Social Democracy, the “Third Way,” and the Crisis of Europe, Part 3

Alejandro Reuss

Historian and economist Alejandro Reuss is co-editor of Triple Crisis blog and Dollars & Sense magazine. This is the final part of a three-part series on the historical trajectory of European social democracy towards the so-called “Third Way”—a turn away from class-struggle politics and a compromise with neoliberal capitalism—and its role in the shaping of the Economic and Monetary Union of the EU. (See Part 1 and Part 2.) It is a continuation of his earlier series “The Eurozone Crisis: Monetary Union and Fiscal Disunion” (Part 1 and Part 2). His related article “An Historical Perspective on Brexit: Capitalist Internationalism, Reactionary Nationalism, and Socialist Internationalism” is available here.

Social Democratic Revivalism?

A deep crisis of global capitalism, its seeds sown in part by a dramatic deregulation of finance, Wolfgang Münchau of the Financial Times notes, would seem tailor-made for a revival of the “centre-left.” Why has this not happened? “The deep reason,” Münchau argues, “lies in its absorption of the policies of the centre-right, going back almost three decades: the acceptance of free trade agreements, the deregulation of everything, and (in the eurozone) of binding fiscal rules and the most extreme version of central bank independence on earth. They are all but indistinguishable from their opponents.” For the most part, however, this has led neither to a general collapse of these parties, nor to a rejection of “Third Way” politics and sharp turn back toward a full-throated social democratic reformism.

The main exceptions, among relatively large countries, are Greece and Spain—the two countries hit hardest by the crisis, and the two which saw the most explosive mass protest movements against austerity. On the electoral front, voters punished the mainstream social democratic parties—the Panhellenic Socialist Movement (PASOK) in Greece and the Socialist Workers’ Party (PSOE) in Spain—for their administration of austerity policies. These parties’ former supporters have gravitated to new political entities promising to resist austerity measures.

In Greece, the SYRIZA coalition rose from less than 5% of the vote in national parliamentary elections in 2009 to more than 36% in January 2015. PASOK, which had not polled less than 38% of the vote since 1977, saw its vote drop from 44% to less than 5%. The story, alas, does not end with a decisive turn against austerity policies. After striking a tough stance against austerity and engaging in protracted and tense negotiations with the “Troika” (European Central Bank, European Commission, and International Monetary Fund), SYRIZA capitulated to a new round of painful austerity (imposed by its creditors as a condition of the “third bailout”). Despite the split of its left wing as the new Laïkí Enótita (Popular Unity) party, SYRIZA basically maintained its electoral strength in the next elections in 2015.

In Spain, the new left party Podemos (“We Can”) debuted with just over 20% of the vote in its first national election (December 2015). Meanwhile, the PSOE dropped from 29% of the vote in 2011 to 22% in 2015. The largest party of the right, the Partido Popular (PP), which has alternated in power with the PSOE since the early 1980s, dropped even harder—from about 45% to 29%. Podemos’ dramatic rise to national relevance inspired hopes of further gains, and even a Podemos-led government, after the June 2016 elections. That did not come to pass. Podemos’ electoral support hardly budged (to just over 21%), leaving it the third-place vote-getter, just behind the PSOE, while the PP remained the top party, regaining some lost ground to about 33% of the vote.

The emergence of SYRIZA (at least until its capitulation on the “third bailout”) and Podemos inspired hope not just for a turn away from austerity policies, but also the renewal of a robust social democratic reformism in the style of the post-World War II period. Meanwhile, in the U.K., a turn away from Third Way politics took the form of a successful leadership challenge within the leading social democratic party: The September 2015 victory of MP Jeremy Corbyn as Labour Party leader signaled a clear rejection of the “New Labour” politics associated with the party’s last two prime ministers, Tony Blair and Gordon Brown, and with Corbyn’s rivals for the leadership, who had both served as cabinet ministers under Blair or Brown. Lest the meaning of the victory be unclear, reported The Telegraph, “Mr Corbyn’s jubilant backers chanted: ‘Old Labour, not New Labour.’” (Corbyn more recently beat back a counter-attack from the Blairites, winning a leadership challenge by an even larger margin.) There are, in addition, a few other emergent left alternatives to the main social democratic parties—such as Die Linke in Germany and the Left Bloc in Portugal. Green parties, another potential source of left opposition to Third Way social democracy, have only gained electoral traction in a few countries, most notably in Germany (where the Greens were twice in governing coalitions with the Social Democrats). In general, however, we have yet to see powerful coalitions between the class-struggle left and the greens.

