Social Democracy and Fascism as Cousins-German

by Henry Farrell on October 30, 2006

Sheri Berman’s book on the past and future of European social democracy makes (at least) two big contributions. First, it takes up Karl Polanyi’s claims about the origins of socialism and fascism and makes something new of them. Berman is explicitly writing in a Polanyian tradition, but she isn’t a disciple or an epigone of Polanyi. Like the social democrats who are the heroes of this book, she takes a classic set of arguments and interrogates and updates them, making claims about what works and what doesn’t, what’s relevant to our contemporary situation, and what isn’t. Second, in so doing she decisively demonstrates the importance of ideas to politics. Her story is one where ideas have dramatic consequences for history. The failure of some socialists to escape from the straitjacket of economistic Marxist thought doomed them to failure and political irrelevancy. The willingness of others to challenge conventional nostrums, and to become actively involved in politics had an enormous historical impact, whether they went to the left (social democrats) or to the right (various strains of fascists and national socialists).

Berman (like Mark Blyth, who also contributes to this seminar) is one of a small group of neo-Polanyians, who are trying to build upon Polanyi’s account of politics so as to provide a better account of how the society and economy in the post-World War II world. One of their key contributions is to wed Polanyi’s arguments with a better account of human agency. Polanyi’s _The Great Transformation_ is a book in which individual agency seems to be subordinated to broader historical trends. Its focus is on how “society” reacts defensively to the depredations of the free market and its relentless commodification of social relationships. Thus, Polanyi’s famous account of the ‘double movement’ in which the excesses of the market inspire a counter-reaction from society. Under this account, socialism and fascism are related; they are different ways in which society has sought to protect itself from the market. The one is a benign effort to restrain the excesses of the market, the other a malign tendency to protect society at the expense of human freedom.

Polanyi’s argument, in its original form, is both intellectually fascinating and rhetorically powerful, but its causal account of how market excesses provoke a response from society is at best a little hazy, and at worst a theory that doesn’t explain the real choices made by human agents (I think that this would be a misreading of Polanyi, but it wouldn’t be a hopelessly off-the-wall misreading). Hence then, the emphasis of neo-Polanyians on clarifying the importance of agency through showing the causal power of ideas. This comes out a little more clearly in Berman’s book than in others in this genre, if only because Berman directly tackles questions that Polanyi himself addressed – the rise of fascism and of socialism as liberal society collapsed in mainland Europe in the 1920s and 1930s. Here, Berman both deepens and revises Polanyi’s account by emphasizing how ideas shaped how different individuals, and the political parties that those individuals worked through responded to capitalism’s internal crisis.

In Berman’s narrative, as in Polanyi’s, there were two antidotes on offer to “economic collapse and social chaos” – social democracy and fascism. Social democracy and fascism were both the result, according to Berman, of long standing intellectual debates within the left over the relationship between economics and politics. Both were movements created by socialists who had grown weary of the passivity of traditional socialism as set out by Engels, and explicated by Kautsky. The reigning orthodoxy emphasized the primacy of economics – economic progress would ineluctably lead to the victory of socialists, who merely had to bide their time. Over time, it became clear that this passive approach was both badly wrong, and a rotten basis to boot for sustaining mass support over the medium term. However, it also proved remarkably resilient. Even if socialist orthodoxy was wrong, it was hard for socialists to get away from. Those who tried to – by advocating even temporary alliances with bourgeois parties – could expect to be vigorously denounced for their heresy. The result was a prolonged and tortuous debate, both within countries and in the International, about the extent to which socialists should participate in electoral politics. In short, those who advocated active politics had a difficult time doing it within mainstream socialism.

On the one hand, social democrats, who wanted socialists to get involved in electoral politics and take power through non-revolutionary means such as getting involved in coalition government, weren’t able to bring other socialists along with them. Some tried to stick it out and to build compromises with more zealous colleagues, sometimes emphasizing to them the need to protect the real advances made by the liberal state by participating in democratic politics. The result was often an unhappy halfway house, as in the German SPD, which participated in elections in the Weimar Republic, but refused to fully embrace it. This cost German social democracy, and the rest of us, dearly over the longer term. Where social democrats were willing fully to embrace existing democratic forms and to extend their appeal beyond the working classes, as in Sweden, they created the basis for a long-standing, and largely successful political compromise. This compromise didn’t seek to eliminate the market (although perhaps the Meidner plan came close), but instead to manage and subordinate it.

