This article appears in the July/August 2021 issue of The American Prospect magazine. Subscribe here.
In the United States we have a national administration whose program, though far from socialist, is more progressive than any since Franklin Roosevelt’s. But in Europe, where citizens have had substantial experience with constructive social democracy, the democratic left is all but dead. Somehow, the U.S. and Europe have reversed roles. What happened?
As recently as a generation ago, European social democracy seemed well entrenched. In the late 1990s, 13 of the 15 member governments of the European Union were left-of-center coalitions led by social democrats. Today, with the EU having grown to 27 member states, just six European counties have center-left prime ministers, and the social democratic vote in most of continental Europe has dwindled to 20 percent or less. The French Socialist Party, which held the presidency as recently as 2017, is near collapse. The German SPD got just 20.5 percent of the vote in the most recent federal election, also in 2017, its lowest share since before World War I, and is now polling around 15 percent, well below the Greens. The British Labour Party is languishing in the polls, far behind the comic-opera Tory prime minister, Boris Johnson.
Even the exceptions are shaky. Sweden, long the epitome of European social democracy, has had a weak, minority two-party coalition with the Greens led by a Social Democratic prime minister, Stefan Löfven, supported in parliament by two center-right parties and the Left Party. The government recently collapsed over rent control. Löfven lost a vote of confidence in June after the Left Party withdrew its support, and barely won a vote to proceed with a newly configured coalition for the final year of his term. In the 2018 election, the Social Democrats got their lowest share of the national vote in a century. In Denmark, the social democratic prime minister, Mette Frederiksen, leads a four-party coalition, also reliant on the votes of non-socialists. In the last election, her party got 25.9 percent of the vote. In Spain, a talented social democrat, Pedro Sánchez, leads a minority government in fragile coalition with the further left Podemos and a Catalan party. In the two 2019 elections, his party got about 28 and 29 percent of the vote. Only in small Portugal is there a durable, popular, and effective all-left coalition government, led by the socialists, who received over 36 percent of the vote.
Elsewhere in the EU’s 27 member states, the right governs.
In the spirit of Tolstoy, one can report that each European nation’s social democratic party is unhappy in its own way. But it’s evident that some common system-wide blight felled Europe’s entire social democratic movement. The particulars are diverse and complicated, but let me give away the punch line: The common blight is neoliberalism. That phrase has been used to mean lots of things. I use it to mean the deregulation of capital and labor, and the ideological claim that these shifts were necessary to make the economy more efficient. That proved to be profoundly wrong. Mainly, market liberalization changed relations of power and wealth.
The post-1973 globalized rules of the market made it much harder to sustain social democracy in one country—and more difficult for a democratic state to govern capitalism at all. Market inequality and market values then fed on themselves, undermining the social solidarity that social democracy requires, and reducing the credibility of the benign state. Even worse, several center-left parties of the late 1990s, most notably those in Britain under Tony Blair and Germany under Gerhard Schroeder, outdid conservatives in embracing neoliberalism. And the European Union, viewed by many Americans as sort of leftish, was actually a prime vector in the spread of enforced marketization.
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Purveyors of the Third Way Tony Blair and Bill Clinton
The financial collapse of 2008 was the coup de grâce. The collapse, and the recession that followed, were the bitter fruit of the extreme financial deregulation that had been embraced by center-left as well as center-right. Europe’s turn to austerity—still more neoliberalism—as the preposterous cure for financial collapse and recession drove voters away from all the mainstream parties. This was a gift for the ultra-nationalist right, which has been gaining ground everywhere in Europe for more than a decade. When voters looked for a radical alternative to austerity, they did not find it on the watered-down center-left. The rise of new anti-system parties also made national parliaments that much more fragmented and reliant on weak, multi-party coalition governments that could do little more than tread water.
If Europe needed one more nail in the center-left coffin, it was the arrival of the refugee crisis. As good social liberals, Europe’s social democrats had supported humane policies toward refugees. Given the ethnic homogeneity of much of the continent, this was a stretch even when times were good. When the economy turned bad, right-wing nationalist anti-immigrant parties captured much of the usually social democratic working-class vote. The backlash was not just against refugees from Syria or Somalia. The EU’s basic law, the Maastricht Treaty of 1992, provides for free movement of EU citizens throughout the Union. The right-wing resentment was directed as much against Polish plumbers in Birmingham or Bulgarian construction workers in Berlin as against darker-skinned refugees.
