The beginnings of a new social democracy/Green Social Democracy

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After the Third Way

The future of social democracy in Europe

Olaf Cramme & Patrick Diamond (eds)

02 April 2012

The future of social democracy in Europe

The political left believed the crisis of neoliberalism would play into its hands. The opposite has proved to be the case. No new variety of capitalism has emerged to fill the void and left-of-centre parties have lost a devastating run of European elections.

This new Policy Network book, edited by Olaf Cramme and Patrick Diamond, contends that social democracy needs to undergo profound renewal if it is to address the exhausted form of western capitalist democracies - the narratives of both ‘third way modernisers’ and the ‘traditional left’ do not offer credible paths forward.

Bringing together leading academics, political thinkers and policy experts, the book seeks to carve out new doctrines, new concepts and new interpretations on which a credible centre-left politics can be built and from which new ideas can emerge.

After the Third Way is available through the publisher I.B. Tauris.

Contents and chapters

The Guiding Purpose of Centre-Left Politics
1. From Fatalism to Fraternity: Governing Purpose and the Good Society
Patrick Diamond

2. Social Democracy in a Global Era
Luke Martell

Policy Predicaments
3. Debt and Deficits: The Quest for Economic Competence
Andrew Gamble

4. The Mechanics of Markets: Politics, Economics and Finance
John Kay

5. Social Democracy at the End of the Welfare State?
Peter Taylor-Gooby

6. Equality, Social Trust and the Politics of Institutional Design
Bo Rothstein

7. Progress and Social Policy: Two-and-a-Half Cheers for Education
Lane Kenworthy

8. Social Cohesion, Culture Politics and the Impact of Migration
René Cuperus and Mark Elchardus

9. Identity, Community and the Politics of Recognition
Michael Kenny

Governance and Politics
10. The Power of European Integration: Choice and Purpose for Centre-Left Politics
Olaf Cramme

11. Back to the Future: Towards a Red-Green Politics
John McTernan

12. Globalisation Challenges to Centre-Left Internationalism
John Lloyd

13. The Squeezed Middle and the New Inequality
Liam Byrne

14. Citizen Engagement and the Quest for Solidarity
Henry Tam

15. Co-operation, Creativity and Equality: Key Concepts for a New Social Democratic Era
Tobias Dürr and Robert Misik

Afterword
16. The New Social Democracy?
Olaf Cramme and Patrick Diamond

About the editors

Olaf Cramme is director of Policy Network and a visiting fellow at the London School of Economics’ European Institute.

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Patrick Diamond is senior research fellow at Policy Network. He is also a Gwilym Gibbon Fellow at Nuffield College, Oxford.

After the Third Way will be launched at a Policy Network and King's College London public lecture in May. More details to follow.

http://www.policy-network.net/publications/4159/After-the-Third-Way

The beginnings of a new social democracy

Stewart Lansley

11 July 2012

Over the last 60 years, European social democracy has moved (though with varying degrees across nations) from ascendancy in the post-war era to marginalisation from the early 1980s and then to ‘The Third Way’ period of accommodation to markets from the mid-1990s.

The essays in After the Third Way: The future of social democracy in Europe show how the centre-left is now in another wave of self-analysis and transition, yet one locked in uncertainty, with its direction and outcome as yet unclear. The book asks whether social democracy can move from what its editors call “a disposition towards fatalism” towards a “new, more radical direction for left-of-centre politics”, to recapture the upper hand and make its mark on an era which faces perhaps the biggest political and economic challenges since 1945.

Since it was written, at least one source of uncertainly has lifted. The electoral outlook for the centre-left has brightened. It has re-taken power in France and won an important regional election in Germany, though this may have less to do with the left offering a great popular policy leap forward than the spreading disaffection with the failure of those in power, mainly the right, to resolve the ongoing crisis.