On the other, some socialists embraced a more radical notion of politics and of revolution that had little time for bourgeois democracy. Georges Sorel and other syndicalists began with demands that socialists foment massive general strikes, and ended by drifting away from socialism altogether, in favour of other ‘myths’ that might help inspire large scale political action, most prominently nationalism. This helped create the conditions for a synthesis between the nationalist movement and elements of the socialist movement in Italy and Germany. National Socialists retained many of the aspirations of social democrats, and made many of the same promises. Like social democrats, their main appeal was that they offered economic stability and security to the masses.

Hence the first part of Berman’s argument – that fascism was, in a sense, social democracy’s dark twin. They shared common ancestry in internal debates among socialists. There was crossover between the two, as erstwhile social democrats became fascists. Finally, there were substantial similarities in their economic policies, and in the ways that they tried to appeal to mass publics. Both represented revolts against a kind of ideational orthodoxy, in which the economic base determined the limits of politics. Both, indeed, sought to use political means to tame the market and to bring it under control. The political forms that they took were very different. Social democrats accepted democratic principles, even as they hoped that they might subordinate the free market to collective needs. Fascists, very clearly, did not. Even so, they had more in common than either might have liked to admit. Both moved away from an emphasis on the historical role of the proletariat towards a kind of communitarian politics, in which the national home replaced the working class as the relevant community of solidarity. While Fascist and Nazi ideology obviously appealed directly to nationalism, so too did Swedish social democracy, with its emphasis on the folkhemmet or ‘people’s home.’

The second part of Berman’s historical argument is less completely sketched out, but perhaps more important to the political story that she wants to tell. Berman argues that after the defeat of fascism, social democracy won more or less completely in Western Europe. Many political scientists, following John Ruggie, have seen the post war period through the 1970s as the triumph of ‘embedded liberalism’ – a form of liberalism managed through agreed practices and institutions, including most prominently the Bretton Woods institutions at the international level. Berman disagrees. She argues that the key principles of social democracy, as they were hammered out during the pre-war era, were what anchored the post-WW II system. Social democracy was based around the ideas of controlling the market and communitarianism – market forces had to be reined in if communities were to survive and to thrive. The market became increasingly subject to political forces, thanks to nationalization. Welfare states were based upon, and sought to perpetuate, a sense of collective belonging. Keynesianism sought to manage the economy without lapsing into totalitarianism. All of this was a far cry from what Marxists or classical liberals wanted; instead, it “most closely corresponded to … the mixture of economic policies championed by social democrats, fascists and national socialists together with the commitment to democracy that social democrats displayed but that fascists and national socialists decidedly did not.”

This suggests to Berman that social democracy was more than a set of policies, or a compromise between Marxism and liberalism; it was an ideology all on its own. While she doesn’t say it explicitly, her argument suggests that social democrats are really closet Polanyians, concerned to prevent society from being gutted by the market, and imposing the necessary constraints to prevent this from happening. This also makes Berman believe that social democracy is newly relevant today. As in the 1920’s, markets are regarded as all-powerful, and people don’t seem to like it very much. There’s a clear opportunity for social democrats to come to the fore again, by stressing the need to protect community, using markets for their clear economic benefits, while protecting citizens from their worst depredations. Markets should be expanded, but they also should be managed. What’s holding back social democrats isn’t that this is impossible, but that they’ve lost their will. Rather like the socialists of a previous generation, they are paralyzed by a set of ideas that they know to be failing, but lacking the self confidence to articulate new ones.

