Nostalgia: Return of Social Democracy

by Marcus Otono

The Rise of Social Democracy

Probably the most effective “reform” on capitalism ever attempted resulted in the rise of social democracy. Social democratic policies enacted in the last century took the edge off of the sharp blade of exploitation of the working class by capitalism by addressing some of the economic inequalities that are inherent in a “winner take all” system. Using tools of progressive taxation, legal protections for worker’s organizations, and a more equal distribution of that taxation and the wealth created, more of the production engendered by the workers under capitalism was spread into wider and wider hands. It seemed to be the panacea that would allow capitalism to flourish without too much of a reaction from the exploited.

And it did work for a while. In the US and Great Britain, the post-WWII boom that rebuilt Britain and Europe resulted in the longest expansion in either country’s history. From 1940 until about 1970 there was plenty of profit to be made for the owners and so they were able to spread the largesse about to the workers so that everybody had a decent living. It was a practical tactic to keep worker discontent under control and keep the profit-making machine working, especially since the owners still retained control over the economy, politics, and society in general. And the mass of workers allowed themselves to be bought by reforms that improved their lives. After all, who wants to go through the uncertainty of a revolutionary change? Revolution is always a last resort when the people realize that they cannot be ruled the way that they always have been ruled. That day of reckoning was delayed by the social democratic reforms of the mid-Twentieth Century.

Then there was also the presence of the USSR on the world stage. By its very existence the USSR facilitated the rise of social democracy by presenting capitalism with a competing system of organizing society. Although degenerated far from the original idea and dreams of the Bolsheviks, just the existence of the Stalinist Soviet Union provided a check on capitalism because it at least “talked the talk” about worker supremacy in society. And as a major player on the world stage between competing imperialisms, the USSR could not be ignored. Capitalism actually had to fight for the “hearts and minds” of the working class world-wide. Social democracy and the social democratic policies adopted by the political representatives of the bourgeoisie was to become the first line of the defense of capitalism against a workers’ revolution.

Falling Profit Rates

But social democratic reforms can only be allowed, and in reality, afforded by the system during times of plenty and expansion. When the inevitable downturns and crashes happen, somebody has to pay for the reset, so that the cycle can begin again. When profits are scarce, programs and policies that benefit the masses are an impediment to restarting the cycle because they take working assets away from the private sector, assets that no one can profit from.

Added to the pressure on profits engendered by the downturns, the competition for resources in the post WWII world put upward pressure on the costs of these resources, when they could be accessed at all. The post-colonial revolutions, both Stalinist and nationalist, in the so-called Third World countries and former imperial colonies, not only raised the prices for resources, but introduced scarcity to the equation. And in reality, the cheap raw materials and super exploitation of the indigenous populations in the undeveloped territories was also a major reason behind the rise in social democracy in the first place. The exploitation of the workers in the developed countries of Europe had been lessened in part because of the super exploitation of the workers, usually workers of color, in the undeveloped parts of the world. The loss of easy access to these raw materials and their subsequent rise in cost, was just another nail in the coffin of the reforms that had been won.

Add in an inherent, systemic tendency for the rate of profit to fall due to more efficient production and these pressures drove the profit for the capitalist system to levels that were not satisfactory for the reinvestment that is the lifeblood of capitalist expansion. The doldrums of low expansion and inflationary spirals of the 1970s clearly showed that something needed to be done to lift those profit levels back to where reinvestment was feasible again. What became known as neo-liberalism became the primary weapon in the propaganda war against social democratic programs.

The Reform of the Reforms

Neo-liberalism, by other names and in a piecemeal fashion, has always been a part of the capitalist playbook. The idea that giving more to the ones who have the most and letting them spread it back out to the rest of us goes back to, at least, the late 19th century. The most recent and complete version of these theories of neo-liberalism were codified by Milton Friedman and the “Chicago Boys”, his economic acolytes of the Chicago School of Economics during the early 1970s. Using the now famous “Disaster Capitalism” scenario and with the full consent and support of the American economic, political, and military empire, Friedman’s theorists took advantage of any sort of cataclysmic event to impose a drastic regime of cuts to the social democratic gains of the people in mostly underdeveloped countries. One of the first and most famous episodes of forced implementation of neo-liberalism was the Chilean experiment with Pinochet and the junta that overthrew Salvador Allende and then went on to ravage and terrorize the country for decades. This was the test case for the forced “liberalization” of the reforms workers had won through the struggle for social democracy. Capitalists considered it a success because it created a few more millionaires and restored their rate of profit, thus allowing for expansion. At least that’s the way they spun the outcomes. The human cost of hundreds of thousands of former middle economic class people falling into poverty for every millionaire created was considered acceptable. Especially if it wasn’t mentioned. And there was also a very human cost in terms of the lives lost and tortured in resistance to the repression that was necessary to enforce this doctrine of austerity.