The challenges facing Europe – prolonged recession, economic stagnation, sinking living standards, soaring joblessness, weakening welfare systems, declining competitiveness – are immense. While 2008 should have been what John Kay describes as a “once-in-a-generation opportunity” for the centre-left to win the battle of ideas, that opportunity has been “comprehensively missed”. As Patrick Diamond puts it, “no systematic, progressive, social democratic alternative has yet emerged”.

Some of those missed opportunities are identified in the book. In the UK, for example, there was the failure (caused by political paranoia) to turn to nationalisation as the solution to the Northern Rock crisis, and, as Kay puts it, “the best means of restructuring banks and securing continuation of their essential functions”.

Much of the book is devoted to the reasons for this failure. Andrew Gamble attributes it, at least in part, to doubts over the left’s record on ‘economic competence’. This has provided ammunition for the right to accuse social democratic parties of poor control of public spending, of excessive reliance on big government and the creation of overweening and bureaucratic states. It has also enabled European conservatives to, at least initially, win support for a continent-wide strategy of austerity while the left has been forced onto the defensive, accused of lacking policies to tackle deficits (despite being caused largely by preventing the crash turning into an even deeper recession) and, by opposing cuts in public spending, remaining wedded to out-of-control government.

But there are other forces at work. Large sections of the European public have, as Peter Taylor Gooby points out, also fallen out of love with the welfarism of the post-war era –  one which has found itself ill-equipped to deal with the post-1980 trends of globalisation, high unemployment, the spread of low-pay and rising levels of poverty. Welfare systems have come to rely increasingly on means-testing, especially in the UK, aimed at controlling costs but at the price of lowering incentives to save and work. A further problem has been the steady fragmentation of working class support, especially for the most redistributive services such as unemployment benefit and social housing.

After the Third Way spells out these and the other dilemmas, choices and challenges facing social democratic parties. What is the right balance between state and markets? What is an appropriate degree of regulation? “Calling for more regulation” is, as John Kay puts it, “not enough”. Does the left have a coherent strategy for wealth creation (as well as wealth redistribution) or what one of Ed Miliband’s advisers, Lord Stewart Wood, has described elsewhere as “a supply-side revolution from the left”? How can the balance of bargaining power be tilted in favour of labour? European party leaders on the left are only too aware of the difficulties they face, in and out of government. As France’s new socialist premier, Jean-Marc Ayrault, put it in his brief post-election speech: “Nothing will be easy, nothing will be given to us.”

While there are big challenges however, the book’s starting point – that the left lacks coherent alternatives to today’s mounting problems – may be somewhat overstated. Conservatives are, after all, now more ideologically at sea than the left. The neo-liberal experiment of the last 30 years has ended in multiple failures. The right’s response to the present crisis – mass austerity – was meant to lead to the revival of private activity, investment and jobs. Instead, as in the 1930s, it is bringing the risk of near-permanent slump, and with it, a final nail in the coffin of ‘market fundamentalism’. The initial public support for what was perceived as a way of dealing with rising levels of debt is now eroding in the face of the reality. Nicolas Sarkozy has been voted out of office. David Cameron is leaking support. Angela Merkel is under growing international pressure to moderate her hardline stance.

While the left may still have its own ‘credibility deficit’, the right’s cherished projects are in disarray and its parties are shedding their claim to superior economic competence. With the failure of austerity economics, the left is starting to win the argument for a multiple-country, global-wide stimulus alternative. Other social democratic responses to the crisis – such as the need for a more responsible capitalism, measures to distribute the fruits of growth more evenly, a move to progressive taxation with the rich paying more – may be far from fully developed, but they are the beginnings of a distinct, workable and alternative political economy.

