Ruling Out Social Democracy as an Option and a Way to Rule It Back In


Howard Richards – TRANSCEND Media Service

14 Mar 2022 – A decisive misunderstanding prolonging today´s mega crisis is the lingering belief that social democracy, as it existed in Europe during the thirty glorious years after World War II, and in a different form in the USA during the four terms of Franklin Roosevelt´s presidency, is a viable option in today´s world.  Although most progressive thinkers today would deny that they suffer from this illusion, I would say (and the reader is free to disagree) that at a deep level it is so widespread that it is taken for granted, and that for this reason well known reform projects –including  those associated with Yanis Varoufakis and Jeremy Corbyn in Europe; with Bernie Sanders, AOC, and Robert Reich in the USA; with a growing number of left-leaning presidencies in Latin America; and with the floundering remnants of social democratic movements inspired by leaders like Nelson Mandela and Julius Nyerere in Africa, run a real risk of being non-starters..

Non-starters?  This is strong language.  Nevertheless, I think I can make a case that it is not an exaggeration by calling only two witnesses, Joseph Schumpeter and Jeffrey Winters; and still have space left to sketch a way to reinvent social democracy in order to rule it back in.

But first a qualification: Under unusual conditions (such as those that prevailed in Europe during the trente glorieuses) social democracy is a viable option.  Contemporary examples are Norway and Bolivia.  Both are in the embarrassing position of enjoying  high and stable (Norway) or growing (Bolivia) levels of social justice made possible by capturing rents from fossil fuels, during a period of history when the natural sciences and Greta Thunberg are telling us (truthfully) that fossil fuels ought not be mined, sold, and burned.  Nonetheless, Norway and Bolivia are making social democracy work; and in the case of Bolivia also “restoring the kinship worldview” (Ubuntu in Africa, buen vivir in Latin America, and with many analogues in all the other parts of the world.)

In 1919, at the age of 36, Joseph Schumpeter became Minister of Finance in the newly founded Republic of Austria.  The socialist President, Karl Renner, had published in 1904 Ein Beitrag zur Kritik des bürgerlichen Rechts (later translated into English as The Institutions of Private Law and their Social Functions).  Renner had argued that if social democrats could achieve electoral majorities they would be able to transform capitalism while staying within the framework of modernized  Roman Law (Common Law in the Anglo-Saxon countries)  that constituted the rule of law in modern republics.  Similarly, Hjalmar Branting, the early leader of Swedish social democracy, had argued that the achievement of universal suffrage would make democratic socialism inevitable.   In 1918, Schumpeter  published Die Krise des Steuerstaats (The Crisis of the Tax State), arguing, first,  that prior to modern republics, rulers had many sources of income. Their greatest single source of income was rents from land ownership. The modern republic was inseparable from a liberal legal framework, limited government, reliance on taxes for government income, and a market economy.

What matters is that  the potential tax yield is limited not only by the supply of the taxable object, less the subsistence minimum of the taxable subject, but also by the nature of the driving forces of the economy.” (p. 115 of the English translation)

This somewhat opaque sentence from 2018 predicts the tax competition among nations of 2022.  Given the nature of the driving forces of the economy, persons and corporations whose permissive acts (investments) start economic activity are wined and dined and subsidized.  Low taxes, access to credit; infrastructure and security provided at public expense, and guarantees that profits made in a country can freely be moved out of it, are among the standard policy tools for getting investors “excited” about investing.  (Dani Rodrik, One Economics, Many Recipes)

Schumpeter´s tenure as Minister of Finance lasted less than eight months.  In his letter of resignation, he explained that he was being asked to perform an impossible task and to deceive the public.  A tax state (Steuerstaat) could not be a welfare state.  In my book co-authored with Joanna Swanger, The Dilemmas of Social Democracies (2006) we do case studies of Spain, Sweden, Austria, South Africa, Indonesia, Venezuela, and the evolution of the economic philosophy of the World Bank.  They show that under normal circumstances Schumpeter´s view tells it like it is.    Renner and Branting were mistaken.  The Swedish (Rehn-Meidner) model could govern a high wage and full employment island (Sweden) in a low wage and high unemployment ocean (the world) under unusual circumstances, but when normality came home, illusions became homeless.