Enough summary. This book excels in showing how ideas really matter to party politics and to politics more generally. Many of the most important choices made, leading to radically different political outcomes in Italy, Germany, Austria, France and Sweden. Most obviously, those socialists who subscribed to Kautskyan orthodoxy in one of its variants found themselves trapped by their ideas, unable to engage seriously in politics, even when they knew that they had to. Rudolf Hilferding (whom I had never known was a confidant of the conservative chancellor Bruening, even while he was the SPD’s main economic theoretician) lamented that the socialists had no proposals to end the economic crisis, even as he stymied efforts to introduce economic planning which was intended to address just this political need. But so too did ideas empower Swedish social democrats to introduce innovations in economic policy that helped cement their long term political dominance.

It furthermore illustrates the organic connections between social democratism and fascism in a clear, but objective way . Again, some details that were new to me – such as that Gramsci had been a devoted follower of Mussolini during the period when Mussolini was a radical socialist. Her account emphasizes the importance of socialist influences on fascism and national socialism at the expense of right wing ones – I’d have liked to have seen, for example, some discussion of how Catholic versions of corporatism intersected with syndicalism in Mussolini’s ideology. But that’s probably unavoidable, given her purpose in the book, and the need to make it readable, short and coherent.

Berman however does make two major claims that I want to disagree with. First, I’m not at all sure that the book does what it sets out to do – to show that social democracy, rather than liberalism was the basis for the post-WWII order. As a social democrat, I’d like to believe this, but I’m not sure that the evidence supports it. Berman shows, pretty decisively in my view, that social democracy played an underappreciated role in creating this order. But by the same token, she discounts the role of liberalism too much – the post WWII European order was a compromise between social democrats and liberals (and indeed, Christian Democrats too).

There’s one sentence in particular that bugs me. On page 179, Berman argues that “If liberalism can be stretched to encompass an order that saw unchecked markets as dangerous, that had public interests trump private prerogatives, and that granted states the right to intervene in the economy to protect the common interest and nurture social solidarity, then the term is so elastic as to be nearly useless.” Here, Berman seems to me not to treat arguments and differences within liberalism with the same seriousness as she treats arguments among the various tendencies within the broad socialist movement. There was a long standing tradition of liberalism, especially on the continent, that had a rather more ambiguous attitude toward the state and toward community than gung-ho Manchester liberalism. For example, James Sheehan in his intellectual history of German liberalism, depicts them as fatally split in their attitude to the state – on the one hand recognizing that the state was the guarantor of the social order that the middle class needed (not least because it helped keep the lower orders in their places), and on the other tempted by the sirens of the untrammeled market. Indeed, Sheehan quotes an evocative bit of cod-Arthurianism that perfectly captures this ambiguity – a nineteenth century liberal’s description of the state as “the spear that heals as well as wounds.” Internal liberal debates weren’t just Manchester economists shouting at each other; they involved a wide array of different positions on the role of state and market.

Or, to put it another way, Berman provides us with an analytic narrative about the emergence of social democracy as an escape from the rigidity of economistic Marxism. Couldn’t one tell an equally convincing narrative about arguments within liberalism between rigid, hidebound laissez-faire economists and other, more socially concerned liberals, leading up to Keynes’s synthesis which had the political aim of saving the market from itself (and then leading into the evolution of Keynesianism and its eventual collapse)? Keynes is a pretty tough sticking point for Berman’s account. As she acknowledges, his ideas were enormously important in shaping the post war consensus about how markets should be controlled. But while (as Berman discusses) Keynes’ ideas had a substantial impact upon social democracy, Keynes can under no serious account be held to have been a social democrat himself. He saw himself as a liberal, his most important arguments were with other liberals, and his political aim was to shore up, as best he could, the existing liberal order by subordinating markets to politics where necessary to secure stability.

One could make similar claims for Christian Democracy. Again, Christian Democracy involved a set of ideas about the role of the state, the need to protect the fabric of society and so on, which fed into the post-WWII order. I think it would be exceedingly tough to show that Christian Democrats were the slaves of social democratic ideology without knowing it – while there was surely intellectual interchange between the traditions, they started from very different places. Quadragesimo Anno shares a lot of common ground with social democracy as Berman defines it, but it starts from a very different place indeed, and ends up too, at a destination that few people would want to define as social democracy.

