The Future of Social Democracy: View of Leaders from Around the World 9781487583385

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THE FUTURE OF SOCIAL DEMOCRACY: VIEWS OF LEADERS FROM AROUND THE WORLD Edited by Peter Russell

During the last two years, social democratic parties have been elected to government in Britain, France, and Germany. They now control government on their own, or in coalition with other left-leaning parties, in thirteen of the fifteen states of the European Union. Political scientist Peter Russell has brought together ten former leaders of social democratic parties and governments from North America, Central America, Europe, Australia, and New Zealand to express their views on the agenda of social democracy for the next century. Whatever the trends in political fortune, one thing remains consistent: the left' s capacity for critical self-reflection. With realistic optimism the essayists pose tough questions about the existing market economy and the movement towards globalization. They challenge neoliberalism' s absolute faith in market solutions and present a strong case for humane public intervention to ensure that increases in wealth are directed to fulfilling the highest potential for all humankind. This book should prove stimulating for readers of all political faiths. is a political scientist and professor emeritus at the University of Toronto. He is also a long-time proponent of social democracy. PETER RUSSELL

EDITED BY PETER H. RUSSELL

The Future of Social Democracy Views of Leaders from around the World

UNIVERSITY OF TORONTO PRESS Toronto Buffalo London

© University of Toronto Press Incorporated 1999 Toronto Buffalo London Printed in Canada Reprinted in 2018 ISBN 0-8020-4211-2 (cloth) ISBN 978-0-8020-8066-0 (paper)

Printed on acid-free paper

Canadian Cataloguing in Publication Data Main entry under title: The future of social democracy : views of leaders from around the world ISBN 0-8020-4211-2 (bound) 1. Socialism.

ISBN 978-0-8020-8066-0 (paper)

I. Russell, Peter H .

HX73.F87 1999

320.53'15

C99-931353-3

University of Toronto Press acknowledges the support to its publishing program of the Canada Council for the Arts and the Ontario Arts Council. University of Toronto Press acknowledges the financial support for its publising activities of the Government of Canada through the Book Publishing Industry Development Program (BPIDP).

Canada

Contents

Acknowledgments Contributors ix

1 Introduction

vii

3

PETER H . RUSSELL

2 Does Social Democracy Have a Future?

13

MICHEL ROCARD

3 A Second Century of Social Democracy

23

INGVAR CARLSSON

4 A Program beyond Utopia

31

ERHARD EPPLER

5 L'Europe rose: Social Democrats in the European Union 39 · NEIL KINNOCK

6 The Social Democratic Challenge in Our Age

53

SHIMON PERES

7 The Path to Democracy: Latin America in a New Millennium 63 OSCAR ARIAS

8 Social Democracy or Liberalism in the New Millennium? 73 EDWARD BROADBENT

vi

Contents

9 Social Democracy in New Zealand DAVID LANGE

10 Social Democracy in Australia JOHN BANNON

11 Conclusion BOB RAE

123

109

95

Acknowledgments

A great many people helped create this book and bring it to fruition. Robert Ferguson, an editor at the University of Toronto Press, was present at the moment of conception that summer day in 1995 when we first talked about the book. I would like to thank him for his encouragement and hard work in getting the project launched, and Virgil Duff, the executive editor at the Press, who helped see it through to completion. I also wish to thank Ed Broadbent and Bob Rae for their initial enthusiasm and continuous help throughout. Without their contacts and high standing in the world of social democracy this book would not have been possible. And of course I am deeply indebted to the eminent social democratic leaders who, along with Ed and Bob, took time out of still very busy lives to write chapters. Finally, I would like to pay a very special tribute to two men who were committed to this project but who died before they could complete their contributions - Michael Manley, a former prime minister of Jamaica, and Don Dunston, a former premier of South Australia. The world and this book are poorer for their loss. PETER H. RUSSELL UNIVERSITY OF TORONTO MARCH

1999

Contributors

OSCAR ARIAS became leader of Costa Rica's National Liberation party in 1979. He served as president of Costa Rica from 1986 to 1990; a constitutional clause barred him from succeeding himself. In 1987 he received the Nobel Peace Prize for his efforts in fostering peace in Central America. He created the Arias Foundation for Peace and Human Progress for the promotion of pluralist participation and peace in Central America and beyond.

was educated at the University of Adelaide. In 1968-9 he was president of the Australian National Union of Students. He worked in industrial relations, labour economics, and higher education before election to South Australia's House of Assembly in 1977. He was leader of the Opposition from 1979 to 1982 and premier and treasurer from 1982 to 1992. He was national president of the Australian Labour party from 1988 to 1991. JOHN BANNON

EDWARD BROADBENT, after completing his PhD at the University of Toronto, taught political science at York University. He was first elected to the House of Commons in 1968. He was national leader of the New Democratic party from 1975 to 1989. From 1978 to 1989 he was vice-president of the Socialist International. He served as president of the International Centre of Human Rights and Democratic Development in Montreal from 1990 to 1995.

x Contributors INGVAR CARLSSON took a degree in political science and economics at the University of Lund and then studied economics at Northwestern University in the United States. He was a member of Parliament in Sweden from 1964 to 1996. During that time he held many ministerial positions. He was chairman of the Swedish Social Democratic party from 1986 to 1996 and prime minister from 1986 to 1991 and from 1994 to 1996. ERHARD EPPLER, who has a PhD from the University of Tubingen, served for fifteen years (1961-76) in the federal Parliament and six years (1976-82) in the state parliament of BadenWuertemberg, while he also chaired the federal Social Democratic party (SPD). He was a member of the SPD's executive council from 1970 to 1997. DAVID LANGE, after graduating from the University of Auckland and practising law, was elected to Parliament in 1977. He became leader of the Labour party in 1983 and prime minister in 1984. He resigned office in 1989 and served as attorney-general until the defeat of the government in 1990. He retired from Parliament in 1996. NEIL KINNOCK, a graduate of Cardiff University in industrial relations and history, represented Welsh constituencies in the British Parliament continuously from 1970 to 1995. He was elected leader of the Labour party in 1983 and served as leader of Her Majesty's Opposition until 1992. He has been a vice-president of the Socialist International since 1984. He is now a member of the European Parliament. SHIMON PERES was born in Poland in 1923 and emigrated with his family to Israel in 1934. After being actively involved in founding the state of Israel, he studied in the United States at the New School of Social Research in New York and at Harvard University. He became chairman of the Labour party and leader of the Opposition in 1977. He was prime minister from 1984 to 1986 and in 1995 and 1996. In 1994 he was awarded the Nobel Prize for Peace.

Contributors

xi

studied at the University of Toronto and Oxford University, where as a Rhodes Scholar he earned a BPhil. He was elected to the Parliament of Canada in 1978. He resigned his federal seat when he was elected leader of the New Democratic party in Ontario. He was leader of the Opposition in Ontario from 1987 to 1990 and premier from 1990 to 1995. He now practises law in Toronto. 808 RAE

MICHEL ROCARD, educated at the Universite de Paris and the Ecole Nationale d' Administration, has served in the French Parliament since 1974. He has held several ministerial positions and was prime minister from 1988 to 1991. He is currently a member of the European Parliament, where he chairs the Development and Cooperation Committee.

taught political science at the University of Toronto from 1958 to 1996. He has published widely on judicial, constitutional, and Aboriginal politics. He is foreign secretary of the Royal Society of Canada. PETER H. RUSSELL

THE FUTURE OF SOCIAL DEMOCRACY: VIEWS OF LEADERS FROM AROUND THE WORLD

1 Introduction PETER H. RUSSELL

This book was conceived in the summer of 1995 at a time when the political and intellectual right was very much in the ascendant. In Canada, locally in our own province of Ontario, a social democratic government led by Bob Rae had just gone down to a resounding defeat at the hands of a Conservative party with a right-wing agenda called 'The Common Sense Revolution.' Nationally a Liberal government was in power but was stealing its policies from its rivals on the right rather than the left. South of the border Newt Gingrich was riding high on his 'Contract with America.' In western Europe, the major powers were ruled by conservative governments. Down under in the antipodes, Labour had fallen from power in New Zealand, while in Australia a conservative coalition was running five of six states and threatening to unseat a Labor government at the commonwealth level. A political thinkers' conference was being organized in Canada with a great deal of media attention, but only those committed to the primacy of the market were invited. At a summer meeting of the University of Toronto Press's Manuscript Review Committee, several of us - academics and editors - while taking time out from reviewing manuscripts to consider those that we might go looking for, began to ruminate on this ascendancy of the right. Did the right have a lock on political change and reform? Was it really the case that all the important new ideas and policies would now and for the foreseeable future be coming from neoliberals who believe that the

4 Peter H. Russell best government is the one that governs least? Was the political left in the democracies in its death throes? Of course, we could always count on a steady stream of manuscripts from left-wing academics condemning the swing to the right. But most of this writing was detached from the realities of party politics in the democracies. Indeed, much of contemporary critical theory questions whether the normal processes of democratic politics are capable of producing any significant improvement in the human condition. So, instead of asking university-based scholars to reflect on the future of the left in democratic politics, we thought that it might be interesting to approach people who have taken democratic politics seriously and have been fully engaged in it at the highest level. The idea would be to organize a book that brought together the reflections of people who, while leaders of social democratic parties and governments, had to make tough decisions on how best to work for social democratic objectives. We would ask such people, now relieved from the vicissitudes of office, to write short essays on what social democracy has contributed to democratic politics in the past and what it can offer for the future. Shortly after this meeting I talked this idea over with two old friends, Ed Broadbent and Bob Rae, both former social democratic leaders. Ed had been the leader of Canada's social democratic party, the New Democrats, at the national level, from 1975 to 1989, and Bob had been an NDP member of Parliament from 1978 to 1982, premier of Ontario from 1990 to 1995. I had known them both when they were studying at the University of Toronto, Ed doing a PhD in political theory and Bob studying for a BA in modern history. Although I had never become involved in their political projects, we had kept in touch ever since. Both were enthusiastic about the project. They agreed to write chapters for the book and to help me identify and contact other contributors from around the world. At the outset, we had to decide how broad we should be in interpreting what constituted social democratic parties. To me, social democracy today represents an orientation in politics that accepts the capitalist market system as the best way of organiz-

Introduction 5 ing the production of the goods and services required to meet material needs but aims to use the state to ensure that the benefits of this system are developed and distributed in a way that ensures the fullest possible life for all. Clearly there are many parties and leaders besides those that explicitly associate with the social democratic label who, in varying degrees, support what I have described as the social democratic orientation. My own erratic voting pattern is a case in point. As a left-leaning liberal of social democratic persuasion, I have voted variously for what until very recently were Canada's three leading political parties - the Liberals, the Progressive Conservatives, and the New Democrats. Broadbent and Rae too recognized the presence of significant social democratic elements in parties other than those that operate under social democratic or labour banners. The U.S. Democratic party is a leading example. However, we decided to confine our coverage to leaders of parties that have been fully, not just marginally or through a faction or wing, committed to social democracy. These are the parties whose whole outlook is founded on an understanding of human needs and human potential that offers the most coherent challenge to neoliberalism. At the beginning we did not think of this book as a millennial project. We began contacting possible contributors in the autumn of 1995 with the aim of having the volume ready for a launching conference at the end of 1997. However, not surprisingly, we found that individuals who have stepped down from positions of formal leadership do not move away from a very full involvement in political life, often on a global scale. It took two years longer than expected to obtain commitments and then essays from enough contributors with the stature and international coverage for which we were looking. It was not until the end of 1998 that we had reached this point and could plan a conference in late 1999 to launch the book at Simon Fraser University in Vancouver. Although we would have liked the project to have come to fruition faster, there has been some advantage in extending it over the last half of this decade. During this period, we have

6 Peter H. Russell witnessed a marked swing of the political pendulum in the democracies. We can see now, as we near the end of the century, that the momentum of the political right has been checked. Western Europe has led the way. Since 1995 social democratic parties have won major election victories in Britain, France, and Germany. Neil Kinnock's essay reports that thirteen of the fifteen member states of the European Union have a social democratic government or a coalition government that includes social democrats. In the United States, Newt Gingrich has been dethroned. In Australia, Labor returned to power in Queensland and, with a majority of first-preference votes, came close to regaining power nationally. Similarly in New Zealand, Labor, as the second party in a highly fragmented parliament, stands a good chance of soon returning to power. In Canada, social democratic governments have won re-election in British Columbia and Saskatchewan. There was a sell-out crowd for a recent thinkers' conference in Toronto featuring six social democratic authors, one of whom was Bob Rae. A collective learning process on the part of social democrats and democratic electorates has contributed to this change in the political climate. Social democrats have shown a capacity, as Ingvar Carlsson puts it, for looking at politics 'with the eyes of reality.' Part of the reality they have seen is that neither democratic electorates nor the international monetary system will tolerate governments with a propensity for making expenditures in excess of revenues. Fiscal prudence is a common denominator of the social democrats who are now returning to power. Electorates too have had a chance to learn about the realities of being governed by neoliberals who believe that government is inherently evil and that the market must be sovereign. Majorities in many countries have learned that the kind of society and the kind of world they want for their families with health, education and employment for all, a clean environment; and international peace - will not emerge simply through the free play of economic self-interest in the market-place. In this changed and changing political environment, this collection of writings by experienced social democratic leaders comes

Introduction 7 at a time when the tide of politics is definitely running their way. I feel fortunate that the distinguished contributors to this volume were willing to take time from their very busy lives to write chapters for this book. We would like to have had even more pieces, especially from the Third World and post-communist countries. As it is, I think we ended up with quite a good representation of national and regional contexts for the working out of social democratic ideas. The largest group, as might be expected, comes from western Europe, where social democracy has its roots: Ingvar Carlsson from Sweden, Erhard Eppler from Germany, Neil Kinnock from the United Kingdom, and Michel Robard from France. Australia's John Bannon and New Zealand's David Lange are from countries that, though once thought of as European outposts on the edge of Asia, are rapidly reorienting themselves as Asian Pacific states. We have two contributions from what might still be regarded as developing countries: Shimon Peres of Israel and Oscar Arias of Costa Rica. The contributions of my Canadian friends Ed Broadbent and Bob Rae round out the collection. I leave it to Bob Rae in the concluding essay to draw together the various themes of the contributors and provide an overview of their thinking on the future of social democracy. But I would like to record here how I - as a political scientist whose practical experience in party politics is basically that of a voter, and one who has voted at one time or another for all of Canada's traditional political parties - assess what these seasoned social democrats have to say. First, I am struck by the regard all of them have for democratic politics. Of course, this is what we should expect, given that all of them have been, and some still are, active in partisan politics. But their commitment to politics is not simply a professional predilection - it is also ideologically grounded. For them, democratic politics is the necessary means through which social democratic parties can gain state power not so as to replace capitalism but to ensure that it works for the maximum benefit of all. Erhard Eppler makes this point quite poignantly when he

8 Peter H. Russell writes that social democracy 'cannot survive the ruin of politics.' In an era in which it is fashionable to trash politics and politicians, such a robust appreciation of the positive potential of the democratic political process is refreshing. Not only are these practitioners still eager to compete for power in democracies, but they want to win and win soon! They are not content to be perpetual critics, mounting critiques of the existing society but destined to remain at the political margin to the left of centre, but not centre left. They see too many injustices, too much suffering, and a world too vulnerable to violence, environmental degradation, and economic collapse to be willing to abdicate the instruments of state power to those who believe that the free working of market forces is a panacea for all problems. But winning power through democratic elections means competing successfully for the support of the centre, or at least of the left-leaning part of the centre. Or, what may be more to the point these days, it means persuading a significant part of the centre to be left-leaning. For political success of this kind, the social democracy advocated here must be and is reformist, not revolutionary - social democratic, not democratic socialist. The political careers of these elder statesmen of social democracy spanned the decades in which the social democratic movement made its peace with capitalism. Social democracy's mission has become not replacing capitalism with an alternative economic system but humanizing capitalism - both nationally and internationally. Michel Rocard's opening essay traces this evolution of the movement from the Swedish party's adoption of this position in the 1930s to its culmination with the British Labour party's decision in 1996, under Tony Blair's leadership, to remove from its constitution clause 4, which called for public ownership of essential capital goods. No longer do most social democrats believe that the kind of society they could regard as decent and just requires a state-run economy. On the contrary, they accept an economic order in which the control of productive enterprises lies principally with private owners responding to the imperatives of competitive markets. However, as I read them - and herein lies perhaps a critical difference between

Introduction 9 social democrats and left liberals - they do not accept capitalism as an end in itself or believe in the divine right of entrepreneurs to compete and make profits or in the pursuit of material selfinterest as the highest human value. Rather, they have become convinced (and on this point Communism was indeed a great learning experience) that capitalism is the only economic system capable of producing the wealth needed to sustain a full and rewarding life for all citizens. David Lange's candid account of Labour's experience in New Zealand marks the outer limits of social democracy's accommodation with capitalism - the point at which that accommodation becomes incompatible with the social democrats' raison d'etre. In a setting where both the Labor party and its chief rival on the right had traditionally presided over a highly protective and interventionist economic order, Labor, when it came to power in 1980, shifted abruptly to a comprehensive program of deregulation and regulatory reform. The result was to discredit social democratic institutions and leave economic rationalism unchallenged as the dominant public ethos. It appears that New Zealand's social democrats fell prey to an ideological obsession with downsizing the state, which, as Ingvar Carlsson points out, mirrors the old left's obsession with enlarging it. Ed Broadbent's explanation of the sense in which the United States could not qualify as a social democratic state helps to clarify the limits of social democracy's accommodation with capitalism. For a social democrat such as Broadbent, the welfare state entails much more than maintaining 'safety net' programs that provide minimal relief for the unfortunate individuals who fail to succeed in the competitive market-place. A social democracy, he argues, while enshrining the fundamental negative freedoms of liberal democracy, attaches equal weight to positive social rights of all citizens to the social and economic conditions required for a full and decent life. These social rights, though ideologically recognized as every bit as fundamental as classical civil liberties, are to be secured not through litigation in the courts but through politics and the active agency of the elected branches of government.

10

Peter H. Russell

In contemporary politics, social democracy's efforts to secure the social rights of a true welfare state must in part be a defensive activity aimed at protecting, restoring, and sometimes improving institutions and programs established by social democratic governments in the past but largely dismantled or seriously thinned out during the neoliberal ascendancy. In countries where the gap between rich and poor is rapidly widening and sound public education and health systems are being dismantled, this defensive, rebuilding side of social democracy is of immediate and fundamental importance. If social democracy is to be a political movement with a significant and creative longterm future, there must be more to it than this. As the Australian John Bannon argues, this is especially the case in a political context such as his, where the social democrats' political challenge is to recapture the centre left. The contributors to this volume, though veteran and in some cases retired politicians, are, in Ingvar Carlsson's phrase, 'traditionally modern' and have cast their minds forward, projecting the social democratic view of humanity and society on the kind of world they see ahead in the twenty-first century. In the forward-looking parts of these essays, two themes strike me as highly salient. One is the focus on education as the central building block of a social democratic society. Oscar Arias, from the poorest region of the world represented in this volume, singles out a strong and accessible education system as the most fundamental step to political reform and economic progress in Latin America, and he also notes how critical educational reform is for Tony Blair, leader of the most recently elected social democratic government in the industrialized West. Shimon Peres provides an incisive appreciation of why education must be so central to the social democratic agenda. In the information age into which we have been moving, Peres points out, the primary basis of wealth is knowledge, not money. Hence the value that social democracy must attach to providing equal opportunities for learning to all citizens at every stage of life. Several contributors emphasize that the education needed for this new age must be conceived broadly to embrace not just technique and technol-

Introduction 11 ogy but a capacity for cultural enrichment through respect for and communication with diverse traditions and societies. This idea takes us to the second forward-looking theme prominent in these essays - their internationalism. These social democratic leaders offer no support for protective economic nationalism. They welcome the reduction of barriers to commerce and to migration among the nations of the world. In this sense they not only accept but welcome 'globalization.' But as social democrats they do not believe that the benefits of globalization are to be realized simply through international laissezfaire. They maintain that the opening up of international commerce will require a strong counter-balancing force of democratic governments acting through transnational bodies to ensure that globalization is beneficial to all and not just to the immediate 'winners' in competitive international markets. Neil Kinnock's chapter marshals the evidence from the recent global financial crisis to make a strong case for a world financial authority An important part of these social democrats' international concern is the connection between increasing poverty in the world and growing threats to security. With so many points of potential disequilibrium in both the world's finances and its security, the twenty-first century, as Rocard remarks ominously, 'begins dangerously.' It is no coincidence that two of the ten contributors to this volume - Oscar Arias and Shimon Peres - have received the Nobel Peace Prize. Social democracy does not have a monopoly on securing international peace or a global economy that brings well-being to all, but its advocates and practitioners have been, and I suspect still are, the strongest international political force insisting on the interdependence of these two aspirations. Social democratic parties constitute the Socialist International, the largest international alliance of political parties in the world today. Many people who, like this editor, do not belong to any of its affiliates will, after reading these essays, be able to take some comfort from the fact that social democracy's leaders and influence will continue to be a major political force around the world in the next century.

2

Does Social Democracy Have a Future? MICHEL ROCARD

Do social democratic parties have a future? This is a loaded question, to which there is no evident answer. If one is to be found, it will have to be based on analyses of the changes that are ongoing in our present civilization. Social Democracy: Its Basic Elements

What is social democracy? It is a combination of three elements a historical movement, an international coalition, and a body of theory. First, social democracy is a historical movement nearly a century and a half old. Second, it is an international coalition of political parties (more than 140 today) called the Socialist International (SI), among which a dozen are currently leading their countries, half a dozen are participating in coalition governments, and about ten others have in the last few decades governed their countries. The identifying criteria for such parties are somewhat clearer in industrial countries than in developing countries, whose social democratic parties are now a majority in the SI. In Third World countries, membership means a more open attitude and more courageous policies in terms of human rights, pluralist democracy, and freedom of the press than is usually the case there. The SI is by no means a structured organization; it does not give orders to its member parties, for it is only a club, producing seminars and debates and promoting possible elements for a common political culture. Third, there is

14 Michel Rocard a theoretical corpus, a set of doctrinal principles that roughly define key features of the political programs of member parties. It is difficult to produce a reliable evaluation of the membership of the political parties that make up the SI. Membership is neither measured in the same way in various countries nor verified . A rough estimate would be about one hundred million around the world. This might appear insignificant in a world of some 5.5 billion inhabitants, but it constitutes the world's largest coalition of political forces. The much smaller Christian Democrat International comes second. Inside the SI, the fifteen social democratic parties of the countries that make up the European Union have founded together the 'party of European Socialists.' This organization has an executive, takes decisions that are formally binding on member parties, and has the second-largest bloc in the European Parliament, with about 180 members, who vote generally in the framework of a collective discipline. Such is the present landscape of social democracy. It is not negligible. Some of the countries in which it has been in power for the longest time have produced societies that are among the world's most egalitarian, possess the best welfare systems, have the lowest level of unemployment, and are frequently the best managed. Austria, Denmark, Finland, Norway, and Sweden are all examples. Furthermore, Spain, in the building of a successful and harmonious democracy after thirty years of fascism, owes much to its king, but much as well to its social democracy. Social democrats share a common attitude towards peace and war, or more precisely towards peace-making. In the Middle East, as in South Africa, for instance, many leaders of the SI have devoted much time over recent decades to creating personal links with rebellion leaders, in an attempt to steer them towards adopting democratic procedures to convince them to negotiate, and to prove that acceptable political partners exist. South Africa is probably the country in which these efforts have been most significant and most successful. The Nobel Peace Prize has honoured social democrats' efforts for peace in the cases of Yitzhak Rabin and Shimon Peres in the Middle East, Willy Brandt for his Ost Politik, Oscar Arias in Central America, and

Does Social Democracy Have a Future?

