After eleven years in government, the German Social Democratic Party are now having to cope with their greatest electoral defeat in the post-war period. On the day of the election there was a feeling almost of unbelief about what was happening, not just among party members but also among many supporters. How was it possible for the social democrats to be so humiliated after their time in office in coalition with the Green Party, and their time in coalition with the CDU/CSU? What had they done wrong? Or, to put it another way: why had they not picked up on the negative signals from the voters? Was it just a matter of having ignored these signals, or was it the result of the political process of orientation – beginning with the Schröder-Blair paper ten years ago – that had set the party on the wrong course, and had affected the whole of Europe?

According to Gerhard Schröder and Tony Blair, writing in 1999: ‘Social democrats are in government in almost all the countries of the Union. Social democracy has found new acceptance – but only because, while retaining its traditional values, it has begun in a credible way to renew its ideas and modernise its programmes’.1 Ten years on, Europe’s political constellation has changed. Only a few social democratic governments can now be found on the political map. And this at a time when the financial and economic crisis would seem to cry out for social democratic alternatives. Within this short period of time, European social democrats have gambled away their credibility, as demonstrated by the disastrous results of the 2009 European elections.

Why are people no longer voting for social democrats, though they stand for sustainable growth and social equity? Is it because their blueprints for the future have failed to produce the necessary ‘security in change’ for millions? What still remains in government policy of their fundamental values of solidarity and equity?

The demise of the welfare state

After the fall of the Berlin Wall, economic and social conditions changed rapidly across the world, not just in Germany. The dynamic forces of growth in the post-communist countries, particularly in China and Russia, were fuelled so strongly that international trade levels and the globalised division of labour reached new heights. During this phase all forms of regulation – everything organised by the state – became discredited – amongst other things because of the economic and social legacy of ‘actually existing state socialism’.

Calls for the regulation of globalisation fell on deaf ears. Indeed, the opposite occurred – denationalisation and deregulation found their way into the programmes of many parties, including those of social democrats. The neoliberal Zeitgeist of free (unregulated) market economics took hold across the world. The consensus on the need for social (i.e. regulated) market economics was eroded.

Despite Willy Brandt’s warning that ‘only the wealthy can afford a weak welfare state’ (an SPD electoral slogan in 1972), the modernisation theories of the Third Way were aimed at denationalisation in all fields. According to the Schröder-Blair paper: ‘Public expenditure as a proportion of national income has more or less reached the limits of acceptability. Constraints on “tax and spend” force radical modernisation of the public sector and reform of public services to achieve better value for money.’ The state was reduced to its sovereign tasks. Significantly, this meant that its role was gradually rolled back in the public’s perception. The public sector share of GDP, regarded as excessive, became a synonym for collective waste at the expense of individual freedom.

Regrettably, the SPD-Green tax reforms took up this idea and, among other measures, they reduced corporate tax and the top rate of income tax. Beginning in 1998, a step-by-step reduction in the top rate of tax was introduced, from 53 per cent in 1998 to 42 per cent in 2005. The basic rate dropped from 23.9 per cent to 15 per cent.

There is no doubt that the public sector needed to improve its level of customer service, and that red tape needed to be eliminated. Yet the signal sent out by this approach was that the state was a necessary evil, and that the levying of taxes was unacceptable theft from the pockets of the public. This shift in attitudes is expressed in the provocative words of the philosopher Peter Sloterdijk, who talks of state kleptocracy, and depicts a modern finance minister as a ‘Robin Hood who has sworn an oath to the constitution’.2

Sloterdijk argues that the present is stealing from the future, and reaches the conclusion that compulsory taxation should be abolished, with voluntary support from the rich being relied on instead. These sentiments reflect a notion popular in all sections of society in Germany, and undoubtedly in other countries: that taxes should be cut in order to give individuals more, with no questions asked about the consequences within society for equality of opportunity and justice.

Certainly, the mantra of tax cuts was what drove people into the arms of the FDP and CDU/CSU in the 2009 elections – the SPD lost 520,000 voters to the FDP and 870,000 to the CDU/CSU. Although the SPD pointed out that huge debts were being incurred at the expense of future generations, voters were persuaded by neoliberal ideology that tax cuts were just and would boost the economy. Even reminders of the necessity of tax revenue for the financing of education, research, innovation and infrastructure were ignored in favour of the needs of individuals. These attitudes create the conditions for irresponsibility on the part of individuals towards society as a whole and towards the state. The motto seems to be: if everybody thinks of themselves, nobody will be forgotten.

So what needs to happen? The decisive question is whether or not European social democrats will be successful in persuading people of the necessity of state benefits and investments, in the interests of equality of opportunity and social justice. Erhard Eppler has pointed out that the privatisation of the state’s monopoly on the use of force represents a threat to fundamental rights of freedom and justice.3 His view is that the progressive income tax that shaped Europe for one hundred years is now being abolished by neoliberals; and that plans for the introduction of a system of bands in the German income tax system will lead to the end of social equity in Germany, and that this model will eventually be emulated across Europe. As he has pointed out, these plans represent a departure for the CDU/CSU from a long-held position: ‘A man like Ludwig Erhard never had even the slightest of doubts regarding a progressive system of income tax. Under Konrad Adenauer, the top rate of tax was 53 per cent’.4 The consensus within society that ‘those with the broadest shoulders should bear a greater share of the burden’ is to be abandoned in the twenty-first century. This means that European social democrats must urgently redefine solidarity through the use of practical political examples.

