Social Democracy’s Secret Sauce

Righteously angry as Judt’s diagnosis is, it lacks a convincing explanation of why social democracy went into terminal decline from the 1970s. His account gives credit for the welfare state largely to far-sighted intellectuals – his great hero John Maynard Keynes, most of all – and public-spirited political leaders, but there is little recognition that pressures from below, or the wider international context, might have made the welfarist gains of the post-war period possible in the first place. Little credit is given to the role of popular movements or the trade union base on which social democracy rested. As Keynes placed his faith in the generosity of the “enlightened bourgeoisie” so, implicitly, does Judt.

Where movements from below do appear in Ill Fares the Land, they are cast as villains. The welfare state raised ambitions, but in time also drew attention to its shortcomings and exclusions. Its complicity with naked imperialist aggression in Vietnam, and its failings on gender and race – the New Deal having coexisted with Jim Crow apartheid into the 1960s¹ – spawned new social movements pressing their own claims for justice. Judt is not just unsympathetic towards them; he ranks them among social democracy’s gravediggers. He charges the New Left with spurning the solidaristic ethos of the labour movement, arguing that “social justice no longer preoccupied radicals”, who instead valued “the rights of each” over “the interests of all” (p.87). His critique is sweeping but vague: Ill Fares the Land neither engages with any particular New Left thinkers nor cites any specific examples. Nevertheless, Judt castigates “the narcissism of student movements, New Left ideologues and the popular culture of the ’60s generation” for having “invited a conservative backlash” in the ensuing years.

What Judt fails to acknowledge is that these movements, whatever their missteps, addressed real failings of the post-war welfare state and represented sincere struggles for greater social equality; while he does concede, begrudgingly, that the anti-Vietnam War protests and US “race riots” of the ’60s were “not insignificant”, he dismisses them as a narcissistic spasm: Judt scoffs that while the New Left was “exquisitely sensitive to the collective attributes of humans in distant lands”, it was “divorced from any sense of collective purpose” at home, its protests mere “extensions of individual self-expression and anger” (pp.88-90). But the demands it raised for racial, gender and sexual justice, like its opposition to imperialism, were not distractions from the struggle for human liberation but attempts to broaden it to include those hitherto left out.² Judt’s antipathy towards ’60s radicalism contrasts sharply with his indulgent view of Cold War liberalism (pp.93-4), as if the former did more to wreck the prospects of progressive change than the latter, with its steadfast loyalty to US imperialism and the periodic witch-hunts that so badly sapped trade unions, as well as countless other popular movements, of their vitality.³

Judt’s disdain for the soixante-huitards’ anti-imperialism and their excessive concern for “humans in distant lands” is especially revealing. Imperialism was social democracy’s secret sauce. Balking at the outright expropriation of capital, social democracy instead depended on the hyperexploitation of the imperial periphery to bankroll its social reforms in the core; for instance, while the National Health Service was still in its cradle, Clement Attlee’s Labour government was fighting viciously to put down the uprising against British colonial rule in Malaya, a vital source of cheap rubber and tin supplies.⁴ Social democracy was similarly reliant on the colonies as a source of imported labour to provide the manpower for its welfare state – the NHS remains reliant on overseas staff to this day – and to take on the most precarious, worst-paid jobs in its industries.

The reality is that social democracy in the West was never self-contained: it was sustained by the economic and military supremacy of the United States, which took on the stewardship of imperialism in a new, formally post-colonial guise while granting its allies access to cheap resources and violently suppressing challenges to its hegemony.⁵ The Vietnam War was not an aberration; it was a direct consequence of the geopolitical logic that also sustained European social democracy. The prosperity of the trente glorieuses was the product of a global order in which the West, led by the United States with its western European clients in tow, dictated terms to the developing world while systematically destroying movements that sought to redistribute wealth on an international scale.

Judt’s dismissal of the New Left as navelgazing narcissists is inadequate as an explanation and, moreover, it points to a deeper and more troubling problem with his own worldview. By portraying the anti-war activists of the 1960s essentially as neoliberals in embryo – more concerned with personal self-indulgence than collective liberation – Judt both distorts their motivations and sidesteps the fundamental issue at stake: namely, that post-war social democracy was inextricably tied to and lived off imperialism. His hostility to the New Left suggests an awareness, however repressed, that the welfare state he venerated was built on imperial extraction, exploitation, interference in the affairs of newly-independent nations and, when the occasion required it, outright military aggression.

Judt was willing to criticise specific wars – he was outspoken in his opposition to the Iraq War – as well as being a firm critic of Zionism,⁶ both of which put him at odds with much of his own centre-left milieu, but he stopped short of calling the deeper structures of global capitalism and imperialism into question. This is why his critique of the New Left, and of the anti-Vietnam War movement in particular, is ultimately a reactionary one. Instead of recognising the New Left as posing a necessary challenge to the failure of post-war welfarism to live up to its own moral aspirations, he treats its adherents as spoiled children disrupting an otherwise functional system. But if the ‘good society’ depended on empire, as it did, then the fault hardly lies with the New Left for pointing out that all it had done was made capitalism more palatable in the imperial core while continuing to plunder the periphery.

