The Saskatchewan Case

Social Democracy and the Economic Crisis – Published on The Bullet, Socialist Project’s E-Bulletin No. 576, by John W. Warnock, December 2, 2011.

In the Spanish general election last Sunday [November 20, 2011], the Socialist Party government was soundly defeated. The rightist Peoples Party won the election but only increased their vote by a very small margin. The Indignados, the people who staged mass street mobilizations, asked the voters to stay home, spoil their ballot or vote for the numerous smaller parties. Neither of the two major parties were deemed fit to govern, they argued. The Socialists lost three million votes.  

The Spanish economy is in the tank with unemployment at 22 per cent and youth unemployment over 40 per cent. Personal and government debt is huge, and investors fear they will default on their bonds. As in the United States, the crisis is the fallout from the collapse of the housing bubble, created by the unregulated finance industry supported by low interest rates and neoliberal government policies.

The Decline of the Social Democrats:

All across Europe, the pattern is the same. The social democratic parties in government embraced the agenda of big business. They deregulated the finance industry, cut taxes on corporations and the rich, and privatized state assets. As government revenues fell, they imposed ‘reforms’ to social programs which fell heaviest on the poor and the working-class:

  • In Iceland the Social Democrats first supported the right wing Independence Party in privatizing the banks and deregulating finance. The banks collapsed. In a governing alliance with the Greens, they tried to make the taxpayers bail out the banks. In two referendums the people overwhelmingly voted ‘no’!
  • In Ireland the Labour Party, then in opposition, supported the neoliberal agenda brought in by the rightist government of Fianna Fail. The banks collapsed, and the government took on major debt to bail them out. Following the February 2011 election, the Labour Party is now in coalition with Fine Gael, imposing a right-wing austerity program on their supporters.
  • In Portugal the Socialist Party government was turfed out in the June 2011 election after being forced to accept an IMF/ECB bailout and austerity program. The large government debt was mainly due to the disasters stemming from their Public Private Partnership program.
  • In Greece the Socialist Party government adopted right wing neoliberal policies, seeing them as the only way to deal with the economic and financial crisis. A number of governments over the years failed to collect taxes from small business, corporations and the rich. Instead, they borrowed money to cover their hidden deficits. The IMF is now directly running the country. A series of harsh austerity programs is driving the country into a deep recession.
  • In Italy, the conservative coalition of parties headed by Silvio Berlusconi has implemented harsh austerity programs to deal with the government debt and the long recession. But the opposition centre-left coalition of social democrats and Greens supports this strategy. As in Greece, the IMF is now directly running the government.

Across Europe the social democrats in office and in opposition have supported the general neoliberal model of the free market and free trade, an end to universal social programs, and the implementation of regressive taxation systems. This is the pro-business right wing package brought in by Margaret Thatcher and Ronald Reagan beginning around 1980. The result has been a general withdrawal from participation in politics, a decline in the percentage of the population even bothering to vote, and the rise of right wing neo-fascist parties.

The Anglo-American Social Democrats:

The dramatic shift to the right by social democratic parties began with the New Zealand Labour government (1984-1990). They used ‘shock therapy’ to virtually repeal the Keynesian welfare state. The Australian Labour governments headed by Bob Hawke and Paul Keating (1983-1996) pursued similar policies. Saskatchewan readers might remember that Roy Romanow was a strong supporter of the policy shift by the New Zealand Labour government. Thus it was really no big surprise that the Romanow-Calvert governments (1991-2007) followed the general pattern of these social democratic governments. One could even say that the rightist policies of the British Labour governments under Tony Blair and Gordon Brown (1997-2010) were patterned after the Saskatchewan model … (full text).

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