The Declining Fortune of Social Democracy

Podcast available here https://soundcloud.com/user-280580802/33-declining-fortune-of-european-social-democracy

In the European elections, the Social Democrats had lost 38 seats. The Conservatives had lost 39 seats. The main winners of the elections were the liberals that gained 41 seats (21 of which comes from Macron’s La Republique En Marche), the Greens that gained 25 seats (12 of which in Germany) and a new right-wing faction Identity and Democracy (which includes Austrian FPO, Belgian VB, German AfD and French RN), which gained 73 seats. The centrist parties, who have been ruling the continent for many decades in the postwar era, are now clearly losing out to alternative political forces that include the economic liberals (for those wishing continued globalization and reward for the wealthy), the Greens (for those wishing a left-wing ecological transformation) and the right-wing populists (for those wishing a return to national boundaries, anti-immigrant positions, xenophobia).

In any narrative of the collapse of the political center, the relatively bigger losers are the Social Democrats on the center-left. The only light points for Social Democrats all across Europe are found in Spain, Portugal, Malta, Denmark and the UK. In this post, I analyze the political situation in these countries and find that Social Democratic parties are waging a largely defensive battle, and only a new anti-capitalist vision can revive their electoral fortune.

Malta has a stable two party system with the Labour Party holding an edge with 37 of the 67 seats in the last parliamentary elections. They have been ruling since 2013, but the conservative Nationalist Party has also held power in turns. Joseph Muscat, who had become Labour Party leader in 2008, won the parliamentary election decisively in 2013, inheriting rising budget deficits, a slowing economy and a near-bankrupt national utilities provider. Upon taking office, Muscat pushed for stronger civil liberties, better access to medicine, free child care centers, more financial/ social benefits for families and a youth employment guarantee. Poverty was reduced and pensions increased.

Muscat almost stumbled on the revelations of the Panama Papers, where he and some collaborators apparently held two companies in that jurisdiction. The journalist Daphne Caruana Galizia uncovered this connection and died in a car bomb attack. A legal inquiry did not produce any evidence for direct links between Muscat and the Panama companies.

For his reelection campaign Muscat promised a more equal wealth distribution, the re-introduction of public holidays, the refurbishing of roads and a tax bonus for low and middle income workers. He was handily re-elected also on the basis of an improving economy (upward of 4% growth) and public finances (surplus since 2016). Given that the GDP per capita is still 5,000 euros below EU average there is still room to grow. The unemployment rate that was more than 6% before 2013 halved to 3.7% in 2019.

In Spain, austerity policies since the great economic crash in 2008 had brought a conservative government to power in 2011. Even though PP leader Mariano Rajoy promised tax cuts for small businesses, a protection of health care and education from austerity cuts, the PP was even more insistent than the Socialists (PSOE) in austerity policies and was ultimately toppled with a vote of no confidence in 2018. The 2016 election had produced an electoral stalemate with the Conservative PP forming a minority cabinet backed by Ciudadanos (C), a smaller centrist political party, and receiving the abstention of the PSOE. PSOE had a leadership crisis after the loss of seats in 2016, which forced out Pedro Sanchez, who did not want to back a PP-C government. However, the other PSOE politicians did not want another general election fearing even more losses, so they begrudgingly endorsed the Rajoy government. Unfortunately for the PP, the economy was not improving, the austerity pain dictated by Europe continued to bite and the corruption scandals their leaders were part of made them very unpopular. Sanchez seized the moment, returned as party chair in May 2017 (also likely for lack of viable alternatives) and launched a vote of no confidence against the Rajoy government. Sanchez was appointed prime minister of a minority government, but his PSOE had even fewer seats than the PP.

In February 2019, Sanchez budget resolution failed lacking sufficient support from the opposition parties and he had to call snap elections for April. The PSOE gained 38 seats (reaching 123) and became the biggest political party albeit still short of a majority, while the PP lost a whopping 69 seats coming down to 66. The bribery, money laundering and tax evasion ring (Gurtel case) surrounding the PP had ultimately destroyed its electoral fortunes. The 2019 election also featured a new right-wing party, Vox under Santiago Abascal. Sanchez PSOE could also steal votes from the left-wing Podemos (-29 seats), which became famous for attacking the centrist parties for their austerity policies.

