THE THIRD WAY
Originally the term social democracy was interchangeable with that of socialism. In the last quarter of the nineteenth century the most influential European socialist party was the German Social Democratic Party, both Bolsheviks and Mensheviks were factions within the Russian Social Democratic Labor Party, and one of the most sectarian and radical organizations of the British Left at the time styled itself the British Social Democratic Federation (founded by H. M. Hyndman in 1881 as the Democratic Federation and renamed after 1884). It was only in the decades following the Second World War that the term social democracy came to acquire specific connotations including an abiding commitment to the rules of parliamentary democracy and the acceptance of capitalist relations of production albeit in a regulated form.
The origins of such views can be traced to distinctive strands of late-nineteenth-century socialism such as Fabianism and the kind of revisionism propounded by the German writer and politician Eduard Bernstein in the 1890s. Most socialist parties, however, even before 1900, distinguished between an end goal—a socialist society where the means of production, distribution, and exchange would be held in common—and intermediate reforms that could take place within capitalism. The revisionists dispensed with the final goal.
The Fabian Society, a largely middle-class British organization founded in 1884, advocated gradual and peaceful social change and rejected the Marxist theory of class struggle. Its most prominent advocates were Sidney Webb and Beatrice Webb, the playwright George Bernard Shaw, and the novelist H. G. Wells. The society derived its main inspiration from the British radical utilitarian tradition and opposed the formation of an independent socialist party, though it eventually supported the creation of the Labour Party and became affiliated to it. The report the Fabians presented to the 1896 Congress of the International (drafted by George Bernard Shaw) sided explicitly with those Socialists who were prepared to support progressive "bourgeois" reforms. Like Eduard Bernstein (who was influenced by the Fabians and formulated his so-called revisionism while living in London between 1888 and 1901), they did not believe in any inevitable collapse of capitalism.
Bernstein, in a series of articles published between 1896 and 1898 in Neue Zeit (later published in English as Evolutionary Socialism in 1899), claimed that capitalism had reached a new stage—unforeseen by Karl Marx (1818–1883)—in which it had developed a self-regulating structure capable of avoiding crises while the development of parliamentary democracy enabled the working class to struggle against the bourgeoisie in conditions of legality and equality. Bernstein noted that even though there was a growth in large corporations, there was also a parallel expansion of small and medium-size firms everywhere in Western Europe and North America, contrary to what Marxist doctrine had assumed. Moreover, society, far from becoming sharply divided between an ever smaller group of wealthy capitalists and an ever larger army of dispossessed proletarians, produced a growing range of intermediate social groups. Bernstein's followers, then a minority within the movement, no longer believed that the final aim, the Endziel, could define the operating principles for current political practice. In a much-quoted phrase, Bernstein declared that he was not interested in the final goal of socialism but in social progress and the political and economic work necessary to bring it about.
Though this revisionism was formally rejected by socialist parties, most socialist politicians and trade unionists were more gradualist than their rhetoric indicated, though, like the French Socialist leader Jean Jaurès (1859–1914), they remained firmly of the opinion that the final goal of the movement had to be maintained as a symbolic commitment.
The advent of communism in Russia, where the "end goal" of a society without capitalism appeared to have been realized, forced many socialists to reexamine the ideology of the final goal, but it was only after the Second World War that a clearer redefinition of social democracy emerged.
In the interwar period, however, various socialist thinkers, such as G. D. H. Cole, examined the possibility for a radical socialist advance in nonrevolutionary situations. The New Fabian Research Bureau produced detailed studies on economic policy, emphasizing "social" control of industry as the distinguishing feature of socialism rather than abolition of private property. Others pointed out that some form of resistance would be expected not only from entrepreneurs but also from trade unionists. Evan Durbin, was well aware of this. In his Politics of Democratic Socialism (1940) he explains that trade union practices would constitute a problem for socialist planning. Yet, throughout Europe, particularly in France in the 1930s and Germany in the 1920s, trade unions were in favor of planning, while the main socialist parties were distinctly unenthusiastic.