Olaf Cramme and Patrick Diamond (Editors), After the Third Way: The future of social democracy in Europe,  IB Taurus, 2012

Related Topics: Economy, Europe and The World, Politics

http://www.fabians.org.uk/the-beginnings-of-a-new-social-democracy/

Book Review: After the Third Way: The Future of Social Democracy in Europe

Posted on October 21, 2012 by Blog Admin

Electorally marginalised, seemingly ideologically exhausted and often out-of-step with the contemporary zeitgeist, many commentators believe that European social democracy is currently in profound need of revision and renewal. This book marks a serious attempt to forge the intellectual backbone of a renewed social democracy fit for the twenty-first century. Bringing together leading academics, political thinkers and policy experts, it offers a new and original perspective on ideological and policy innovation and will be invaluable reading for anyone interested in the future of social democracy. Reviewed by Eleanor Bindman.

After the Third Way: The Future of Social Democracy in Europe. Olaf Cramme and Patrick Diamond (eds). IB Tauris. April 2012.

Find this book: 

After the Third Way is a collection of essays on the future of mainstream leftwing politics in Europe put together under the aegis of Policy Network, a centre-left thinktank based in the UK. It brings together pieces by leading European academic experts on leftwing politics and policy, journalists, former special advisors to the UK’s previous Labour government, and from current Labour Party MP and shadow secretary for work and pensions Liam Byrne. Its contributors aim to address both the current challenges facing Europe’s centre-left parties, such as the global economic crisis and European integration, and longer-term structural issues which began in the 1980s, such as the decline in class-based voting, the diminishing power of trade unions and globalisation. These changes have seen many European centre-left parties, perhaps most noticeably ‘New’ Labour, move increasingly away from the state towards the market.

Yet, as the editors point out, there is a general feeling that contemporary social democracy has “lost its distinctive sense of purpose and governing élan”. Each chapter attempts, at least in part, to explore why this might be the case and to offer potential ways out of this stagnant situation by focusing on issues such as education, migration, the changing nature of the welfare state and the currently modish idea of the ‘squeezed middle.’

In his piece on ‘Global democracy in a new social era,’ political sociologist and expert on New Labour Luke Martell considers some of the challenges to European social democracy posed by globalisation, including more neoliberal economic policies which have led to tax cuts, a reduction in welfare provision and weaker regulation to protect labour and wages. According to Martell, some on the centre-left have come to believe as a result that social democracy should ‘modernise’ in favour of markets, private provision in the public sector and deregulation, and away from redistribution and Keynesian economics. Yet he argues that this is the wrong path to take and social democrats should focus instead on regulating markets and maintaining boundaries between the state and the market.

In his contribution on the welfare state, Peter Taylor-Gooby highlights the current dominance of an unstable politics of welfare, with support for social provision waxing and waning depending on the state of the economy, with the Euro-zone crisis being a particular factor. While support for health and education provision remains strong, more obviously redistributive provisions such as unemployment benefits and social housing tend to lose widespread endorsement since they are seen to benefit a particular dependent group. At the same time, welfare provision is threatened by the ‘market logic’ dominant in certain liberal European countries such as Ireland and the UK which sees the state as a burden on the private sector and implies that the only way to respond to economic crisis is to cut public spending in order to contain state borrowing. Taylor-Gooby points out, however, that this policy, which has been readily adopted by the current UK Government, will lead to greater inequality and poverty. He ends by calling on social democrats to seize the opportunity such a policy position presents and find a way of linking ‘investment, equality, opportunity and internationalism.’

Overall this volume offers a useful and, at 16 chapters long, relatively comprehensive overview of some of the challenges and potential opportunities modern European social democracy must contend with. The decision to cover such a breadth of issues and by so many different contributing authors does, however, mean that by necessity each contribution is relatively short and tends to give a general interpretation of the ideas it covers. Nevertheless, it certainly has use as an accessible introductory text for students and policymakers.