Was this cumulative downfall in some sense inevitable, given structural changes in the political economy of capitalism and the fact that postwar social democracy was built on unique historical circumstances? Or was it the result of optional and opportunistic decisions that might have been different? Conversely, since the U.S. led the way both to global neoliberalism and lately to its repudiation, might the Biden administration prefigure the revival of a more social economy throughout the West? And does an existential climate crisis that cries out for collective action create new opportunities or new divisions?
IN THE TRENTE GLORIEUSES, as the French call them—the 30 years of the postwar boom—there was a lucky convergence of economics, ideology, and geopolitics. The war had discredited the fascist right, the libertarian right, and a collaborationist corporate right. No serious players in that era believed in laissez-faire—a most unusual condition for capitalism. In the democracies, the argument was between social democrats and statist conservatives who were also willing to create an expansive welfare state to hold Stalinism at bay. In the 1950s, social democrats had influence mainly as opposition parties. Christian Democrats were the prime architects of Western Europe’s postwar system. Except in Britain and Scandinavia, social democratic governments came later.
The United States, eager to keep communism out of Western Europe, was in the role of benign hegemon, supplying dollars and public capital via the Marshall Plan, giving each nation-state plenty of sovereignty, willing to indulge leftists as long as they were anti-communists. Commerce had restarted, but there was no drive for ultra-marketization. Thanks to fixed exchange rates and capital controls under the Bretton Woods system, and the national economic planning and public capital stimulated by the Marshall Plan, democratic states could and did govern markets.
The project of economic recovery stimulated a general boom. The power of trade unions (some of them communist-led) and the burgeoning welfare state, coupled with tight limits on speculative private finance, meant that the boom would be broadly egalitarian. Even conservatives recognized the need to regulate capitalism.
In Britain, a frankly socialist Labour government led by Clement Attlee created the modern welfare state in the late 1940s, and it was continued by the Tories under Winston Churchill and then Anthony Eden and Harold Macmillan in the 1950s. In France, the nationalist Charles de Gaulle began the French postwar version of welfare capitalism in 1945 and 1946, leading a three-party coalition that included socialists and communists, and then returned as prime minister in 1958, then as president in 1959 under a new constitution. In West Germany, where the Christian Democrats barely defeated the Social Democrats in the Bundestag in 1949 to form the first postwar government, Konrad Adenauer’s policies were a blend of market liberalism leavened by substantial regulation, strong unions, and welfare spending.
Thus in much of Europe, there was a managed form of capitalism with a strong welfare state, unions recognized as legitimate social partners, and even some islands of public ownership. We were also a long way from the kind of hyper free trade, free capital movement, privatization, and deregulation demanded and secured by neoliberalism. The emerging common market was a customs union and a tariff-free zone, but not yet an engine of free markets generally. Nation-states had plenty of sovereignty to devise their own systems.
For the most part, postwar social democracy stopped well short of democratic socialism. What’s the difference? Social democracy relies more heavily on the social income of a welfare state, on the labor power of collective bargaining, and on macroeconomic efforts to keep the economy at full employment. Basically, it is heavily regulated welfare capitalism. In some countries, such as France and Italy, the state plays a more direct role. In other regions, notably Scandinavia, strong unions and social bargaining are key. But under social democracy, industry and finance are mostly private. And in an economy where capitalists retain residual power and wealth, keeping capitalism harnessed in a broad public interest requires just about everything to break right. The Swedes managed it for half a century. Elsewhere, it faltered earlier.
In the 1940s, there was a famous argument between John Maynard Keynes and his quasi-Marxist protégé, Michal Kalecki. The Polish-born Kalecki conceded as a matter of technical economics that it was indeed possible, as Keynes had argued, to overlay full employment onto a system that remained basically capitalist. But as a matter of politics, Kalecki added, the capitalists will never let you do it. At the time, Keynes seemed to have won the argument. Today, Kalecki is looking prescient.
Europe’s postwar social democrats had inherited from their more radical forebears more of a socialist ideology. In Britain, the Labour Party’s famous Clause IV, adopted in 1918, called for “common ownership of the means of production, distribution, and exchange.” It was ditched by the neoliberal Tony Blair in 1995 as a relic. In Germany, the SPD also had a legacy clause committing it to socializing the means of production. But this was repudiated by the party’s Bad Godesberg program of 1959, which repositioned the SPD as more of a middle-class party and helped pave the way for the first SPD-led government in 1969 under Willy Brandt.
