Thanks to globalization, it is often said, the world is at the dawn of a new era. The spread of markets across the globe, and the deepening and quickening of economic interconnections accompanying it, is creating a fundamentally new situation for leaders and publics, imposing burdens while constraining choices. You can either opt out of the system and languish, or put on what Thomas Friedman has called neo-liberalism's 'Golden Straitjacket', at which point 'two things tend to happen: your economy grows and your politics shrinks' (Friedman, 1999).
Globalization's onward march has produced a backlash too, of course, and anti-globalization protests have become a regular feature of contemporary life. Yet today's market boosters find it hard to understand what the fuss is about. They point to the very real economic benefits that capitalism brings and the poor economic track record of non-market-based approaches to economic affairs, shake their heads, and dismiss the protesters as ignorant fools or adolescents acting out some personal psychodrama. If only the marchers could learn some math, they scoff, or learn to care about increasing the aggregate wealth of society as a whole rather than coddling a few special interests, everything would be fine.
What neo-liberals fail to recognize is that such narrow economistic attitudes miss the point. Yes, capitalism is easily the best system for producing growth. But that has never been, and is not today, the only issue. The real debate about markets has focused not simply, or even primarily, on their economic potential, but also on the broader impact they have on the lives of individuals and societies. Critics have worried, and still worry, not about whether unleashing markets will lead to economic growth, but about whether markets themselves will unleash morally and socially irresponsible behaviour while eviscerating long-standing communities, traditions, and cultures.
The roots and rationale of social democracy
It was in response to precisely such concerns that social democracy first began to emerge. The first half of the nineteenth century was the golden age of liberalism, which emerged alongside the industrial revolution as the first modern political and economic ideology. In many parts of Western Europe, liberalism appeared as a progressive and even revolutionary force, promising to break down the remaining structures of the old regime and replace them with a system based on individualism, rationalism, and permanent economic progress.
Yet by the middle of the century, the practical consequences of unfettered capitalism--dramatic inequalities, social dislocation, and atomization--lead to a backlash against liberalism and a search for alternatives. Marxism offered the most powerful challenge from the left, and during the second half of the century it gathered many adherents and spawned its own political movement. But Marx had little to say about the actual transition from capitalism to socialism or about how socialist parties might help to bring such a transition about. These oversights were exacerbated by the materialism and determinism which his followers tended to emphasize.
By the end of the century, however, opposition to both economic determinism and political passivity was growing on the left. One of its sources was the recognition that many Marxist predictions had not come to pass--capitalism as a system had developed new vigour, while the bourgeois state had undertaken important political, economic and social reforms. Another source of opposition came from the sense that orthodox Marxism had failings not merely as a guide to history, but also as a guide to constructive political action. Socialist parties had become powerful actors in a number of European countries, yet orthodox Marxism could not furnish them with a strategy for using their power to achieve their goals.
If socialism was not going to come about simply because it was inevitable, then it would have to be achieved as the result of human action. Some activists, like Lenin, felt that this achievement could be imposed by force, and set out to spur history along through the politico-military efforts of a revolutionary vanguard. Others, not willing to accept the violence or elitism of such a course, chose to revamp the socialist program so as to attract the support of a majority of society. Although Bernstein's revisionism is the best known, he was hardly alone. All the features of his critique were brought forward in other West European countries during the late nineteenth and early twentieth centuries. As a result, socialist parties and the Second International were consumed by the 'revisionist controversy'.
The final break with orthodoxy came in the 1920s and 1930s as European socialists, now often the dominant parties in their national political systems, confronted the challenges of a socio-economic landscape transformed by the First World War. Populist movements on the right were starting to chip away at the support of traditional liberal and conservative parties. Right-wing protests against capitalism's atomization, amorality, and materialism had been growing since the end of the nineteenth century, but the war gave them a mass base. Concerned about the power and appeal of the right, many revisionists argued that clinging to the orthodox Marxist program would doom the democratic left to oblivion. They proposed instead a program that would tap into the needs of the mass of disoriented and discontented Europeans.
In the context of the interwar years and the Great Depression, this meant first and foremost using political forces to control economic ones. In Belgium, Holland, and France, Hendrik de Man and his Plan du Travail found...