Is there a liberalism beyond social democracy?

by Colin Crouch
The liberal concern with challenging concentrated authority makes it a natural partner for social democrats; attempts to achieve this marriage have fallen short when economic power is neglected, but the unparalleled influence of corporate elites today makes this alliance more urgent than ever.

Traditional social democracy became doomed during the 1980s, and needed a new charge of liberalism to move it forward. In trying to do this while retaining the form of the mass party seeking to win national elections in a global economy, the Third Way movement was able to produce only a liberalism that fell short of social democracy’s fundamental values. Can there be a liberalism that “goes beyond” rather than “falls short” of social democracy? And can it be based on mass parties?

That is my argument in brief. Both the question in my title and that with which the previous paragraph ends are serious, not rhetorical. I try here to resolve the former; the latter is left open. The question in the title has three troublesome terms. By defining them I shall have gone some way towards answering it.

I am using “liberalism” in its most classic philosophical sense, to refer to an approach of never accepting authority as final, of constantly searching for alternatives, and of doing that through a constant process of extensive tolerance for new sources of ideas as well as conflict and contestation.

I am using “social democracy” to describe that form of politics that emerged in the mid-20th century, seeking both to guarantee certain collective goods and the egalitarian goal of redistributing wealth and power to maximise the quality of life and security of middle- and lower-income working people – but doing so in the context of a capitalist economy.

To a considerable extent liberalism and social democracy are allies. Social democracy’s commitment to the interests of ordinary working people renders it critical of established elites. Less obviously, its attempt to pursue these interests and those of collective goods within a permanently accepted capitalist economy implies constant challenge and conflict, the restlessness that is fundamental to liberalism. It is this same unending search for new and improved solutions to problems that justifies liberalism and social democracy claiming the name of “progressive.”

Given that political movements associated with liberalism came gradually to be associated with comfortable middle-class groups, social democracy could always claim to be a kind of liberalism “beyond” liberalism itself. The same cannot be said of socialism in any strict sense or, even more so, communism, which not only envisaged an end point to struggle in the achievement of an economic system, but also saw that end point in terms of an end to competition – a quality essential to striving through contestation.

But that is an idealistic account. In practice, social democracy often fought shy of the insecurity that is implied by liberalism’s restlessness. As advocates of the cause of “ordinary” working people, social democrats understandably emphasised a need to reduce economic uncertainty and to protect such people from risk – primarily protection from workplace risks through employment law and trade union action, and from wider social and economic risks through social policy and stable demand management. Attractive compromises could be found. In particular, Keynesian demand management tried to produce stability and security at the macroeconomic level while leaving enterprise free at the micro level. Policies of this kind provided a shared ground between centre-left and centre-right, within which social democrats often wanted to go further. They sought various forms of economic planning, which served reasonably well for tasks of post war reconstruction, in a context of economies supplying staple goods to largely domestic markets.

It was far less helpful at working out what to do in globalising consumer economies based on rapid product innovation and marketing. Indeed, at times of major change to economic structure these priorities led social democratic movements to be more conservative than liberal, to use the term that the 19th and 20th centuries give us as the immediate opposite of liberal. These movements found it easier to try to resist disruptive change than to define changes that would be benign for their constituencies. As a result, when this resistance failed they were often left defending a kind of rump of the past.

Enter at this point the new approaches to social democracy generally known as the Third Way. In embracing economic change, including change that was disruptive, and by abandoning the traditional workplace agenda – but not the social policy agenda – of social democracy, the Third Way seemed to have reasserted social democracy’s claim to be part of the critical, liberal, progressive wing of politics. Here, surely, was a liberalism beyond social democracy?

This brings us to the third troublesome word in my title: “beyond”. I am using it to imply an approach to policy that in some way goes further in a desired direction than another. So a liberalism that goes beyond social democracy would be an approach that goes further towards social democracy’s central priorities by reasserting typical liberal practices over those that had become characteristic of social democracy itself. This is to be contrasted with a liberalism that “falls short” of social democracy by giving up social democracy’s egalitarian aims in exchange for a simple compromise with the current ruling form of liberalism, neoliberalism.

