Social Democracy and Globalisation: The Limits of Social Democracy in Historical Perspective
| Published date | 01 October 2002 |
| Date | 01 October 2002 |
| DOI | 10.1111/1467-856X.00087 |
| Author | John Callaghan |
| Subject Matter | Article |
Vol. 4, No. 3, October 2002, pp. 429–451
Social democracy and globalisation:
the limits of social democracy
in historical perspective
JOHN CALLAGHAN
Abstract
This article argues that social democratic governments throughout the 20th century faced inter-
nal and international constraints arising from the operation of capitalist economies and that
the evidence for a qualitative deepening of such constraints since the collapse of the Bretton
Woods system is far from unequivocal. Financial markets were already big enough and fast
enough to deter such governments from the pursuit of egalitarian policies in the interwar years
or to destabilise them if they ignored the warning signs. This article also shows that the effi-
cacy of Keynesian macroeconomic policy in the Golden Age has been exaggerated and that
the problem of short-term movements of speculative capital persisted throughout this era in a
country such as Britain. Keynesianism never worked in the face of mass unemployment and it
is misleading to suggest that its breakdown in the 1970s somehow robbed social democracy
of the policy tools that had maintained full employment in the 1950s and 1960s. A host of
additional problems have indeed beset social democratic governments since 1973, but the
analysis of such problems is hindered rather than helped by much of the literature which
invokes economic globalisation. Globalisation theory is in need of further specification before
it can be useful and arguments about the economic consequences of globalisation since 1973
need to distinguish its effects from those of the many conjunctural problems of the period as
well as the policies that important agencies have pursued in search of solutions to them.
Since the late 1980s globalisation has entered the vocabulary of academics,
journalists, politicians and members of the public but the concept has been
© Political Studies Association 2002. Published by Blackwell Publishers, 108 Cowley Road, Oxford OX4 1JF and
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John Callaghan
given a variety of meanings and remains the subject of debate and con-
troversy. In this article I will ignore most of this controversy in order to
focus on economic globalisation—integration of financial markets and
other markets, internationalisation of production, increasing competitive-
ness—and the contention that these forces create novel constraints for
social democratic governments which restrict the choice of policies that
social democratic parties can feasibly offer (Banuri and Schor 1992; Amin
1996; Cox 1997; McGrew 1996; Gray 1996). This is an argument which
European social democrats themselves have accepted or felt obliged to
address, no doubt in part at least because of their traditional program-
matic economism, much of which is driven by the way contemporary
elections are fought (Labour Party 1994; Lafontaine 1996). Some com-
mentators have acknowledged ‘how extraordinarily novel the world
economy is in its current transnational form’, while admitting that
‘this new situation is so recent that almost all generalizations about it are
speculative or deductive’ (Hobsbawm 1995, 41). Others have not been so
cautious and have been quick to speculate or deduce that globalisation of
markets has undermined the autonomy of the nation state, widened eco-
nomic inequality and inaugurated a competitive ‘race to the bottom’ as
governments seek to attract mobile capital by reducing or eliminating per-
ceived impediments to business, such as relatively high business taxes and
relatively entrenched labour rights (Tilly 1995).
My intention here is not to question the existence of economic con-
straints on the operation of social democratic governments in pursuit of
egalitarian policies, nor to question the fact that such constraints intensi-
fied after 1973. Constraints of this sort always operated in the 20th century,
though with changing intensity. Does globalisation help us to understand
the deteriorating climate for social democracy after 1973? My answer
to this question is sceptical rather than purely negative. At present the
explanatory power of the concept of economic globalisation is impaired
by both conceptual confusion and the lack of convincing empirical evi-
dence. The first point can be briefly illustrated by the fact that leading
proponents of the concept make contradictory predictions about its con-
sequences for policy (though both seem pessimistic for social democracy).
