Vindicating European Social Democracy

European social democracy has been one of the most notable achievements in the long history of Europe. It gave many people an opportunity to live a life in dignity, to satisfy one’s own desires. Now it’s being endangered. Under normal circumstances the majority of the people are unable to climb up the socio-economic ladder. The society had to create conditions conducive to such an improvement in material situations. According to the philosopher John Rawls, all people are born under different circumstances. The two most relevant pre-determining factors explain great material differences, whereby it is solely up to the society’s choice how to allocate resources, whether it includes an expansionist or a reductionist government. These two factors are inheritance and natural abilities, for which none of us can claim credit, and, yet, by birth all of us are forced to live and participate in the society that has more or less economic disparities (as I said, depending on the society’s choice, the historic experience, the interplay of the government, businesses and citizens). Under Rawls’ difference principle every benefit that goes to the high earners is only acceptable if the least well off benefit too. 1

That is not the surrender to a centralized, bureaucratic planned economy. In some ways all governments have to retain certain functions, especially in making long-term investments that benefit communities, businesses and people when the times are tough. But having full equality might be something that should not be achieved. I prefer the incentive system that capitalism has. People should live their life in freedom, and at the same time preserve a condition that is responsible to coming generations. If, for example, the oil interests are geared toward profit maximization, it would be morally acceptable to do so. But if the oil companies knowingly destroy the environment, then the generational contract would be breached on which a society is based. None of us can claim responsibility for the blunders of our forefathers, but nonetheless we are the ones that probably need to solve the problem that has been created in the past.

So freedom as a morally justified concept can not be repudiated. In fact, it should be encouraged. But the problem that is associated with unlimited freedom is, that only some can really claim the advantage out of it. Laissez-faire capitalism does not want to acknowledge that some interests, who concentrate a lot of wealth, constrain the freedom of many other people. There is a distinction between the tyranny of the few and the tyranny of the many. The tyranny of the many usually include ethnic or religious conflicts that may be fueled by strong personalities, but whose actions are carried out by the masses belonging to the ethnicity or religion in question. The antisemitism or the antiislamism certainly belong to the category tyranny of the many. The tyranny of the few is when some powerful interests hold the rest of the society hostage, and hamper the liberty thereof. One major example are the banks that have recently claimed $9 trillion in low-interest Federal reserve loans to guarantee their bailout. The excess reserves were not used to give more loans to small businesses and people, or to help them keep their homes, but to buy Treasury Securities at higher interest rates to increase profit at the expense of taxpayers. 2

The wealthy elites will always claim that the money they are making is well earned, that they have worked very hard for it, but it is a question of how much the society wants to reward a certain activity, and that the control mechanisms to avoid corporate malfeasance are weakened. If the wealth disparities in society are increased, it becomes evident that the fabulous concentration of wealth is closely interrelated with the greater struggle the middle class is undergoing.

This is pretty much the process that is wrecking America, but it doesn’t mean that Europe is not affected by it. According to the deceased historian Tony Judt, the business theorists like Friedrich Hayek or Ludwig von Mises, who defend liberty in terms of the minimum involvement of government, have gained too much importance, and that “[t]o abandon the gains made by social democrats—the New Deal, the Great Society, the European welfare state—is to betray those who came before us as well as generations yet to come.”3 Judt knew that by considering the long, war-driven European history

The problem is that structural changes since the 1970s, the Fordist model of the economy 4 that relied on mass production of manufactured goods in western societies and was heavily Keynesianistic, was replaced by globalization, including the rise of information technologies and service based jobs, and a more flexible work world. The automization and outsourcing of many manufacturing jobs may have opened up some opportunities elsewhere, but it reduces the scope of predictability for middle class people. The sociologist Richard Sennett picked up one of these aspects, and described the term flexibility in the working life, and how it reduces predictability that is so important for long term relationships, trust and confidence. 5 The modern capitalist economy that forced people to become more flexible in their work schedule (which means more work, more job training, more education, at the same time while raising kids and tending the household just to sustain a certain standard of living) does not follow the needs and interest of the people. The interest of the people is certainly to see their standard of living rise, while obtaining more free time and more manageable work. The rise of service-sector jobs would offer that kind of opportunity, and the improved technology also creates sufficient resources to afford a better general standard of living. As Noam Chomsky said, “The resources are there, the policies aren’t.” 6

The term flexibility has positive connotations, because it is aligned to freedom. Yet, what is that freedom worth if for the average middle class person there is a higher stress level, where there are only a few winners and many losers? It is a matter of political choice to return policies to the hands of the common people, and only social democracy offers the vision of freedom, justice and solidarity. 7 The central charge against social democracy has been its overt emphasis on the wage conditions of hired workers, not the conditions of the working poor, those that live precariously despite work. 8 The problem is not that hired workers wouldn’t deserve higher wages. I think higher wages for workers are a fundamental task of labor unions. But the problem comes up if the labor unions don’t unite all workers under one umbrella, but differentiate between different branches of work. The mass production-based, repetitive assembly-line work has basically lost significance in the West, and more people are trying to find new jobs in the unorganized service sector.

