MARKET-FRIENDLY SOCIAL DEMOCRACY[1]
Jonas Hinnfors
Department of Political Science
University of Gothenburg
Sweden
Paper presented at the ‘Rethinking Social Democracy II’ conference, Swansea 31 March – 2 April 2005
A core aspect of the social democratic project is its views on the liberal market economy. It is therefore of considerable interest that traditionally strong social democratic parties, such as the British Labour Party and the Swedish Social Democrats (SAP), are increasingly earning a reputation of becoming ‘more neo-liberal than social democratic in character’ (Thomson 2000: 7). Purportedly, Labour used to be ‘social democratic in its stated aspirations and ideology. ... [S]ubsequently ... these were again subordinated to economic exigencies’ (Hay 1999: 57 f.). Today Labour’s ‘policy far more closely reflects the preconceptions and prescriptions of the Thatcher and Major governments’ (Heffernan 2000: 72, viii; Callaghan 2000: 163 f.; Morgan 2001: 588) spreading ‘the gospel of market fundamentalism’ (Hall 2003: 19, 13-14).
SAP, the very epitome of a Golden Age social democratic party, gains a reputation of walking much in tandem with the Labour Party. ‘SAP has fallen ‘victim to the ascendancy of neo-liberal economic thought’ (Lindvall and Rothstein 2004: 2) and begun the demise of the ‘Strong State’ (Lindvall and Rothstein 2004: 2). A decade earlier ‘Sweden seemed immune to worldwide political trends in a conservative or neoliberal direction. [But s]uddenly, this success story unravelled in 1989-91’ (Pontusson 1992: 305; Pierre 1999: 50 f.; Scase 1977: 164 f.). Both parties have been described as ‘cognitively locked [up] into these new [neo-liberal laissez-faire] ideas’ (Blyth 2002: 237 f.).
With the notion of neo-liberalism corresponding to ‘non-interventionism’ or ‘laissez faire’ it appears premature to characterise Labour and SAP as neo-liberal. Indeed, financial markets have been deregulated and market mechanisms tried in the public sector but, why would the parties remain so committed to cutting unemployment and to keeping up the welfare state with significant spending increases? Why would they keep up high taxes, or even recently raising them? Why not instead take the opportunity and really finishing off the still incomplete retrenchment of the welfare states begun during the Thatcher era and, albeit to a lesser extent, by the Swedish 1991-1994 non-socialist Cabinet? This is not neo-liberalism.
However, forty years ago social democracy still had a discursive aura of socialism around it. Even so, hardly any real ‘planning’ authorities surfaced. Whatever they had in mind about the future, the planning-oriented social democrats failed utterly to deliver (Coates, 2001; Cronin 2004: 66: Gamble 1894: 172; Hay 1999: 57). The fact that few measures of an alternative economic system were actually introduced is puzzling. With their minds set on socialism, there must have been room for delivery. The fact is that the failure indicates the parties’ difficulties in distancing themselves from the basic tenets of the market economy. The claim made in this paper is that on a key element—underlying ideological views on the status of the international capitalist market economy—the parties’ views were more or less friendly already during the Golden Age of social democracy (liberally defined as beginning in the mid 1960s and ending in the early 1990s).
A neglected—but powerful—indicator of the parties’ beliefs is the way in which they explain (in manifestos, programmes etc.) what they actually mean by concepts like ‘planning’ and ‘socialism.’ Rather than taking these concepts at face value one could actually look into the parties’ operationalisations of them. As will become clear in the following, both parties have continuously—in government and opposition—been careful only to suggest what could be reconciled with the market economy. With a range of welfare-state corrections of the market economy’s outcomes being the parties’ main objectives, rather than moving in the direction of ‘planning’ or ‘a revisionist road to socialism’ there is ground for rethinking the concept of social democracy, of the scope for revisionism and of the movement’s history and future.