All this suggests to me that Berman’s criticisms of Ruggie are well founded – the post war order was something much more complicated than a moderated form of liberalism – but that her claim that it was instead social democracy all the way down goes too far. My strong intuition (and it’s not much more than that; a lot of research would be needed to validate or invalidate it) is that this order was a sometimes uneasy synthesis between social democracy, and other political philosophies, all of which agreed, albeit for differing reasons, on the need to moderate and control market forces.

My second disagreement perhaps flows from the fact that I’m a social democrat who doesn’t consider myself to be a communitarian. Berman suggests that one of the reasons why social democrats should be communitarians is that if they aren’t, they’re liable to be out-competed by nationalists benign or nasty, who will steal their clothes, just as they did between WWI and WWII. This is a plausible empirical claim, albeit one that if true I would find pretty uncongenial. But Berman’s account can be read in another way too. If social democracy and fascism are cousins-german, then there’s a very plausible risk that social democracy, if it goes too far in this direction, can lapse into a sort of fascism-lite. This strikes me as a particular political risk in Europe today. A political debate is beginning to take shape in which the right is making significant political advances by attacking immigrants and Muslims in one way or another. This of course ties into wider debates about Europe’s role in the world, the possible accession of Turkey to the EU etc. In many countries, I suspect that there’s a big opening for a leftwing political party that combines robust economic populism with equally robust nativism and hostility towards immigrants. So far, to my knowledge, no party has really taken advantage of that opening. Berman’s account leads me to suspect that this failure is an accident of history, and not to be taken for granted. The worry that social democrats will be outflanked by the nastier sort of nationalist is a real one. But there’s also a real risk of social democrats going too far in embracing nationalist and exclusionary rhetoric with consequences that could be nearly as unpleasant. Hence, my preference at least for a social democracy that at the very least leavens its communitarianism with a broader, more international set of solidarities, and thus is less likely to be hijacked.



John Emerson 10.30.06 at 1:07 pm

I’m not too friendly with the Socialism/Fascism equation when libertarians make it, but I do have some confirming evidence.

Minnesota’s Farmer-Labor Party during the 1930s was probably America’s most successful leftist or populist movement ever. Governor Floyd B Olson explicitly called himself a socialist rather than a liberal. Not coincidentally, Minnesota at that time was predominantly fairly recent Scandinavian or German immigrants. The FLers stayed in power long enough to transform the state, and the later DFL (merged Democratic Party) tended to be at the left of the Democratic Party.

The FL Party is also a counterexample to the Hofstader thesis about the destructiveness of populism. By almost any standard more good than harm was done.

In 1936 the only Congressman who voted to end the arms embargo to the Spanish Republic was the Minnesota Farmer-Laborite John Bernard, who was almost excommunicated for his vote. Only six years later in 1942, the Farmer-Labor Senator Ernest Lundeen died in a mysterious plane crash while under investigation for Nazi ties.

The FL Party effectively joined the far left and the far right into a single party for about ten years. Quite a feat. (Another curiosity is that small-town bankers were left of center during the thirties. They really hated the central banks.)




abb1 10.30.06 at 1:17 pm

Yeah, I’m just an unfrozen caveman, but it seems to me that post-WWII European socialism is not an original concept nor is it fiscism’s dark twin, but simply a compromise between 3 basic components: classical liberalism (capitalism), egalitarianism (marxism), and nationalism (fascism). It’s a constant balancing act, that’s what it is.

note to self: use the word ‘epigone’ at least once in your life, dammit.


radek 10.30.06 at 1:54 pm

This helped create the conditions for a synthesis between the nationalist movement and elements of the socialist movement in Italy and Germany

And Spain too, as well EE to a lesser extent.
Otherwise this seems like a really good discussion of a really good book I haven’t read.


Seth Edenbaum 10.30.06 at 2:46 pm

“Second, in so doing she decisively demonstrates the importance of ideas to politics. Her story is one where ideas have dramatic consequences for history. The failure of some socialists to escape from the straitjacket of economistic Marxist thought doomed them to failure and political irrelevancy.”