Class Struggle and Revolutionary Politics

There are also lessons here for the revolutionary left—that is, those whose aim is not some form of reformed capitalism, but the replacement of capitalism by an egalitarian, democratic, and cooperative alternative. The case for this perspective relies on two ideas. First, that it is necessary to abolish capitalism to solve the searing problems of the present day. Second, that it is possible to build a future society, embodying the virtues described above, and that this would be preferable to capitalism.

Revolutionary socialist politics have a long history in Europe, and there is no shortage of self-described revolutionary organizations, of diverse ideological traditions, in Europe today. However, for the most part, revolutionary socialism has been quite marginal to the politics of most European countries for decades. (Even in countries with influential Communist parties, like France and Italy, these parties had long since settled into reformist politics.) The relative stability of European capitalism in the latter half of the 20th century and the strength of a reformist social democracy (in some cases paying ceremonial tribute to the dream of a “socialist” society far off on the horizon) blunted the appeal of social revolution. The present period shows, however, that changed underlying conditions—the erosion of social democratic reforms, the eruption of a serious crisis of capitalism, the vacuum created on the left by the rightward drift of the social democratic parties themselves, and even the emergence of mass opposition movements in some countries—do not automatically lead to growing influence for anti-capitalist forces on the left.

The reconstruction of a meaningful anti-capitalist politics in Europe faces two enormous challenges:

First is the reconstruction of the working class’s capacity for struggle.

It is not only in the United States that the power of the workers’ movement has eroded in recent years. The decline in union membership as a percentage of employed workers (or “union density”) serves as a quick, rough indicator. High-income countries are divided into basically two groups, those where union density has declined significantly and those that are treading water. Between 1999 and 2012-2014 (using the most recent year for which data are available), out of 21 high-income OECD countries, not one had experienced a substantial increase, six were treading water (with a change of less than 10%, e.g., for a country with a union density of 25% in 1999, a changes of less than 2.5 percentage points in either direction), while fifteen had experienced substantial decline.

Strike rates, too, are down across the capitalist world. In principle, a decline in the most visible form of conflict between capital and labor could have any of several explanations: a trend toward more amicable relations between capital and labor, a substitution of alternative means of struggle by workers and unions, or a preponderance of power on one side or the other (so that the weaker side does not dare engage in a frontal confrontation). It’s quite obvious, in the current period, which of these is the case.

The weakness of working-class movements is also evidenced in income trends. Real wages in high-income capitalist countries have stagnated in recent decades. As productivity has increased, and employers have captured most of the income gains, workers have seen their shares of national income erode. Economist Jayati Ghosh, summarizing the findings of a recent McKinsey Global Institute report, describes the trends as follows: “From 1970 to 2014—with the brief exception of a spike during the 1973–74 oil crisis—the average wage share across the six countries studied in depth (United States, United Kingdom, France, Italy, the Netherlands and Sweden) fell by 5 percentage points. In the most extreme case of the United Kingdom, it declined by 13 percentage points.”

This is not to say that inexorable forces doom workers everywhere to their current fate. Differing institutional conditions in different countries can make significant differences. Workers have suffered a catastrophic decline in union membership in some countries but not others, with the political conditions for union recognition, collective bargaining, and the right to strike explaining much of the difference. In terms of income shares, Ghosh argues, “state policies and institutional relations in the labour market matter” as well.