For example, a liberal industrial policy beyond traditional social democracy abandons the attempt at economic planning in exchange for deploying collective resources to provide strong physical and human infrastructures. The extent of public investment involved is unacceptable to true neoliberals, but its aim is to create frameworks within which competition, entrepreneurship and innovation can thrive; so it is a liberalism beyond social democracy rather than a relapse into simple neoliberalism.

These strategies have been seen at their strongest and most successful in the Nordic economies. We can contrast this with the strategy of New Labour in the UK, where the overwhelming weight of the financial sector in the City of London led to a concentration of infrastructure effort on that sector and that region at the expense of almost everything else. This merely embedded neoliberalism within economy and polity. Without intensive research it is difficult to determine whether this was because the sheer path dependency of the British economy on the City will prevent any kind of UK government from ever doing anything different, or whether it resulted from the general passive approach of New Labour to business interests in general.

The half-liberal Third Way

This brings us to the heart of the challenge. Third Way social democracy grasped half the nettle of the liberal challenge: the need to embrace markets and competition in economies that could not be planned, and where consumers of public services were demanding choice. But it did not grasp the liberal need for challenge and contestation aimed at concentrations of economic power. People were not encouraged to reflect critically on their working lives, as this smacked of trade unionism, seen as an element of social democracy’s conservative qualities. The behaviour of great corporations was not to be a matter for public debate, as this smacked of anti-capitalism, seemed hostile to enterprise and (less honourably) might threaten corporate donations to party funds. As a result almost the entire emphasis of what we might call the “social democratic quality” of Third Way movements fell on the debate over the quality of public services. This became virtually the sole terrain where voters were invited to perceive political divisions of left and right.

This development had several consequences. First, and positively, in Europe (as opposed to the US) centre-right parties were forced to accept the terms of that debate and commit themselves to public service improvement rather than decline.

Second, also positively, spending on public services either increased or remained high wherever social democratic parties were either in government or competing strongly in elections.
But a third consequence was that public employees became virtually the only group (apart from criminals and immigrants) who could be blamed for anything going wrong in society, as private business interests had been declared hors de combat. This was unfortunate, partly because it encouraged the unfair scapegoating of large numbers of people who try to do their jobs well; partly because it generated a definition of what was wrong with society that was over-simple and ultimately helpful only to the political right; and partly because public service workers had become an important constituency for social democratic parties, giving them in particular their first strong links to women voters.

Repoliticising work and business

The adequacy of public service provision will long remain a social democratic priority, but it needs to share a place with other policy needs. While the main reasons for this are principled, there are also strategic reasons, given that a policy of promising ever more and better services is unlikely to be viable for a number of years to come. The new agenda is to be found in the repoliticisation of work and business. In terms of popular, electoral politics this means finding new combinations of security and flexibility rather than straightforward labour market deregulation; and making a political issue of the “time-poor” problems that afflict the lives of the two-job couples who are so important to the modern economy.

The social democratic approach to citizenship has long stressed that rights derive from participation in the workforce; the economy needs our work, and needs us to work to the best of our abilities. This is the basis of our claim to dignity at work, and guarantees that, in exchange for our commitment, we shall be protected from the uncertainties of the economy and therefore employment, but against which wages and salaries are unlikely to enable us to insure ourselves. Hence much social policy. This can be seen clearly at the heart of the various combined packages of labour legislation, social policy and union power in the Nordic countries.

There is a neoliberal version of the relationship between citizenship rights and work that is superficially similar, but which says simply: no work, no rights. This is the workfare model that originated in the United States and spread quickly to the United Kingdom and many other countries. Instead of being an active subject claiming rights in exchange for making a work contribution, the worker becomes a passive object of policy, confronting a set of largely negative incentives to ensure (s)he can get into the workforce somehow.

