For anyone interested in issues of social and economic justice in the current economy: There’s a brilliant, must-read essay in the current issue of the New York Review of Books on the past and future of social democracy. It’s written by a former general secretary of British Dror Labor Zionist youth whom you might have heard of, by the name of Tony Judt.
His essay is worth reading in full, but in brief he talks about how the social democracy (or its American cognate, the New Deal) gave way in the mid-1970s to the laissez-faire economics of Milton Friedman and the Chicago School. He walks through the corrosive social impact of privatization and grudging, restrictive welfare and unemployment policies.
The lessons he draws are a bit contradictory, and I wish he had reconciled his two conflicting arguments: On one hand, we need to recapture the moral arguments of right and wrong in political discourse and get away from the relentless cost-benefit analyzing that governs so much of current policy-making:
What do we find instinctively amiss in our present arrangements and what can we do about them? What do we find unfair? What is it that offends our sense of propriety when faced with unrestrained lobbying by the wealthy at the expense of everyone else? What have we lost?
The answers to such questions should take the form of a moral critique of the inadequacies of the unrestricted market or the feckless state.
On the other hand, he says it was the insecurity and fear bred by the Depression and the rise of fascism — in essence, the collapse of liberal society — that led Britain and America to adopt Keynes’s “social-security state.” We are now facing a collapse of comparable magnitude, and it’s time to muster the urgency of the 1930s. Therefore, “If social democracy has a future, it will be as a social democracy of fear.”
Rather than seeking to restore a language of optimistic progress, we should begin by reacquainting the achievements of the twentieth century, along with the likely consequences of our heedless rush to dismantle them.
Which does he recommend — the social democracy of fear or the language of morality in social arrangements? They both seem right, but they also seem to cancel each other out, and Judt doesn’t resolve the contradiction.
One of his most fascinating observations concerns the historical roots of our pre-1975 New Deal state and our post-1980 laissez-faire state. From the mid-1930s to about 1980 the economies of the English-speaking world were guided by the thinking of the British economist John Maynard Keynes. Since 1980 or so the reigning economic philosophy is drawn from the thinking of a group of Austrian-born contemporaries of Keynes—he names Ludwig von Mises, Friedrich Hayek, Joseph Schumpeter, Karl Popper and Peter Drucker (and he explains why he picked those five).
It was the different experiences of living through the nightmare 1930s in England or Austria that gave rise to the two competing philosophies dividing America today. The five Austrians
were profoundly shaken by the interwar catastrophe that struck their native Austria. Following the cataclysm of World War I and a brief socialist municipal experiment in Vienna, the country fell to a reactionary coup in 1934 and then, four years later, to the Nazi invasion and occupation.
The consuming question underlying their various works, Judt writes, was:
Why had liberal society collapsed and given way—at least in the Austrian case—to fascism? Their answer: the unsuccessful attempts of the (Marxist) left to introduce into post-1918 Austria state-directed planning, municipally owned services, and collectivized economic activity had not only proven delusionary, but had led directly to a counterreaction.
The European tragedy had thus been brought about by the failure of the left: first to achieve its objectives and then to defend itself and its liberal heritage. Each, albeit in contrasting keys, drew the same conclusion: the best way to defend liberalism, the best defense of an open society and its attendant freedoms, was to keep government far away from economic life.
Keynes, by contrast, “grew up in a stable, confident, prosperous, and powerful Britain.” He too “watched his world collapse, taking with it all the reassuring certainties of his culture and class.” But unlike the Austrians, with their certain predictions of how one event leads to another,
Keynes would insist upon the essential unpredictability of human affairs. If there was a lesson to be drawn from depression, fascism, and war, it was this: uncertainty—elevated to the level of insecurity and collective fear—was the corrosive force that had threatened and might again threaten the liberal world.
Keynes’s solution was for the government to step in and guarantee individuals a modicum of security — social security — against the frightening whims of history.