But as Kalecki might have predicted, all it took was one bad decade for the systemic preconditions of effective social democracy to be blown away. A strategy of high taxes and good services depended on full employment and broad consent. In the 1970s, the combination of inflation, slower growth, and high unemployment stressed the model to the breaking point. In 1973, President Nixon ended the Bretton Woods system, whose fixed exchange rates limited the speculative and deflationary impact of global capital.
In much of Europe, there was a managed form of capitalism with a strong welfare state, unions recognized as legitimate social partners, and even some islands of public ownership.
In Britain, where a Labour government was in charge, the stagflation of the 1970s exposed all the system’s fissures. Unlike Sweden, British trade unions never really embraced collaborative social bargaining. In 1969, the Labour prime minister, Harold Wilson, had tried to move the British labor movement more in a Scandinavian direction. His employment minister, Barbara Castle, produced a white paper promoting consensual social bargaining titled “In Place of Strife.” The class-conscious unions were having none of it. What they wanted was strife.
A decade later, in the so-called winter of discontent, efforts by unions to defend their incomes in the face of high inflation and high unemployment led to a series of public-worker strikes. Rubbish piled up, corpses could not be buried because of a gravediggers’ walkout, and even some ambulance drivers refused to work. Caught between unions and outraged citizens, the government of Labour Prime Minister James Callaghan got clobbered in the 1979 general election. The beneficiary was Margaret Thatcher and 18 years of hard-right rule. When Labour finally got back to power in 1997 under Tony Blair, he was determined to make over Labour into a middle-class party, to purge the left, and weaken the trade union movement. Blair succeeded in this, but badly split his party and left it divided between an affluent cosmopolitan wing and a working class that was falling further and further behind. Labour has yet to recover.
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Socialist President François Mitterand of France
In France, meanwhile, the same period of economic distress in the 1970s brought the left to power. In 1981, François Mitterrand was elected president of France with a mandate to pursue not just social democracy, but something closer to democratic socialism, including substantial public ownership of banks and industry. But in the years between Attlee in Britain and Mitterrand in France, the rules of international capitalism had been changed. With exchange rates back in speculative play and capital fully mobile, money traders could bet against the franc. After two devaluations and failed emergency capital controls, a humiliated Mitterrand reversed course, and embraced something like neoliberalism with a human face. Had capital been as mobile in 1945 as it was in 1981, Attlee would not have stood a chance.
Even in Sweden, the economic situation of high inflation in the 1970s, followed by high interest rates and an overly strong dollar in the post–Bretton Woods 1980s, created international conditions that were increasingly toxic for social-democracy-in-one-country. The Swedish model was far more than a cradle-to-grave welfare state. Trade union economists Gosta Rehn, Rudolf Meidner, and Clas-Erik Odhner, working with industry counterparts, had devised a very astute system for a high-performance, export-led economy that was also highly egalitarian.
One pillar was an “active labor market policy,” meaning continuous upgrading of the workforce in the context of full employment. When the world economy hit a downturn, exports fell, and Swedish unemployment rose, slots would be opened for workers to take well-paid retraining sabbaticals. Government would subsidize regional economic development, and as a last resort create good public-service jobs. This package kept Sweden competitive and workers fully employed. Most of this model was not government-led. It was the result of social bargaining between union federations and employer federations. Around 90 percent of the workforce, including white-collar workers, belonged to unions, which were the core institutions of Swedish social democracy.
The other ingenious aspect, with positive feedback effects, was a “solidarity wage” policy—continuous efforts to narrow wage differentials, within and between sectors. Unions deliberately resisted the tendency of high-skilled workers in short supply to try to bid up their wages.
They did this both as anti-inflation medicine to keep the Swedish export economy globally competitive and to narrow the wage spread between more highly skilled and less-skilled workers. Thus, when a worker needed to change occupations because of changing industrial conditions, there was less risk of lost income. It made for a highly educated and globally competitive economy. The model, however, depended on the national sovereignty to devise a system uniquely reflecting Swedish democratic design. Sweden was an outward-looking economy that relied on exports, but that also had the space to create its own social compact. Norway and Denmark had local variants on a broadly similar model, again with a key role for unions and for consensual social bargaining.