In 1996 Jeffrey Winters published Power in Motion: Capital Mobility and the Indonesian State.  Back in 1936, Keynes had already emphasized two points sometimes called Staggering Facts: the chronic weakness of effective demand, and the chronic weakness of the inducement to invest; and consequently the chronic tendency of the economy to stop, not to go.  It stops when investors do not invest; it goes when they do invest.  Employment is a function of how much labour-power employers hire. The employers hire just enough workers to produce as much merchandise as they think they can profitably sell.    Keynes called investment the causa causans of employment.  Winters elaborates:  “And it is precisely in designing and implementing policies [of the governments hr] that meet the population´s investment and production needs, by first satisfying the core objectives of those controlling capital that the structural dimension of investors´ political power finds expression.”  (page 3)

It follows that governments do not govern.  As Jürgen Habermas had argued in The Legitimation Crisis in 1973, in modernity the market is the primary institution.  The government is secondary.  Markets command governments more than governments command markets.   Winters further elaborates:   Meeting the physical needs of the population, especially when it is a large urban population with no capacity to retreat into local subsistence agriculture, depends on first satisfying the core objectives of those controlling capital.  Therefore, governments, whatever their ideology may be, in practice devote themselves to attracting investment and to discouraging disinvestment (capital flight).  Governments that fail to comply with this structural imperative do not last.

             “When investors choose not to invest, policymakers are powerless to force them.” (Ibid.) This third Staggering Fact, like the first two, justifies the use of the word “structural.”  “Social structure” is a concept studied in detail by Doug Porpora and Tony Lawson, to whose works I refer anybody interested in a deep dive into its meaning and consequences.  Social structure is more fundamental than legislation.  It is presupposed, not created, by economic models.  Social structures tend to be taken for granted as natural, and to be ferociously defended as sacred.   In modernity the basic structure is named in many ways by liberals, by Marxists, and by others who are neither liberals nor Marxists.   One way to name it is: The basic social structure is  the allegedly God- given  or Nature-given right of a person (and also of  a  corporation granted the rights of a person) to liberty and to property.  Basic “structural” rights trump needs.  When investors choose not to invest, policymakers are powerless to force them because, given the basic social structure, the need for food, for dignity, for employment, the need to save the biosphere, and any need whatever, can be satisfied if and only if, first, property owners freely choose to invest.

Winters goes on to demonstrate the existence in our times of a further extension of a logic that has been implicit in capitalism from the beginning.  David Ricardo (1772-1823) thought about it, wondering why capital did not always flow to whatever location offered the highest profits.  Ricardo´s answer was that investors feared losing their money if they sent it away to distant places with strange customs and poor law enforcement.  Today´s accelerating globalization that Winters writes about presupposes a global world order solving the problem Ricardo worried about.

We now live in the time of what Winters calls the Locational Revolution.  Its full effects will be incalculable. They are yet to be felt.  In our times, the times of the Locational Revolution, controllers of capital decide which laws to obey when they decide where to locate.  Governments compete to please them.   Legislators write laws designed to stimulate a nation´s economy.   They try to make it go, but only controllers of capital can actually make it go.

(I simplify, using the expression “the economy” as it is commonly used, while knowing that, as Hazel Henderson and others have shown, more than half the world´s work is done outside “the economy” that gets so much attention and whose malfunctioning does so much damage.)

I hope the above is a sufficient introduction to reasons for ruling out social democracy as we have known it in the past as an option for the present.  It leaves some space to write about how to rule a reinvented social democracy back in.  It will be convenient to start with Johan Galtung´s triple analysis of violence: direct violence, structural violence, and cultural violence.

Picking up on an idea from Pierre Bourdieu, Magnus Haavelsrud and Alicia Cabezudo have been developing peace education methods based on the principle that when culture and social structure conflict, social structure tends to change.  I do not know whether anyone else is working along similar lines.  Speaking more generally, I recommend –-and I detect growing counter-cultures and scientific  research programmes moving in the direction I am recommending – seeing cultural violence as more fundamental than structural violence, indeed as its root cause and as the source of its constitutive rules.

Structural violence, in turn, massively creates direct violence (as does massive emotional starvation at birth and in early childhood, as Darcia Narvaez has shown –but, as Daniel Goleman points out in his work on emotional intelligence, the emotional starvation of millions of children is itself largely a consequence of overstressed and overworked parents struggling to get by in today´s global economy).