15

John Hurne in Northern Ireland. The same culture of peace explains the successful negotiations and the stability that emerged in New Caledonia in the Pacific ten years ago. Can social democracy, with its significant mobilization of people and its generous though imprecise project for our societies, survive, develop, and even gain in influence in the next century? I have strong doubts. Still, my answer is 'yes, if.' But the 'ifs' are numerous and significant. The Evolution of Social Democracy

The socialist movement was born in Europe in the first half of the nineteenth century as a protest against the initial cruelty of the capitalist system. This protest had moral reasons and led to action in two directions. One aimed to protect workers against the violence of the system. Consumers' cooperatives, mutual funds, cooperative job-seeking centres, and the like were the first forms of social democratic practice, long before the birth of trade unions. The second sought to create small communities, isolated from the general economic system. These communi- ties, living according to collectivist principles, were supposed to represent the embryo of a future non-capitalist society. The New Harmony founded in Indiana around 1820 by Robert Owen, was an example of such a community, as were the 'Phalansteres' created by Charles Fourier in France. In a way, the Israeli kibbutzim are a late expression of the same movement. But then along came Karl Marx, who created the first International Association of workers. He produced a pseudo-rational explanation of the evils of capitalism, pinning responsibility for its social cruelty on the fact that in this system all means of production and exchange belonged to private persons, the capitalists. The International came to have one central demand: public ownership of capital goods. In Europe, as well as in the United States, however, the first social democratic activists and leaders struggled for human rights, association and union rights, universal suffrage, freedom of the press, and other civil liberties. So, when in 1917 and 1918,

16 Michel Rocard the Socialist International, or SI (the second one, the first having collapsed) had to decide whether it would support the Russian revolution - provoked by one of its leaders, Lenin, and by the party faction that he led (the majority of the Russian Social Democratic Workers Party, 'bolshevik' meaning majority), it decided that it would not. It reasoned that the sacrifice of liberty was too heavy a price to pay for the proletarian revolution. With this decision, the SI confirmed that democratic constitutional liberties were a fundamental aspect of social democratic programs. On this occasion, however, it did not decide to reject the objective of generalized public ownership of the means of production and exchange. On the contrary, it insisted that this vision remain the final objective of social democracy. In France, the only country in which the majority of the local socialist party decided to found a Communist party, Leon Blum, defending the 'old house' and a non-authoritarian vision of social transformation, still referred to 'proletarian dictatorship.' Social democratic parties had to adapt to local conditions and develop according to their own rhythms. Thus some came to reject the principle of public ownership of production and exchange, to reject the concept of an administered economy, and to accept that a free society needs a market economy and that social democratic politics consists of correcting the unfairness of the market, protecting the income of the poor or disadvantaged, and building the basis of a welfare program. The first group to adopt such a program was the Swedish social democrats. They did this in 1932 and then governed continuously for forty-four years. They are again in power. The other Scandinavian parties followed this path before 1939. It took longer in the rest of Europe to adopt policies like those of the Scandinavians. The West German social democrats decided to move in this direction in a stormy 'doctrine Congress' at BadGodesberg in 1959. The Austrians, Belgians, and Dutch did so more progressively, but roughly in the same period. It has been more difficult to achieve this change in Latin Europe. The Spaniards were the only ones to reject public ownership by a solemn vote, on the occasion of a party crisis brought

Does Social Democracy Have a Future?

17

on by Felipe Gonzales precisely to provoke that result. He said, 'We have to decide whether we are marxists or not. I am not': he won the party leadership in 1979. He then won the elections and went on to govern his country, remaining in power for twelve years. Things were more difficult in other major parties. The French socialists won a presidential election in 1981 with a large program of nationalization, which they accomplished, doing less harm than was feared but less good than they had expected. The move away from public ownership began shortly afterwards, under the pressure of economic constraints, particularly deterioration of the balance of payments. In Italy, local circumstances explain why the socialist party broke up, even though it had largely begun the necessary change. It is undoubtedly the Italian Communist party that conducted the most astonishing adaptation to modern society. It turned to a market-oriented economic vision and became the Democratic Left-wing party, at the price of a split in which it lost a quarter (some three hundred thousand) of its members. It became the key party in Italy's governing coalition and currently leads the government. The British Labour party abandoned clause 4 of its constitution, which called for public ownership of essential capital goods, only under the leadership of Tony Blair in 1996. Blair went on to win the 1997 election decisively. Since then things have sorted themselves out. Although conservative forces, and many political commentators, have a vested interest in presenting the social democratic forces and parties as archaic collectivists, devoted to a planned economy, it is clear that what the social democratic project aims at today is a society of solidarity in a market economy. This stance might be less clear in the case of Third World parties, which all have their particular history but the direction is basically the same. Most of this evolution took place during the period of splendour and power of the Communist dictatorship in Russia (150 million inhabitants) and, through Russia, in the Union of Soviet Socialist Republics (100 million more). The free industrialized countries ('free world') devoted two-thirds of the twentieth cen-

18 Michel Rocard tury to dealing with the threats represented by the aggressive posture and very considerable military force of the Soviet Union and of fascism . For socialist and social democratic forces in the West, this effort entailed two major consequences. The first was the very high price paid for the semantic confusion. Communist dictatorships described themselves as 'socialist' to monopolize the term and to prevent any effort to create more social justice in market economies by those calling themselves socialist or even social democratic. We have not finished paying the political price of this confusion in terms of dilution and lack of visibility of the social democratic project, however radically different it might be and even though in all the countries that the communists eventually conquered they imprisoned the socialists and social democrats long before the capitalists or right-wing politicians! The second consequence was that in the large alliance that finally 'won' the forty-five-year 'Cold War,' the socialist, labour, and social democratic forces were in such a minority that they could not exploit their participation and illustrate their political project on the world scene. They could achieve only a welfare state that performed well in a few small countries. Market forces seem then to have won the Cold War, established the market system throughout the world, and convinced Third World countries that there is no future outside the open system. Francis Fukuyama has even concluded that this means 'the end of history.' The End of History?

Fukuyama's analysis has to be questioned, and for good reason. It is undoubtedly true that social democratic forces - the most

adequate term for this rainbow collection of parties - for the last two or three decades have been in a purely defensive posture. It represents an international policy that is concerned more with disarmament and peace than with repression, a democratic policy that tries to halt the lowering of salaries and the dismantling of social welfare programs and struggles against poverty with

Does Social Democracy Have a Future?

19

more convincing results than obtain in purely liberal countries such as the United States. These are the principal and most visible reminders of the century and a half of social democratic ambition. But this position is weakening everywhere as the welfare state is more and more questioned, wealth and poverty become more concentrated, and everywhere where they govern social democrats diminish their budget deficits, organize the decrease of social guarantees, and discover that poverty grows under their leadership too. The efficiency of their vision is less and less evident in the present globalizing world, with its brutal competitiveness. Is the story finished? I am far from sure. In terms of trade, competition, and even production, the world is unifying. But there is no world regulator. Given underdevelopment in Africa and most of Latin America, serious environmental challenges, the volatility of currencies and fragility of the financial system, worldwide organized criminal activities (estimated by United Nations organizations to involve 10 per cent of world production), and the uncertain peace in many regions, the planet is in great disorder. Thinking about these issues and preparing solutions are critical tasks. It is impressive to see the scale of the contribution of social democrats in grappling with these matters. Willy Brandt, the former chancellor of West Germany, who imposed 'Ostpolitik' and thereby prepared the way to a pacific outcome of the Cold War, led the UN commission that produced a report on NorthSouth relations that is still the framework for any initiative in that field. Gro Brundtland, former prime minister of Norway, has performed a similar task, chairing a UN commission to reconcile free-enterprise production with protection of the environment. Her concept of sustainable development is now accepted and used everywhere. Furthermore, the most insightful reflection on the world system and on reform of the UN is probably contained in the report Our Global Neighbourhood, published in 1995 at the request of the secretary general by a commission in which half a dozen social democrats played a major role, includ-

20 Michel Rocard ing the co-chairman, former Swedish prime minister Ingvar Carlsson. The world is changing rapidly, and the social democrats' earlier project might not fit new conditions, but at least their forces are at the forefront of the work aimed at building an acceptable world order. We need also to be aware that the capitalist system has its own contradictions and malfunctioning. Over the last two decades a very gradual evolution has transformed the structures and daily conduct of capitalism. Capital and financial assets are now free to circulate over nearly the entire planet, except for a few authoritarian countries, of which the largest is the People's Republic of China. Financial orders travel at the speed of light, foreign investment is more and more free to enter most countries. As a result, companies are quickly and powerfully concentrating. A handful of them now produce 20 per cent of the world's wealth. This evolution has been accompanied, if not provoked, by a change in the nature of power inside firms. Power lies no longer in the hands of producers or industrialists, but completely with the financiers. Management criteria have changed. Industrialists, however ferocious in social relations, know that the key to making profits and to the preservation of this capacity is technique, control of a process, collective know-how possessed by staff members. They know that their company is a complex mixture of people, research results, equipment, know-how, and financial assets. No mere financier will be as keenly aware of this. For the latter, a company is exclusively a sum of assets made to produce the biggest possible profit. Research is therefore not an immediate necessity and can be curtailed. Employees have no other value than their immediate profit-making capacity. The long term is no longer a preoccupation. In this atmosphere, a qualified staff is not considered a key element. Most workers have therefore lost any sort of esprit d'enterprise. There are macro-economic consequences of all this. For the last twenty years the average U.S. salary in real terms has diminished by 14 per cent. Poverty in the United States has increased to include 19 per cent of the population, approaching sixty mil-

Does Social Democracy Have a Future? 21 lion people. If jobs have been created in the millions, the share of very low incomes among them has grown too. In these same twenty years, the American gross national product (GNP) has grown roughly by half, but 60 per cent of this enormous new wealth has gone to 1 per cent of citizens, as Robert Reich noted. Under Conservative governments, Britain followed the same path, with poverty affecting 14 million people there, or more than 20 per cent of the total population. The evolution in this direction is less significant in Continental Europe, where the social welfare system offers a stronger cushion. But the direction is the same, and the results are beginning to appear. France counts 3.5 million unemployed plus four million marginalized or precarious workers. Germany resisted longer but over the last three years has seen a speedy process of job transfers, redundancies, and rapidly expanding poverty. In fact the system seems to have forgotten its history. It began with enormous disequilibria, with the growth of wealth not being balanced by the growth of consumption and purchasing power. Karl Marx made the prognosis that it would explode. It nearly did. Two world wars, the conditions of the Second being created by the nature of the issue of the First, and a mega-crisis in between are a heavy burden to bear. Three organizing factors have helped to stabilize the system. One is the Keynesian prescription for the rules of financial stability. The second is Beveridge-style social welfare systems as stimulators of global demand and a cushion for correcting cycles. And the third is Henry Ford's formula of his own practice as a principle of global conduct: 'I pay my workers so that they can buy my cars.' Contemporary capitalism is forgetting all this. The world financial arena is filled with potential disequilibria. The constant growth of poverty increases violence and threats to security. And countries in which a growing proportion - today more than 20 per cent of the population - is living in poverty and suffering substantially reduced global demand. And so growth slows even more. The United States is relatively protected from all these developments, because it is not subject to an external monetary constraint, but the rest of the developed

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world is in this situation. The global crisis does not generate conditions for peaceful and harmonious development. The twenty-first century begins dangerously. The Task Ahead

These tendencies have to be corrected if we want to preserve our civilization and the social cohesion of our societies. My judgment is that the world has no other force than social democracy to achieve these objectives. Will European social democracy be capable of analysing the situation correctly, provoking a sufficient convergence among national parties, and influencing governments to give the European Union enough institutional authority to serve as the main lever for such worldwide action? The answer is not clear. These are the 'ifs' that I announced at the outset. But the need is evident, and the task is clear. The objective is closely linked to the symbols and values inherited from the past. New civic action, worldwide, occurs more and more through the agency of non-profit associations and non-governmental organizations (NGOs) of various kinds. But these are not as well organized as the social democratic network. It is not certain that social democratic forces can change quickly enough, modernize their thinking, and establish the convergence of their national projects so as to consolidate democracy and preserve it from the excesses of the market. If they do not, they will fail and disappear, and our civilization will be poorer and more violent. If they do, and if they can organize around an alliance of progressive forces (unions, parties, NGOs) present in civil society, we could then promise again to our children a better society in the future.

3

A Second Century of Social Democracy INGVAR CARLSSON

In many countries the more down-to-earth, programmatic aspirations of early social democracy have been achieved. Parliamentary democracy has been established. Working hours are limited and regulated. Unions are not only legal, they are also an integrated part of most civilized societies. Taxes finance a common welfare system encompassing the whole population. Has social democracy therefore essentially accomplished its mission in these countries, or is it to approach a new century with more far-reaching ambitions than merely being custodian of the welfare state? I strongly advocate the latter position. There are important lessons to be learned from the first century of social democracy. There are new goals that were not so clear in the political debate of the past. Political ideologies are like organisms - they either develop and live on, or they stagnate and slowly become irrelevant. The end of this century has striking similarities with the end of the last. The late nineteenth century saw the emergence of a new order of production, with a pace of technological change that created new power relationships and broke up an old order. It saw winners and losers in the dynamics of the shift. Social tensions grew. There was an atmosphere of pessimism and talk of the end of history and natural injustices. Looking back over a hundred years, we can say that the left movement in industrial democracies has been remarkably successful. Not only has it

24 Ingvar Carlsson realized its initial concrete goals, but it has also inaugurated social change in harmony and in direct correlation with these decolonization, gender equality, and combating social discrimination. There is no reason to rest or to overlook the pressing human, human-made suffering of today. But there is reason to be proud. Few, even among the most enthusiastic supporters of a reformist and democratic socialist movement a hundred years ago, would have been able to foresee the positive changes that, despite everything, have occurred slowly and methodically during the century called by British historian Eric Hobshawm 'the age of extremes.' Despite the more spectacular and devastating communist and fascist experiments, it is really the social democracy of western Europe that has the most impressive record. Most developed societies now commonly care for the elderly and the sick and regulate the relationship between employer and employee. What made it possible for the left - viewed from a broad, century-long perspective - to achieve this much was a combination of three things. There had to be, first, a willingness to analyse history and to learn from past experience; second, an acute sense of the real, everyday challenges facing a majority of the population; and third, a clear and modern ideological direction. A movement that re-enacts itself and aims only to repeat its successes will remain a thing of the past. The democratic socialist movement certainly risks doing that. There is enough of which to be proud. There are plenty of institutions to guard. There are hierarchies and power relationships to nurture. But if that is all that we do, we shall be merely caretakers - I am tempted to say the 'undertakers' - of social democracy. Lessons to Be Learned

A building block of social democracy, as well as a separator from other leftist movements, was the fight for parliamentary democracy. While continuing the struggle in those countries in which it has not yet come, we must study its shortcomings in those with lengthy experience of parliamentary democracy. It has been necessary, but not enough, to create for most peo-

A Second Century of Social Democracy 25 ple in parliamentary democracies a true participation and sense of influence. This is the individual dimension of democracy. Each person needs the possibility of having some personal influence over important aspects of his or her life. This is the idea behind the collective action of the labour movement. Through working together, the powerless are empowered together. But a second step, just as crucial, is to ensure that collective power does not remain only in the hands of collective institutions. There is a danger that young people lacking the historical perspective will see the common institutions of the left- unions and parties - as elites and as difficult to influence as corporations or states. Their enthusiasm for replacing an elite of the right with an elite of the left will probably be limited. Influencing a company by consumer action may seem a more practical way of getting results than getting a national party to legislate. A New Left should champion the potential for political subsidiarity - making sure that as much power as possible is as close as possible to each person concerned and, equally important, that democratic decisions are taken at the level where they can be effective. Today, in most countries, this means more local democracy, decentralization, as well as more international democracy, or internationalization. There is hardly a greater danger to the democratic achievements of the twentieth century than the many powerless politicians at the state level, too far away from local realities to know what decisions to make, and too far away from the real transnational forces affecting the nation for which he or she is responsible. Who in the long run wants to vote for someone who can affect what he probably should not, but who cannot affect that which he ought? Rather than regressing to provincialism, we must meet the realities of the next century with renewed transnationalism. Labour movements - unions and parties - need to work more together, make more decisions together, and devote more time and energy to developing a common agenda. Mechanisms such as the European Union and the United Nations - and their party and union counterparts - need more attention and more clout. The price to be paid, in the form of decreased formal national sovereignty, is quite low, when we see the com-

26 Ingvar Carlsson mon sovereignty gained through working together. There is a strong need for binding, majority voting to increase in organizations of international cooperation. Consensus-building is always to be preferred but cannot be counted on in every situation. International cooperation has always been crucial to social democracy and will become more so in the future. We cannot solve the shortcomings of national democracies by denying the need for transnationalism. Today's world requires cooperation because so many of the problems facing individual states are shared. The Role of the State

Ironically, while most of the democratic left now has a relaxed attitude to the role of the state in society, the early obsession of the left now seems to have been taken over by the right. While a modern left calls for not bigger but better government, the not-somodern right still vehemently advocates smaller government at all costs. The right's obsession with privatization and deregulation mirrors the position of the early Soviet system - that everything should be publicly owned and operated. Both are equally wrong and have led to devastating economic and social results. Looking back at a century of Swedish development, we see that it is not periods of private-enterprise dominance or state dominance that have been the most successful, but those of balance and cooperation. 'Better' government does not seek to replace private capital and ownership. It rather attempts to use democratic means - legislation, education, infrastructure investments, and even leadership - to stimulate economic development in the desired direction. In some cases, it may privatize or abolish old institutions no longer serving that purpose. In other cases, it may establish new state agencies or public corporations. Intelligent government involves not a choice between private and public; it is rather a combination - call it 'priv-ublic' or 'publi-vate.' This perspective also applies to welfare policies. A traditional left approach is concerned only with what the state does, and a traditional right position only with the individual's own means. A modern left position is, in my mind, more trustful of the indi-

A Second Century of Social Democracy 27 vidual's own potential, but also acutely aware of how this potential can be enhanced and developed by means of public policy. The Western welfare state may learn from decades of debate over Third World development: 'Give a man a fish, and he will eat for a day. Teach a man how to fish, and he will eat for a lifetime.' Sometimes the public debate about welfare can be likened to two swimmers arguing about the best way pupils can learn to keep their head above the water. One, on the right, says that the pupil should be thrown into the water and will learn out of the instinct of survival. The other, on the left, says that the pupil should be held under the stomach and told to move his or her arms and legs. A sustainable welfare society in a more humane and productive form is not compensation but enhanced opportunity. It involves sick leave and allowance but also, and more important, health care and rehabilitation. It means unemployment benefits but, more important, mid-life education and an active labour-market policy. A future welfare state has all those traditional elements, but with an emphasis more on work and opportunity. With this, it is no longer in danger of everincreasing costs but is rather a productive welfare system, improving the economic performance of individuals and society. One could go one step further and, by focusing on the functioning of society outside the traditional realms of welfare policies, link welfare to participatory democracy. All the various experiences - gender, ethnic background, age, class - should participate in the laying down of the ground rules of a society. A society can hardly be made just afterwards, but needs to be just first. The welfare system should not be a band-aid on an unjust and exclusive system. That is why the work to develop democratic mechanisms is crucial to making the welfare society sustainable. An elite, educated but possessing only a narrow experience of society, can never be competent enough to reform the systems. Inclusive Democracy

The initial impetus for social democracy was the severe injustices

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of the nineteenth century. The idea that no one's life should be determined only by background, class, or economic status, is profoundly humanistic. It was a logical continuation of the liberal revolutions of the late eighteenth century, complementing constitutional political rights. Today it is clear that we must add two dimensions to our analysis of exclusion and oppression: gender and race. Class, race, and gender are bases for discrimination and possess striking similarities and some differences. In order to build an inclusive society one needs to look attentively at all three. Do we still believe that it is a work of nature that men hold a devastating majority of top positions in business, universities, and politics? Is it a coincidence that such a large proportion of political leaders are white males? A left approach is to search for the explanations in culture rather than nature, in society rather than biology. A modern approach is to look at diversity and representation not only as an issue of justice, but also as an issue of quality. With one class, one sex, one ethnic background becoming dominant in any organization, that organization most probably is intolerant. And that intolerance also affects the people inside it. In all-white, male organizations, the women outside are excluded, but also the men inside are more limited. When sitting around a table, preparing a decision, asking questions of a lecturer, analysing results, participants almost always use their own personal experience as background to their comments and their judgments. If the organization functioned only in an all-white, all-male, upper-middle-class world, intolerance and exclusion would not be a problem. But this is not the case for most organizations, and never the case for political organizations. Instead of resorting to excuses such as 'there were no women who wanted the position,' decision-makers need to be held responsible for their results. The capacity to put together a group of people reflecting the diversity of society is an important sign of a person's capacity to be a leader or a decision-maker and to be open to different ideas. A Democratic Post-Materialism

As the industrial mode of production employs fewer and fewer

A Second Century of Social Democracy 29 people, and the ecological limits to growth enforce this tendency, a political movement must rethink its analysis in light of this new economic situation. Some have proposed that the knowledge-based future society is intrinsically more unjust, requiring a larger part of the population to take low-skilled, lowwage, insecure jobs. Many of these jobs, according to this theory, would be in personal support of a minority of well-paid, highly skilled professionals competing in a global labour market. There is nothing completely new in this theory. It has always been advanced, and always been proven wrong. First, few people have no geographical ties other than the sender of their paycheque. Most people have families. They have friends, roots, and loyalties that tilt the price mechanisms of the neoliberal theories. Also, many skills are language- and culturespecific in the broad sense. Even a money-market analyst will depend on local contacts and relationships to function well. Second, great injustices hamper the productivity of an economy. Denying access to education and training means reducing productivity and therefore future growth. The products of the future will need an economic demand. Fair distribution of incomes is in fact a prerequisite for sustainable economic growth. Third, from a leftist point of view, there are few if any people who by birth or inclination are determined to serve others. Rather than surrendering to the vision of the post-industrial society as unjust, we need to consider ways of democratizing the new sources of power, employment, and income. Culture will be ever more important. Knowledge-intensive production makes language and communications crucial. Basic skills of reading and writing are necessary but not enough. More is needed, such as literature, music, and the arts and being able to communicate with other cultures. Making access to culture and communication the right of everyone is not utopian: the music and movie industries are among the most quickly expanding ones. Teenagers quite often have better tools to communicate worldwide and find information on the internet than their parents have through the encyclopaedia and telephone. The need is there. The potential is there. The challenge to poli-

30

Ingvar Carlsson

ticians and others involved in the organizing of societies is to link the skills of the young with the demands of the labour market. Central to the social democratic agenda of today and tomorrow is the question of how the educational system, modelled by industrial societies that aimed at a beginning-of-life education, can switch to the lifelong skill-building that everyone will need in the future? A Traditionally Modern Left

Social democracy is based on the real dreams of real people. When I joined the youth movement some fifty years ago, we were determined to look at political problems with 'the eyes of reality.' That attitude contrasted sharply with the communist movement, which started its analysis with theses and books. It was very different from the conservative movement, which put the nation and ownership before people. Looking at politics with 'the eyes of reality' has several advantages. It provides a certain immunity to grand designs that threaten to be forgetful of basic human rights. It is a good basis for reformism, for the gradual kind of change that works so well with democracy. And especially important for the new century: it is necessary to change as reality changes. Social democracy means trying to get at the heart of economic power, not succumbing to it. It means trying to turn human needs into economic demand . It means not accepting that an individual's whole life will be predetermined by characteristics at birth, such as sex, colour, and parental income or class. The inspiration for this effort has always been overwhelming and everywhere to be found . It is enough to meet people who have had to limit their scope and aspirations. That is what makes me confident that social democracy will evolve and continue to attract young people all over the world.

4

A Program beyond Utopia ERHARD EPPLER

A Legacy of Programs

When democratic socialist parties were founded in the nineteenth century, they stood for radical social change - by political means. They were inspired by the vision of a society and an economy that were no longer capitalist. This vision often lacked clear outlines, but it motivated millions of people who were dissatisfied with the society in which they lived. Those social democrats who regarded themselves as Marxists could compensate for the opaqueness of their vision by holding to their conviction that the laws of history would bring about 'socialism' anyway. Whatever this might be in detail, it would prove infinitely better than capitalism. At the end of the twentieth century, not much of this opaque vision is left. The laws of history did not work as they were supposed to. Neo-liberal thinkers who have learned from Marx much more than they are prepared to admit suddenly claim to have unveiled the laws of history. Just as orthodox Marxists did, they pretend to know the purpose, the end, and the aim of history. When they tell us that there can never be an alternative to capitalism, they may encounter some hardy people who would like to contradict them. However, when those who challenge the neoliberal orthodoxy are asked what the alternative might look like, there is no answer - at least no serious one. Social democrats can no longer offer a vision of something fundamentally different from what we have.