It is not a truism, however, that changes in government policy (like more favorable legal conditions for union organization or greater protection for the right to strike) must precede a major turn of the tide. A worsening legal and political environment, to be sure, is a major factor in labor-movement decline in many countries. However, we should recall that major upsurges in labor organization, strike waves, and so on have often happened under conditions that, in important ways, were less favorable to the labor movement than those of today. (Think, for example, of the great upsurge of the 1930s in the United States.) Nor is it obviously the case that a reconstruction of social democracy’s postwar heyday—with large and stable unions, a more favorable division of the national income, an expanded welfare state, or a reinvigoration of the reformist social democratic parties themselves—must precede the revival of a more radical anti-capitalist politics.

From the vantage point of a revolutionary anti-capitalist project, what is necessary is to reverse the defensive and demobilized position—and the death by a thousand cuts—that is the current reality for the working class in so many countries. This means a revival of the capacity for mass action, such as large-scale strikes, which leading revolutionary Marxists of a century ago, like Rosa Luxemburg, saw as cauldrons of class consciousness. It requires a broad politics of solidarity, in which struggles are not confined to the narrow interests of this or that particular group (whether defined by occupation or industry, broad social layer such as “white collar” vs. “blue collar” vs. “the poor,” or by fault lines such as native vs. immigrant). What it does not require—indeed, what must not be tolerated—is for such unity to be forged at the expense of silencing the grievances of historically subordinate groups (such as racial/ethnic minorities, women, or immigrants). It must not assume that the leadership will come from some traditional “core” of the working class, who will deign to reach out and include other groups. Indeed, the leadership for a new radical movement may come precisely from groups that were excluded or marginalized by the labor and social democratic movements of the past. Moreover, the forms of mass action need not be exclusively workplace-based. Large protest marches against austerity, in Greece, Spain, and other countries, were certainly an encouraging sign (though they have ebbed since).

Second is the reconstruction of a nexus between class struggle and socialist politics.

To accomplish that, it is not sufficient for socialists to proclaim the superiority of an egalitarian, democratic, and cooperative socialism of the future to the unequal, hierarchical, and predatory reality of capitalism today. An appealing vision of a new socialist society is certainly necessary, however partial and speculative it must be (a detailed and specific blueprint would verge on utopian fantasizing). But it is not sufficient, since a vision of that kind—of the world we are fighting for—has to be quite stable. It cannot change, as political slogans and demands must, to match the pulse of present-day struggles. (At worst, a steadfast emphasis on the necessity of revolution or the superiority of life “after the revolution” can devolve into static sloganeering disconnected from such struggles.)

Nor is it sufficient for revolutionaries to be exemplary builders of labor unions or working-class parties, or exemplary fighters for immediately realizable reforms. Serious engagement in actual movements is necessary, if revolutionaries are to achieve meaningful influence with the much broader groups that are organizing and fighting (however partial the objectives of those movements may be). Again, however, it is not sufficient. Building protest and reform movements can lead to real gains within the confines of capitalist society—rather than advancement toward the abolition of capitalism. (At worst, “revolutionaries” who confine themselves to the role of building reform movements are really not revolutionaries at all, but exemplary reformists.)

Déjà Vu All Over Again?

The two roads outlined above are not hypotheticals. They are descriptions of a division that afflicted European social democracy in the late 19th and early 20th centuries—between the so-called “minimum program” (the fight for reforms realizable under capitalism, which by the 1910s was unmistakably the real daily work of the main social democratic parties) and the “maximum program” (the objective of socialism, which by then was largely confined in these parties, as Trotsky later put it, to “holiday speechifying”).

Trotsky outlined, in the 1938 Transitional Program for Socialist Revolution, an alternative approach to overcome this split between practice of reform and preaching of revolution—to “help the masses in the process of the daily struggle to find the bridge between present demand and the socialist program of the revolution.” The idea was to raise, at each turn, demands that both offered plausible answers to current problems under capitalism and thrust at the foundations of the capitalist system.

One example, from the Transitional Program itself, is for the workers’ movement—confronted by capitalists’ claims that cost increases force them to raise prices—to demand that the employer “open the books” and show whether it is costs, or rather monopoly profits, that explain high prices. Thus, a struggle over prices and, indirectly, the distribution of income within capitalist society, is turned into a struggle over “business secrets,” that is, one aspect of capitalist property rights. Other planks included the expropriation of the big banks, shortened work hours without reduction in total pay, and the expropriation of shuttered factories and their reopening under workers self-management. Far from being pie-in-the-sky fantasies, these are actually ideas that have been seriously proposed, by various figures on the left, in response to the recent financial crisis and Great Recession, though seldom in the form of a coherent program.

