Tim Battin is a Senior Lecturer in Political and International Studies at the University of New England. This essay originally published by Renewal, a journal of social democracy.
Is it simplistic — or clarifying — to ask: what are the categories of impediments to a social democratic future? Arguably, the obstacles to civilisation’s struggle to transcend the self-regulating market by consciously subordinating it to a democratic society (to use Polanyi’s definition of social democracy) fall into one of five categories. In the first place, there is the question of whether a set of economic and social policies capable of subordinating the self-regulating market to democratic practices is technically feasible. Putting aside the other obstacles about to receive mention, can the policies themselves work? Second, there is an electoral, or demographic, question to be asked: based on an objective understanding of who stands to gain, is the number of citizens standing to benefit from a radical restructure and redistribution sufficient to sustain an electoral majority? Is it any more difficult in contemporary circumstances to stitch together an electoral majority coalition in favour of social democracy than it was in the 1950s, ’60s or ’70s? Better still, if the majority is possible, are the demographics of this majority such that it may be sustained for a time to allow social democratic policies to be bedded down and made popular? Third, and closely related to this societal factor, there is the perennial question of class structure, the traditional concern of the Left. If a social democratic mix of economic and social policies were to have intrinsic merit, and if the number of citizens standing to gain from such a program were well in a majority, what does the class structure of any given society suggest about the likely success or otherwise of such a program? Is the class structure — and the material interests represented by this structure — such that a technically viable mix of social and economic policies benefitting the greater number is still doomed to political failure, or is the outlook more sanguine? And fourth, closely attached to the class structure, a society’s institutions tend to mirror past struggle and activity. Depending on the institutional layout of a particular society, progressive politics can be thwarted or enhanced (Cf. Dow, 2010). The scope of this article does not allow an analysis of all these factors, though they are touched on where pertinent. The primary task is to focus on the one remaining hurdle not yet mentioned.
Neglected by political scholars on the Left, although somewhat taken up in recent years (e.g. Berman, 2006; 2011; Schmidt, 2008; Palley 2012; Mirowski 2013), is the role of ideas. For a time, writers such as Peter Hall (1989; 1994) were almost lone figures in putting the case that a left politics needed to be more acutely focused on the power of ideas themselves if the political prospects of a left party or coalition of parties were to be viable. It is an important question because so many of the various arguments against social democracy (whether by those who are hostile to it or those more sympathetic but sceptical) touch on political economic ideas about what is possible. One need only consider the changing complexion of the globalisation literature in the last twenty years — a development not principally reflecting changes in real conditions over that time but rather a better reading of the situation (Piven, 1995; Glyn, 1998; 2006; Weiss, 1998; 1999; 2003; Boreham, Dow and Leet, 1999; Saul, 2005) — to appreciate that ideas themselves are powerful entities. To claim as much is not to argue that ideas are more important than any of the other factors usually considered by progressive intellectuals to be essential to left political strategies. However, in arguing that the power of ideas is a necessary (though insufficient) ingredient in the combination of factors holding out some prospect of social democratic success, we might allow for the possibility that the relative autonomy of ideas has been overlooked. To put all this another way, to what extent have nominal social democrats been hoodwinked by the power of ideas inimical to social democracy? The central theme of this article is that, not for the first time in history, an ideational component is capable of providing a circuit breaker in the present impasse.
The irony of the present period, at least in liberal market societies, is that we could be considering the future of social democracy with significant sobriety at the same time as the economic and social conditions all but dictate an electoral embrace of quite a radical social democratic program. Juxtaposing the supposed exhaustion of social democracy at precisely the time as the social and economic conditions shout out for social democratic revival carries an incongruity worth noting. The irony deepens when it is realised that parties and groups of the Right seem to appreciate this more than parties of the nominal Left. The ferocity with which climate change denialism is discharged is the clearest indication that the Right knows more than anyone that global warming will require a radically collectivist solution.
In short, social democratic parties have lost their intellectual confidence since the onset of the neoliberal era. It is true the economic environment for left-wing programs changed at some point in the 1970s and ’80s, but the precise nature of this change has generally been misunderstood and its extent overstated; in any case, the abandonment of socialist ideas and policies by nominal social democratic parties is a bigger shift than the change in the environment. One way to illustrate this proposition is to cite an example of the recent Australian revival of a policy program abandoned in the 1970s, overt Keynesian fiscal stimulus.