When the global slowdown of the 1970s and 1980s hit, the system was stressed. In Sweden, voters unhappy with the economic downturn elected a conservative/liberal coalition government in 1976, which began undermining the model and weakening the role of unions. To compete, Social Democrats also introduced elements of marketization. Two other conservative governments were elected, in 1991, and again in 2006. By the 21st century, Sweden was a less equal nation, and market values as well as market policies were crowding out egalitarian and solidarity values. (If I am more highly skilled, I deserve higher pay.) Today, the active labor market policy looks more like that of the U.S.: Report to the unemployment office and prove that you’ve been looking for a job. Training subsidies are far less generous. In the last couple of elections, the conservative party has expressly sought to divide Swedes by class, and brand the Social Democrats as the party of losers. Their slogan: If you depend on welfare, vote for the Social Democrats; if you work for a living, vote for us.
When I visited Sweden a decade ago, conservatives were well on their way to undermining the Swedish model while pretending to uphold it. Joakim Palme, a social scientist and the son of late beloved prime minister Olof Palme, who was murdered in 1986, told me, “Social Democrats led the way in introducing more competition in the public sector, but you have to be very careful about which sectors and what rules, because it’s a slippery slope.” One well-intentioned decision of Social Democrats that backfired was the idea of shaking up the public-school system by allowing parents or teachers to create alternative schools paid for by tax money. When the conservatives took power in 1991, they opened ownership to for-profit corporations, which marketed their schools to smart and healthy kids and avoided those with special needs.
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Olof Palme, Sweden's beloved Social Democratic Prime Minister
When I returned to Sweden in 2015, a new factor was the divisive role of immigration and the backlash of many otherwise progressive voters. All of these forces undermined Swedish social solidarity and weakened the Social Democrats as its standard-bearer. In 2019, the former Social Democratic prime minister Ingvar Carlsson, who sponsored some of the pro-market reforms in the 1980s, told a French interviewer, “We made a serious mistake: we underestimated the political strength of neoliberalism.”
NEOLIBERALISM HAD a strong ally in the European Union. The EU has been very good on some issues, such as climate and privacy, but when it comes to the basic regulation of capitalism, the EU is emphatically pro-market and anti-state. The predecessor European Community left far more room for national policy. But the Maastricht Treaty of 1992, which created the EU, required free movement of capital, goods, services, and people. As subsequently interpreted by the European Court of Justice, this provision undermined the ability of states to regulate capital in multiple ways. The ECJ overturned state requirements of minimum wages on construction contracts and allowed corporations based in one member country to violate local collective-bargaining agreements in another. In practice, a Bulgarian worker sent to Belgium by a staffing agency to work on construction could be paid Bulgarian wages and effectively be sheltered from local labor standards. Maastricht also promoted privatization of public functions, such as passenger rail and postal service, in the name of greater market competition.
The Maastricht Treaty of 1992, which created the EU, required free movement of capital, goods, services, andpeople. This provision undermined the ability of member states to regulate capital.
The EU had one other consequence whose perverse effects became obvious only after the collapse of 2008. A crowning achievement of Maastricht was the creation of the euro. In exchange for giving up their cherished deutsche mark, the Germans insisted on stringent budgetary requirements for every member nation of the EU. Debt and deficit ratios were strictly limited, but there was no European-wide sharing of fiscal burdens. Maastricht was approved just after the collapse of the Soviet Union and the reunification of Germany in 1989. One paradoxical consequence was that France and other nations were eager to contain a new enlarged Germany in a more powerful EU—and that gave the Germans substantial leverage over the terms.
The euro was entrusted to the new European Central Bank (ECB), which was responsible to multiple masters, and was given fewer powers than the American Federal Reserve. One result of the euro was that nations like Italy, Spain, and Greece, with historically weak currencies, were now issuing bonds in euros rather than in lira, pesetas, or drachmas. That meant investors could buy those bonds without worrying about the risk of devaluation, and nations of Southern Europe accustomed to paying higher interest rates were in the happy position of getting credit at rates almost as low as the hard-currency Germans. In their euphoria about avoiding devaluation risk, markets missed the more serious risk of default.