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But they still stand for change. Those who support change will be asked why they think that it is necessary, what they want to alter, what the targets are, who should profit from change, who will have to pay for it, how they intend to bring it about, and who should be its agents. Answering such questions - as social democrats used to do - leads to the writing of programs. Social democrats were always busy writing programs - much busier than conservatives. Those who aim to conserve and maintain what is already real can confine themselves to a few simple principles. Those, in contrast, who are obliged to explain the reason, the need, the direction, and even the method of change must write complicated programs. As long as social democrats regard themselves as agents of change, they will write programs. They have always had to endure the tension between their programs and a very obstinate and stubborn reality. They lived in this tension - perhaps even on this tension. When it collapses, there may still be a political party. But is it a party of social democrats? Classical programs of the German Social Democratic party (SPD) always consisted of two parts. First, the SPD explained why capitalism was destined to disappear and why it deserved this fate. Second, the SPD put forward very practical demands to improve and reform capitalism. In practical politics it stressed the second part - the reform of what was doomed. This is what millions of working-class people were interested in; they wanted social security, higher wages, fewer working hours, and better housing and education. Much of the party's motivation, however, derived from the first part. It was worth fighting for a society that was completely different from the system of exploitation under which social democrats had still to live. The first program that managed to overcome this dichotomy was that of Godesberg in 1959. It concentrated on describing what social democrats really did and intended to do. At the end of the twentieth century, social democrats no longer are inclined to predict what Augst Behel called the 'groBe Kladderadatsch.' What has happened is the implosion of a system that had thoroughly discredited every vision of 'socialism.'

A Program beyond Utopia

33

Beyond Programs?

We no longer have to deal with the question of when capitalism will collapse. The question now is whether there is any chance of reform in global capitalism. And if there is not, does it make sense to produce social democratic programs? Will they not all be swept away by the dynamism of global markets? Will those social democrats who are elected to govern their countries ever be able to take the programs that we drafted seriously? Or will they prefer to muddle through, neglecting and despising any kind of program? Will programs have to disappear, together with the final goal? The split now opening up seems different from that which occurred in the early days of social democracy. It no longer separates the vision of a completely new society and the effort to make the old one work better. It is rather the gap between any program and everyday politics. The split a hundred years ago originated in the belief that capitalism was bound to disappear, so that improving it was not worthwhile. The gap today stems from widespread doubts that capitalism will ever disappear and fears that it may be far too dynamic and powerful to be tamed by anyone. At the end of this century no one can draw a picture of what society should look like in forty or even twenty years. We do not know how innovation in communication, mass production, medicine, or genetic engineering will change our societies. We know only that there are powerful forces that will have an enormous impact on society. We do not even know whether political majorities will succeed in prevailing over market forces, or whether political parties will turn out to be obedient servants of what we call 'the economy.' Or will there be a political market just as there is a capital market and a labour market? Will those who are politically responsible put up with being nothing more than an agency for promoting and speeding up economic growth? Will parliaments and governments put up a social and ecological framework that can induce the market to produce what a major-

34 Erhard Eppler ity of people thinks desirable, or will those who are economically powerful set the framework within which politicians can keep up appearances and enjoy their vanity? Social democracy is a political movement. It cannot survive the ruin of politics. Social democracy will always have to offer a policy. Wherever politics and policies are replaced by market forces, there will be no social democracy. It is true that we have no utopia to work for. Even if we agree on some policy, we do not know where it will lead. We distrust even utopias, since all of them invoke dreams of harmony, whereas democracy means conflict. It is not only dangerous to miss utopia, it is equally so to reach it. Nevertheless, social democratic parties need the tension between program and reality, between targets and everyday politics. They cannot exist without some design, some draft of what is necessary and desirable. They will suffer from a theory that tends to neglect the effort and trouble of realization, as well as from political practice that despises programmatic discussion and regards muddling through not as a last resort - sometimes inescapable - but as the only realistic way of governing. In the second half of the 1980s, when the SPD was preparing a new program to replace Godesberg, there was a discussion of the character of democratic socialism. Was the society for which its proponents fought something fundamentally new, or was it a modification of the democratic society in which we lived? Was democratic socialism only a 'dauernde Aufgabe' - a permanent, never-ending task, as the party had stated at Godesberg - or was it at the same time 'a new order' that could be realized? After four years of discussion, the party drafted a program based on the idea that it faced the never-ending task of working for freedom, justice, and solidarity. But the supporters of the new order can still quote a passage that mentions 'striving for a new and better order.' That is how big parties work. At the end of this century, this controversy seems to reflect the past. But if we cannot define or even sketch some 'new and better order,' if we cannot offer some real alternative to a capitalist society, why then do social democratic parties exist? Can they

A Program beyond Utopia

35

detach themselves from their founders' beliefs? Can they forget what inspired millions of courageous people, who were prepared to undergo repression and persecution? Is there anything that might replace this final target? Acting for Democracy

Perhaps there is, if we consider social democracy as a condition for any modern democracy, as an indispensable component of democracy. Social democratic parties did not come into existence because some intellectuals had read Karl Marx and then convinced some workers to form a new party. It was born when a majority of working-class people found that the liberals did not deliver what they had promised. The workers of the nineteenth century did not object to liberal democracy. But they found that the freedom, equality, and solidarity preached by liberals was withheld from those who had nothing to offer but their labour. Freedom ended at the door of their factory. What could they do with their freedom as citizens so long as they were forced to work fifteen hours a day in order to earn enough to feed their families, but not enough to send their children to high school? Most social democrats were simply fed up with being treated as second-class citizens. Social democratic parties a century ago grew rapidly because millions of people wanted to force bourgeois liberalism to give them what it had promised. They wanted to know what they were to live on when they were old or sick or unemployed. They would not put up with economic 'laws' that did not and could not take into account their basic needs. They supported the new parties in order to achieve some counterbalance in a society dominated by those who owned the means of production. They expected the new parties to ensure freedom, justice, and solidarity for those whom the liberals either forgot or did not take seriously. What trade unions were doing in the field of economics would be completed by a party in the field of politics. Social democrats had first to fight for their right to vote. Once everyone, regardless of wealth, had the right to vote, a political major-

36 Erhard Eppler ity, through political power, would gain what the ruling class still withheld from the emerging working class. This is why social democratic parties from the very beginning were eminently political parties. Their very purpose had been to achieve by political means what the market could not give those who live on the shady side of the society. In this respect nothing has changed throughout the twentieth century. Where neoliberals try to replace politics by market forces, social democracy must either resist or accept becoming superfluous. Social democracy stands for satisfying needs that cannot and will not be fulfilled by market forces. Perhaps European democracy does not work unless there is continuous tension between the requirements of capital and the needs of people. Communism has shown us what happens if you try to replace the market by political decisions. We are learning now what happens if you try to replace politics - and policies - by reliance on the market. That communism is incompatible with democracy has been proved during seven decades. Now communism is being turned upside down. And we have to learn that communism turned upside down is just as incompatible with democracy. Democracy is a political idea and a political order. It is bound to die together with politics. In resisting neoliberalism, social democrats act on behalf of democracy. If democracy needs the tension between the requirements of capital and the needs of people - and perhaps even lives on this tension - there must be at least two parties in which this tension works in different ways. Democracy will always produce parties dominated by the interests of capital. And this is likely to provoke the founding of a party in which human needs prevail. No big party will ever be able to neglect entirely either the requirements of capital or the needs of human beings. But as there will always be parties in which the interests of capital will prove stronger than anything else, there must also be a party that tries to represent what people need and what the market cannot give them. As long as social democrats make up their minds to be this party, nobody can prevent them from doing the job.

A Program beyond Utopia

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Fundamental Human Needs

What are the needs that neoliberalism cannot satisfy and does not recognize? First, there is, of course, social security. Social security in the twenty-first century may have to be organized in a different way, but it must still be social security. Social democrats will never agree that it can be satisfied only at the expense of freedom. On the contrary, for a majority of people a framework of social security is the basis of free decisions, a framework for freedom. Second, there is what we might call ecological security. People prove very conservative when it comes to their wish that a forest should remain a forest and a lake should remain a lake. Ecological security means that mothers need not keep their children at home because playing in the sun might cause skin cancer. There are also non-material needs. Human beings feel a need for justice - whatever they may mean by that word. Most people feel irritated when shares of an enterprise rise in value after hundreds of employees have been dismissed. Very often it is impossible to say whether needs are material or non-material. Is the need for 'just' taxation a material or a non-material issue? At any rate, there must be a political force that can give voice to such needs and is powerful enough to do something to satisfy them. If democracy - at least in Europe - is kept alive by the tension between the laws of capital and human needs that cannot be met by the market, there can never be a final victory. There may be a winning and a losing side, but the winners must always be careful not to destroy or annihilate the loser. Victorious neoliberalism - if it wants to be democratic - must recognize a political force representing the demand for what the market cannot provide. A victorious social democracy will have to give the market a chance to use capital in accordance with its own laws - within a framework, of course, that has to be set up by government. Social democracy, as one pole of a never-ending tension and one agent in a never-ending conflict, has a never-ending task. This is not an inspiring prospect. But it is a realistic outlook. And

38 Erhard Eppler it may prove better than no prospect at all. There is no answer to the question of what, in the end, society should look like. Apart from some catastrophe, there is no end. It seems part of our Christian heritage to insist on some final solution, to envisage the end of history. But there is nothing permanent in history except the task of giving human beings a chance of living as human beings striving for a better world and quarrelling about what this might be. If social democracy is prepared to accept this role, a more modest but indispensable role, it will have to live without utopia. But it need not and cannot live without a program, not without the basic values of freedom, justice, and solidarity, not without a list of priorities derived from these values, not without an idea of social security designed for the twenty-first century, not without a strategy of ecological modernization for sustainable development. Social democrats must be able to say what the social and ecological framework for the market should look like and how it can be attained. They have to account for the method of asserting the authority of democratic majorities over economic power. And this means they must have a clear idea of their contribution to political culture in the century to come. Politics takes place and policies are developed somewhere between utopia and muddling through. Those, in the twentyfirst century, who will be looking for utopia will fail, whether they find it or not. But those who smugly confine themselves to muddling through, or are even proud of doing so, will abolish politics and, in the end, ruin democracy.

5

L'Europe rose: Social Democrats in the European Union NEIL KINNOCK

In the last year of the twentieth century, ministers from democratic socialist and social democratic parties make up or lead the governments of eleven of the fifteen member states of the European Union and share power in two others. The achievement is unprecedented - and when the major surge came in the United Kingdom and France in 1997 and Germany in 1998 it was quick and calm. There were no bouts of turmoil on the stock markets and foreign currency exchanges. Parties celebrated victory more in dazed delight than in delirium. Only the most neurotic on the right muttered about a red tide engulfing Europe. Tony Blair greeted the 'new dawn' with: 'The people are our masters now.' Lionel Jospin and Gerhard Schroeder showed similar aplomb, The modesty was not false or populist. The new British prime minister was speaking in conscious counterpoint to the arrogance of the Tory years and the 'We are the masters now' hubris of Hartley Shawcross echoing from the postwar Labour landslide. The others were similarly recognizing the size of the task facing them and the responsibility that it brought. Boredom with the right, contempt - in some places - for its sleaze, resentment - in other places - at unemployment and insecurity were among the ingredients of the changes in the United Kingdom, France, and Germany. But there were two critical factors that turned voters' weariness and protest into massive shifts. One was the erosion - some would say eradication of reasons to fear the coming of the social democrats. In the case

40 Neil Kinnock of Labour and other parties like the German SPD and the Italian Partito Democratico della Sinestra, the strategy of reassurance had been worked on for years. This was not mere 'spin doctoring.' To be convincing, it had to be genuine and deep rooted. And, with policy shifts away from unilateral nuclear disarmament and other minority passions of the mid-1980s towards the confident deployment of market-friendly policies by the mid1990s, the accumulated proof of an authentic change was conclusive. The other reason for landslide victories was the genuine desire among voters - whether returning to the socialists or supporting democratic socialist parties for the first time - for a fresh start. The sentiment has no easy definition. It was helped by the qualities of the party leaders who, in different ways, embodied the new appeal of their parties. Highly professional campaigning also played a part. But, most of all, the parties were offering policies that were at last understood to be reasoned, workable, and relevant for an age of realists. In essence, electorates that felt a time of change needed governments that could manage change efficiently and humanely voted to get such governments. Results everywhere showed that the simplistic New Right and the sloganizing Old Left need not apply. The New Look of the Left

For most of the parties now governing in the European Union, power is not of course an unknown experience: some have led or shared in administrations for decades. What is new for many is the vocabulary - and the policies - with which they govern. First, stability, discipline, welfare modernization, liberalized markets, public-private investment partnerships, strong emphasis on quality as well as quantity of public provision are words and concepts that are used and applied alongside the more traditional policies for care, fairness, and opportunity. Planning is referred to as a necessary instrument, never a doctrinaire weapon. Nationalization isn't heard of at all. Partial or wholesale privatization of specific publicly owned legacies such as

L'Europe rose: Social Democrats in the European Union 41 national airlines is in prospect in those countries where it has not already happened. While the commitment to universal entitlement to basic standards of benefit and pensions coverage remains, within it there is now growing emphasis on trying to combat the residual, systemic poverty that persists - indeed, grows - among as many as a fifth of some national populations, despite more that half a century of welfare states in several countries. Second, the broad gains of the left (or centre left, since that is the course along which it advances) owe something to a popular desire to have change with continuity. That preference is not unknown. It was a major propellant of the forward march of the welfare state in the 1950s, with both sides of politics accepting a managed economy and Keynesianism. The electorate then would not support the return of pre-war conservatism. Voters now will not go along with restoration of what many think of as '1970s' statism.' Political skirmishes can be waged excitingly in the ideological hills between general elections, but the contests for power take place on the centre ground. They are won by capturing it, and the weapons must include reassurance as well as audacity. Third, the age in which democratic socialists squandered gleefully, delighted in school truancy and social indiscipline, celebrated debt, and taxed sadistically never occurred. It belongs to the imagination of some of the fervid enemies and a few of the comrades with confiscatory fantasies. Recall - and the record shows - that past social democratic governments were in a state of compulsive political rectitude. Nationalization was undertaken to salvage strategic industries, not to apply doctrine. Introducing and sustaining the welfare state were bold and essential actions, but they imposed tortuous strains. To cope with economies disabled by war, or burdened with trade and spending deficits, or hit by oil shocks, social democratic governments introduced freezes and austerity policies that suppurated votes and alienated allies. Today's social democrats learned from all that. They publicly acknowledge the limitations before elections instead of being

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trapped by the constraints after them. This approach has the virtue of honesty - and makes it possible to judge them on progress achieved rather than on gaps between the poetry of promises in opposition and the prose of performance in government. Social Democratic Gains and Values

Understanding these results is an essential antidote to demotivation among democratic socialists. Energizing them requires something more. Having worked to get their leaders into power, they rightly want to be sure that it is used to gain social democratic progress. The progress that can now be made will not come near to perfection, of course. But socialists are not utopians. Mundane but sustained success in creating realistic chances, expanding usable rights, dismantling unfairness, fostering innovation, and supporting creativity all give encouragement as they incrementally reshape society. To emphasize that is not to rationalize caution. It is to recognize Sydney Webb's 'inevitability of gradualism' in action, or what I once called 'socialism by slog.' It can test patience, but it is dependable in its consistency and direction. And, cumulatively, it does prove the worth of having social democratic governments. For those who still think that such a prosaic version of progress lacks vision or drama, I paraphrase Aneurin Bevan: to see employment training where there was none, child care where it was scarce and unaffordable, talent flourishing where is was stillborn, prejudice combated where it was tolerated or even mobilized, and resistance to poverty replacing resignation to it is to witness vision becoming reality. 'It is the verb that matters,' said Bevan, 'not the noun.' Social democracy can transform through reform, revolutionize by ameliorating, as long as the will to persist with progressive change is continual and the values remain constant. Values in the post-ideological age? Values when political bipolarity is said to belong to the past? Values when life is sharp and silicon-chipped? Aren't values mere sentimentality in the age of the sound bite and the focus group?

L'Europe rose: Social Democrats in the European Union 43 The answer is that values - the basic sense of what is right or wrong, fair or unfair, community responsibility or selfish indulgence - are alive and held by the great majority of people. They are consciously imparted from generation to generation, not as unreachable ideals but as a code for the decent conduct of life. They are being applied by social democrats. And they are as relevant as ever in this high-tech, polluted, globalizing, conflict-scarred, budget-balancing, longer-living, fashion-conscious, tyrant-tolerating, enterprising, individualistic, just-intime-delivering, credit-carded, crime-damaged, poverty-divided, bar-coded, glossy, grief-stained, dangerous, beautiful time. What makes us social democrats or democratic socialists is not just our belief that freedom is the most desirable condition of life. It is not even our understanding that if liberty is to be real for individuals - the whole purpose of our efforts - it requires economic sufficiency, social protection, and equality of opportunity as well as legal and political rights. Many Christian Democrats, liberals, and others can - and do - share those views to a greater or lesser degree. It is the next step, the one that turns the abstract admiration of freedom into action, that makes those groups falter. We believe that economic decisions and actions should be made compatible with the needs of society by means of plural democracy. That is what put the 'social' into socialism before Marxists hijacked it, gave it a pseudo-scientific aura, and where they ruled - usually made it oppressive. It is what makes democratic socialism distinctive and valuable now. There has never been a single route to that conviction, and there isn't a singular means of applying it. It is pragmatic and adaptable to the times and realities in which it has to be used. If it becomes dogmatic, it gets stale and brittle. If it is diluted, it becomes irresolute and vacuous. It does not live on the 'borrowed vitality' of being a middle course between the command economy and unbridled capitalism. It takes its own strength from the understanding that economic efficiency and social justice are dual and interdependent purposes, not mere parallel ambitions. Failing to pursue the former goal seriously inhibits the creation of wealth. Failing to pursue the latter greatly

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impedes the distribution of wealth. Ignoring either brings incompetence and poverty - and their huge economic and social costs, which disfigure neighbourhoods, nations, and the world. Changing Terms of the Struggle The socialists who hold to those purposes and want the elective power to put values to work clearly cannot afford to be static in their language or their policy. If they were, they would be stranded while times changed around them. They must know how to enjoy the struggle, while recognizing that progress is not the elimination of the struggle but rather a change in its terms. These terms have certainly altered, not just since the origin of the European social democratic and Labour parties but, particularly, in the most recent decades. The radical evolution in the structure, skills, and location of labour forces; the slow but significant alterations in the economic status and social role of many women; moves away from the expectations, identity, and relationships of the 'nuclear family'; the arrival of the multiethnic society; the coexistence of increasing overall prosperity with growing poverty in countries such as Britain; the ageing of populations; and other seismic shifts - widely catalogued and analysed - have all reshaped the terms of the struggle. The internationalization and corporatization of capitalism and the globalization of markets, technology, and employment also radically changed the terms. And among the results, leftist ambitions to replace capitalist ownership - at the commanding heights of the economy, if not universally - became little more than a rebel yell. The collapse of Communism is another profound change in terms. But it is not, as some thought (quaintly, in my view), because it would be regarded as definitive proof that socialism was a historic flop. It is because yesterday's 'evil empire' suddenly became today's - and tomorrow's - shambling, postSoviet mendicant, with huge populations doomed to jobless, heavily indebted, near-purgatory. The crumble deprived some on the right of demonizing rhetorical flourishes against the left.

L'Europe rose: Social Democrats in the European Union 45 They lost the Soviet 'tiger at the gates' and their self-appointed sentry's position with it. And, more recently, the 1998 Russian crisis has taught the more sensible of them that the free-market model cannot easily be transplanted everywhere like some sort of great McDonald's franchise. But the burial of Communism under its own contradictions had no implications for Western social democrats, who - in philosophy, policy, and action - have always been distinctively different from, and not a palatable surrogate for, Marxist-Leninism. The end of imperial Communism did, of course, free the satellite states of central and eastern Europe. And as soon as they had regained their breath after that liberation, they made applications for admission to membership in the European Union (EU). The careful but definite process for facilitating that enlargement of the EU has continued ever since. In less than a decade there has been huge and arduous progress towards functioning democracy and mixed-market economies after more than half a century of totalitarian paralysis. The task of gaining levels of economic performance that will enable new entrants to accept the rules and responsibilities as well as exercising the rights and opportunities of EU membership imposes huge demands on the peoples and leaders of the candidate countries. But their sustained determination, supported by some help from the EU, is bringing admission nearer. In the first decade of the new millennium, Europe - the world's most warring continent - will be more economically integrated, politically democratic, and peacefully secure than at any time in history. The prize is priceless, the project magnificent. Like other great adventures, however, stable and successful arrival at the destination will depend more on perspiration than on inspiration. Social democrats in western Europe will have to ensure that their populations understand the reality that embracing the East will not impose great burdens, or bring cheap labour economies into the single market, or result in the loss of development assistance for regions that are poor or going through industrial transition. Social democrats who lead - or have led - governments in several of the applicant countries will have to continue

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with their efforts to reassure their people that the stresses of change are worth enduring, even when many profound alterations and job losses in industry, agriculture, administration, and countless other areas make the going very tough. In both parts of the continent, social democrats will have to repel the nationalists and populists who are exploiting the insecurities inevitably felt by some sections of the public at the prospect of change. Reason, accurate information, and use of the full force of the laws against racists will all be essential to those efforts. The ultra-right will never gain mass support, but the misery that it can inflict on individuals and ethnic minorities and its distortion of the method and implications of enlargement of the EU must be consistently resisted . Social democrats not only have the governmental responsibility to do that, they have the values and instincts that equip them to do it. As it governs in the midst of these and other transformations in the terms of the struggle, democratic socialism - more than any other creed - must be attuned to the realities of the age. Policy and ideology that might have fitted the challenges of previous times sometimes survive because of habit or sentiment. They are familiar echoes. People feel comfortable with them. But when the challenges change, so must the thinking - and the doing. Mass poverty, mass unemployment, mass production, mass illiteracy needed mass responses in western Europe. Chronic low incomes in the midst of relative affluence, 10 per cent unemployment, radically different economic structures, and educational under-performance pose a different set of challenges. They ·demand more precision in the policies of prevention and cure. Social Democracy's Challenge in the EU

The challenge is one of management by democratic governance so as to achieve secure societies and strong economies. The size of the task is formidable. Seventeen per cent of households in the current European Union live on less than half of the average of all incomes. Ten per cent of the potential workforce - about

L'Europe rose: Social Democrats in the European Union 47 18 million people - are registered unemployed, among them about 8 million who have been out of work for more than a year. Twenty per cent of young people are leaving formal education and training without recognized qualifications. On the plus side, the EU as a whole has a net current account surplus, low public borrowing, and low inflation. Its combined wealth is within touching distance of that of the United States, its share of world trade is slightly bigger, and its capital markets are in the same league as those of the United States. But growth is too fragile, public capital investment has fallen in the last decade, and private investment is cautious. While telecommunications, software, pharmaceuticals, and financial services are relatively buoyant, the impact of global instability following on recession restrains advance in several other sectors. Conservatism in parts of the financial system can deter new enterprise, conservatism in parts of the employed labour force can discourage new jobs, and conservatism in some management perpetuates old ideas of prerogative and authority. There is reason to take confidence from brilliant scientific and artistic inventiveness and technological prowess, and to be reassured by the fact that, in the absence of the general commitment to social provision, poverty would be more widespread and divisions deeper. But no social democrat will rest on that, or settle for merely alleviating disadvantage with some extra sympathy. The understanding that if there is to be consistent reduction of social exclusion there has to be rigorous reform is therefore growing. Putting that realization into effect is not painless. In EU countries in general, the systems of taxation, social security, economic development, and education and training were built on assumptions about work and society that are becoming less valid . If those systems are left to themselves they will become less sustainable, not least because of demographic change. In 1986, for every one person over the official retirement age (normally 65) in the EU, there were five people aged between 15 and 64, the main potential working-age population. By 1996, the ratio was four to one. By 2020, the ratio will have diminished to only three to one.

