Europe and the Global Financial Crisis: the Rebirth of Social Democracy or Business as Usual?

Abstract

Historically, social democracy's ability to deliver reforms for its working class supporters has been premised on an expanding capitalist economy. Economic growth is important for generating the tax revenue to fund social programs. But it also enables social democrats to advocate policies aimed at raising living standards while at the same time not threatening the interests of business: when profits are flowing and jobs rapidly are being created, social spending could simply be funded through rising government income. When the capitalist economy is performing strongly, social democrats can therefore offer some reforms. But when capitalism is weak, social democracy becomes a pale imitation of right-wing conservativism as it is forced (particularly when in government) to support measures such as restraining wages and cutting social spending in an effort to induce investment. This chapter thus argues that, contrary to much media speculation, the present economic downturn will not lead to a revival of social democratic style policies by governments, but in all likelihood to further pressure for policies that favour business. Those interested in more radical policies in the wake of the crisis will thus need to look further left than social democracy to social movements and more radical left-wing parties. The chapter begins with a discussion of the general relationship between social democracy and the capitalist economy. The second part of the chapter surveys policy trends by European governments since the crisis began, and concludes that the general pattern is consistent with the continuance broadly of a pro-business neo-liberal policy approach. In short, we should expect business as usual.