The social democratic project
Efficiency, full employment and equality. Such would be the brief definition of social democracy (Przeworski 1987: 241). A specific approach towards the market economy takes central stage. Various forms of State intervention are deemed necessary to prompt the market into desirable behaviour and to aid those unable to sustain themselves. Typical measures include the eight-hour day, various welfare state policies, industrial accident legislation, zoning laws, environmental restrictions, collective bargaining legislation etc. (Glyn and Wood 2001; Hay 1999: 57; Hibbs 1987: 4; Shaw 1993: 116; Tilton 1992: 414 ff.). Although other types of indicators have changed drastically over the past decades (e.g. union influence/legislation, party membership size and composition of the electorate) they are seldom included in definitions of social democracy (Shaw 2002: 6; Glyn and Wood 2001: 61 f., 291; Howell 2000; King 2002).
Far-reaching as the policies may appear—some hold they correspond to a ‘planned’ society ‘where freedom for private initiative is framed or curbed by social control’ (Tilton 1992: 417) in the service of the common good (Berman 2003: 142).)—it’s surprising how closely they conform to a mixed market economy. It appears ‘reformism’ as such offers little help without further clarification (Wickham-Jones 1995: 700). This is not only a problem with the definitions. It’s a problem social democracy has faced for the last forty years.
Labour: market logic
Labour attempted several planning initiatives in the 1960s, including a ‘Prices and Incomes Board,’ a ‘Department of Economic Affairs’ and a ‘National Plan’ for investments and growth. A major goal was to boost management and scientific skills by ‘removing the fetters of social conservatism’ (Cronin 2004: 66). In short, these measures were all a ‘toothless’ ‘dream’ (Cronin 2004: 66; see Goodhart 1965; Stewart 1977: 50). Radical voices wanted public ownership to ‘change the public-private balance’ (Judith Hart, quoted in Hatfield 1978: 158). At the same time the Party advocated ‘competitive stimuli by giving a lead on investment’ and ‘reduc[ing] private monopoly by inserting public enterprise competition’ (Eric Heffer, quoted in Coates 1980: 90). Thus, public ownership would be a means to making better use of market processes with real public influence changing the way private companies operated (Holland 1975: 159 f., see also Chapters 2-4). Overall, policies centred on encouraging private enterprise to becoming more competitive through mergers etc. (Beckerman 1972: 191 ff.; Gamble 1994: 120; Labour 1970[2]; Shaw 1996: 78; Woodward 1993: 88).
Lack of delivery has been accompanied by lack of ideological underpinning. Very little was to be done unless ‘justifie[d]’ by business (Labour 1964). In 1966 Labour’s ‘overriding aim’ was the ‘pursuit of solvency and the defence of the pound ... [by creating] overseas confidence in sterling’ and ‘[t]o maintain full employment and a high level of investment in productive industry’ (Labour 1966). ‘Confidence’ and ‘productivity’ indicate robust market acceptance. Even in reference to the symbolically important coalmines the Party would not venture anything but market conformity: ‘Everything depends upon efficiency, costs and the resulting prices. If more can be profitably sold, then no barrier will stand in the way of expansion’ (Labour 1966). Profits and markets were essential in this thinking.
Following the left’s increasing NEC influence (Hatfield 1978) the ownership question resurfaced in the early 1970s. The party claimed it would ‘substantially extend public enterprise’ by taking some sectors into public ownership (Labour 1974a). But, the Government claimed its ‘first priority’ was a ‘determined attack on inflation and the appalling overseas deficit.’ Somewhat peculiarly given Labour’s Keynesian position, the Tories were accused of having allowed deficits to accumulate (Labour 1974b).
Whereas public ownership was important in the 1973 Party programme with ‘[p]ublic control and participation’ projected for certain sectors, the meaning of ‘control’ was left unexplained (Labour Party 1973: 32 ff.). The programme was very evasive regarding financial institutions. Studies were ‘under way’ and, in keeping with market ideals, the Party stated that ‘our exports must not be allowed to become uncompetitive against those of our leading competitors’ (Labour Party 1973: 16).
