Bridging the gap between the interests of their traditional supporters and the demands of the global economy is major challenge for social democrats today.

If European social democracy is to recover from the experience of three decades of dominance by neoliberal thinking, a world economy on the brink of financial meltdown, and a substantial increase in economic insecurity and social inequality, its leaders and thinkers must acknowledge and embrace two fundamental truths: first, that global markets and firms play a major role in today’s economy, and, second, that European societies are undergoing a transformation in the diversity of their workforces and in new family patterns.

The political realities of today’s world are not the same as those of the nineteenth century, when the labour movement began to grow, or of the twentieth century, when an organised and managed market economy and extensive welfare state were prevalent. The new world economy we live in is shaped by global firms and global production chains. Few of the products we consume do not have components produced in faraway countries and/or by large transnational corporations. Everyday shopping connects different parts of the world through supply chains. The world economy is interdependent and characterised by far stronger competition than hitherto between producers, and new patterns of relocation. Jobs come and go, with firms investing in different places, and fewer and fewer people are able to enjoy stable employment. Heightened competition for jobs has contributed to a widening of social inequality, and, in particular, to stagnating wages for the low-paid.

This is matched by workforces and populations more diverse than ever before. Women workers have claimed equal careers and rights, and this has had massive implications for family life. The rise of female employment has fundamentally changed family structures – and vice versa. Working patterns vary with the needs of families, and the transition between work and family has become blurred. At the same time, ethnic diversity in workplaces and neighbourhoods has become a reality in many places. Migration and persisting ethnic identities are seen as a challenge to the fabric of western societies, in particular on religious grounds.

Both developments have undermined and eroded the social settlements that underpinned post-war European societies. Regulated labour markets, egalitarian wages and a focus on the male breadwinner stabilised the middle classes in the past, but these cannot be resurrected for the future. In many countries social-democratic governments have facilitated these processes but without being able to shape them towards more economic security and equality. The financial crisis may have discredited neoliberal economic policy, and the notion of self-regulation by financial markets; but it has not provided policy-makers with a blue print for new policies.

Social democrats face additional challenges because their traditional supporters include those who are vulnerable to the processes of restructuring. The lower middle classes, the traditional backbone of social-democratic parties, are at risk of being left behind in our more polarised societies. Their goals of more equality, social investment and protection can only be achieved against the politics of pure market forces. They are easily accused of relying too much on big government and hindering investment. They are also less media savvy, less familiar with facebook and twitter, and have fewer international contacts and interests, and are therefore in danger of being left behind in the global discourse on sustainability and governance.

Rather than being tempted to engage in nationalist populism and unrealistic promises, as some on the far right and left are, social democrats must attempt to build bridges between the global economy and the needs of modern societies in the interest of the bottom half of income groups. They also need to minimise the infighting within their own organisations and avoid further sectarian splits. Ideally, they should reach out intellectually and personally to the world of business and social campaigns, and try to educate their organisations and members about the new world we live in. They have to realise the limited capacity of the state – even, ironically, at a moment when the state has intervened in the economy more than any time in post-war history. The compass which guided the left throughout the twentieth century will not help them; they must find new ways and a new orientation. One key component here is dialogue – not just within their own organisations but in a broader dialogue across their societies about the values of social justice in a Europeanised, globalised and diverse world.