48 Neil Kinnock But the problem, and the seeds of the solution, lies behind these bare figures. The employment rate in the EU - the proportion of the working-age population actually working - is only 60 per cent. This means that the real dependence ratio for 1986 was nearer 3 to 1, and for 1996 it was 2.4 to 1. In 2020, that would translate into only 1.8 people generating taxable income against each one person needing - and having earned - support in retirement. Raising the employment rates from 60 per cent to 70 per cent is, however, realistically attainable with good strategic political and economic governance and with strong investment in the whole potential productive workforce. Achieving both goals is essential if more working-age people are to be able to contribute to active society, rather than just be administered on the sidelines. And it is also vital if the contract between generations is to be kept. A Program of Structural Reforms

These and other current and foreseeable realities compel structural reforms in economic, employment, social-protection, and taxation systems. Establishing conditions in which more people can work will require more diverse forms of employment law and practice, wider definitions of economic activity that is valued (and rewarded), and education and training that continually equip people with new skills and competence relevant to broader economic activities and creative opportunities. In addition, social support systems need to address wider forms of disadvantage and to be based more firmly on the experience of people who use and who work for the relevant community and voluntary sectors. There is evidence that, after years in which governments of the right ignored or postponed responses to the trends, social democratic governments are getting the reform process gradually under way. Governments that want to combat poverty and enable the term 'social security' to retain real meaning over the next thirty years are making a start on shifting the use of resources. They realize that, while more revenues will need to be collected, current systems of taxation and distribution spread benefits so thin that they further coagu-

L'Europe rose: Social Democrats in the European Union 49 late poverty and are of no more than marginal value for those who are not poor. Reallocating money to target poverty while simultaneously encouraging people to increase their personal protection while they are in employment is basic, therefore, to a workable design for the future. In the same spirit, education is getting a higher spending priority, and provision is being extended to lifetime learning. The advances cannot be rapid, and, since getting knowledge must be liberating as well as functional, maintaining breadth as well as specialist depth poses financial as well as intellectual and organizational demands. But those investment requirements have to be met. Ignorance would certainly be more expensive. And exclusive concentration on the so-called basics would guarantee citizens a lack of adaptability in adult life, even if, by some miracle, it managed to retain the attention of children in school. As these changes take shape through national actions, the EU as a whole is concentrating on common concerns about unemployment. In 1997 the latest revision of the treaty that defines the EU included a specific employment clause. Later a heads-ofgovernment jobs summit adopted a strategy for refocusing economic and social systems to meet new conditions. Obviously, no one thinks that treaty clauses or strategies will of themselves create jobs. What can do so, however, is the growth-oriented coordination of economic policies among member states. That is now being developed through efforts to complete the single market, through common commitments to trans-european infrastructure networks and to the research and development budget, and - above all - by establishment of the Economic and Monetary Union (EMU). As it matures, EMU will diminish or prevent the effects of currency turbulence, help to provide the price stability necessary for sustainable growth, and contribute to the achievement of a core objective of the EU 'a high level of employment and social protection.' Clearly, establishing a single currency and a central bank will not endow policy-makers or anyone else with mystical powers. It increases rather than replaces the need for fiscal sobriety and monetary realism. The growth that stability facilitates must be transmitted as economic security and social progress. The com-

50 Neil Kinnock mitment to stability must not produce economic rigor mortis. Social democratic governments that have neither monetarist obsessions nor free-spending illusions are fitted to the task of gaining and keeping that essential balance. Civilizing National and International Markets In much the same way, social democracies will not accept the neoliberal fable that markets should be the determining social and economic authority. Of course, they never did believe that myth instinctively or intellectually, and it should not even be necessary to make the point in a commentary on them at any time. The world has, however, just come to the end of twenty years in which such free-market fundamentalism did spread. It came to dominate or to influence areas of activity as diverse as the international financial system, education, and health care. Now, therefore, social democratic governments have a particular function of putting the market into perspective and taking action that will retain its dynamism while preventing its excesses. That obviously is not a new function. Social democracy was born - in Europe - because of the instability and exploitation inherent in the unrestrained market system. Social democracy grew up with the task of tempering the one and combating the other. And while the scale, integration, volatility, and complexity of markets have all increased, the basic social democratic commitment to civilizing the system must continue. But it has to be applied in a changed setting. The means of doing so, though easily stated, are not easy to put into practice. Free economies need firm rules, fairly applied by accountable institutions, if they are to keep real freedom. Countering monopoly practices, protecting shareholders, consumers, and the environment, and preventing unsafe or unjust treatment of employees make up a familiar list of ambitions for social democrats. Those goals now have to be rigorously fulfilled, not simply because they are desirable, but in order to sustain the vitality and the security of the economic system. To do that is not to repeat the old-fashioned pattern of 'interventionism.' It is not a matter of 'picking winners' or 'second-

L'Europe rose: Social Democrats in the European Union 51 guessing' capitalism, and it does not involve 'bail-outs' with taxpayers' money. It is to provide the context in which the market system can work productively, and offer choice and opportunity, without being so destructively capricious or so powerful that it subdues regions, states, and people. As in other spheres, rights must be balanced by responsibilities, because the economic and social price of imbalance is too high. Achieving that objective is not necessary only in the developed market economies of the Northern Hemisphere. It has to be global. The world has just gone through a course of instruction about what bankers and brokers and bewildered ministers called 'the inherent instability of global capitalism.' Perhaps the crises and their consequences have not yet run their course. While the memory of the turmoil and familiarity with its effects are fresh, it is time for governments - and social democrats particularly - to intensify their efforts to establish 'a new world financial architecture,' in Tony Blair's phrase. The foundations have been laid by the realism expressed in the midst of the crisis. 'Instead of relegating politics to the sidelines and mandating minimal government,' wrote Anatole Kaletsky of The Times, 'advanced capitalism requires conscious management by government, central banks and international regulators in order to prosper or even perhaps to survive. Without a certain amount of government intervention, global capitalism generates booms, busts and crises. It is simply risible to claim that unfettered financial markets can always be relied upon to allocate resources in an optimal, or even in a prudent, way. In short, the global financial crisis is exposing the "magic of the market" as a myth.' Building on that understanding obviously requires specific actions of reform and restructuring. Social democratic governments have a vested interest in seeing that those actions take place. If they strive, rightly, to practise economic prudence and stable management - as they do - they must work to impede the destabilization of markets and the erosion of confidence generated by global crisis. If they want to prevent a retreat into protectionism - and they do - they must collectively prevent speculative excesses, so as to ensure maintenance of conditions

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that permit liberal trading and investment. If they want the Third World to combat its poverty by participating properly in global economic activity, the former Soviet Union to gain economic advance so as to avoid political chaos, and emerging economies to mature without repetitions of the ruinous experience of recent years, they must set their hands to reconstruction and supervision of the principles and practices of the world financial system. That requires a world central bank that can help currencies resist speculative assault in ways that are quicker and less ponderous than those provided by the International Monetary Fund (IMF). A World Financial Authority empowered to regulate investment banks and hedge funds would deter speculative currency shifts. In extreme conditions - as advised by Paul Volcker, Paul Krugman, and others with solid credentials of orthodoxyit should be possible for countries to use capital controls without destroying their credibility. The world's poorest countries need more debt reduction and, in some cases, write-off. Coordination of the plethora of international organizations such as the G7, the International Monetary Fund, the OECD, the World Bank, and the World Trade Organization would add cogency to efforts to anticipate and respond to economic emergencies and to provide advice on priorities for public spending. George Soros's proposal of new international credit funds should be pursued. Achieving such changes will obviously impose great demands on energy, time, and political will. Social democrats must not be daunted. They have both the internationalist commitments and the national· self-interest required to design and apply the changes. Combined in the EU, and with the Euro as a world currency, they have global presence. They can use it to benefit themselves and humankind by achieving what would amount to a new Bretton Woods system for the twenty-first century. Managing capitalism in a globalized economy is a crucial mission for modern social democracy. It is right. It is necessary in practical terms. It is consistent with our values. To adapt a phrase, 'Social Democrats of the World, co-ordinate - you have nothing to lose but your coyness, you have a future to build.'

6

The Social Democratic Challenge in Our Age SHIMON PERES

I recently participated in a conference in the United States that dealt with topics relating to ideology. One of the delegates, who knew me as a Labour party man, turned to me suddenly and said, 'You know, socialism is very much like the Titanic - a luxury liner which set forth on a spectacular voyage, hit an iceberg and sank!' I responded that I held different views. Socialism bore no resemblance to the Titanic or to any other ship, for that matter, nor could it be compared to a sailing trip. If anything, socialism does not constitute a vehicle used for travelling, nor is it designed to sail. Socialism, just like the sea, takes the shape of an autonomous civilization - a civilization that abounds with life, is washed by waves, and is hit by thunderstorms - but on no account is it a one-time phenomenon, nor a transient one. Socialism's Constant but Evolving Mission

More than seeking to set an example, socialism's mission is to address moral issues: truth, justice, liberty, equality, human dignity, solidarity, and mutual assistance, at one end of the scale, and to negate discrimination, oppression, exploitation, degradation, and bondage, at the other. Socialism is not confined by borders, religions or ethnic origins. Democratic socialism is a whole entity that cannot be splintered into fragments - socialism on one part and democracy on the other, nor can it be applied at home and ignored elsewhere. Socialism does not stand still; it is ever-flowing, continuously revitalizing itself, just like time

54 Shimon Peres renews itself as it flows on. Nor will it suffer double values: trivial discrimination equates with blatant discrimination, and discrimination, whether temporary or permanent, will be judged by the same laws. Socialism changes, just like the times, for nothing is static. The last time the world witnessed a status quo was in the time of Joshua, when he bade the sun and the moon to stand still in the valley of Ajalon. This was a short-lived status quo, which has never repeated itself. Life is not a cycle of recurring events but a cycle of constant mutations. Socialism took up different issues in different periods: at one time it concentrated on the exploitation of workers, lack of social benefits, and laws against strikes; at others, trade unions, freedom of speech, and equal rights for women were on the agenda. It also denounced a distorted form of socialism that had convinced itself that embracing dictatorial rule was acceptable. Social democracy never gave its blessing to such a merciless union. It professed that equality does not give licence to revoke the right to freedom, and freedom does not have the right to revoke the right to equality. The truth of the matter is that many of social democracy's concepts have been adopted by its adversaries. It is also true that today's form of capitalism is no longer what it was in the past. It recognizes the importance of social benefits, acknowledges the right to form unions and the right to strike, and encourages better working conditions and fairer working hours. It understands the need to ban child labour and fight against the discrimination of women. Some workers even have the privilege of sharing in the running of the company and enjoying a fitting pension scheme. Capitalism has metamorphosed. The changes that it underwent were generated in large part by social democratic ideology. Even revolutionary socialism was forced to disengage itself from the yoke of its dictatorial concepts and lean towards democracy, and in large part towards social democracy. The former Soviet Union is a living example of the devastation that a dictatorship - also labelled socialist - can induce; it has the potential of shaking the foundations of human confidence and causing irreparable harm to the environment.

The Social Democratic Challenge in Our Age 55 The Challenge of a New Era The prodigious changes witnessed in our era - an era whose credo is a flourishing economy and scientific achievements (as opposed to an economy that called itself scientific) - do not negate the role of social democracy in our world but present it with new challenges. We are in the process of moving not only from one century to another, but also from one historical era to another. Present events may not constitute the end of history but will doubtlessly serve as the beginning of a new history. This imminent age is not so much an extension of the past as a reference to a whole new future. What shape will this future take? How has our world altered? A vital change lies in the fact that many observers now identify sources of wealth and power not in material possessions and territorial control but in intellectual resources, both scientific and technological. A country's assets are represented no longer by its size, but rather by its scientific and technological standards of excellence. Territorial wars are therefore redundant, to be replaced by a sense of competition in the world of creativity. Armies are not formed to conquer wisdom. A better future for tomorrow's generation can be secured only if we provide the young with the tools to acquire knowledge both now and in the years to come. The transition from a focus on territory to a focus on science will reduce the need for frontiers among nations. Similarly, the importance of geographical expanses will dwindle, and ethnic differences as they are perceived today will diminish. Science needs no passport to travel. Computers recognize no boundaries and are not daunted by distances, and in this day and age ethnic origins neither ensure, nor prevent, progress. The borderless world of science will usher in an era in which a world of enemies will give way to a world of dangers. Enemies have territories. Dangers have wings. In the aftermath of the collapse of the Soviet Union, for instance, the United States lost its major enemy, and the North Atlantic Treaty Organization (NATO) turning yesterday's foes into today's allies. Enemies are gradu-

56 Shimon Peres ally fading away, for it is recognized that a healthy economy can be the source of valuable scientific and security-related benefits. But new dangers are gathering in our skies. The potential of this new historical era, as too the dangers it holds, is no longer rooted in territories or defined by political borders. The transition from a world of foes to a world of dangers involves immense challenges, for dangers, just like opportunities, can spread everywhere. Today, the plagues of fundamentalism, chauvinism, and racism are not confined to territorial borders but constitute contagious global sicknesses. Terror is not restricted to a specific domain. Missiles hurtle through space, unaffected by the lay of the land beneath them, crossing frontiers and fortifications unchecked, and unconcerned with natural obstacles. Unconventional weapons, like drugs, are spreading far and wide; the ability to control their proliferation is debatable. Ballistic considerations are outweighing territorial ones, and they too yield strategies that are more global in character than national. A new kind of landscape is unfolding before our eyes. In the past, when we opened the window, we perceived our immediate environment. In the words of the poet, 'Man has been fashioned by the landscape of his homeland.' Today, we open not only our window at home but also the window of the internet and that of our television set. As a result, we live our lives within the context of two landscapes, which complement one another: the landscape of our immediate environment and the global one. The mentality of our children, born in a world of such open windows, is already different from that of their parents. They are aware that the economy is both open and global, no longer confined by national rules and regulations as it was in the past. They realize that economic markets are more important than nations. And they have come to understand that high technology produces more services and commodities than the old-fashioned conveyor-belt system. The world is going through a process of reorganization. In the Middle Ages, cities became nations; today, nations are forming

The Social Democratic Challenge in Our Age 57 communities - the Association of South East Asian Nations (ASEAN), the European Union (EU), MARCOSOL, and the North American Free Trade Agreement (NAFTA)- not to speak of India and China, which constitute immense common markets in their own right. Europe was the first entity that addressed the requirements of a changing world and created the European Common Market. In the wake of the First World War, Europe had been convinced that it could prevent another world war by reducing the calibre of guns and limiting the size of armies. Hitler poked fun at these restrictions by building 'pocket-size warships.' The Europeans genuinely believed then that the larger the warship, the greater the war, and vice versa. Quietly Hitler also built a massive army under their very noses. Relying on the same restrictions after 1945 would have been an exercise in futility, so the Europeans decided to adopt a different approach. This time it took the shape of an economic structure aimed at promoting cooperation among nations, which in turn would lead to open borders between them. In other words, Europeans made a conscious decision to abandon the political glory-seeking road of victory and move instead towards an economy that would provide the basic needs of men and women. Europe decided to economize its politics instead of politicizing its economies. Indeed, in the latter half of the twentieth century, Europe has not experienced war, except for sporadic ethnic confrontations in the splintered Balkan countries. The Market: Its Triumph and Its Limitations

The market economy proved its immense potential not only in economics but also in politics. Not only in Europe, but the world over, it is recognized that a market economy meets the needs of people and is in keeping with the trends of the new era. The market economy has been and still is celebrating its victory in many parts of the world . The process of abolishing trade restrictions (in part or totally), privatizing, creating a modern communications infrastructure, establishing multinational enterprises, expanding

58 Shimon Peres research and development, and increasing educational budgets has also led to a cut in security budgets and a decrease in military conflicts, bringing about a hopeful wind of change- a new hope for the whole world. The world seems to be more fluid, more attentive, and more bent on commerce and trade. But the truth needs to be said: together with the headway made by the European Common Market, certain drawbacks began to appear. In the United States, the gap between rich and poor grew, in Europe the unemployment rate rose, and in China restrictions were put on the size of families. The social democratic truth began to surface once again: it is possible to commercialize products but not people. Can the market determine the value of a person's health or the value of a youth's education? Can statistics illustrate the social effects of unemployment? And even pure economics cannot respond satisfactorily to a question regarding the stability of a society in which the social gap hits you between the eyes. It is true that it is not governments that run industries. But it is governments that print money and determine the scope of its circulation; they also fix interest rates, thus becoming responsible for the level of inflation, unemployment, and poverty. Furthermore, only they are in a position to set priorities for the construction of national infrastructure. They hold the key to the future of health, education, housing and environment, internal security, social security, and national security. It is therefore governments' obligation to implement the will of the people by means of the mandate given them by the people. It is the people who decide what they want and set their priorities; it is also they who determine the value of things, even though the economy regulates the price. And it is inconceivable that an individual's worth is determined by a market price. Talking about a market economy is legitimate, but creating a market society is not a thing to be considered. In other words, it is unthinkable that the market and its demands should shape the character of a society and control the individual's destiny and dignity. You can privatize business; you cannot privatize elections.

The Social Democratic Challenge in Our Age 59 The market economy has, in any case, gained a great deal of power. Generally, the market operates according to the laws of supply and demand - except that demand can be artificially generated by media exposure and the world of advertising. Human resources are responsible for this new affluence and the stability of the market, and, as a result, thirteen of the fifteen nations making up the European Union have social democrats in power or a coalition government that includes them. I assume that the European voters decided to socialize the economy, just as fifty years ago they economized politics. Human welfare is as important as the welfare of the market, as are education, employment, housing, and the air that we breathe. When the economy is a matter of national concern, so too is the welfare of society. This is why it is inconceivable that when nations form a union, that union would be exclusively economic in nature and ignore the social aspects. The Centrality of Education

Social democracy does not relate solely to matters of politics and economy but also concerns itself with fundamental values. It is a banner-carrier - not only a book-keeper. It must uphold impeccable ethical and moral standards so that the basic values that it represents serve as a source of inspiration. It should have the ability to unite through the force of its vision, not only through the force of its organization. In addition, it must be capable of revitalizing and renewing itself by immersing itself in a world of innocence and youth. The immense challenges that humankind has witnessed serve as a gateway through which social democracy can enter, waving new flags, and stepping into a world that yearns for solidarity and decency. Wealth today is reflected not in money but by knowledge. And if this wealth is to be divided fairly, social democracy must provide equal educational opportunities, at the primary, secondary, and post-secondary levels, to every individual throughout life, starting from kindergarten and even earlier in its mother's womb. Only in this way will true equality be

60 Shimon Peres enjoyed. Safeguarding the mother's health and correcting any prenatal defects constitute the fundamental conditions necessary to provide every human being with an equal opportunity to cope with life's challenges. The educational system must ensure that all children, regardless of their financial circumstances, are able to join a well-equipped kindergarten, followed by primary and high schools, allowing them to continue with their studies for the rest of their lives, if they so choose. This is what it takes to implement true social democracy in our era. Education is the key to equality. However, learning should not have a time limit. In our changing world, the secret to a productive life lies in every person's being able to keep abreast of scientific and technological advances. An individual's intelligence must surpass that of a sophisticated machine and possess the versatility needed for the multifaceted nature of today's professions. To this end, it is crucial that studies continue beyond the education acquired during the generally allocated school years. True socialism in our age is the socialization of education - to be put at the disposal of each and every person, all through life, from the first day to the last. Human beings must be capable not only of learning but also of knowing how to learn. Employers too must provide ongoing training, enabling workers to update themselves with new developments. Education and culture are the building blocks of social democracy in our age. Education will allow people to earn their living with dignity. The prayer 'Bring forth bread from the earth' should be changed to 'Bring forth bread from the mind.' Culture, for its part, will fulfil people's spiritual needs, whether through literature, art, sport, travel, or recreation. Democratic Pluralism and Peace

Naturally, there is no social democracy without democracy. Today, democracy cannot limit itself to representing the diverse elements of society but must attempt to bridge the gaps between them, by means of persuasion, not coercion. Democracy is not a forum where all are in accord, nor does it constitute a collection

The Social Democratic Challenge in Our Age 61 of agreements; it is a gathering of people with a variety of views, a convention of non-agreements. Today, democracy seeks not only to provide equal opportunity to all but also to give everyone an equal right to be different. Under the roof of one democracy, diverse religious, cultural, and ethnic groups will be able to live side by side in freedom and harmony. Democracy's function is to safeguard the dignity of human beings. Within this context, tolerance of individuals' distinctive characteristics plays a major role, for human liberty is measured by the liberty that a person has to live his or her life as he or she pleases - and not only the freedom to choose one's representatives - all this on condition that it does not undermine the rights of others to live or think according to their beliefs. The world, it is said, became a global village, and as a consequence villages have become global as well. And global equates with pluralism. Democracy in our age must be pluralistic in character and should not rest only on its historical ideology. Not all of the world's nations have adopted democratic rule, just as not all democracies advocate socialistic values. There is no objective reason why a taste for human solidarity, combined with the flavour of human liberty, cannot be experienced the world over. If we succeed in convincing all those concerned to live in a world in which education and freedom, creativity and hope, are of major concern, we may be able to rid ourselves of one sore evil that has poisoned human history: bloodshed. War no longer plays the same role in our era as it used to. Much more of good can be accomplished in present-day scientific laboratories than on the battlefields of yesterday. Much more true strength can originate in university campuses than in military camps. Humans should no longer pursue enemies, nor turn into each other's enemies. Today's new society seeks to cultivate the best of men and women and to extract the best from each of us. The effort of turning to themselves and to others with the purpose of discovering the positive rather than the negative can but enrich people of all ages, the young in particular. The objective of social democracy is not the pursuit of enemies but rather the eradication of our own historical prejudices, stern-

62 Shimon Peres ming from the ceaseless bloody battles in which our species has been involved over the years. There is no need - and there is certainly no justification - to shed more blood. We stand on the threshold of new opportunities, by means of which we can create instead of conquer. We shall strive to overcome our evil instincts, with the aim of leaving future generations a legacy of outstanding and noble achievements. We cannot afford to stride ahead with an old head in a new world. The world has changed. It is time we followed suit.

7

The Path to Democracy: Latin America in a New Millennium OSCAR ARIAS

Today, as a Latin American, I am proud to say that over the last two decades my region of the world has set forth on a democratic mission without precedent in our history. This should give us all cause for hope. Nevertheless, it is only natural to wonder about the sustainability and quality of our emerging democracies. Although we have regular elections, more than 200 million human beings are living in poverty. Almost 100 million exist in absolute poverty and extreme misery. Virtually excluded from our political system, and condemned to a short and brutish existence, these suffering masses are a constant reminder that Latin America's fundamental dilemmas have yet to be resolved. I attempt here to outline an approach towards alleviating some of the prevailing injustices imbedded within the social fabric of Latin America. The frenetic course of economic growth and globalization - though offering some benefits - is not a rainbow leading all developing countries to a pot of gold. Rather, our nations should try to pursue a middle path between unfettered free markets and the 'almighty' public sector. Let us call this path 'social democracy,' although, in truth, I have never believed that democracy needed to be redefined . Indeed, we may call it what we wish, as long as equality of access to the democratic process and equality of social and economic opportunity pervade our societies, as long as we reach out first to the diseased, the impoverished, and the forgotten in each of our countries.

