Today, the big challenge for developed
welfare states is the insider-outsider gap. To close it, we need a
predistributive strategy that rebalances the power relationship between
workers and employers
Closing the insider-outsider gap
Willy Brandt, Bruno Kreisky and Olof Palme were among the 1970s’ most
prominent interpreters of and spokespersons for European social
democracy. The trio also represented a kind of leadership that was
bigger than their own parties and countries. It´s a paradox that despite
globalisation and the EU's increased role that this kind of social
democratic leaders are rare today. In their co-authored 1976 book, La social-démocratie et l’avenir (Social Demcoracy and the Future)
Willy Brandt argues that unlike communists, social democrats do not
justify their goals by adhering to a single political theory or
philosophy; they have an open world view.
These words say something about what has happened since then. Communism
in Eastern Europe died of its own sickness in 1989. And in 2008,
deregulated capitalism reached its dead end.
When social democracy now tries – or fumbles – to find a way forward,
Willy Brandt's call still holds. This kind of pragmatism and eclecticism
is the key to social democracy's historic success and future ability to
find political solutions based on new historical circumstances.
But where are the lines of conflict in the 21st century?
Policy Network has presented an interesting analysis in the essay, “How social democracy can triumph in the 5-75-20 society
," published in Making progressive politics work: A handbook of ideas
The 5 percent is the economic and financial elite that increasingly
freed itselt from the surrounding community, and perhaps the nation
states. The 20 percent are those who live outside society and often in
poverty, when offered work it is a matter of precarious working
conditions. The vast majority are the 75 percent in “the middle”, from
the working class to upper middle class. They are in the essay generally
referred to as the middle class. This group is experiencing increased
pressure both financially and mentally. And they are – and this is
probably the essay’s central message – the social group which determines
future elections. To be able to form a workable majority and become a
realistic government option in a number of countries, social democracy
must attract this large group of voters.
The analysis of the 5-75-20 community can possibly be regarded as an
attempt to marry the American Occupy movement's criticism of the top one
percent ("we are the 99 percent") and a previously widely spread
analysis of the emergence of a two- thirdsociety in the post-industrial
capitalism. Criticism of the one percent at the top is an expression of
an American radical populist or progressive tradition, partly harboured
within the Democratic Party but also in various social movements and
organisations. The two-third society could be regarded as a warning sign
of a shift where the more affluent in the upper third can form a
majority along with the third in the middle. The third "down there" run
the risk to become a minority. A new election logic is established.
Formerly the labour movement built an alliance from the bottom up,
between the working class and the middle class. Both of these approaches
provide important insights and warning signals.
One could say that Thomas Piketty’s important work Capital in the 21st Century
gives support to this analysis. Not least because it highlights that
the top layer of society is pulling away and will consume an increasing
share of wages and capital income, dividing society further and making
the economy more and more dysfunctional. Social democracy emerged in a
society marked by poverty. It promised to lift the majority of people
materially and provide the working class with full citizenship and
participation in society and the distribution of production performance.
Today, the major challenge is how we deal with growing prosperity and
increasing wealth in society overall. It is as before a matter of
distribution policy. But a somewhat different kind of challenge.
During the Progressive Governance Policy Network conference in
Amsterdam, many speakers referred to the "middle class" rather than the
"working class." However, social democracy is a product of an emerging
working class in industrial societies, which later also included workers
in the service sector and the public sector. This too might be an
American import to European social democracy; "middle class" is long
established in the Democrats' rhetoric. But I don´t believe it works in a
Swedish or Scandinavian context. And I am not fully convinced about the
idea overall. I am aware that in the American context “the middle
class” includes both blue collar and white collar workers. But there is a
risk the Left knowingly or unconsciously distancing itself from the
"underclass" or "the poor."
All this requires strategic and policy analysis and reflection. To me
the challenge is not about choosing one or the other, or if social
democracy should represent or appeal to the middle class or the working
class. I suspect that this reflects a conflict whithin the progressive
political field. Various representatives of social democracy emphasise
either the working class or the middle class in its political analysis,
or as a potential electoral base, which tend to tell something about if
you lean to the "right" or to the "left." The question is whether social
democracy can overcome this tension and be relevant once more, in line
with Willy Brandt's advice in 1976.