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Eleanor Bindman is a third-year PhD researcher in Politics at the University of Glasgow. Her research focuses on the EU’s human rights policy in relation to Russia, with other research interests including contemporary Russian politics, international relations and social policy. She previously studied Russian language, history and politics at the universities of Edinburgh and London and in 2010 worked as an intern for the Commissioner for Human Rights at the Council of Europe in Strasbourg. Prior to starting her PhD she worked as a research assistant for Human Rights Watch in Moscow and has also worked as a freelance translator for several years. Read more reviews by Eleanor.

http://blogs.lse.ac.uk/europpblog/2012/10/21/book-review-after-the-third-way-the-future-of-social-democracy-in-europe/

After the Third Way. The Future of Social Democracy in Europe

Posted on 13 April 2012 in Debating Democracy

Olaf Cramme

Olaf Cramme summarizes for EUDO Café the findings of his book After the Third Way. The Future of Social Democracy in Europe  (edited by Olaf Cramme and Patrick Diamond, I.B. Tauris, 2012).

The global financial crisis has struck like an earthquake at the heart of the institutions, practices and beliefs of the last decades. Yet while some rushed to proclaim the end of “neoliberalism”, almost five years after the beginning of the crisis it remains wholly unclear what kind of political ideology will or can replace it.

Our book argues that for social democracy to fill the void, centre-left parties in Europe urgently need to renew their political identity as well as policy offer, leaving behind the dominant narratives of “third way modernizers” and the “traditional left”.

The central question of the crisis is not whether it will rejuvenate nation-state social democracy, but whether it can stimulate new strategies on which a revived platform of egalitarian prosperity and social welfare might be built. The task is to frame a response so that social democracy can benefit from a new openness to ideas in domestic and world politics – against a residual neo-liberalism that would frame the world financial crisis as one of the over-bearing state.

In such an enterprise, several animating themes are immediately resonant. The first relates to the nature of capitalism itself. Historically, social democracy has been developed in conjunction with capitalism. It defined the boundaries as to what is seen as politically feasible. Social democrats remained ahead of the curve by building the institutional pillars which not only shielded citizens from harsh conditions in the market economy, but helped shape it in the first place.

Critics argued that centre-left parties had become “structurally dependent” on capitalism, that is, dependent on capitalist markets to generate a surplus for investment in welfare and public services. Yet reform has proven ever more difficult, not least because social democrats have taken their eyes off the fundamental transformation capitalism has been subject to over the past decades. Understanding again the changing character of market capitalism has never been more urgent for the centre-left, which aims to bring about a more just and humane conception of the market economy.

The second theme alludes to the changing nature and form of the state. Again, social democracy has been historically dependent on state power. But the size and complexity of the state makes it more and more difficult for citizens to understand who makes decisions and who should be held accountable. The development of new technologies and scientific innovation places decision-making power in the hands of experts, putting added pressure on modern liberal forms of representative and participative democracy. Large-scale bureaucracies risk fuelling citizen disengagement and declining trust in the political system. There are other pressures on the traditional social democratic conception of the state, such as the ageing society and changing demography that will not disappear.

Finally, left-of-centre parties have been increasingly hampered by cultural cleavages relating to increasing ethnic heterogeneity, the free movement of labour and open migration systems, the rise of new forms of politicised and assertive religious radicalism, and an apparent conflict between “cosmopolitan” and “communitarian” interests. The identities and solidarities on which social democracy in Europe has been built are under increasing strain. New actors on the far left and far right, as well as astutely positioned conservative and Christian democratic parties, will not hesitate to capitalise on the struggle to craft a clear narrative – however myopic and divisive. Providing people with a coherent sense of belonging and collective purpose has to be at the forefront of centre-left thinking, combined with openness to global and world affairs.

Each of these themes must be subject to a further test: are social democrats capable of developing a governing strategy that can live up to these enormous challenges? Although the nation-state has become the principal bastion in the fight against the financial and economic crisis, its “golden age” is irrefutably drawing to a close. There is now an urgent need for new capacities and instruments to exercise collective power locally, nationally, and globally.
For social democrats, however, this means a change in mindset, given the long-held fixation with the levers of national power expressed through the monolithic nation-state. Citizens have to be engaged in a more sophisticated dialogue about the nature of interdependence and the meaning of sovereignty, allowing the centre-left to regain ownership of a changing internationalist agenda – be it European integration, climate change, or the response to humanitarian crises.

