Howard Richards, Professor of Peace and Global Studies

My thesis (and that of my co-author Joanna Swanger, Richards and Swanger 2006) is that social democracy declined in the decade 1970-1980 mainly because it was incompatible with the basic cultural structures of the modern world.   Any attempt to revive its ideals must therefore be transformative. It must transform a basic normative (legal and ethical) framework that effectively prohibits the construction of a caring economy.
    The modern world-system has from its beginnings been resisted and contested by its victims. Modifying it to make it work for the benefit of everybody reached a high point in the Scandinavian social democracies in the decades immediately following World War II.   Through the United Nations the Scandinavian high point came to define the ideal of “economic and social development” to which the rest of the world aspired.    But by the year 2000 all challengers to the dominant paradigm, including social democracy in its Scandinavian and in its other forms, appeared to have been defeated or to be in retreat.   Our assessment of the proposals of Barack Obama will depend on our understanding of the causes of social democracy´s decline.   His proposals must confront the objection that they will not work for the same reasons that social democracy did not work, insofar as he is proposing, as social democrats proposed earlier, to make the economy function for the benefit of everybody; and insofar as he proposes to do so in ways similar to what the social democrats (counting Franklin D. Roosevelt as a social democrat) attempted earlier.   His hearers are entitled to ask in what, if anything, the differences between Obama and his predecessors consist. If he thinks economics for the people will work now in ways it did not work then,   it must be because he thinks he knows something that Alva and Gunnar Myrdal, Gosta Rehn, Rudolf Meidner, Dag Hammarskjold, John Maynard Keynes, and the other architects of social democracy did not know.
     If one imagines someone in a western democracy reading daily newspapers year after year during the decade of the 1970s; and if one runs one´s imagination like an Eisenstein film, alternating images of someone reading a newspaper with images of someone standing on a beach watching the waves roll in and out, the eddies swirling to and fro, the occasional flotsam stranded on the sand, while listening to seabirds squawking unintelligible but apparently urgent messages that may and may not predict which way the sea is moving; then one might well be imagining someone who did not realize, even after processing a plethora of information, that the tide was surging decisively to the right; someone who was surprised when, in a single year of denouement, at the end of the decade, Ronald Reagan was elected President of the United States, Margaret Thatcher was elected Prime Minister of the United Kingdom, and Helmut Kohl was elected Chancellor of the Federal Republic of Germany; all three voicing the same message, a message the voters apparently heard and understood because with their ballots they endorsed it: get the economy moving again.   The social democrats, they said to the voters (if I may attribute to them a slight enlarging of the category “social democrat” to include Jimmy Carter) have brought you stagflation. (Stagflation is rising unemployment, falling profits, a rise in bankruptcies, a decline in investment, and rising prices.)   We, the economic realists (if I may imagine them naming themselves back then with a phrase now made famous by Nicolas Sarkozy) will get you on the road again.
    They did. They brought inflation down and investment up. The American landscape was dotted with new millionaires as ordinary people found the values of the company shares in their retirement plans ballooning.   The formula for success of the economic realists can be reduced to a few words that skip details and omit nuances but are not untrue: Change the balance of economic power in favor of the investing class, while bringing more people into that class through delayed taxation of retirement plan portfolios, life insurance, and other invested funds.   When corporate profits go up, and the size of the savings made available for investment increases, then investment goes up. The economy gets moving again. Even the working masses (the ones whose real incomes adjusted for inflation have been steadily going down since the mid 1970s except for a brief respite during part of the Clinton years) arguably are better off because of such neoliberal policies; for, it can be argued, if creeping socialism had been allowed to creep forward during two decades more, then by the year 2000 the deterioration of incentives for entrepreneurs and galloping inflation would have lowered the standards of living of the working masses to depths far below the depths to which they admittedly did sink during the last decades of the twentieth century while conservative leaders advised by orthodox economists steered the ships of state.
