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The development of and future of social democracy in the west

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The development of and future of social democracy in the west
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Hallman, James
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iv, 84 leaves : ; 28 cm

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Left-wing extremists -- United States ( lcsh )
Left-wing extremists -- Sweden ( lcsh )
Socialism ( lcsh )
Left-wing extremists ( fast )
Socialism ( fast )
Sweden ( fast )
United States ( fast )
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bibliography ( marcgt )
theses ( marcgt )
non-fiction ( marcgt )

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Includes bibliographical references (leaves 82-84).
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Department of Political Science
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by James Hallman.

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|University of Colorado Denver
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Full Text
THE DEVELOPMENT OF AND FUTURE OF SOCIAL
DEMOCRACY IN THE WEST
By
James Hallman
B.A., Colorado State University, 2001
A thesis submitted to the
University of Colorado at Denver
in partial fulfillment
of the requirements for the degree of
Master of Political Science
2006
,3 l


This thesis for the Master of Political Science
degree by
James Hallman
has been approved
y Steven Thomas
~Date
11


Hallman, James (M.A., Political Science)
The Development and Future of Social Democracy in the West
Thesis directed by Professor Christof Stefes
ABSTRACT
The development of the radical left in the United States and Sweden is
studied in this paper. The object is to better understand the fate of the social
democratic left in the west under the modem system of global capitalism. By
studying the development of Sweden and the United States this paper
demonstrates that the development of social democratic institutions are dependent
upon the degree of democratic oversight in a given country and can be completely
compatible with strong economic growth and competitiveness. Though it must
expand the scope of its activities in order to prove successful, the progressive left
can indeed be a power tool for the further promotion of globalization while being
a strong force for offsetting the worst of its economically and socially disrupting
effects.
This abstract accurately represents the content of the candidates thesis. I
recommend its publication.
Signed
in
Chnstof Stefes


TABLE OF CONTENTS
CHAPTER
1. INTRODUCTION...................................... 1
2. THE MODERN GLOBAL SYSTEM: A SURVEY.................7
The Institutions of the Modem Global System........8
The Corporation...................................17
The Implications of Globalization.................20
The Decline of the Nation and Party...............25
3. SWEDEN: A STUDY IN MODERN SOCIAL DEMOCRACY.......33
4. CAPITAL ASCENDANT: THE UNITED STATES OF
AMERICA...........................................53
Political and Social Development in America.......54
Global America and the Role of Social Democracy...74
5. CONCLUSIONS.......................................78
BIBLIOGRAPHY...............................................82
IV


CHAPTER 1
THE CLEARANCE OF THE LEFT: AN INTRODUCTION
History only requires a brief glance to realize that our modern era is one
unlike any other. It is a period of incredible wealth and potential. People now have
the opportunity to reform society in such a way as to create a better, healthier, and
more egalitarian world than ever before. The productive organization of the modem
world system has created such wealth that it would be unimaginable in any earlier
epoch. However, this is the era of global capitalism, and it is an era defined by
freedom and gluttony for some in stark contrast to the vast inequality and poverty that
plagues almost every modern society. The incredible growth of economic might and
productive potential has also brought with it a whole new set of societal and national
relations in order to accommodate these changes. This new set of rules is generally
referred to as globalization, and this process is having a powerful effect on the old
national ideologies on both the left and the right.
Globalization is the culmination of an economic process that began in earnest
in the 19th century with the development of industrial capitalism. This process also
brought with it a whole new set of injustices that still affect todays post-industrial
civilization. Nevertheless, it is these new economic relationships that have created
1


the foundation of the modern world. These relationships are defined by the presence
of class conflict and brutal competition. Capitalism creates a situation in which it is
not the object of exchange that contains value, but the exploited labor of the worker.
Self-earned private property... is supplanted by capitalistic private property, which
rests on exploitation of the nominally free labor of others, i.e., on wage labor.1
However, while there has always been a certain degree of exploitation in every
economic system, modern world capitalism differs owing to the immense scale and
method of this exploitation. In order to cope with this potentially explosive conflict,
nations have developed complex codes that are bent towards the control of the
laboring masses. Nevertheless, owing to this unstable context, an uneasy truce has
been struck between the needs of capital and the needs of the people that labor within
that system.
In order to ensure that this set of conditions is socially feasible, the working
class has had to organize and defend its interests, which are often at odds with those
of capital. It has done this out of a need to improve its own quality of life, but also
out of a desire for equality amongst workers and those whose wealth is dependent
upon their activities. This organization and this understanding manifest themselves
through the creation of trade and labor unions, and are accompanied by the
development of a grouping of intellectual movements that serve to provide an
ideological foundation to this burgeoning sense of class-consciousness, all in the hope 1
1 Karl Marx, The Marx-Engles Reader, Robert C. Tucker ed. (New York: WW Norton & Company,
1978), 437
2


of preventing any additional denigration of the proletariat. This intellectual
movement constitutes the origins of the modern left, in its socialist, communist, and
social democratic varieties.
In the wake of the 20th century a great deal of scholarly attention has been
paid to the developing capitalist world-system. Following the dissolution of the
Soviet Union, the general opinion of many intellectuals is that the projects of
socialists, communists, and other leftist thinkers have failed. This is not quite true.
Both the modern intellectual left and right have failed to revise themselves adequately
in light of contemporary conditions. In the case of the left, the strategy adopted by
more radical factions has been to seize national power, either through legal means or
revolution, and then alter the basic class structure of the capitalist world. Obviously,
while this might have seemed sensible during earlier periods, it is no longer practical
in what has become a truly global economic system. In light of recent developments,
the basic problem of the modem left is a tendency towards atavism: it has been
unable to change its strategies in the global world. As markets have opened even
further, the classic approach of the left to seek national power is becoming
increasingly unrealistic. The simple fact of the matter is that the ideas of the
traditional left have become largely impractical in the age of globalization since no
nation can be an island unto itself. This is one of the basic lessons of the communist
experiments in the Soviet Union and China. The global economic system can no
longer accommodate countries that attempt to sever themselves from the international
3


economy, certainly not if they hope to share in its spoils. The most successful
governmental compromise between traditional leftists aims of total equality and
complete subservience to capitalist exploitation in the developed world is the social
democratic system in Sweden.
With that example in mind, this paper seeks to examine the development of
the left and the global economy. In order to do this, we will explore the development
of socialism and social democracy in light of its successes and failures in Sweden and
the United States. By engaging in this study, we shall see that the capitalist world
system has changed the nature of the reformist playing field in addition to changing
the nature of the left entirely. The left has made a transition from revolutionary
progressivism to a justification for more and uninhibited capitalism in the United
States. These developments limit the feasibility of any activity that jeopardizes the
fundamental stability of the economic status quo. In the case of Sweden however, the
social democratic movement has created a highly competitive and relatively
egalitarian society, all without sacrificing a basic commitment to basic human
flourishing. It is because of fundamental differences in political and economic
accountability that the severe differences between Sweden and the United States have
emerged.
Critical to our analysis is the underlying idea that, contrary to popular belief,
the bulk of globalization's negative features are directed at the labor forces in
developed economies, and not at the developing world. Globalization creates
4


incredible wealth, massive corporate profits, and sizable increases in the standard of
living in many parts of the developing world, but more and more it is doing this at the
expense of workers in the developed world. Over the past 15 years, income
disparities have increased dramatically around the globe, and in even the most
successful countries, the relative wages of workers has dropped steadily. In short,
globalization increases the relative equality of wealth between nations while
decreasing it between class groups within. Sweden has survived these changes while
keeping an eye to the needs of the population, and the United States has begun to lose
its edge.
This paper discusses the modem world system, and describes the role of the
progressive left in it. The basic premise that underlies the arguments presented is that
the left still presents a positive force in the world. It is this potential that makes the
pursuit of social justice a worthwhile endeavor. Nevertheless, it is not a project that
can be left to its own devices, for there is a great deal of ideological baggage that
must be shed and reexamined before a credible alternative to the existing global
system can be created.
In order to fully understand the previous role of global capitalism and the left,
the second half of this paper is dedicated to understanding the movements towards
social justice in Sweden and the United States. The choice of these two nations is
relatively straightforward. Sweden possesses the strongest social democratic
traditions in the developed world, and this system is struggling successfully to change
5


in the contemporary world system. On the other hand, the United States is the bastion
of modem capitalism and possesses very little in the way of a formal socialist
tradition, and is finding itself in a slow decline.
The major difference between the two nations is one of governmental
responsiveness. Government in Sweden is more direct than in the United States, and
its electoral machinery more easily accessed by the population. The fact is that left
wing reform appears to follow democratic systems in which public oversight is higher
and the citizenry has more direct control over their national institutions because of the
high levels of popular appeal that these programs typically have. Where governments
are more open to public oversight, socialism and other left wing projects take a
stronger hold. Where they are not, socialism will not prosper owing to the political
mechanisms of the particular society being largely usurped by the greater powers of
capital. The consequence for the left in such a situation is clear: a dramatic loss of
public support owing to general political inefficiency. In order to retain relevance,
the left must find a way to adapt to the evolving context of the capitalist world
economy and make itself relevant to the concerns of the global underclass once again.
This paper is designed to help illuminate that new context.
6


CHAPTER 2
THE MODERN GLOBAL SYSTEM
The fall of the Soviet Union was accompanied by a massive string of changes
in how the peoples of the world now related to one another. Regardless of ones
ideological position, there was a general sense of relief with the end of the Cold War,
and the time had come to focus attention on the future. During the 30 years preceding
the Soviet collapse, numerous breakthroughs had taken place whose importance had
been underestimated under the threat of nuclear war. The information networks of
the world had begun to develop at an astounding pace, not to mention the general
decline in transportation costs and the availability of goods. Globalization, that
phenomenon of trade already remarked upon by Karl Marx in the mid-19th century,
was poised to soar ahead with breakneck speed once again on the basis of these new
developments. With the Soviet Union gone, there was no longer a major bloc of
nations attempting to resist the spread of American-style capitalism or to put the
brakes on the future of international free trade. Nevertheless, the new world order
still needs a framework from which to operate and institutions to guide it.
This framework is provided by three principle institutions. The first is the
nation state itself. Today, the various countries of the world still constitute the basic
7


economic and political units. While globalization is steadily eroding the power of
these structures, economic integration and engagement is still understood along
international boundaries. Second are the international trade and development
organizations that effectively act as the moderators between nations. Finally there is
the international corporation, which now exists as a more potent and powerful entity
than ever before in history. Over the course of this section, we will examine the
modem systems of international capitalism and ways those interactions affect the
national welfare and political systems of the world economys constituent parts. The
importance of these developments cannot be understated. Since the fall of the Soviet
Union, organized international capitalism has presided over a 4.5 trillion dollar
increase in global trade.1
The Institutions of the Modern International System
In order to understand the role of social democracy in the modem world, it is
important to investigate those institutions primarily charged with creating the context
in which international trade has developed. In order to paint this picture, it is
necessary to look closely at the IMF, the World Bank, and the WTO and the methods
that they employ to promote growth and foster international trade. From here, we can
better assess the difficulties faced by social democratic regimes and their
constituencies. 1
1 The WTO Under Fire, The Economist, September 20*-26lh 2003, 26.
8