Sanchez portrays himself as more progressive than his predecessor. He appointed 11 women into his cabinet of 18 ministers. He wants to expand unemployment compensation, strengthen relations with the EU, endorse a refugee resettlement program, where Spain accepts some of the refugees that are in Germany. Sanchez opposes Catalan separatism. After indicating dialogue with the Catalans, stiff independence referendum demands by the Catalans made Sanchez respond with the threat of police force and crackdown from Madrid.

Sanchez is in the midst of forming a new government cabinet. I doubt that Sanchez popularity comes from his progressive ideas (which are rather scarce and limited), but rather the complete mismanagement and corruption of the PP opened up the political vacuum for the PSOE. They have a few years to prove themselves in power. If they oblige to the EU austerity guidelines, more votes can be lost to left-wing Podemos. If they are too open on immigration, the right-wing Vox can steal supporters. And once the Spanish voters begin to forget the PP’s corruption scandal, they will be back in power in 5-10 years.

In any case, PSOE’s position is still quite fragile, holding only a little more than one-third of the seats in parliament. In the talks he is holding with the opposition parties, he is hoping to get either support from Podemos, Ciudadanos or PP, but he seems to be coy on whether to form a coalition government. In the Madrid regional elections held on May 26, the PP lost 18 seats, allowing PSOE to become the first party by holding their 37 seats from the previous election. A PSOE-led Madrid government is not guaranteed as the leaders of PP, Vox and Ciudadanos are negotiating for a three-way right-wing coalition agreement.

What is the situation in Portugal? Since democratization with the Carnation Revolution in 1974, there have been two major political parties dominating the Portuguese political system, including the center-right Social Democratic Party (what a misnomer!, PSD), which combines Christian Democracy with economic liberalism. The other major party is the center-left Socialist Party (PS). PSD and PS have switched up political control over the decades. The heated period came around 2010, when the EU essentially forced a nearly bankrupt Portugal to accept austerity policies to comply with the conditions of debt repayment.

In 2011, the opposition parties voted down the austerity budget bill proposed by the minority PS government led by Jose Socrates, which triggered snap elections that same year. The Socrates government also requested a EU bailout facing an unaffordable surcharge on the government bond after investors began to sell Portuguese debt en masse. In the elections, the PS promptly lost 23 seats and the PSD gained 27 seats. The PSD under Pedro Passos Coelho negotiated a coalition government with the smaller Christian-conservative CDS-PP. The conservative coalition government imposed even more brutal austerity policies, slashing civil servant salaries and curtailing their hiring, increase the health care tax and fees, increase the VAT, an end to the Lisbon-Madrid high-speed rail construction, the privatization of media, utility, banking, the airline, telecom, insurance and hospitals, and cuts to the unemployment benefit size and duration (30 to 18 months).

Coelho’s policies were quite unpopular, and even their junior coalition partner threatened to blow up the coalition by withdrawing from government in 2013, but Coelho convinced the CDS-PP to stay on. The unpopularity of the austerity policies convinced party leaders of the governing coalition to form an electoral alliance, which was called Portugal Ahead. It became the largest parliamentary faction, but lost a combined 22 seats and thus the absolute majority in parliament. Coelho was appointed prime minister again, but failing a no confidence vote was replaced by the Socialist Antonio Costa, who could convince the left-wing Left Bloc (BE) and Communist-Greens (CDU) to back his minority government. BE and CDU agreed to prop up Costa’s PS because he promised to roll back many austerity measures, while also promising the EU to reduce the budget deficit.  Costa backed an increase in the minimum wage, an increase of vacation days, tax credits for SMEs, higher public-sector salaries, and a halt to privatization. At the same time, Portugal is expected to generate a budget surplus next year.

