To most observers, it has become obvious that, since 2008, the global financial contradictions would need more than facile cosmetic “tweakings” – especially now that they have become exacerbated by the Ukraine War. This conclusion has forced many leaders of countries in crisis to re-examine the structural bases of their economies, in attempts to craft comprehensive and coherent responses that go beyond merely ameliorating symptoms.
The triumph of the neo-capitalist model over the socialist alternative at the end of the 1980s was supposed to have delivered us to the “end of history”. The victorious neo-liberals never felt it necessary to really articulate an “ideology”. Their most popular exposition, dubbed the “Washington Consensus”, was merely the title an economist tagged on to his compilation of demands made by IMF/World Bank on faltering Latin American economies, including Guyana’s.
It is clear that the extreme ideologies – pure socialism and unfettered capitalism – have failed the test: the former because of too few incentives, and the latter because of booms and busts, unproductive speculations, and uncontrolled negative externalities. As most of the countries attempt to pick up the pieces from the neo-liberal Titanic, they are all adopting policies – to a lesser or greater extent – from the “middle-way” social democratic (S.D.) tradition, pioneered in Europe over a century ago.
These policies include a “mixed economy” of both privately and publicly owned enterprises; a wide range of subsidised or publicly provided social services – especially health and education; regulation of enterprises for the benefit of wider societal interests; progressive taxation; rule of law; and social justice and entrenched human rights etc. Those countries that held on to their S.D. policies to a greater degree, such as Germany and India, have fared better than those that plunged deepest into the neo-liberal vertigo of market fundamentalism – such as Britain and the US. The latter duo’s praxis – dubbed “Anglo-American” capitalism by the Germans, has however still denied the assumption of any ideology.
At the onset of the crisis, the greatest focus was placed on rescuing the financial system, which crumbled because of the false assumption that the self-regulated market could best spread the risks it was supposed to intermediate. In S.D. fashion, governments have had to move in massively at both the national and international (IMF) levels to stop the haemorrhaging, which is still ongoing. As the crisis inevitably spilled over into the real economy, the major S.D. tools of governmental fiscal and monetary policy were ratcheted up – they had become standard after WWII. This is also ongoing.
There is now acceptance of the fundamental S.D. position: that Government must play a greater role in ensuring that the goals of society are fulfilled, and that the primary goal is that programmes must deliver the greatest good to the greatest number, and not just the top one percent. With this in mind, it is quite appropriate that other S.D. programmes for social justice are being proposed at this juncture.
The case for widening the S.D. approach may best be made at this juncture in terms of the handling of risks which have been brought to the fore in the financial meltdown. Social democrats have long argued that the capacity to share and manage risks most effectively is at the societal level, rather than at the individual level. The set of policies traditionally associated with social democracy may be regarded as responses to a range of risks facing individuals, from health risks to uncertain life chances. The neo-liberal critique has posited that the S.D. welfare state approach killed initiatives, but we have seen that unregulated markets are not the answer.
The collapse of the neo-liberal paradigm does not mean an atavistic return to the ideas, policies and practices of the post-war social democratic era. Social democrats must learn from the mistakes of that era, and retain what was valuable in the failed experiment, including a commitment to sound fiscal policy and a rejection of protectionist restrictions on trade in goods and services. This constant adjustment to the test of experience, rather than arguing only from first principles, is the distinguishing feature of the ideology of social democracy.