While Susan Strange argued that the litmus test of globalisation involved
‘signs that convergence is winning over divergence’, Philip Cerny has
argued that it was a ‘fundamentally complex and “heterogenizing”—even
polarizing—phenomenon’ capable of generating, not eroding, striking
differences among social formations’ (Strange 1998, 709; Cerny 1996,
618). Others talk of ‘an integrating and yet disintegrating world order’
430
© Political Studies Association 2002.
Social democracy and globalisation
(Mittelman 1995, 273) and of ‘homogenizing consequences for states and
societies’ which can yet ‘highlight difference’ (Sjolander 1996, 604).
Further specification of the concept seems to be necessary before it can be
useful as an explanatory tool. At present it seems only too easy to deduce
that globalisation is the ultimate cause of every adverse economic
problem—from the breakdown of the ‘Keynesian mechanism’ to the con-
temporary growth of inequality in Britain. Atkinson has recently cast
doubt on the latter by showing that inequality of market income grew more
slowly than the inequality of post-tax income in Britain, arguing that this
is clear evidence of the primary role of government policy and perhaps
changes in political values—which are themselves shaped by political
forces—rather than the pressures of impersonal market forces operating
globally (Atkinson 2001). What I want to do here is to show that the glob-
alisation argument is often bad history as well as bad analysis.
I propose to do this by briefly examining some of the salient experiences
of social democratic governments during three distinct periods of the 20th
century—the interwar years, the years of the long boom after 1945 and
the years since the collapse of the Bretton Woods system after 1973. The
first step must be to define social democracy and here I want to empha-
sise that while there have been significant national variations in ideology,
policy and organisation the consistent thread in social democracy has
always been the quest to combine economic efficiency and social justice.
This is what unites the beliefs of such different figures as MacDonald and
Branting, Crosland and Palme, Brandt and Jospin. For most, if not all, of
the 20th century, the dominant trends in social democracy linked progress
in social justice to the prosperity arising from a capitalist society. By mid-
century social democracy was associated with the creation and further
extension of welfare-state capitalism but the particular policies of the social
democratic parties varied nationally. Austria maintained a large nation-
alised sector (much of it inherited from the war and Soviet occupation); in
Sweden, public ownership was marginal to social democratic strategy; in
some countries a highly centralised corporatism was possible, in others it
was not. Social democrats themselves in any case stressed that these were
merely means towards the achievement of a more egalitarian society. The
extent and generosity of welfare provision also varied from one country
to another, as did the principles upon which it was founded. Within this
variation, however, all social democratic parties continued to draw moral
strength, inspiration and distinction from the struggle against poverty and
inequality. The language of socialism generally remained dominant in party
discourse throughout the post-war years and there was a minority element
© Political Studies Association 2002.
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John Callaghan
in all of these parties which favoured much stronger anti-capitalist
measures. Social democratic governments, however, placed their faith in
macroeconomic management of largely private economies, combined with
measures of redistribution, regional policy, various labour-market initia-
tives, provision of educational opportunity, free health care and social-
service entitlements.
The interwar years
It is no exaggeration to say that until the end of the Second World War
the record of social democratic achievement was poor and there was no
evidence of anything that could be called a social democratic model of
governance. Social democratic parties only began to experience office at
national level during the prolonged period of economic volatility opened
by the First World War. These governments faced formidable domestic and
international constraints and achieved little—though it is arguable that the
little they did achieve was significant in the minds of their supporters.
It is true, for example, that in Sweden and New Zealand social demo-
cratic governments, coming into office during the upswing of the economic
cycle in the 1930s, were able to make real reforms in social policy, as did
the Popular Front government in France in 1936–1937. Despite the pre-
vailing economic adversities and the conservative bias of conventional
expert opinion they were able to introduce state-subsidised unemployment
insurance (Sweden); new pensions benefits and health services (New
Zealand); housing reform (Britain) and legislation for a 40-hour week and
holidays with pay (France). But those...
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