Marxism was an idea. “The failure of some socialists to escape from the straitjacket” of their ideas doomed them, as loyalty to any idea as such dooms anyone.
Social democracy succeed not because of ideas but on account of what lay beneath them: in language, in society, in the social ground.

Fascism was only a “dark twin”, in as much as in a post (bourgeoise) revolutionary world Monarchy was impossible. Fascism is a parody, a theatrical reprduction of monarchism in Modern form. Monarchism had once been a flexible legal/linguistic system. Fascism was merely a model -another ‘idea’- and inflexible, as all models are.


bob mcmanus 10.30.06 at 2:56 pm

I hate to mention competition, but I am currently reading a pretty long book by Geoff Eley Forging Democracy The History of the Left in Europe 1850-2000, Oxford University Press, 2002.

Did I pick up a wrong book?


John Emerson 10.30.06 at 3:00 pm

I looked that one up, Bob. Too expensive. But that’s the way The Man wants leftist books to be, right?


stostosto 10.30.06 at 3:06 pm

I can’t stomach the thesis of socialist and social democrats as “cousins” or in any other way related to fascism or nazism. I can see the argument, but I remain angered, provoked, and annoyed that serious people are making it.

Other than a very probable idiosyncratic bent (coming from a family of three generations of social democrats), I don’t think it’s convincing either.

Fascism, with its strong emphasis on authoritarianism, tradition, warrior ethos, myths, and exclusive, aggressive nationalism is simply a different species altogether. Much closer to conservatism, with its militarism and authoritarian state, portraying itself as the legitimate representative of god, nation and people.


John Emerson 10.30.06 at 3:45 pm

The shared elements would be mass solidarity, a degree of nationalism, and amelioration of the harsh effects of the market.

Militarism, authoritarianism, witch hunts for internal enemies, and secret deals with capital at the expense of labor would be the distinguishing differences.

It’s not original to describe fascism as an ersatz and degraded form of socialism / syndicalism. I don’t know if Berman says more than that.

I also think that in many respects social democracy is an ameliorated form of liberalism, rather than a sharp alternative. It’s still a capitalist class society, but the market is buffered.


abb1 10.30.06 at 4:28 pm

All three of them have popular appeal: liberalism, egalitarianism, and nationalism; liberté, égalité, fraternité. That’s not remarkable.

It’s like the RGB color model – you can create millions of colors by combining the basic three – red, green, and blue. Same here: liberalism, egalitarianism, and nationalism; mix them any way you like.


lamont cranston 10.30.06 at 4:36 pm

Berman actually did a review of the Eley book for Dissent a few years ago. That’s more of a straight history; this is more of an thematic interpretation. Plus, they differ on a lot of points. Eley is quite taken with the New Left and various kinds of identity politics; Berman has no patience with that stuff. She basically thinks Edward Bernstein and the early Swedish social democrats got pretty much everything right, and that what’s necessary now is primarily to understand what they actually thought and did. Hence the bulk of the book being on the first half of the century rather than the second.

It’s a really sharp book, and quite short and well-written for all the ground it covers. So people should read it and see for themselves what they think. Guaranteed to make you see some stuff in a different light…



John Emerson 10.30.06 at 5:05 pm

Let me just say that the New Left and identity politics are two different things. Identity politics grew out of the collapse of the New Left (around 1974). It was some of the same people, but under new leadership not very friendly to the old New Left leadership.

There was a tremendous battle about this at The Valve, and I doubt that I convinced anyone.


bob mcmanus 10.30.06 at 8:08 pm

10:Am a slow reader, but I was impressed with the way Eley integrated 1st wave feminism into the development of Social Democratic Parties as practical political engines. The social in socialism.

But I am OT.


DartScottA 10.30.06 at 10:14 pm

“I think it would be exceedingly tough to show that Christian Democrats were the slaves of social democratic ideology without knowing it – while there was surely intellectual interchange between the traditions, they started from very different places.”