The remarkable socialist electoral successes in Western Europe (except in Italy and France) following the end of the Second World War brought about a further development of social-democratic policies. The socialist parties in power, above all the British Labour Party, faced the question of managing capitalist economies. They had to deal with practical problems such as postwar reconstruction and welfare reforms. They had to ensure that there would be no return to the unemployment of the 1930s. They had to cajole the trade unions to contain their wage demands while ensuring economic growth and productivity increases. The end goal was not abandoned but put further into abeyance. The main thinkers behind the new social democracy were not socialists but liberals such as John Maynard Keynes (1883–1946), who explained how it was possible to use macroeconomic policies to avoid unemployment, and William Henry Beveridge (1879–1963), who had written the blueprint for a welfare state in which citizens would be looked after "from the cradle to the grave."
Such advances, far from leading to a period of electoral consolidation for Western European socialism, marked its high tide. By the end of the 1950s, with a few exceptions, socialists were still in power only in the Nordic countries. The Cold War played a part in the difficulties faced by the Left, since socialists had to distinguish themselves constantly from the negative model of Soviet communism. This effort was particularly marked among Social Democrats operating in countries aligned with the the United States under the umbrella of North Atlantic Treaty Organization (NATO). Indeed, some parties, notably the Labour Party in Britain and the socialist parties of Belgium, France, Norway, and Holland, had been among the initiators of the Atlantic alliance. Others, such as the German Social Democrats and the Italian Socialists, eventually abandoned their position of neutralism or equidistance and, as they advanced toward political power, joined the pro-Atlantic consensus.
The most important pressure toward social democratization, however, was not the Cold War but the real success of capitalism in the 1950s. Far from crumbling, or stagnating, as so many had wrongly forecast in the 1940s, the Western economies saw, in the years 1955–1964, their strongest economic performance to date. A "golden age" of capitalism appeared to have dawned. The sorry record of capitalism of the interwar years receded from collective memory. Not only did full employment become a reality almost everywhere, but also the consumer society, with all its material seductions, became a mass phenomenon. The bulk of the working class, far from becoming increasingly poor—as some, notably the French communists, still believed as late as the late 1950s—was beginning to share in the general prosperity. Making matters more difficult for the Left was the fact that much of this growth had taken place under the aegis of governments of the Right, notably the Conservatives in Britain, the Gaullists in France, and the Christian Democrats in Germany and Italy, who had adopted social and welfare policies not dissimilar from those advocated by Social Democrats. Neoliberalism, at least in the 1950s and 1960s, was not the key to electoral victory.
Various thinkers, both in Europe and in North America, suggested that the era of socialism was over. Following, consciously or not, the ideas pioneered by Bernstein, they declared that capitalism had changed so remarkably that the old dogmas of the Left, such as central planning and nationalizations, should be jettisoned. The era of the "end of ideology," harbinger of the postindustrial society—the American social theorist Daniel Bell (b. 1919) had been the prescient exponent of such concepts—had arrived. The question was now how to manage the "affluent society"—a phrase coined by the American economist John Kenneth Galbraith (1908–2006)—and the contrast between private affluence and public squalor.
European intellectuals tried to integrate this type of thinking in a reinvigorated or modernized concept of socialism. In Britain the most influential text of the new revisionism was Anthony Crosland's The Future of Socialism (1956). This was a more systematic summa (comprehensive treatise) of arguments put forward by earlier Labour revisionists such as Douglas Jay and Hugh Gaitskell (party leader after 1955). Crosland decreed that capitalism had solved the problem of accumulation and that socialists should concentrate on ensuring an equitable social division of the fruits of growth. Wealth redistribution, not the abolition of capitalism, was the goal. This belief was increasingly shared by all socialist revisionists throughout Europe. In any case, they argued, nineteenth-century capitalists no longer existed. The owners of capital were no longer in charge. Control, and hence power, had shifted to the managers of large joint-stock companies. Such separation between owners and managers had been noted since the interwar years by Keynes, earlier revisionists such as the Belgian Labor Party leader Hendrick de Man, and writers such as the Americans Adolf Augustus Berle and Gardiner C. Means (The Modern Corporation and Private Property, 1932), and popularized by James Burnham, a former Trotskyist, in his influential The Managerial Revolution (1941), published in France with a preface by the socialist leader Léon Blum.