64 Oscar Arias But where does this process begin? Democratic institutions cannot be strengthened and the poor cannot be empowered unless we first undergo a fundamental change of conscience. Our initial task is to adopt a new ethical perspective for Latin America that is informed by history. Poverty and the Need for Economic Growth

Indeed, how much longer can we ignore our fundamental responsibilities to humanity? We have known for a long time that Latin America has the worst distribution of wealth in the world. Its income gap between rich and poor is by far the widest and most profound on this planet. As Carlos Fuentes pointed out, twenty-four individuals in Mexico possess more wealth than twenty-four million of their fellow citizens. Furthermore, the richest 20 per cent of Brazil's people earn thirty-two times more than the poorest 20 per cent. Latin Americans have reaped a bitter harvest from this historic inequity. Ongoing income disparity has dragged us through a long, violent succession of both populist and authoritarian cycles. And despite the advent of democracy, we have been unable to create a redistributi•e system that even begins to provide equal opportunities. For example, Latin Americans pay the least proportionate amount of taxes - 11.2 per cent of gross national product (GNP) - in the world. This paltry figure, about a fourth of what citizens of industrialized countries pay, presents Latin American governments from constructing solid infrastructures and consequential social programs. Nor have we.taken steps to establish the most basic conditions for human security. Thousands of men, women, and children every year fall casualty to the violent eruptions triggered by inequality and impoverishment. Over centuries, our countries' elites have simply hovered above this permanent state of siege, rather than making the least effort to establish an elemental solidarity with their less fortunate brothers and sisters. A new ethical code for Latin America must seek to construct a cohesive society characterized by a rational and modern form of

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capitalism. Such an economic system faces a two-fold challenge. First, it must achieve a minimum 6 per cent annual growth rate anything less, and poverty will grow and fester. Second, and more important, the system must accomplish these gains without exploiting the humble at every turn, as it has up until now. A 6 per cent annual growth rate for all Latin American countries may have seemed impossible after the devastating Mexican peso crisis of December 1994. Despite sustaining losses in early 1995, however, our region rebounded tenaciously. Annual growth of between 4 per cent and 5 per cent is projected for the next few years for most Latin American countries. Yet these predictions were calculated before the economic crisis in Asia, which had a jarring impact in Latin America. Furthermore, even a growth rate of 4 to 5 per cent would not be sufficient to reduce substantially the poverty that continues to oppress so many in our region. The great disparities in both income and distribution of assets mean that only higher growth rates can diminish poverty. Economic reforms have had little effect on inequality and - owing to only moderate growth - have not been sufficient to curtail poverty. The Primacy of Education

In order to generate the necessary growth, the basic objective in our economic reform agenda must be to improve educational services. Education is the most fundamental way to empower the individual and thus a pillar of any democracy. In the absence of education, a new, ethical system will simply not be possible. In an era when information means power, Latin American suffering will only increase if we maintain a poorly educated population. The single mother's son and the labourer's daughter who abandon their studies prematurely are destined to belong to a growing mass of vulnerable, impoverished individuals in the twenty-first century. It is quite disconcerting, then, to realize that 40 per cent of the adolescents in my own Costa Rica - a nation whose educational heritage is well recognized in Latin America - do not attend high school.

66 Oscar Arias As long as Latin American societies remain unwilling to invest substantially in education, they will continue to face economic underdevelopment and social disintegration. Today, there is a consensus that educational levels determine the economic prosperity of individuals and nations. Likewise, disparity in educational opportunities generates social inequality. Education is indispensable if we are to consolidate Latin America's nascent democracies. Through education we can dispel, once and for all, the false belief that has deceived Latin Americans since the early days of independence - namely, that it is possible to create true republics without first establishing a culture of liberty and freedom. Through education, every Latin American will be able to contribute creatively to the progress of his or her society. Truly, education puts within our reach the power necessary both to dignify human life and to fulfil its grand potential. As Great Britain's Prime Minister Tony Blair has recently declared, 'The three objectives of our society must be: education, education, and education.' We also must not forget to improve health services, which, along with better education, can create medium- and long-term competitiveness and productivity as well as amplifying the poverty-reducing effect of economic growth itself. In public health, where health and educational programs intersect, we should be particularly concerned with the alarming rate of population growth. To avoid destitute multitudes in the next century, Latin America must act now to advocate conscientious family-planning programs. Humanizing Globalization As a further measure of economic reform, Latin America must seek more efficient financial markets. Indexes of financial development in Latin America are far lower than those of East Asian and OECD countries. Intermediation margins (that is, the difference between the interest _rate the banks pay out and the rates they charge borrowers) are high, and bond and equity markets are small, illiquid, and highly concentrated. Unequal access to

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financial markets also distorts growth in much of our region. Moreover, inadequate access to credit for small businesses, rural producers, and the poor prevents economic growth from generating jobs and reducing poverty. We would all like to think that globalization will become the talisman that saves us from this devastating inequality. We would like to hope that the technological revolution and global markets will obligate all countries to invest significantly in education and the well-being of their populations, so that we do not enter the new century with millions of people consigned to sixteenth-century methods of production and subsistence. But, unfortunately, our current reality cools any such optimism. Globalization has only further defined a painful duality within our societies. We are witness to two splintered subcultures: one, the minority, which sees its access to technology, knowledge, and power multiplying exponentially; while the other, the woeful majority, is banished from this fertile land of privilege. Lamentably, development in many countries has now officially become an exclusive banquet for the wealthy. Expecting that the solution to hemispheric social integration will casually emerge from globalization, then, is quite unreasonable. Real effort is necessary. It is time to contemplate the lessons of recent history - lessons in which we can find keys to future policies. What Latin Americans have learned about the interaction of the state and the market in the economy constitutes an important example. Those market supporters who refuse to concede any authority to the state, as well as their counterparts, are being unrealistic. More than half a century of extensive state intervention in much of Latin America has expanded and modernized economies. However, such intervention has also generated protected, inefficient sectors, often corrupt state institutions, and considerable bureaucratic red tape. Rectifying the role of the state in Latin American nations is thus essential. We must act to liberate the private sector from the chains that have long condemned it to impotence. In fact, it is in our best interests that private ventures take over many productive functions formerly presided over by the state. I do not wish

68 Oscar Arias to espouse any particular ideology with these remarks. Today's international economy simply demands levels of efficiency and flexibility in productive sectors that are attainable only within a free-market system. We cannot, however, confuse reform of the state's role with a systematic destruction of its proper functions. As Octavio Paz, the Mexican Nobel laureate for literature, wrote: The market is an efficient mechanism, but, like all mechanisms, it is blind: it creates abundance and misery with the same indifference. Left to its own course, the market threatens the ecological balance of the planet, pollutes the air, poisons the water, makes deserts of forests, and, in the end, harms many living species, among them man himself. Last, and most importantly: the market is not - and cannot be - a model for life. It is not an ethical code but rather only a method of production and consumption. It ignores fraternity, destroys social ties, imposes uniformity of conscience, and has turned art and literature into commerce. There is not, in what I have just said, the least nostalgia for 'state-dolatry.' The state does not create wealth. Many of us ask ourselves, does this situation have a solution? And if it does, what is it? I would be lying if I said I had the answer. No one knows. Our Century closes with an immense and daunting question: What can we do? We can offer our own testimony. Truthfully expressing what we feel and think is already the beginning of an answer.

Certainly, a globalizing market cannot entirely fulfil Latin America's need to redistribute wealth, battle poverty, achieve social integration, and invest in human capital and infrastructure. This sad truth brings us to a truth that should never have been disputed: the functions of the state and the market are complementary, not adversarial. Once we arrive at the optimal relationship between these two dynamic entities - that is, once we finally turn to social democracy's 'middle path' - we will begin to triumph over poverty and inequality. Thus we have noted that a commitment to better education, more efficient financial markets, greater credit access, and a refined state-market mechanism will help us obtain the much-

Latin America in a New Millennium 69 needed higher growth rates to combat poverty. Furthermore, property rights and adequate legal and regulatory systems are crucial for growth because they promote more and better investment, and Latin America needs much more investment to sustain high growth. Overcoming Corruption

All our efforts will be in vain if our governments and legal systems are not strong enough to sustain economic improvement. Indeed, it has been demonstrated that many of our nations lag behind others in terms of the quality of public bureaucracies, the credibility of government, and the reliability of the judiciary. We must act to strengthen these public institutions, or we will not be able to uphold even minimum economic gains - much less achieve maximum growth. A key factor undermining the integrity of the public sector is corruption, which spreads contempt and disenchantment like wildfire among our people. Yet corruption does not consist only in people using political power for unlawful personal gain. Corruption also occurs when democratic leaders fail to fulfil their duty to educate the citizenry - telling people only what they want to hear and not what they need to know. Furthermore, it is corrupt to neglect the diligent preparation, unselfishness, and sincere vocation to serve necessary for political participation. Corruption degrades not only individuals and societies but the entire democratic system. Indeed, Latin America has suffered continuously from the effects of corruption. It is hardly surprising that our political systems are sorely hampered by a lack of credibility. With few exceptions, the political elite of Latin America continues to disregard basic democratic principles and persists in flooding the system with self-interested demagoguery. Truly, public service must go hand in hand with responsibility and morality. Regulating the Arms Trade

Certainly there are no easy answers to Latin America's challenges. Yet I maintain that our primary dilemma lies in the

70 Oscar Arias sphere of values. Before anything else, Latin Americans must strive for democratic, compassionate, and just societies. However, irrational and malicious global practices, such as the international arms trade, continue to impair our democracies by generating still greater social inequality. On 1 August 1997, U.S. President Bill Clinton reversed a decades-old policy banning the sale of high-technology weapons to Latin America. The reversal of this ban - a restriction that, while in place, benefited everyone except arms dealers - is a mistake of historic proportions. This measure will incite conflict - dormant for many years in Latin America - between civilian authority and military power over the allocation of budget expenditures. If purchase of conventional weapons already represents an excessive burden on national budgets, high-technology weapons would demand a much larger sacrifice at the expense of Latin America's people. I have always condemned arms-producing and -exporting countries whose commercial avarice is the primary cause of elevated military expenditures in the developing world. I find it particularly ironic that developed countries justify arms trafficking as a natural response to existing demand, while at the same time they insist that drug trafficking be restricted on the supply side. This rationale can be illustrated by a Colombian or Bolivian arguing that the export of mind-altering drugs to the United States is justified because such production creates jobs in the agricultural, industrial, and commercial sectors of these countries. Furthermore, it could be argued that, if these drugs were not exported from Colombia or Bolivia, they would simply be supplied by other countries. For many, this comparison may seem rather drastic. However, there is no doubt that both types of sales export death and misery. The fact that selling arms is considered legal while selling drugs is not does not make the former morally defensible. The arms trade is one of the largest sources of corruption, to which several scandals - in both developing and developed countries can attest. If we are frightened by the extent of drug trafficking originating from the South and directed to the North, we must also be scandalized by the scope and magnitude of indiscriminate arms sales flowing from the North to the South.

Latin America in a New Millennium 71 This is why we have asked all arms-manufacturing countries to support an International Code of Conduct on Arms Transfers. A committee of seventeen individuals and organizations - all Nobel Peace laureates - has joined me in promoting this initiative. Building on similar proposals that have been debated before the U.S. Congress and the European Union, this code of conduct would demand that any decision to export arms take into account several characteristics pertaining to the country of final destination. The recipient country must endorse democracy, defined in terms of free and fair elections, the rule of law, and civilian control over the military and security forces. Its government must not engage in gross violations of internationally recognized human rights. Moreover, the code would forbid arms sales to any country responsible for armed aggression in violation of international law. Finally, it would require the purchasing country to participate fully in the United Nations Register of Conventional Arms. Our goal is to see this initiative introduced before the UN General Assembly. Conclusion

Latin Americans must together adopt a new ethical framework to confront irresponsible economics, educational disadvantages, apathy, corruption, and the arms trade. Yet this moral paradigm need not be invented from scratch, as its design is implicit in the political, philosophical, and religious tapestry of humankind's history. This ethical stance will incorporate precepts such as Plato's 'Virtue of the State,' Moses' commandment 'Thou shall not kill,' Jesus' teaching to 'Love thy neighbour as thyself,' Gandhi's instruction to 'Never respond with violence,' as well as Mandela and Menchu' s dedication to equality and civil rights. Considering our vast racial, religious, and philosophical diversity, Latin America is certainly well-suited to establish such a cosmic ideology. The Dominican Pedro Henriquez Urena spoke long ago on the historical importance of the challenges facing our people: 'If our region is to be nothing more than an extension of Europe, if the only thing we do is provide more territory for the exploitation of

72 Oscar Arias man by man ... if we do not decide to make this a promised land for all humanity weary of seeking vainly for it elsewhere, then there is no point to our lives.' It is indeed time to establish a promised land in Latin America. To construct a code of democracy, equality, responsibility, and compassion, we must forge the best of our past to the hopes for our future.

8

Social Democracy or Liberalism in the New Millennium? EDWARD BROADBENT

Many people see the modern world as one in which liberalism has triumphed. Putting humanity at the centre of the universe with reason as its guide, liberalism started out as a philosophy 300 years ago in England. A century later it was picked up by the philosophes of the Enlightenment in Paris and relaunched as an ideology. In the nineteenth century, the social and political essence of liberalism - an individual rights-based model of society and the rule of the market-was democratized by the industrial revolution and the workers' movement. After decades of opposing universal suffrage on the grounds that democracy would politicize the distributional struggle of the market-place, following much violence and fearing much more, liberals finally accepted the principle of one man, one vote. The twentieth century is now concluding with what many see as the universal pursuit of liberalism's legacy of a capitalist economy and representative government. Liberalism seems to be central in the agendas of a large number of democratic governments, including some headed by parties traditionally on the left. Why should this be so? Liberalism Is Not Enough

Because of our deep partisan differences, we on the left have tended to ignore liberalism's great contribution to social life. Designed to supplant faith with reason, inefficient mercantilism

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with markets, and corrupt and hierarchical land-based aristocracies with accountable institutions, liberalism's positive influence on humanity has been quite palpable: intellectually creative societies, rapid economic growth, significant scientific discoveries, medical cures in abundance, a revolution in communications technology, and for ordinary people a supply of consumer goods and services that only ascetics can decry. Unquestionably its greatest political contribution has been the amalgam of rightsbased representative government anchored by tolerant civil societies in which pluralism and the rule of law prevail. What about our new or residual problems - consumption as a way of life, class-based inequality, sexism, racism, ecological destruction, unemployment? Contemporary liberals claim that such problems either require more doses of some aspect of liberalism or are irremediable in any form of free society. Social democracy, they contend, has had its day. But why should this be? If liberalism in its various phases and contradictions has been with us for more than 300 years, why should the time of testing for social democracy, its most significant offspring, be reduced to less than half a century? What humanity needs is social democracy on a global scale. I base my argument on the claim that the social democratic movement has unquestionably been the principal democratic alternative to liberalism, that it has provided the guiding ideology to many governments, and that these governments have changed the world for the better. More than any others, social democrats have been responsible for a new concept of democratic citizenship that began to take root in the North Atlantic states during the second half of this century. Unlike Leninism, which, tragically in the name of socialism, led to the fanatical suppression of liberty, social democracy has managed to achieve within many states an approximation of what a feasible socialism can be- the most highly textured mix of liberty and equality the world has ever seen. My comments about social democracy rest on what I see as most characteristic of the philosophy of labour, socialist, and social democratic parties and their leading personalities in gov-

Social Democracy or Liberalism in the New Millennium? 75 ernment whom I have known over the past thirty years. More pertinently, they are based on social democratic practice - an assessment of what these movements and leaders have actually done. Their fundamental concern and basic difference from liberalism have been over equality. Whether articulated in the humanist speeches of Willy Brandt or with the conceptual clarity of Olaf Palme or simply implemented by trade unions or legislatures in Europe, Australia, New Zealand, and Canada, this commitment to equality has played a crucial role in the evolution of democracy in our century, one that transformed the lives of millions of ordinary people. At the turn of the century 'socialist' and 'social democrat' were synonyms. But shortly after the appearance of Bernstein's Evolutionary Socialism in 1898, described by the author himself as 'revisionist,' social democrats increasingly saw themselves and were certainly seen by their liberal and Leninist rivals as those socialists who believed in the non-violent transformation of capitalist society. At first this was understood as simply an important difference in means on the road to socialism. However, contrary to what Marx had forecast fifty years earlier, Bernstein argued, on the basis of empirical data, that capitalism was resulting in improved conditions for millions of people. He was right. After ordinary people won the battles for political and civil rights, they used these new entitlements in the workplace and in civil society to their advantage. They created or supported political parties that would use state power to legislate improvements in work and other social conditions. Liberal democracy may have been bourgeois, but it was not a hoax. The relative class balance began to change. In time, the new emphasis on rights promoted by social democratic movements helped to destroy those forces opposed to extending equality, including many Liberal parties. Many social democrats started to believe that their goal of social equality was compatible with some form of market economy. Social democracy took a decisive turn in this direction after 1945. The rise of strong trade unions and the social cohesion of wartime helped inspire major social reform on both sides of the

76 Edward Broadbent Atlantic, leading to the modern welfare state. The social democratic version of the welfare state was predicated on a set of universal social and economic provisions functioning side by side with markets. Indeed such provisions required the economic growth made possible by a market economy. To ensure that this social benefit would be the result, a capitalist economy required an intervening government. This combination - social rights, market economy, and activist government - laid the foundation for what was neither Marxist nor liberal, but rather a novel, expanded notion of democratic citizenship. Social democrats contended that these new societies could achieve a much higher level of personal freedom and distributive justice than had ever been thought possible. This notion of the need for deeply embedded social rights, alongside the operations of a market economy, is unique to social democracy. Liberals do not agree. For them, the good society is one in which all citizens start out on the basis of formal equality in individual rights. The economy is organized on capitalist principles. While this system entails inequality in assets at birth, for the liberal, equal access to education or post-industrial retraining should make it possible for all individuals to compete more or less on equal grounds; economic rewards are allocated on the principle of greater amounts going to those with greater innate ability or to those who make a more energetic effort or perform a task that the market values. Assuming the existence of laws to stop the formation of cartels and state guarantees to ensure that no one remains in abject poverty, any resulting inequalities, to a liberal, are exactly as they should be. It is equality of opportunity, not substantive equality, that counts. Liberals work for formal equal access to political and civil rights, not more. An egalitarian just society, with universal social and economic rights for all citizens, would be an oxymoron for a liberal. Instead, 'safety-net welfare' - a redistribution towards the destitute as an obligation of government - is the liberal norm for social policy. This is the goal for the large majority of U.S. Democrats, British Conservatives, and European Liberals. Social democrats differ from liberals on precisely this issue. As

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social democrats, we use 'equality' to mean not simply equality before the law, or the equal right to participate in politics, or the equal formal entitlement to have access to employment, or gender and sexual equality, or the equal freedom to purchase goods and services in the market-place. Social democrats believe in all these rights, but more as well. In any society that lacks a significant degree of income equality, we see it as self-evident that the exercise of these rights cannot be equally available to all. In a market economy, where most goods and services are bought and sold, choice requires cash; the less cash, the less choice; the less choice, the less freedom. The rich do have more freedom. Furthermore, the exclusive emphasis on such rights alone is morally inadequate on other grounds. We reject liberalism's market mechanism as the sole criterion for distributing the accumulating wealth of a nation. We maintain that a substantial degree of social equality is an essential characteristic of a good society. And we strongly assert that social equality is different in kind from income equality; the strong presence of social equality can serve to alter considerably the negative effects of income differentials. The Welfare State

As the century closes, we can now see that the great accomplishment of social democracy has been the creation of a particular k_ind of welfare state. It was during the three decades following the war that social entitlements ceased to be marginal in daily life; in both number and diversity they produced a qualitatively different kind of society. During this period, throughout northern and western Europe, Canada, and Australia and New Zealand, a combination of most of the following services came to be seen as rights by the average citizen: health care, shelter, education up to and including university level, basic income during periods of unemployment, and retirement income at a level to ensure a life of dignity. As well, from the mid-1960s to the 1980s a plethora of government programs targeted women, visible minorities, the handi-

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capped, and the poor. Beyond these rights and entitlements there emerged the general expectation, encouraged by governments, that the fruits of cultural, scientific, and economic innovation would be broadly shared by all. In some of the welfare states - in Denmark, Holland, Norway, Sweden, and West Germany - poverty virtually disappeared. In all welfare states, more people had more freedom than ever before in history. In social democratic welfare states, social entitlements were not restricted to the poor as bail-out provisions but were provided as universal rights for all. The postwar shift to the collective goal of social rights was the product of a constellation of powerful social forces. In Britain and western Europe, unions had reached the peak of their power at this time. And the political strength of the newly elected Labour government in Britain, as well as the strong presence of the left in Scandinavia and elsewhere on the continent, illustrated the depth of the desire for change. Returning veterans and ordinary people everywhere wanted no return to the 1930s. They combined to insist that their governments provide for their social needs as well as their political rights. Although the principal leadership for this recasting of life in an industrial society came from the left in the North Atlantic democracies, as in all periods of fundamental political change, other forces were also at play. On the continent there was the presence of 'social market' ideology in Christian Democratic parties. In Britain and the United States, war-time leaders moved in a new direction. Having lived through the Great Depression and both world wars, both Winston Churchill and Franklin Roosevelt had come to believe that laissez-faire capitalism was itself a major cause of social and political conflict. Although Churchill was swept from office at war's end, it was his coalition government that decided in 1942 that social and economic rights were to be put in place not only in postwar Britain but as an integral part of the new world order. In the United States, at least at the highest level, similar thinking was at work. In his last State of the Union address in 1944, Roosevelt called for the United States to adopt an Economic Bill of Rights. 'True

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individual freedom,' he said, 'cannot exist without economic security and independence. Necessitous men are not free men. In the pursuit of happiness, political rights are no longer sufficient.' Economic rights, guaranteed by the state, were also needed. Although Roosevelt failed to get Congress to accept economic or any other social rights, the United States did go on to create its own version of a liberal 'safety-net' welfare state. In this American model, apart from its strong universal pension program, most social measures are of the 'safety-net' type. Supplementation for individual 'failure' in the market-place, not social rights, provides the essential rationale. This and the pervasive anti-statist ideology of the United States make it a liberal, not a social democratic, nation. In Canada, within a two-year period at war's end, the Cooperative Commonwealth Federation (CCF) almost won an election in the industrial province of Ontario, led in a national public opinion poll for the first time, and formed North America's first socialist government in Saskatchewan. Liberal Prime Minister William Lyon Mackenzie King, ever sensitive to what was needed to maintain power, immediately produced a federal policy program that led to establishment of many universal social programs. Before the creation of the welfare state, the progressive enhancement of human experience had been virtually the privilege of only the richest classes in society. Distributional intervention by the state in the economy was now ensuring this possibility for everyone. Such intervention was also designed to produce full employment. It was thus anticipated that citizenship in the modern world would entail much higher levels of both security and social justice. Citizens in turn would help build and sustain tolerant democratic societies. Once ensured universal entitlement of the opportunity of work, access to health services, and an adequate pension, they would more probably become supporters of political and civil rights for others at home and be more generous in their views of those who lived in distant lands. This is precisely what happened. During the heyday of the

80 Edward Broadbent welfare state, affirmative action programs for women and visible minorities obtained the support of, or at least did not generate significant opposition from, male industrial workers, who thought that they finally had governments which took seriously the task of ensuring an acceptable level of social justice. They also supported foreign aid programs abroad. For millions, it was the Golden Age. Markets: Harnessed and Subverted

To social democrats, the prospect of ever-increasing social equality necessarily involves a complex set of relationships that serve to both harness and subvert the power of the market. They see the processes of democracy as the most effective means of ensuring that men and women do not become enslaved to the severe inequality and commercialization of life that results from unfettered markets. They also see the market mechanism as the best means of ensuring the production, distribution, and sale of most goods and services. However, social democrats argue that certain goods, services, and activities are so important to all citizens that they should be removed entirely from market criteria. This is a decision made in a political process. Because the state depends on the innovation and productive efficiency of the market to ensure social goods at a level beyond scarcity, social democrats sanction private ownership, competition, and differences in income. Thus they accept many of the inequalities that come from a class-divided capitalist economy. However, progressive taxation and the strong presence of social rights that ensure major elements of equality for all citizens in the essentials of personal and family life can considerably reduce the negative effects of market-based inequalities. Put in terms appropriate to our age, as long as ordinary citizens can send their children to good public schools, have free comprehensive health services, benefit from income and retraining programs when they are unemployed, buy a television set, have an annual paid vacation with access to healthy air and clean beaches, and retire with dignity, most will regard neither with

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envy nor contempt the way of life of the jet set. They will simply be indifferent. It is this balance between market principles and non-market values - whose specific content varies over time that has made possible the sense of freedom and social equality experienced by millions of ordinary people. Free from the time demands and anxiety otherwise needed to make personal market decisions about health, pensions, and other social rights, they are literally freer to choose how to spend their time: listening to Bach, playing baseball, or drinking beer and talking with friends on a sunny afternoon. In terms of social philosophy, in such circumstances it becomes morally quite tenable for the ordinary worker to accept a fundamental assumption of the market economy - i.e., that unequal talents and efforts could result in unequal rewards. Even inequality in assets at the beginning of people's lives could be acceptable if the same society provided a wide range of social and economic rights that otherwise might never be achievable. Unlike the appeal of communism, which remained a conceivable but unrealized ideal in the 1930s, the well-functioning welfare state after the war offered an imperfect but moral and reasonable alternative. It was no wonder that the 'extremes' of both left and right so characteristic and destructive during the Depression withered away during this period in the North Atlantic democracies. All the dominant parties had come to accept the legitimacy of an activist and equalizing state. The social democratic welfare state rests fundamentally on the concept of social equality being, as it were, built into the notion of citizenship in an industrial or post-industrial age. Pre-welfare state democracies set out political and civil rights in law as entitlements for all citizens. The state had an obligation to provide the conditions necessary for each citizen to exercise these rights. Among other requirements, this meant providing laws, bills of rights, courts, and police forces to protect citizens from each other and from the state itself. All citizens had these rights, and the democratic state was obligated to enforce them. Citizens in turn had obligations - notably, to respect the laws. In welfare states established on social democratic principles,

82 Edward Broadbent social and economic rights exist on the same universal basis as political and civil rights. Equal citizenship entitles everyone to such rights, and the state is required to enforce these rights as universal provisions. The failure to do so is to deny equality of citizenship. The difference between the two categories of rights - between social/ economic and political/ civil - lies not in the principle of universality, which applies to both. The difference is that a social right, whether in the form of individual payments (pensions) or a social good (health services), requires the allocation of significant economic resources by the state, for the purpose of providing a benefit financed by the community as a whole. The level of benefit is dependent on the stage of economic development of a given nation and on the competing claims of the state's other financial obligations and on the political will or ideology of the government. When health care is established as a social right, its value at delivery depends not on a citizen's economic capacity to purchase but on the amount of resources a democratic state decides to allocate for medical purposes. At whatever level it is provided, in other words, a rich lawyer, for example, should have no better treatment than a bank clerk. Similarly, in education, all should benefit equally from high-quality, publicly funded schools. Currently, in Canada, France, Germany, and Sweden, a majority of the rich send their children to the same public schools and use essentially the same medical services as other citizens, because the quality is maintained at a high level. That this is not the case in Britain reflects successive governments' failure to provide education and health opportunities at a high common level - i.e., as equal social rights. It is no accident that the sense of class inequality continues to be felt more deeply in Britain than in any other modern democracy. Deeply imbedded unequal, two-tier access to the most crucial social services education and health - makes this virtually inevitable. Successful, functioning welfare states are a product of a positive and complex mix of ideology, political leadership, and institutional practice. Should a social democratic state modify or eliminate a significant number of universal social programs it

Social Democracy or Liberalism in the New Millennium? 83 would, of course, at some point cease to be social democratic. Just as the United States today can be seen as a liberal welfare state that never aspired to social democratic status, so too could the Scandinavian and other European countries revert to a presocial democratic character. Similarly, Canadians, who first came to describe themselves, as 'sharing and caring' people only after years of strong universal social programs (health, pensions, unemployment insurance), could soon lose both the practice and the self-description. Current federal and provincial policies are undermining strong universal programs in health and education. The more these foundational institutions are changed, the less Canadians will see themselves as sharing and caring. And the less they see themselves this way, the more they will support policies that undermine the institutional foundation of social programs. It is only by exercising their political rights that democratic citizens can challenge the undermining of their social rights. In seeking redress of either a political or a civil right, citizens naturally turn to the courts. In the case of social rights, redress itself requires a political act. Apart from the failure to implement a regulation, which may permit judicial review, disputes about the level of benefit of a social right, like its establishment in the first place, are a political issue. Values, leaders, and ideology count. Social rights are established by citizens acting as equals in the political process. They can be taken away in the same process. Different Visions, Different Realities

The social democratic welfare state should be seen for what it is: a principled, functioning, real-society alternative to liberal democratic, America-style capitalism. The liberal sees an individual's life as unfolding in a society that stands in an antagonistic relationship to the state and in which all citizens are essentially in competition with one another. The liberal then designs all institutions to make sure that they mesh with such a divisive goal. The social democrat makes different assumptions, beginning with the rejection of the competitive individualist model.

