Social democrats need to move beyond neoliberalism to find new ways of promoting the well-being of ordinary citizens.

The crisis of neoliberal capitalism was widely supposed to be a huge opportunity for the mainstream left, in Europe and elsewhere. Having been largely sidelined politically and on the defensive intellectually for most of the period since the neoliberal revolution of the 1980s, the spectacular collapse of that paradigm would, surely, enable it to finally go back on the offensive. Given the bankruptcy – literally! – of liberal policies, voters would trust mainstream left parties to reduce inequality, rein in the markets, re-impose sensible regulation, channel investment towards social goals, and defend and rebuild welfare states and other institutions vital to the well-being of ordinary working people.

That has not happened.

Most mainstream left parties have performed poorly, in some cases disastrously, in recent national and European elections. All the signs are that liberal and right-wing forces have managed to retain, and have even strengthened, their intellectual-ideological position in public debate; and there is little sign of the left recouping some intellectual hegemony. It seems ironic, but surveys suggest that frightened voters have sought the solidity and supposed economic competence of centre-right parties. Worse, the knives are already being sharpened: regardless of the real causes of the crisis, the resultant high unemployment and fiscal deficits will be used, as in the early 1990s, to attack labour market institutions, unions and welfare states.

Rather than crying ‘foul’, we must analyse how this happened.

The picture varies between countries, but some key common themes emerge. Social democrats seeking to associate themselves with ‘modernity’ have become enamoured of financial capitalism and liberal policies and values. Their post-crisis critiques of neoliberalism have thus been unconvincing. Linked with this, alliances with the broader labour movement and other progressive social movements have become strained or have been neglected. Voters have lost faith that social democrats are better able than the right to manage capitalism (especially the macroeconomy and the welfare state) in the interests of ordinary people. The result has been a crisis of identity, and there has been widespread abstention from voting, and/or support for ‘hard’ left (and to some extent also extreme right) parties.

What now?

Social democracy in Europe needs a period of intellectual renewal. It must find new answers to the old question of how to manage capitalism so as to maximise the well-being of ordinary citizens in the face of new challenges; in particular it must address the globalisation of economic relations, and the need to shift our production and consumption models to respect the ecological constraints of our planet and the demands of global justice.

The starting point for renewal should be the crisis and its aftermath, which have revealed some old, widely-forgotten truths. First, Keynes was right – in two ways. Market economies are inherently unstable and require government intervention at both the micro and macro levels (regulation, demand management); but also, governments have the means to do so – contrary to the fatalist approach of both liberals and the extreme left. Second, labour market institutions and regulations and the welfare state are key stabilisers of economies and societies and promoters of social justice. Moreover, they often increase economic efficiency in a world of market imperfections and dysfunctionalities. Third, gross and widening social and economic inequalities are not only ethically objectionable; they are endemic in an untrammelled capitalist system, and ultimately inimical to economic development. Fourth, much of the needed regulation and institutionalisation has to be located at supranational (European or even global) level; if not it will be undermined by goods competition or capital mobility.

The mainstream left has lost sight of these – and some other – basic truths that have been important pillars of the social-democratic project in the past. It needs to re-associate itself with them, and in so doing distinguish itself on the one hand from liberals and conservatives, and on the other from a nationalistic, inward-looking hard left, lost in political fantasies about centralised decision-making, and/or economically illiterate. At the same time it is necessary to find new answers in a globalised and resource-constrained world that will enable alliances to be forged between broad sections of society with diverse interests: most fundamentally this relates to an accommodation between the so-called winners and losers of globalisation.

That is a ‘big ask’ and approaches will obviously vary between European countries. But if the key lessons are learnt from the crisis and taken as a starting point, it can be done.

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