A credo about the need for social justice for everyone, the October 1974 manifesto was still emphasising productivity, competitiveness and high investment, in a ‘new deal’ (Labour 1974b). Some actors favoured protecting the economy from the international market (Coates 1980: 86 ff.; Gamble 1994: 178 f. Hatfield 1978: 151 ff.; Stewart 1977: 216 ff.). But, ridding the Labour Party of its adherence to the market was a formidable task. Increased public ownership were to improve the way the market functioned and ‘towards state-initiated restructuring of British capitalism on a large scale’ (Coates 1980: 96; Crosland 1956; DEA 1969; Holland 1975: 24; Shaw 1996: 115) involving the same ‘shedding of labour’ (Coates 1980: 96) as any other capitalist rationalizing process. The market-conforming policies and ideas prevailed.
If the Labour Party texts did somewhat turn away from the market in the aftermath of the oil price shock in 1974, the formulations were soon back on more familiar ground. The Labour Party wanted to ‘ensure that consumers are not exploited by monopoly producers’. Monopolies render a market economy less efficient. By sentences like these, the Party could show a conviction to ensure real - and fair - competition become the hallmark of the economic system. Labour wanted to give ‘high priority to working for a return to full employment,’ although full employment ‘must go hand-in-hand with keeping down inflation’ (Labour 1979). The public sector was given a role by the manifesto to outline ‘positive strategies’ for industry, aid in investment, and provide training and retraining programmes. Public ownership should only be used where ‘possible’ and as a means to aid specific companies. Industries had to ‘adapt to new markets and technological change’ (Labour 1979). There is little to indicate other than that the notion of the market was firmly entrenched in Labour’s thinking. Government planning was the weaker in comparison to the broad outcome of the market.
If ever, socialism was on the 1979-1983 agenda. Capital was the enemy. In NEC documents, where the left consolidated its position (Minkin 1978: 326), the long-term goal was to ‘substitute private ownership by; public enterprises, workers’ cooperatives, municipal ventures and ownership by workers’ capital funds’ (Labour Party, NEC 1981: 11). Capitalism’s inner drive to ‘move in search of the highest private profit’ should be replaced by ‘social control of production’ (Labour Party, NEC 1981: 11). But, most intriguingly, ‘small businesses’ were excluded from the need for common ownership. They should even be ‘encouraged’ (Labour Party, NEC 1981: 21). Even more paradoxically, ‘the level of productivity right across industry’ should be raised by making it ‘more responsive to technical change and to changes in demand - particularly in world markets’ (Labour Party, NEC 1981: 19 f.). Somehow the market economy was to remain.
Already the 1982 Party programme was distinctly less radical. Now, private companies were manifestly accepted and the programme explicitly stated that ‘[w]e do not say that common ownership will need to reach down into every aspect of economic activity’ (Labour Party 1982: 9). The goal was to give ‘the community decisive power over the commanding heights of the economy’ (Labour Party 1982: 9) but, ‘joint ventures between public and private companies’ was added to the list of public ownership forms with the range of nationalised industries drastically reduced (Labour Party 1983: 11; Labour Party 1982: 9). The increased attraction of the market was shown by the proposal to give ‘far more freedom [to public enterprises] to raise funds on capital markets’ (Labour Party 1983: 11). A more determined way to deal with the market economy would perhaps have been to reduce the influence of capital markets.
The election manifesto, which contributed to the devastating 1983 election defeat, was surprisingly market-focused. According to the manifesto ‘we must … [maintain] the pound at a realistic and competitive rate’ (Labour Party 1983: 9). ‘[P]ublic borrowing [should be] financed, through the financial institutions and national savings, without disruptive or damaging changes in interest rates’ (Labour Party 1983: 9). ‘Realistic’ and ‘competitive’ exchange rates are those set by the international capitalist economic system. A society permeated with the will to allocate resources according to ‘needs’ would hardly pay much attention to ‘competition’ as such.
