Liberalism, Socialism, and Democracy

What, if anything, can be usefully salvaged from the socialist tradition, now that communism lies in final disgrace? Paul Starr argued in these pages last fall that four developments -- the implosion of communism, the collapse of efforts to reform communism from within, the failure of socialism in the Third World, and the shift of European socialists toward liberal policies -- should persuade American liberals that socialism ought not to be part of our vision of an ideal society.

What follows is less a rejoinder than a brief for social democracy, as a tradition that loathed communism and may yet enrich liberalism. Social democracy, for at least a century, has been the domesticated form of socialism -- a vaccine made of benign cultures that can inoculate against the ravages of both communism and laissez faire.

Social democracy, certainly, is no mechanical third way. As a worldview, it accepts private ownership and parliamentary democracy, yet retains a broadly egalitarian ethic and keeps a weather eye on the nastier tendencies of capitalism. Social democracy does not propose to supplant capitalism, but to tame it. So, in a sense, does liberalism -- but the differences are telling.

Like liberalism, social democracy belongs to the tradition of a limited state based on political rights and civil and social liberties; it has no sympathy for either command planning or command politics. In our century, social democrats have also been among the most resistant to dictatorship and the most inventive in demanding that if the state is to be an engine of progress, governments must be both accountable and competent. Social democracy resists extreme inequality but does not advocate absolute equality. Yet social democracy does go somewhat beyond liberalism as generally understood. And it does reflect some constructive influence of democratic socialism, particularly in its insistence that capitalism be understood as a system. It is this virtue that most distinguishes social democracy from liberalism, yet also makes it an important ally of liberalism.

Understanding the dynamics of how capitalism, as a system, tends to intrude on both the democratic polity and on the social viability of a market economy itself is essential to a politically sustainable liberalism. The dilemma is only compounded by the globalization of markets that out-run national polities. In my reading, especially of recent thinkers, I find the best insights on the dilemma of reconciling capitalism and democracy in the work of social democrats and democratic socialists.

Thus, though liberalism and social democracy substantially overlap in their vision of a good society, notably in their policy particulars, this ideological distinction is more than a semantic or sectarian one. These labels, and their resonances, invite careful differentiation. Social democracy is not merely a prodigal mutant of liberalism, now free of its youthful socialist indiscretions. On the contrary, American liberalism is often vulnerable, analytically and politically, precisely because it has not learned more from its social democratic cousins. My purpose here is to persuade the reader that a bigger dose of social democracy would enrich liberalism, not confuse it.

The liberalism of America's Founders was a rather conservative brand of liberalism, one that sought restraint on the passions of the masses as much as it sought limits on the abuses of the state. As industrial capitalism developed, the challenge of building a good society, of assuring ordinary people life, liberty, and the pursuit of happiness, necessarily evolved with the new economic circumstances. The anomalies and cruelties of a market economy came to be as much of a threat to ordinary life and to civil society as the threat of state tyranny. Twentieth-century liberalism, particularly at its New Deal zenith, rejected laissez faire and embraced economic intervention. It nominated the state as the agency of intervention, invoking, in Herbert Croly's famous inversion, "Hamiltonian means for Jeffersonian ends."


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At its most potent moments, the liberalism of the Progressive and New Deal eras was indeed influenced by socialism. The progressives were wary of concentrated wealth, for political as well as egalitarian reasons. New Dealers understood that market economics could be at odds with other liberal objectives; that markets needed to be tempered for the sake of economic stability and efficiency, as well as for broader opportunity and distributive justice. The high-water marks of the New Deal, like Roosevelt's little-remembered 1944 Economic Bill of Rights, were nothing if not social democratic.

But these innovations in a time of upheaval left only weak roots, in inhospitable soil. They stopped short of fundamental revision of the liberal creed. Individualist liberalism returned as soon as the storm passed and the sun came back out. As Louis Hartz presciently observed in 1955, Roosevelt lacked either a serious socialist challenge on his left or a convincing conservative challenge on his right, so he resisted ideological revision and sold his reforms as merely pragmatic. Albert Hirschman, writing a quarter-century later, at the dawn of Reaganism, ruefully commented on Hartz's insight, "Today, of course, we can appreciate the high cost of Roosevelt's maneuver. The New Deal reforms ... were never truly consolidated as an integral part of a new economic order or ideology."