Since Crosland saw socialism as something to be achieved incrementally, it was still an "end state," though one that could be reached only after a long process of molecular social and political change. Meanwhile socialist policies simply described a set of values, such as that every individual should have an equal chance. So long as there was a substantial private sector, declared Crosland, socialists must logically applaud the accumulation of private profits and ensure that they be reinvested and used as "a source of collective capital accumulation and not as a form of personal income."
In Germany the new revisionism appealed to the Social Democratic Party (SPD), which was out of office for all of the 1950s. It was not a marked feature of parties that were in power either on their own or in coalition, such as the Scandinavian or the Belgian and Dutch. By the end of the 1950s, Marxist doctrine, which the SPD, along with many socialist parties had formally adopted at the end of the nineteenth century, was abandoned. The SPD's new Basic Programme, ratified at the Bad Godesberg Congress in November 1959, declared solemnly that "Democratic Socialism" in Europe was "rooted in Christian ethics, humanism and classical philosophy." Karl Marx was relegated to the attic. The new revisionists also made their peace with religion. Anticlericalism had been one of the driving forces of continental socialism. By the 1950s it had become apparent that this served no practical purpose beyond antagonizing those with religious convictions, hence the reference in the Bad Godesberg program to the Christian heritage of Social Democrats.
None of this was entirely new. Positive references to the social values of Christianity could be found in the declarations of various parties such as those of the SPD itself, the Austrian Socialist Party (SPÖ), and the Dutch Labor Party, and even the Belgian Socialists and the Italian Communists. The most important aspect of the new Bad Godesberg program was not the abandonment of Marxism—something most commentators emphasize—nor that the party committed itself to growth (a commitment made in previous party statements), nor in the acceptance of the market, but in the conflation between the party's immediate demands and its long-term aims. This classical distinction enabled the party to advance virtually any reformist short-term goals provided the final aim, the abolition of capitalism, was regularly and resolutely reaffirmed. The forsaking of Marxism was the symbolic representation of the abandonment of socialism as an "end state." The new goals were equally valid for both present and future: growth of prosperity, a just share of the national product, full employment, stable currency, increased productivity.
This model of social democracy was now dominant on the Left throughout northern Europe. In Sweden, where the longevity of Social Democrats in power was an example to the rest of the Western European Left, a more practical model of management of the capitalist economy emerged. Since equality had become social democracy's most important goal, the principle of equal wages for similar works was to be enforced throughout the Swedish economy, after negotiations between trade unions and employers had agreed on the various wage levels—the so-called solidaristic wages policy. The more efficient firms, able to pay higher-than-agreed wages, would make higher-than-average profits (and pay more taxes). Workers made redundant by the closure of the less efficient firms unable to pay the going rate would be retrained and redeployed in the more advanced sectors thanks to what was called an "active labor market policy." That way a virtuous circle was established and was operational throughout most of the 1960s: flexible labor markets, capitalist efficiency, and technological progress coexisted with high taxes and social equality.
In much of southern Europe, however, social democracy was still regarded by Socialists themselves as flawed by its excessive moderation toward capitalism. Even in Britain the return to power of a Labour government in 1964 did not satisfy either the trade unions nor the Labour Left (in 1960 the Labour revisionists had been unable to remove from the party constitution the famous Clause Four, which claimed as the party's ultimate goal the common ownership of the means of production, distribution, and exchange). The country's economic conditions were such that the main preoccupation of the Labour governments of 1964–1970 and 1974–1979 as well as of the intervening conservative administration was to quell the wage demands of trade unions, with varying degrees of success. In Italy and France, Socialists were forced by their conditions of inferiority with respect to the communist parties to pose the question of alliance above that of policies—the French resolved it by forging a difficult entente with the Communists, the Italians by the opposite but equality difficult task of compromising with the ruling Christian Democratic Party. In the rest of southern Europe in 1974–1975—with Portugal, Greece, and Spain finally emerging from dictatorships of various hues—Socialists were faced by apparently strong communist parties and had to take a socially radical stance.