How is that possible? For one, Costa’s government made cuts in infrastructure spending, which could impact future growth. The ECB bond-buying program has calmed the nerves of investors. A modest economic recovery in the EU helped Portuguese exports, and higher prices in Greece and Italy lure more tourists to cheaper Portugal. 250,000 Portuguese had left their country with the onset of the crisis, which relieves the unemployment rolls. Finally, by reversing painful austerity measures, the business community restored their confidence and began to invest in economic expansion, which is crucial to generate a virtuous economic cycle of rising economic activity and tax revenues. The economic growth rate accelerated to 3% in 2017, and is still 1.7% projected for this year.

In election polls for the general election in the fall, PS holds a comfortable relative majority of 37%, way ahead of the PSD’s 26%. The left-wing majority with BE and CDU will likely hold as well. The Portuguese voters are likely to reward the turn away from austerity. But there are signs of strain in the left-coalition. The teachers unions have made demands to collect back pay for the frozen salaries between 2005-07 and 2011-17. The finance minister projects the additional cost to be between $600 and $800 million, which might not be a lot when the government at all levels spends $100 billion, but Costa thinks that the government has to be committed to a zero deficit target and that any concessions made to teachers will result in political demands by other civil servants, thus ballooning the fiscal deficit. Catarina Martins, BE party chair, backs the teachers’ demands and claims that Costa is playing political theater for denying the teachers their back pay. Costa threatens his resignation if the BE and CDU vote for the back pay bill.

In Denmark, things are looking positive for the Danish Social Democrats under Mette Frederiksen, which held its vote share in the 2019 elections and picked up one seat to become the biggest party with a quarter of the seats. The Social Democrats had been ejected from government in 2015, when Lars Lokke Rasmussen’s Venstre (conservative) coalesced with the Liberal Alliance, the Conservative People’s Party and was propped up by the right-wing Danish People’s Party (DPP) that campaigned on welfare chauvinism and an anti-Muslim agenda. Now the left-wing alliance, which includes the Social Liberals, Socialist People’s Party, Red-Green Alliance and the Faroese Social Democratic Party have 93 of the 179 seats, thus scoring a majority, although Frederiksen has to negotiate the details of the coalition agreement. The big losers of the 2019 election have been the right-wing DPP losing 21 of their 37 seats. Venstre gained 9 and the Conservatives gained 6 seats.

What happened to the DPP? The first problem seems to be that by propping up Rasmussen’s coalition government, the DPP became associated with the political establishment, and right-wing parties tend to lose out when they get to government and start disappointing the public. Second, the SD under Frederiksen claimed that the loss of social democratic legitimacy comes from the neoliberal policies which involve cuts to social services and elevated levels of immigration, which hurts the working class electorate. Frederiksen argued that in order to return to power, the Social Democrats had to be pro welfare state and anti-immigration. Frederiksen endorsed the burqa ban and the deportation of unwanted non-EU migrants, primarily those from African countries. These unwanted migrants needed to be resettled to North Africa, which resulted in her being accused of being xenophobic. The SD could not steal many votes from DPP, but they surely made it less appealing for existing SD voters to switch to DPP. The Danish Social Democrats are not very inventive or visionary. Rather they are waging a defensive struggle against the right-wing.

The UK political system has been dominated by Brexit and that actually is a major threat to a potential Labour Party victory. But let us analyze it slowly. The big story is that the Labour Party had returned to power in 1997 with the promise of the Third Way, which is the adoption of neoliberalism with a friendly face under Tony Blair. Blair deregulated the financial sector, allowed for a further hollowing out of British manufacturing, the foundation of private-public partnerships for funding infrastructure, the costly war in Iraq and a boost in health care and education spending. The finance-first strategy was quite risky as the economic crisis of 2008 hit Britain especially hard. A Conservative administration under David Cameron took over in 2010 blaming the escalating debt on Labour mismanagement (which was really about handling the cost of the financial crash and bailouts of banks), and promising harsh austerity cuts. Despite austerity, it was remarkable that Cameron won reelection in 2015 and could end the coalition government with the Liberal Democrats based on his promise to hold an EU referendum, hoping to appease the Tory skeptics and UKIP, which threatened conservative MPs. It was a political gamble Cameron lost. The 2015 election vote was not a vote for austerity.