While some of the above demands may still be apt now, the point is not to take specific demands written over 75 years and apply them by rote today. Rather, the idea is to craft a political program responding seriously to present problems, but pointing to the necessity of a fundamental change in the economic system—a social revolution—to resolve these problems. No single demand would, in itself, amount to the abolition of capitalism and yet a full program of “transitional demands” could not be realized within the confines of capitalist society.

It is conceivable that a social democratic reformism could take root again, and there could be a new period (similar to the Cold War heyday of social democracy) of reformed capitalism. One of the ironies of the present period, however, is that the champions of neoliberal capitalism tell us that the key features that legitimated postwar/Cold War capitalism in the rich countries of the West—rising standards of living, strong and stable trade unions, improved conditions of labor, an expansive welfare state, etc.—are now impossible. Back then, when the rulers of the rich capitalist societies felt the need to defend the superiority of their system over possible alternatives, we were constantly told that contemporary capitalism was not the Dickensian hell of the past, and that this reformed capitalism was superior to “socialism” in every way. Today, we are told that we just can’t “afford” the social protections (unions, the welfare state, etc.) we once enjoyed, or expect the economic progress (rising incomes, increasing leisure time, etc.) we were once promised.

Are such social improvements, indeed, now impossible? Not physically impossible, to be sure, for contemporary societies now dispose of far greater productive powers than those of even the recent past. Impossible within the framework of the capitalist world economy? The defenders of capitalism insist that they are.

If that is true, then any serious reformism is out of the question and, indeed, there is no alternative—to social revolution.

Sources: Wolfgang Münchau, “Perplexing failure of Europe’s centre-left,” Sept. 20, 2015 (; Council of Europe, “The European Social Charter” (; Ernest Mandel, Europe vs. America: Contradictions of Imperialism (New Left Books, 1970); Peo Hansen, In co-operation with Carl-Ulrik Schierup, “Still a European Social Model? From a Vision of a ‘Social Europe’ to the EU Reality of Embedded Neo-liberalism,” Center for Ethnic and Urban Studies, Occasional Papers on Ethnic Studies No. 26, 2005; Peo Hansen and Sandy Brian Hager, The Politics Of European Citizenship: Deepening Contradictions in Social Rights and Migration Policy (Berghahn Books, 2010); Michal Kalecki, “Political Aspects of Full Employment” (1943); Jonathan Wheatley, “Brazil: Business Likes Lula–but Wall Street Doesn’t,” Bloomberg, Oct. 14, 2002 (; W.L. Guttsman, “The British Political Elite in the Class Structure,” in Philip Stanworth and Anthony Giddens, eds., Elites and Power in British Society (Cambridge University Press, 1974); Gerald Friedman, Reigniting the Labor Movement: Restoring Means to Ends in a Democratic Labor Movement (Routledge, 2007); Margaret Thatcher, TV Interview for Thames TV This Week, Feb. 5, 1976, transcript on website of the Margaret Thatcher Foundation (; Tim Ross, Peter Dominiczak and Ben Riley-Smith, “Death of New Labour as Jeremy Corbyn’s socialist party begins a period of civil war,” The Telegraph, Sept. 12, 2015 (; Organisation for Economic Co-Operation and Development, Trade Union Density (; L.J. Perry and Patrick J. Wilson, “Convergence of Work Stoppages: A Global Perspective,” Journal of World-Systems Research, Volume XIII, Number 2, 2008; L. J. Perry and Patrick J. Wilson, “Trends in work stoppages: A global perspective,” Working Paper No. 47, Policy Integration Department, Statistical Development and Analysis Unit, International Labour Office, November 2004 (; Jayati Ghosh, “The Economics of Political Change in Developed Countries,” Frontline, Aug. 19, 2016; Leon Trotsky, The Transitional Program: The Death Agony of Capitalism and the Tasks of the Fourth International (Bolshevik Publications, 1988).

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