Government assists workers in this task, largely by reducing their employment protection rights so that employers are more willing to hire them. In practice this was supplemented by something else: workers might not be able to insure themselves against labour market risk, but they can fund their consumption through second mortgages and credit card debt, making them less dependent on their labour income. This unspoken part of the neoliberal model became implicated in the appalling behaviour of the financial sector that produced the crisis of 2008.

Although it usually retained something of the social democratic idea that public policy had an obligation to help workers improve their skills, Third Way social democracy went a long way down the path of a neoliberal interpretation of the relationship between work and citizenship rights. This followed inevitably from downgrading the role of trade unions as guardians of workers’ active voice in the labour force, which was part of a wider trend within the Third Way of rejecting work as an area where working people were invited to make political demands. Shareholders were the only legitimate stakeholders here as in other parts of economic activity.

This approach must be challenged. The financial crisis has removed the prop of consumer debt on which the neoliberal approach to the problem of labour insecurity was based. Meanwhile, reasserting the importance of workers’ dignity and active voice is one of those issue areas where the right finds it very difficult to follow social democracy. This is conditional on means being found for reconciling that voice with the flexibility needed by a modern economy; but various national experiences do provide examples of that reconciliation.

The issue of work-life balance is an aspect of the dignity of labour. It is also an issue capable of uniting the interests of middle-income “aspirational” families and those of routine workers at the bottom of the ladder – a unity that Third Way politics has always seen as deeply problematic. The two-career couple has become essential to both neoliberalism and social democracy, as well as to the general contribution that feminism has made to public policy. Neoliberalism needs the flexibility it brings, with periods of unemployment and short-time working being easier for people to accept when there is not a sole breadwinner in a family. Social democrats have come to appreciate the “femino-multiplier”, as women’s entry into the labour force generates more employment to replace the domestic and care work formerly done by now working women. But there is a cost in the timetabling strain on couples who are trying to bring up children while holding down two jobs. There is scope here for attractive policy initiatives for social democrats.

The problem of corporate power

But in this essay I want to concentrate on a more difficult issue: the problem of corporate power. Large, global corporations have today acquired a power that cannot be accommodated by any theory of democracy. No other interests can rival their lobbying, as the behaviour of the US Congress regularly reveals. They are often able to determine a country’s fiscal or regulatory policies by threatening to relocate. Their claim to being acceptable within democracies rests on the argument that they exist solely within the market, where the consumer is sovereign. But this cannot justify the way in which they wield political power, which is completely inconsistent with the theory of the free market.

In recent years a new terrain has been opened up to corporate political power through the sub-contracting of many public services to private corporations. Usually the “customers” in these new public service markets are not the users of the services, but government departments; a tiny circle of commissioners work in a cosy relationship with a small group of oligopolistic corporations, determining how public services shall be delivered remote from both democracy and market. Not much market or choice reaches the ultimate consumers.

In the wider economy the essentially political nature of the giant corporation is becoming recognised through a circuitous route. While all sides of the political class have preferred to ignore the challenge this presents, many active citizens are concerned, and firms have taken note of the damage that this concern can do to their brands. The left complains about consumer society, but in such a society shopping can become a political activity. Many aspects of corporate behaviour are involved: environmental damage of many kinds; the exploitation of slave labour in global supply chains; banks that concentrate their activities on speculation in secondary markets, from the negative consequences of which the taxpayer has to rescue them.

Soon, once a small number of corporations have become responsible for delivering most public services, a new lively politics of challenge will emerge directed against them as well as the governments and parties that have indulged them. Corporations defend themselves from this new criticism through corporate social responsibility strategies (CSR). Initially public relations exercises, these have become serious matters, as corporate critics monitor firms’ behaviour, and draw public attention to hypocrisy and continuing bad behaviour. This is true liberal politics, seeking progress through conflict and contestation rather than through the imposition of a master plan, forcing improvement in the process. And it goes ‘beyond’ social democracy, because it takes up issues that are thoroughly consistent with social democracy’s concern for egalitarianism and for collective needs.

