The Retreat of Social Democracy. By John Callaghan, Manchester University Press, 2000.
Many of the social reforms implemented by the Labour government after the Second World War were repeated elsewhere in Europe, including Christian Democratic Germany and Italy. Many of these regimes did not claim to be socialist or social democratic, yet by the late 1950s they were spending more on social security than Britain. The economist J.M. Keynes had expressed the ruling class point of view when he called the Beveridge proposals for the British welfare state “the cheapest alternative open to us”. There were other benefits for the ruling class too, including higher profits by maintaining a downward pressure on wages. As Labour MP Richard Crossman explained to his readers in the Daily Mirror (15 November 1955):
“The fact is that ever since 1945 the British trade unionist would have enjoyed a far higher wage packet if his leaders had followed the American example and extorted the highest possible price for labour on a free market. Instead of doing so, however, they exercised extreme wage restraint. This they justified by pointing out to the worker the benefits he enjoyed under the welfare state—prices kept artificially low by food subsidies; rents kept artificially low by housing subsidies, rent restriction; and in addition the Health Service.”
But these reforms were always liable to be reversed if the economy ran into trouble and capitalists sought to reduce the costs of the state. This is precisely what happened in the 1970s when economic stagnation and high inflation (so-called “stagflation”) set in. This set the scene for the rise of Thatcherism and the neo-liberal agenda, hastening the retreat of Social Democracy around the world. Although Professor Callaghan acknowledges the capitalist nature of economic stagnation as a factor in the retreat of social democracy, it is clear that he attributes most of the blame to Social Democrat leaders for capitulating to the Thatcherite onslaught. This may well be the case, but Thatcher was the bastard child of capitalist crisis.
Callaghan also claims that wages increases contributed to inflation. But wage increases cannot cause inflation. Unless market conditions change in their favour, or they are a monopoly or in receipt of a government subsidy, businesses cannot raise prices simply because they have had to pay higher wages. If businesses could recover wage increases by increasing their prices, there would be no point in their resisting wage claims. The fact that they do resist wage increases is because they increase costs and reduce profits. This is quite separate from inflation—a persistent increase in the general price level—which is the sole responsibility of governments when they issue more currency than is needed for the economy at that time.
Callaghan’s qualified support for Labour and Social Democratic parties in Europe rests on the bizarre claim that “self-avowed socialists” exist in all of them. But it is unlikely that the leftist Callaghan would acknowledge Stalin as a socialist because Stalin said he was one. Even Tony Blair very occasionally uses the “s” word, but does anyone still take him seriously?
Lew Higgins
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