As the effects of the global economic crisis were becoming more apparent in 2008, circumstances afforded the Australian prime minister, Kevin Rudd, an opportunity to initiate a debate about the neoliberal record and social democratic alternatives. Judged against the standards of politicians’ writing, Rudd’s essay (Rudd, 2009) was regarded by many as a thoughtful and serious contribution to the body politic. Given Rudd’s apparent level of awareness, then, it is all the more significant that a momentous occasion was squandered. An authentic social democratic party presiding over essentially sound economic conditions could only dream of a crisis seen over 2008 to 2010. The crisis was real, and rather than relying on the phenomenon of a fabricated crisis, or natural disasters, to introduce ersatz solutions, as neoliberal governments have done for more than three decades (Klein, 2007), a social democratic party could have seized the opportunity of an actual crisis to argue for far-reaching economic restructuring and social re-ordering. Notwithstanding the progressive elements of Rudd’s essay, his stance failed to depart from neoliberalism because it avoided critique of the broad neoliberal agenda: privatisation, deregulation of the labour market and increased employer prerogative, financial liberalisation of the 1980s, commercialisation of higher education and other hitherto public entities, and the contradictory growth of regressive government expenditures alongside the continual thwarting of useful government expenditure. It is true that the standard of extant political economic debate and the extremity of neoliberal ideas must be considered a constraint on a country’s social democratic prospects, yet that only goes to underline the argument being made that ideas are more powerful than is commonly believed. In any case the extreme and fatuous nature of Australian debate at the time is not the only thing that prevented Rudd from staking out a social democratic terrain. He was trapped by the Labor Party’s recent embrace of neoliberalism under Hawke, Keating, and the Labor oppositions facing the Howard Coalition government.
A Keynesian program more thoroughly consistent with social democracy, more capable of providing intellectual assistance to a social democratic escape from the parameters of neoliberalism, would have financed a component of the fiscal expansion through taxation. Andrew Glyn (2001, 5) has argued that the unwillingness of a government to tax-finance its current spending programs is a sign of weakness. Only after a social democratic government has pushed tax-financed expenditure to its political limits would it make up the shortfall of spending (of whatever is called for in policy terms) with deficits, and it would vigorously defend those deficits. A highly credible intellectual defence of a deficit is of course concerned with the portion of a program that is devoted to investment projects.
The circumstances of the global economic crisis, together with the conditions of Australian society and its economy at the time of the crisis, justified a mixture of deficit spending and tax financing. Three obvious sources of redistribution of public finances are a tax on wealth thereby establishing greater consistency between the taxation of earned and unearned income, increasing the marginal tax rates applying to higher income earners, and reducing the more inefficient and regressive of taxation expenditures. In this setting all of the monies made available through deficits could have been channelled into physical and social investments designed to address the years of neoliberal neglect in Australia: public hospitals, public education, affordable housing, transport, renewable energy, along with various related concerns of social democrats. Alongside this measure, taxation revenue would have been redistributed to recurrent forms of expenditure directed to low and middle income groups, or, because of the delay in raising the revenue, used to replenish public finances after deficit financing performed its more immediate tasks. Once demand has been restored, the aim of the exercise is to establish a re-ordered mix of taxing and spending along social democratic lines.
The failure of the Rudd and Gillard governments to gain electorally from the successful handling of the greatest economic crisis in eighty years is often attributed to the problem of a counter-factual and/or with the obsessive level of spin associated with those governments. There is truth in these attributions, but at a deeper level the failure owes itself to neither government having a clear purpose or coherent story to tell. When, in 2007, a pending change of government was obvious, the ALP needlessly almost matched the Liberal-National Party Coalition on promised tax cuts disproportionately directed to higher income earners, and Rudd, somewhat incoherently, claimed to be a fiscal conservative.
