New Democrats, New Labour, and Europe's Social Democrats

Yale Open Course <Power and Politics in Today's World>

Lecture 6: Reorienting the Left: New Democrats, New Labour, and Europe's Social Democrats

The 1990s and the 2000s were marked by the reorienting of the left especially in the UK and the US where it began to shift more to the center and adopt neoliberal policies. The decrease in industrial jobs which led to a decline in union membership weakend the left-of-center parties, leading their leaders such as Tony Blair and Bill Clinton to distance themselves from the left flank of their parties and cater to the center and center-of-right constituents.

Notes

• After Thatcher, Labour Party out of power until Tony Blair

  • Tony Blair: “new constitution for the Labour Party”

    • removed Clause 4: nationalization of the means of production/distributional exchange

  • Bill Clinton @ democratic leadership council

    • similar to New Labour

    • “New Choice” → “personal responsibility to make future America better”

Absolute vs. relative gains

• no win-win situation for relative valuation

  • one of the reasons for neoclasscist’s distaste of relative valuation

• relative gains are often more potent in politics

  • but local reference groups matter more than distant ones

    • source of indivious or solidaristic comparison

      • Solidaristic: vulnerable to the logic of the divide-a-dollar game

    • unions can function as institutional backbone for solidarity of people below median income

Thought experiment:

• Lottery scenario 1:

  • Steve wins $2 mil, but next day gets a call that says there was a second winner and his prize money now is $1 mil

• Lottery scenario 2:

  • Art wins 500K but gets a call the next day that says he’s won $1 mil because there was no second winner

• Who’s unhappier?

  • Steve → loss aversion (similar to endowment effect)

    • it bothers people more to have something taken away than gaining something (Daniel Kahneman)

    • to motivate people to do something, better to talk about avoiding a loss rather than a prospect of gaining something

      • prospect theory

• Problem:

  • unions - becoming less effective → becoming smaller and weaker

    • US membership peak in the 1950s and falling ever since

    • UK peaks in the 80s and declining

  • places where unions are powerful within the left-of-center parties, they will pull away from the median voter

    • ex. UK 80s, South Africa 2000s v. Germany

      • In Germany, agreement by unions applies to non-union workers

        • interest of unions and of all workers better aligned

• Political triangulation

  • left-of-center party (candidate) peeling away from the flank to attract median voters and the other side (esp. true when unions and left-of-center party are weak)

    • ex. Bill Clinton, Tony Blair

    • the flank abandoned, no place to go

Multiparty system

• more representative? yes at the election stage but not at the governing stage?

• more likely to be egalitarian and redistributive? inequality less severe in France and Germany (multiparty states) compared to UK and US

• BUT:

  • unions are declining in these systems

    • because of:

      • globalization of capital (low exit cost for capital)

      • jobs increasingly going to technology

• Implications:

  • ↓ union membership, ↓ union leverage to negotiate

    • left of center parties less effective in protecting workers

    • protecting unionized workers might come at the price of losing below-median income workers, service workers, long-term unemployed

• In multiparty states, the number of parties are going up

  • the major party moves to center → new party takes up the flank

    • greater fragmentation on the left

  • industrial jobs ↓ → left party weaker → new parties to take up the open seats

• party fragmentation makes it difficult to sustain solidaristic ideologies among the below-median voters

  • fragmentation on the left can lead to fragmentation on the right

DIAGRAM

• SPD loses voters → CDU moves to center to pick up new voters → the left and right flanks open for other parties to collect votes

• Proportional representation (PR) system

  • Multiparty system

  • the previously acknowledged benefits of better representation & ↑ equality in qusetion

The Resurgent Right in the West

Yale Open Course <Power and Politics in Today's World>

Lecture 5: The Resurgent Right in the West

In the 1970s and 80s, the West saw a shift away from social democratic models of government towards those centered around undoing and opposing the postwar consensus. The collapse of communism and the changing labor market contributed to new geopolitical and economic conditions favorable to the conservative movement. The Reagan and Thatcher administrations' rhetoric of personal responsibility and absolute economic improvement, along with the unstable nature of distributive politics, further fueled this shift. During this time, the burgeoning welfare state and unions came under attack, although to a lesser degree in multi-party systems such as France and Germany compared to two-party systems exemplified by the UK and the US.

Notes

The “Postwar consensus” from 1950s in almost all capitalist societies

• Strong welfare + social protections

• Progressive redistribution through tax system

• Substantially bipartisan

• Ex.