84 Edward Broadbent This rejection is not based on a utopian counter-vision, which sees humans as unalienated, creative, and altruistic beings. Instead, it rests on a view of humanity that is much closer to reality than the caricature promoted by liberal individualism. Social democratic individualism incorporates cooperation. It is an individualism derived from a vision of human beings as inescapably social creatures, with both personal and shared goals. For the social democrat, there are two important, universally observable qualities of human beings that should receive equal weight in assessments of potential economic and political structures - our disposition to pursue individual and personal gain and our disposition to act cooperatively in implementing shared objectives with others. Any polity that does not take into account these two basic human characteristics at best does a disservice to its citizens. It may do much worse. The social democrat sees in his or her version of the welfare state, which marries a market-driven economy to a regime of social rights, the answer to this century's most famous political question: what is to be done? Unlike the liberal, classical or neo-, the social democrat sees the human capacity to cooperate as a practical and moral foundation for universally based social objectives radically dissociated from market criteria. Unlike Marxists, old or new, the social democrat does acknowledge as productively useful our permanent disposition to seek our own benefit. A form of capitalism based on social rights is not therefore either a compromise of liberal-democratic principles or some half-way step to a Marxist utopia. It is instead the best kind of society that can be constructed, given these two differing aspects of our nature. It provides for a broad range of individual and collective rights and for the opportunity for personal and community good. However, since the social democrat's deep commitment to political democracy entails the acceptance of pluralism, there is political space for those on the left or the right to broaden or narrow the degree of equality within society: to eliminate or maintain poverty, to recognize or withhold collective cultural identity rights for minorities, to respect or not divergence in sexual orientation, or to make bureaucracies more or less responsive to citizens.

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Within the collective matrix of the democratic state, social democrats will probably be located among those supporting the first option in these pairs of choices at any given time - all of which would expand human liberty for more people beyond the parameters set either by market forces or by tradition. However, competing political priorities and the resurgence of liberal political agendas can result in different decisions. Bad or mistaken leadership can also do so. The Neoliberal Challenge The marriage that is the welfare state brings together the two human dispositions of cooperation (equal universal social programs) and self-interest (unequal wage and salary incomes based on market performance). Like all marriages it is precarious. Balance is required. If self-interest is replaced by selfishness or if altruism is expected to prevail over cooperation, the welfare state runs into trouble. While the welfare state does contain major elements of altruism - for example, in affirmative action programs and special entitlements for the poor - altruism is not its psychological driving force. In the intimate or loving relationships of the family whether of the traditional or post-traditional type - men and women are quite capable of high levels of unreciprocated generosity on a long-term basis. In part, that's what love is all about. However, democratic citizenship is another matter. It is not intimate. In the well-functioning welfare state neither selfishness nor altruism prevails. Taxes in the welfare state needed for universal social services obtain widespread support precisely because the services themselves are provided to everyone. I willingly pay today because I or my children will be beneficiaries tomorrow. I am even willing to pay more than 'my share' - for example, for targeted funding - on the condition that others do their share of work and the overall level of social programs continues to meet my needs. There is, however, an aspect of the welfare state that is directly related to the potential for selfish or greedy behaviour: the market. The market allows for the normal disposition of most peo-

86 Edward Broadbent ple to work on a regular basis in terms of self-interest. This is not to say that they are selfish, nor a fortiori are they driven by economic greed. However, some are driven by selfishness. And the market, sanctioned by the welfare state, provides legal leeway to this minority. When left to its own devices or when influenced by the state, self-interest may convert itself into selfishness because of the Hobbesian competitive pressures of the market. The ideology of the state can help tip the balance. In the last quarter of the twentieth century, Margaret Thatcher and Ronald Reagan did make a difference. While earlier pragmatic conservatives had supported the left in establishing the welfare state, these two radicals led an all-out attack on its ideological foundations. They attacked social rights as an unjustified burden on individual self-realization. Thatcher once claimed that only individuals are natural, that society is merely an artificial construct. She thereby justified her slashing of state provisions as 'liberating' citizens from all inessential obligations imposed by the state. According to this version of self-fulfilment, the pursuit of self-interest alone can be virtuous. Self-interest thus becomes selfishness. Neoliberalism in the real world of politics is born. Citizenship, far from being a comprehensive idea entailing the use of the state for many public purposes (including the establishment of social rights), thus becomes quite narrow in its scope. In fact, for many neoliberals 'politics' is outside the ideal of the good life. Such a life is to be experienced predominantly in the private realms of family, work, and neighbourhood. Reagan often expressed such general views, particularly when social policy was in question. He asserted that state spending on social programs, apart from minimal support for the absolutely destitute, really constitutes a misplaced sense of charity, which should remain a private virtue, not a public obligation. It was time, he argued, to stop advocating such spending of other people's money. In this thinking, one's public obligations become so minimal that private and public roles become almost identical. Just as totalitarianism eradicates the personal in favour of the collective, so neoliberalism eliminates the political pursuit of the public good in its triumphant promotion of the private self. Citi-

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zenship as a social enterprise disappears. And so, too, does social democracy's more specific concept of citizenship combining political, civil, social, and economic rights and obligations. The agenda of radical conservatives in the Anglo-American world in the 1980s was not simply a 'necessary' but temporary program for coping with sudden increases in oil prices, demographic changes affecting the cost of social programs, and lower rates of economic growth - all of which created fiscal pressures in the 1970s. Such serious practical matters had to be addressed. However, neoliberals used the existence of such real problems as a launching pad to remake history. To do so, they brought into play both long-run ideological ambition and short-run objectives. In terms of government policies, their intention was for the state to reduce its commitments in principle, not merely address short-run necessities. Their goal was to shift financial resources to richer individuals in the private sector and to effect a broadly based attitudinal change in the population as a whole, so that those citizens who had begun to internalize the cooperative values essential to social citizenship would cease doing so. Program reductions, privatization, and deregulation were the practical details of a comprehensive ideological assault - with known consequences. Inevitably, such acts widened the gap in monetary income between individuals and reduced the impact of non-monetary income in stimulating non-market based choices and values. Some assaults were quite direct - for example, those against unions. Changing laws that had allowed relatively unchecked power to union leaders was desirable; completely breaking the power of unions was not. Neoliberals wanted not only to deal with certain 'rigidities' in the labour market; they wanted to do so in a way that would transform the power relations between labour and capital. Thus, while the Dutch and other continental social democrats showed how labour 'flexibility' could be made possible without reductions in either social programs or workers' rights, British Conservatives adopted legislation that left workers with the weakest legal protection in western Europe. For his part, Ronald Reagan began his presidency with the dis-

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missal of hundreds of striking workers in the airline industry, and his attacks on members of organized labour as 'special interests' never let up. These Anglo-American leaders attacked the notion of collective and cooperative social activity on every conceivable occasion. After all, if democratic electorates could be persuaded of the desirability of private wnsumption as the goal of the good life, then the possibility of a future return to a program agenda of an activist state, even one controlled by a party traditionally on the left, could be made less likely. The neoliberal attack has not been restricted to domestic politics. Gathering in London in June 1983 at a meeting hosted by Prime Minister Thatcher, heads of conservative parties (many in government) from western Europe, Australia, Canada, Japan, New Zealand, and the United States created the International Democratic Union. The stipulated goal of this new international grouping has been to foster the global spread of the neoliberal version of democracy: entrepreneurial capitalism, limited government, and the ideal of 'personal' freedom - not economic and social rights. The unwritten but frequently talked about objective is to challenge the global expansion of the Socialist International so successfully initiated by Willy Brandt in the 1970s. Though still smaller than the Socialist International, the International Democratic Union has had considerable success. Significantly, it has replaced the old Christian Democratic International (which does endorse social and economic rights) as the leading global body of conservative parties. It currently boasts a membership of seventy governing and opposition parties in fifty-six countries. Neoliberal international trade agreements devoid of any social policy components - for example, free from any burden of conditionality or labour or other human rights - have also become the order of the day. Symbolic of this new global order is the World Trade Organization, notable for its rigl':>rous adherence to the principles of laissez-faire capitalism and the flouting of the commitments made by its signators to their obligations under United Nations human rights covenants. Even democratic

Social Democracy or Liberalism in the New Millennium? 89 capitalist countries with a distinctly different cultural heritage like that of Japan and other Asian democracies have been under unrelenting pressure from the North Atlantic democracies, notably the United States and the United Kingdom under the Conservatives, to abandon their distinctive state interventionist policies. Such policies had included keeping income spreads narrow and employment levels high. The Future

As the new millennium approaches, Bernstein's optimism at the close of the last century about the prospects for the democratic transformation of capitalism into egalitarian societies seems misplaced. Those North Atlantic democracies with the weakest social democratic and social rights - the United States, Canada, and the United Kingdom - have been moving backward. They have been experiencing the reduction or freezing of social entitlements, new reliance on market mechanisms for government programs, and an increase in the commercialization of life's activities. This has recently been accompanied by the ideological substitution of language promoting undefined 'social cohesion' in place of older postwar commitments to greater equality. Along with Australia and New Zealand, where neoliberal ideology has also been influential, this reduction of the state's social responsibilities, complemented by the perceived threat of the globalization of capital flows, has produced escalating inequality and an intensified sense of vulnerability in much of the population. Perversely, these populations are still being encouraged to intensify their commitment to the very policies that have produced such results. In continental Europe, in contrast, where social democracy has been strongest both ideologically and in practice, the determination by both governments and their electors to maintain the egalitarian essence of social citizenship, while adapting to new circumstances, seems durable. So, what is to be done? For social democrats there can be no simple-minded return to what was working in the 1960s. We

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must address the problems of social and economic life that began to emerge during the period of the welfare state's Golden Age (1945-80): the lower rates of economic growth, greater proportional costs of health and pension programs, post-industrial patterns of work, and the globalization of capital. New approaches must take into account the radical change in the nature of families, the expanding role of women in the economy, and the reduced need for unskilled blue-collar workers. The negative effects of large public and private bureaucracies must also be countered. Clearly these matters require initiatives to expand democratic participation at the local level, in communities, and in places of work, both to give people a greater sense of participation and to develop in them feelings of obligation to their society. Neither the importance nor the political complexity of these challenges should be underestimated. However, in my view, these steps will be quite inadequate on their own. Both the ideology and the reality of equality count. The great contribution by social democrats has been their commitment to social equality. Other important political values political and civil rights, transparency, accountability - they share with other democratic politicians. Equality, however, is theirs alone. It is their raison d'etre. It is true that in the early years, having experienced Nazism and the Great Depression, they were joined by others such as Churchill, Roosevelt, and certain key Christian Democrats, who also saw the need for universal social and economic rights. Now, however, conservative parties in this post-Cold War era have virtually abandoned their social heritage. Neoliberalism has triumphed. The political battle lines are now more clearly drawn. The challenge of preserving social citizenship in the modern world rests with social democrats. We humans have inflicted unspeakable horrors on each other in this century. We have also created many masterpieces in music, painting, literature, and the cinema. We need a political structure that reflects our desire for personal happiness as well as for the public good and institutions that also minimize the prospects of evil having its way. The imperfect social democratic

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welfare state is such a structure. It is for this reason that we must not be misled into thinking that the time of social rights has passed, that somehow they have become an obstacle or irrelevant to the 'economic' requirements of the coming century. For neoliberals to say so is as historically absurd and morally offensive as it was for Leninists to have claimed earlier in this century that political and civil rights were a bourgeois encumbrance. Human dignity requires for its flourishing both sets of rights and their related sets of obligations. In order for us to continue the struggle against the world's radical conservatives (neoliberals), we must realize how significant - and precarious - the social democratic legacy has been. To abandon its core value of equality now would be to sacrifice its major contribution to the idea of democracy in the twentieth century. As I write, the fiftieth anniversary of the Universal Declaration of Human Rights is being celebrated. That remarkable postwar document includes the much older political and civil rights as well as the new social and economic rights. Despite their three hundred years, political and civil rights are still under attack, as seen in the continuing persecution and discrimination related to religious, ethnic, racial, and sexual-orientation differences. Though vigilance on these rights is obviously essential, it is more than fortunate that the principle of political and civil rights has become deeply embedded in the North Atlantic states. Citizens' rights involving the freedoms of religion, speech, assembly, association, voting, and due process are defended quite vigorously by the establishment media as well as by academics and an active human rights community. However, this has not been the case with threats, abuses, or even clear violations of social and economic rights. In fact, some of those who most strongly defend the political and civil rights of liberal democracy have emerged as the leading enemies of social and economic rights. The same Western intellectuals who denounce the appearance of ethnic cleansing or censorship either condone or openly foster the dismantling of citizens' social rights. They appropriately insist that the democratic state, through its courts and parliaments, must protect the

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right of an author to publish or a child with AIDS to go to a public school. But they readily acquiesce or even celebrate when the same democratic state dismantles a pension scheme, curtails a health benefit, or ignores the claim of workers to a union at home or abroad - all of which are internationally recognized human rights. These rights are as central to human dignity as political and civil rights. While neoliberals may revert to preSecond World War standards of citizenship and remain ideologically consistent, social democrats cannot. We must not allow the more avaricious aspects of current North Atlantic capitalism at home and abroad to wipe out the great postwar social reforms of this century. Policies that promote the removal of all 'shackles' to the global movement of capital, now as in the nineteenth century, reveal the self-serving ideology of the dominant classes. Trade policies that protect the mobility and property rights of corporations but ignore the human rights of millions of workers are not neutral. They tip the balance in favour of the few over the many. The elites that advocate such policies need reminding that earlier in this century laissez-faire capitalism denied real freedoms to millions, exacerbated class conflicts, and helped destroy some democracies while seriously destabilizing them all. In addition to the fundamental need to keep our social rights as citizens, other serious concerns about an unregulated market have also emerged in our time. If we are to preserve the environment on a sustainable basis, achieve gender equality, take into account the legitimate claims to identity of certain minorities within existing democratic states, and foster the development of cultural options beyond commodification, we require an activist democratic state. Only the mendacious or those ignorant of recent history can continue to argue that a neoliberal version of capitalism on a global scale for the new millennium would avoid either the serious social instability or the commercialized inequality that were its legacy for the nation-state in the first half of the twentieth century. As the century closes, a large majority of the governments

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in the North Atlantic world are once again made up of parties traditionally on the left that are supported by electorates that have valued social and economic rights. They must use this moment in history wisely. Most recent studies make it quite clear that globalization, greater longevity, slower growth, and postindustrialism need not inhibit the building of democratic societies in which citizenship based on social equality is the norm. While the nation-state must devolve certain responsibilities both downward to civil society and outward to new global institutions in order to make corporations and investors accountable, for the foreseeable future the state itself must remain the key instrument of democratic power for ordinary people. Values make a difference in politics. With a continuing commitment by political leaders to the egalitarian essence of social democracy, there is hope that the idea of social citizenship can emerge victorious. To live without illusion, and still to have hope - not such a bad beginning for the new century.

9

Social Democracy in New Zealand DAVID LANGE

New Zealand did not respond to economic crisis in the early 1980s with the small-scale adjustments that had characterized its recent history. The Labour government (1984-90) transformed the country's economic and social institutions. Its instinct to modernize led it to adopt the economic rationalism of the political right. Labour in New Zealand went further than any other social democratic party in its commitment to the principles of market liberalism. Its efforts led to its overwhelming rejection by the electorate, and its experience offers any number of stark lessons about the limits of reform. The Distinctive Qualities of New Zealand's Social Democracy

The Labour party in New Zealand was the creation of the trade union movement. At the beginning of the century the labour movement sought expression through industrial militancy but, unable to make any impression on the existing economic order, later sought representation in Parliament in order to modify economic and social institutions in favour of working-class interests. The New Zealand Labour party was founded in 1916. Labour had the great good fortune to secure a parliamentary majority for the first time in 1935, when the economy had begun its recovery from the worst of the Great Depression. Its leaders were greatly influenced by Keynesian economics, which offered social democrats an approach to the manage-

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ment of a capitalist economy that was both coherent and appealing. The government built a framework of economic regulation and laid the foundations of a comprehensive scheme of welfare provision. The distinguishing feature of its approach to economic regulation was the raising of protective barriers against the import of manufactured goods. The wealth created by primary producers, who sold their produce mostly in the British market, was distributed through the economy by a system of wage-fixing and income redistribution based on progressive taxation. Labour's achievement lasted long after its eventual defeat in 1949. The country was prosperous, and there was broad acceptance of the economic and social institutions which appeared to guarantee that prosperity. Some distinctive characteristics of New Zealand's social democracy must be noted here. The dominant culture is one that expresses its egalitarian values in terms of the rights of the individual, and its collective efforts have generally been aimed at enhancing the opportunities available to individuals. There being little tradition of cooperation, governments generally preferred to secure desirable outcomes through regulation, rather than by incorporating representatives of interest groups in the decision-making process. The position of trade unions was protected by compulsory union membership, which tended to encourage complacency in union leadership while doing little to entrench the institution. Labour's social democratic achievement, in other words, was a scheme that was inherently liable to alter when individual perceptions of benefit began to shift. This type scheme was questioned, in New Zealand as elsewhere, in the 1970s, when it faltered in its hitherto-unquestioned ability to produce high (in New Zealand's case, literally, full) employment, low inflation, and enough economic growth to allow for generous welfare provision. The pattern of economic regulation suited a wealthy economy with an assured market for its products; but from the 1960s, when New Zealand lost its unqualified access to the British market, its terms of trade declined and its economic performance lost ground in comparison to that of other developed countries. The country was slow

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to respond to its difficulties, and adjustment was for long postponed, or even actively resisted. The Turn to Economic Rationalism It seemed to me, when Labour took office in 1984 in the midst

of a currency crisis, that the reform of the country's economic and social institutions was both necessary and inevitable. The failures of the old scheme were sadly evident. Yet in framing our response, few of us leading figures of the new government were in any way attracted to the reconstruction of the social democratic scheme. Instead our instinct led us to look for a solution in economic rationalism. Some part of the explanation for this response lies in a simple electoral calculation. Labour's record as the builder of the fortress economy and founder of the welfare state had not paid it significant electoral dividends. After losing the general election in 1949, it won only two three-year tenures, at the end of the 1950s and the beginning of the 1970s. Its conservative opponents, the National party, were the beneficiaries of the consensus that marked the postwar period. It was the National government (1975-84) that indeed was strongest in its resistance to any reconstruction of the country's economic and social institutions, long after the need for change became obvious. In an adversarial system of politics, and one in which our opponents were standing on a platform of our own making, there seemed little electoral advantage to be gained by improving a scheme whose maintenance had disadvantaged us and benefited our opponents. Something must be said about this National government. It was led by Robert Muldoon, a populist politician of some belligerence. His domineering personality found its ideal expression in the practice of interventionist economic management. He combined the offices of prime minister and minister of finance, and in a small ·country with a form of government containing few of the checks and balances of larger, more complex societies, he exercised remarkable power. He used it to pursue an increasingly idiosyncratic economic policy, in which a raft of regulation

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floated on a sea of borrowed money. He did more to discredit interventionist forms of economic management among his political opponents than did the inflation and rising unemployment of the period. Muldoon's brute populism, and his willingness to pull economic levers for his party's electoral advantage, certainly reflected, if it did not immediately cause, significant shifts in voting behaviour. Many blue-collar workers were attracted for the first time to National. Middle-income earners, appalled by Muldoon's assaults on, or indifference to, liberal causes, were equally attracted to Labour. Trade-union influence had long since waned in the Labour party. While unions still gave considerable financial support, and many were formally affiliated, their role in the selection of candidates and in policy-making had diminished. Of the Labour cabinet in 1984, only one member had long trade-union experience, and that was in a white-collar public-sector union. There were no strong personal relationships between leaders of the parliamentary party and those of the union movement at the national level. Parliamentary Labour was dominated by representatives of middle-income earners and the professions, and although both the minister of finance, Roger Douglas (once an accountant), and I (once a lawyer) came from families that could trace their association with the party to its earliest days, some of our cabinet colleagues were comparatively new to it. Thus Labour came to office with little predisposition to defend the institutions that its predecessors had created and indeed considerable impatience with them. The public sector was inefficient, its organizations were charged with conflicting objectives, and many of its commercial operations seemed to give only a passing nod to sound business practice. One example illustrates the point. The post office delivered the country's mail, ran its telephone service, and had a large banking operation. It was one of the largest employers, and some part of its inefficiency could be attributed to its role in labour market policy. Its work practices reflected its role in job creation. It was an organization compromised from its beginning in its

