Remaking the Centre

For more than a generation, what Europeans call social democracy and what Americans call liberalism has been the dominant political creed of the North Atlantic world. Its achievements have been enormous. As Ralf Dahrendorf points out in his important and persuasive pamphlet, ‘After Social Democracy’,* ‘it has turned the empty promise of freedom of contract into effective citizenship rights; the welfare state lies at the heart of social democratic politics. It has proved the ability of open societies to change without revolution; the varieties of Fabianism are, among other things, a triumph of democracy. It has spread the belief in a rational society; human improvement by education, social improvement by the uses of science, decision-making by rational discourse are all a part of the prevailing creed.’

The welfare states of North-Western Europe and North America are not only richer than any previous societies have been. They are also freer, more equal and happier. For this, social democrats deserve most of the credit. In or out of office, they have drawn up the agenda of politics; until recently, their opponents on the right were much more anxious to claim the social democratic legacy for themselves than to challenge or dismantle it.

But no longer. In most of its old strongholds, social democracy is now unmistakably on the defensive. In Britain, Labour’s social democratic right is a small minority of the party outside Parliament, and has only a bare majority even in the Parliamentary Party. The equivalent Conservative tradition – the tradition once exemplified by Harold Macmillan and Iain Macleod – is in eclipse. Outside formal politics, the intellectual running is increasingly being made by neo-Marxism on the left and by a curiously febrile neo-liberalism on the right. Mutatis mutandis, much the same is true of the United States. The old Roosevelt Coalition has collapsed; though the Democrats are still the majority party, their ideological centre of gravity has shifted from the social democracy of the New and Fair Deals towards a helpless, hand-ringing conservatism. Even in Scandinavia, the social democratic hegemony of the last forty years seems to have been broken. Helmut Schmidt still reigns fairly securely in Bonn and Bruno Kreisky rather more securely in Vienna. Elsewhere, the social democratic lights are dimmed at best.

One reason, no doubt, is simply that politicians and intellectuals like novelty as much as anyone else. Yesterday’s wisdom is always a little boring, even if it is true. The day before yesterday’s can be made to sound smart, even if it is false. But there is more to the current eclipse of social democracy than a change of fashion. In two critically important respects, the social democracy of the last forty years – the social democracy of the New Deal in the United States or of the ‘Attlee consensus’ in this country – can no longer provide solutions to the most pressing problems of the day.

Almost by definition, it cannot provide solutions to the problems which it has itself created. Like all successful political movements, social democracy has been a victim of the law of unintended consequences. The slums have been cleared, but the tower blocks which replaced them have bred rootlessness and delinquency. Grammar schools have been abolished, but the independent schools have been strengthened and it is probably harder for bright working-class children to reach the top. Industries have been nationalised, but public monopolies have turned out to be as hard to control as private ones. Trade unions have been freed from judicial restrictions, but they have become less and less answerable to their members. Taxation has become more progressive, but the black economy has flourished. The savage, unregulated market of the 19th century has been tamed, but it has become increasingly clear that the tamers themselves now need taming.

The central discovery of the founding fathers of social democracy was that the Economic Man of the 19th-century was a fiction; and that, because of this, the invisible hand of free competition would not always produce the greatest happiness of the greatest number. Their solution was to call in the polity to redress the balance of the economy: to allocate more resources through the state and fewer through the market, and to give the state instruments with which the market could be rigged. This solution attracted them partly because it was convenient. The state was there, and no other agency was at hand. But that was only one of the reasons why they were attracted to it. Another was that, as good democrats, they assumed that a combination of universal suffrage and the traditional liberal freedoms would subject the state to the popular will. Though they were properly sceptical of the liberal doctrine that the market always does what the consumer wants, they were hopelessly naive about the corresponding doctrine that the Government always does what the voter wants. And so decisions made through the political process seemed to them both more efficient than, and morally superior to, decisions made by the market.

