Social democracy triumphant?
Among other things, the 2006 US election marks the end of the Republican revolution that began in 1994 when the Republicans led by Newt Gingrich gained a majority in the House of Representatives for the first time in 40 years and sought to push through the radical “Contract with America”. This can be seen not only in the Congressional results but in the defeat of a series of tax limitiation initiatives. Even in the US, the appeal of social democracy remains strong.
So, this is a good time to run my piece on Sheri Berman’s The Primacy of Politics, which was part of a Crooked Timber seminar. Mark Bahnisch has more. And the debate with Tyler Cowen over US and European economic performance continues.
Iâ€™ll leave it to others more expert on the history of European Marxism to discuss the main arguments in Sheri Bermanâ€™s book. Iâ€™ll focus on a couple of peripheral points.
First there is her observation that the system triumphant at the end of the 20th century is not capitalism but social democracy. This is obviously true in the European countries she studies, but it is clearly true more generally. Even in the US, the state plays a role in the provision of health, education and social security broadly similar to that of European welfare states, and government expenditure accounts for more than 30 per cent of GDP.
Advocates of genuine laissez-faire recognise this – hence Ayn Randâ€™s lament that capitalism is The Unknown Ideal. Alternatively, one can refer to welfare capitalism, the mixed economy and so on.
But the triumphalist literature of the 1990s, epitomised by Fukuyama and (several levels lower down) Thomas Friedman presented the evidence with a curious twist. These writers began with the observation that, with the collapse of communism, there was no serious alternative to the Western economic model, which they typically called capitalism. Then they tried to argue that this success implied that Western countries should change their economic model, in the direction of more free markets and so on.
The obvious fallacy is that â€˜capitalismâ€™ is being used to refer to welfare capitalism in the first part of the argument and to laissez-faire in the second. Despite its weakness, this argument proved exceptionally convincing in the late 1990s, until the collapse of the dotcom boom dented its appeal, and the emergence of big government Republicanism rendered it politically irrelevant, at least in the US.
My other point concerns Bermanâ€™s argument that Marxist dogmatism prevented most European socialist parties from providing any policy response to the Depression, the big exception being the Swedish Social Democrats. A look at the experience of the English-speaking countries suggests some grounds for scepticism.
In most of the English-speaking countries, the left (labour parties in Australia, New Zealand and the UK, the Democrats in the US, Liberals in Canada) held office for some period during the Depression. None of these parties were significantly affected by Marxism. Some were theoretically socialist and others were not, but all focused primarily on piecemeal reformism.
Despite the absence of Marxist ideological commitments, the parties that were in office at the outbreak of the Depression floundered, and were unable to produce a coherent alternative to the demand for orthodox sound money policies. The British and Australian parties split, with senior leaders defecting to the conservatives to form â€˜national unityâ€™ governments in both cases. Both parties remained in opposition throughout the 1930s. The Canadian Liberal government also lost office.
By contrast, the left governments that were elected during the Depression (the US Democrats in 1932, NZ Labour for the first time in 1935 and the Liberals also regaining office in 1935) fared much better. Given the depth of the Depression, almost any kind of Keynesian stimulus was bound to work well, and conservative resistance to welfare-state measures was ineffectual. The leaders of these governments, Roosevelt, Savage and McKenzie King remain revered figures. The same path was followed, with a delay in Australia (where the Labor party was in office from 1941 to 1949 and in Britain from 1945 to 1951).
A possible alternative analysis, then, is that the Depression created conditions under which a social-democratic response could be put forward, but that this was not a real political possibility until the bankruptcy of orthodox finance had become fully evident.