   The transition from the world just after World War II to the world today can also be described with the help of the concept of “regime of accumulation.” (e.g. Harvey 1990, Aglietta 1987) It is a concept that presupposes the previous social construction of the basic cultural structures of the modern world. Given that;
(1)The production of goods and services happens if and only if the owners of the means of production decide to make it happen; and
(2)That they usually decide to make it happen when they have confidence that the result of investing in productive activities will be that after a time the money thus invested will grow and become more money, i.e. accumulate; and
(3)That society cannot exist at all without goods and services;

it follows that whatever else a society does, one thing it must do is to assure that investors have confidence (as required by (2).   A “regime” in this context governs a political order, an educational system (see Bourdieu and Passeron 1990), ideologies, and everything else –the whole ball of wax. Everything must be compatible with one thing that is essential; the confidence of the investor.
        The working people who had the good fortune to live in a western democracy in the decades just prior to the 1970s were the beneficiaries of a Keynesian regime of accumulation.    Keynes had taught that the great drag on prosperity that limited profitable production was a chronic weakness of effective demand.   (Keynes 1936 pp. 27-28)   The best way to inspire investors´ confidence was to assure investors that when the products produced were brought to market they would be met there by plenty of customers able to buy them. Social democrats were happy to hear this.   High wages were said to be good for business.   Policies designed to create a prosperous middle class were said to be good for business.
        The late lamented Keynesian regime of accumulation was also known as “Fordist.”   It was named after Henry Ford because he perfected assembly line mass production. Fordist production (which is “roundabout” in the terminology of Ludwig von Mises, meaning that it takes a lot of time and money to tool it up, but once it is tooled up it is incomparably more efficient than village crafts) requires huge investments.   It produces Model T´s or refrigerators of antibiotics or almost anything at a unit cost far below the unit cost of undercapitalized small fry.   Henry Ford could easily undersell the boutique automakers of France. The latter were thenceforth combined to niche markets making a few special vehicles for a few wealthy clients.   But in the process of making Model T´s and other products at a low unit price, Henry Ford and others created a vast and expensive productive apparatus that imposed a will of its own on its makers.    It demanded to be put to work to make if not Model T´s then next year´s model or in any case something or other that could be sold. And there had to be customers to buy it.    It was a corollary of mass production technology that there had to be a mass market.   Neither Henry et al nor society as a whole could afford to let millions of cars and refrigerators rust unsold.   Neither society as a whole nor Henry et al could afford to write off as losses the huge sums invested in tooling up to make them.   Society needed –and through the backing of labor unions by social democratic governments and the mesmerizing of consumers by mass media it got—a regime of accumulation that put in the pockets of the masses money; and in their heads visions of sugar plums, automobiles, and refrigerators.
         Today´s phase of the evolution of the modern world-system can also be said to be governed by a regime of accumulation. To strengthen investor confidence that capital will accumulate by being turned into more capital, today´s regime depends more than yesterday´s on low wages. It raises profits directly by lowering the portion of revenue paid out in wages.    To find buyers with money in their pockets and desires in their heads today´s regime depends more on globalization.   It no longer needs a prosperous mass of consumers at home.
            Elsewhere, a co-author and I have written a book showing that what can be said using the idea of “regime of accumulation” can be reframed in a broader and more anthropological perspective. (Richards and Swanger 2006) What is constant in human history are ecology and culture.   A human group always makes some adaptation or other to its environment. It always has some culture or other.   It does not always have a regime of accumulation.    Premise (1) above, “The production of goods and services happens if and only if the owners of the means of production decide to make it happen” is not always true. Workers are not always separated from their tools by Roman concepts of dominus, and people are not always separated from each other by Roman concepts of separate juridical subjects who owe each other nothing if no contract connects them.   Even today in our western democracies, a great deal of the work we do (Hazel Henderson estimates that it is more than half) is not done in the entrepreneurial economy where workers are hired for the ultimate purpose of turning money into more money. (Henderson 1996   Gibson-Graham 1995)    What we show in our book is that the decline of social democracy can be understood in terms more fundamental, older, and more pervasive than the concept of regime of accumulation, namely: suum cuique, alterum non laedere, honeste vivare, pacta sunt servanda.    The Austrian social democrat and one time President of Austria, Karl Renner, published a book in 1904 acknowledging that Roman Law as updated in modern European codes provided the legal framework for a commercial way of life that privileged a few and exploited many, and which was inherently unstable, but he claimed that the very same traditional legal concepts could be used to fashion a new society that would be democratic, caring, and stable.   Society could be changed, as many socialists thought then and still think today, by changing who possesses “power,” and the “power” could be used to put new content in the old forms.   We show in our book that Renner was mistaken (but without mentioning him, since we did not know about him when we wrote the book).    The basic structures of the modern world condition production (always remembering that as Hazel Henderson and others show that those basic structures do not govern everything) on making the rich richer, and they do not lend themselves to simultaneously increasing production and democratizing distribution.   Modern cultures are unstable from the moment free markets based on the juridical principle of contract become their organizing principle, simply because people are free to buy or not to buy, for any reason or for no reason. There is no guarantee that everyone who needs a job paying a living wage will find somebody who wants to hire him or her; and there is no guarantee that somebody who wants to sell a product at a cost-covering price will find buyers – not for the reasons Keynes gave to establish these points, which are true as far as they go, but for the deeper and simpler reason that the basic structure of our culture rests on premises that imply that nobody has any obligation to do anything just because somebody else needs it done.   No regime of accumulation can make a modern economy indefinitely stable, none has, and none ever will.
