What is social democracy?

Social democracy is one of the vaguest terms in the political vocabulary, yet it refers to a regime of considerable importance. Originally, social democrats were socialists who thought the surest path to societal transformation in emergent liberal democracies lay in building popular support through competitive party politics and social-movement organization. Since the 1960s and 1970s, however, social democrats have dropped references to socialist goals in favour of promoting a progressive, domesticated form of capitalism. But what precisely does this latter goal entail?  Today, “socialist” parties in competitive party systems often have platforms that suggest a social-democratic orientation, whereas parties labelled “social-democratic” or “labour” pursue policies little different from those of the neoliberals. How can we resolve this definitional riddle?

We have to begin with an abstract definition, one that is broad enough to allow for many specific differences  yet narrow enough to exclude imposters. I should emphasize that what I am referring to is moderate social democracy; radical social democracy is quite different in my usage.

Moderate social democracy installs a particular regime in a capitalist society: one that comprises a widely supported set of norms, procedural rules and organizational arrangements designed to deepen democratic control of the state and to employ this state to regulate markets and otherwise intervene to enhance social equality, institute universal social protection and (partially) decommodify labor. A social-market economy, sometimes referred to as a solidarity economy or social capitalism, thus expands, though the pre-existing liberal-market economy survives and may often flourish. In principle, the Invisible Hand of social norms shapes markets, via the state, to serve the common good. Such a delicately balanced system rests on a provisional, often implicit, class accord, sometimes quite minimal, which may be periodically renegotiated. As new challenges arise, the compromise will need to be adjusted to accommodate new policy directions or organizational arrangements. Finally, social-democratic parties depend for their success on building trans-class electoral coalitions; the working class is nowhere numerous enough or strong enough to sustain this regime. Moderate social democracy is a complex system that presupposes a class-divided society, strong institutions, sufficient resources to support redistributive programmes and adept political leadership.

I’ve suggested that the counterpart of a social-democratic regime is an expanding social-market economy. The leftist government faces simultaneous pressures: from the liberal movement to disembed the economy, thus fortifying the liberal-market system, and from the societal counter-movement to re-embed it, thus extending the realm of decommodification. Social-democratic governments must try to reconcile these conflicting pressures. The balance they attain depends on such factors as the terms of the national economy’s incorporation into the global market system and the governing party/coalition’s ideology, unity and strength. Decommodification of labor, land and money is, in any event, never more than partial. People continue to engage in calculating, economizing behavior. Most household consumption still involves the purchase of commodities. People must still compete for jobs or support themselves through small businesses or self-employment. What develops is a hybrid economy, with a sphere governed by market exchange co-existing with spheres regulated by the Polanyian principles of reciprocity and redistribution. To believe in social democracy is to embrace the possibility that the social-democratization of capitalism can protect society and nature without undermining capital accumulation.

The subjection of markets to social norms – that is, the expansion of the social-market sphere – often occurs through the independent actions of civil society. The “fair trade” movement is a case in point. Purchasers of various agricultural products use norms of fairness to govern the prices they pay to producers (usually in developing countries). Consumer cooperatives of various sorts immerse their transactions in non-commercial norms stemming from community bonds. And roducer cooperatives have long been seen as a way of mitigating or eliminating the subordination and exploitation of workers through cooperative decision making. (Of course, if producer cooperatives compete with capitalist firms, they will usually mimic the latter’s focus on profitability.) Diverse activities in civil society thus fall within the ambit of the social-market economy.

Social-democratic governments also extend the social economy by implementing modern forms of non-market relations involving institutionalized reciprocity and redistribution. For Polanyi, reciprocity and redistribution are ways of satisfying material needs that, unlike market exchange, are submerged in social relations and thus regulated by social obligations.
Reciprocity derives from the obligations stemming from community solidarity. Since anthropologists studying small-scale societies have most often used this concept, a misconception arose identifying reciprocity with such traditional practices as gift-giving in small-scale societies. Although reciprocity is indeed characteristic of small peasant communities, the rise of market systems undermine these traditional practices. Modern social democracy substitutes institutionalized reciprocity. National populations, in effect, agree that fellow citizens facing catastrophic situations – such as ill health or disability, an impoverished old age, childhood poverty, or prolonged unemployment – will receive state assistance without the need to repay their financial debt. State-managed social protection schemes, by socializing certain risks, constitute institutionalized reciprocity.

Redistribution also forms part of the expanding social economy. Redistribution, in Polanyi’s terms, denotes a system in which resources (goods, natural resources and/or money) flow to a central node, and are then redistributed by the authorities in accordance with “custom, edict or ad hoc central decision”. Polanyi adds that the “collecting” of goods is only notional: what is crucial is that the central authorities have the power to allocate certain resources. Although historically redistribution was associated with empires and kingdoms, we should not equate this principle of integration with autocracy and oligarchy. Redistribution may also operate in societies governed through democratic procedures. The social-democratic state engages in extensive redistribution in the form of progressive-tax financed cash transfers, high-quality and accessible public educational and health facilities, public housing schemes and land transfers from the wealthy to the poor via state programs. Markets persist and calculating, economizing behavior continues in certain spheres of material needs production and distribution. However, regulations, statutes and transfers embodying norms of equal opportunity, solidarity, healthfulness and (perhaps) ecological sustainability partially re-embed economy in society.

Social-democratization thus leads to a hybrid economy in which the three principles of rational behavior – reciprocity, redistribution and market exchange – co-exist. With the rise of capitalism, market exchange predominated. Motives of personal gain and fear of hunger guided economic activity in a world in which labor and land, in addition to capital, consumer goods and services, were available to the highest bidder. People assumed a market mentality of possessive individualism. But the damage incurred by such a system led people to push back. The result, in the case of the social-democratization of capitalism, was some degree of decommodification of labor in particular and a redistribution of power and resources. Clearly, this arrangement cannot develop without a mobilized civil society and a deeply democratic system.  It is the ensemble of regulation, institutionalized reciprocity and redistribution, in addition to the independent activities of civil society, which decommodifies labor, and sometimes land, education, housing and health services as well.

It is difficult to sustain such a system, but arguably worth the effort considering the dearth of viable alternatives.

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