In this context, the rushed return to neoliberal orthodoxy over 2010 to 2012, indicated by Australian Treasurer Wayne Swan’s surplus fetishism, does not require detailed explanation. The ALP’s trajectory to reduce taxation and spending as a percentage of GDP was already marked out when the Rudd government came to power. In fact, Commonwealth taxation in the 2012/13 fiscal year was at 1.5 percentage points below the level of the last Howard government. The difference in receipts, according to the Australia Institute, would be enough to finance the changes to school funding, fully implement the impending National Disability Insurance Scheme, fully fund a public dental scheme, and still have money left over.
Social democratic parties almost always have the most demanding paradoxes to confront. But the successful visionaries in those parties know that they are dealing with contradictions. When social democratic practitioners have sometimes spoken of ‘saving capitalism from itself’ they are being ironic (or at least they used to be). The irony serves to point up the difficult but not impossible task of using an endogenous crisis of capitalism to transform it into something quite different. Significantly, a defender of social democratic revisionism in 1960s Britain, Roy Hattersley, has recently underscored the fundamental difference between the aims of what was then regarded as a new approach, and the opportunism and cynicism of New Labour. Genuine revisionism, argue Roy Hattersley and Kevin Hickson (2012), is based on the likelihood of societal coalitions in favour of social democratic programs and the political ideas needed to make that appeal. The approach of the Australian treasurer, Wayne Swan, showed no such awareness of any contradiction, any irony, or indeed any optimism. Capitalism was indeed saved from itself, but it was not changed in the process.
The relative autonomy of ideas?
When we turn to the political science literature centrally concerned with societal coalitions and political ideas, Hall argues a position consistent with the optimism called for: the “persuasiveness of economic ideas depends, in part at least, on the way those ideas relate to the economic and political problems of the day” (Hall, 1989, 369). In this vein, Sheri Berman’s comparative study of the efficacy of social democratic ideas in Sweden and Germany in the interwar period is able to show the critical importance of political and economic ideas in the hands of a political party (Berman, 1998). It is not so much the ideas of economists that she sees as the crucial thing here, but the integration of ideas into a larger political force, married to an attractive political rallying cry (1998, 205). She extends the force of this argument in her later work where she is concerned with the persistent tension between capitalism, democracy, and social stability — a tension about which social democracy was and remains the only durable solution (Berman, 2006, 210).
Ideas alone are not a reliable predictor of what societal coalitions may form. The link between ideas and societal coalitions is to be found at the point at which democratic governments embark on a considered program to deal with a change or a new economic development. Economic policy making is not simply a response to economic developments but is a highly political process in which governments (and prospective governments) are always thinking about potential coalitions (Hall, 1994); at least, such a situation is a necessary condition for successful politics. The aim of social democrats is to seek ways to alter “the terms of political discourse in such a way as to legitimate a variety of politics and make new combinations of political forces possible” (cf. Hall, 1989, 7).
The position adopted here is that an appreciation both of the power of ideas and the proper identification of interests (and the potential societal coalitions attached to them) are necessary preconditions for significant political change; neither one on its own is a sufficient precondition for such change. Political ideas themselves are formed in part — at least this can be said of the present time — from perceptions of what societal coalitions are possible. It follows, then, that there is a need to examine the precise point of interaction between political ideas and some particular (pessimistic) perceptions presently held about the potential for coalition or constituency formation.
Consider the connection between the appeal of ideas and the building of an electoral coalition. Some observations may support the view that electoral impediments can be overstated, and, concomitantly, the presuppositions of nominally social democratic parties understated. It was an avowedly social democratic platform that brought the ALP, led by Bob Hawke, to power in 1983; it was the subsequent spurning of that program which was associated with the ALP’s electoral decline (Scott 2004). In the case of the UK, over the 1995-97 period leading up to the election of New Labour, that is, at a time when it was obvious the British Conservatives could not be re-elected, Tony Blair became ever more aggressive in ridding the British Labour Party platform of socialist reference. In 2007 Kevin Rudd became more audacious in abandoning ALP positions the more obvious the impending success of the ALP became. Over 2008 and 2009, when public support for tackling climate change remained strong, Rudd and his inner circle (which included Gillard) walked away.