The advent of the indebted state

The international financial and economic crisis in autumn 2008 led overnight to a renaissance of the state. Without the decisive action of governments in taking on state loans and guarantees, the financial markets in their entirety would have collapsed. Those who generally call for the rolling back of the state made an about-turn, and called for a state able to take on the risks and to take action, with all the implied consequences for tax-payers. States set up rescue programmes for the banks and the economy; and they organised economic recovery programmes to avert a comprehensive global recession. The G20 states, particularly the USA, China and the European Union, acted in concert. The debts that were incurred – quite rightly – as a result of the economic crisis are intended to help boost the economy and thus safeguard jobs. And regulation of financial markets – both at international and European level – also seems to be on track, although further close observation of this process with regard to the binding nature of transparency and monitoring will continue to be necessary. So far, so good.

Yet if, on top of all this, tax cuts for higher earners are now introduced in Germany, it will lead to an enormous weakening of the state and to further privatisation. As has already been the case, the high levels of debt will be used as an excuse for further privatisation by the state, including public services and social security systems. And higher state debt, incurred as a result of unjustifiable tax cuts, will exacerbate conflicts over the distribution of resources between rich and poor, which could lead to the abolition of social benefits, or to a situation in which compensation for the loss of benefits would only be available to those who had the means for private insurance.

In this way, the ‘fiscal state’, which finances itself through income-dependent taxes, is gradually being replaced by a ‘fee state’ without social criteria. One example of this is the introduction of university tuition fees.

Social democrats would thus be well advised to combat these developments before it is too late. Tax policy is a central political instrument for social justice and equality of opportunity in our society. The resolution passed at the 2009 SPD conference in favour of a wealth tax is a positive signal in this context. Yet this alone will not be sufficient. We need a discussion, including at European level, about what would constitute a socially just and sustainable tax system (for example a transaction tax).

The end of the nation state

Deregulation and privatisation have systematically restricted the ability of European nation states to take action; and this has been exacerbated by the decisions of the European Commission. Rivalry and competition have been transposed into national law through the rules laid down by the European Commission. In many areas, national competences and rules have even been replaced by European ones (for example the Services Directive). And there are also international deregulatory agreements that have to be implemented.

Many individual citizens view the nation state as having become a mere implementor of European regulations (Brussels bureaucracy), or as unable to take action itself. On the global labour market in particular, individuals are seeing the limitations on national laws. This creeping loss of powers by the European nation states does nothing to increase the willingness of individuals to finance these states. Thus the challenge for all European social democrats in this century will be to find answers to market globalisation, with proposals for international and European regulation, as, for example, called for in the SPD’s Hamburg Programme adopted at the Federal Party Conference in October 2007: ‘Where the nation state is no longer able to provide the markets with social and ecological frameworks, the European Union has to take over’. As the programme points out: ‘The federal nation state is not necessarily weakened by each conferral of decision-making power onto the EU. This also applies to taxation policy. Minimum rates for corporation taxes, decided by the EU, would even strengthen it’.

As Jon Cruddas and Andrea Nahles write in their Good Society document: ‘There is an urgent need for a coordinated Europe-wide fiscal stimulus … We need to introduce European-wide reforms in financial and economic governance.’

Willy Brandt stressed that every era demands its own answers. Thus, social democrats in Europe must give priority to clarifying the relationship between individual nation states and the European Union, in order to avoid social Europe being weakened from within. European integration must be deepened through a new form of democratic statehood, in order to safeguard the primacy of politics over economics, ensure cultural diversity, and allow citizens to realise their full potential.

As new SPD chairman Sigmar Gabriel said at the party conference in Dresden: ‘If we take international policy seriously, a European and worldwide left is also needed, which provides clear answers from a social-democratic perspective, rather than varied ones. To me, these are important questions of direction, which must be asked, and on which we must strive to assert our interpretation’.5

Those who wish to live freely and in self-determination must not forget that they rely on support from the public institutions. They therefore need the state, which creates the conditions for solidarity – for equality of opportunity and social cohesion. In order to make this possible, however, social democrats must be successful in anchoring their ideas of freedom, justice and solidarity in people’s minds, in such a way that these ideas do not seem distant from people’s everyday hopes and concerns.

We need a new process of understanding between the citizen and the state, in which citizens accept that they have responsibility in civil society as elements of the state. Policy-makers – particularly European social democrats – are therefore called on to shape and organise this identity process.

Endnotes

1 Europe: The Third Way/Die Neue Mitte, http://library.fes.de/pdf-files/bueros/suedafrika/02828.pdf

2 Cicero (2009), ‘Kleptokratie des Staates’, 25 June.

3 Eppler, Erhard (2009), Der Politik aufs Maul geschaut. Kleines Woerterbuch zum oeffentlich Sprachgebrauch, Bonn, Dietz Verlag.

4 Eppler, Erhard (2009), Speech at SPD conference, http://www.spd.de/de/pdf/091115_rede_eppler.pdf.

5 Gabriel, Sigmar (2009), Speech at SPD conference, http://www.spd.de/de/091113_rede_gabriel_bpt09.pdf.