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objectives and its planning by unwise or excessive political interference. In the year before Labour took office, when it was often difficult to make a call between our two largest cities, and the telephone service in the heart of our largest commercial centre frequently collapsed because of overloading, the post office's resources were consumed by the construction of a state-of-theart exchange, and associated works, promised by the prime minister to the electors of a small rural district. Its planning was deficient, and information about its operations difficult, if not impossible, for ministers to obtain. The response to these difficulties came more obviously from the right rather than from the left of politics. There was little intellectual vigour on the left. The institutions of social democratic economic management had been widely discredited by their abuse under the National government. The beneficiaries of decades of protection had perhaps grown complacent. They were certainly ill-prepared to mount a coherent defence. Something of the left's difficulties can be illustrated by the unfortunate history of the royal commission into social policy. Before reaching office in 1984, Labour had promised to hold an inquiry into public welfare provision. It soon became clear that the social services as a whole were a point of potential division in the government, and the subject of the inquiry was widened so that it could examine the whole basis of the public provision of social services. The commission was asked in effect to provide an intellectual counterweight to the arguments of the right, which, having swept all before it in economic management, was now threatening to commercialize social services. The inquiry proved a dismal failure, its report a considerable setback to the left. Its membership was eminent, and it consulted widely, but it seemed unable to come to grips with the intellectual challenge, offering little more than assertion when analysis was needed. The intellectual impetus came from the right. The new government's principal economic advisers, the officers of the Treasury, were seized with the values of economic rationalism. Perhaps encouraged by the neglect of its advice when Muldoon held the finance portfolio, Treasury had abandoned its long-held

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commitment to Keynesianism and absorbed the lessons of the neoliberal Chicago school. Economic rationalism offered both analysis of and prescription for the country's economic difficulties and, in contrast with the complexities of the old social democratic scheme, simplicity. It was intellectually appealing. I do not underestimate the personal factor in the political mix. The Labour party, as always in its history, was factionalized. One faction could, not unfairly, be characterized as inheritor of the social democrats. It was led, when I went into Parliament in 1976, by a survivor of the one-term Labour government of the early 1970s, which had an unhappy record. Elected with a substantial majority, it ran up against a balance-of-payments crisis. Its reward for its stewardship was massive rejection by the electorate. The opposing faction in the caucus took the lesson from this disaster that there was little to be gained in persisting in the party's traditional remedies. A struggle for control served only to deepen these differences. They were unresolved at the time of the general election in 1984: the party's economic policy, as set out in its manifesto, was so broadly written as to allow for almost any prescription. The election marked a comprehensive victory for the party's right, and Labour embarked in a new direction. In retrospect, the seeds of Labour's difficulties can be seen at it~ very start. Its manifesto, and all that I said and did as the country's new prime minister, were meant to convey to the public that, whatever our means, our ends were recognizably Labour. We sought a dynamic economy because we wanted full employment, just as we hoped to reinvent our social institutions in the interests of equality of opportunity. We were thus doubly vulnerable: we had continued to assert the values of social democracy while rejecting its methods, while we were as much exposed as our party had been in the past to the political risks of poor economic performance. Labour's achievement in government was little short of revolutionary. It carried out a comprehensive program of deregulation and regulatory reform. The country's high protective barriers had been built on import licensing, tariffs, export incen-

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tives, and agricultural support. Farm subsidies were the first to be reduced. In industry, we progressively reduced tariffs, ended most import licensing, phased out export incentives. We abolished price controls. We sought to introduce more flexibility into the labour market. The government did not significantly deregulate the private-sector labour market, preferring instead to create a legislative framework that permitted a greater variety of settlements by agreement between employers and unions, but it largely deregulated the public sector-labour market. Deregulation and regulatory reform also took place in specific economic sectors. In the financial sector, we abolished controls on interest rates and on exchange rates, floated the exchange rate, and abolished ratio requirements and credit guidelines. Non-banking financial institutions received easier access to banking licences. The transport and communications sectors were reregulated so as to allow easier entry for qualifying participants. Labour's reform of the public sector was close to a textbook scheme of the public choice school of economic analysis, in which politicians and officials are assumed to act in their own self-interest and the value of collective action through the medium of government is accordingly discounted. The actions of government were to be transparent, so that cross-subsidization could be avoided. Activity in the public sector was to be contestable, on the grounds that government monopolies were harmful to the common good. In this view, performance in the public sector was also at risk from 'capture' of public provision by interest groups. Another influence was the theory of agency problems that was beginning to reshape activity in companies. Just as the directors of a company try to make sure that its managers are acting in the interests of shareholders, ministers should ensure that public servants act in accordance with the views of elected representatives. The result was a system that clearly spelled out exactly what ministers wanted of their departments, providing for the monitoring of performance and for sanctions when it did not meet objectives. The systems designed to meet these requirements

102 David Lange owed a great deal to economic theories of contracting, so that 'principal-agent relationships' and 'contracts' became comon currency in the public sector. The state's major departmental commercial activities were transformed into state-owned enterprises, with their operations distanced from ministerial control on the grounds that accountability as well as efficiency would increase if the functions of managers were separated from the political responsibility of ministers. Many of these enterprises were privatized in Labour's second term in office. These and other measures designed to open the economy to market competition and reduce the directive role of government in the economy were, in social terms, extremely disruptive, given the substantial welfare element in the economy's protective structures. During the 1950s and 1960s the labour force had been fully employed, or there were labour shortages. Unemployment rose rapidly in the 1980s, to 4 per cent of the labour force in 1986 and 10.7 per cent in 1992, when the OECD rate was 7.5 per cent. To compensate its traditional supporters among the urban working class for the loss or potential loss of employment, or deterioration in conditions of employment, Labour spent more on social services. The proportion of government spending (which as a whole rose) on health, education, welfare, and other social services grew from 52.8 per cent in 1983/4 to 68.8 per cent in 1988/9, while spending on agriculture, industry, energy, transport, and communications fell by half. As a matter of policy, the government carried out its program of deregulation and regulatory reform quickly, so that beneficiaries of the old regulatory regime had little opportunity to resist the process. Despite the social dislocation, the government maintained a high level of popular approval in its first term in office (1984-7). There was some acceptance of the difficulties involved in what was widely believed to be a transitional phase. Deregulation set off a speculative boom that lasted until the stock-market collapse of 1987 and almost certainly contributed to Labour's success in that year's general election. Labour increased its parliamentary majority, winning considerable new

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support among middle-income voters while largely maintaining its voting base among lower-income earners. Division and Defeat

The government's difficulties began well before the general election of 1987. Traditionalists in the ranks of the extra-parliamentary party were loud in their condemnation of economic policy, but there was a wide gulf in attitude between them and most of the cabinet, and their dissension was manageable. Then early in 1987 I received a remarkable proposal from Roger Douglas, the minister of finance. He asked me to agree to his preparing in secret the implementation of a new scheme of economic management based on a flat rate of income tax, privatization of the public sector's commercial assets, and privatization or commercialization of its social services. It was the rationalist view of the public sector taken to its logical end, and it caused me great difficulty. It had an ideological bent that seemed out of place in a finance minister. It was far beyond the tolerance of the electorate, which was unlikely to support the large-scale privatization of public-sector assets and whose willingness to accept further radical change was, I believed, greatly limited. Critically, a reduction in the government's taxation revenue implied the erosion of its provision of social services, yet Labour could not justify its economic restructuring in identifiably Labour terms were there not some means of reaching its traditional goal of equality of opportunity. From this time on there was a diminution of confidence between the finance minister and me. I saw great merit in the case for pausing to review what had already been done and to assess the effectiveness of our economic management. Our underlying assumption, which held that the economy would be self-stabilizing if the government balanced its budget and controlled inflation, seemed deficient in the light of boom, recession, and unemployment. It was especially important for Labour to entrench provision for the social services, so that the economically and socially disadvantaged did not have to rely on the

104 David Lange receipt of financial benefits, with which, the minister argued, they might purchase health, education, and other services from commercial providers. Financial benefits, however generous their initial provision, were only too easily eroded or reduced by a less sympathetic government. The minister did not share these reservations (some time after he left Parliament in 1990 Douglas founded a new political party on the far right, although it has not gone so far as to advance his proposal that income tax be abolished). These differences proved corrosive. In Labour's second term in office, they were played out in public with an intensity unparallelled in our modern political history. The government had no agreed program and, openly divided, was soon discredited. Labour's traditional social democrats formed a new party pledged to reconstructing the economic and social institutions of the postwar consensus. In a climate in which disappointment in the government was pervasive, the new party's claim that Labour had betrayed both its past and its supporters rapidly gained ground. Labour surely reached its low point in 1990, when the parliamentary party, desperate to avoid looming electoral oblivion, engineered the replacement of my successor as prime minister with a leader who was thought to have more popular appeal. This happened seven weeks before the general election. In this brief period, the government negotiated what it called a compact with the trade unions, an agreement based loosely on an Australian model, in which it offered the unions some voice in economic policy, and particularly in the government's fiscal program, in exchange for industrial cooperation. This attempt at a corporatist approach, which had no precedent in the New Zealand model of social democracy, was singularly self-serving and easily identifiable as such. Labour's principal opponent, the National party, meanwhile contrived to give the impression to the electorate that it too, like the defectors from Labour, aimed to restore much that was familiar from the recent past. On the strength of that impression it was resoundingly elected.

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Fall-out and Consequences This is not a record of recent New Zealand politics, but an account of what happened next, to place Labour today in context. Far from reversing Labour's policy direction, National took up where Labour left off. It deregulated the private-sector labour market, reduced welfare benefits, and extended commercial p~inciples into the social services. At the general election in 1993, the voters, remarkably enough in a first-past-the-post electoral system, effectively expressed their disapproval of both major parties by reducing National's majority over Labour to a single seat. By the time of the 1996 election, the country had adopted a form of proportional representation. A new party called New Zealand First campaigned on a platform that offered both to restore elements of social democratic practice in economic management and to assist the defeat of the National government. Voters gave the party the balance of power, but quite unexpectedly it announced that it would form a coalition government with National and almost entirely abandoned the social democratic content of its platform. These dismal events have not led to the resurgence of social democracy that might have been predicted. The Alliance, a party formed around the traditionalists who left Labour in the 1980s, won less than 10 per cent of the vote at the 1996 election and has not supplanted Labour as the major party of opposition to National. Labour today claims to have returned to its traditional values, but it by no means intends to restore the protective structures that once characterized New Zealand's social democracy. Its interest lies principally in the distribution of the wealth generated by the deregulated economy through social programs that will enhance individual opportunity. Social democratic institutions remain discredited among the country's elites. Indeed, the extremes of economic rationalism are so much the common currency that, despite demonstrable failings in economic performance, there is little electoral market for active forms of economic management. Labour has been tentative in its attempt to break the vicious circle that besets the public provi-

106 David Lange sion of social services. Reductions in availability and accessibility, the targeting that has accompanied reductions in government expenditure, and uncertainty in the labour market have combined to create a climate in which tax increases are thought to be electorally unsustainable. Labour has been careful to distance itself from Alliance proposals to make the tax structure markedly more progressive. Labour in government faced the challenge that has faced social democracy almost throughout its history. No longer the exclusive representatives of working-class interests, social democrats became managers, pledged to enhance the working of t}.:1e capitalist economy in the interests of an ever-shifting coalition of potential supporters, yet increasingly on the defensive against accusations that its interventions were impairing economic performance. New Zealand Labour made the most radical response possible to this dilemma. It sought to modernize the economy, but in a way that would dramatically reduce the government's capacity to manage, believing that the wealth created would in itself be compensation for the social disruption caused by the transformation and that the number of its beneficiaries would make Labour the natural party of government. Nobody can doubt the extent of the transformation. If that were the only test, Labour succeeded remarkably. It also succeeded, in ways that are outside the scope of this account, in promoting the interests of women and the rights of the indigenous Maori people and in advancing New Zealand's interests in the environment and foreign policy. But the deregulated economy did not generate the wealth on which its social programs depended, and Labour, which in its first term broadened the base of its electoral support, was after its second severely punished by the electorate. The future of social democracy in New Zealand is uncertain, although not because Labour is incapable of making an electoral recovery. Having stood aside from active economic management, it must rely on the working of the deregulated economy to produce the wealth on which its social programs depend. If there is no growth, or slow growth, its programs are immedi-

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ately put at risk. Labour in the old model of social democracy might have been open to the charge of incompetence: in the new model it is open to the even more debilitating charge of indifference. Labour in government will be exposed to the inherent instability of the deregulated economy, just as its social programs will continually be vulnerable to the corrosive logic of the market economy. The inherent contradictions of social democracy, far from being lessened by Labour's radical program, have increased. Labour in New Zealand, in using the arguments of the right to attack a model that had demonstrably grown inadequate, was then seduced by the logic of the right into a belief that nothing need replace the institutions that it had demolished . For us social democrats, there is little here to encourage us, and a great deal to regret.

10 Social Democracy in Australia JOHN BANNON

As the twentieth century ends, nearly one hundred years after the establishment of the Commonwealth of Australia, social democracy in Australia is under siege. Its political standardbearer, the Labor party, the oldest political party in the nation, and one of the oldest continuously operating social democratic parties in the world, is out of office nationally and in five of the eight states and territories. It is in the process of redefining its goals and philosophy to take account of globalization and the new economic era. This is no easy task for Australian social democrats, raised in a culture of pragmatism, sceptical of ideology, and imbued with a levelling ethos that distrusts the theoretician or philosopher. As inheritors and captives of more than a century of political activity, and only recently emerged from an unprecedentedly long period of government in which many of its traditional policies were modified or overturned, the ranks (and the leadership) are confused about which direction to take. This essay explores the burden and lessons of the distant and recent past and indicates the directions in which future policy should go. The Roots of Social Democracy and Early Rise of the Labor Party

The social democratic tradition in Australia traces its antecedents mainly through British sources. A strong Benthamite and

110 John Bannon Chartist influence on the politics of the Australian colonies in the nineteenth century combined with the seemingly inexorable rise of craft and general trade unions. The flag of democratic socialism in Australia was formally raised on the back of a massive industrial confrontation, beginning with the shearers' strike in Queensland and spreading around the continent, which marked the onset of the great depression of the 1890s. The failure to make gains by industrial means and the shocking defeat of the hitherto-successful union movement prompted the formation of colonial Labor parties. The recourse to parliament was spectacularly successful, with Labor quickly gaining represen~ation, its disciplined ranks holding the balance of power in a number of legislatures and briefly forming the world's first democratic Labor government in Queensland in 1899. Labor began to be the dominant alternative force in all the colonies, which became states on federation in 1901. As the twentieth century advanced, the entry of Labor ministers into coalition governments soon followed. The decision of labour councils and trades unions to seek parliamentary power with their progressive liberal fellow-travellers coincided with moves to create what was to be the Commonwealth of Australia. In 1891, when the party was founded, parliamentary delegates from all the Australian colonies and New Zealand met in Sydney to write a constitution for Australia. Labor was initially ambivalent, if not hostile to the Commonwealth. In the critical elected convention of 1897-8, although it presented slates of candidates, it was unsuccessful, with only one of its number (Arthur Trenwith from Victoria) taking his place with the other fifty founding fathers. Labor parties feared that their gains at the colonial level would be wiped out by a conservative federal legislature. Most of their members campaigned (again unsuccessfully) against federation in the referendums that adopted the Australian constitution. However, beginning with the first national parliament in 1901, Labor had considerable success, briefly forming a minority government in 1904 and forcing a fusion of the conservative and liberal forces. In elections in 1910, Labor achieved government in its own right nationally and at state level in South Australia. For

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the first time in world history there was a democratically elected majority national Labor government. It seemed that, given a universal franchise (women had the right to vote in South Australia from 1894 and in the new Commonwealth from 1903) and fairly drawn electoral boundaries, Labor would be unstoppable. Splits, Failures, and Limited Successes

Parliamentary success had come at the price of adopting gradualism. Socialist rhetoric was usually accompanied by professions of loyalty to crown and empire. In 1913 VI. Lenin noted Australian Labor's success and the prevalence of 'peaceable' trade union leaders in its parliamentary ranks and dismissed it as a liberal bourgeois party. Such tags were not of great concern to social democrats whose origins lay in pragmatism, who tended to be impatient with ideology, and who felt that their aims could all be achieved by parliamentary means. The seemingly inexorable triumph of Labor, both state and federal, came to a shuddering halt during the First World War, when the party split at all levels over Labor Prime Minister Billy Hughes's attempt to get approval to supplement the volunteer forces by conscripting men for the Western Front in 1916. Hughes and some of his colleagues left to form a coalition with the conservatives. Labor took years to regroup and then had the misfortune to form its next government a matter of weeks before the stock-market collapse of 1929. Another split over its handling of the Great Depression saw it out of office two years later. After it governed successfully during the Second World War and afterwards (1941-9) under John Curtin and Ben Chifley, an anticommunist crusade by the 'industrial groups' in the trade union movement in the 1950s saw a further fracture in 1955. The result was that Labor formed national government for only seventeen of the first seventy years of federation. After 1947, social democratic hopes of a strong centralist agenda of change and reform were pretty dim. Much of Labor's welfare program was kept in place by the conservative government, which presided over a booming economy. Labor managed to survive its split and lack of federal success during these years

112 John Bannon partly by its ability to govern at state level, where, from time to time, it held office in most of the states. But this seemed second best. Australian Labor has never really come to terms with federalism and its possibilities, despite the realities of the constitution and its own state-based organization. As is outlined below, such accommodation will be fundamental to its survival and to that of democratic socialism in Australia in the twenty-first century. By the end of the 1960s, forming a federal government still seemed just beyond reach. A number of great policy issues had been resolved by the party, including clear acceptance of a mixed economy and the abolition of the restrictive immigration policy (White Australia), which threatened Australia's relations with Asia. The federal campaign of Gough Whitlam as leader of the party in 1969 pushed policies that went beyond the normal scope of Commonwealth power. His comprehensive centralist agenda promised national action on a range of issues, many of which had been the traditional preserve of the states, such as urban development, public housing, education, and aboriginal affairs (although the policies in some cases had already been articulated at state level, most notably by Don Dunstan in South Australia). The 1969 campaign coincided with a rare period in which there was not one Labor government in the country. These issues remained on the federal agenda when Whitlam finally came to power in 1972 and in the euphoric early days started implementing his program at a furious pace. The result in the long term was bitterly disappointing. The political failure of the Whitlam government and its unconstitutional dismissal by the governor general in 1975 (overwhelmingly endorsed by the voters) was seen as a salutary lesson at both state and federal levels. Its disregard of the ability of the states to block or undermine the national government as it tried to crash through the constitutional divisions of power and the frantic pace of change and reform cost the government dearly. External factors such as the oil crisis did not help, but the shattering of full employment and the rise of youth unemployment damaged the government's economic credentials and doomed the social democratic experiment. Unemployment jumped from

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a few thousand to hundreds of thousands. Its persistence destroyed the government's credibility. If social democracy is to have legitimacy in Australia, it must always have full employment (however defined) at the core of its policy. The inspiring but ultimately disastrous three years under Whitlam (1972-5) were followed by seven years of conservative rule. Despite the strains, there were no further splits in the party, but the price was entrenchment of a formalized factional system in Labor. The factional system was necessary to preserve the broad base of the party as an alternative government in its own right, maintain trade unions' influence, and, over time, allow the entry of some from the shattered communist left. Governing in Difficult Economic Times

Labor got another chance in 1983 off the back of a major recession and armed with policies that took account of post-Whitlam circumstances. State Labor was also enjoying considerable success, providing an opportunity for a reworking of cooperative federalism to avoid some of the problems that had destabilized Whitlam. Bob Hawke as prime minister was dealing with a new generation of ministers and state leaders all well prepared for office. The social democratic ascendancy had arrived for only the third time in a century. The Hawke-Keating government, conscious of the need to demonstrate its economic management capacity, embarked on radical financial deregulation and publicsector reform. The early period was marked by effective major policies, such as the wages accord with the trade union movement, plans for restructuring industry, tax reform, and the stabilizing and reduction of public-sector debt, all accompanied by substantial increases in employment. A mini-recession in 1986 and the 1987 stock-market collapse were successfully handled. But there was major trouble coming, and it showed up first at the state level. The financial collapse of the late 1980s and early 1990s took a number of previously successful state Labor governments with it. While the loss of government in the biggest state, New South Wales, in 1988 was matched by the gaining of

114 John Bannon government after thirty-two years in Queensland, the most damage was done in Victoria, South Australia, and Western Australia. The Western Australian case was somewhat different from its eastern relatives; a royal commission into corruption wreaked havoc on the former leadership. In Victoria and South Australia, the main cause of Labor's undoing was the exposure of state-owned financial instrumentalities to the recession and over-ambitious and (in hindsight) reckless lending policies, which forced the states to stand behind them. This had a disastrous effect on debt levels in an unregulated environment, where for the first time the international rating agencies were making an independent assessment of each jurisdiction. In South Australia, relatively conservative policies of government financial management had reduced debt as a proportion of gross state product to an unprecedented 15 per cent, the second lowest in the country. With low overall tax rates and recognized provision of quality service in education, health, housing, and other sectors, it could be seen as a model of third-way social democracy. The financial meltdown of 1991 resulted in a big jump in debt, mobilization of financial reserves, and a massive loss of confidence, not just in the government but in its policies. South Australia was not alone. The unforeseen effects of deregulation included reduction of prudential supervision by the central bank, which affected both public and private sectors. With freeing of the banking sector and introduction of foreign banks, everyone was looking to 'do a deal.' After the 1987 stockmarket crash, property became the focus of investment, and there was plenty of money available to finance any bankable scheme. Competition was expected to provide cheaper money. It certainly provided more money, but as the boom developed interest rates rose ever higher, maintaining a margin above the rapidly rising inflation rate that resulted in record real rates. There was a dearth of good projects, but any number of financial organizations were prepared to back anything. Resort development, management buy-outs, and takeovers proliferated. The risks were being compensated for by higher rates, but competition among financiers began to shave margins in projects funded

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on the security of inflated property valuations. When investors started to retreat and reduce their exposure, values spiralled downward, and the good was destroyed with the bad. In similar situations in the 1970s the Reserve Bank had taken early and drastic action, but in the new environment its supervision was reduced to virtually a watching brief, and little warning was given or preparation made for the coming catastrophe. Ironically the state-owned banks that had burgeoned under Labor governments in New South Wales, Victoria, South Australia, and Western Australia were the early victims. Irrespective of their financial exposure, their political exposure gave them little chance to maintain commercial privacy or trade out of problems, while the backing of the state ensured that their losses were absorbed and made good at taxpayers' expense. They drew the attention and the sting through the early stages of the crisis and gave the bigger private banks a breathing space, which in the end allowed the latter to survive without the same massive injection of public capital. For a generation of leaders and party policymakers brought up in the postwar environment and believing that they had learned from the experience of the 1970s - particularly from the fate of the Whitlam government - it was a massive blow, which prompted rethinking of all the orthodoxies of public ownership and government economic intervention. Financial regulation urgently needs to be rethought. The 1997-8 collapse of the Asian economies has ignited the usual conflict between those who see the new regimen of deregulation as causing the problem and those who argue either that it was not implemented fully or that distortions led to the flaws. Those who were hailing the 'Asian miracle' are now talking about the failure of 'crony capitalism,' yet the same institutions that were lending into the Asian economies were lending into Australia in the late 1980s before the crash. The analogy of the unwinding of some of the Asian economies in 1997-8 with what happened in regional economies in Australia in 1990-1 is close, despite the absence of the sort of 'cronyism' targeted in Asia, but it seems that the lessons have not been learned. Somehow the federal Labor government survived the fall-out

116 John Bannon from recession and the state debacles and won elections again in 1990 and 1993, against the odds. The balance sheet, however, was not looking healthy. As economic historian Hugh Stretton so bleakly puts it, over the decade, financial deregulation, combined with an increasingly free trade in goods, resulted in halffinished or overcapitalized resort developments and about 20 per cent more central-city office space than could be used, $30 billion or more of both public and private bank losses, $120 billion of new private foreign debt whose servicing cost much of what Australia's exports earn, and a seven-fold increase in real interest rates over those prevailing for the previous half-centu~y. Although welfare payments and tax had been better targeted to the poorest section of the community, the gap between rich and poor had grown. Long-term unemployment had increased, as had casual and part-time work, at the expense of full-time employment. The states were resorting to asset sales and regressive measures, such as extended gambling taxes, to maintain services. Labor's Defeat in 1996