For social democrats, the gross miscalculation was to assent to a federation that required extreme liberalization of capital but with no common tax and fiscal provisions. When the collapse of 2008 came, the crash and its aftermath were more serious than their U.S. counterpart because the ECB lacked the Fed’s anti-depression tools, and because the budgetary rules, which Berlin and Brussels refused to waive, required austerity. For nations like Greece or Spain, the only remedy was to require them to borrow a lot more money, at punitive rates, to repay creditors. Northern Europeans led by Germany resented the presumed profligacy of the south. In the emblematic Greek crisis, two casualties of the administered depression that followed the collapse were PASOK, a model social democratic reformist regime, and its more radical successor, Syriza. Neither could withstand the enforced austerity. A broader casualty was European prosperity and the credibility of the kind of activist government associated with social democrats.
Each major European nation thus presents its own variation on the theme. A common element is the erosion of the class politics in which the social democrats were the champion of the traditional working class. In much of Europe today, there has been an inversion. Those who vote for the center-left party are increasingly middle-class people with cosmopolitan values such as concern for climate change, LGBT rights, racial justice, and feminism. Meanwhile, as recession-level unemployment drags into its second decade, the traditional working class sees the social democrats delivering precious little, and migrates to the right. This is, of course, similar to the American dynamic, where the move of Democrats toward greater social and cultural liberalism and away from broadly shared prosperity seeded the ground for Trump within the white working class.
Brexit displayed a uniquely British version of this dynamic. The Labour Party’s base is divided into a socially conservative working-class electorate in the economically depressed north, and cosmopolitan professionals in the prosperous south around Greater London. Even though depressed areas attract relatively few migrants, the open immigration allowed by the EU became a symbol in the working-class north of how EU membership was bad for the locals. Brexit cleft the party in two: According to the BBC, the four constituencies that supported Remain by the largest margin were Labour, as were three of the top six constituencies voting for Leave. Small wonder the party could not define a position on Brexit that was not divisive of its base. The Labour leader at the time of the Brexit vote, Jeremy Corbyn, a longtime Euro-skeptic, tried his best to fudge his position, and failed. Labour was also badly divided into more left-wing followers of Corbyn and more centrist supporters of the EU and Blairism.
Meanwhile, the bizarre Tory leader, Boris Johnson, got very lucky in the timing of the pandemic. When Brexit narrowly passed, serious economists and business leaders predicted catastrophe, because the British economy is so closely tied to the European. That may yet come. Johnson has tried to minimize the damage by having Britain basically follow EU rules (except on immigration) even though Britain no longer has any say over policy in Brussels. But while the EU’s procurement of vaccines bogged down in national rivalries and delays by Eurocrats concerned with budget impacts, Johnson followed the U.S. approach and spent whatever it took to get vaccines for his citizens. British voters are thankful to have been spared the EU’s vaccine fiasco, Brexit looks like a blessing in disguise, and Johnson now runs well ahead of Labour in the polls.
THE GERMAN SPD, the world’s oldest social democratic party, is suffering death from a thousand cuts. The opportunistic policy shifts by Gerhard Schroeder, the SPD chancellor in the late 1990s, badly split the party and removed traditional protections for labor. Schroeder’s so-called Hartz IV reforms, named for the labor relations director of VW who orchestrated them, created a new category of “mini-jobs” and divided Germany’s working class into those who still enjoyed protections and those who did not. Schroeder also deregulated financial markets, breaking up Germany’s system of “blockholder capitalism,” in which banks were major shareholders of corporations and provided the patient capital that spared corporate planners the pressure to produce short-run returns and allowed for long-term investment and planning (and reliable wages). Today, German financial capitalism is more Anglo-Saxon. The Schroeder government also cut taxes on the wealthy, and substantially privatized pensions. Consequently, retired German workers get less than what their counterparts receive in neighboring Austria, where pensions are still public.
Bebeto Matthews /AP Photo
SPD Chancellor Gerhard Schroeder
The partisan consequence of this shift was the breakaway of the left wing of the SPD to join with ex-communists from the East, to create a left party—Die Linke—in 2007. In three states, Die Linke has served in coalition governments with the SPD and the Greens, but has never reached more than 12 percent of the vote nationally. Some SPD leaders keep talking about a national coalition with Die Linke, but it is always a generation in the future, since feelings are still bitter from the 2007 split.
Not only did the SPD lose core support due to the breakaway. As traditional blue-collar workers, the longtime core of the SPD, have become a smaller share of the total workforce, that has added to the attrition. On one flank, the SPD has been steadily losing younger voters to the Greens. On the other flank, the rise of the neofascist Alternative für Deutschland, the AfD, has come almost entirely at the expense of the SPD.