This new politics has largely been ignored by Third Way social democracy, except in attempts at working collaboratively with firms to develop their CSR agenda. Mainstream parties are worried at incurring the displeasure of corporations and seek to avoid the liberal challenge of accepting conflict as a major route to progress. Social democracy is sadly trapped at the national level, because of the overwhelming importance of the nation state for democracy. Democracy is national; capitalism is global. That juxtaposition lays bare the weakness of democracy in its exchange with the large corporation. The new citizens’ initiatives that challenge corporate power do not have these worries, and in many instances are becoming international themselves. The threat that ‘we shall take our investments elsewhere’ does not work against campaigns which are also present ‘elsewhere’, and which in any case do much of their work at points of purchase and consumption rather than production.

Of course, these campaign groups have pitifully small resources when compared with the corporations they are challenging. At certain points they can make no progress without support from governments or, better, international public bodies. But we are left with a very serious question. Are political parties, dependent as they are on global corporations for national economic success, at all capable of embracing a liberalism that goes beyond social democracy, requiring challenge and contestation aimed at those corporations? Or will the energy and vibrancy of the new politics pass completely from parties to looser, less nationally bound campaigning groups, with parties of all types picking up pieces of the new agenda only when campaigns have clearly so moved public opinion on an issue that they have to give in to them?

Making parties part of the campaign

Matters are unlikely to be as negative as this. Any policies that campaign groups eventually manage to achieve will have to be processed through party-based governments, so campaigns would be unwise to ignore parties in their own lobbying work. This in turn provides an opportunity for those in the parties who worry about corporate power to lend a willing ear and occasionally to take up a cause themselves earlier in the process.

This is not to try and write parties out of history, only to see things from their point of view. It was characteristic of “old” social democracy to see the party as the channel through which all causes should pass, because the party was the sole reliable representative of the class. Campaigning groups that refused to link themselves to the party were suspect as being part of a hostile bourgeois world. This tendency, which social democracy shared with communist movements, was always one of its less attractive, anti-liberal features, as it restricted the channels through which innovation could come. By the 1980s, when parties had ceased to represent classes in the old way, it even lost its original justification. A policy coming up through a party membership was likely to represent nothing more than the preoccupations of a few well organised individuals. Third Way reformers had perceived this, and became rightly suspicious of anything coming through mass parties.

This continues to be the case. It would not be a sensible response to my arguments here about corporate power for party members to start processing resolutions calling for various actions unless they know that there are strong, mobilised bodies of opinion out there in the wider society caring deeply about the issue in question. And effort and energy should be directed outwards to that wider opinion, not inwards to manipulating a party machine.

Successful campaigns require complex interaction between parties and mass publics, given that parties cannot see themselves as direct and automatic reflections of those publics. The traditional left responded to these problems by ignoring the public; the Third Way by responding passively to what it was told was the message of opinion polls and focus groups. In place of these equally unappealing options there has to be active engagement. And interacting with campaigning groups is a major route to that.

The time is very ripe for this. New technologies have produced new communications spaces outside the control of the corporate mass media. This is providing possibilities for liberal debate similar to that generated by the early spread of newspapers in the 19th century. It will be a time-limited window of opportunity, as eventually the corporations will learn how to get control of new media as they did the newspapers. Another transient window is being provided by the very real popular interest in and anger at the behaviour of the financial elite. We are living at an important moment. Are social democratic parties capable – not of taking control of it, that would not be good – but of becoming part of it?

Colin Crouch is professor of governance and public management at the University of Warwick Business School

This essay is a contribution to the Policy Network publication “Priorities for a new political economy: Memos to the Left”, which was presented to the Progressive Governance Conference in Oslo.

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