This is the terrain on which left-of-centre parties have to forge new electoral strategies and political identities. The book shows how this can be done in relation to specific social democratic predicaments, marking a serious attempt to forge the intellectual backbone of renewed social democracy fit for the twenty-first century.

http://blogs.eui.eu/eudo-cafe/after-the-third-way-the-future-of-social-democracy-in-europe.html?forwardie6=1

Green Social Democracy: By Michael Jacobs

04/02/2013 by Michael Jacobs

We are living through not one but two crises of capitalism. The first one – the economic crisis which has followed the financial crash of 2008 – everyone knows about.  The second is less familiar.  This is the crisis of the global environment.

Of course environmentalists have been warning of ‘environmental crisis’ for over 50 years, whether from the chemicalisation of food, air pollution, rainforest destruction or climate change.  But I use the term in its original Marxian sense.  A crisis of capitalism occurs when the dynamics and forces of the system build up costs and risks to such an extent that they end up undermining themselves, creating a self-perpetuating spiral which can only be escaped through state intervention – by governments effectively saving capitalism from itself.

This is of course precisely what has happened in the economy since 2008.  An unsustainable boom in lending and credit, driven by a huge expansion of the financial sector, led to an asset price bubble and subsequent collapse, followed by a retrenchment in spending, leading to loss of output and rising unemployment.  The slump into which these events pushed the economy could only be escaped via massive state intervention – initially in bailing out the banks, and then in huge injections of demand, first fiscal (stimulus) then monetary (quantitative easing), a process which is still not complete in any of the major Western economies.

This is a crisis of capitalism in the precise sense that capitalist dynamics undermined the system, almost bringing it down, and could not then correct themselves without assistance from the state.

The environmental crisis is now of the same kind.  This is most obviously the case in respect of climate change.  It is now clear that the global economy cannot continue to burn fossil fuels as its main source of energy: the carbon embodied in them, if released into the atmosphere, will cause changes to the climate not seen since the last Ice Age.  As the World Bank warned recently, present emissions trends will lead to global warming of at least 4 degrees Centigrade by the middle of the century, triggering “a cascade of cataclysmic changes”, including more frequent weather-related disasters, declining global food stocks and sea-level rise affecting hundreds of millions of people.[i]  As the Stern Report showed, even leaving aside the human cost, the economic losses caused by such events would be equivalent in this century to the cost of the two world wars and Great Depression of the last.[ii]  In its continued investment in fossil fuels, capitalism is undermining itself.

But the crisis is wider than this.  Figure 1 shows an index of the prices of 33 commodities, ranging from iron ore, copper and aluminium to soybeans, coffee and cotton, from 1900 to 2010.  It shows a remarkable phenomenon.  For a hundred years to just after 2000, commodity prices fell by on average 1.2% per annum, amounting to an overall reduction over the century of 70%.  But in the last ten years that entire one hundred year fall in price has been erased, by a surge in prices almost twice as great as that which occurred during the second world war.  As Jeremy Grantham, the investment fund manager and philanthropist who compiled these figures, has put it, this is ‘the mother of all paradigm shifts’.[iii]

Now look at Figure 2.  It shows world food and energy prices over the last six years.  In 2008 both spiked, then nosedived as the financial crisis took an axe to demand.  But since then, while global economic growth has recovered only slowly, food prices have risen back above their 2008 peak, and oil prices are today above $100 a barrel.  Why?  Because supply cannot keep pace with demand.  The environmental crisis now is not just one of excess pollution, but of inadequate supply of resources – the inability of the global environment under present economic conditions to provide enough energy, food and other commodities to meet demand at stable prices.