To be sure, it is not entirely fair to blame something called "liberalism" for the extreme individualistic tendencies of American society, which make it so difficult for a politically robust liberalism to take root. Nor is it realistic to expect that European social democracy, which grew in a rather different soil, could simply be imported whole and expected to thrive. My point is that liberalism, which today has reverted to one of its conservative moods, is strengthened and not weakened when it learns from social democracy. This is less a brief for a social democratic label -- in America the label of choice for our kind of politics is necessarily "liberal" -- than a plea for a social democratic sensibility.

Europe's social democrats, developing a welfare state and a Keynesian strategy of economic stabilization roughly in parallel with American liberals, nonetheless had a somewhat different understanding of what they were about. As part socialist and part liberal, they understood the enterprise not just as spreading social benefits or fighting unemployment, but as taming capitalism and as building a durable political constituency to make that enterprise electorally possible. Sometimes they overreached and embraced excessively statist mechanisms. But they understood that attaining some social control over private capital was a necessary part of building a sustainable mixed economy. I am sympathetic to social democracy, not as a bridge to socialism, but as a bridge to a more durable liberalism.

The taming of an economy whose dynamics are fundamentally capitalist is an excruciatingly difficult political and institutional endeavor, for market forces keep relentlessly encroaching on whatever social bargains are made. To grasp that, one needs to think hard about capitalism as a system. Social democrats at least take the exercise seriously; many American liberals seem to be uncomfortable with it. A decade or so ago, when the social democratic compromise began to falter seriously, it was voguish in democratic-left circles to insist that one had to go "beyond social democracy, to democratic socialism." Alternatively, other social democrats retreated into neoliberalism and settled for Keynesian tinkering around the edges. This debate sometimes had the familiar, tedious whine of left-sectarian politics. Yet it also signaled a willingness to think hard about the dynamics of taming capitalism as a system -- something all too rare among liberals. Most American liberals, like Roosevelt, still sell their reforms "as merely pragmatic."


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Admittedly, American liberalism and European social democracy are under assault from similar forces. These include the globalization of commerce, the fiscal limits of redistribution and macroeconomic management, the oddly conservatizing effects of slow growth, the erosion of trade-union solidarity, the crowding out of civic forces by market forces, and the timeless appeal of radical individualism for society's haves. Superficially, labor and social democratic parties in the west have suffered the same political reverses. Yet they are better bolstered to recover, it seems to me, because they have more systematic understanding of what is taking place.

The social democratic/mixed economy compromise came unstuck in the early 1970s, on both sides of the Atlantic. There followed an era of conservative rule, which attempted to resurrect a purer free market, celebrate individualism and entrepreneur-ship, pare back the welfare state, and thus rekindle economic growth. The conservative project failed; its diagnosis was mistaken and its remedies flawed. But the collapse of communism is taken as a vindication of the conservative brand of classical liberalism -- laissez faire. While there is no mechanical third way, just as there is no "moral equivalence" between the failures of, say, Thatcher and Brezhnev, we liberals nonetheless need to resist the laissez-faire triumphalism that falsely follows from the death of state socialism and remember the systemic flaws in pure capitalism.

There is now an opportunity to revive a center-left. However, the social democratic version of this conversation often tends to be richer than its liberal counterpart. And the liberal version remains vulnerable to a set of fallacies that flow from its connection to classical liberalism. In Europe, the question of how to revive a social market economy -- the euphemism of choice for social democracy -- in the face of transnational private commerce is a center-stage public debate. In America, the counterpart debate is largely dismissed as merely a subterfuge for economic "protectionism," the latter being a sin defined by the lexicon of classical economic liberalism.

Another concept central to social democracy and almost entirely marginal to American liberalism is the idea of "social solidarity." In the development of the social democratic compromise, two things became clear early on. First, public policy had to create loci in which solidarity values could flourish. Social solidarity means an ethic based on the treatment of people as citizens with equal rights and entitlements, rather than as consumers purchasing commodities in a marketplace based on their private incomes. These oases of solidarity values were necessary as a counterweight to the ethic of radical individualism and the political power of individual and corporate wealth. They include, above all, trade unions, and also universal programs of social income, based on the criterion of citizenship rather than destitution or prior contribution. Second, class mattered immensely. Unless the broad class of non-wealthy wage earners remained in a high state of political mobilization, both solidarity values and the political constituency for the center-left party would melt away.