Thus far the term ‘ideological’ has been avoided for the reason that various uses of the term are incommensurate with one another. Intellectuals on the Left, particularly Marxists, have contended that the prevailing ideology of a society in crucial respects reflects the dominant class interests of that society, and, by extension, it serves to prevent an objective understanding of those class interests on a day-to-day basis, or of who stands to gain and lose in any significant policy shift. There is much truth in this theoretical stance, but it may in part be responsible for a neglect of the precise relationship between ideas, perceptions of interests, and even coalition formation. By downplaying a relative autonomy of ideas we risk forfeiting insights into the critical moments of change or potential change. The approach can have serious consequences. A preparedness to see that ideas have a relatively autonomous role to play can break the political gridlock. As David Harvey has explained, “the lack of an alternative vision prevents formation of an oppositional movement while the absence of such a movement tends to discourage the articulation of an alternative” (2010, 227).
A social democratic constituency
A social democratic movement, in seeking to transcend the self-regulating market, has a starting point altogether different from neoliberalism’s precepts. Critically, social democrats begin with an assumption that there is no such thing as the ‘free’ market (Polanyi, 1944; MacEwan, 1999; Galbraith, 2008), that all markets are constructed. So, by extension, the only choice to be made in any society that sees a role for markets is between a system providing state-regulated markets that bestow advantage to powerful propertied interests, on the one hand, and state-regulated markets that are subordinated to democratic society. In contrast, a public discourse that is based (at best) on ‘splitting the difference’ is neither principled nor practical. The approach of the Rudd and Gillard governments to industrial relations in 2008 and 2009 eschewed the concept of a democratic society altogether by invoking a facile (and inaccurate) image of striking a balance between the interests of employer representatives and of working people. This approach followed a period between May and September of 2007 in which the leadership of the ALP, while in opposition, consciously pulled down public expectations about the reversal of the so-called ‘Work Choices’ legislation of the Howard government. As a stand-alone example, the set of events would be a serious indicator of intellectual retreat. However, together with climate change fragility, it is symptomatic of so much of the neoliberal stance of the feeble among the ‘social democratic’ parties.
Avowedly right-wing parties come to view the more timid of ‘social democratic’ parties, even if they have won a decisive mandate, as unwilling to reverse fully the neoliberal incursions, no matter how extreme. Their real victory is in knowing that the basic thrust of social change is in a neoliberal direction. More dangerous, confirmed neoliberals become increasingly aware that the links between a purported ‘social democratic’ party and its natural constituencies become more tenuous or non-existent the more such a party breaches the public’s trust. A healthy state-society relationship, the sine qua non of social democracy, is impossible when the main political institution conducive of that relationship, a political party of the left, surrenders intellectual ground won by the efforts of societal coalitions. The vote-changing campaign of the ‘Your Rights at Work’ movement in the Australian election of 2007 (Muir, 2008; Spies-Butcher and Wilson, 2008) seemed to be viewed by the ALP leadership as a delivery of superfluous support. The sociological-institutional effect is that societal coalitions become more difficult to construct in any opposition to a subsequent course that right-wing policymakers may wish to take, while the intellectual effect is that the terrain of ideas has effectively been conceded. To add insult to injury, avowedly neoliberal parties allow themselves the luxury of an incoherent implementation of neoliberal policies and considerable scope for populist politics, while pretender parties often self-impose a more puritan program.
Some ‘social democratic’ parties have failed to consider that “variations in party strategies and policies can be of greater relevance for class voting than are changes in class structure” (Korpi and Palme, 2003, 443). There is room for social democrats to think of the relative autonomy of the political party. A worthwhile hypothesis is that the set of perceptions held by political elites is crucial in determining how successfully support for a left program can be garnered. In other words, in the concern with the politics that produces policies, we are situated at the point at which ideas have a cause-and-effect relationship with socio-economic interest groups.
At its very base, a social democratic politics would proceed according to what the available evidence suggests about the possibilities for social democratic policies. We have already hinted at some social attitudes to issues such as distribution and redistribution. Contrary to neo-liberal designs, there is evidence of widespread public support for reduced inequality, higher levels of taxation (particularly if higher taxation can be directed to socially desired services), and greater public amenity. Dealing with long-neglected problems, such as overwork, casualisation, and job insecurity more broadly must raise the likelihood of a broad constituency. While some who purport to be social democrats remain for the large part timid about connecting neo-liberal causes to their effects, avowed neo-liberals are attuned to the impact of just such a connection.