The Unbearable Lightness of Social Democracy

Ill Fares the Land does acknowledge that social democracy was “always a mongrel politics”, averse to theorising but combining “socialist dreams of a post-capitalist utopia” with a sincere commitment to “the rules of the democratic game” (p.73). Social democrats, as Judt observes, were “not uniquely or even primarily interested in economics”; rather, their creed was “in essence a moral matter… offended at the consequences of unregulated competition”. This lack of attention to political economy, far from being a feather in the cap of social democracy, goes a long way to explaining why it proved so helpless in the face of stagflation in the 1970s.

If social democracy “succeeded beyond the wildest dreams of its founders”, as Judt puts it (p.229), why did social democrats roll back so many of their own achievements? The answer lies in this crisis, which shattered some of the key pillars on which social democracy rested. Specifically, the post-war boom had been fuelled by an abundance of cheap oil: with the oil price shock of 1973, which sent the price of crude spiralling higher, inflation rocketed and the entire Western economic model was plunged into crisis. Social democrats’ ability to finance welfare programmes, maintain full employment and keep organised labour quiescent was suddenly jeopardised. Governments now faced a choice: maintain public spending at the cost of rising inflation, or impose austerity to stabilise prices and calm financial markets.

In Britain, the neoliberal turn thus began not with Margaret Thatcher but with the Labour government under James Callaghan that preceded her in office. In 1976, Callaghan went to the International Monetary Fund seeking a loan to patch up his government’s finances, but this came with conditions – in particular, swingeing spending cuts – that would herald the denouement of Britain’s comprehensive, universalist post-war welfare state.⁷ Callaghan explained his volte face to that year’s Labour Party conference in terms that Milton Friedman himself hailed as “one of the most courageous and remarkable statements ever made by a leader of a democratic government”:

We used to think that you could spend your way out of a recession, and increase employ­ment by cutting taxes and boosting government spending. I tell you in all candour that that option no longer exists, and that insofar as it ever did exist, it only worked on each occasion since the war by injecting a bigger dose of inflation into the economy, followed by a higher level of unemployment as the next step.

Social democracy changed millions of working-class lives for the better, but it is striking how quickly so many of its achievements were overturned. There were radical tendencies within social democracy that contested the neoliberal turn, including Bennism in Britain, but these were mostly routed and marginalised by the mid-1980s, as were the more recalcitrant trade unions. Attempts to revive and radicalise Keynesianism, such as those of the government of Francois Mitterrand in France in 1981-83,⁸ were swiftly undone by the accelerated mobility of finance capital in a more porous, globalised economy; Mitterrand, like Callaghan, was compelled to adopt the new neoliberal orthodoxy (not entirely unwillingly, again like Callaghan) and accept defeat in his attempts to prop up the franc.

Social-democratic class compromises stabilised capitalism by giving the working classes of the imperial core reason to see a reformed, liberal capitalism as being preferable to any other system on offer, and by supporting at least a tolerable standard of living for the majority of these workers. But this class compromise could not have come about without the October Revolution, the Chinese Revolution and the wave of anti-colonial revolutions that swept the globe in the post-war decades.⁹ Social democracy put manners on capitalism, at least in the relatively privileged societies of the Global North, but it required a revolutionary threat to force these concessions. Although social democrats were frequently among the most inveterate anti-Communists, they gained leverage from Communism; in its absence as a mass political force in the West today, they no longer have any real bargaining power to wield against capital. Trade union leaders, with only a few exceptions, were likewise willing to play the Cold War game in return for improved welfare and wages, while dutifully purging their own ranks of industrial and political militants.¹⁰

But the post-war social-democratic project rested on the assumption that capitalism’s crisis tendencies could be managed indefinitely through Keynesian counter-cyclical policies, a strong welfare state and corporatist bargaining arrangements. When global capitalism went into crisis after 1973, the logic of class struggle upended this assumption. Capital would no longer tolerate the compromises of the previous years, while unions retained enough strength to demand wage increases but lacked the political power to transcend capitalism and reshape the economy in a fundamental way. The neoliberal turn that followed was not just a contingent policy shift but a reassertion of class power from above, designed to ensure that organised labour and its political allies could never again exert the same influence over economic policy. Unleashing mass unemployment helped break the power of the unions, a blow from which they have not subsequently been able to recover.

Yet Judt celebrates social democracy’s willingness to acclimatise itself to capitalism as evidence of laudable pragmatism. He comments that Keynesian social democrats “had no time for nationalisation in its own right”, even if they were prepared to accept its “practical advantages in particular cases” (pp.58-9). He adds, puzzlingly, that the Labour Party “doted on public ownership”; this might have been broadly true of its rank and file, whose ability to shape party policy was always tightly constrained, but its leaders certainly did not take Clause IV too seriously – with the partial exception of the Attlee government – and never came close to taking the ‘commanding heights’ of the economy into public ownership.¹¹ Leaving the means of production firmly in private hands was precisely what enabled capital to unpick Labourist reforms when a crisis of sufficient magnitude presented the opportunity.

This is the paradox of social democracy: it can secure real gains within the framework of the existing system while the going is good, but unless it moves beyond merely regulating capitalism and instead seeks to replace it with socialised control over economic priorities, it will always be vulnerable to counter-offensives. The history of social democracy demonstrates that the choice is not straightforwardly between reform and revolution, but between reform as a step towards structural transformation and reform as a fragile and temporary accommodation within capitalism, leaving its fundamental prerogatives undisturbed – one from which capital will withdraw as soon as its interests are threatened.