What social democrats in the West should be doing, which is to “achieve a peaceful world where these basic values [freedom, justice and solidarity] can be enhanced and where each individual can live a meaningful life with the full development of his or her personality and talents and with the guarantee of human and civil rights in a democratic framework of society”9, is not only to make lives more comfortable for working class people. Social democracy has the task to carry forward the interest of the whole society, and that is to reduce income inequalities. The British researcher Richard Wilkinson published a study, claiming that people living in societies with more income inequality have shorter, unhealthier and unhappier lives; increases in the rate of teenage pregnancy, violence, obesity, imprisonment and addiction; destroyed relationships between individuals born in the same society but into different classes; and function as a driver of consumption depletes the planet’s resources. 10 Wilkinson also concluded that more equal countries like Japan or Sweden have the most satisfied people in the industrialized world. 11

Wilkinson’s conclusion doesn’t mean that the quantity of wealth has no relevance at all in terms of people’s happiness. There is a correlation between existing wealth and happiness, but only up to a certain point. The secret is that the majority of the people classified as the middle class have sufficient resources to make a decent living. Once a threshold has been reached where most of the basic necessities plus immediate needs are satisfied other considerations like improving social relationships come to the forefront, except if the society is too involved in heeding the profit-maximizing calls of market capitalism, and excessive consumerism. The Hedonic treadmill says that as wealth increases, so do expectations, and so does being accustomed to the lifestyle that the new level of wealth brings. 12 It should be possible to be satisfied with less. The first car might bring happiness, but chasing after a second car is not required if one is the only driver. This is especially relevant for people at the upper echelon of the wealth scale. Take Warren Buffett as a contrary example: despite his net worth of over $47 billion, he lives on a modest-size property he acquired for $31,000, and grants himself $100,000 a year for personal expense. 13

But to return to the endangered state of European social democracy, there are some serious points that need to be raised. Europe is moving in two different directions. Greeks, Portuguese, Spanish and Irish people are facing drastic budget cuts along with sharp increases in taxes, because the economy is suffering and the public debt is rising rapidly. Germany and Austria, in the mean time, are seeing a modest economic recovery. Some experts already talk about a Europe of two speeds. 14 It is understandable that there has been profligacy in some of the Eurozone states, but the question is how to retain solidarity and economic growth to all countries, and I think that only social democracy delivers the unifying factor to work on an economic recovery package for the weak countries, who should focus on rebuilding their economy rather than bring their public finances in order (which automatically extracts from job-creating measures). The economic divide will only hurt the vision of a unified Europe, and turn out to be dangerous given the numerous labor protests in Spain or Greece.

What remains unseen in the debate over “irresponsible” states is that in large part banks are responsible for the economic turmoil aided by a by-stander government, some of them even encouraged the reckless practices of the banks. Former German finance minister Peer Steinbrück even posed the question who is governing the country: the governments or the banks? 15 The political activist Noam Chomsky says that financial institutions have created financial products that was aimed at expanding profit rather than producing anything of worth. 16 Ireland has fallen into the trap of its banks creating financial devices that caused a property bubble in their own country. 17 Greece has taken the advice of Goldman Sachs, and obscured billions of Euros in debt by making the cash upfront invisible. 18

The greed of the banks is growing into epic proportions, and the likely outcome is a return to those bailouts and budget austerity packages, because the banks are so essential and no politician is trying to change the system in a dramatic way. It has always been the political left that demands change when the powerful become too powerful. Some politicians from the left have shown support for a financial transaction tax. 19 But even the worthy proposal of a financial transaction tax does not seem to solve the general problem. The general problem is that we have moved our economy to one driven by financial capital rather than industrial production. Even a service-based economy can be a good one, one that generates its growth mainly via teachers, lawyers, accountants, doctors and nurses. But such an economy also needs to secure jobs and job opportunities to those with few education and little money. And that is the task of social democracy that should never be given up.