The problem became how to “sell” this return to a purer and more cutthroat version of capitalism to the very people who benefited the most from those reforms, workers who lived in the developed world and especially the USA and Britain. Every country couldn’t be liberalized by the Chilean method. In the more developed countries a subtler tactic was utilized, the denigration of workers and even government itself and by extension the programs that the government administered for the rest of us. Beginning with Thatcher and Reagan, the followers of the Friedman school of neo-liberalism came to power and turned their propaganda guns on the workers and the unions that represented them, succeeding in breaking their power. At the same time, they planted the meme that government was inefficient and that anything that could be done by government could be done better by the private sector. They fostered a worshipful attitude towards wealth by implying that, if you weren’t wealthy or had plans and ambitions to be wealthy, you were beneath notice. Of course, it was never mentioned that most wealth that was to be worshiped is of the inherited variety, with a very limited access to that wealth by anyone other than the ones who already have it.

Thus, began one of the most remarkably successful propaganda campaigns that could be imagined. It broke the power of the organized workers and, as a result, broke the power of the entire working class. It fostered a sense of “independence” from each other and even glorified selfishness, rather than solidarity. It was so successful at turning the masses against the social reforms that had benefited them for decades, that the very idea of these programs became an anathema to every “sensible” conversation about the economy. Unless, of course, the conversation revolved around the question of how much could be cut, eliminated, or privatized. These programs had to be curbed in order to free up monies that could then be invested in profit making.

Nostalgia for Social Democracy

The current waves of resistance to what’s called austerity politics has its roots in the defense of these past glories of social democracy and social democratic policies that have been under attack and whittled away over the last thirty plus years. None of the anti-austerity groupings that have arisen in the last decades have actually pointed out any other path than a return to these policies. Whether SYRIZA, Podemos, Chavez and the Bolivarians, and now, Sanders in the US, the left government in Portugal, and Corbyn in Britain or any of the myriad of other reformist left groupings that have arisen have put forward any alternate path.

Perhaps some could be put down to the nature of a defensive struggle. It’s easier to fight for a known quantity than for an untried future. But what’s missing here is the historical context that social democracy arose in the first place. Social democracy was not given, it was taken. It was born out of struggle and not just at the ballot box. The struggle was sharp and oftentimes bloody as capitalism resisted sharing any more of the wealth that workers had created. For a while the workers gained some influence because of this struggle and were able to make gains, gains that were supposedly protected by bourgeois law. So, it’s logical to conclude that to protect and, in some cases, regain social democracy, more struggle will be necessary. If anything, capitalism is less able to give back now than in the heyday of the middle Twentieth Century, so the struggle quite possibly could be even sharper.

If struggle is inevitable, then it seems logical to ask why should workers stop at social democracy? Especially when the policies that makeup the whole of this worker support of capitalism are actually not up for the job.

What’s perhaps most ironic about the current nostalgia for social democracy is that this system of reforms that were won with difficult struggle, blood, sweat, and tears of the working class weren’t that great to begin with. Because they left the current owners and system in place, they inevitably were on a collision course with the system from their origination. In most cases they were minimum demands for just enough to live on and reproduce the next generation of labor. And maybe some scanty protections when the bosses decided that even minimum demands were too much for their profit margin to handle. Or when the worker got too old to be productive. Because the market still ruled, albeit with some governmental planning and direction, there were still scarcities of necessary goods and services. The dictatorship of the market also led to inflation, an economic condition that was much more problematic for the working class, especially the working poor, than it was for the owners. In short, leaving the capitalists in control guaranteed that nothing would really change. While it’s true the iron fist of “work or you don’t eat” was slightly softened by the velvet glove of social democratic programs for the masses, since the owners still owned it was inevitable that the programs were inadequate, inefficient in delivery, and always under attack either overtly or covertly. Would anyone expect anything different today?

Why Return to A Failed System?

Social democracy and the reforms of capitalism that were the result of this struggle were clearly part of specific conditions that held sway during the early to middle part of the 20th century. Some of those conditions are replicable today and some are not. The struggle itself is something that undoubtedly must be part of today’s prescriptions. Capitalism will never give anything without the same type of militant demand which won the reforms which were enacted in the first place. The question then becomes, if a serious struggle is necessary to even get mild reforms enacted or protected in the capitalist system, then why stop at reform?