The massive rejection of the Keating government in 1996 was the fruit of this decline. Its election in 1993 had been based on popular fear of the conservatives' radical and ideologically driven proposal for a goods and services tax (GST). In 1996, the conservative coalition ditched the GST in favour of soothing reassurances to every sector that threatened to cause trouble. While Labor maintained some support in the heavily populated and more internationalized Sydney-Canberra-Melbourne triangle, the rest of the country savagely rejected it. In the 1998 election, even the breaking of many of its assurances and its revival of a GST proposal did not prevent the conservative government from being comfortably returned, though with many fewer seats. At the end of the 1990s, there seems to be a conservative ascendancy in Australia. At the federal level, the government of John Howard, though not controlling the Senate, has an adequate majority in the lower house. The next election is likely to

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take advantage of the post-2000 Olympics in Sydney and centennial spirit in the Australia of 2001. While the Labor government of New South Wales managed to increase its majority in 1999, those in Queensland and Tasmania cling to power with razor-thin majorities. The rise of the One Nation party, with its radical-right populist agenda, has caused an additional dilemma. One Nation demanded massive reduction in immigration, particularly from Asia, disengagement from Asia, rejection of multiculturalism, and reduction of government support to the indigenous community - a platform that appealed to many rural electors, including some traditional Labor voters. Faced with the accusation that its policies were indistinguishable from those of the conservatives, or simply economic rationalism with slightly more humane features, Labor in opposition has tried to retrieve its core support in traditional areas. But Labor, with its record of financial deregulation and privatization over thirteen years in government, rather than advocating new policies appears simply to be claiming that the conservative government is going too far. This approach has had some success in elections, but not enough for Labor to win office or really change the terms of debate. It is not surprising that there is a call for Labor to differentiate itself in a positive rather than a negative way from the conservative coalition if it is to have a chance of governing again. Having tried the variations of social democratic orthodoxy and been rejected, it must think again. The Challenge of Recovery: An Australian 'Fourth' Way

Ironically, Labor was governing in Australia for much of the era of rampant international deregulation and privatization under Thatcher, Reagan and Bush, Mulroney, and the (admittedly milder) Kohl. Labor is perceived as having implemented a 'third way' before it was promoted in Europe, and the experience was not all good. As Labor went out of office in Australia, the baton in much of the North Atlantic world was passing to rejuvenated social democratic parties with apparently new left-of-centre policies. Tony Blair and Gerhard Schroeder, for example, are in

118 John Bannon the position of trading on the obvious failures of previous conservative incumbents and are not tagged with the early-1990s recession or its consequences. The task for social democracy in Australia is consequently far more difficult. In the short term the idea of the party's going back to the grass roots and listening to its core supporters is valid. And while it regroups, a declaration that economic rationalism has failed in many respects (employment creation being the prime area) and a resort to old slogans may be necessary. But Labor clearly must produce policies and doctrine that can recapture the middle ground and address not just the problems of the economy but the alienation of those excluded from the benefits of financial deregulation, who are seeing the gap between their real standard of living and that of the wealthier growing. So the problem for Labor and social democrats in Australia is that just as Europe and North America rediscover left-of-centre policies and install governments committed to them, Labor languishes in the political wilderness, seeing some of the benefits of its groundwork go to the new conservative government and proving unable to prevent further dismantling of what it saw as being of social value. There is no easy recourse to a 'third way' or neue mitte. A 'fourth way' must be found. This is especially difficult for the country of socialisme sans doctrine, where policy debate and theory are often on the margin. As never before, politics is focusing on economic competence. To be characterized as an opponent of economic rationalism is to be seen as economically irrational. However, it could be argued that this is a false dichotomy. The promotion of economically rational policies should be reconciled with or modified by socially rational policies aimed at preserving equity, opportunity, security, and the coherence of the community. Labor needs to begin by realizing that economic growth is not of itself the route to social security and amenity, because of the limits to such growth, whether for economic, social, or environmental reasons, and because the distribution of its benefits is so uneven. The operation of the market plays a critical role, but a totally free market cannot generate sufficient growth or equity. A strong,

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active, and responsible government is essential to a social democratic society. Therefore if social democracy is to have a future, we must restore the concept of government as the means of ensuring fair distribution of basic services throughout the community, of regulating anti-social excess, and of promoting a concept of citizenship. This means not that the government needs to deliver all services, but that if it commissions others to do so they must be able to act with appropriate guidelines and adequate resources. Simple denunciation of 'out-sourcing' and privatization is neither appropriate nor, given Labor's record, credible. Labor must develop very clear principles to measure proposals for privatization. Government is ultimately held responsible for the failure of essential or community services, whether or not it owns or controls them. If this is the case, then it has to look very seriously at any sale or delegation of authority. It must be totally confident that the regulatory regime that is substituted for public ownership can be adequate and enforcible. It must be sure that the net public-sector worth or return is increased, not reduced, if it sells an asset. It must balance the temptation to return short-term budget surpluses or reduce debt against the long-term value of the asset or enterprise in public ownership. Whatever expectations a government might raise about its ability to deal with issues, it is ultimately constrained by international forces and judgments over which it has little control. A small nation dependent on export of commodities and with a highly traded currency is especially vulnerable, as Australia has discovered. Australia has vigorously pursued international and regional agreements, particularly through Asia-Pacific Economic Co-operation (APEC). If it is to preserve some autonomy, it should perhaps pursue more targeted bilateral arrangements. Democratic socialists worldwide could well promote the 'Tobin tax,' to prevent or reduce currency speculation without inhibiting legitimate trading or placing artificial values on currencies, in conjunction with a return to more supervision of the flow of speculative capital by international agreement. On the domestic front, social democracy in Australia is ulti-

120 John Bannon mately about individuals having a place and respect in the community, fair and equal opportunity, the right to work and to basic services, physical security, and a healthy environment. The credentials of Labor in these areas are sound. If social democrats can develop policies that return to the basics but also take account of new circumstances, they can recapture support from people who feel uneasy about rampant market forces and private welfare. Creating jobs remains the greatest challenge. Policy initiatives should include an employment strategy to break the expectation and acceptance of continuing high unemployment. As well as increased support for education and training and specific government programs in underprivileged and depressed areas, there is a case for public employment schemes for relatively unskilled and service-oriented work, which can be adjusted in response to the rise and fall in private-sector labour demand. The plans can be funded from savings on social-security payments. Of course there must be the means to address these policies: tax and revenue policy will provide the financial capacity, and in the Commonwealth of Australia the reform and development of cooperative federalism and regional development will provide the executive capacity. Social democrats, as well as losing the debate about the government's role in service delivery, have consistently failed to establish the unavoidable connection between taxes and services and to confront the electorate with it. Part of the resistance to taxation results from that lack of perceived connection. Federalism has contributed to this gap, as Canberra levies more than half of the revenue that the states spend. This is usually presented as a recipe for irresponsibility by the states, which can promise services without raising the revenue. Recent experience, however, suggests that it allows the central government to get credit for unilaterally reducing tax revenue, keeping control of its own-purpose outlays, and balancing its budget by reducing payments to the states, yet remaining insulated from public anger at the consequent cutback in services. The cooperative arrangements referred to below could deal with this dilemma. As well as stressing the connection between provision of essential services and taxes, proponents of a tax system must

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ensure that it is fair and progressive. Though lightly taxed overall, Australians have relied heavily on personal income tax, which is collected as 'pay as you earn' (PAYE) from the regular salaries and wages of workers, offering little scope for avoidance or evasion. Great anger is caused in the PAYE sector by reports of the small marginal tax rates paid by the wealthy. The last two decades has seen growing income inequality, which has undermined the legitimacy of taxes and the responsibility of their being paid progressively. Tax and revenue policy is crucial to a government program, but so is borrowing. Public-sector debt has been erected into a bogey that has virtually immobilized government initiative, in particular undermining the concept of borrowing for capital infrastructure. Again, social democrats need to rethink acceptable levels of public debt and financing of infrastructure, or else the pursuit of government surpluses will destroy public initiative. The Need for a New Approach to Federalism

All the big issues in Australia must finally be seen in a federal context. The dilemma for social democrats who wish to implement a program that involves an active government or public sector is that by its nature a federation distributes power. The constitution defines the powers of the Commonwealth and leaves the residue to the states. The states have tended to be the service deliverers, while the Commonwealth makes the social service payments. But the Commonwealth, particularly since the Uniform Income Tax case of 1942, has held the financial power, and the states remain dependent on its allocations to finance their programs. It is very rare for Labor to be in office federally and in all states at one time. Even when this has happened, differences between the states make uniform policy impossible. This situation has made federal Labor impatient with the states. In office it has been attracted to schemes to bypass the states. In practice, however, much of the implementation of a social democratic program has relied on state action. The rarity of social democratic federal governments in the first eighty years of the Commonwealth made this factor even more important. A case

122 John Bannon in point is South Australia, where governments led by Don Dunstan in the late 1960s and through most of the 1970s took legislative and administrative initiatives in areas such as indigenous land rights, equal opportunity, anti-discrimination, the environment, consumer protection, urban planning, multiculturalism, government support of the arts, and industrial democracy, which became part of a national agenda. Because of the comprehensive reporting of events from Canberra, much of the achievement of progressive state governments has been overlooked or, if adopted at the national level, simply become part of Commonwealth achievement. Recognition by social democrats that Australia, despite its appearance of Westminster government, is in fact a federation is indispensable to future implementation of its ideals. The mechanisms of federal-state cooperation are vital, because federal initiatives can always be destroyed or distorted by the states. Equally, the states at times provide the only protection for the social democratic agenda from a conservative federal government. This has never been more the case than in recent years, when traditional bipartisan support for a welfare state has shattered. The establishment of formal and permanent mechanisms for intergovernmental cooperation, along lines pioneered by the Hawke-Keating government, should be a plank of policy. Social democracy cannot restore the sovereignty of the nation-state, but with a new approach to federalism and localism and application of the principle of subsidiarity, it can mobilize active government and community forces to address social and economic problems. · The outlook for social democracy in Australia is clouded as we approach our centenary. One hundred years ago, Labor and its adherents had to shake off their colonial focus and scepticism of the federal future and enter the new century with an energetic commitment to shape the new nation. Today's Labor, having enthusiastically embraced the changes of globalization, and having been damaged by some of its consequences and rejected by the electorate, must not become static or reactionary if it is to shape the next one hundred years.

11

Conclusion BOB RAE

Change is the cliche of our time. It also happens to be a prevailing truth. Walter Lippmann once described public opinion as 'the pictures in our heads.' Marshall McLuhan pointed out that we spend our lives viewing much of life 'through a rear view mirror.' Mo,st of us continue to think about our private hopes and public lives with images that do not reflect current reality, let alone future possibilities. What is encouraging about this collection of essays is the authors' willingness to clear some cobwebs. The global order of private capital and market forces likes to assert that there are no alternatives. Each essay is an affirmation of the need to explore broader approaches. Three Themes

Some themes predominate. I mention only three. The first is the commitment to international solidarity. The current rhetoric about globalization leads to the preposterous assumption that the neoconservatives are the only internationalists. From Michael Rocard's brilliant essay on, it is clear that all the contributors understand that the challenge of the new politics is not bound by the nation-state. Creating new mandates for the European Union, the International Monetary Fund, the United Nations, the World Bank, and the World Trade Organization is a key mission for twenty-first-century politics. The second theme running through the essays is education.

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Both Peres and Arias put this at the heart of their presentation, and they are right. Access to learning will become the litmus test of a democratic society: social democracy will be assessed by its ability to grasp the centrality of this issue. The essays by Oscar Arias, David Lange, and John Bannon, among others, focus critically on a third issue: the experience of governing, the challenges of compromise, and the limits and the difficulty of maintaining popular support while managing governments in times of change and even recession. For understandable reasons, this has been a focus of mine as well. Without question, the most difficult challenges have come while one is managing a recession or profound change. The Dutch have achieved great success; we were not politically successful in Ontario, nor was James Callahan able to govern and maintain support through the British downturn in the 1970s (see also the French Socialists in the early 1980s). The recent successes of Tony Blair and even Bill Clinton point to the most difficult question: can we achieve popular support (on welfare, for example) only by mimicking the right? Or can a work-focused approach (as in Holland) be given a progressive cast, without the primitive elements of Thatcher and Reagan? Confronting a Changing Context

The world of the 1950s and 1960s was one in which a typical family had two parents and one wage-earner. Dad worked, and Mom stayed home with the kids. Many policy-makers still carry that picture in their heads; many politicians still launch an appeal to that mythical family. Yet we know that the reality was and is very different. One-parent families are common, not exceptional. Women have entered the workforce and are not going back. Gays and lesbians rightfully expect their partnerships to be recognized by law and custom. If the world of the home has been transformed, the world at work has changed dramatically as well. Our economies are at once more local and more global. We are more dependent on

Conclusion 125 trade than ever before. National governments seem less capable of responding to our needs and demands. The digital economy gives rise to new opportunities, but the technological revolution is even more bewildering and dramatic than the industrial changes that shaped our past. Patterns of work have changed, and will continue to do so: more people work part-time. Hours of work for many others have increased dramatically. The wellpaid male industrial or resource worker who could on his own provide for his family is no longer at the centre of our national economies. People have a sense that the reassuring middle of our lives has been chipped away, with both success and failure counting for more. Incomes are becoming less, not more, equal. Canada, for example, is now a multiracial country and in the next century will become even more so. The picture in our collective heads of our Aboriginal population is still of a group of people marginal to the mainstream and living in remote communities. In twenty years, the majority of the population in the inner core of many of our cities will be Native. Many Canadians are having difficulty coming to terms with these realities. The social democratic movement in Canada, of which I have been a member all my adult life, needs to confront these changes and conflicts. A set of policies - bigger centralized government, higher taxes, more intervention, and public ownership - has been challenged in virtually every social democratic party in the Western world. Such policies cannot really be what social democracy is about, because they are not palatable recipes for governing. The neoconservative right, in the name of globalization and many other so-called 'objective factors,' has embraced inequality, the rising gap between rich and poor, and the dismantling of the state as critical steps along the one true way. There is a spirit of ideological fervour at work greater than anything seen on the left in recent memory. Tom Lehrer once joked that the right won all the battles but 'the left had all the best songs.' Now the right has the passion as well, misplaced through it may be. If the 'neocons' have their way, there will be little trust and community remaining left once they have done with their revolution.

126 Bob Rae The Three Questions

There are three questions attributed to Rabbi Hillel, who lived in Babylon over two thousand years ago: 'If I am not for myself, who is for me? But if I am only for myself, what am I? And if not now, when?' The first question points to the enduring value of self-interest, which we ignore at our peril; the second, to the need for generosity in a world that values greed too much; the third, to the need for action and the danger of doing nothing - a weakness to which we are all, in our private and public moments, too prone. There are forces at work in our world, as there have always been, that are technological in origin or that pertain to broader, impersonal forces. Some are summed up in the phrase 'globalization.' As individuals, and in our political communities, the fact that we cannot stop all these changes should not be an excuse for giving up or for simply becoming a cheerleader for the corporate agenda. We can strengthen our capacity both individually and together to cope with change. Social democracy goes astray when it pretends that politics and governments can do a great deal to stop technological change and innovation. At the same time, many on the right confuse the 'is' of globalization with the 'ought' of simply accepting all its effects. They preach a political quietism that is really just a cloak for greed. The core value of social democracy - the sense that communities and citizenship matter, that ordinary people need to work together to improve their lives and to increase their ability to cope with change - is sound. It is the 'ought' that gives us the vision to face a difficult world. The value is deep and enduring, but the policy instruments that we choose to express it must change and evolve in response to experience. Some people - fortunately their number and influence are dwindling - get so attached to a nostrum - government ownership, a particular method of regulation, one system of taxation or another - that they fail to see that these policies are just tools. They are not the substance of social democracy itself. The essence of social democracy is its belief in the equal right of

Conclusion 127 every person to enjoy the good things of life, its commitment to freedom, and its recognition of the enduring value of human solidarity. This is the spirit that fuelled western Canadian farmers in the Depression and industrial workers who sought shorter hours and higher pay. From Tommy Douglas through Martin Luther King, Jr, to Tony Blair, the fire is about everyone having that chance. The intuition behind the idea is the sense that elites take care of themselves and that the 'comfortable majority' looks first to itself. A decent politics understands that the public forum is the one place where this imbalance of power and opportunity can be corrected. The pursuit of self-interest in the economy is as natural for the trade unionist as for the entrepreneur or even the tycoon. The healthy competition of the market, the achievement of our own individual success, is not to be scorned or feared. Economic and political systems that do not attach priority to the satisfaction of this demand from individuals have failed and will continue to do so. Prosperity matters. As Billie Holiday reminded the world: 'I have been poor, and I have been rich, and rich is better.' This expression of the self is not just economic. It is about who we are: sexually, culturally, politically. A bewildered Abraham turns to the heavens and says three words: 'Here I am.' They are potent words and have been spoken by every person, and every people, seeking freedom. The assertion of identity is not selfindulgence. It is basic to our understanding of what it means to be human. But it is not enough, which is why Hillel asked his second question. The trouble with brash neoconservatives, excessive nationalists, and single-issue politicians alike is that they all stop with the assertion of self-interest. Like infants who have just discovered their navels, their obsession with self prevents them from corning to terms with the second question. My views about the economy and government are really an extended discussion of the connection between Hillel's first two questions, about the relationship between prosperity and the public good. Many on the right are trapped by arguments that the pursuit of self-enrichment by itself produces the best of all

128 Bob Rae worlds. Many on the left fail to see to what extent the modern economy is not simply a universe of great evil. Hillel's questions would lead them to a more balanced view. A politics that ignores self-interest deserves to fail. An economics that ignores our common interest as citizens in the well-being of the broader community will eventually face a wall of public hostility. The poet Oliver Goldsmith wrote at the beginning of the industrial revolution of a world where 'wealth accumulates and men decay.' While the public good is not best pursued by ignoring the appetite for gain, gain alone is not enough. People will not accept being treated as commodities. They will insist on being recognized as citizens, members of families, cultures, and broader communities. They will insist on their rights. We live in an age that celebrates claims. Hillel's second question suggests that we need to go beyond the pursuit of self-interest to an understanding of the responsibilities that we have for other people. We live in a time of extraordinary technological change and financial windfall. Yet schools are underfunded and public goods are reviled by the business press. We can trace social democracy's origins to this impulse, since it real!y stems from a keen sense that we have to challenge and change power structures that deny legitimacy to working people, to Blacks and other minorities, and to women and their assertion of identity. Just as liberalism insisted on the need to change old structures because they gave no way for self-interest to be reflected or expressed, democratic arguments about extending the franchise, dissolving colonial ties and the embrace of the imperial idea, and finding real room for ordinary people have become a fundamental part of what we see as the basis of a good society. Capitalism and democracy have long lived in mutual accommodation in most Western countries. It is an accommodation that works only when balances are struck. There have been several moments when the social contract has come perilously close to the breaking point. In the nineteenth century the gap between rich and poor seemed so vast that great social movements arose

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which insisted that the condition of the people was at least as great a question as the primacy of property and the free market. Efforts were made to bring the 'robber barons' and the 'malefactors of great wealth' to heel - social insurance schemes were devised, competition laws were passed. Even the U.S. Congress decreed in 1916 that 'labour is not a commodity.' The 1930s saw the next great round of reform, as the Depression shook the system to its roots. Some in the U.S. plutocracy of the day saw Franklin Roosevelt as a 'red' and a revolutionary. The more enlightened realized that he was someone who believed in democracy, enterprise, and government, and they saw nothing contradictory in this faith. Edmund Burke would have understood him, because he believed in reforming in order to preserve. The modern welfare state that we associate with Roosevelt was consolidated and improved in virtually every Western country until the 1970s. The failure to introduce comprehensive health care in the United States has left that nation short-changed. A very different set of economic and political circumstances today leaves us with our own great challenge. The reforms of David Lloyd George or Roosevelt were premised on national economies and nation-states. No one doubted or challenged that premise, although many differed with the policies put forward. Hillel's second question can no longer be answered only in a local context. The mobility of capital, its global reach, has now reached the point where democracy and the state have difficulty intervening and responding. Some argue that this difficulty should be met by governments' simply taking up the old tools controls on foreign exchange, capital flows, more public ownership, higher tariffs: in short, more protection and intervention. It would be wrong to dismiss these approaches. There are certainly times, for example, when Canadian industry quite rightly invokes anti-dumping laws to ensure that competition with foreign producers remains fair. But it is hard to see a deeply protectionist strategy as having much long-term appeal. Mobility is a highly prized value, as is choice. Consumers want to be able to choose from a wide variety of products, no matter where they

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are produced, at the lowest possible price. They do not want the state telling them what they can buy and where they can put their money.

The Priority and the Limits of Politics Governments and democracies are not impotent. Nor are they omnipotent. Our challenge now is to create a politics that can reassert its relationship to the real economy. That means more cooperation and coordination with other countries, more international rules that are based on more than just the convenience of capital. The trouble with Multilateral Agreement on Investment (MAI) is that it ignores the problem of the 'democratic deficit' and belittles the legitimacy of politics. It is also unnecessary. Americans are rightly preoccupied with the dramatic decline in the U.S. inner city and the sheer weight of the damage caused by a culture of violence, substance abuse, and crime. As Canadians, we like to think of ourselves as superior to these problems. Yet the same economy can produce the same trends: there are Native ghettoes in Canada's cities that will only too quickly rival the tragedy of inner Chicago and Detroit. We have trouble admitting this sad fact to ourselves, but it is true. Unless work is found and education takes hold as the central value, poverty will take even deeper hold of the next generation: then we shall reap the whirlwind . A prosperity that is too confined and exclusive begins to take on its own pathology. The rich hardly give away enough money to make up for the relative decline in tax revenues and government expenditure. This means poorer schools, weakened health care, and social services for children and the vulnerable that have gone from barely adequate to impoverished. If the rising tide fails to lift all boats, resentments will increase. Sometimes these resentments will find their expression in too much nationalism, in resistance to immigration, in gender wars, or in varieties of religious fanaticism . Often they find a home in a climate of public mean-spiritedness that appeals to the lowest of our instincts. It does not have to be this way. It is possible to admit legiti-

Conclusion 131 mate claims for prosperity without abandoning the commitment to the public good. The right is talking unity. A broad social democratic and liberal left should be doing the same. The alternative is that the right will establish first its dominance over programs and ideas, and then (as in Ontario) over government itself. Over a hundred years ago, progressives alarmed at the brutality of the industrial revolution insisted on the need for balance, on the role of unions, communities, and the state as a necessary countervailing force to private monopoly. In the midst of our own revolution, we need the same insight: the difficulty is that government itself needs to change and the bounds of the nationstate are too narrow to correct what has gone wrong. The democratic spirit can be a great force. We need more of it to give hope to those who feel abandoned and bewildered in this brave new world of rapid change. The last words in George Orwell's diary before he died contain these prescient words: 'The greatest of all the disadvantages under which the left-wing movement suffers: that being a newcomer to the political scene, & having to build itself up out of nothing, it had to create a following by telling lies. For a left-wing party in power, its most serious antagonist is always its own past propaganda' (Collected Essays and Letters, vol. IV, London: Secker & Warburg, 1968, 515). Where social democracy has been most successful it has exercised fiscal responsibility, trimmed bureaucracy, and ultimately lowered taxes (once these objectives had been achieved). It has also pioneered social and economic reform to reinforce solidarity and strengthen community. Its prolonged wait for power fostered in it a sense of timing, patience, and discipline that are entirely admirable. The successes of Sweden, Holland, and Saskatchewan come to mind. Permanent opposition status, however, can breed a climate of promise-making, resolution-passing, and self-righteous tendentiousness that runs completely contrary to the needs of any governing party. It allows a party to wallow in the rhetoric of being a 'conscience,' as if this were what politics is all about. Politics is about the persuasiveness required to move people to judgment. Judgment is by definition a matter of choosing between alter-

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natives, none of which may at any given time be desirable. Is there really only one 'moral' response to a dictator sitting on a supply of anthrax? Is it more or le·ss moral to borrow money to fund a social investment? Or is it more moral to lower the deficit and eventually allow more room for spending on education and health care? The premise that questions of political choice lend themselves to one ethical answer is an enduring residue of fundamentalist thinking that has little to do with reality. A successful social democratic party will despise neither prosperity nor power. It will respect markets and businesses. It will admire innovation, hard work, and education. It will fight for a sustainable economy, for equality, and for solidarity, but it will understand that none of these can be achieved with an excess of partisanship. We must understand the priority of politics but also appreciate its limits.