To see anthropology and sociology –and not economics—as the fundamental social sciences, and to see fundamental social science as historical (as both Emile Durkheim and Max Weber, among many others, advocated) is a step toward freeing the human mind from liberal and neoliberal hegemony.  A point hinted at above, that the ferocious defence of extreme and oversimplified versions of liberty and property is a knee jerk response of majorities, including many of the victims most damaged by the system, is a symptom of hegemony.

Culture can be read as the ecological niche of the human species.  Culture is much older than social structure –social structure being a concept more at home in the modern Gesellschaft than in the traditional Gemeinschaft.  Social structure can be seen as a key concept for sociology, while culture is the flagship concept of the more comprehensive science of anthropology.  Culture links the natural sciences to the social sciences.  It links evolutionary biology to social psychology.   Lev Vygotsky embedded psychology in culture, history, and biology when he founded the intellectual tradition called Cultural Historical Activity Theory (CHAT).

Now, at a time in history when a hegemonic rule of law cements in place a locational revolution that disempowers governments, a promising educational strategy reframes the laws of economics –previously framed as eternal and universal analogues of Newton´s laws of motion—as cultural constructions built by 18th century European culture from materials provided (mainly) by the modern reception of Roman Law.  Modern western liberal culture, like any other culture, can be reconstructed as new generations learn it and change it as they learn it.   This is happening.   It is happening in the light of contemporary natural science and in dialogue with the “defeated epistemologies” of Asia, Africa, and Latin America that are coming to voice and demanding to be heard.

Seeing the culture concept (Google James Boggs, The Culture Concept as Theory, in Context) as primary, and as a powerful force for structural transformation, motivates building cultures of peace today, here and now.  It suggests (as Haavelsrud puts it) using education from below to counter oppression from above by governments hell-bent on making big business even more profitable than it already is by intimidating labour even more than it is already intimidated.    It encourages governments like Gabriel Boric´s new government here in Chile, that are trying to reinvent social democracy after its catastrophic defeat by finance-capital-driven neoliberalism.

Here are two more contemporary trends we have going for us:

One is the unbounded idea.  When the workers lost the class struggle, the capitalists lost too.   They created a world that nobody wants to live in –and in which nobody could live in much longer even if they wanted to, because it is unsustainable.  These realities motivate growing support for movements that are aligning across sectors for the common good. There is more voluntary sharing of wealth.   There is more thinking outside the box, forgetting the old dichotomy market vs. government, while realizing that for any given problem that we set out to solve together, the number of possible solutions is in principle unlimited.

Another trend going for us is the ethics boom.  As if by instinct operating at a gut level, there is a massive groundswell of awareness  that if there is still hope for humanity, that hope requires, as Buckminster Fuller put it,  “graduating” to a higher ethical level.    Not to a bogus ethics that glorifies sacrificing the needs of the many to the property rights of a few, but to  a care ethic, to an ethics of responsibility, human rights, dignity, cognitive justice,  inclusion, service, solidarity.      Today we should adopt as an ethical starting point Andrew Sayer´s proudly mundane principle that the purpose of an economy is to enable people to live well.  We should embrace Martin Luther King Jr.´s concept of one Human Family living in one World House: and Evelin Lindner´s Big Love.   The typical objectives of social democracies, such as everyone having good health care, housing, and pensions, should be regarded as ends-in-themselves, to be accomplished one way or another.


Prof. Howard Richards is a member of the TRANSCEND Network for Peace Development Environment. He is a philosopher of social science and Research Professor of Philosophy at Earlham College, Richmond, Indiana, USA. He was educated at Redlands High School in California, Yale, Stanford, University of California at Santa Barbara, University of Toronto, Harvard and Oxford. He currently teaches in the University of Cape Town`s EMBA programme. His books include: The Evaluation of Cultural Action; Letters from Quebec; Understanding the Global Economy; The Dilemmas of Social Democracies; Gandhi and the Future of Economics; Rethinking Thinking; Unbounded Organizing in Community; and The Nurturing of Time Future. His new book, written with the assistance of Gavin Andersson, Economic Theory and Community Development: Why Putting Community First Is Essential for Survival, is now available from the publisher, Dignity Press, and from Amazon and other major booksellers, as a print book and as an eBook.

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This article originally appeared on Transcend Media Service (TMS) on 14 Mar 2022.

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