Three times within recent historical eras capitalism has massively failed to live up to its promises of a societal system that improves the lives of everybody that lives under it. That capitalism is the best that we can do is proven false by these regular, historical downturns that effect the masses proportionally more than the owners. The Long Depression in the late 1800s, the Great Depression, and the current Great Recession and ensuing Long Depression were all systemic failures of massive proportions for the working class that makes up the majority of the people. And reforms were always put into place to ensure that these economic cataclysms would never happen again. Until they happened again. The wealthy in society, living on inherited property, whether money, stocks and bonds, rentier income, or the actual, direct ownership of land and the means of production, always weather these crises more or less intact in their wealth and power. But while the owners lose a few points on the scorecard through these systemic earthquakes, the workers always lose a whole lot more. Jobs, income and life savings, homes, health, welfare and self-respect are gone in an historical flash and have to be slowly and painfully rebuilt using the rules laid out by the ones who benefited the most and who suffered the least during the crisis.

And these are just the big tremors in the system. There are regular downturns and recessions every few years that, while less severe, still cause hardship and heartache for the rest of us. Then the lie of reform is repeated until the next time it’s proven false. Then it’s repeated again. If the definition of insanity is doing the same thing over and over and expecting a different result, then history clearly shows that trying to reform capitalism is insanity.

The current wave of opposition to the barbarities of naked capitalism is an expected dialectical response to the current crisis. Unfortunately, this opposition is still locked into the “insanity” of trying to bring back yet another failed method of reform. By advocating for a return to social democracy and the social democratic programs of the last century, the reformers are preventing the debate from broadening out into a more comprehensive discussion of what really needs to be done. Whether it’s Greece, Spain, Portugal, Bolivia, or even the USA and Britain the failure of the reformist left to actually win the platform they ostensibly fight for shows the failure of this model of resistance. The example of SYRIZA who took power, democratically elected on a mandate of fighting austerity and, tacitly at least, returning to social democracy comes immediately to mind. But just by taking the reformist route, SYRIZA agreed to play by the rules of the capitalist system. And we all see how that worked out.


This has always been the contradiction involved in the social democratic reform of capitalism. Laws, policies, programs, rules and regulations that attempt to improve the life of workers and society at large have always been an impediment to profit-making and, as such, have always been and will always be in direct conflict with the power-brokers. They have to pay for the reforms in higher taxes, less opportunities for profit, and a less responsive marketplace. The very reforms of the system that gave workers a bigger share of it, will always need to be rolled back as soon as possible for the system to work more efficiently for the ones who own it.

A return to social democracy and social democratic policies is clearly not the way to go in this new century. Anything that leaves the current owners in place is shown by history to be inadequate for the tasks of creating a more equal and more responsive society for the ones who make it all work. That’s the rest of us, the ones not lucky enough to be born into wealth and privilege. We need to begin the discussion of what needs to be done as soon as possible and also related it to current developments and projects like the DSA. The DSA was chosen by parts of the working class as a potential political alternative to bring their struggles further. Unfortunately, the current leadership and also its fixation on supporting Bernie Sanders with any cost, is pulling the social democratic tactic and strategies over the political hope of thousands of new political activists. Our discussions, however, need to be open and widespread and especially including historical analysis about the fact why the old ways didn’t work and why the program of permanent revolution is the way to go. This inevitably needs to involve representatives of the working class and unions, as well as supporting and joining the struggles of suppressed minorities in society.

A worldwide response to defend worker gains that are under attack is imperative since capital is more global than ever in scope. But we cannot just defend, we must find a way, whenever possible, to go on the attack with transitional demands that go further than social democracy and put pressure on capitalism, pressure that will actually show the bankruptcy of ideas that is capitalism in the 21st Century. This is a system that has proven over and over and over again that it will not and cannot work for us over the long term. And no reform can make it so. The reforms that actually work to equalize wealth won’t be tolerated over the long term because they interfere with the running of system and the rule of the owners. This is the ultimate contradiction of the return of social democracy under the rule of the bourgeoisie. It’s only possible at certain times and under certain conditions and even then, it is inadequate for the task of societal equality and is always in danger of being repealed.

We deserve better, but we won’t get better until we demand it. It’s the power dynamic in society that needs to change, but won’t until we recognize that a return to a mythical “Golden Age” of capitalism isn’t enough. And since power will never be “given”, we need to understand that the change that needs to come will only come if we take it.