             The required transformation is not from one regime of accumulation to another but from a lower level of moral development to a higher level of moral development.    In Eisler´s terminology it is orienting more to the partnership end of a spectrum and less toward a dominator configuration.    Like a Hegelian Aufhebung or a Piagetian advance to a higher stage, transformation as I want to think of it preserves previous gains.   It is not designed to destroy anything, certainly not modernity. I do not want to fix anything that is not broken, nor to undermine the happiness of people who in spite of all the challenges that face human beings in this imperfect world have managed to establish tolerably happy lives for themselves and their families.   I do want to move to a system that is so social and so socially conscious that it will still be called capitalism only by those who love the very word as Gandhi loved the very word “socialism” (etymologically equivalent to “partnership,” being derived from socius, Latin for “partner”) even though Gandhi was aware of the great crimes that were being committed in socialism´s name; but helping capitalism to transform itself into social democracy is not destroying it, nor is it failing to appreciate its achievements; it is helping it to become its better self, the self that its best dreamers always wanted it to be.
            I have more to say about why social democracy declined in the late twentieth century, why it is so hard to revive it and to go beyond it to build societies even better than the Scandinavian social democracies, and about what “transformation” means, but instead I will move on now to consider the ideas of Barack Obama and Riane Eisler.    I will later insert the remaining points I want to make about “transformation.” But first I will mention just one example of the need for transformation –an especially pertinent example because it played a key role in social democracy´s decline and neoliberalism´s rise about 1970-1980. It is an example of something that is broken and does need a paradigm shift to fix it.    Inflation.

Inflation is too much money chasing too few goods. Milton Friedman´s classic monetarist theory explains inflation as a monetary phenomenon. I gloss it as attributing inflation to deviations of the “amount of money” circulating in the economy (bearing in mind that holdings in bank accounts and other things besides simple cash on hand are included when measuring “amount of money”) from what it should be (bearing in mind that “what it should be” depends not just on to what extent the money has the solid backing of real stocks of real goods and services, but also on how fast the same money facilitates more than one sale transaction by moving quickly from hand to hand). Friedman´s theory is an updating of David Hume´s 18th century theory: the coinage is debased (i.e. inflated) when the sovereign issues more of it, or for some other reason more of it gets into circulation, beyond what is justified by the existence of things to buy with it. The results of many studies tend to show that Friedman´s monetarist theory is on the whole empirically verifiable. (Laidler and Parkin 1975) The theory implies that governments should reduce public spending, central banks should raise interest rates to reduce the money supply, and employers should hold the line on wages and on new hires when prices are rising and inflation threatens to become chronic. But these measures slow down economic activity. There are fewer sales. These measures tend to favor those who are already favored (for example, those who do not need to work because they live off interest, who are favored by higher interest rates). They tend to punish those who are already punished (for example people whose wages are low). But the alternatives are even worse: inflation out of control will harm everyone, and it will harm especially the poor. Economic science says to the poor: heads you lose, tails you lose. This is a practical anomaly; it is analogous to the theoretical anomalies discussed by Thomas Kuhn in his work on the history of science. Kuhn shows that anomalies that cannot be handled satisfactorily by an existing “normal” science precede a paradigm shift.

Can the US be Transformed? Hopeful Answers from Barack Obama and Rianne Eisler