Of course, these rising prices are already bringing forward new supply – that’s a natural feedback mechanism.  But in no field is new supply keeping pace with demand.  And the cause is not difficult to find.  With a sixth of the world’s people, China’s annual 7-8% growth rates are sucking up unimaginably large quantities of resources.  China consumes more than half of the entire world’s output of cement, and more than a third of its iron ore, steel, coal, lead, zinc, aluminium, copper, nickel and even pigs and eggs.[iv]  It simply is not possible for an economy so large to grow so fast without impacting on the global availability of resources – and of course on the carbon emissions and the habitat loss which also accompany the industrial engine.  These price rises are already slowing China’s growth down, and in turn slowing the growth of the rest of the global economy.

In the past, environmental costs were largely imposed on the economic periphery – air pollution in poor urban areas, toxic waste dumps, the depletion of fish stocks and destruction of rainforests.  No more.  Now resource scarcity is affecting prices right at the heart of the global economy, where substitution is difficult and productivity improvements are not keeping pace with the growth of demand.  For example, there is a remarkable correlation between energy price spikes and US recessions over the past forty years.  With only one exception, a doubling of the oil price has always been associated with recession in the US, at the same time or soon after.  And it’s not difficult to see why.  Energy is a significant cost in all developed economies and a doubling in its price has a significant effect on both output and consumer spending. One of the reasons why economic recovery is so difficult today is precisely because of this under-noticed phenomenon: as soon as growth gets going again, scarcity-driven energy prices rise and choke it off.

In this sense, the environmental crisis must now – finally – be regarded not merely as a crisis of ecosystems, or of human values, but as a crisis of capitalism, in the sense that the dynamics of capitalist growth are now undermining themselves.  As resource scarcities in energy, food, land, water, fisheries and commodities combine with the impacts of climate change, ocean acidification and habitat loss, the global economy is facing serious feedback costs which are already affecting, and will increasingly affect, its ability to continue growing.  As a sobering report from the Stockholm Resilience Centre put it last year, we have entered a new phase of human history where we are approaching the biophysical ‘planetary boundaries’ which provide a ‘safe operating space for humanity’.[v]

What does all this mean for the left?  It means we have to enlarge our understanding of both capitalism and social democracy.

Modern social democracy came into being in the 20^th century to manage a capitalism which was unable to manage itself.  In the first half of the last century Western capitalist economies undermined their own processes of accumulation and growth by their inability to provide proper welfare for their workers.  Low incomes, poor housing, inadequate education and ill-health led to low labour productivity, and inadequate consumer demand for the products capitalism generated.  When the financial crisis of 1929 hit, capitalism fell into slump and could not get out of it without state support – in the US through Roosevelt’s New Deal, in Europe through rearmament and ultimately war.  After 1945 social democrats (and in continental Europe, Christian ones) rescued this failing capitalist system from itself.  They created welfare states, secondary and tertiary education and national health systems which prevented absolute poverty and raised labour productivity.  Strong trade unions raised labour’s share of national income, which in turn raised demand for consumer goods and services. Governments nationalised key industries to ensure investment in infrastructure, and used Keynesian fiscal and monetary policy to maintain full employment. At the same time social democrats set out to use the products of wealth creation to achieve their cherished social goals – a reduction in inequality, universal social security, comprehensive education and the promotion of arts and culture for all.

The parallels with today are evident.  Once again it is only governments which can rescue capitalism from the slump into which it has fallen.  But the traditional social democratic programme will now not be enough.  Today we also need to manage the environmental impacts of a system rapidly destroying the foundations on which it rests.