The history of the modern global system originated from the creation of the
International Monetary Fund (IMF), the signing of the General Agreement of Tariffs
and Trade (GATT) treaty in 1947, and the foundation of the World Bank. The
organizations and the treaty arose from a desire to organize international trade in
hopes of staving off another global depression like the one that took place during the
1930s. Both the IMF and the World Bank were founded on the basis of the economic
theories of John Maynard Keynes. Keynes effectively encouraged governmental
spending on national economies through unemployment insurance, some limited
government hiring, and citizen-level economic stimulus packages in order to
reengage the economy again during hard times. In this way, the average citizen
would once again have money to spend and could therefore encourage the economic
wheels to begin turning. Since the theory had seemed to function well in fighting off
the first major depression in the early 20th century, why couldnt it be applied
internationally?
To aid in facilitating this goal, the GATT was designed as an effort to level
the international playing field and undo the protectionism of the interwar era. GATT
was basically a set of rules that would govern trade between signatories with the aim
of raising standards of living, ensuring full employment and a large and steadily
growing volume of real income and effective demand, developing the full use of the
9


resources of the world and expanding the production and exchange of goods.2 3 A
number of subsequent negotiations were undertaken over the course of the century
that modified deadlines, established new goals, and incorporated more nations into
the system. The original intention was to create a permanent international
organization that could effectively police international trade between members called
the International Trade Organization (ITO). The ITO was never actually established,
owing mostly to its inherent over-ambitiousness. Beyond incorporating the standards
of national tariffs and rules for international trade, the ITO was also to regulate labor
standards and other aspects of national economic policy. This proved impossible to
ratify in several of the national parliaments, most notably the US congress, so the ITO
was left as nothing more than a pipe dream.
The International Monetary Fund was a complimentary organization with a
similarly global mission. The IMF was designed to intervene during those periods of
economic crisis that seemed to crop up from time to time in capitalism. Owing to the
growing interdependence of financial markets, the IMF was critical since it was
founded on the assumption that ...markets often did not work well that they could
result in massive unemployment and might make needed funds unavailable to
countries to help them restore their economies. The IMF was to provide funds from
which countries could draw in order to prevent their economies and/or currencies
2 World Trade Organization, GATT 1947, 30 October 1947.
.
3 Joseph E. Stiglitz, Globalization and its Discontents (New York: WW Norton & Company, 2002),
12.
10


from collapsing. Needless to say, this system was clearly designed with the idea of
mutual protection in mind. Collective action could help to stabilize the international
capitalist system by overseeing monetary policy.
The final organization to be mentioned is the World Bank. Originally
established in 1944 to help oversee the reconstruction of Europe following the war, it
was also tasked with the provision of funds for development. To this end, the World
Bank would negotiate loans on behalf of needy national interests in order to help
them develop in such a manner as to become competitive in the international market.
In addition to this basic function, the World Bank is also involved in providing policy
and development advice, and offering technical assistance to developing nations.
Both the World Bank and the IMF still exist today, and the GATT treaty now
forms the backbone of the World Trade Organization (WTO). The WTO is in many
ways the fulfillment of the original ideal, the ITO, in that it is an international
organization made up of the representatives of those nations that were part of the
various GATT agreements and designed to ...provide the common institutional
framework for the conduct of trade relations...4 Arguably, the WTO is today the
single most prominent organization for the regulation of international trade. It not
only sets the agenda for the dismantling of tariffs, but also is the primary medium for
settling trade disputes. In effect, the WTO tries to act as a united nations for
member states insofar as international trade is concerned, acting as an organization
4 World Trade Organization, Agreement Establishing the World Trade Organization, 15 April 1994,
.
11


through which negotiations can take place, and to develop the structure and itinerary
of international capitalist development. However, unlike the original ITO, the WTO
takes no official stand on labor issues and is therefore concerned solely with
macroeconomic growth.
However, there is a great deal more to the workings of the WTO than initially
meets the eye. Its position as arbiter of international trade, not to mention its system
of decision through consensus, creates some natural inequality. Part of the problem
inherent in creating a universal mechanism for trade has to do with the basic
inequality in the international system. Despite the belief held by many that nations
hold equal power irrespective of wealth, the advanced industrial nations of the West
do have a definite advantage over their underdeveloped neighbors.
Most of the West maintains heavy subsidies on agricultural products in
addition to numerous tariffs on manufactured products. The great irony, of course, is
that all the while, the advanced economies use the WTO and other such institutions as
a means to insist that developing nations take steps to lower their own barriers and
allow these goods in. According to the UN Development Policy and Planning Office,
Foreign direct investment (FDI) and official loans and grants were the only net
sources of capital inflow for [developing] countries.5 Clearly this situation suggests
a certain degree of dependency between the developed and the developing worlds.
This dependency suggests that most of global growth that takes place directly benefits
5 United Nations, World Economic Situation and Prospects 2004, January 2004,
.
12


the developed world with very few of the long- term benefits being accrued in
developing nations. However, the ruling classes in both nations benefit from the
lowering of barriers since Western firms can shore up flagging profit margins by the
exploitation of workers in poorer nations. In the end, the working classes in both the
West and the developing world suffer; in the West from falling wages and lost jobs,
and the developing worker from lessened political power and substandard conditions.
The WTO then, being the principal international organization dedicated to
furthering trade, is hardly creating the level playing field envisioned by the original
drafters of GATT 1947. Instead, it is only reinforcing the bonds of dependency
between the developed West and the developing world, which still remains largely
subordinate to international trade system. The greatest hindrance to world economic
development is the imbalance between the rich nations and the poor nations, and little
is being done to close that gap. Not only in terms of discrepancies in GNP, but more
importantly in weak or non-existent democratic oversight, which limits the ability of
those peoples to influence how globalization affects them.
The existence of the political and economic imbalance seems a perfect
opportunity to introduce the next major player in the world economy, the World
Bank. If the WTO exists to further the cause of international trade liberalism, then
the World Bank, with its slogan our dream is a world without poverty is surely the
institution that would see after the needs of the worlds underclass, whether they be
First World unionized specialists, or Third World sweat shop laborers. In some
13


sense, the World Bank does this. It is a financial institution that works with
developing nations to secure loans in order to provide for development funds, helping
to alleviate the crises of debt stricken governments. It effectively acts as a creditor
and can step in to provide nations in need with the financial assistance they may
require to better the standards of living of their people.
However, the World Bank is also permitted to set the terms of these loans, and
has been known to use its economic leverage to encourage social and political change
in certain nations.6 It is also a business venture and as such it has investors who are
often interested in seeing development go in certain directions. The World Bank is
not a non-profit organization of course, and no matter how much work is done,
attempts to encourage development become ...actively antidevelopmental when the
proceeds are used to build dependence on imported technology and experts...and
drive people from the lands.. .they depend on for their livelihoods.7 The problem is
the codification of dependency in the developing world. While this situation may be
quite beneficial to the economic conditions of the corporations that directly benefit
from such policies, it does little to alleviate the poverty of the general citizenry of
either developing or developed nations in the long run. Instead, it merely creates a
system of structural exploitation.
6 Jagdish Bhagwati, In Defense of Globalization (New York: Oxford University Press, 2004), 88.
7 David C. Korten, When Corporations Rule the World (San Francisco: Berrett-Koehler Publishers
Inc., 2001). 165.
14


The final organization that warrants serious consideration is the International
Monetary Fund. The IMFs main duties are centered on international monetary and
exchange stability. To accomplish these goals, it has established a system through
which loans can be repaid and no nation is left with an excess of monetary instability.
To facilitate this goal, the IMF is capable of offering technical assistance, financial
grants, and loan renegotiations between nations. Potentially, the IMF has a great
interest in supporting developing nations and narrowing the current imbalance of
international trade since doing so helps to reduce the potential of monetary collapses.
To accomplish this goal, the IMF is often involved in the same types of work as the
World Bank, although the two can be intense rivals or highly complementary. The
IMF is loosely attached to the UN, and receives its money in the form of quota
payments from its members as either hard currency or securities.
The IMFs principal aims are monetary stability and loan repayment. As such
it focuses on macroeconomic indicators in order to ensure that the economic practices
of the countries it assists are in order. Unfortunately, this focus means that the IMF is
often grossly out of touch with the realities of its recommendations. Often, the IMF
drastically fails on the human level, tending instead to focus only on those areas of
the economy that are the most useful for economic growth instead of those important
to social development. This failure means that the IMF will pay the most attention to
industrial plants and resource production, while discouraging governments from
investing in human services like hospitals and schools. The other problem that
15


governments face when working revolves around the IMF concerns over budget
deficits and balances. For example, when the IMF looks at a nations budget, it will
focus on tax revenue, and considers all loan money as something off the books. This
bias means that when a country is given a sum to spend on schools, the IMF discounts
it from its budget calculations, effectively barring developing nations from spending
that money, since any failure to comply with IMF regulations means that the IMF will
withhold aid. In turn, this bias creates a situation in which governments are unable to
promote social programs such as education, health care, and labor insurance since
these programs are generally funded by foreign aid in such nations. Developing
social capital is not a part of the IMFs agenda despite the enormous potential that the
organization has.
The result of these interactions is the tacit promotion of trade inequality
between nations and within them. Creating a rigidly competitive international
community, makes it necessary for developed nations to adjust their own internal
social policies to accommodate the threats, both real and imagined, posed to their
own economic stability and growth by these international understandings. As will be
demonstrated below, budgetary and economic crises are often dealt with by
weakening or eliminating socially progressive policies in order to provide for the
more immediate needs of business.
16


The Corporation
As economic barriers begin to break down even further through the policies of
organizations like the WTO, IMF, and World Bank, a new center of power has
overtly emerged on the world scene: the multinational corporation. These
organizations are beholden to no single nation, and concern themselves only with the
profitability of their industry. To these entities, globalization as it is currently
practiced means that their coffers can do nothing but grow. Corporations have
become increasingly borderless in that they can easily transfer personnel and
productive capacity in and out of any country. Consequently, national concerns over
social justice and workers rights can quickly become economic liabilities to the
corporations that operate in them. Since the primary concern of such programs is the
redistribution of wealth, such public investment can lead to declining private profits.
International corporations have been an integral part of the global economy
since the 19th century beginning with organizations like Standard Oil. These are
effectively companies that operate in multiple countries, and have used the declining
costs of communications and transportation to spread their businesses and agencies
around the globe in such a manner as to be most cost-efficient. The most clear-cut
examples of this sort of organization are oil companies. While many are
headquartered in the United States, England, and other developed nations, most of the
actual labor staff works in the Middle East, Mexico and other oil-rich regions where
17


they drill for oil, maintain pipelines, refine, and barrel oil and petroleum products for
export. Internationalization is an obvious route to vertical monopolization.
However, it is not only the extraction and delivery of natural resources that are
generally dominated by international corporations. More and more, even
telecommunications and manufacturing are being handled in a similar manner.
Telephone systems may be designed by a Japanese firm, and then assembled in
China, and sold in France, as would be the case with Sony. Even GE now
manufactures many of its American military aircraft engines in Mexico instead of the
o
United States. Given the size and economic power of these various international
companies, it falls to national governments to offer competitive societies in which
these companies can operate. The development of the competitive societies is
achieved through a combination of subsidies, bribery, and political manipulation by
members of government and individual companies. In some cases the actual
handouts may be in the form of lower corporate taxation, or even deliberately limited
labor rights. Governments are generally expected to limit their regulating of
corporations in order to help keep the costs of operations down in their countries. If a
multinational corporation were ever displeased with the terms that they receive from a
given country, and found the cost of matching national regulation to be more than the
potential to profit, it can easily relocate their operations to a friendlier locale. Higher
minimum wages and national healthcare plans can wind up meaning higher 8
8 Noreena Hertz, The Silent Takeover: Global Capitalism and the Death of Democracy (New York,
NY: The Free Press. 2001), 33.
18


unemployment, especially if governments expect business to help foot the bill. Given
the public nature of Western democracies, companies occasionally find themselves
competing for favor, but the best9 company does not always receive the desired
offers. More often than not, its those lobbyists who can best promote their private
agendas.
The power and unaccountability of the international corporation forms the
crux of the problem with globalization as it relates to social justice in the developed
world. Economic rationalism and corporate libertarianism force social issues to take
a back seat to growth and the desires of nations states to seem corporate-friendly.
What is ironic is that the current world situation runs the very real risk of repeating
the problems of the 19th century, which was an era of intense labor conflict. Many
current economists seem to forget that the protectionism of the past, especially the
Great Depression era, were created in response to the economic crises of the time and
did not create them.10 Many of the programs dedicated to the defense of the working
classes were a response to the gross inequities created by global capitalism. The
current phase of globalization then forces the developed world to reduce the various
measures designed to protect workers to a level commensurate with its developing
competitors instead of vice versa. As governments wrestle to lower the taxes levied
on corporations and their CEOs, less and less money is available to fund the welfare
state. Since the 1970s workers in most of the developed world have experienced a
9 Meaning socially AND economically.
10 Eric Hobsbawm, The Age of Extremes (New York: Vintage Books, 1996), 90-91A
19


