Socialism
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that poverty should be reduced and inequality narrowed through the redistribution of wealth from rich to poor. At the heart of Keynesian social democracy there lay a conflict between its commitment to both economic efficiency and egalitarianism. During the ‘long boom’ of the post- 1945 period, social democrats were not forced to confront this conflict because sustained growth, low unemployment and low inflation improved the living standards of all social groups and helped to finance more generous welfare provision. However, as Crosland had anticipated, recession in the 1970s and 1980s created strains within social democracy, polarizing socialist thought into more clearly defined left-wing and right- wing positions. Recession precipitated a ‘fiscal crisis of the welfare state’, simultaneously increasing demand for welfare support as unemployment re-emerged, and squeezing the tax revenues that financed welfare spending (because fewer people were at work and businesses were less profitable). A difficult question had to be answered: should social democrats attempt to restore efficiency to the market economy, which might mean cutting inflation and possibly taxes, or should they defend the poor and the lower paid by maintaining or even expanding welfare provision? This crisis of social democracy was intensified in the 1980s and 1990s by a combination of political, social and international factors. In the first place, the electoral viability of social democracy was undermined by de-industrialization and the shrinkage of the traditional working class, the social base of Keynesian social democracy. Whereas in the early post-1945 period the tide of democracy had flowed with progressive politics, since the 1980s it has been orientated increasingly around the interests of what J. K. Galbraith (1992) called the ‘contented majority’. Social democratic parties paid a high price for these social and electoral shifts. For instance, the UK Labour Party lost four successive general elections between 1979 and 1992; the SPD in Germany was out of power between 1982 and 1998; and the French Socialist Party suffered crushing defeats, notably in 1993 and 2002. Furthermore, the intellectual credibility of social democracy was badly damaged by the collapse of communism. Not only did this create a world without any significant non-capitalist economic forms, but it also undermined faith in what Anthony Giddens (see p. 15) called the ‘cybernetic model’ of socialism, in which the state, acting as the brain within society, serves as the principal agent of economic and social reform. In this light, Keynesian social democracy could be viewed as only a more modest version of the ‘top- down’ state socialism that had been discarded so abruptly in the revolutions of 1989–91. From the 1980s onwards, reformist socialist parties across the globe, but particularly in countries such as the UK, the Netherlands, Germany, Italy, Australia and New Zealand, underwent a further bout of revisionism, sometimes termed neo-revisionism. In so doing, they distanced themselves, to a greater or lesser extent, from the principles and commitments of traditional social democracy. The resulting ideological stance has been described in various ways, including ‘new’ social democracy, the ‘third way’ , the ‘radical centre’, the ‘active centre’ and the ‘ Neue Mitte ’ (new middle). However,
the ideological significance of neo-revisionism, and its relationship to traditional social democracy in particular and to socialism in general, have been shrouded in debate and confusion. Its central thrust is nevertheless encapsulated in the notion of the third way, highlighting the idea of an alternative, in a broad sense, to capitalism and socialism. In its modern form, the third way represents, more specifically, an alternative to old-style social democracy and neoliberalism.
Third way: The notion of an alternative form of economics to both state socialism and free-market capitalism, sought at different times by conservatives, socialists and fascists.
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