What hinders social democrats from formulating their policies is perhaps this structural economic change, that labor unions and political parties do not play such a great role in people’s lives anymore. Instead of formulating positive socio-economic outcomes, the left in Europe has been forced to fight on a defensive position. Right-wing populists apparently are attacking the conservative/social democratic consensus, and foreigners are viewed more and more hostile by the native population. It seems to be evident that there is no point in the native poor- that see their economic standing weakened by globalization- pitted against the foreign poor, who stand even fewer chances of social elevation. Nonetheless, the political left has to raise its voice and describe an opportunity how the majority native people can get along with the minority foreign people in this country without resorting to mere verbal reassurances. This will only heighten alienation on both sides, and facilitate the rise of right-wing populism a la FPÖ, Northern League, Vlaams Blok, Danish People’s Party, National Front and Jobbik.

Improving integration of immigrants is extremely important in the face of the recession. There is an upsurge in racism due to the economic downturn. Instead of criticizing the governments for not restraining the excesses of the banks, or proposing a meaningful job creation plan to counter the recession, people will resort to visible people in their neighborhoods, most likely dark-skinned immigrants. 20 Especially Nicolas Sarkozy’s harsh deportation of Roma’s can be seen in context with this economic crisis. Again one structural issue appears to be important to point out. Europe’s economic boom was possible, because cheap labor from abroad came in. Of course, they are working for lower wages and less benefits than the native people, but they are the ones that are available. The taxes they contribute to governments certainly bolsters the western welfare states that are so important to upkeep to prevent populist rage.

A problem comes up when these social welfare standards are lowered, and when the people begin to despise the people that have enabled the economic boom in the first place, when the economy begins to deteriorate. The generalization of the “bad immigrants” only temporarily offers solace to the people, and give a false sense of identity to the underclass natives. Helmut Schüller argues that the debate on integration is a distraction from the capitalist oppression of the wealthy few, so that whenever they cut jobs, native and foreigners, the natives are left to rage against foreigners in the quest for the few available slots. 21

I would not say that the integration debate is negligible. It should be seriously addressed especially by social democratic governments, who have an interest to get the vote of working and middle class natives as well as foreigners. The left has the unthankful task of providing jobs, education and language courses to all, while risking to fail in their policies, which opens the gates for right-wing populist sentiment that follows simple arguments. Generally, there is a high tendency, for example in Germany, of nativism and hostility to immigrants. 22 The sociologist Saskia Sassen argues that middle and working class people are not merely racist or crazy, but have become poorer, so it’s likely natives will blame foreigners for taking away “their” jobs. 23 This is the reactionary opinion that can only be overcome, when the society can generate a positive vision for all, that is full integration into the welfare state, the creation of jobs, the investments in infrastructure, education and innovation. What we need is more equality, a bigger welfare state, a redistribution of wealth, because people see job losses and pay cuts, while the economy seems to be improving, while the banks are returning to massive profitability. So they will ask: why don’t I feel a recovery?

To return to history: Social democracy has been so successful in Europe, because Europe has learned from the mistakes of the past, from internal political division based on ethnic superiority. It took the painful experience of two combined world wars to quench out all desires for another destructive war. It is done not by sermonizing about how a good life should be led, but by solving the material problems plaguing the people. Social democrats have been taking the leadership in this initiative, and in these transformative times they should take charge again.
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Notes
1 Rawls, John, and Erin Kelly. Justice as Fairness: a Restatement. Cambridge, MA: Harvard UP, 2001. Print.
“John Rawls-. Justice as Fairness: Justice within a Liberal Society.” Stanford Encyclopedia of Philosophy. 25 Mar. 2008. Web. 05 Dec. 2010. http://plato.stanford.edu/entries/rawls/#JusFaiJusWitLibSoc.

2 Rosenberg, Paul “Fed’s Bank Bailouot Topped $9 TRILLION in Loans–made TARP “pocket Change” Says Bernie Sanders.” Open Left. 03 Dec. 2010. Web. 05 Dec. 2010. http://www.openleft.com/diary/21008/feds-bank-bailouot-topped-9-trillion-in-loansmade-tarp-pocket-change-says-bernie-sanders.

3 Goldstein, Evan R. “The Trials of Tony Judt.” The Chronicle of Higher Education. 06 Jan. 2010. Web. 05 Dec. 2010. http://chronicle.com/article/The-Trials-of-Tony-Judt/63449/.
Judt also published a remarkable book on European history since 1945, denoting the significance of the European welfare state as a means of reducing class/ethnic conflicts that have accompanied European politics ever since industrialization. Judt, Tony. Postwar a History of Europe since 1945. London: Pimlico, 2007. Print.

4 According to Wikipedia “to standardize a product and manufacture it by mass means at a price so low that the common man can afford to buy it.” “Fordism.” Wikipedia, the Free Encyclopedia. Web. 05 Dec. 2010. http://en.wikipedia.org/wiki/Fordism.