This also has a regional dimension. Many of the more enterprising residents of the former DDR moved to the prosperous West. Many of those who stayed behind have the political attitudes of left-behind workers everywhere—angry, nationalistic, jingoistic. In partisan terms, the anti-communists of the former East Germany view social democracy as too close to communism, so they vote for either the CDU or the far right. Those who miss the security of communism vote for Die Linke. Squeezed between these extremes, the SPD has never been able to gain traction in the East. And if one thing more were needed, the SPD has had a string of uninspiring leaders, while the CDU and the country have been led by Angela Merkel, a widely respected figure. During the time when the SPD served in two Merkel governments as junior partner, between 2009 and 2017, its inability to define itself and its decline only deepened.
Another paradox: Merkel has been relatively popular not just in personal terms but because she nudged the CDU-led German government more in a social democratic direction, adopting the first German minimum-wage law and improving health care. This reflected the influence of the SPD as junior coalition partners, but the SPD as a party got little credit. So as policies of welfare capitalism survive, social democracy as a movement is weakened. (It’s also the case that several far-right parties elsewhere in Europe defend the welfare state, but for nationals, and not for migrants. As elsewhere, immigration has strengthened the right in Germany.)
If any sort of left might revive in Germany, it is more likely to be led by the Greens, who are now running second in the polls to the CDU with the next federal election scheduled for this September. The problem, however, is that the German Greens in some respects are not quite a left party, but a party of young and middle-class people whose top concern is the environment and human rights. Mathematically, one possibility could be an anti-CDU coalition government led by the Greens, with the pro-market Free Democrats and the SPD. But that would be far from a left government and would likely intensify the slow decline of the SPD. A Green-SPD-Linke coalition is also conceivable—there are such coalitions in three states led by the SPD—but at this point in the polling, neither Green-led option commands a projected parliamentary majority. Most likely is another CDU-led government, perhaps in coalition with the Greens.
Austria presents an interesting variation on Germany and Sweden. For 29 years, between 1970 and 1999, Austria was led by social democrats, sometimes in a grand coalition with the center-right Austrian People’s Party. But since 2000, the far-right Austrian Freedom Party has made huge gains, and briefly served in government as the junior coalition partner with the mainstream People’s Party—one of the few cases in Europe of inclusion of the far right in government, another being Norway, where the center-right has been willing to grant respectability to the far right. These gains have come substantially at the expense of the social democrats.
Vienna, a city-state that dominates a small country, is still led by a popular and effective social democratic government. And it still boasts a legacy of socialist institutions, including the West’s best program of municipally owned housing. Like the social democratic welfare state everywhere in Europe, legacy institutions have a long half-life; but they steadily erode in the face of neoliberal pressures and the failure of social democratic parties to replicate their broad support among younger voters.
Despite the fact that a generous welfare state is largely intact, the Austrian social democratic party keeps losing working-class voters to right-wing anti-immigrant nationalists. In the 2017 election, the Social Democrats were in a virtual tie with the far-right Freedom Party, at 26.9 percent and 26.0 percent of the vote, respectively. In 2019, the Freedom Party suffered internal scandals that caused the government to fall. In the snap election that followed, the Greens made a strong showing, and the current government is a coalition of the center-right and the Greens.
As in Germany, the relationship between social democrats and Greens is also tricky. The social democrats are historically based on a class politics and an ethic of equitably distributed income and consumption, while, to a greater degree than in the U.S., the green ethic in Europe is cultural and, for some, post-materialist. The Austrian Greens are more left than their German counterparts, and Green coalitions with social democrats are definitely possible, but often come at the latter’s expense.
IN FRANCE, THE COLLAPSE of the left has been the most profound. After Charles de Gaulle acted in 1958 to convert France into a presidential system under the new Gaullist Fifth Republic, for a time the result was more stable party systems. This was a plus, because France under the postwar Fourth Republic had a fragmented multiparty system with weak coalition governments that seldom lasted more than a year or two. The right held power from 1958 through three presidents, while the left regrouped. In 1981, a newly configured Socialist Party elected Mitterrand, with support from the Communists. He served for 14 years. The next two presidents were both center-right conservatives. Meanwhile, the nationalist far right under Jean-Marie Le Pen, later succeeded by his more presentable daughter, Marine Le Pen, gained ground. In 2002, Jean-Marie Le Pen made it to the second-round runoff election, crowding out the Socialist candidate Lionel Jospin. He did poorly in 2007, after President Nicolas Sarkozy adopted many ultra-nationalist themes. In 2017, however, Marine Le Pen was the finalist against Emmanuel Macron, and she is expected to be a finalist again in 2022.
