracy will wane; it will always offer a promise to those too timid for revolutionary change. But it will offer, at best, a rear guard action to an increasingly powerful capitalist ruling class. It may retard the gains, slow the rot, but it will offer no reversal of capitalism’s course. That can only come from a revolutionary movement for socialism.

Taking issue with a venerated, sincere, but short-sighted advocate of the working class, Karl Marx mounted a measured defense of the value of trade union action to secure higher wages:

The general tendency of capitalistic production is not to raise, but to sink the average standard of wages, or to push the value of labour more or less to its minimum limit. Such being the tendency of things in this system, is this to say that the working class should renounce their resistance against the encroachments of capital and abandon their attempt at making the best of the occasional chances for their temporary improvement? If they did, they would be degraded to one level mass of broken down wretches past salvation…

...the working class ought not to exaggerate to themselves the ultimate working of these everyday struggles. They ought not to forget that they are fighting with effects, but not with the causes of these effects; that they are retarding the downward movement but not changing its direction; that they are applying palliatives, not curing the malady…

They ought to understand that, with all the miseries that it imposes on them, the present system simultaneously engenders the material conditions and the social forms necessary for an economic reconstruction of society. Instead of the conservative motto: “A fair day’s wages for a fair day’s work!” they ought to inscribe on their banner the revolutionary watchword: “Abolition of the wages system!” ⁸

Piketty and others have likewise shown that the “general tendency of capitalistic production is…” to increase inequality, paraphrasing Marx. Like trade union activism for higher wages alone, social democracy can only succeed in “...retarding the downward movement but not changing its direction; ...applying palliatives, not curing the malady…”

Instead of futilely seeking to turn the clock back to before “neo-liberalism,” our modern day warriors for social justice must embrace the revolutionary slogan: “Abolish capitalism!”

Greg Godels

zzsblogml@gmail.com

 
1 Capital in the Twenty-First Century, Thomas Piketty, translated by Arthur Goldhammer, 2014

2 Where social democracy doesn’t occur as a movement or party under its own name, it is represented from time to time or as the left wing of another movement or party (eg. UK Labour Party or US Democratic Party).

3 Chronicles On Our Troubled Times, 2017, p. 3-4.

4 In the Communist Manifesto, Marx and Engels describe utopian socialism as arising when the working class “...offers to them [the advocates of utopian socialism] the spectacle of a class without any historical initiative or any independent political movement.” For practitioners of utopian socialism, “[h]istorical action is to yield to their personal inventive action; historically created conditions of emancipation to fantastic ones; and the gradual, spontaneous class organization of the proletariat to an organization of society specially contrived by these inventors.”
Cooperatives, for example, are among the neo-utopian “fantastic conditions of emancipation” visited on today’s left. Academic leftists are leading neo-utopian spinners of “society specifically contrived by these inventors.”
5 For a clear and concise explanation of Modern Monetary Theory, see Modern Money, Robert Hockett, in Dollars and Sense, March/April, 2018, pp. 7-14. Hockett explains MMT in its social, legal, historical context.
6 Thanks to Tony Coughlan for recommending this important book.

7 Modern Monetary Theory springs from the notion that after the break with the Bretton Woods system tying currencies to gold and the shift to the dollar as a fiat currency in 1971, the issuance of currency becomes solely a matter of central bank decision making. MMT essentially uncouples money from any objective theory of value and makes its creation, its use, and its purpose a matter of convention or social choice.
The grizzled Howard in  the book/movie Treasure of the Sierra Madre as well as Karl Marx would be appalled by this view.
Its proponents overlook the danger of assets bubbles when any reasonable objective measure of value is lost. 

8 Value, Price and Profit, addressed to Workingmen, Karl Marx, 1935, p. 61.