decline in both their standard of living and their relative income. The last three years
alone have seen a 60% increase in overall average corporate profits, and only a 10%
wage increase for workers in the US.11 This change marks the single fastest rise in
corporate profits in almost 75 years, but with healthcare costs mounting, and public
service spending declining, the West is in danger of sacrificing its future to these
short-term gains in share value. While this risk is not solely the fault of globalization,
the unending quest for more economic liberalism and increased market share has
certainly contributed to the collapse of systems that redistribute wealth and enable
social justice to function.
The Implications of Globalization
Economic liberalism traditionally suggests that government should minimize
its intervention in the workings of the economy. In line with Adam Smith, the
economy will mostly take care of itself providing that a framework exists to
encourage free trade, prevent fraud and coercion, and stabilize the market. In reality,
governments and corporations that work with them have never been opposed to
corporate welfare. In practice, the only genuine, unfettered competition in most
developed nations is among workers, who are left to compete on the open market for
jobs from among the well-fed companies. Corporate libertarianism has become the
dogma of many elites throughout the developed world. The concept is a simple one: 11
11 "Breaking Records, The Economist, February 12th-18th 2005, 12.
20


offering companies breaks from taxation, limiting the power of workers groups, and
offering a degree of corporate welfare will enable companies to innovate more and
provide jobs to more people. In practice, this trickle-down rationalization has not
worked so well for the majority of workers. While companies may offer more jobs,
more often than not these jobs are temporary and/or part time work that leaves most
workers unsure of their future. The decline of workers wages effectively increases
demand for work, thereby driving down the cost of labor. This downward spiral
places workers in a weaker bargaining position in respect to their employers, who,
when the situation threatens to get out of hand, now have the ability to simply
relocate rather than bargain with employees. The worlds corporate giants are
creating a system of managed competition by which they actively limit competition
among themselves while encouraging intensive competition among the smaller firms
and localities that constitute their periphery.12
Corporate libertarianism has been a massive boon for the corporate elites who
have seen little but rising salaries and profits. Combining their massive capital base
with ever expanding bargaining power, most large, multinational corporations are
now in a stronger position than ever in history to dominate the governments through
which they operate. Additionally, the various corporate advisors have placed
themselves in positions of power in organizations like the WTO and IMF so that they
can now have a major voice in how the rules of international commerce are created
12 Ibid., 209.
21


and enforced. The current Director General of the WTO is Dr. Supachai
Panitchpakdi, a prominent Thai banker. Anne O. Krueger is the First Deputy
Managing Director of the IMF, and formally was the World Banks Vice President of
Economics and Research, and James Wolfensohn, the former president of the World
Bank, was an investment banker. All of these individuals have backgrounds
originating in high finance and consequent ties to global business. Ostensively, the
corporate elites understand their stake in the global order, and cannot allow major
decisions and policy changes to be made by politicians in a vacuum. Clearly, these
organizations are not staffed by individuals familiar with the plight of either
developing nations or the proletariat in any part of the world. Instead they will focus
more on the numerous benefits that globalization and open markets can bring to their
businesses.
The plight of leftist compromise solutions like social democracy throughout
the developed world stems from the belief that growth can be created only by
providing the corporate entity with every conceivable liberty, and that when
corporations grow wealthier, so do the individuals who rely on them for goods and
employment. Since the development of this Washington Consensus, globalization
has been handled through the needs of the international corporation and a strong
belief in the softening of regulation over private institutions. As implied, the
Washington Consensus assumes that privation, liberalization, and macrostability are
22


supposed to create a climate to attract investment, including from abroad.13 This
investment then creates the growth that allows any economy to develop and provide
more jobs and better goods and services to its people.
To accomplish this goal, every major Western government courts
multinational corporations and other large private businesses. The hope is that these
companies will build factories and provide other institutions with investments that
will help increase the overall performance of a given economy. Nevertheless, by
reducing the amount of federal protections for workers and their families, reducing
upper-class and corporate tax rates, usually at a cost of minimizing the social
programs designed to help citizens, more and more people live at the mercies of the
market and companies are seldom encouraged to take up the slack in the
governments stead. By disenfranchising labor groups and social democratic parties,
companies need only minimal investment to have laws passed that relax the policies a
host country may have for the protection of workers from such vicissitudes as
downsizing, sickness, and even work related injury. The irony is that in the long run
when the lower classes feel insecure, they stop spending, which can create a stagnant
economic situation.
Governments feel themselves forced to limit or avoid social democratic
programs and various forms of labor protection for a host of reasons. The most
important of these is the exit threat posed by major companies, or the risk of capital 1
1 Stiglitz, 67.
23


flight. Accompanying the reduction of national trade barriers has been a dramatic
relaxation of the rules dictating capital transfers. This trend effectively means that
companies can now set up shop virtually anywhere, and can easily shift production
and materials from one region to another. Depending on the scale of such a transfer,
the results can be devastating for thousands of workers, not to mention the potential
blow to the overall GNP of an individual country, while helping to bolster the overall
profits of a specific company. This growing corporate mobility, combined with the
general insecurities of any capitalist nation, combines to create a situation in which
governments and their spokespersons are prone to accepting the death of social justice
as an as an unavoidable part of competing on the global market. In the meantime,
large companies are able to cut wages and reduce benefits without fear of retribution
from either their host governments or their employees, since both groups fear that the
employer might simply pick up and leave. This process is called social dumping, and
effectively means that companies can dump their ties to a host nation leaving the
government to clean up the mess. This danger weighs heavily on the minds of most
governments because, in essence, the services of large segments of the working
population can be... easily substituted by the services of other people across national
boundaries.14
14 Dani Rodrik, Has Globalization gone to Far? in The Globalization Reader. Frank J. Lechner and
John Boli ed. (Malden, MA: Blackwell Publishers Inc., 2000), 221.
24


The Decline of the Nation and Party
Overall, the pressures of the growing sense of international competition and
the decline of national power in the face of it have many convinced that the nation-
state itself is an outdated instrument that often places itself in the way of economic
progress, and that the left is all but dead. In many ways, these assumptions have
become self-fulfilling prophecies, and a glut of literature exists that promotes the
liberation of the global corporation from the stagnant and archaic nation state.
However, scholars like Paul Kennedy in his book Preparing for the Twenty-First
Century see the decline as a dangerous process. Mr. Kennedy suggests that the
nation-state is losing it autonomy as a result of the rising power of supranational
institutions that are capable of transcending the capabilities of national governments
to tailor national policy to the needs of their populations.15 In the case of Mr.
Kennedys book, this developing situation is viewed as negative since local
governments are likely to be more in touch with the needs of their respective
populations.
Many other scholars suggest that by fostering the power of the international
agencies, and weakening the nation state, we stand to enter into an era of
unprecedented peace and prosperity. This line of reasoning makes several
fundamental assumptions, however. The first of these is that the basic position of the
worker is not declining. The most common claim is that neither trade nor its
15 James Kurth, The Decline and Fall of Almost Everything, Foreign Affairs, Spring 1993, 85.
25


absence can shelter a country from wide cycles of unemployment.. .',16 It is the
working class that will shoulder the greatest share of this burden. So, while it may be
true that these cycles are unavoidable, this reasoning fails to account for the fact that,
on the whole, workers in the West have seen a steady decline in relative wages over
the last 20 years,16 17 and the growth of the service sector has failed to offset the
dislocation caused by these wide cycles.
This decline is tied to another common assumption: that any jobs and benefits
lost as a result of capital flight will be replaced by something else. While the
manufacturing sector in much of the developed world has declined, there has been an
increase in service jobs to replace them. On the whole, these jobs have paid less and
have also begun to leave. Even now, many major US firms are outsourcing many
aspects of customer service to less developed countries. Finally, there remains an
inherent assumption of historical inevitability. Normally such arrogance has been the
purview of Marxists whose idealism makes such mistakes understandable wishful
thinking. The assumption in the destiny of corporate globalization is that free trade is
here to stay, and the plight of the proletariat and other members of the underclass are
destined to be tied to the demands of the international corporation. The current
system of globalization, so goes the argument, is the natural result and pinnacle of
human development over the entirety of its history.
16 Ibid, Gary Burtless, Robert Z. Lawrence. Robert E. Litan, and Robert J. Shapiro, Globaphobia:
Confronting Fears about Global Trade, 181.
17 National Coalition for the Homeless, Employment and Homelessness, February 1999,
.
26


While free trade may indeed be here to stay, the nation state has not become
antiquated yet. The ideals of social democracy are the last best hope for ordinary
citizens, since the average shareholder is not overly concerned with their plight. The
developed world remains critical as well, since it generally boasts the strongest
democratic traditions coupled with the greatest political and economic power in the
modem world system. It is from the potentials of these democracies and theories of
equal rights that the new world must be constructed. In other words, the modem,
developed nation-state is the only place that has the democratic machinery in place to
give voice to the counter-forces of mainstream contemporary economic thought, such
as labor unions, socialists, and others who are willing to sacrifice capitalist growth for
quality of life. The basic issues at stake are best understood through the dual
questions of where power should lie, and what purpose the economy should serve. Is
power simply to be held by an oligarchic alliance of big businesses and compliant
government? Is the economic system merely an engine of upper class accumulation?
Clearly the answer to both of these questions in the current international system is
yes, which is precisely why the nation-state cannot be discounted yet.
Today, most public policy cannot be implemented without at least tacit
approval from major firms, and moreover most economic policies are currently
directed towards their benefit. Already, most major industrialized nations have been
scrambling to reduce taxes on major companies that take needed money away from
social services. Examples of this can be found all over the developed world. For
27


example, US corporate affiliates operating overseas have seen their tax rates drop
from an average of 57% to 28% since 1983 and corporate taxes in Germany have
fallen by 50% over the last twenty years.18 All of these changes point towards the
rising prominence of the corporation in domestic politics during the age of
globalization.
Major companies have achieved this by spending some of these earnings on
influencing government policy. Today, a sizable percentage of campaign financing
comes directly from corporations and their subsidiaries. Additionally, companies
form numerous special interest groups in governments around the world, from the US
Congress to the European Commission. Everywhere companies are using their
incredible economic clout to direct and control the activities of governments that can
offer access the markets that companies desire access to. Legally, companies create
institutions to reinterpret laws and help to establish more and better legal protections
for their activities while simultaneously attempting to reduce the rights of their
employees.
Internationally, corporations have organized like never before in history.
With the creation of the WTO, most international business firms now have an
international forum from which to work. The WTO enables these companies to
challenge as unfair national laws that could be detrimental to their particular industry.
Tobacco companies are particularly fond of this arrangement, as it allows them to try
18 Hertz, 53.
28


and challenge public-health measures. Moreover, most governments are expected to
give national seats in the WTO to corporate and financial agents, and in many cases
find themselves competing with other nations and companies to help protect and
promote their various private interests.
Social democracy is quickly coming to be viewed as an anachronism by
numerous political and economic elites in the international scene, as it stands in the
way of global economic competitiveness. The past five years have not been good to
the economies of Western Europe that have been the traditional bastions of social
democratic policies. Social democracy is basically a system of government that
attempts to meld the forces of the market, government, and civil society to maintain
a dynamic balance among the often competing societal needs for order and equality,
the efficient production of goods, [and] the accountability of power...19 Under such
a system many of the basic needs of the population are distributed by the state, or the
that regulates this distribution with attention paid to fairness and equality. These
include national health care, unemployment insurance, job training, higher education,
and many other benefits.
However, after the global economic downturn of the late 20th century much
that was admirable about social democracy, especially the European model, has been
called into question as governments desperately seek methods to restore lost vitality
to their economies. The principal answer to these problems that has been advanced
19 Korten, 103.
29