That means regulating the resources and energy that flow through the economy so that they stay within sustainable bounds.  We know how to do this.  The price of carbon needs to be high enough to make the burning of the most polluting fuel, coal, unprofitable, and to drive investment in energy efficiency.  So long as they remain more expensive than fossil fuels, renewable energy sources such as wind and solar need to be subsidised through price support such as ‘feed-in tariffs’.  The variable generation from renewables needs to be backed up by nuclear or gas, eventually fitted with carbon capture and storage technology, and by interconnected ‘smart’ grids which ensure that electricity can flow from wherever it is being generated to wherever it is needed, with demand adjusted to supply.  Fuel for transport needs gradually to shift from oil to a decarbonised electricity system.  Meanwhile we need to use pricing, regulation, land use planning and public spending to stimulate investment in resource efficiency in every sector from agriculture and water to minerals and materials.  Public support will be needed for research and development of new green technologies.  We need to limit polluting wastes and restructure consumption patterns to stimulate re-use and recycling.  We need to limit the harvesting of fisheries and forests to their long-term sustainable yields.  Precious habitats must be protected by creating greater value from their conservation.  In many of these areas we need to come to international agreements to ensure that some countries do not free ride on the efforts of others.

None of this is theory any more.  In countries and industries across the world, the sustainable management of the earth’s resources is being practised.  But it is not happening in enough countries, or enough industries, and with not enough urgency relative to the patterns of growth and resource use which are now leading us into crisis.  So this is social democracy’s new task.

In the past this would not have been easy.  Traditionally the left saw environmental protection as a luxury which could only be afforded once wealth had been generated.  Environmental policies which imposed costs on industry risked damaging growth and destroying jobs.  Environmentalism was a minority middle class movement, with no economic interests underpinning its politics.

But that is no longer true.  Today the most powerful voices in favour of environmental protection are arguably not the traditional green NGOs – Friends of the Earth, Greenpeace and the like – but the major corporations in the rapidly growing green economy.  Under the pressure of both resource scarcity and environmental policy, a whole new sector of industry has emerged over the last twenty years, and it is now one of the most important in almost every leading economy.  Globally, the low carbon and environmental sector is worth £3.3 trillion, making it larger than the aerospace industry.  Over the last few years, even after the crash, its annual growth rate has been over 3%, and this is expected to remain or increase over the next decade.  The UK’s share of this market is the sixth largest in the world, at nearly 4%.  Now worth over £120bn, the UK sector is itself growing at around 4% per annum – one of the few major sectors currently doing so.  It already sustains just under a million jobs.[vi]

As this industrial sector has grown over recent years, it has changed the economic evidence and narrative around environmental policy.  No longer can such policy be said simply to be a drag on economic growth, imposing costs with no economic benefit.  Now it is widely acknowledged that green policy can be a driver of growth.  Energy and resource efficiency can cut costs, while environmental and green energy investment stimulates demand for new technologies and services, creating jobs and driving exports.  It is no coincidence that over the last two years both the OECD and the World Bank have produced major reports demonstrating the underlying economic theory and practical evidence on the feasibility of ‘green growth’.  They have shown that, implemented well, environmental policy can impose short-term costs, but these costs are in reality investments in more productive capital – in natural resources, industry and infrastructure – and therefore lead to higher economic output over time.[vii]

This change in the economics of environmental protection is of vital importance to social democrats.  For it changes the politics.

When social democracy rescued 20^th century capitalism from itself it did so through a powerful coalition of forces.  At its base was the working class, organised through trade unions and social democratic and labour parties.  But critical too was the support of a significant proportion of the business community, and the middle classes who worked in it.  For enlightened businesses could see where their real interests lay – not in the ‘free market’ dogmas of those who purported to champion capitalism but whose laissez faire policies could not get the economy out of depression, but among those who wanted to use the state to stimulate demand and therefore to create the markets for business investment and output.  The business class by means universally supported social democratic parties and governments in the post-war period, but enough of them split apart from their ideologically backward-looking peers to create decisive support for the Keynesian programme and the creation of the welfare state.  Yes, this involved giving a larger share of their profits to the workers and to the state in taxes; but the benefits in terms of the growth of demand for the goods and services they produced more than outweighed the cost.