Social democracy is essentially optimistic. As Berman argues (2006; 2011), the very birth of social democracy owes itself to the acknowledged failure of laissez-faire capitalism and, critically, the development by progressive thinkers of practical and egalitarian programs appealing to cross-class coalitions. What is said to be different in the early twenty-first century, as we noted almost at the outset, is the constraint of globalisation. But, as writers such as Weiss have observed, the most important or fundamental barriers to greater equality are not the assumed imperatives of global capital, but domestic interests, coalitions, and institutions (cf. Weiss, 2003, 11, 26-27), a position that left-Keynesians since Joan Robinson and Michal Kalecki, have long been arguing.
The obvious centre-piece of a social democratic program is full employment. The quid pro quo for those already in employment would be policies designed to address the chronic problem of over-work and job insecurity. Such a program would require an incomes policy along the lines of the original 1983 accord, including most particularly the restraint of executive pay, a possibility now made easier by the Australian High Court’s 2006 decision about the corporations power of the Commonwealth. The newly created jobs could come in the sectors of health and education, accompanied by allocation priorities, policies, and explanations designed to attend to the public’s concerns about declining quality in those sectors, along with a new surge of public housing at the low end of the market. A country that has the historical experience of high levels of home ownership, but which has recently seen a regression under neo-liberal policies, is particularly prone to a progressive policy shift. Along these lines Hugh Stretton (2005) has proposed a program based on additional public activity, including a paid parenting wage, a policy that is capable of attracting strong support from a new constituency. To this there is a need to make public infrastructure and the improvement of public transport to Australia’s outer-metropolitan areas a high priority. Full employment, the most universalist of all measures, enhances the social solidarity needed to deliberate upon so many of society’s other problems requiring public solution.
Keynesian ideas need not be used simply to guide the economy. They can also be “employed, with great political effect, to construct wider social coalitions and to justify the development of social institutions” (cf. Hall, 1994, 148). This is why those hostile to social democracy had first to set out to discredit Keynesianism. Keynesianism, as it is practiced by social democrats, represents expansion of public capacity. Such expansion opens up possibilities for the formation of societal coalitions in ways that non-expansion cannot.
More than a quarter of a century ago, one of Australia’s foremost social democratic intellectuals, Hugh Stretton, denounced the lurch to the Right. At the end of his Political Essays (1987) he outlined three political economic futures of Australia, told as histories. In the third history, which he hoped he could have told with more confidence, Australia travelled the path towards significantly more equality. “The more general achievement of…that plan was to transform the political atmosphere. Nobody had realised quite how much of the old electoral conservatism had rested on fear, uncertainty and technical bafflement…” (1987, 264). If there is one aspect of social and economic life that all Keynesians agree is the legacy of Keynes, it is the concern with uncertainty — with all the fear and instability that this entails — and the ever-present need to overcome it. It is this kernel of the Keynesian tradition that united so successfully with social democratic ideas in the middle of the twentieth century. It will be in capturing the significance of contemporary uncertainty and fear, and in realising the potential for progressive allegiances, from which a revival of Keynesian social democratic policies will emerge.
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 Others included Weir and Skocpol (1985).
 Another example of the Right’s awareness of the importance of ideas concerns a recent action of the Australian Financial Review. Before the economic crisis of 2008, John Quiggin, an Australian Federation Fellow, was tolerated as a columnist at the AFR as a quaint resident lefty. But when his views were vindicated by the events of the crisis he was informed his services were no longer required.
 We stress this recent form as ‘overt’ because, as writers such as Wilson and Turnbull (2000) and Crouch (2008; 2009) have recorded, neoliberal governments in Australia and the UK have long been using a covert, or ‘secret’, form of privatised Keynesianism.
 Indeed, the uglier the populism, the more it can indicate neoliberalism is reaching its (electoral) limits. Another indicator of contradictory neoliberalism is the growth of welfare under neoliberal governments. By 2005, the Howard government in Australia had grown social welfare from the 35.4% of budget outlays under Keating to 42.5%.
 Data compiled by Scott (2006), shows a significant collapse in support for the ALP among 18-24 year-olds in the 2004 Australian election. Apart from 1996, it was the lowest in a generation.