by governments and their corporate sponsors is the reduction of social benefits, since
such programs are usually paid for by taxes on the wealthy. It is hoped by reducing
those taxes that investment will once again flow into the national industries since
traditional economic wisdom suggests that the upper classes are the engines of
economic growth. By doing so, perhaps Europe will find itself able to compete better
internationally. However, the region runs the risk of creating a society less pleasant
than the one that Europeans are struggling to save. As mentioned earlier,
macroeconomic indicators often overlook the plight of the average citizens, who find
themselves underemployed and uninsured.
The basic question that must be answered by the proponents of free trade is
whether or not they are genuinely committed to the ideal of human welfare.
Globalization in itself is not an evil enterprise. In fact, it can do a great deal of good
for everyone involved. The simple development of international networks that
promote increased cultural integration brings the benefits of growing understanding
and cooperation. Additionally, economic integration creates the possibility of more
rational systems of labor division that can assist geographical and cultural regions to
optimize their efficiency thereby expanding the available wealth of those regions.
Indeed, this law of comparative advantage is taking place in a limited fashion. The
fundamental problem remains one of exploitation and alienation.
This assessment may not be kind enough, however. The most basic problem
with globalization lies in the corporate and political actors who are most prominent in
30


its realization. International corporations provide the greatest block to any
meaningful reorganization of the global economic system since these institutions are
the organizations around which most major developments have been instituted and so
are its greatest beneficiaries. The rubric of globalization does not, in a realpolitik
sense, emphasize the flourishing of the majority of people, but instead attempts to
find way to subordinate people to the system. Globalization is not the result of
communities of people coming together to create a better, more egalitarian world;
instead, it is the result of a system of global trade that avoids any public oversight and
is consequently competitive to the point of self-destructiveness.
Does this mean that we are dealing with a conspiracy? Quite the contrary: for
the most part, the current international economic system undermines the further
development of equality as a result of unintentional and disparate activities focused
solely on the unimpeded quest for increased personal wealth by a number of
individuals and organizations. It is this lack orientation towards long-term goals and
the will of private communities that makes international capitalism so potentially
dangerous. Equality and social welfare is not part of the modem corporate capitalist
systems agenda, and are perhaps the greatest limit to the ultimate goal of wealth
accumulation. At the same time, a redistribution of wealth is the only way that
capitalism can continue. The more that capital is concentrated, the less need there is
for innovation and reinvestment, and the less that the average consumer is able to
interact with the system. What must happen is for governments to reassert
31


themselves over the economy and return to a focus on civil society, which is the only
place in which democracy can really excel. The international economic system
should be a tool for human development, not a tool for unlimited capitalist
accumulation. As such, the people who are the cogs and gears must be allowed a
voice.
32


CHAPTER 3
SWEDEN: A STUDY OF MODERN SOCIAL DEMOCRACY
While international capitalism has begun to erode the foundation of social
democracy in many parts of the world, there is still hope for the socially progressive
left. Sweden has, for much of the 20th century, held the imagination of the
international left owing to its ability not only to compete economically on a global
level, but to maintain a foundation rooted in social democracy. The country boasts
the most comprehensive socially democratic in the world, a top-notch educational
system, guaranteed health care for every citizen, high marks for income equality, and
more. Moreover, it has done so while managing to remain competitive in the
international market. What is equally astounding has been Swedens ability to
overcome its weaknesses and continue to succeed where many believe that it should
have failed. To understand Swedens example, we should begin by studying its
entrance into the global market, the development of the Swedish social model, and
how it has handled its historical troubles to emerge as one of the worlds most
important economies.
The early economic development of Sweden paralleled that of many of its
contemporaries. It was marked by a sizable agricultural sector and a protoindustrial
33


sector that revolved around the putting out system, or cottage industries. Indeed, as
in most of Western Europe, it was these humble beginnings that gave shape to
Swedens industrialization of the 19th century and beyond.1 Despite the ripe
economic conditions in 18th and 19th century Sweden, the fact remains that Sweden
was late to embrace the technologies and social organization that were pioneered by
the British during the Industrial Revolution. Therefore, Swedens industrial
transformation did not begin in earnest until the 1870s. Nevertheless, much that
would help to define Swedens economic and social policies had already begun
earlier in the century.
Swedens industrial history begins, like that of many European states, with
land reform. In the case of Sweden, this reform took place during the middle of the
18th century when the feudal system was officially abolished and the constitutional
monarchy established. Like France, Swedens constitution construed society in terms
of economic and political estates. As in France, the estates were divided into noble,
clerical, and peasant estates. However, unlike France, the peasant estate totaled half
of the Diet instead of only a single vote. While this difference allowed the peasant
classes a more meaningful voice in government, it also demonstrated an early concern
by Swedish government about the well being and interests of the people uncommon
throughout most of the West. On most issues of high politics including foreign policy
1 Goran Therborn, A Unique Chapter in the History of Democracy: The Social Democrats in Sweden
in Creating Social Democracy, Klaus Misgeld and others ed. (University Park, PA: The Pennsylvania
State University Press. 1992), 7.
34


although, the peasant estate was generally not consulted. The Swedish peasants did
have a voice in the creation of domestic policy.
The freedoms and rights accorded to Swedish peasants allowed for an
explosive growth in agricultural productivity that helped to encourage the growth of
early factory systems. Contrary to conventional wisdom which places focus on
technological development, the advances of the industrial age grew out of the new
methods of labor organization. Despite the value of the steam engine and other
advances, these technologies arose as a consequence of industrial social organization,
and did not spontaneously create the factory. Regardless, rising agricultural
production led to a rising standard of living amongst Swedish peasants, and
consequently the development of a more rational consumer culture. Peasants simply
had more disposable income to spend on goods, thus fostering the cottage industrial
sector. This system, wherein merchants would provide raw materials to peasant
households and these households would then produce finished products, was referred
to in Sweden as the kauf system, or buying system. It was the rising demand of the
peasant middle classes that led to the reorganization of kauf networks into more
regulated and centralized factories.
Naturally, it was from here that Swedish industry was bom. While the usual
route for industrial development was based around the early textile firms, Sweden
focused its export production on iron and timber products. Regardless of the lucrative
promise of this growing heavy industry, Swedens leaders sought to defend
35


agriculture. This priority had the dual effect of creating additional labor demand
outside of the growing industrial sector and also of propping up the Swedish
peasantry financially. In essence, much of Swedens industrial growth was more
dependent on a strong domestic market than was common throughout much of
Europe, which focused primarily on producing goods for export.2 3
Swedens workers generally experienced an overall growth in wages and were
unusually well off in comparison to many of their European counterparts. This
advantage stems from two important developments. The first was the relative buying
power of Swedens peasantry. Since early industrial development drew from the
liberated peasantry, the expectations of the Swedish worker were higher owing to the
relatively high standard of living that the Swedish working class enjoyed. This higher
standard of living also applied to workplace conditions. Swedish workers,
accustomed to the kauf system, did not much approve of the conditions common in
early factories. Since these same laborers constituted the bulk of Swedens skilled
labor force, some sacrifices had to be made by capitalists to acquire these workers. In
fact, the inherited traditional skills were closely linked to a troublesome culture,
the elimination of which the modern industrialist saw as essential to continued
industrial growth.~ Overall, Swedens proletariat inherited certain traditions that
created the foundation for potentially powerful labor organizations.
2 Lars Magnusson. An Economic Histon- of Sweden (New York: Routledge Press, 2000), 110.
3 Ibid., 114.
36


Whatever the particulars of the Swedish workers mindset, this group
inherited a unique set of organizations. Unlike most European nations at the time,
Swedish workers were quick to organize, and in fact, did so on a large scale before
their employers created institutions to counter the trade organizations. The first
Swedish union was founded in 1846, with many to follow. By 1883 the Swedes
established a central trade organization that attempted to unite all of the nascent trade
organizations in order to better influence national policy. The development of these
associations was in part due to the necessity of collective action in order to counter
the interests of large capital, since Swedish firms in general were unusually large and
centralized. However, this was understandable only from the perspective of political
organization. What prompted the creation of these groups was a combination of
industrial factory organization and the older cultural institutions that revolved around
the preindustrial craft associations that had managed to be transformed, instead of
destroyed, by industrialization. By 1909, Sweden had undergone the necessary social
reforms that enabled the proletariat to quickly rally to politics when granted the vote.
However, the international economic conditions of the times also aided
Swedish industrial development. Sweden entered the developed industrial world
economy during the era of British dominance. The ideology of free trade was
actually quite the boon to Swedish industry since there was no system yet in place to
attempt to enforce trade reciprocity. As such, Sweden could benefit from the
international economy while protecting its fledgling industries. As the 19th century
37


progressed, Sweden was able to integrate itself smoothly into the world economy, all
the while attempting to retain a strong domestic market.
This policy stemmed in part from a surprising concern over public good and
benefit during the industrial age. Owing to the powerful grassroots organization that
had been created over the second half of the 19th century, Swedish government was
greatly interested in keeping a focus on social justice. It was generally understood
that public and private interests were often mutually exclusive. Increasingly, the
state and society were expected to create conditions that would encourage the
growth of the new industrial society and, not least, solve the social problems that
appear to accompany industrialism.4 In other words, Swedish government took an
active role in promoting the development of a stronger social base in the face of the
dislocation that follows industrialization. This tendency became all the stronger
following the early 20th century election of the social democrats.
During the Depression, Sweden acted much like most of the developed world,
though it was affected later than much of the world. Protectionism became the order
of the day as countries desperately tried to close off their economies from the
volatility of the international economy. [Sjtates found themselves building
increasingly high barriers to protect their national markets and currencies against the
world economic hurricanes, knowing quite well that this meant the dismantling of the
world system of multilateral trade on which, they believed, world prosperity must
4 Ibid., 179.
38


rest.5 Sweden was no different, taking the opportunity to remove itself from the gold
standard and to devalue its currency. Indeed, as in the majority of European nations,
this same period witnessed a revolution of sorts in Swedish social policy. Swedish
economists had long been swayed by Keynesian ideas, and during the Depression,
Sweden, like the United States, encouraged social policies that created demand,
thereby encouraging the consumer market to continue to grow despite the collapse of
the international economy. As a result of these policies, combined with a historical
tendency that had favored the domestic market, the impact of the Depression on
Sweden was minimized. Consequently, Sweden suffered less and for a shorter span
of time from the global collapse than many of its developed counterparts.
By the end of the first half of the 20th century, the developed world had been
thoroughly abused. It left the first half of the century smoking from the ruins of WW
II ready to get back to the business of developing capitalism. Sweden exited the war
in a slightly better position than those actors who had been directly involved, mostly
by being complicit with Hitlers demands, even going so far as to allow his armies
access to Norway. Sweden was never as battered by those nations who resisted or
been conquered be Germany, very little of its industry had been damaged by the
fighting. Despite the breakdown in global trade, Sweden was quickly able to
reintegrate itself into the larger European world, becoming a major trading partner
with West Germany, Britain, and the surrounding Scandinavian countries.
5 Hobsbawm, Age of Extremes, 94.
39