Exactly the same phenomenon is happening now over environmental policy.  The traditional business view can still be heard – such policy is bad for business, growth and jobs.  But it is now matched by the voice of businesses who will benefit from it, and who understand that their self-interest is best served by an economy that is not fatally undermined by rising resource prices and the impacts of climate change.  Thus, as the Government prepared its Energy Bill this autumn, over 50 of Britain’s largest businesses called on it to adopt a target for the decarbonisation of the power sector by 2030, followed by seven of the largest green manufacturers (including Siemens, Alstom and Mitsubishi) threatening to pull their investment from Britain if it did not do so.  Remarkably, the CBI called for the same policy.  Indeed its 2012 report, The Colour of Growth (which argued that that colour was green) was perhaps the decisive moment in this field.[viii]  Here was the voice of the British business community as a whole calling for stronger environmental policy, on the grounds that this would most benefit growth and jobs.  The TUC, for its part, had already got there: it published its first report outlining the employment benefits of the low carbon economy in 2009.[ix]

So just as social democrats in the 20^th century forged a cross-class, cross-industry coalition in favour of the welfare state, so social democrats today need to forge a comparable alliance in favour of the environmentally-based economy. Green politics is no longer simply about a middle class environmental movement: that is a vital constituency – four million members of the National Trust, and nearly a million members of local wildlife groups shows that the values of environmental stewardship form a powerful counterweight to those of consumerist materialism – but it is now joined by powerful economic interests.

Towards the end of the last Government, it looked as if the Labour Party had begun to understand some of this.  Its pioneering 2008 Climate Change Act set environmental (carbon) limits, and required by law that the economy live within them.  It created a national economic strategy, the Low Carbon Transition Plan, which in turn led to the development of a low carbon industrial strategy and the invention of the Green Investment Bank.  It joined with its partners in the EU to develop a low carbon European economy through the 2020 package of emissions targets, carbon pricing and renewable energy.

In its Policy Review today the party needs to develop this further.  It faces a particular challenge to redefine the role of the state.  A green social democracy will require smarter and more active economic government.  It will need to use a variety of interventions – the tax system, regulation, industrial policy and public investment – to help steer the economy onto a more sustainable path.  It will have to work not only at the national and local levels, but internationally.  The European Union will be a critical part of this transition, to make the world’s biggest single market a driver for global environmental standards.  A green social democratic state will have to forge an active equality policy, so that environmental costs do not fall most heavily on the poor.  And it will have to find new ways of creating public consensus, so that the implicit contract between present and future generations is understood and can be sustained.

None of this will be easy.  It will require radical thinking in Opposition, and determination in Government. But that is precisely how social democrats built the welfare state economy in the 20^th century.  We will have to do it again for the green economy of the 21^st.

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[i] World Bank, Turn Down the Heat: Why a 4C Warmer World Must be Avoided, 2012.

[ii] N Stern, The Economics of Climate Change: The Stern Review.Cambridge University Press, 2007.

[iii] J Grantham, ‘Time to wake up: days of abundant resources and falling prices are over forever’, GMO Quarterly newsletter, April 2011.

[iv] Ibid.

[v] J Rockstroem et al, ‘A Safe Operating Space for Humanity.’ Nature, 461 (24), 2009.

[vi] Department for Business, Innovation and Skills, Low Carbon Environmental Goods and Services; Report for 2010/11, 2012.

[vii] OECD, Towards Green Growth, 2011; World Bank, Inclusive Green Growth: The Pathway to Sustainable Development, 2012. For a survey see M Jacobs, ‘Green Growth: Economic Theory and Political Discourse’,

Grantham Research Institute on Climate Change and the Environment Working Paper, LSE, 2012.

[viii] CBI, The Colour of Growth: Maximising the Potential of Green Business, 2012.

[ix] TUC, Unlocking Green Enterprise: A Low-Carbon Strategy for the UK Economy, 2009.

This column was first published by the Fabian Society

http://www.social-europe.eu/2013/02/green-social-democracy/