While French parties have been becoming more personalist for decades, the 2017 election was implosive even by French standards. The Socialist incumbent, François Hollande, was deeply unpopular and did not run for re-election. The Socialist candidate, Benoît Hamon, won a bare 6.4 percent of the vote, and ran a weak fifth. In the parliamentary elections that followed a month later, the Socialists were all but wiped out in the Chamber of Deputies. Macron, meanwhile, had to invent a party, “La République en Marche!” from whole cloth. In the runoff, Le Pen lost 2-to-1, but gained a majority of blue-collar workers. In the French case, the once powerful Communist Party, which had commanded the loyalty of the working class especially in northeast France, has also lost ground to Le Pen.
The other piece of hopeful news for Europe is the emergence of the Biden administration as a role model. We have come full circle—FDR’s design for postwar Europe helped enable social democracy.
Why is the whole French political system coming apart? Because the electorate is deeply unhappy and no political party seems able to remedy the distress. Macron attempted reforms of the labor and pension systems, but popular resistance on the part of those who benefit from the status quo forced him to backtrack. Ideologically amorphous protests like the Gilets Jaunes (Yellow Vests) reflect general discontent with a stagnant economy and a welfare state that has reached its limits and fails to serve those left behind. French political scientists refer to a society of insiders and outsiders; the insiders benefit from a legacy of regular jobs and related benefits, while the outsiders are on their own; and the ranks of the outsiders who have little stake in the system are growing. Macron, who won election as a competent technocrat, now has approval ratings of around 40 percent. In the recent June regional elections, allies of both Macron and Le Pen did worse than expected; Macron’s party won just 10 percent of the vote. At the same time, neither the Socialists nor their conservative and radical-right rivals have much policy leverage.
WHERE DOES ALL THIS LEAVE the social democratic project? One piece of good news is the fact that the EU, in the COVID crisis, at last put some serious money into EU-wide recovery measures through a trillion-euro temporary package of loans and grants to member states called Next Generation EU. Unemployment in the euro area after 2008 had slowly declined to a low of 7.2 percent in 2019, still almost double the U.S. rate, but has risen again in the pandemic. With right-wing governments in power in most member states, there is still little support for the idea long pitched by social democrats of EU bonds at the scale needed to underwrite a continent-wide, Biden-style public-investment program. When it comes to marketization, the entire EU is subject to the strict Maastricht rules. When it comes to investment, each nation is on its own, and still constrained by the EU’s strictures on deficits. Social democrats are loath to give up on the EU because it is seen as a bulwark against toxic nationalism. Yet the more the EU demands austerity, the more fuel it pours on the nationalist fire, and the more the association of mainstream parties with the EU is politically toxic.
The other piece of hopeful news for Europe is the emergence of the Biden administration as a role model. The U.S. does not suffer from the EU’s artificial budget rules, and it has a central bank that can buy all the debt necessary to finance a recovery. We also have less of a contradiction between green goals and other progressive ones. The green aspect of the Biden public-investment program is part of an economic-development strategy, not a cultural expression of anti-materialism. Like “third-way” European leaders Blair and Schroeder, American neoliberal Democratic presidents—Obama, Clinton, and Carter—made some bad decisions that were optional. Biden has made some good ones.
The U.S. has its own version of obstructionist federalism, as well as a right-wing anti-system party—the Republicans—with a much larger share of the vote than any such party in Western Europe. But the country has a progressive administration that knows what it wants, with the capacity to govern without having to negotiate among multiple coalition partners. One of the things the Biden administration wants to do is scrap neoliberalism, whose assumptions have been overtaken by reality. Astonishingly, to the extent that there is a resurgent democratic left, its home is America.
In a way, we have come full circle. Under FDR, the U.S. built the global system on which European social democracy was constructed. Now we must rebuild it, both for our own sake and that of the West and the entire world economy—with public investment at the core, and green public investment at that. There was a time when American progressives made pilgrimages to places like Sweden and Austria. Now, European social democrats are looking the other way across the Atlantic to see what they can learn from us.
