Neoliberals and Social Democrats

Arnold Kling has a post up in which he complains that the terms ‘neoliberal’ and ‘social democracy’ are both vague and perjorative. Neoliberalism "gets used as an undefined all-purpose boo-word." And "If neoliberalism is the ill-defined boo-word, then social democracy is the ill-defined yay-word."

The post never really separates the two complaints, though, and so they come across as having equal weight. I’d prefer it expressed a little differently. Yes, "neoliberalism" and "social democracy" are ill-defined, but then so are a lot of useful political terms. For my money, the problem is with the prejudice. And yet, it’s an interesting side-effect of prejudice that negative connotations are more linguistically destructive than postiive ones. If we feel we have a better idea what "social democracy" means than "neoliberalism," then primarily because social democracy is no one’s bogeyman.

It’s interesting that neoliberalism and social democarcy as political terms both describe moderating tendencies among opposing political and economic schools that arguably meet in the same, or at least overlapping, places.

If it’s hard to pin an exact date on when "social democracy" came into being, it’s not hard to trace its pedigree: marxist parties came to realize that forementing revolution was tactically ineffective. Worker uprisings tended to fail without coordination, and the government had gotten pretty good at preventing coordination, both by old-fashioned crackdowns, and modern Bismarckian policy compromises. The workers just weren’t radical or engaged enough to overthrow the entire social order when people were willing to give them healthcare, housing and occasional pay increases. So the radical left spilt, and Social Democracy is one of the results. If you had to put a date on it, it’s the 1925 Heidelberg Program – the platform adopted by the German SPD (Social Democratic Party of Germany) – in which the party, already committed to the idea of change through democractic means, took it one step further and agreed to work with "bourgeois" parties to acheive its goals. It was now a fully committed to the democratic system, right down to the notion that compromise wit opponents is a democractic value. The question of whether it were still allowed to call itself "socialist" was bitterly devisive on the German left at the time, and it arguably elected Hitler (since the KPD (Communist Party of Germany), under orders from Moscow to destroy the Weimar Republic, refused to cooperate or form a coalition with it, when a combined socialist front would’ve won the election with an absolute majority). After the War, following trends of similar parties in other countries, the SPD eventually dropped marxism and expressed a willingness to work within capitalism to achieve its social goals. Whether you take the German SPD or the Swedish Socialdemokraterna as the prototype, by the mid-1960s both vanguard parties were in the same place: they supported a heavily redistributionist social corporatist state, which endures as the definition of "social democracy" today.

Once upon a time – neoliberal was a similar moderating of classical liberalism in response to new economic realities. It started life as a contentful term in the 1930s and 1940s, refering to those people who had been classical liberals accepting that Keynesian approaches had won at least the practical argument, and so acquiescing to government interference in the economy, at least as far as smoothing the business cycle. As will happen, as the world leaned further and further leftist and state-interventionist, "neoliberals" pushed their compromise with state intervention further than further, ending in a place where they agreed with the provision of a social safety net as a proper function of government. Like with social democracy, the process really reached its apotheosis in the Soziale Marktwirtschaft of postwar West Germany. Here again, the economic substrate is free market capitalist, but the state is expected to intervene to keep the system "fair and humane," for some value of "fair" and some value of "humane."

So it really is the same process and (more or less) the same destination starting from different poles. The SPD committed to democracy to advance Socialist goals, and the neoliberals to the welfare state to slow down the Keynesian Drift. Both ironically ended up being what they started out trying to prevent: the SPD (and Socialdemokraterna) dropped Socialism and embraced a corporatist social state; the neoliberals dropped the ordoliberal insistence that the state intervention confine itself to promoting a proper liberal legal framework1 and embraced, what else?, a corporatist social state.

In what’s perhaps a rarity in political terms, both seem to mean exactly what you’d expect them to from a purely constructivist perspective. If "neo-nazis" are National Socialists who have adapted by dropping the portions of the platform that are maximally objectionable (concentration camps, world conquest, things like that), and if "neo-conservatives" are conservatives who’ve dropepd everything that isn’t directly related to promotion of the nation state, then it makes sense that "neo-liberals" would be (classical, given the timeframe) liberals who’ve jettisoned a lot of things that make (classical) liberalism unpopular. Likewise, "social democracy" is exactly what it says: from 1925 onward the SPD embraced support for democracy as a foundational principle. The "social" just tells you what their democratic aims are.