We know better now. The first and most obvious reason why social democracy is now on the defensive is that the political assumptions of 19th-century liberalism have turned out to be as fallacious as its economic assumptions. It has turned out that the polity cannot be relied upon to redress the balance of the economy, and that politicised decision-making is not inherently better than market decision-making. The unregulated market of the 19th century was capricious and cruel, but an unregulated state is likely to be even more so; and the state is much harder to regulate than the market ever was. But although social democracy has been extraordinarily fertile in expedients for regulating the market, it has shown little or no interest in regulating the state. As a result, one of its chief legacies is an overmighty state which is also becoming, in the current jargon, ‘overloaded’.

Not only can the social democracy of the last forty years offer no solution to the problem of ‘overload’: it also offers no solution to the complex of problems summed up in the notion of the ‘limits to growth’. More than any other political creed, more even than 19th-century liberalism or Stalinist Communism, modern social democracy has put its faith in continuous economic growth. The second obvious reason why it is now on the defensive is that economic growth, even if it is still feasible, is clearly enormously more difficult than it was in the Fifties or Sixties. For if growth is more difficult; peaceful redistribution is also more difficult, and one of the central postulates of the social democracy of the last forty years is that peaceful redistribution is not only possible but easy.

Read against this background. Professor Galbraith’s collection of book reviews, essays and travel pieces is doubly disappointing. Annals of an Abiding Liberal is a classic example of vanity publishing. It has no message – except, perhaps, that Galbraith is an important man, with important friends in important places – and no unity. It contains a few economic essays, which repeat old themes more powerfully developed elsewhere. There are a few rather laboured humorous pieces, written with a heavy facetiousness, which presumably some find funny but which I found unbearably arch. There are several book reviews, one or two of which are mildly interesting. The only piece which seems to me to have been worth reprinting is a sympathetic and moving little essay on Thorstein Veblen. The rest would have been better left to oblivion.

Yet the book has a strange, back-handed kind of importance. Professor Galbraith is, after all, one of the gurus of the social democracy of the past forty years. If Crosland’s Future of Socialism was the Old Testament for my generation of social democrats, Galbraith’s Affluent Society had a good claim to be the New Testament. We used his now rather shop-soiled paradox – ‘private affluence and public squalor’ – to justify any increase in public spending, however wasteful, and any extension of the public sector, however mischievous. The object of a reforming politician, we told ourselves smugly, waving our Galbraiths aloft, was to increase the ‘social wage’: in other words, to take people’s money away from them in order to give it to highly-paid bureaucrats to spend it on their behalf.

It was nonsense, of course. But fifteen years ago it was – at least, I hope and believe it was – forgivable nonsense. The public sector was, after all, much smaller than it is now. Though the Whitehall mandarinate was, if anything, even more secretive and unadventurous than it is now, it did not fight quite so flagrantly to defend its own privileges and extend its power. The scandal of local government reorganisation was still to come. The public-sector unions had not yet revealed their full potential for rapacious disregard of the public interest. Parliament had not yet revealed its hopeless inability to control, or even to monitor, the spending of public money. Above all, the recession had not yet started; and we were still strangers to the alarming new world in which the public sector is much better protected from squalor than the private.

Now that all these things have happened, however, one might have expected the world’s leading champion of the old equation between social virtue and the social wage to notice that something has gone wrong – or, if that is asking too much, to notice that large numbers of people clearly think that something has gone wrong. Such expectations would have been vain. Professor Galbraith emerges from these pages as the Bourbon of the social democratic Establishment who has learned nothing and forgotten nothing. His solution to the agonising new problems of the late Seventies and Eighties is to repeat the old social democratic slogans of the Fifties and Sixties. Public spending is good, and private spending is bad. The notion that taxpayers are in revolt against high public expenditure is a myth, put about by the Wall Street Journal. The solution to our current economic ills is to combine the old Keynesian remedies with an incomes policy.

