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This book outlines the reasons for the development of and need for social democracy and the welfare state. It begins with the reaffirmation that post-2008 Anglo-America has seen the greatest concentration of wealth since the Great Depression, some nine decades earlier. The book reviews the thought of classical liberals like Adam Smith, democratic theorists like Alexis De Tocqueville and Matthew Arnold, and early social democrats like John Stuart Mill and Beatrice Webb. It further details the reasons for the derailing of the welfare state. Milton Friedman's ideas about the free market were institutionalized by Ronald Reagan in the US and Margaret Thatcher in the UK, both of whom dismantled the welfare state, or as much of it as possible. The book talks about the collapse of the Grand Narrative of the Left in the 1980s and 1990s. How this led to the 'great forgetting' in Anglo-America, and to a lesser extent in continental European social democracies and welfare states as well, is discussed. The book argues that 'forgetting' the past success of social democracy has been costly. It highlights that globalization does not explain unemployment in Anglo-America; nor is it the cause of inequality in either the US or the UK. A comparison of Anglo-America's social model with the European social model of the welfare and social democratic states of continental Europe, follows. Even with the high unemployment rates of the European Union, most of Europe is still as economically efficient as the US and the UK.
This introduction presents an overview of the key concepts discussed in the subsequent chapters of this book. The book begins with the reaffirmation that post-2008 Anglo-America has seen the greatest concentration of wealth since the Depression, some nine decades earlier. It reviews the thought of classical liberals like Adam Smith, democratic theorists like Alexis De Tocqueville and Matthew Arnold, and early social democrats like John Stuart Mill and Beatrice Webb. The book outlines the reasons for the development of and need for social democracy and the welfare state. It argues that globalization does not explain unemployment in Anglo-America; nor is globalization the cause of inequality in either the US or the UK. The book compares Anglo-America's social model directly to the European social model of the welfare and social democratic states of continental Europe.
The nineteenth century is largely invisible; it exists without context, memorialized in fragments in museums, theme parks, and heritage sites. It is enshrined in official memory as nostalgic triumphalism, such as Francis Fukuyama's infamous declaration praising the end of history and the victory of Western idealism and liberal democracy. In truth, the US had become more like a Latin American oligarchy than a mixed economic democracy, more like Mexico and Russia than Sweden or France, when measuring the concentration of economic power. Outside the US and the UK, the concentration of income and wealth diminishes considerably, notably in the European social democracies. In the US, the 2005 Maxwell Poll on Civic Engagement reported that 80 percent of the population thought inequality was a problem. Globalization also has played a role in growing inequality; it has greatly increased the power of the corporation, both economically and politically.
Moral economy took precedence over the freedom to trade without hindrance. It was based on the human ability to feel the pain and pleasure of others, and to set that as a priority. Adam Smith did not believe that pleasure could or should be derived from self-love or "self-interested consideration". Only public virtue and right actions could reduce excess. The reduction of excess would lead to greater equality, and therefore greater happiness. Alexis de Tocqueville believed that American democracy could only be fulfilled if liberty was joined to equality. Tocqueville's conviction was clear enough; no democracy can long endure without social equality. Unlike modern neo-liberals, John Stuart Mill was convinced that setting limits to wealth, by establishing the principle of social equality, was the basis of the general wellbeing of society. In his essay, "Equality", Matthew Arnold noted that everyone in England defended equality before the law.
The welfare state was actually born of consensus, and was more the product of reformist liberalism in late nineteenth century than the product of twentieth-century idealism. World War I was only the beginning of what would become a chamber of horrors. John Maynard Keynes thought, with the examples of Depression and World War I behind him, that economic collapse and a return to political extremism could only be forestalled by increasing the role of the state. He admired socialist utopianism for three reasons: its passion for social justice, the Fabian ideal of public service, and the elimination of the love of money or the money motive. The Social Democrats of Scandinavia provided illustration of what could be accomplished by economic planning and regulation without resorting to nationalization and state ownership.
Like all fundamentalist faiths, no matter how much Milton Friedman tried to base his theories on the principles of 'science', his system was a perfect circle. For Friedman, the welfare state induced dependency, and therefore prolonged poverty. Milton Friedman did not believe in social equality, only in the equality of opportunity. The world view of Friedman and the Chicago circle did not gain traction until the mid-1970s, when several upheavals brought challenges to the consensus supporting welfare states and social democracies. The transformation from an industrial to a service economy had dramatic consequences. Deindustrialization of many of the old industrial centers in the US and UK decimated the working class, the traditional electoral base of the Democrats in America, and the Labour Party in Britain. Armed with Milton Friedman's "freedom to choose" rhetoric, corporate America, soon joined by the political elites in Washington, including Democrats and Republicans.
The collapse of communism in the Soviet Union in 1989 precipitated triumphalist hurrahs from Francis Fukuyama, who was moved to project the "End of History" as such, and the global triumph of liberal democracy. Social democrats had always taken measures to distinguish themselves as the democratic alternative and asserted their willingness to compromise. The response of New Labour in the UK, Left Democrats in the US, German Social Democrats (SDP), and to a lesser extent the Swedish Social Democrats (SAP), was predictable. The German model of the welfare state was dedicated to the building of a modern society based on social insurance and class collaboration. The SAP government admitted that it had not been able to protect social welfare as promised following its return to power in 1994, but the state of social services became the dominant item on its agenda in 1997.
The Great Recession of 2008 and its aftermath alerted us to the dangers of an unfettered and unregulated market. Deregulating and liberating the market from a regulating state has proven to be debilitating, reminding us that a state that regulates too little can be as dangerous as a state which regulates too much. Those who wield political power know that social inequality does not just happen, nor is it the inevitable result of the freeing of markets. Ironically, as the state has become deregulated and privatized, especially in the Anglo-American world, it has also showered more favors than previously on the corporate world, which is the biggest beneficiary of both deregulation and privatization. The privatization of the state means a further receding of the public sphere, and a shedding of the responsibilities of the state toward our collective welfare.
Shortly into the twenty-first century, a new master narrative resurrected the old mythology of globalization: universal economic and financial integration would lead all of us to endless productivity and unlimited economic growth. An apt illustration of the divergence between the interests of the financial and political elites and everybody else in Anglo-America was unintentionally made by Bill Clinton during the years of his presidency. Throughout his tenure he told Americans to go out and get the training they needed for the good jobs in the emerging global economy. As many in the US continue to debate global warming while accusing environmentalists of tree hugging, European businesses have generally been more committed to an enduring social contract. Moreover, Europeans, by all measures, were among the happiest in all developed nations, precisely because of their welfare states and social democracies.
America, with its naive faith in the so-called free market, which it has celebrated as a universal curative, has tended to deride the miracles of Europe. Europe has achieved postwar peace, prosperity for most Europeans, even in the crisis years following the Great Recession of 2008, social justice, and ecological protection undreamed of in the US. Americans have less health coverage than Europeans, and they do not live as long; and America no longer has a distinct advantage in wages and productivity. The European social model protects people against accidents of nature, it sustains families against the ravages and unpredictability of economic downturns, it constrains social inequality, and it helps families avoid poverty. Americans tend to blame social democracy and the welfare state for Europe's unemployment and lack of growth.