There existed during the post war period significant ideological distance between the Christian Democratic and the Social Democratic particularly in their respective conceptions of the welfare state. Largely this has to do with the Christian Democratic rejection of class which stem from Catholic social doctrine. During the post-war period both political ideologies sought the construction of national political economies that would ameliorate the market failures associated with the great depression. However, unlike their opposition Catholic parties, who had since Rerun Novarum been wary of laissez faire capitalism, did not seek to accomplish this through a diminution of class difference. Rather, in many cases they constructed welfare states that protected existing class structures. Their “Middle Path” capitalism was remarkably similar in tone and rhetoric to that of Schroeder and Blair’s “Third Way.”

See Irving 1979, Weiss 1988, Van Kerspergen 1995, and Esping Andersen 1999 for a better discussion.


ed 10.30.06 at 10:25 pm

I know its wrong to let facts get in the way of a good argument, but the notion that the Social Democrats didn’t “fully embrace” the Weimer Republic is simply historically incorrect. They provided the Republic’s first President and most of its Chancellors, and took the lead in writing its Constitution. Their deputies were the only Reichstag deputies to vote against the Enabling Act. In fact, the problem with Weimer is that the Social Democrats were the ONLY major faction committed to the Republic -the right hated it and made no secret of that, as did the Communists, while the religious and regional parties were only too willing to cut deals with the extreme right.

The Social Democrats also succeeded in holding on to most of their electoral support in the early 1930s elections. On the other hand, support for the conservative and right-liberal parties collapsed as support for the NSDAP rose. The NSDAP quite clearly took over the right wing vote. The idea that it had some sort of special appeal to working class voters has also been exposed as a myth.

I can’t think of any prominent Social Democrat who joined or worked with the NSDAP. After Hitler took power, their leaders either were sent into exile or were sent to concentration camps. By the way, the Communists succeeded in maintaining an undergroup resistancce movement for several years after the Nazis took power.

There were a few former socialists in other countries, such as Mussolini, who embraced fascism, but so what? Politicians move around the ideological spectrum more than most people remember. There were also former socialists who joined or were co-opted by the non-fascist right (Millerand, McDonald), also some politicians who moved leftward during their career (Haldane). You have Churchill, who moved from ultra-imperialist Toryism to welfare state Liberalism, then back, before he became Prime Minister.

The only part of the argument that has some basis in reality is that both fascists and social democrats gained support after World War I and during the Depression, for the obvious reason that both events discredited the pre-World War I liberal consenus. But the movements were opposite, social democrats being, after all, democrats and also tending to support pacific foreign policies, income redistribution downward, trade unions, and welfare states that don’t make demands on the recipients. The vaunted fascist support for welfare measures is more of the “we will give you a job in the arms factory and you will take it and like it, and also enjoy your vacations at the resort owned by the same company” variety. You can’t get farther removed from the spirit of socialism.


abb1 10.31.06 at 3:34 am

I think emphasis on ‘democratic’ in ‘social-democratic’ is slightly misleading. The ‘democratic’ part only indicates the mechanism used to maintain the ‘socialist’ part. The hope is that diversity of attitudes among the whole population will somehow produce a decent mix of liberalism-egalitarianism-nationalism. It’s a lousy mechanism, I must say, or we wouldn’t have George W Bush and the Iraq war.

Yugoslavia under Tito is an example of non-democratic socialism. Clearly a strongman was necessary to suppress internal nationalist tensions there. Same is – arguably – true about other places, like Mubarak’s Egypt. And in Israel we have decades of democratic fascism: two most popular politicians at the moment are Liberman and Netanyahu, both are classic … well, let’s say classic yahoos.

Democracy is neither sufficient nor required for socialism. It’s a secondary feature.


soru 10.31.06 at 6:04 am

the Social Democrats were the ONLY major faction committed to the Republic

I think that is true of the actual party apparatus, but the problem was that the base of the party, the intellectual arguments, the rhetoric, the emotional commitment, was to democratic socialism, not social democracy.