In addition to its strong industrial position, Sweden used the opportunity of
increasing global trade to develop the Swedish model: the system that defined
Swedens society and government throughout the second half of the 20th century.
The Swedish model featured the special relationship between employers and
employees that developed from the end of the 1930s...6 This relationship included a
great deal of compromise between laborers and their employers through government-
sponsored agencies. The government, now firmly in the hands of the Social
Democrats, would not actually intervene in these negotiations, but through them,
Swedish workers were empowered to demand better compensation, increasing their
standing relative to the companies for which they worked, and to spearhead a drive to
equalize incomes throughout the country.
The upshot of all these conditions in Swedish politics and civil society was the
development of social institutions dedicated to keeping the lower classes healthy,
educated, and relatively afluent. There was little that the Swedish industrialist could
do owing to the historical volatility of the Swedish worker, and the accessibility of
Swedish democracy. This combination of elements ensured that capital domination
was not an easy thing to guarantee and that social programs were going to take a top
priority. As a result, the period from the end of the Second World War until the mid
1970s saw the rapid growth of Swedens economy, and a swift increase in the wages
and standard of living of most citizens, though as mentioned earlier, this was a
6 Magnusson, 232.
40


common trend throughout the developed world. What makes the Swedish situation
unique was the overwhelming concern by government, and the trade unions with
stability and the security of the average Swede. Most importantly, the Swedish
electorate trusted the government, and its role in it. The expansion of the Swedish
welfare system also brought dramatic shifts in the distribution of wealth. In the years
following 1920, the percentage of wealth controlled by the wealthiest five percent of
Swedes, dropped from 77% to 44%, meaning that a greater proportion of national
wealth is controlled by the lower classes. According to Lars Bager-Sjogren and N.
Anders Klevmarken in their paper Inequality and Mobility of Wealth in Sweden
1983/84-1992/93, the income of top earners in Sweden steadily declined in terms of
their overall domination of the Swedish economy.7
Swedish social democracy is the culmination of efforts by three major state
actors. The first is the Social Democratic Party, known in Sweden by the acronym
SAP. This party came to prominence in the 1930s and immediately set about
installing governmental programs and reforms that would strongly support the
working class. The second is the Swedish Trades Union Congress, or LO, a powerful
special interest organization that is the effective successor to the central trade union
that had emerged near the end of the 19th century. Finally, there is the Swedish
Employers Confederation (SAF), which is the capitalist organization that
counterpoints the LO. Since the SAP and the LO were powerfully aligned, it should
7 Bager-Sjogren, Lars and N. Anders Klevmarken, Income Inequality and Mobility of Wealth in
Sweden 1983/84-1992/93, 1997, .
41


come as no surprise that the SAF often found itself forced to compromise with the
demands of the working class. This unique institutional framework formed the
background to the full development of Swedish social investment immediately
following the World War II.
Swedish social democracy entails a number of institutional and legal systems
designed to assist in the development of a more egalitarian and efficient economic
system. The first major mechanism is the wage-solidarity policy that became a major
piece of social policy during the 1950s. Effectively a complicated scheme to ensure a
high degree of wage equalization, this policy legitimated the redistributive demands
of low-wage unions by identifying them with the long-term interests of the labor
movement as a whole.8 Clearly the wage solidarity went hand in hand with the idea
of labor equality and notions involving equal pay for equal work. These ideas also
helped to shape the bargaining methods employed by the LO during wage
negotiations. By enforcing higher pay schemes, the Swedish government hoped to
encourage companies in Sweden to focus on efficiency instead of wage gouging and
labor manipulation.
The Swedish model also encourages both growth and labor mobility. It was
generally recognized that the Swedish future depended on high rates of growth, the
importance of which was fueled all the more by the rising expectations of the average
Swedish citizen. As such, both the SAP and the LO understood that companies
8 Jonas Pontusson, The Limits of Social Democracy (Ithica: Cornell University Press, 1992), 63.
42


would have to attempt to remain competitive in the global market. The upshot of this
was an understanding that companies would have to be allowed to shift operations
and engage in any number of structural changes. To help and ease the dislocation that
this would cause, the Swedish government introduced welfare reforms that helped
insure that workers would have access to job training and financial assistance. This
policy would keep people employed and keep domestic demand up and secure. The
policy also included relocation credits in order to help families quickly and easily
transition to new homes when their jobs were moved or cut. This labor market policy
gave a great deal of freedom to employees and opponents of the policy feared that
labor might become too mobile, making it impossible for employers to hold on to
their work force.. .9
The final major element in the Swedish model was stability. In order to truly
honor its obligations to the citizenry and their expectations, Swedens government
had to find a way to offer job stability to its people. This came in the guise of either
limited direct state involvement in industry or outright nationalization. In times of
crisis, the government would nationalize various industries by purchasing a
controlling share in them. By doing so, the government hoped that important national
industries, such as coal and iron production, could be protected during periods of
declining demand, and that job transitioning could be easier. In some cases, the
Swedish government would take over whole industries, thereby establishing itself as a
0 Ibid., 65.
43


sort of monopoly. In the case of alcohol and tobacco, this monopolistic role also
allowed the government to limit the distribution and consumption of products that
could be viewed as a danger to the public.
It was also assumed that government involvement could help to increase
efficiency in publicly sensitive industries, such as health care and pharmaceutical
development. The market could be an effective tool, but it was felt that some things
were simply too important for their fate to be left to the volatility of a given products
short-term marketability. This tendency to nationalize entire industries at will as well
as the general willingness of the government to stand aside when market conditions
were favorable, characterized a general break from the traditional European practices.
Nevertheless, the Swedish governments involvement in industrial nationalization
never exceeded controlling more than 10 percent of the existing workforce.10
Combined with the other initiatives undertaken by the Swedish government, the
nation was quickly becoming a sort of workers state in which much of the social and
political power was held by the bulk of agencies of the working class, and businesses
were increasingly forced to cater to their employees, or at least engage them in honest
dialogue.
The first two policies, and the irregular extent and predictability of the third,
were major separations from the rest of the European social model which generally
contained the more universal policies such as pensions, universal health care, and
10 Magnusson. 248.
44


access to education. Of course, the Swedish model contains these benefits as well in
addition to their provisions for housing, minimal nutritional standards, and a minimal
level of income.11 Taken together, the Swedish system of government is a classic
example of a social corporatist model, meaning that unelected bodies take a critical
role in the decision-making process. Over time these same interest groups have
become virtual appendages to the government that they seek to influence. The
difference between Sweden and much of the rest of the developed democracies that
function on this level is the degree to which these special-interest organizations are
democratic, and strongly linked with legitimate, populist, and proletarian interests. In
the end, the Swedish governmental and social model that developed was open, and
responsive to the needs of the electorate. However, having given such wide freedoms
to laborers and taken a considerable amount of freedom away from the capitalists. As
the world entered an era of powerful economic reintegration, Sweden was in danger
of having to sacrifice those principles that had been core to its development.
During periods of rapid growth and development there is little that can
completely undermine these sorts of broad social initiatives owing to the economic
conditions that make people less prone to hoarding. In fact, such policies depend
absolutely on a stable domestic economic system, strong tendencies towards growth,
and a strong export market. Such was the case in the few decades following WW n,
during which many of these policies were being established. However, as has already 11
11 Ibid.,, 243.
45


been demonstrated, things were changing dramatically in the outside world. As
European and American companies began to push for broader and more open
markets, it became clear that there was the promise of vast rewards for moving
operations in a more global direction. This explosive growth in international
competition was going to cause problems for Sweden as an island of progressive
policies.
As one could safely assume, the economic recession that swept the world
during the mid-late 1970s hit Sweden hard and called the entire social system into
question. This crisis occurred during the era in which the groundwork would be laid
for the development of Reaganomics and Thatcherism, and these concepts started
to become popular alternatives to the social systems in Europe (and to some extent
North America). This era saw unfettered capitalisms resurgence, and undaunted by
the lessons of the previous century, all of the major governments in the developing
world were swept up in its current.
The 1960s ended with the Swedish government saddled with the burden of a
sizable deficit, and ill prepared for the strong recession that hit during the 1970s.
Industries all across the developed world watched as growth slowed (and in some
cases reversed) and industries stagnated. Sweden, with its strong ties to the
international economy, would suffer just as much. The Swedish model was clearly
entering a period of crisis. \
46


The crisis of the developed world that struck during the 1970s was
traditionally attributed to the oil scarcity of 1973-74. During this time, the
Organization of Petroleum Exporting Countries (OPEC) increased the price of oil
exports by roughly 400 percent, sending shockwaves throughout the West and
accelerating the decline of Western economies. In Sweden, this was an era of
intensive governmental activity in the industrial sector as the government rushed to
shore up flagging industries and stave off the sudden and rapid decline of heavy
industry. To try and stabilize the economy, reduce the intense drain on the national
coffers caused by rampant unemployment, and regain a competitive advantage, the
Swedish government proceeded to invest heavily in business bailouts, even going so
far as to increase the number of state-owned enterprises considerably, and drastically
devalued the Swedish Krona against other major currencies so as to spark imports and
discourage exports.
By the end of the 1970s, it seemed that the ploy had worked. Swedish
industry regained a good deal of ground, and the historical aim of full employment
seemed to once again be possible as the 1980s opened. This was the time during
which Sweden attempted to develop the famous Third Way of economic
development, discussed by Anthony Giddens as the politics of self-actualization as
opposed to emancipatory or politics of inequality. This method stood as a stark
contrast to the other two models promoted in the West. The First Way was the title
given to the policies adopted by Margaret Thatcher in England and Ronald Reagan in
47


the United States. Both emphasized the importance of supply-side economic
incentives for business, while simultaneously drastically cutting government spending
in the public sector; in other words, attempting to slay social democracy. The
Second Way was the centralized socialist methods embraced in the Soviet Union,
and with its brand of centralized economic planning.
The idea of the Third Way emerged in Sweden in the early 1980s. This was
an effort to restore the sense of security that had vanished from Swedish society
following the crash of the last decade. Like the English model, this was a supply-side
policy that sought to stimulate Swedish industrial growth through boosting the
desirability of Swedish exports while simultaneously encouraging the domestic
market. To accomplish this purpose, the government undertook a policy of currency
devaluation. To make this possible, it was necessary for labor movements and
employers unions could come to an accord on wage policies owing to the need for
solidarity on such sweeping initiatives. When a nation devalues its currency, it
relative buying power with respect to its neighbors decreases, which can have a
devastating effect on the ability of the middle and lower classes to meet their needs.
However, these policies also serve to increase the price of imported goods and help to
increase the reliance on domestically manufactured goods, which can stimulate
employment and thus domestic consumer demand. While it can have an immediate
effect on the microeconomic concerns of the individual worker, it can help to salvage
slumping economies in the medium to long term. Nevertheless, the LO (the Swedish
48