Now, it is possible to find some version of this conversation in the opus of American liberalism, if one looks hard enough, though this is not primarily what American liberals talk about. Writers who come immediately to mind include Charles E. Lindblom, whose discussion of the disproportionate power of money in a political democracy in Politics and Markets is a classic; in this category one would also put Robert Heilbroner and Walter Dean Burnham. But all three, and others like them, are liberals who have been influenced by socialism. Indeed, the most astute writing in the genre tends to come from liberals who have considered themselves of the left, at least long enough to have read some Marx, and are best classed as recovering socialists. Marx himself, as Schumpeter was among the first to distinguish, was a false prophet and an incompetent social architect -- but still worth reading as an analyst of capitalism. (Marxists eavesdropping on this discussion will find it hopelessly meliorist, if not downright reactionary, which suggests that our own differences are quite manageable.)

Lindblom's way of looking at politics, appreciated in the academy, has had lamentably little influence on the popular conception of political economy -- far less than, say, the lingering influence of neoclassical economics. Politically, the more resonant construct is that of thinkers like Theodore Lowi or Mancur Olson, whose subject is the degradation of pluralism and the eventual gridlock of politics itself. It is a slippery slope to the inference that we'd better just trust markets.

In American discourse, solidarity issues simply don't resonate, even among many liberals. Trade unions, for the most part, get a terrible press. They are seen as just another self-interested pressure group rather than the logical and necessary constituency for a mixed economy. Given the chronic economic insecurity and hence conservatism of wage earners, unions are essential if wage workers are to be the constituents for a broad agenda of social justice rather than quick to blame the systemic failures of capitalism on immigrants, blacks, or Japanese. Conservative liberals tend to desert labor -- and even some labor unions tend to desert labor, with devices like a two-tier wage structure, because the labor movement itself partly reflects American individualist rather than solidaristic traditions.

In liberal America, concerns about the political power of concentrated wealth are too easily dismissed as merely the politics of envy rather than a Lindblom-style worry about asymmetry in political power. Because of our weak social democratic tradition, leftish impulses are frequently orphaned or misunderstood. Populism, the inchoate and ideologically amorphous cry for economic justice, often finds a home on the right rather than the liberal left. It is sneered at by enlightened commentators as unseemly class warfare or nativism. Social democracy in contrast is seemly, ritualized, and ultimately a more durable class conflict on behalf of wage earners.

Another contemporary liberal movement with populist overtones is consumerism. But in a political culture with no social democratic idiom, consumer advocates tend to couch their criticism of corporate power as the right of individual consumers not to be overcharged, poisoned, polluted, or otherwise ripped off. This is admirable as far as it goes, but consumerism quintessentially speaks the language of markets, not the idiom of social solidarity. It stops just short of a systematic critique of a market economy, and it doesn't connect as fully as it might to other progressive constituencies. In the absence of a social democratic context, the consumerist critique sometimes even overreaches by seeming viscerally and unreasonably anti-corporate per se (but wait, don't we need corporations to provide jobs?) -- rather than an effort to tame corporations and turn them to public purposes, in the manner of European social-market corporatism.

Social class is seldom an explicit part of the American political conversation. And attempts to inject discussions about some of the uglier systematic tendencies of capitalism itself are characteristically rejected by many liberals as tendentious and childishly radical. Indeed, my social democratic friends keep insisting that their critiques of particular market failures -- in health care, housing, transit, financial speculative excess, environmental pillage, and so on -- be anchored in a systemic critique of capitalism. This formulation invariably elicits a weary wince from my liberal friends, who see the reference to "capitalism" as merely an archaic left-wing rhetorical flourish rather than a necessary analytical frame.


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The liberal resistence to social democratic insight also helps explain why our form of liberalism is so chronically vulnerable to the tendency to flake off into neo-conservatism. Many liberals in the 1980s joined conservatives in exaggerating the potential of deregulation and privatization, and in the false logic of sacrificing equity to growth. Conversely, the liberalism of the 1960s was too ready to target the poor as a separate population, rather than anchoring anti-poverty in a broad, solidaristic agenda. And when the anti-poverty crusade produced a backlash, some liberals abandoned the poor entirely as a political albatross. Social democracy is a good antidote to liberal fragmentation.

Take the issue of the budget deficit. The obsession with deficits and savings rates is now being argued -- by Brookings-style liberals -- as if Keynes had never lived. For example, the claim advanced by Charles Schultze in the 1990 Brookings volume on economic choices that "the United States" was on a "decade-long consumption binge" is a compositional fallacy that no social democrat could ever make. This formulation ignores the fact that during the 1980s the real incomes of more than 70 percent of Americans dropped. Who is to be the constituency for a politics of budget balance uber alles? On what kind of pre-Keynesian economics is it based? But this is precisely the legacy of conservative liberalism, which is to ignore questions of social class and the relationship of wealth to political power, and to seek technical solutions.

