The once-dominant role and current crisis of social democracy in much of Europe in the last century can hardly be understood without analysing the shift from confrontation to compromise in the relationship between the trade union and labour movement and the employers/right-wing forces. This historical compromise between labour and capital was the result of comprehensive class struggles that shifted the balance of power in favour of labour. Employers viewed such a compromise as a tactical step in order to dampen and counteract the radicalism of a strong and growing trade union movement. In Norway it was formalized through the first Collective Basic Agreement between the Norwegian Confederation of Trade Unions (LO in Norwegian) and the Norwegian Employers’ Association in 1935. That same year the Labour Party, with support from the Peasants’ Party, won government power for the first time.

Based on this compromise, the foundation was laid for the golden age of social democracy. It was a real compromise, where employers eventually had to give a number of concessions to the trade union and labour movement – including the acceptance of major political interventions in the market. Thus, the basis was laid for great social progress for workers. The welfare state developed. The Norwegian, or Nordic, model came into being.

From its foundation in 1887 to the class compromise in 1935, the Labour Party had emerged as a party of social justice – with socialism as the long-term goal. Put aside perennial disagreement on the left about social democracy’s strategy and tactics: Labour emerged as a real mass organization for workers. The class compromise, however, did not only contribute to social progress, it also proved to have unforeseen effects. The Labour Party’s central role in implementing the compromise transformed the party’s organization as well as its politics. This brought a deradicalization of the party – among other things via adopting a social partnership ideology. In short, the party changed from being a mass organization for working people into an administrator of the class compromise. Here we find the seeds of today’s crisis of social democracy.

Social partnership

The so-called Norwegian model is the true-born child of social partnership ideology. For the employers, the class compromise was a tactical move to undermine a strong and socialistic orientated labour movement. For social democracy, however, it appeared as a higher form of reason – a collective sense based on the fact that “employers also understood that cooperation, rather than struggle, was in their interest” (as Norwegian social democrats reiterate).

Based on this ideology, social democracy then developed a comprehensive understanding of society where the economy (capitalism) could be governed by political regulation and market interventions (Keynesianism). In this way, a regulated, crisis-free capitalism could be created, while mass unemployment, poverty and misery, as in the 1930s, were relegated to history. The class struggle itself was tamed, and in many ways reduced to an institutionalised, collegial rivalry such as the biannual collective agreement negotiations.

This entire understanding was put to the test when capitalism again went into a crisis in the 1970s. Oil crisis, currency crisis, commodity crisis – and finally a full-scale economic crisis – displaced the post-war period of economic growth and stability. The social democratic policy of intervention in and regulation of the markets no longer worked. Stagnation and inflation arose in parallel (stagflation) and unemployment increased. Such a crisis was in many ways contrary to the prevailing social theory and ideology of the Labour Party. So were also the reactions of the employers and the political right, as “collective reason” gave way to an ever-increasing offensive against trade unions and the welfare state. Neoliberalism became the answer to the crisis from the employers and the right-wing – and the consensus-oriented labour movement was taken by surprise by this offensive and unable to respond in kind.

Supping with the devil

Compliance towards the neoliberal offensive became the answer. Gradually, social democratic parties adopted more and more of the neoliberal agenda – with privatization, deregulation and restructuring of the public sector to market-oriented New Public Management-inspired organizational and management models. This contributed further to strengthening neoliberalism within the Labour Party, as many state bureaucrats, who carried out this transformation, and ended up as well-paid directors, belonged to the party. Thus, the party’s social basis was changed, something which makes it very difficult to turn or change its direction.

However, it is not just social democracy that struggles today. Both of the two main forces in the European post-war political landscape are experiencing formidable problems and major political turbulence. In a number of western European countries, the struggle between social democrats and so-called socially responsible conservative parties was dominant, and they often swapped positions. Both were linked to class compromises in different forms, and these characterised their policies. Now, however, that historical compromise has largely broken down, although the process is slower in the Nordic countries.

It is therefore not only the crisis of social democracy we are experiencing but that of the compromise-based post-war political model in Europe. In the first phase of this political crisis, new far right parties emerged – viz. Front National in France, the so-called freedom parties in Austria and the Netherlands, and the Progress Party in Norway. The lack of any alternative policy from social democratic and left-wing parties means they must take their share of responsibility for this development. They had no policy to take on the neoliberalist attacks on the social gains that had been won through the welfare state. In recent years, however, we have seen that new political alternatives have started to grow also on the left (Syriza in Greece, Podemos in Spain, Momentum in the UK, and the newly established Power to the People in Italy). These are young and incomplete initiatives, which can fail (like Syriza) or succeed, but in any case will further develop through struggles and experiences, victories and defeats.

There is little evidence that the Labour Party will be able to transform itself into what we need as a liberating force in the current situation. The social basis for radical renewal is too weak and organizational barriers too strong. As social problems are increasing and ever more people are feeling insecure and unsafe, any party of the left will need to have more radical alternatives, visions and solutions – very different from the political centre or the right.

In the absence of real alternatives, parties of the existing social democratic order will probably still win elections without any deeper transformation – when frustrated voters move from one political option to another as they realize that election promises are broken. This should hardly lead to any relief among leaders of contemporary, crisis-ridden social democratic parties. A growing number of workers and young people in particular, have started to demand more radical solutions.

Or, as Gramsci famously said: “The crisis consists precisely in the fact that the old is dying and the new cannot be born; in this interregnum a great variety of morbid symptoms appear.”