Confederation of Trade Unions) was not about to accept currency devaluation without
an increase in pay. Consequently, it was necessary that all of these changes be made
while increasing the average wage. The Third Way sought to maintain the welfare
system and wage-solidarity policies while insisting on the renewal of the private
sector as the engine of economic recovery.12 In the short term, this ploy succeeded.
The Swedish economy made a dramatic turnaround during the middle of the 1980s,
even boasting full employment. While the arrangement struggled during the 1990s,
Sweden still enjoys a steady growth rate, and has been ranked as the 11th most
competitive country in the world by The Economist,13 This outcome would suggest,
then, that social democracy can remain a highly competitive force in the global
economy. Such a policy certainly takes a bottom-up approach to economic and
sociological stimulation, but this can clearly be a powerful boon. After all, a business
can be every bit as strong when the employees see the benefits of working
competitively, even if the social welfare system removes some of the freedom from
private entrepreneurs.
At the time, the economy was overloaded with industrial workers, and
Sweden was creating an export surplus of industrial goods. While certain raw-
materials markets were left largely untouched, industries like steel and coal could
simply no longer compete with outside sources, especially in the developing world.
While further devaluation was certainly an option, the final results would have to be a
12 Pontusson, 117.
13 "Krybbe to Grav," The Economist, June 12-19, 2003. p. 14.
49


lowered standard of living, since the country would quickly be unable to afford
anything in the way of imported goods. In short, it was no longer realistic for the
government to continue paying for industrial jobs, and those workers needed to make
fairly massive transitions. Sweden had to change its focus.
The fundamental problem with the Swedish model was the inflexibility
afforded to capital owing fundamentally to the Swedish commitment to demand-side
economic models. As the bottom was falling out from industrial production all over
the developed world, the Swedish system lacked the flexibility to quickly make the
structural changes necessary for adaptation. The new methods of production no
longer favored the organized interests of the factory worker. Instead the new
information economy relies upon a laborer who is a combination of blue and white-
collar labor. This sort of labor is much harder to standardize. Additionally, these
new workers are far more specialized and educated than thier industrial counterpart.
The inevitable result of the decline of the industrial economy in the West is a decline
in the availability of semi-skilled, yet high-paying jobs. To compete with the
developing world, the developed West must find a way to work more efficiently,
while still providing for the basic needs of its population in terms of types of work
available and the protections made available to encourage the dynamism of options
available to workers.
Like many other developed nations, Sweden has seen a sizable upswing in
employment rates on the service side of economy. However, as has also been the
50


experience in other developed countries, these jobs simply cannot pay as well as the
older industrial ones. Nevertheless, this is the area into which Swedens proletariat
has been forced. Predictably this shift means that the dreams of a more egalitarian
society are quickly slipping away and the entire Swedish system may be slipping
away as the society develops an increasing dichotomy between the rich and the poor:
a pattern that can be seen throughout the West. Thus far the Swedish system has
proven itself to be highly resilient, and it can be hoped that through rigorous
enforcement of labor policies and employment services Sweden can maintain its
unique system of competitive social democracy.
Certainly the opening of the global economy has had an effect on this
development. Without the freedom to protect its markets, Sweden has been forced to
undercut industrial production. The fundamental problem facing the developed world
in the New World Order is that of change, and Swedens unique social welfare
system is so far seeming able to successfully cope with these changes. The question
remains as to whether or not Sweden can successfully maintain such a system in the
modem world. What Sweden has succeeded in doing so well is carefully regulating
the labor market by investing in healthcare, training and retraining, and helping the
working Swede to remain comfortable, secure and able to cope with the rapid changes
brought about by the opening international marketplace while maintaining healthy
demand in the domestic market. But these regulations affect nearly every aspect of
the Swedish economy, owing to the expense of funding such ambitious projects. So
51


far, Sweden has managed to offer competitive incentives to business, but in the face
of growing competition from abroad, Sweden runs the risk of capital flight.
Furthermore, some labor market regulations create a conflict between short-term job
security for the individual and the need for a well-functioning labor market and
flexible firms.14 In other words, Sweden may have too much of a good thing.
Sweden has been slowly taming and leaning up its expansive social system, as is the
essence of the Third Way. While Swedish business may be limited in its flexibility
by certain aspects of its social system, Swedish government is a highly responsive
organization that focuses its efforts of the dual aim of economic competition and
citizen protection. Remaining tuned in to the needs of the Swedish polity, gives
Sweden a chance to balance economic efficiency with a civilized society.
14 Assar Lindbeck et al, Turning Sweden Around (Cambridge. MA: The MIT Press, 1994), 92.
52


CHAPTER 4
CAPITAL ASCENTANT: THE UNITED STATES
No understanding of social justice, social democracy, or globalization can be
complete without a look at the United States. From its humble beginnings as a colony
of the British Empire, this wide and untamed country at the very fringes of
civilization has risen to become the premiere capitalist power in the world in only two
centuries. Not only in terms of its industry is the American presence now tangible in
every corner of the globe, but also its fashions, advertisements, and products. Truly,
to fully understand the fate of social welfare and the left in the era of globalization,
the role of the United States is key.
However, the United States, despite an energetic and active history of labor
and left wing activity, has one of the weakest progressive movements in the
developed world. The bargaining power of the American worker has been effectively
hamstrung, as evidenced by continual corporate downsizing, the collapse of corporate
pension schemes, and the inability of labor movements to enforce their demands on
companies. As we shall see, this failure is due to a combination of elements ranging
from the cultural and historical activities, both of the proletarian parties and the ruling
elites, and to the ever-changing world of which America has become the principal
53


architect. Globalization has played an important role in the suppression, creation,
dismantling, and possibly reconstruction of various institutions of social democracy
for Americans. As economies turn increasingly outwards, national governments are
being forced to turn their eyes inwards and address the more immediate concerns of
the populations that they have been charged with attending to, lest they become
irrelevant. Failure to do so will bring about a rise in the perceptions by polities of
their governments illegitimacy.
Political and Social Development in America:
The history of industrial and socialist development in the United States is best
understood as emerging from the American Civil War. This massive conflict raged
from 1861 to 1865 and ended the long standing split between the agrarian South and
the industrialized North. This split was based on a number of factors not limited to
the means and predominant modes of production. Nevertheless, it was primarily a
conflict over the sociopolitical demands of agrarian slavery and the industrialization
that had taken over the North. These changes had influenced nearly every aspect of
northern society, and the expansionist needs of Northern industrialism made a conflict
between the two regions inevitable. One example could be found in the disparate
views towards the international economy: The South, a virtual semi-colony of the
British to whom it supplied most of their raw cotton, found free trade advantageous,
whereas northern industry had long been firmly and militantly committed to
54


protective tariffs...1 Tariffs were the means by which any developing country would
try to protect burgeoning industries. However, this transition in the South had the
effect of committing them to the same industrial progress as the North, reinforcing its
place as secondary to the industrialized North.
The Civil War was a cover for other changes that were gripping the United
States at the time including, the steady development of the US labor movement. As
we have already discussed, the labor movements in the industrializing world often
formed the backbone of socially progressive practices. While the European worker
clashed with the capitalist and the aristocrat for political recognition, the American
worker had already obtained it after property restrictions had been removed from the
electoral system during the Jacksonian restoration of the 1820s and 30s. But unlike
Sweden, whose electoral machinery was quite open from the outset, the American
system was a far less direct, pluralistic system, meaning that regional consensus took
precidence over national policy. Coupled with the nature of the American two-party
system, this arrangement led to a situation in which the bargaining power of the
national minority voices was dramatically limited. Access to government was largely
limited along distinct class lines. The consequence of this political situation for the
worker and proponents of social democratic reform was that ...their economic
battles could be taken over by political parties that blurred class lines.1 2
1 Hobsbawm. The Age of Capital, 141.
- Howard Zinn, A Peoples History of the United States (New York: Harper Collins Press. 1999), 232.
55


Americas industrial development brought with it the inevitable struggle
between laborers and the capitalist classes, as surely as it had brought similar troubles
throughout the industrial world. America's workers were unionizing, striking, and
otherwise trying to protect themselves and their futures. This struggle became
stronger following the Civil War and the sudden surge in industrial development that
followed. Between 1859 and 1899, the number of industrial workers increased four-
fold, and the number of factories doubled during the two decades before the turn of
the century.3 This trend meant that workers were also going to attempt to assert their
rights more strongly than had previously been the case. Complicating matters was the
relatively closed nature of the American political system, which left workers with
limited recourse to the engines of government.
The post-war labor movement began simply enough. Workers organized the
National Labor Union in order to arrange strikes for the eight-hour workday. This
movement was to illuminate the true nature of American capitalist powers; they
would only give an inch when there was absolutely no other choice since public
pressure was so great that to continue resisting change would jeopardize the whole of
society. When American workers started agitating for the 8 hour workday, so strong
were the interests resisting the workers that the walkouts and strikes dragged on for
three months. But by the end, American workers had earned their decreased working
3 Phillip Abbott, Political Thought in America (Prospect Heights, IL: Waveland Press, 1991). 179.
56


day.4 This situation would prove to be typical. American capitalist interests were
powerful in the US, arguably more powerful in their government than any of their
counterparts across the industrialized world. As such, they could call upon
considerable private and public resources to defend their interests. Under these
circumstances the most remarkable thing about social democracy in America is that it
managed to develop a tradition at all. In fact, the degree to which capital could
dominate national politics is one prominent feature of American industrial
development that separated it from Western Europe: there was a total absence of any
kind of control over business dealings, however ruthless and crooked, and the really
spectacular possibilities of corruption both national and local especially in the post
civil war years.5 Against this backdrop stood the American worker whose struggles
would showcase the brightest and best that American democracy could offer.
During much of the 19th century, the American proletariat was not unified by
any particular ideology. Socialism was late in coming to these shores, and the initial
American labor movements generally lacked scope and long-term vision. The reason
was fairly simple. Socialism had grounded the labor movement in Europe, and
helped to bring the proletariat there a sense of itself, as we have seen from the case of
Sweden, which adopted some socialist values to a capitalist society. In the case of the
United States, this foundation arrived late, but when it did, the established political
parties quickly rallied to defeat it. Socialism, such as it was, threatened to undermine
4 Zinn, 240.
5 Hobsbawm, The Age of Capital, 144.
57


the entire structure of American democracy, not to mention the danger that an
awakened and class-conscious proletariat could pose to the socioeconomic status quo.
Capitalism had become Americas new autocracy, and the socialist and other labor
movements were threatening to unseat it as surely as Robespierre had done to the
aristocrats in France a century before.
The man who came to define American socialism was Eugene Debs. Early in
his political career, Debs did not believe in the notion of the class struggle. In fact, he
went so far as to suggest that the capitalist class and the laboring class were linked,
and that only through their cooperation could society flourish. However, his
experience during the Pullman Strike6 would change this view, and he soon
recognized an inherent antagonism between the two groups. The creation of the
Socialist Party reflects this change. Debs felt that the American Proletariat had never
really become class conscious, as such it was the duty of the party and of Debs to
make them so, saying on one occasion that ignorance alone stands in the way of a
Socialist success.7
Debs worked hard to draw a line of separation between his political beliefs
and those of the tiny communist movement. He believed in the equal distribution of
capital but not of property. More specifically, as he explained in 1900,
6 The Pullman strike was a famous strike between railway workers and the National Guard. When
workers sturuck for better wages and safer working conditions, the nation guard was sent in to break
up the strikers and allow the railways to resume operations while ignoring the demands of the involved
workers.
7 Harold W. Currie, Eugene V. Debs (Boston, Twayne Publishers, 1976), 67.
58