5 Sennett, Richard. The Corrosion of Character: the Personal Consequences of Work in the New Capitalism. New York: Norton, 1998. Print. http://www.richardsennett.com/site/SENN/Templates/General.aspx?pageid=40

6 Chomsky principally referred to climate change efforts, but in spirit he agrees with the ideas given. Chomsky, Noam. “Noam Chomsky on the Economy, U.S. Midterm Elections, Climate Change, Haiti, and More.” Democracy Now. Web Interview. 05 Dec. 2010. http://www.democracynow.org/blog/2010/11/30/noam_chomsky_on_the_economy_us_midterm_elections_climate_change_haiti_and_more.

7 The principles of the Socialist International (SI) “Declaration of Principles.” Socialist International. June 1989. Web. 05 Dec. 2010. http://www.socialistinternational.org/viewArticle.cfm?ArticleID=31.

8 Brand, Ulrich. “Sozialdemokratische Politik in Zeiten Der Multiplen Krise.-“Schwächung des Sozialdemokratischen Milieus”” Die Zukunft. 13 Apr. 2010. Web. 6 Dec. 2010. http://diezukunft.at/?p=1295.

9 “Declaration of Principles.” Socialist International. June 1989. Web. 05 Dec. 2010. http://www.socialistinternational.org/viewArticle.cfm?ArticleID=31.

10 Wilkinson, Richard G., and Kate Pickett. The Spirit Level: Why Greater Equality Makes Societies Stronger. New York: Bloomsbury, 2010. Print. http://www.guardian.co.uk/books/2009/mar/13/the-spirit-level

11 Wilkinson, Richard. “Interview – Richard Wilkinson – Why Greater Equality Makes Societies Stronger.” YouTube. 14 Jan. 2010. Web. 05 Dec. 2010. http://www.youtube.com/watch?v=1Y0sBsZfzJk.

12 Grayling, A C. “Happiness Is the Measure of True Wealth.” The Telegraph. 10 Apr. 2008. Web. 05 Dec. 2010. http://www.telegraph.co.uk/comment/3557112/Happiness-is-the-measure-of-true-wealth.html.

13 Smith, Lisa. “Warren Buffett’s Frugal, So Why Aren’t You?” Yahoo! Finance – Business Finance, Stock Market, Quotes, News. 04 Jan. 2010. Web. 05 Dec. 2010. http://finance.yahoo.com/news/Warren-Buffetts-Frugal-So-Why-investopedia-1012408202.html?x=0.

14 Sanders, Doug. “Two-Speed Europe: A Continent Fissures Into Deeply Divergent Economies.” Doug Saunders. 01 Dec. 2010. Web. 05 Dec. 2010. http://dougsaunders.net/2010/12/europe-economy-germany-ireland/.

15 “Aber er kann reden, mitreißend, und anders als viele in seiner Partei ist er Kosmopolit genug zu begreifen, dass die europäische Politik schnell handeln muss, will sie ihr Primat zurück: Vor einer auch weiterhin entfesselten Finanzökonomie, deren Regulierung sich Steinbrück in den Herbsttagen der Finanzkrise einfacher vorgestellt hat.” Ankenbrand, Hendrik. “Das Comeback.” Frankfurter Allgemeine Zeitung. 12 Sept. 2010. Web. 6 Dec. 2010. http://www.faz.net/s/Rub594835B672714A1DB1A121534F010EE1/Doc~E48DDAEA0D76A4F23A7AF5E743B24C54A~ATpl~Ecommon~Scontent.html.

