The crisis of European Social Democracy

The graph below shows an index based on the simple and population-weighed average vote share for social democratic parties in the old EU member states (Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden and the United Kingdom) from 1946 until the end of 2014. The base year for the index is 1970. The rapid and deep decline of votes for social democratic parties after the introduction of the Euro and the onset of the financial crisis is clear and stark.

The graph isn’t pretty reading for social democrats. Social democratic performance at the polls has fallen consistently from 2005 onwards. That’s not simply the result of a general political fragmentation, the deep decline is a specific problem of the social democratic left. If you the graph the same sort of statistics for conservative parties, you would see that they are on average above their 1970 baseline.

At the recent event held in Berlin entitled “Plan B For Europe?”, Yannis Varoufakis made some very interesting contributions (a video of the full event can be seen here). In this clip Varoufakis talks about the crisis of the Left and the crisis of European Social Democracy.

The analysis put forward by Varoufakis is interesting but incomplete and too simplistic. Two other major factors (at the very least ) have to be taken into consideration when trying to explain the malaise of European social democracy. First the historical evidence shows pretty clearly that the bad times, the times of economic uncertainty, contraction, recession and depression, are the times when the left struggles the most to win popular support. This runs counter to a deeply embedded, but in my opinion dangerously wrong, belief which is especially prevalent amongst much of the radical left that things must get worse in order to get better. The belief that the crises of capitalism inevitably push the population to the left. The historical evidence actually seems to show just the opposite, that the fear and uncertainty engendered by economic problems makes people afraid of the progressive project and that actually the support for progressive social democratic politics flourishes most during the good times when the economy is strong and growing. The progressive project is a project founded on optimism.

The second significant factor underlying the decline of European social democracy is the actual design, architecture and mechanics of the European project, and above all of European Monetary Union (EMU). I explained in a previous article how the logic and ideas of the Ordoliberal school of political economy were central to the design of both the EU (certainly after the Maastricht treaty) and the design of the single currency system. Ordoliberal ideology is so extensively embedded in the structures, rules and policies of the EU and the Euro system that it almost completely crowds out social democratic ideology at an institutional level. Moreover one of the central pillars of Ordoliberal political economy (that the governance of the economic system should be above politics in the form of an overarching system of rules, and that the role of the state is to simply police a well ordered market where fair and free competition can deliver the optimum outcomes) actually runs completely counter to interventionist social democratic ideology. The Ordoliberal general belief that public deficit and debt are always bad (and conversely that savings and surpluses are always good) is deeply embedded in the design of the single currency regulatory system. This means that in the eurozone Keynesian demand management via deficit public spending is essentially outlawed and this at a stroke removes a central plank of social democratic economic policy. An Ordoliberal driven economic policy for growth can only ever focus on the supply side and this means in practice focussing on improving competitiveness through greater labour flexibility (a euphemism for increasing employment insecurity and reducing protective labour regulations). European social democratic parties therefore operate with their main pillars of economic policy immobilised and are forced to promote the implementation of non-social democratic labour market policies. So electoral support, not surprisingly, has tended to fall away.

A major and urgent problem confronting the social democrats is the need to formulate a new, and shared, position on the European project. For a long time the social democratic left has fully supported the European integration project. The internationalism of the EU chimed with the historic internationalism of the left, and the growing globalisation of capitalism clearly required something that went way beyond merely national responses. The social democratic left has for a long time seen the EU as a mechanism for delivering social justice in Europe, for building a counter weight to US hegemony and for overcoming reactionary and destructive nationalism. Unfortunately the European project has taken, from the left’s point of view, a seriously wrong term. Quite how and when the project went wrong is a big question, but it has very clearly gone very badly wrong. Somehow without realising it a system has been built, mostly as a result of the single currency project, which has sharply curtailed the ability of left of centre governments to deliver progressive Keynesian policies and which has, perversely, ended up actually enshrining the brutal discipline of mass unemployment and poverty as the tools of choice in relation to economic reform. The social democratic project is currently trapped inside the larger, and now actually alien, European project and it has to break free somehow and create a left of centre bloc that can force through the deep reforms that the EU needs and push the entire European project in a new direction. That means it has to break with the cosy consensus politics of Brussels.

How to take the European project forward in a more progressive way is a very difficult problem. There are, I think, two possible scenarios of reform which would create a much greater democratic space for social democrats in the EU to deliver their programs. Both scenarios involve, essentially, greatly increasing the amount of true democratic control of economic policy in the EU and both offer the opportunity to break with the current Ordoliberal, deficit averse, rule based system.

Scenario One: The EU drops the notion of moving towards ever closer union, accepts that the only real democracy legitimacy in Europe is found at the national level and becomes a loose confederation of separate states with free trade and some, probably quite limited, overarching cooperation agreements. Basically the Single market with some modest social programs bolted on the top. This would mean dismantling the single currency – no easy task – and abandoning the ambitions for a single voice for Europe in world affairs along with all the other pretension of European statehood. The advantage of this scenario of reform is that freed from the binding rules of the eurosystem national social democratic government would be free to pursue expansionary economic policy, where necessary based on deficit financing. In addition without the shelter of a single currency the German low wage high export economy, the primary source of instability in the eurozone and the driver of deflation, would be curtailed by currency shifts as the reintroduced Deutschmark appreciated in value.

Scenario Two: The EU moves rapidly to becoming a full political union. This means full fiscal union with the bulk of taxation and spending moving to a single pan-European government. If this road is taken then it is utterly essentially that it is on the basis of a truly democratic political system. And that means asserting the complete and total primacy of the European Parliament in the political system of the EU. The European Parliament should elect the government of the EU, the Commission must be relegated to being a mere European civil service, the system of nationally selected commissioners must end and all the European ministers (which would replace the abolished commissioners) and the European President would have to be themselves directly elected politicians. All this could be done on either the basis of a parliamentary system (with a Prime Minister elected by the European parliament) or on the basis of a directly elected European President (answerable to the European parliament). Whatever option was selected the primacy of the European Parliament would have to be central to the project with every policy, every decision and every official answerable directly to the Parliament. The advantage of this scenario of reform for the social democrats is economic policy would no longer be set in stone in a system of rigid rules about public spending ratios and no longer guarded by an unelected bureaucracy. This means that a pan-european social democratic bloc could seek support for a growth strategy, and its political offer to the electorate would be plausible because such a strategy could actually be implemented (which it cannot under the current eurosystem).

Personally I favour the first option. I used to favour the second option but now I think that in the actual conditions of the Europe as it is today that it is not possible to build a truly organic integrated pan-European democratic system based on deeply rooted democratic legitimacy. Building organic and deep democratic legitimacy at a national level in the various member states took a long time and I think the conditions of Europe now are such that no real pan-European democratic legitimacy is possible. I also think that any attempt to shift the most important functions of government (taxation, budget setting, social welfare programs, ect) away from national governments and upwards to a pan-European set of institutions would generate explosive and insurrectionary hostility inside the various member states. Hence my support for the first option of a loose confederation of nation states in an enhanced free trade area and a single market. Within such a looser confederation, and with the single currency and the other trappings of ‘ever closer’ union discarded, a new space for social democratic politics would open up.

If the social democratic left remains trapped inside the current status quo (even an ‘enhanced’ status quo with greater powers transferred to the essentially non-democratic European level) social democracy will, I fear, continue to wither.