As it happens, I think he is right to advocate an incomes policy. But incomes policies have, after all, been tried rather often in this country; so far, they have all collapsed in the face of trade-union hostility and public apathy. This is not to say that they should not be tried again: they do offer the only way of combining low inflation with low unemployment. But it is to say that advocates of an incomes policy should acknowledge the enormous political obstacles to success, and think hard about the best way to overcome them. Professor Galbraith merely tells us that incomes policies are good things, which is about as useful as telling an advanced alcoholic that he should never have started to drink.

Yet, by a strange paradox of intellectual myopia, Professor Galbraith’s own theory offers, if not a solution, then at any rate the beginning of a diagnosis. The central theme of virtually all the economic essays in this book is the distinction between the ‘market system’ and the ‘planning system’: in other words, between that part of the economy where market forces still operate in the old textbook fashion, and the part where giant firms and giant unions can bend the market to their will. This distinction is a crucial one, and the books in which Professor Galbraith first drew our attention to it are of enduring value.

For the ‘planning system’ is, of course, the source of most of our troubles. It generates the wage-cost pressures which make incomes policies necessary; it gives union leaders the muscle with which incomes policies can be destroyed. It, moreover, frustrates all three of the most widely-advocated solutions to the present crisis. The traditional social democratic solution, tried by George Brown and Harold Wilson in the Sixties and by Michael Foot and Jim Callaghan in the Seventies, is the ‘social contract’ – a private deal between the Government and the unions, by which the unions trade wage restraint in return for extensions of their organisational power. As the last Government showed, such a deal can bring inflation down, but only at the cost of progressive industrial sclerosis. The neo-liberal solution, currently being applied by the present Government, is, in effect, to act as though the ‘planning system’ did not exist. Not surprisingly, this simply makes the crisis worse. The neo-Marxist solution, peddled by Tony Benn and Stuart Holland, is to take over the planning system by huge extensions of public ownership. That would produce even faster industrial sclerosis than we have already, and make the state even mightier and more overloaded.

It is silly to pretend that there is an obvious way out. The one undoubted lesson of the past fifteen years is that obvious solutions do not work. But two things do seem fairly clear. The first is that, since the ‘planning system’ is the source of the problem, we ought to do all we can to strengthen the ‘market system’ at its expense – by helping small firms, by encouraging worker co-operatives, by giving incentives to self-employment, by penalising energy-intensive technologies and fostering labour-intensive ones, by working with the social forces which are steadily enlarging the ‘black economy’ instead of against them. The second, however, is that such measures cannot conceivably eliminate the ‘planning system’ altogether; that, since the ‘planning system’ will remain with us for the foreseeable future, the problems to which it gives rise will remain with us also; and that, since these problems are political rather than strictly economic in character, the solutions will have to be political as well.

Professor Galbraith does not even recognise that these problems exist. Professor Dahrendorf does not solve them either, but he does at least see that they cannot be solved within traditional social democratic terms. As he puts it in his final paragraph,

at this point, there are no signs at all that a centre party based on the present right wing of the Labour Party will be any more forward-looking than the ruling Social Democratic parties on the Continent. The issue today is not how to be social democratic, much as this may agitate the victims of adversary politics. The issue is what comes after Social Democracy ... [It] will have to be an imaginative, unorthodox and distinctive liberalism which combines the common ground with the new horizons of the future of liberty,

Unlike Professor Dahrendorf, I do not believe that the ‘imaginative, unorthodox and distinctive liberalism’ he wants can be brought to bear on our politics unless the present party structure is smashed; and I do not believe that the present party structure can be smashed unless the social democrats of Labour’s ‘radical right’ recognise that their attitudes have to be revised, that this cannot be done within the existing Labour Party, and that a new force of some kind is required. Whether that new force should be a new party, or an enlarged, and to some extent reconstituted, Liberal Party, is a subordinate question. What matters is that it should come into existence. Professor Dahrendorf’s phrases sum up the direction in which it will have to move. We shall not escape from our present impasse until it does so.