In fact, the middle class and the "interlayer" is an old problem for the
left. It goes as far back as to Marx, who predicted that these groups
would shrink in an escalating class struggle while the working class was
awarded messianic tasks. Neither one of his predictions have come true.
In fact, social democracy gained support among the working class and
built an alliance with the middle class conceived through the welfare
state as such. Swedish social democracy began in the 1920s to move from
“class” to “the people” in their rhetoric. In the 1950s, the growing
layers of white collar workers became an important part of the social
democratic reform strategy. In the 1970s, Olof Palme spoke about "the
working people" to attract both white and blue collar workers.
But what about political and social alliances today? In the political
arena, Social Democrats are experiencing increased competition. Not
least over their core voters. Moreover, right wing populist parties are
gaining support in traditional left wing communities. But there are also
new progressive competitors on the pitch. Some left socialist parties
developed in the (left) social democratic direction. The greens
represent a philosophical tradition previously lodged within the labour
movement and in the socialist family from William Morris and forwards.
And in Sweden, a feminist party could very well enter the Swedish
parliament in September. The feminist party gained one seat in the
European Parliament this summer and its representative has joined the S
& D Group! You could say that the party falls as much in line with
is as with social democracy as with liberalism. The orignal parties no
longer have patent to their ideas.
But the big question today is whether the labour movement risks
distancing itself from "the 20 percent," or if it can maintain an
alliance with those outside the community and the labour market on the
one hand, and the "workers" on the other. The insider-outsider problem
is also a real challenge for any society and certainly for a developed
welfare system. I think this in itself is the strategic key. It´s
obvious that this group should be consolidated and that the working
conditions especially in the service sectors must be improved. And that
high permanent unemployment is a monumental failure of the economic
policy paradigm that has dominated the last decades.
This crack between insiders and outsiders has been exploited very
successfully by the Swedish bourgeois parties. They won the 2006
election and have governed Sweden for eight years on a policy that
radically widened the gap between the “75 percent” and the “20 percent”
(in Sweden probably 10 percent). They won voters from the “75 percent”
on a simple and cynical policy: Reduced benefits from social insurance
to the sick and unemployed and more stringent conditions in order to
receive welfare benefits. And tax cuts for those with a job. This meant
that the "75 percent" (and the “5 percent” even more) have come out
increasingly better. The “75 percent” in Sweden is not squeezed as in
Great Britain. But the 10 percent with low incomes have been hit, and
hit really bad. Enough voters from the working class and the middle
class bought the message and changed their party preferences from left
to right. Social democracy was consigned to opposition and has
undergone its biggest crisis in a hundred years. The Social Democratic
social pact must be built from the bottom up while maintaining an
alliance with the upper social hierarchy and officials.
The whole discussion about predistribution contributes in this regard
with an important perspective. Hopefully this does not mean that
redistribution will or should be defined away from the progressive
agenda. A social democratic strategy also needs redistributive measures.
For me predistribution is mainly about the power of labour relations
and workers' bargaining power towards employers. Furthermore, social
democracy was created on work-related issues and redistribution of power
and money. Labour organisations have been losing ground across Europe
and worldwide for a long time. A social market economy requires that the
workers can negotiate on reasonably acceptable terms with their
counterparts. Otherwise the economy will produce growing wealth at the
top and greater uncertainty and lower incomes at the bottom. We need a
comprehensive plan to once again embed capitalism in democracy starting
from the labour market. And it must be done at the European level. The
problem is that the EU guarantees freedom of the markets and undermines
the social dimension of the European project.
And this is social democracy's central dilemma today. European societies
are being pulled apart. This contradicts not only social democratic
instincts, but also evades the whole basis for the social democratic
Håkan A Bengtsson is CEO of Arenagruppen in Stockholm
This article forms part of a series of responses to the Policy Network essay on the Politics of the 5-75-20 Society