In the mean time, Ed Miliband stepped down as Labour leader. Changes in Labour Party rules (giving Labour Party grassroots supporters who paid a 3 pound membership fee the right to vote for the leader) made it possible for the hard-left backbencher Jeremy Corbyn to become leader of the Labour Party, pledging to reverse not only the Tory austerity cuts but also to throw Blair’s Third Way into the garbage can. Corbyn is a 1970s leftie, and hopes to restore public ownership in industries and higher investments into the welfare state. This came to the dismay of the Blairites of the Labour Party, who were plotting their political assassination of their unloved leader. This leadership bid carried out in 2016 under the charge of Owen Smith failed spectacularly by confirming Corbyn as Labour leader. Smith copied some of Corbyn’s rhetoric but assured businesspeople and middle class voters that he would not appear as radical as Corbyn. Who would vote for a fake copy?

In the following general election post-Brexit called by the uncharismatic and uninspiring Theresa May hoping to get a bigger Tory majority and reduce her reliance on hard Brexit Tory backbenchers during the crucial Brexit negotiations with the EU, Corbyn’s Labour Party won a whopping 30 seats, while the Tories lost 13 seats and their absolute majority. May had miscalculated, and was forced to go into a confidence and supply deal with Arlene Foster’s DUP to prop up her minority government. The hard Brexit backbenchers led by Jacob Rees-Mogg and the European Research Group were more powerful than ever, voting down all three attempts of May to get her Brexit deal approved by parliament. With Labour’s electoral gains, the Blairite assassins had been thoroughly defeated, and no one as of yet has dared to overthrow Corbyn again.

But the Labour Party is not guaranteed a victory largely because of Brexit. The opinion polls show that the remainer Liberal Democrats and the Brexit Party under Nigel Farage are gaining in the polls. The March 2019 deadline for Brexit had been breached because parliament refused to accept either a no-deal or May’s deal. May then requested from the EU an extension to the deadline, which has been pushed to October 31. This should give parliament more time to deliberate. May announced her decision to step down hoping to break the deadlock, although a Tory leadership contest will mean more months of uncertainty. Both the Labour and the Tory Party have been losing half their voters they had in 2017, because neither of these parties has a true solution. If Jeremy Hunt wins the Tory leadership contest, he might re-introduce May’s deal. If Boris Johnson wins it, there could be a hard Brexit, which most politicians and British people do not want (although under this scenario the Labour Party could profit the most).

As for Labour, Corbyn had campaigned for remain but in a lackluster way, because he thinks that the EU is a neoliberal project that undermines working class interests. Furthermore, the trade union leaders are Brexiters themselves and are pressuring Corbyn to not relent on Brexit. Although two-thirds of Labour constituents support remain and a second referendum, Corbyn does not like the idea and insists on a general election and a soft Brexit, which he hopes to negotiate as incoming prime minister. The optics is really bad, because Corbyn’s strength is on domestic and social policy legislation, not Brexit. If a new general election happens before a decision on Brexit is reached, then it is by no means guaranteed that the Labour Party will win it or gain a plurality of seats. With an indecisive Labour Party the entire Corbyn agenda could be stopped in its tracks.

What can be said about social democracy in these countries? In Malta, the economic management of the Labour Party has been much better than for the National Party, which gives the Labour Party the political legitimacy to govern. The only thing that can stop their rise is if a corruption scandal engulfs the government or an economic downturn occurs. The relatively lower standard of living in Malta suggests that there is some more space for growth (upward of 4% rather than 2%). In Spain, the relative weakness of the PSOE and the lack of reliable coalition partners means that the Sanchez government could not make an important impact in policy and he has only been in power for almost a year, mainly because the incompetent and highly corrupt PP had destroyed its own public image.