16 “U.S. owners and managers have long ago made the decision that they can make more profit with complicated financial deals than by production. So finance- this goes back to the 1970s, mainly Reagan escalated it, and onward — Clinton, too. The economy has been financialized.
Financial institutions have grown enormously in their share of corporate profits. It may be something like a third, or something like that today. At the same time, correspondingly, production has been exported.” Chomsky, Noam. “Noam Chomsky: WikiLeaks Cables Reveal “Profound Hatred for Democracy on the Part of Our Political Leadership”, Noam Chomsky Interviewed by Amy Goodman.” The Noam Chomsky Website. 30 Nov. 2010. Web. 05 Dec. 2010. http://chomsky.info/interviews/20101130.htm.
Peer Steinbrück expresses a similar sentiment. He thinks that finance capitalism has not produced real values. This is an assessment I very much have to agree with. “An den Universitäten, den Business und Law Schools sowie in der Finanzindustrie selbst wird eine Generation sehr tougher Frauen und Männer ausgebildet, die sich in einem anderen Koordinatensystem bewegt als der Rest der Gesellschaft. Gelegentlich ist mir durch den Kopf gegangen, ob diese besondere Welt von Banken und Finanzen mit den daran hängenden Berufen nicht zu einer Fehlallokation von Begabungen führt. Das klingt kompliziert und ökonomistisch, deshalb will ich das erläutern. Der Finanzsektor ist durch extrem hohe Bezahlungen schon beim Einstiegsgehalt sehr attraktiv. Statistisch zeichnet sich insbesondere in den USA und Großbritannien ab, dass der Anteil derjenigen, die Natur- oder Ingenieurwissenschaften studieren, deutlich unterproportional gegenüber dem ist, was die Industrie an Qualifikationen braucht. Wie bei einem Staubsauger zieht der Finanzsektor personelle Ressourcen an, wobei man lange darüber streiten kann, ob er überhaupt reale Werte erwirtschaftet.” Steinbrück, Peer. “Welcher Idiot Verliert Schon Gern?” Die ZEIT ONLINE. 16 Sept. 2010. Web. 05 Dec. 2010. http://www.zeit.de/2010/38/Interview-Peer-Steinbrueck?page=3.

17 Matthews, Graham. “The Roots of the Irish Crisis.” Green Left Weekly. 05 Dec. 2010. Web. 05 Dec. 2010. http://www.greenleft.org.au/node/46328.

18 Story, Louise, Landon Thomas, and Nelson D. Schwartz. “Wall St. Helped to Mask Debt Fueling Europe’s Crisis.” New York Times. 13 Feb. 2010. Web. 6 Dec. 2010. http://www.nytimes.com/2010/02/14/business/global/14debt.html.

19 “Suddenly the leaders of Europe’s three biggest economies – Angela Merkel of Germany, Nicolas Sarkozy of France and Gordon Brown of Britain – are promoting a financial transaction tax as a way to fulfil commitments to domestic budgets, climate change and international development.” Singer, Peter. “Tax Banks And Give To Poor, Robin Hood Style.” The Sydney Morning Herald. 31 Mar. 2010. Web. 05 Dec. 2010. http://www.smh.com.au/opinion/politics/tax-the-banks-and-give-to-the-poor-robin-hood-style-20100330-rb8r.html.

20 Ghosh, Jayati. “Racism and Recession in Europe.” Foreign Policy In Focus. 10 June 2010. Web. 05 Dec. 2010. http://www.fpif.org/articles/racism_and_recession_in_europe.

21 “‎”Die Politik hat in Hinblick auf Information der Bürger völlig versagt. Sie müsste einen Großteil ihres Geldes dafür verwenden, den Bürgern zu sagen, dass unser System politisch wie gesellschaftlich längst ein übernationales ist, dass die Offenheit für andere Kulturen überlebenswichtig ist, aus demografischen wie geistigen Gründen. Es geht um Ehrlichkeit: Eine Gesellschaft, die lautstark ihre Tür zuknallt, aber unterm Türschlitz massenhaft Leute hereinsaugt, um sie gewisse Arbeiten machen zu lassen, ist unehrlich. Mir wurde nach langem Nachdenken klar, dass die Integrationsdebatte ein Ablenkungsdrama ist, das mit gut verteilten Rollen aufgeführt wird. Ablenkung davon, dass es um die Frage der Verteilung geht. Auch die Hetzer in der Ausländerdebatte sind Helfershelfer des Kapitals. (…) Im Kern der Debatte geht es um den Weg, die Leute möglichst klein zu kriegen, damit möglichst Wenige möglichst viel haben, und möglichst Viele möglichst wenig. Indem man die Gesellschaft noch einmal auseinander dividiert, lenkt man sie ab. Man gibt ihr die Ausländer als Feinde, sie verbeißen sich darin – und merken gar nicht, dass ein Dritter [Manager, Reiche] dazu lacht.” Schüller, Helmut. “”Wohin Soll Man Gehen, so Nackt?” – Anders Gefragt.” Der Standard. 04 Dec. 2010. Web Interview. 05 Dec. 2010. http://derstandard.at/1289609432534/Anders-gefragt-Wohin-soll-man-gehen-so-nackt.

22 “Ausländerfeindlichkeit Ist Erschreckend Normal.” Die Welt. 18 June 2008. Web. 6 Dec. 2010. http://www.welt.de/politik/article2119053/Auslaenderfeindlichkeit_ist_erschreckend_normal.html.

23 Sassen, Saskia. “”Die Menschen Haben Echte Angst”” Der Standard. 01 Nov. 2010. Web. 05 Dec. 2010. http://derstandard.at/1288160398764/Standard-Interview-Die-Menschen-haben-echte-Angst.