What they really wanted was to achieve a majority mandate, then abolish capitalism. Anything less was a tactical necessity at best, a betrayal at worst.

Their failure was a failure to realise that not only was that impossible, but that better things were possible.

That failure to align rhetoric with actions cost them both popular support, and political allies.

Consequently they lost, and there is no worse political judgement.


DC 10.31.06 at 6:59 pm

The SPD “participated in elections in the Weimar Republic, but refused to fully embrace it. This cost German social democracy, and the rest of us, dearly over the longer term.”

One could argue that the SPD was too institutionalised a part of Weimar to initiate any real resistance when 1920s push came to 1930s shove.


Joerg 11.02.06 at 6:06 am

What do you mean by “refused to fully embrace it”???

“The result was often an unhappy halfway house, as in the German SPD, which participated in elections in the Weimar Republic, but refused to fully embrace it.”


david g 11.02.06 at 9:27 am

I look forward with intense interest to reading Berman (and Eley, for that matter). So these questions derive exclusively from the comments on this and the other Berman-threads.

1. I welcome the argument about fascism being social democracy’s dark twin. It’s been made numerous times in Italy (by Domenico Settembrini in 1979, by Renzo De Felice, Francesco Perfetti and others). It’s a rich, revealing, and, I see, for some provocative argument, but needs to be handled carefully. I’m not sure how much mileage it yields outside Italy, for example.

2. If Berman thinks the Swedish form of social democracy is the ideal type, I also welcome that argument. But Sweden is a small country. What can we say about an ideal type of policy that comes to fruition in a small country? How relevant is that ideal type for interpreting developments in bigger countries or Europe-wide?

3. While Berman’s book may be an outstanding example of the history of political ideas, I have trouble making the link to it being also an outstanding account of current policy and a recommendation for the future, as in “how to save Europe”.

4. I question whether debates of the interwar years are terribly relevant for anything after 1970 except in a purely intellectual sense, and in the sense that many policymakers who came to prominence after 1970 were followers, pupils, or friends of those who conducted the interwar debates.

5. One reason is this. In the interwar years and indeed for some time after 1945, social democracy (understood as ideology plus policymaking plus mass mobilization plus government) took place in a context where (1) the typical worker was a production worker in the private sector and (2) the public sector didn’t exceed 20 per cent of the economy. Today, the typical worker is in the service sector and, in Scandinavia, in the public service sector, and government exceeds half the economy. With such fundamental parameters changed beyond recognition, what is the relevance of social democratic ideas and practices evolved in an entirely different context?

6. I am (in most areas relevant for this debate) a classical liberal. However, I have vast sympathy for the social democrats, not least those of Germany and Scandinavia. Yet I think, and what I read about Berman confirms it, that this is pure nostalgia. Europe is structurally so different from the Europe in which social democracy came to prominence that recounting and resurrecting ancient arguments may be wonderful intellectual history, but irrelevant for policy debates today.

7. So as far as making prognoses for European societies and economies is concerned, I’m with Tyler Cowen. Prosperity and growth won’t be saved by using social democratic recipes invented in an age where the private mass-production sector flourished and government was small. Paradoxically, looking back, Europe until 1970 was a liberal paradise, and indeed I would claim that it was the growth permitted by an essentially liberal structure (with social democratic political coloring) that permitted the social democratic redistribution in the first place. So, no, I don’t agree with the fundamental notion of the primacy of politics, at least in Berman’s sense.

8. Just one example to substantiate this last claim. In Italy a major focus of the unions (esp. the communist-controlled ones) until 1980 was the idea that wages are an independent variable, that is, should not be determined by the profitability of the individual company. An analogous policy was followed even more consistently in Sweden, where it was used to drive “unprofitable” businesses out of business. However, economics always wins in the end, and the result of the campaign for raising wages independently of whether the employer could in fact pay them resulted in the destruction of many of Italy’s largest employers. From a public choice point of view the independent-variable-argument was a clear case of insiders exploiting their power to extort rents at the expense of all others.

There really are no free lunches, no matter how much social democrats might decree that there should be. The result is always negative.

Comments on this entry are closed.