Socialism means the collective ownership by all the people of all the
means of wealth production and distribution.... Socialism does not
propose the collective ownership of property, but of capital: that is to
say, the instruments of wealth production, which, in the form of
private property, enable a few capitalists to exploit vast numbers of
workers, thus creating millionaires and mendicants and inaugurating
class rule and its odious and undemocratic distinctions.8
There is a clear distinction here that is uniquely American. Debs did not endorse the
redistribution of private property or of the material wealth. What Debs advocated
was a socialism directed at American consumers and the way in which they would
access the means of production. However, it is important to note that the equal
distribution of productive capital would lead to an equilibrium being reached between
people who were once of different classes. In any case, Debs brand of Socialism
was nothing if not literally revolutionary. He succeeded in crafting an image of
socialism that could appeal to the independently minded American worker.
The 19th century in America was defined by the dual development of labor
and industry. As has already been pointed out, this was a period of intensive
industrial growth, and the titanic struggles between the capitalists and the proletariat
were far too numerous to enter into detail about here. Needless to say, the Socialist
Party and its members often found themselves at the forefront of the movements to
secure more and better rights for those they sought to represent. It would not be until
Americas entrance into the First World War that the country's power holders would
* Ibid., 68.
59


accomplish the dual goals of eliminating the threat of socialism and the United States'
taking its place among the worlds great powers.
Socialism was not without some successes, however. Like the Populist Party
that emerged alongside the socialists, their principal success was in changing the way
in which the two major parties functioned. In order to maintain direct control over
the political system, the Democrats and Republicans were forced to accept some of
the socialists demands, and in so doing small parts of their preferred programs.
Owing to the expansive political machinery at their command, this enabled the two
major parties to pull the rug out from under any alternative parties that succeeded in
developing a following. This tactic worked especially well on the Populists, who saw
much of their support base eaten up by the democrats in the elections of 1896. The
Democrats accomplished this by folding to certain demands and playing off of other
concern about the publics view of the Populist program as revolutionary. There
would be similar attempts by both major parties to usurp the Socialist Partys role, but
most of these would fail by virtue of the revolutionary aims of the Socialists in which
the major parties could not acquiesce while maintaining legitimacy with their
capitalist sponsors.
As the 20th century began, America was also witnessing the development of a
stronger middle class. As in other countries, Americas middle class grew out of the
swelling ranks of middle managers and bookkeepers that kept industry moving
forward. As its rank would suggest, the middle class acted as a buffer between the
60


proletarian masses and the capitalist classes. The psychology of the middle class was
one that prized temperance as a virtue. Not being so destitute that they were forced to
live paycheck to paycheck, the middle classes nevertheless stressed the importance of
frugality and living within their means. This goal often placed them at odds with the
lower classes, whose financial concerns were almost universally short term. As the
twentieth century began, it was the middle classes that were steadily becoming more
critical to the future of American political and economic concerns because of their
combined political and economic power.
The middle class formed a sort of swing vote in the game of national politics.
Its members did not hold sympathies for a class-conscious proletariat, nor did they
accept the desire of the capitalist classes to be granted more and better freedoms in
the pursuit of profit. While middle-class individuals would often be morally swayed
by the plight of the workers, their first concern was for order, and this group could
never endorse the sort of revolutionary programs laid out by proletarian parties.
Consequently, the middle classes usually sided with the business concerns, since
these concerns at least promised security, over the more utopian ideals of the working
class. In America, with its vitriolic working classes, the middle class served as a
traditional bastion of stability and was critical to the continued legitimacy of both the
political and economic systems.
The First World War signaled the political death knell of the American
Socialist Party by legitimating a number of laws and policies directed against such
61


potentially revolutionary ideologues. The most important of these laws was known as
the Espionage Act, which made special provisions against Whoever, when the
United States is at war, shall willfully cause or attempt to cause insubordination,
disloyalty, or refusal of duty in the military [...] forces of the United States, or shall
willfully obstruct the recruiting or enlistment service of the US.. ,9 One could argue
that this provision was directed squarely at the socialists who considered it their duty
to end the involvement of the US in what they regarded as a solely European war.
Nevertheless, the law was quite effective in that it saw much of the leadership of the
Socialist Party arrested, including Eugene Debs. The party would never fully recover
from these blows. Nevertheless, it is a mistake to assume that Marxism and socialism
have never played an important part in American ideological development.
From the ashes of the First World War and the American Socialists, however,
a new proletarian movement would gain ground, though it would never become quite
as powerful as its socialist counterparts. The Bolshevik Revolution in Russia had
given communism a whole new lease on life. While this ideology had always been a
bit of a fringe ideology, especially in the United States, the events in Russia brought
the American Communist Party fresh membership and an increased initiative. It was
only a short time before Communists were organizing workers and attempting to
create new systems of organization.
9 Zinn, 365.
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Their chosen instrument was the Industrial Workers of the World (IWW).
The IWW was initially formed by the more radical wing of the American Federation
of Labor (AFL) in 1905 owing to the exclusivity and corruption that was becoming
common in that organization. The political volatility amongst members was a draw
to socialists and communists alike who tended to quickly take up positions of
prominence within the organization. Following the outbreak of the war, and the
formation of the Soviet Union, the communists attempted to fill the radical vacuum
left following the decline of the socialists. Unfortunately, the October Revolution did
not simply benefit the Communist Party. It had the effect of spurring the
conservative industrialists and their governmental allies into action. Consequently,
Communists were imprisoned and hunted across the nation. Many stayed to fight the
system, but a good number fled to Russia in hopes of finding their workers
paradise there.
Immediately following the war the domestic situation would cool down
somewhat. Indeed, the 1920s opened as a decade in which things appeared to be
getting better for workers. Wages were growing and unemployment was reaching an
all-time low. The development of mass production and the modem factory system
was nearly complete. This transition allowed for longer production runs with greater
returns than had been previously possible and led to the development of workers
unions that could better link with employers to reach better settlements. Indeed, it
seemed that the roaring twenties were a promising time for all Americans. However,
63


these circumstances of opulence and progress were not to last. By 1929 the economy
of the United States collapsed, and much of the industrialized world followed suit.
The catalyst to this traumatic economic event was the stock market crash of
1929 which led to the Great Depression. Following this collapse, banks around the
country closed down and many found themselves without savings. By 1932, over 12
million people had become unemployed with no relief in sight.10 Most of the major
industries slowed production to a trickle in light of nose-diving domestic demand, and
industrial employment likewise spiraled downwards. Coupled with various
ecological crises in the agrarian parts of the country (dustbowls, drought, etc.), the
decade was quickly becoming one of underemployment, malnutrition, and destitution
for a significant number of Americans.
Needless to say, this crisis pushed the problem of the maldistribution of
wealth into the forefront of national politics, and gave additional credibility to the
claims of the Communists and other left-wing radicals (owing in part to the strong
growth figures in the USSR at the same time) that capitalism was destined to fail.
Genuine reform had been put off for the better part of fifty years, and now something
had to be done or it was feared by the government that the political and economic
institutions of the United States would collapse in a vicious revolt by the starving
masses. To save the republic, a New Deal was needed, and President Roosevelt
would offer it.
10 Abbott, 223.
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There have been many arguments that Roosevelt was not inspired in this
program by the left-wing ideologies. While this may be true in the case of the man,
surely many of the New Dealers were so inspired. National leaders developed a
certain understanding of the importance of demand-side economic policies. If people
could not spend, they could not buy. If they could not buy, then American industry
could not produce. The solution to the Great Depression seemed simple: get people
back to work. To this end, the Roosevelt administration created the Civil Works
Administration, the Works Progress Administration, and the Public Works
Administration. Investing in projects beyond the scope of private industry, the
WPA, with its forerunners and derivatives, transformed America.11 It did so by
employing people again, building roads and art projects, and returning a sense of
hope to the population during a time when things could have hardly seemed worse.
Despite the best efforts of the Roosevelt administration,, it was the devastation of war
that would restart the US economy in earnest. The social justice of The New Deal
changed only slightly the attitude of the American industrialists, and mostly served to
salvage a political and economic system on the verge of collapse.
The details of the Second World War are far less important to the
understanding of social democracy in the United States than those of its outcome.
Immediately following the war, the US found itself in a position of unparallel
dominance economically and politically. While it is true that the US had become the
11 William Manchester, The Glory and the Dream (New York: Bantam Books, 1990). 86.
65


worlds foremost economic power by the end of the 19,h century, the economic
destruction of Europe created a situation of near dominance on the international
scene. By way of the Marshall Plan, US economic hegemony in Western Europe was
secured. International trade could now get back on track. With national
manufacturing concerns bolstered by public spending on the war, markets in Europe
literally starving for goods, and the threat of Soviet power ensuring continuing
spending on the Military Industrial Complex, the development of the United States
into its modem form was realized and the country moved into the golden age of
capitalism.
Despite the considerable fears that pervaded American society during the
height of the Cold War, the 1950s and 60s were arguably the best years for most
Americans economically. Mass production had led to stable jobs that paid well,
education was becoming available to more people, and the labor unions had finally
come into line in the face of growing affluence, which ensured that industry could be
the ruling concern without opposition. Nevertheless, postwar affluence and the fear
of communism had the net effect of eliminating the left from the American political
debate. Across the country, bosses and politicians capitalized on largely irrational
fears of communism to silence most critics and have the worst arrested or harassed.
In 1950 Joseph McCarthy ushered in a new wave of anti-leftist sentiment around the
country. There were times when correspondents wondered whether anti-American
polemics in the Soviet Politburo could possibly be as scathing as those heard under
66


the Capitol Dome.12 While the political rejection of all things even remotely
communist and socialist was not a direct result of the reemergence of globalization,
the acceptance of the policy was connected to it. Americas dominance in the global
economy was responsible for a higher degree of economic equality and prosperity
than ever before. Concerns over social justice had fallen far from the mainstream
since the economy was finally delivering on all fronts. The left had become a
political and economic liability to the ensconced elites, and now that it had salvaged
the country from revolutionary destruction, it could be used as a tool to defeat itself.
In this manner was the debt owed to the ideological left forgotten. The Cold War had
the powerful effect of forcing social democracy to completely retool its arguments
and intellectual foundations in order to not seem tainted by of communist ideology.
To be a leftist had become a political liability in life or in office.
However, the nation was soon to prove just how resilient the ideas of class-
consciousness and historical materialism could be. The wave of protest in the midst
of the plenty of the 1960s gave a new life to the radical left and to the overriding
concern for social justice. The 1960s and early 70s would be the last great push from
the American left until the present day. And it began with two wars: one against the
Vietnamese, and another against poverty.
Many scholars see the 1960s as the beginning of the end for the United States.
There can be no doubt that the end of the Sixties marked the end of the most
12 Ibid., 492.
67


prosperous period in American history, at least for the vast majority of people. The
war in Vietnam, like the later Soviet war in Afghanistan, demonstrated that the
superpowers were not invincible, and in fact were struggling to maintain their hold on
world affairs. Moreover, the war extracted a terrible toll on the US economically.
Not only did the Vietnam War drain American coffers and gold reserves but, the
United States incurred these costs just as Europe and Japan experienced major
economic upswings. These conditions ended US preeminence in the global
economy.13
On the home front, the relaxation of anti-communist rhetoric following the
end of McCarthys career and the embarrassed silence that followed, combined with
growing civil unrest forced the creation of a more comprehensive welfare system as a
truce between a government bent on foreign war, and a populace increasingly
disenchanted by its activities. Medicare was finally created in 1965, which gave
basic medical services to the elderly, despite the tooth and nail battle between the
government and the American Medical Association. Additionally the Johnson
administration attempted to reform the educational system, by creating the Office of
Economic Opportunity (OEO). The OEO introduced a swath of reforms including
the Head Start Program, the Neighborhood Youth Corps, Upward Bound, and the
Community Action Program. Despite a shaky start, the OEO had a good number of
successes. In five years the war on poverty programs would play a key role in lifting
13 Immanuel Wallerstein, The Decline of American Power (New York: The New Press, 2003), 18.
68


thirteen million people out of pauperism.14 Nevertheless, the OEO failed in the end.
Depending on which side of the political spectrum one fell on, the programs either
did not go far enough, or they went too far. In any case, the activities of the OEO
were scaled back considerably following the explosion of demand for more assistance
from those the programs were intended to help. Government was simply unwilling to
go any further than they already had and was already facing growing political
resistance from many elitist sources. Clearly, the dominant powers in US politics had
underestimated the scope of the problem.
The need for welfare reform grew during this period owing to the growth in
national prosperity. As prosperity grew, so did discontentment with ones lot, as is
further suggested by Ted Gurr.15 Especially if ones lot was well below the perceived
social norms. The civil rights movement became possible and practical after
standards of living had created the time and leisure required to seek out further
racial/gender based advancement and equality. Medicare became increasingly
important compensation as families were forced split up out of economic necessity
and children could no longer see to the needs of their parents. . ..Gemeinschaft was
giving way to Gesellschaft', communities to individuals linked in anonymous
societies.16 Clearly the political left offered potential solutions to many of the
growing problems in society, though it was not to last.
14 Manchester, 1043.
15 Ted Gurr, Why Men Rebel (Princeton: Princeton University Press, 1970), 24.
16 Hobsbawm. The Age of Extremes, 340.
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By the 1970s the domestic situation had begun to calm. Certainly the era of
protest left a powerful mark on American society, but the civil rights movement was
beginning to shed some of its militancy and the war in Vietnam had all but ended in
1973. The aftershocks were still to come, however. Public faith in government was
at an all time low following the grim experience overseas and the Watergate scandal
of 1973-74. Election turnout offered some proof to this declining faith: in 1960, 63
percent of registered voters participated in elections. By 1973, this figure had
declined to 53 percent, with more declines to come.17 It was beginning to appear that
the revolution was not going to destroy the republic. Instead, America was plagued
by a strange sense of disengagement that endangered the legitimacy of the
government, a form of progressive political burnout, as it were.
Economically, the 1970s were a critical decade that saw the birth of the first
formal organizations of globalization. True, there had been an ongoing process of
European integration after WWII, but Europe, despite the tendency toward conflict
throughout its history, was a culturally and economically interdependent region
already. The Trilateral Commission brought the major international economic actors
together in a new way. It included members from the United States, Western
Europe, and Japan, and functioned in a way that formally recognized the economic
dominance of these three regions and their corporations. The Trilateral Commission
remains an impressive organization even today. Founded by banker David
17 Zinn, 564.
70