Now, however fair it may have been to see "neoliberals" and "social democrats" as two sides of the same consensus in the 1960s, it’s clear that they’re highly antagonistic now. "Neoliberals" are the left’s current bogeyman. But like a lot of things involving left-wing rhetoric, this seems to be really unfair. What everyone currently called "neoliberalism" has its roots in the 1970s and the Chicago Boys, a group of economic advisors to the Chilean military government comprised largely of prominent (classical) liberal economists. It then got extended to people like Margaret Thatcher and Ronald Reagan who, although inheriting power from governments that were already reformist, got blamed for the world shift toward more deregulated and free-market approaches to economy. Neoliberal has become associated with the people who facilitated the scaling-back of social democracy, and it’s understantable that there’s resentment about that on the left. What’s less clear is that there was any corresponding ideological shift among neoliberals themselves. If the neoliberals were scaling back social democracy in the early 1980s, then only because social democracy had had a lot of "success" (in implementing its program, anyway) in the preceding two decades. Ronald Reagan never challenged Social Security, though (in fact, he defended it), and Margaret Thatcher kept her hands off the NHS. It’s not all that clear to me that "neoliberalism" circa 1983 is any different from Soziale Marktwirtschaft circa 1953, though the political circumstances certainly were.

No, I think both "Social Democracy" and "Neoliberalism" are relatively clear, as political categories go. No doubt we’d prefer some definitive, written-down statement of first principles, but in the limit, I think people know what these terms mean. "It’s not the definition, it’s the prejudice," you might say. If "Neoliberal" seems fuzzier than "Social Democrat," then because it’s more likely to be used as a perjorative. And if "Neoliberal" is more likely to be used as a perjorative, then I think it’s because there’s some justified suspicion that its adherents are less sincere.

I think of it like dogs and cats. They’re both popular pets, but dogs are more popular, and they’re both domesticated animals, but dogs are more domesticated. Similarly, both social democracy and neoliberalism are domesticated versions of radical programs. Social democracy is watered-down marxism, and neoliberalism is watered-down laissez faire. They both exist because their forebearers made compromises in exchange for political gains, and in both cases the compromises got baked into their ideological DNA over time. But with neoliberals, like with cats, this process seems to be incomplete. Social democrats strike me as completely sincere. They really do believe in democracy as a guiding principle, and they really are committed to achieving classless social equality entirely through the democratic process. Moreover, they’re mostly content to do it at a socially acceptable pace. If their style of argumentation leaves much to be desired, one can hardly deny that, in stocking academic and educational professions, they’ve committed to the long play. With neoliberals the commitment feels thinner. They seem to still be in compromise mode, where working within the welfare state framework is just a cover until they can convince everyone to dismantle it. The social democratic parties all formally repudiated Socialism at some point in their histories – making it explicit that public ownership of the means of production was no longer a goal. There’s never really been a similar manifesto from neoliberals. Now, that’s largely a function of the fact that there aren’t really expressly neoliberal parties to draw up such a manifesto, but this fact just contributes to the impression that they’re not fully committed to the current system. They seem to prefer to sit on the sidelines as advisors, nudging things this way or that way but never really submitting a proposal to the general electorate for ratification. It’s not entirely their fault: human nature thinks of political parties and platforms in terms of lists of things you’re going to do, and neoliberalism is more about what people wnat to undo. To the extent it’s ever about doing, the proposals tend to be efficiency-based proposals, not direct, visible handouts that provide immediately benefit. Neoliberals, like all (classical) liberals, suffer from Batiat’s seen and unseen conundrum, in that the benefits they advocate are less immediately visible (whereas for their opponents, it’s the costs that are not immediately visible). But at the end of the day, there really is some truth to the impression – neoliberals are less "domesticated." If they strike everyone as less than full participants in the status quo, then because they’re really not.

All of this is a long-winded way of agreeing with Kling: neoliberal and social democracy are problematic categories. What I insist on is that they’re problematic not so much because they’re ill-defined, and more because one of them has been successfully styled in a perjorative way by adherents of the other.


  1. For example, by regulating competition, preventing monopoly, things like that.

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