Conservative liberalism tends to be uncomfortable with "the passions," preferring a politics based on cool, rational, secular self-interest and institutional invention. With the Constitutional Founders, liberalism mistrusts mass movements, which it fears as potentially despotic. While the liberal tradition has good reason to worry about the tyranny of majorities, in modern industrial capitalism mass movements are often indispensable if the power of wealth is to be offset by the power of people. Without mass movements, occasionally even impolite ones, energizing civic life -- the labor movement, the women's movement, and the civil rights movement come to mind -- we are left with a bloodless, cerebral, and feeble politics.

Take the issue of universalism in social entitlement, one of The American Prospect's favorite causes. Many liberals, particularly the "neo" sort, conceive of paying Social Security pensions to the middle class as fiscally irresponsible and socially odd, since society obviously has more deserving cases who could use the money. In the end, the neo-liberals shrug and conclude that this must be mere "bribery" of the middle class. The most convincing defenders of universalism understand its logic in terms of class alliance and wage-earner solidarity. Not coincidentally, William Julius Wilson and Theda Skocpol -- and your faithful essayist -- are all self-described social democrats.

Take the issue of health care. Market-influenced conservative liberals make the mistake of imagining that some yet-to-be-invented system of consumer choice may somehow allow society to offer universal health care while using market mechanisms to discipline providers. But this is delusional, for any universal entitlement is no longer operating in market-land. It can use some "market-like" devices, but to be efficient it requires universal rules specified by government. Moreover, the more opportunity there is for the well-to-do to opt out, the more the constituency for a solidaristic approach tends to erode. It might help if we admitted George Bush's charge that providing health care on the basis of to each according to his needs is, well, a wee bit socialist. Likewise free public education. The need to counteract capitalism's relentless "commodification"of human life is a socialist insight.

It is true that nearly every social democratic policy invention can be found somewhere outside the socialist tradition. Free public education was invented in Massachusetts, in the 1660s, nearly two hundred years before Marx. And, as we all know, social insurance was invented by Otto von Bismarck. Yet Bismarck championed social insurance largely because the rising Social Democratic Party was beginning to capture the affection of Germany's industrial workers, whose allegiance Bismarck wanted for the Prussian crown. And in this century, it is fair to say that labor and social democratic parties have done a better job than either conservatives or liberals at both extending and defending social entitlement.


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This brings me back to political and ideological history. Liberalism is partly an ideal type -- a philosophical construct with knowable boundaries. But the liberalism that has existed in historic time has been rather more supple, fluid, and evolutionary. The "New Liberalism" of Hobhouse in Britain of a century ago, the radical liberalism of Lloyd George, and of course the New Deal liberalism of FDR indeed created ambiguities about the boundaries between liberal and "left." But didn't liberalism grow stronger precisely when it was receptive to the influence of democratic socialism?

Some left-liberals, such as John Dewey, thought liberalism might lead to democratic socialism. Others, such as John Stuart Mill, were receptive to socialist ideas at the level of the firm, but not the entire economy; and, on balance, Mill considered himself an anti-socialist. However, while Mill can be revered as a buried treasure of democratic liberal theory, the evolution of modern liberalism and social democracy did not proceed mainly via Mill, but via Roosevelt and Reuther, Keynes and Attlee, Palme, Brandt, Mitterrand, et al, with a strong assist from the labor movement. As for Dewey, just as there is no Manichean wall between liberalism and social democracy, we cannot fairly divide Dewey into the educational prophet whom we admire and the soft-headed philosopher who was naive about socialism. His views on universal public education were not unrelated to his receptivity to socialist ideals.

Social democracy has been around since the schism within German Marxism over a century ago. In the postwar era, social democracy pulled back even further from its socialist ancestry and became more clearly allied with the liberal tradition. But it preserved basic insights and instincts having to do with the limits of marketization, the virtue of social solidarity, the need for social limits if not controls upon private capital, and a comprehension of the relations between class, money, and political power in a market society.

At bottom, the common goal of the editors of this journal is to repair and reclaim American liberalism. My own personal heroes in the field of political economy -- Keynes, Polanyi, Joan Robinson, Galbraith, Hirschman, Heilbroner, Lindblom, Dean Bumham, Irving Howe, and the late, sainted Mike Harrington -- are all people of liberal spirit who blurred the bounds between liberalism and socialism somewhat, and by so doing served to push liberalism outward. Our task today is to do the same, and particularly to infuse decent social and economic policy with a durable politics. By all means, let us define clear boundaries between a liberal society and either a command economy or a dictatorship. But in doing this we should not just make room for social democracy on our side of the line, but also cherish it.

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