For all the statements about ‘controls’ and ‘monitoring’ the Party was unexpectedly weak. ‘[C]ontrols w[ould] be closely linked to our industrial planning, through agreed development plans with the leading price-setting firms’ (Labour 1983). ‘Plan’ had clear overtones of socialist power but, what would be ‘agreed’ upon was, obviously, to be set by the international capitalist market system. Labour’s ‘relationship with private corporate capital is not new in Labour Party terms’ (Coates 2001: 300). The Party’s rhetoric squared rather badly with what was actually said on concrete measures. Core Labour formulations pointed in the direction of a tacit acceptance of market forces.
It has been suggested that ‘[t]he 1987 manifesto was essentially a watered-down version of the 1983 document’ (Driver and Martell 1998: 14) and that ‘the modernization of the Labour Party began in earnest’ only after the 1987 election defeat. However, even though it retained considerable pledges to combat unemployment and poverty, the proposed means had changed completely. Roughly, the Party was back to where it stood in the 1960s. Symbolic traces of socialism remained but hardly substantively (Ross 2000: 26; see also Callaghan 2000: 118 ff.). By raising a warning finger that ‘all [but a few welfare state policies] that require substantial public finance must take lower priority in terms of timescale and public resources’ (Labour 1987) the Party showed there was a narrow limit to public spending. Moreover, the public sector was manifestly described as a means to achieve certain ends but not an end in itself. Prioritised sectors were ‘health, housing, social services and crime-fighting.’ i.e. the ‘classic’ areas in a social liberal market economy, which were also targeted in Working together for Britain where Labour wanted to ‘Rebuild[ing] Britain.’ The investment plans concerned infrastructure and schools and hospitals rather than publicly owned industries. Industry was to be boosted and modernised by setting up ‘Enterprise Boards’ (Labour Party 1985b: 10, 14).
Rather than controlling exports, imports and exchange rates, as attempted in 1983, Labour wanted to ‘attract and retain British savings and investment in Britain’ through the tax system (Labour 1987). ‘Modern industry … requires consistent government support in education and training, and in research (Labour Party, TUC-NEC 1987: 6).
Already two years earlier, the Investing in Britain Programme was a catalogue of proposals on how to help industry modernise and increase competitiveness through ‘joint discussions with firms and unions’ in order to ‘identify priorities for investment ... provide financial assistance’ to firms (Labour Party 1985: 7) and setting up a National Investment Bank with the objective of providing ‘industry in Britain with the long-term finance it needs’ (Labour Party 1985: 11). The market’s key function was made clear by stating that ‘there is no reason why total employment in manufacturing should continue to fall – provided British industry can capture a larger share of a growing market’ (Labour Party, NEC 1984: 11, italics in original; see Labour Party, NEC 1985). Market acceptance cannot be stated more unequivocally.
In the ‘Policy Review,’ set in motion in 1987, Labour ‘laid out a series of far-reaching proposals designed to correct market failures’ (Wickham-Jones 2000: 16). The 1989 Meet the Challenge, Make the Change report stated that ‘the market and competition are essential in meeting the demands of the consumer, promoting efficiency and stimulating innovation, and often the best means of securing … changes which are needed to take the economy forward’ (Labour 1989: 10). This clear market-correcting view was the next step in the party’s move towards harmonising its rhetoric with a surprisingly robust view about the market economy. In Looking to the Future, (Labour 1990), the Party coined its philosophy on on the relationship between public sector and private enterprise with the slogan ‘[b]usiness where appropriate: government where necessary’ (Labour 1990: 6).
SAP: Socialism in the closet
Much as the Labour Party the SAP leadership has been cautious about veering far from the fundamentals of the market economy. Almost without exception SAP’s alternative visions for the economic system have been well inside the existing system. Refraining from ownership as a means of correcting the market is far from a ‘new’ social democracy position. According to former Swedish Prime Minister Tage Erlander, the demand for nationalisation had been pushed into the background. Instead the role of the public sector has been that of an overarching body rather than an all-powerful commander (Shaw 1993) providing equality through a ‘cradle-to-grave’ welfare state (Gray 1996) and economic policies. Indicative of SAP’s guarded attitude towards a socialist economic system is the taboo status of ‘socialism’ in SAP documents. Not a single reference to socialism can be found in SAP election manifestos since before 1964.