The key event for the subsequent convergence of the entire European Left around the goals of social democracy was the victory of the Left in France in 1981. The platform on which it had been elected was a radical program of nationalizations and public spending aimed at overcoming capitalism. The ensuing economic reflation, under the presidency of François Mitterrand (1916–1996), occurring at a time (1981–1982) when the rest of Europe was deflating, caused a rise in prices in France as well as a massive balance-of-payment deficit. The lessons would not be easily forgotten: the European economies were by now so interconnected that even social democracy in one country—to adapt the famous slogan of Joseph Stalin (1879–1953)—had become less probable than ever.
Economic interdependence—the term most frequently used before globalization became more fashionable—appeared to make redundant the main economic tool used by social democracy. This was not Marx's theory (he had been, after all, the first great theorist of globalization) but Keynes's. The kind of macroeconomic management favored by social democracy assumed that each nation-state was in charge of its destiny. This, at least in Europe, was no longer the case. Deprived of their pathfinders, Social Democrats adopted, more or less overtly, a defensive strategy. Having been out of power for eighteen years (1979–1997), the British Labour Party under Tony Blair (b. 1953) was the most outspoken advocate of the new policy turn, labeled the "Third Way," but the rest of the European Left pursued a similar course, albeit less enthusiastically. The fall of the Berlin Wall, it seemed, had not just heralded the tocsin bell for communism but also a further retreat for social democracy. A grand narrative—largely inspired by the successes of neoliberal economic concepts—emerged and was accepted by most Social Democrats. Its basic coordinates were: an acceptance that market forces should not be muzzled by excessive regulation; that such regulation had to be coordinated with other countries; that public spending should be kept under strict control; that the welfare state should be defended, if possible, but not extended; that privatization, when it eradicates monopolies, was desirable; that equality had to be tempered by the need to preserve incentives and competition; and that the power of international financial institutions—and, above all, of financial markets—may be contained—if at all—only by international agreement and not by unilateral state policies. Social Democrats of northern and southern Europe converged toward these precepts and were joined by the emerging democratic Left in the postcommunist states of central and Eastern Europe—even more enthusiastic about the new "third way."
Further indicators of political convergence were the generally positive attitude of the Left toward European integration—at least compared to the position of many of their opponents on the Right—a dilution of their previous commitment to state centralism and, consequently, a significant acceptance of the values of devolving power.
Differences remain. Political parties continue to respond overwhelmingly to a national electorate. They are inevitably constrained by the weight of their own traditions and those of their own countries. They react to the persisting differences in the levels of development and structural characteristics of their respective economies. The size of the working class may have been shrinking everywhere, but the rate of deindustrialization was highly uneven: higher in Sweden and in the United Kingdom than in Germany or Austria. Opposition to cuts in welfare spending were more significant in France and Germany than in Britain, where unemployment was lower under Tony Blair's Labour government. Ecology plays a far more important role in politics in Germany and Sweden than in France or Spain. Feminism has greater strength in Western than in Eastern Europe.
The perception of globalization has brought convergence not only to the Left but also between Left and neoconservatism—and largely and unavoidably on the terms set by the latter. Such convergence, in reality, had existed previously; for most of the 1950s and the 1960s Social Democrats and Conservatives shared common values: full employment and the welfare state. In the 1970s there was a widespread acceptance (across the political spectrum) that it was not possible to rule a country against the trade unions. To some extent this was the consequence of interdependence. If national politics is increasingly constrained by a globalized economy, it is hardly surprising if these constraints force both sides toward similar policies. Social democracy now has modest ambitions. Its aims are defensive: to protect the achievements of the past, to continue to improve social life under capitalism, to promote an ethos of cooperation, and to enhance social and civil rights.
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