Rockefeller and associates in 1973, it includes the heads of the 5 largest multinational
corporations, officials from the worlds largest banks, and the heads of several major
media conglomerates. Jimmy Carter, in 1976, became the first US president to
formally join the Trilateral Commission, thereby symbolizing a period of corporate
growth and collusion with government not seen in almost a century of American
history. For the first time, a framework existed that allowed the heads of state and
heads of industry to work together relatively free from the potential troubles of
democracy and the leftist attacks.
By the end of the 70s and the beginning of the 80s, the American domestic
economy was in decline. Jobless rates were climbing, and wages were declining as
the United States fell into the international recession that was plaguing the developed
world. To counter the growing problems in society, US corporate interests elected
to end their apparent passivity in politics and create a new order in which they could
function as freely and uninhibited as society would bear. To begin this process, they
formed the Pacific Legal Foundation. This was a ...business-organized and funded
legal center to promote the general interests of business in the nations courts...
against workers rights and corporate taxation.18 19 It also precipitated a change in the
nature of business lobbying in the halls of government, as corporations began funding
the creation of citizen organizations whose names obfuscated the true nature of
these organizations. One example, founded in 1988, is the National Wetlands
18 Ibid.. 578.
19 Korten, 144.
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Coalition, which is predominantly supported by development firms and believes that
the federal government, while seeking to protect wetlands, casts a wide net and
imposes burdensome and ineffective regulations on private property that does not
function as or provide the ecosystem benefits of high-value wetlands.20
Clearly, if the latter half of the 1970s witnessed a resurgence of business
activity in government, the 1980s served as the culmination of those efforts. Under
President Ronald Reagan, nearly the entire economic and budgetary mechanism was
restructured in order to slacken legislation and free business from the controlling hand
of government. Together with Margaret Thatcher, Reagan created the Washington
consensus on international economic affairs. Almost immediately, Regan set about
slashing public spending on welfare and other social-democratic programs,
effectively eliminating the work that had been done under previous administrations.
The heady days of the New Deal and the War on Poverty were ended, as taxes in the
upper income brackets were significantly reduced. The reasons behind this activity
were many. Despite the ethical concerns held by the Reagans New Right, the
belief had reemerged in government that the wheels of economic development had to
be set into motion by the capitalists and not the consumer. The 1980s represented a
full retreat from those policies that had emphasized demand-side economics in favor
of the supplier. All of this was accompanied by a series of handouts to business
interests suggesting that capitalism could not function on such a huge scale without
20 The National Wetlands Coalition, All of Them, 1st August, 2001
.
72


significant public interference. ...Most neo-liberal governments were obliged to
manage and steer their economies, while claiming that they were only encouraging
-y i
market forces." What chance did socialism and social democracy have in such an
ideological environment?
Despite the best efforts of corporate libertarianism and the neo-liberal
conservative movement to silence the cries for increased social justice, the last decade
and a half has seen a growing reexamination of these projects in America. The most
noteworthy example came under the presidency of William Clinton during the 1990s.
Clinton became the first president since Johnson to propose an extension of health-
care benefits, even going so far as to suggest a national health care system such as the
kind found throughout Europe. Nevertheless, these proposals were accompanied by
significant cuts to the meager American welfare system. Clinton represented a new
movement in the American Establishment left: a trend toward centralism. By the
beginning of the 21st century, the New Left had moved significantly right. This shift
in part reflected to the fact that the American political system was, and still is, closed
and dominated by two political parties, both tied to corporate wealth." To continue
to survive in this climate, the establishment left needed to move to the center,
simultaneously increasing their relevance to the economic elites and politically
alienating the nations progressives. 21 22
21 Hobsbawm, The Age of Extremes, 412.
22 Zinn, 612.
73


The fundamental problem remains that America is a deeply divided and class-
based society. The objections raised by the traditional left may have been disrupted
and dispersed by the modem American ideology, but that fact cannot change the
fundamental importance of the left for political stability and social equality.
Americas role in the global economy exists because of the overwhelming power and
vitality granted to those institutions and beliefs that have benefited the economic
elites. All that remains is to examine modem America in the global system.
Global America and the Role of Social Democracy:
As the 21st century begins, the American left has largely failed in its
objectives, for a number of reasons, the most important of which is political
manipulation by powerful economic actors in a political system with tightly
controlled access. Throughout the course of American history, the left has attracted
the attention of, but been co-opted by the power holders, who have used progressive
policies to stave off crisis. In other words, the United States often enters into left-
wing compromises, but seldom implements fundamental reform. The survival of
socialist and other left-wing movements was always tied to their tacit acceptance of
the capitalist status quo, or the assumed inevitability of the capitalist world system.
Although these movements did of course mobilize large masses of people to struggle
against the system, they paradoxically served historically as cultural undergirding for
74


the systems relative political stability.23 When they pushed too hard, pretexts were
found to eliminate and discredit them.
Another way of looking at the contemporary socialist tradition in America is
through the lens of globalization. Following the Second World War, the global
economy had begun to expand again, and the success of the West was based, in large
part, upon its rejection of extremist ideologies of both Right and Left in favor of
democratic pluralism...24 The current age sees no such compromise. The massive
levels of disenchantment with the existing system, consistently declining relative
standards of living, and an absence of democratic accountability have put the
American left in the unenviable position of ideological powerlessness, and the
American right is seen as a group of hard realists.
This perception by many should not be overly surprising. The American
system of government was designed with the idea of staving off fundamental change
and maintaining a strong hierarchy based on the importance of protecting unequal
property. This feature is perhaps the fundamental contradiction in the American
system today: how can there be equality under the law, in government, or in any other
avenue of life while we maintain and in fact, promote vast inequality in economics?
The American left has tried repeatedly to provide answers to this question but has
proven incapable of implementing a solution because of myriad difficulties that
23 Wallerstein, 222.
24 Korten, 94.
75


continually arise. The American economy and political system, is not designed to
function in a progressive direction. It serves only capital and to replicate itself.
Globalization serves as the culmination of the ongoing policy of protecting the
large at the expense of the small. It composes an international system that promotes
the free movement of business and capital without concern for the impact that this has
upon the common people of the nation. In many ways, this aspect of globalization
acts as proof that the left has failed in its mission. America is one of the worlds
greatest proponents of this system, and its corporations feel even less devotion to their
home country than do many of their foreign competitors.
This situation is allowed to continue owing to the weakness of democratic
responsiveness in the United States. History shows that the US has possessed a
powerful socialist and labor based tradition. It also shows that those organizations
had to fight hard and hope on systemic failure in order to win their major successes.
Yet despite all of those efforts at reform, the United States has the weakest social
justice systems in the developed world. This weakness does not stem from a natural
self-reliance on the part of the American proletariat but from a closed democratic
system that is largely immune to change unless forced to change by boiling social
protest. In the United States, liberty is not primarily personal or political. Liberty is
above all the pursuit of profit and the freedom of property, from which only a select
few can truly benefit. Without constitutional liberty, too much democracy can lead
76


to disaster. The United States, however, has a different problem. It still has too
little.25
25 John B. Judis, Putting Liberty First," Foreign Affairs, May-June 2002, 128.
77


CHAPTER 5
APPLES AND ORANGES: THE CONCLUSION
From the preceding discussion, several things become clear. The first is that
the left has had an important role in the development of the international capitalist
world. Clearly, the forces of socialism and social democracy have been instrumental
in the establishment and security in of the welfare states and social justice programs
that emerged following the 19th century. Moreover, most of these developments
came out of revolutionary struggles undertaken by the members of exploited classes
under the theoretical auspices of socialism. To avoid needless violence, governments
must be structured in such a way that they are capable of responding positively to the
needs of their populations.
Secondly, the social democratic and progressive movements have begun to
increasingly break down in the United States, largely because of the ever-increasing
influence of modem capital, and its program of favoritism for itself but increasing
international competitiveness for the rest of us. In essence, the objectives of the
leftist movements inspired by 19th century labor theory appear to be both impractical
and incompatible with the demands of contemporary international capitalism or the
realities of globalization.
78


The third issue that arises suggests that this situation is not inevitable. As the
case of Sweden demonstrates, social democracy and responsible capital both have a
great deal of mass appeal and, combined can even be competitive in the global
market. In those societies that are open to the democratic impulses of society, social
democratic policies can hold sway in any given government. In other words,the left
must figure out how to pressure and use government to shape more democratic and
egalitarian public policies. When capital is forced to recognize the legitimacy of
social-democratic concerns and aims, powerful and beneficial compromises can be
reached on both sides.
When a nation embraces a social-democratic system, it runs the risk of
becoming bogged down by the difficulties inherent in managing the interplay
between the interests of the working class and those of capital. If this situation is
mismanaged, such countries immediately place themselves in a weaker position than
their less socially inclined neighbors. Sweden's success is owed to its flexible set of
governmental institutions, and a strong desire to try and please both sides of the
equation. The strong emphasis on job retraining, worker-assistance programs, and
other progressive policies have also played a major role in Swedens success at
beating the odds. On the other hand, the United States has a historical tendency to
embrace progressive reform during times of severe social crisis, while abandoning
them in times of plenty, precisely when such programs would be able to accumulate
the strength to hold off collapse.
79


It follows that the crisis of the American left today is a political and an
economic one. By failing to continue its push for broader reform and greater
equality, the left resigns itself to a position of inferiority to the demands of
international capitalism. Instead of being a force for change, it becomes a tool of
economic control and indoctrination. In order to effect major systemic change, the
left must adopt a two-pronged strategy. One of these must focus of the conditions of
politics abroad, since the economic climate of the global economy encourages capital
and thus growth to move from one place to another depending upon the individual
methods of taxation, and the volatility of labor markets in countries around the world.
If the left can provide an increasing demand for global improvement and reforms,
capital will have little choice but to bargain with the peoples whom it would
dominate. The other tactic must be a concentrated effort to reassert public oversight
in the economic concerns of government. For too long has corporate interest
possessed disproportionate amounts of power in this arena, and many citizens of
advanced economies lack a proper understanding of how important these issues really
are.
The crisis of the left grows out of the crisis of the global proletariat. While
the world has developed an increasing international division of labor, the current
organization of the global system ensures a steady decline in the standard of living for
most people, especially in the developed world, where standards of living are most
likely to even further in the foreseeable future. Until such time as a coordinated
80


policy can be adopted by those who concern themselves with the plight of the
underclasses, they will be doomed to failure. The solution must lay either in
international action across national boundaries, or in drastic decentralization and a
disassembling of the modern nation-state and the notion of economies of scale.
Given current political and economic trends, the more likely solution is one involving
coordinated international action.
The traditional activities of the left have been committed to creating a better
life for the people who make up the statistics studied by economists. Every person in
poverty is an individual with family and friends who should be offered every
opportunity to make a good life for themselves and those around them, not simply an
unfortunate statistic that marks a minor and temporary increase in a companys stock.
The aim of social democracy is to try and insure that the people have the best of their
government and their economy at their disposal.
81


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