  • US: “The Great Society” (LBJ) → civil rights, Medicare, expansion of welfare

  • Britain: Clement Attlee’s govt 1945 → British welfare state

  • European social democracies

• Euro-communism

  • Social democracy not a byway to Marxist communism but a proper form of organization

70s, 80s → conservative attacks

• Hostility towards unions and the welfare state

• Against progressive taxes and regulations

• “Government is the problem!”

• Reagan elected 1980, Thatcher 1979

  • Weren’t initially considered a threat to the establishment

The Effect of the End of Communism

• Good for the left?

  • Social democracy → acknowledged as a legitimate form of social organization, an equilibrium

  • got rid of the bogeyman for the right to mobilize against

    • Leftist agenda could no longer be seen as an attempt to promote communism if there is no communism

  • Money spent on arms race could be channeled into the economy

• BUT

  • less favorable demography and geopolitics

    • Post-war social democracy and welfare state had depended on fortuitous circumstances

      • Demographically - big working age population

        • Dependency ratio ↑ = working age population / dependent population (<15 and >65)

        • in the 80s

        • working age population grew old to become the dependent population

        • Dependency ratio ↓ → fiscal stress

      • Economic health had been buttressed by American funds

        • Europe hadn’t needed to spend any money on defense

        • American interest in building Europe bulwark against USSR ↓

  • Alternative bogeyman

    • Islamic fundamentalism → not a threat to capitalism since there is no Islamic model of economy

  • ↓ incentive to buy off working class discontent

    • post-depression fear among business elite of the spread of communism among workers → approved the New Deal

    • w/o USSR, no need to keep the expensive welfare state

      • No alternative system to win over people

Two logics of distributive politics → contributed to the rise of the right

• Median always below the mean (the ultra rich pulling the average up)

• Always more people below the average income

• Median voter theorem: politicians seeking to win votes will be responsive to median votes

  • impetus for downward redistribution

  • But this doesn’t happen!

    • Why?

      • Another dimension other than income such as gender, race, etc.

      • Majority rule divide-a-dollar game

• No matter how you divide it, there is always some potential majority to upset that division

• Implications

  • Don’t need a second dimension to get distributive instability

  • Interest alone will not produce effective demand for downward redistribution

• Then what about ideals and institutions?

Ideals

• fairness?

  • people usually make local comparisons (within their groups)

    • Not fatal to solidarity but compete with other ideals of fairness

      • self-referential comparisons, “Pareto improvement”

        • Whether you are better off than you were before

      • gap between the rich and the poor

  • Thatcher / Reagan appealed to:

    • absolute improvements

    • prospects for upward mobility

    • Reagan’s (the new right) rhetoric: “everyone should be able to become a millionaire”

      • v. modern day pro-market conservatism revolving around loss aversion

      • responsible for:

        • “Make American Great Again” (Donald Trump)

        • Trump never promising to eliminate inequality but rather to deliver absolute improvements

        • “America’s best days lie ahead” (Hilary Clinton)

    • Benjamin Disraeli: possible to appeal to working class voters to vote conservative policies

  • Difficult to hold solidarity with the fairness ideal because factions within the group can be picked off with rewards (divide-a-dollar game)

    • Thatcher appealed to the lower-middle class with upwardly mobile aspiration

    • w/o a second dimension like race, solidarity vulnerable to breaking off by ideologies

• Ideals of fairness not enough for redistributive politics?

Institutions to sustain working class solidarity?

• Unions?

  • Reagan firing air traffic controllers / Thatcher breaking up miner’s union

    • new hostile attitude toward unions

  • Dramatic decline of union membership

  • Wagner Act 1935 protecting unions

    • Undone by Taft-Hartley Act of 1974 that cut back on union protection

  • America economy shifting from manufacturing to service

    • ↓ union membership

      • ↑ difficult to unionize in the service sector

      • free trade

        • can’t sustain unions when

        • exit cost for capital ↓

        • exit cost for labor ↑

      • As union membership ↓, inequality ↑

        • Middle class share of income ↓

  • Around the world, in major economies, unions getting smaller and weaker (except for Finland)

  • Unions tend to be relatively small in two-party systems

    • Can’t get a lot of redistribution

• France/Germany = multiparty system

• US/UK = two-party system

• Multiparty system more responsive to redistribution/media voters?

Chinese and Vietnamese Capitalism

Yale Open Course <Power and Politics in Today's World>

Lecture 4: Fusing Capitalist Economics with Communist Politics: China & Vietnam

China and Vietnam, each under a post-communist capitalist authoritarian system, have seen impressive economic growth that offers alternatives to the Western capitalist model. China, especially, from opening up of its market and capitalist experimentations in the 80s to the unprecedented rate of growth and finally to the slowing down of the economic acceleration in recent years poses many questions to the theories of economic and political reforms in developing countries. Specifically, its history of the government crackdown on civic attempts at liberalization and the continued centralization of power in the midst of economic growth severs the previously assumed link between economic growth and democratization. It remains to be seen how the Chinese economy will fare in its transition from manufacturing to a service-oriented economy and how the political terrain will shift in response to the slowing down of the economy.