Only in Portugal does one have the impression that social democracy has made a powerful comeback. But the major reason is that rather than the PS propping up a conservative minority government (and thus implicitly endorsing the EU austerity mandate), it formed a minority government itself with the support of the left-wing BE and CDU, who demand a reversal to austerity cuts. The Portuguese political system has a left-wing bias, chiefly because immigration, the preserve of the right-wing, is not really an issue in Portugal. The largest immigrant groups are from Angola, Brazil, France, Mozambique and Cape Verde, but they are about 5% of the population. Given the low fertility rate and poverty-related emigration, the Portuguese population is actually shrinking. The mobilizing topic are bread and butter lack of jobs and reductions in social services, which tends to stimulate left-wing voting. Costa can then present himself as a guarantor of social services, while also signaling budget responsibility to the EU. This happens in a favorable period of the economic cycle. When that period comes to an end, the socialist hold on power is threatened.

For Denmark, the SD is waging a defensive battle against the right-wing DPP, which suggests that aside from a splintered left there is a substantial anti-immigrant sentiment and a desire to maintain the welfare state for ethnic Danes. The UK Labour Party is in the process of throwing off Blairite Third Way ideology, but is currently in political opposition and is obliterated in the polls by Corbyn’s unsustainable position on Brexit. These successful cases of social democracy reveal the defensive struggle of social democracy.

Aside from those cases, the Swedish and Finnish Social Democrats lead government coalitions, but they have only about a fifth of parliamentary support and need many coalition partners to stay in power. The overall trend for these parties is one of gradual decline. The Finnish party system has long been splintered, as it competes with two other big parties, the agrarian Centrists and the conservative National Coalition. Sweden- similar to Austria- has been a Social Democratic dominated country, where SD could get at least 40% of voter support, but that hegemony has been declining the past 20 years. The 2018 elections pushed the SD down to 28.3%, which is the lowest value since 1908.

In Eastern Europe, Social Democrats in Poland are not doing so well because they are connected with Communists. The right-wing conservative Law and Justice Party of Jaroslaw Kaczynski has dominated Polish politics at least for a decade. In Hungary, the Social Democrats held power during various periods until 2010, when the election of the right-wing conservative Viktor Orban devolved the country into a quasi-dictatorship with a deteriorating civil society, unfree media and pliant judges. The Czech Social Democrats are somewhat better off, although they are squeezed by the centrist populist businessman Andrej Babis, who is now experiencing mass protests against his corrupt rule. The Social Democrats support Babis in a coalition cabinet. In Slovakia, a charismatic politician Robert Fico, who founded the Social Democratic SMER as a successor to the post-communist Party of the Democratic Left in 1999, led his party to a string of electoral successes and the largest political force in the country. The continued success of SMER is in doubt. In 2018, Fico resigned after the death of the journalist Jan Kuciak, who had investigated tax fraud and corruption among SMER government officials.

Romania has been a Social Democratic dominated country since the second legislative elections in 1992. It also emerged as a successor to the National Salvation Front under Ion Illiescu. Unfortunately for Romania, many of Illiescu’s successors were quite corrupt. Adrian Nastase (prime minister from 2000-4), Victor Ponta (2012-5), and party chair Liviu Dragnea (2015-9) have either been sentenced to prison or have faced fines for corruption charges. While the Romanian SD is affiliated with the European Social Democrats, the Western European party colleagues have advocated for severing the ties with their Romanian colleagues given the attempted court packing, undermining of rule of law and severe corruption among the Romanian SD, which is still in the ruling government. The European PES is hesitant to exclude the Romanian SD because it would weaken the parliamentary group. Among the Baltic states only Latvia has a relatively influential Social Democratic Party, which is translated as Harmony, taking up about one-fifth of the seats, but since its founding in 2010 it has been stuck in opposition.

Elsewhere, the situation is quite dire for Social Democrats. In France and Italy, they have disappeared as a political force. In France, the liberal Macron is fighting it out with Le Pen’s National Front. In Italy, the north supports the nationalist Northern League and the south supports the centrist-populist Five Star Movement. Both parties are in a coalition government. In the Netherlands, the previously ruling PvdA lost three quarters of their seats and became an insignificant political force in 2017. In Austria, the long-dominant SPO has been pushed to second place with the takeover of the young, charismatic Sebastian Kurz in the conservative OVP, who made his name by taking on the right-wing anti-immigrant themes of the FPO and thus pretending that he is not part of the establishment (even though he has been in government since 2011, and his party since 1986). The nationalist FPO is facing a leadership crisis with their leader Heinz-Christian Strache resigning from government after being caught in a videotape desiring a Russian oligarch to take over a newspaper and influence the elections. Yet, the SPO cannot take advantage of the situation because leader Pamela Rendi-Wagner lacks the charismatic appeal and a strong vision.