Notes

• China & Vietnam

  • Economically successful post-communist, capitalist authoritarian systems

    • (Cf. North Korea, Cuba - non-capitalist post-communist authoritarian systems)

  • Dramatic decline of poverty but increase in inequality

    • Globally, within country inequality ↑, global inequality/poverty ↓

• The Run-up to Tiananmen

  • 1976 Mao dies → 1978 Deng Xiaoping “liberate thinking”

    • Experimentation with new forms of capitalism

      • Big special economic zones created

      • Opened up to direct foreign investment

  • The Beijing Spring 1979-81 + Democracy Wall Movement in Xidan

    • Greater freedom of speech

      • Criticisms mostly backward-looking (on Mao, Cultural Revolution)

      • Democracy Wall Movement shifted the focus of criticism towards demands for more democracy

    • 1980s - time of political testing

      • Student movements

      • Criticisms and pushback (”party rule & socialist path”)

      • Inflation, austerity, escalating protests, continuing economic reforms

  • June 1989 Tiananmen Square Massacre

    • Coincides with the Eastern European liberation

    • Killing + imprisonment of protesters

  • Economic reform continues, increasing growth

• Reasons for the Chinese & Vietnamese success?

  • Late developer advantage?

    • Late developers can skip some stages of economic developments

    • But not all late developers succeeded

  • Predominantly rural at start?

    • Didn’t have inefficient urban economy to dismantle

    • But not true for other agrarian countries

  • Confucian values?

    • Not true for all Confucian countries (North Korea)

  • Education?

    • Not true for all educated countries

  • Less entrenched command communist system?

    • Russia → deeply entrenched Communist economy that fell apart when USSR fell

    • China & Vietnam not as entrenched

  • Gradualism

    • Gradual experimental approach in opening their economies

  • Experimentation and decentralization

    • Devolved power and less micromanaging

  • Competition within the state sector and with the private sector?

    • Relative competition for state sector-dominated economy

  • Export-oriented growth?

    • Not true for all export-oriented countries

  • Relatively good accountability and rule of law?

    • Officials can be punished for inefficiency and corruption

    • Increased demand for rule of law in commercial sectors dominated by foreign investment

      • But foreign firms don’t have the informal access to officials that domestic firms have

  • Leadership?

    • mechanisms for renewing leadership?

      • After Mao, China figured out a way to avoid long-term rule by a charismatic leader? → Xi Jinping changed this

  • Sustainability?

    • Growth of state sector since 2008, but still inefficient than the private sectors

    • The Smile Curve of Profitability

• Chinese firms starting to move away from manufacturing and towards customer service and R & D

  • The original curve flattens after Chinese firms reverse engineer technologies

• Govt difficult to pick winners (success businesses) for more complex growth

• Changing leadership and corruption

  • 10-year term limit removed by Xi Jinping

    • The mechanism for renewing leadership broken down?

  • Vietnamese separation of power breaking down?

• Less foreign direct investment → economic and political effect

  • increase in corruption and inefficiencies?

• Demand for higher wages

  • The flying geese theory

    • Capital goes where urban labor is cheapest

    • As the cost of wage increases, capital leaving China

• With slowing growth, regime legitimacy ↓?

• A resurgence of political dissent?

• Sequencing of economic and political reform (in a shock therapy approach)

  • Critique against technological determinists:

    • Both paths have been successful (Poland & Czech Republic)

    • Both the losers and winners of the reforms will politically mobilize

    • Economic advantage of gradualism and experimentation

      • Ex. China & Vietnam’s dual track pricing

        • Private market alongside public market

        • Companies can produce to meet the quota for the public market then sell the rest in the private market

    • Political advantages of gradualism and experimentation

      • reform in ways that lock them in & build coalitions for future reform

Modernization Theory

• Economic development will inevitably produce demands for democracy

• The logic:

  • no bourgeoisie, no democracy

    • The middle class will demand more rights

      • But will it if all of its demands are met?

  • Working class pressure

  • Fighting & paying for war

    • Governments will need to make concessions to get people to pay for the wars and fight in them

      • But what if govts no longer need large armies and are paying the war with debt?

Upshot for future:

• Democracy not inevitable; depends on contingent historical struggles

• If China/Vietnam’s economies/wages/legitimacy ↓, the state might become more repressive