In Germany, the SPD is obliterated in the polls. It got 20% in 2017, but now polls at 12% being trapped in an unwanted grand coalition government and without a real positive vision for the country. Party leader and parliamentary group chair Andrea Nahles promptly resigned her post after the Bremen council elections and the EU elections went badly for the SPD. The Green Party with their focus on climate change, and shutting down nuclear and coal plants, are soaking up the political vacuum, even overtaking the conservative CDU. The only hope for the SPD is the chair of the youth wing, Kevin Kuhnert, who demanded the re-nationalization of companies and investments in the welfare state. In Greece, the severe financial crisis with attendant austerity has wiped out PASOK with the political vacuum taken up by left-wing Syriza, right-wing Golden Dawn and the conservative New Democracy.

The declining electoral fortune of Social Democrats could be interpreted in different ways. One thesis is that after many years of building up the welfare state, we no longer need Social Democrats, and people start being interested in environmentalism or national security issues. Another thesis is that the Social Democrats are needed more than ever, but they have not properly responded to the challenges of globalization and technological change, which undermined the working class, the voting base of social democracy. As such radical left forces like in Greece or right-wing forces as in most other European countries become the party to vote for. A third related thesis is that Social Democrats becoming so weak have to coalesce with conservative and centrist parties, who veto pro-welfare legislation referencing the inability to create more debt. The EU legislates a debt brake via the Maastricht criteria and does not allow for much fiscal space for social investment programs, thus undermining any potential for social democratic policymaking.

Presently, social democratic ideas are saved in some corners but not by traditional party apparatchiks. Antonio Costa reverses austerity policies on the backs of an improving economy, and two left-wing parties applying pressure from the left. Jeremy Corbyn has a genuine vision, but it is going back to a supposedly more celebrated era of the past. Yanis Varoufakis, chairman of Diem25, has been running a failed EU campaign to push for more public investments in Europe. Die Linke party leader in Saarland, Germany and former SPD chairman, Oskar Lafontaine, advocates a merger between SPD and Linke to strengthen the left-wing of the political spectrum. Bernie Sanders in the US is trying to introduce a European-style welfare state.

These are a few light points, although they are unlikely to restore the social basis for voting social democratic. Traditional working class identities are challenged by automation and ever more insecure employment contracts. Legislating more employment security is at most a temporary stopgap measure before the robot assault prevails. A return to the Keynesian era of economic growth- the pillar of social democratic policymaking- is no longer sustainable with impending scarcity of natural resources and climate change. Corporate supply chains are very globalized, and the all-powerful technology companies are built on the network effect. The implication is that returning to a national social community of the postwar era- another premise of social democracy- is unrealistic. The only way for social democracy to survive is to overthrow the neoliberal and work-centric mantra by advocating for a shortening work week, a radical shift toward renewable energy, the strengthening of social services, a universal basic income and a renunciation of the economic growth model. It will probably take some time before this message can sink in, but given their existential crisis the comrades ears are hopefully going to open up.

If social democrats pursue an anti-capitalist agenda, and we are able to introduce what Aaron Bastani called a “fully automated luxury communism” would that not make social democracy irrelevant? One should recall that the birth of social democracy was the industrial revolution and the insufficient social protection of the emerging working class. The institutionalized and mediated class conflict between labor and management froze into place a political structure where social democrats are represented in the ranks of government. They were not solving a social crisis but ameliorating and managing it, and thus kept themselves politically relevant. A true communism would obviate the need for social democracy. Is that not a pity for social democracy? In that case, my reply is that my goal has never been to save social democracy for its own sake, which would be an understandable motivation for party apparatchiks eager to keep their jobs and membership contributions. My goal is human liberation, and only time will tell whether the route of liberation requires social democracy as an instrument or not.

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