Saving capitalism: Rudd, Labor and social democracy

Solidarity’s Ian Rintoul explains how Rudd’s new essay shows that he accepts the ‘Third way’ model of accomodating to capitalism

Prior to the federal election in 2007, Kevin Rudd proclaimed himself an economic conservative.
Two years later as the Global Financial Crisis plunged the world economy into recession, Rudd published an article in The Monthly, attacking the extreme capitalist neo-liberal orthodoxy of the past 30 years. Here Rudd portrayed himself as a kind of social democrat. Now, in Rudd’s latest article “Pain on the road to recovery” (SMH and The Age, 25-26 July), it seems the economic conservative has re-emerged.
In The Monthly article, Rudd says that it was not capitalism that had caused the crisis, but “extreme capitalism.” The task of social democratic governments, like Labor, was not to challenge capitalism, but to “save capitalism from itself.”
But there was nothing particularly social democratic about this. Governments of all persuasions resorted to massive state intervention to bail out capitalism. Kevin Rudd joined Gordon Brown and Barack Obama along with conservatives German Chancellor Merkel and French President Sarkozy in coming to capitalism’s rescue.
Kevin Rudd himself has undergone a number of transformations. In 2003, he told the Financial Review, “I am an old-fashioned Christian socialist.” In 2006, however he told The Age, “I am not a socialist. I have never been a socialist and I never will be a socialist.” The same year he told The Australian, “I’m proud to be a committed social democrat as I have been all my life.”
The original theorist of social democracy in the German Social Democratic Party, Karl Bernstein wrote at a time of relative capitalist stability and argued that class struggle was obsolete. He wanted to accommodate with capitalism.
Even so, he still saw parliament as a way to progressively remove the anomalies in the capitalist system.
There is also however a left social democratic tradition that is concerned with transform capitalism. Writing in the 1970s, as crisis re-emerged in the world economy, the British economist and left social democratic theorist Stuart Holland argued for a Labour government to nationalise the commanding heights of the economy as the initial step in taming multi-national corporations.

The Third Way
But it is “reformism without reforms” that has characterised social democratic governments since the end of the post war boom in the mid-1970s.
In Britain, the Labor government between 1974 and 1976 presided over the biggest cut in the average manual workers wage in the 20th Century. In 1974, the Whitlam government abandoned the reforming outlook of its early years and introduced a Budget that savagely cut government spending. In the years following, increasingly, Labor-type governments implemented whatever pro-capitalist policies were necessary to keep the system afloat—cutting social services, pushing income policies that cut real wages, etc.
By the mid 1990s, social democracy was an even paler image of earlier versions. Holland had argued that multinational corporations were too powerful and therefore had to be brought under control. British Labour leader, Tony Blair, advocating the Third Way, gave social democracy an even more conservative twist—arguing that corporations were too powerful to be brought under control. Accommodation was all that was possible.
As current British Prime Minister, Gordon Brown, explained when he was Tony Blair’s chancellor, “The old Labour language—tax , spend and borrow, nationalisation, state planning, isolationism and full time jobs for life for men…is inappropriate.”
Despite any appearances to the contrary, this is the version of social democracy to which Kevin Rudd subscribes. Well before the Third Way was theorised, it was being implemented by the Hawke and Keating Labor governments.In his essay in The Monthly Rudd identifies precisely with the Third Way and with the Hawke and Keating governments—which privatised the Commonwealth Bank, scrapped free tertiary education, deregulated the labour market and presided over cuts in real wages.
So it is not surprising that in the SMH article, social democracy doesn’t get a mention. Rudd now describes his Labor government, perhaps more accurately as, “centrist right” or as a “government of the responsible centre”.

Managing capitalism
In February Rudd’s Monthly article remarked that, “Increases in public investment and direct transfers will stimulate the economy, but they will have to be paid for in the future…”
By July, the future is already here. Rudd explicitly argues that Australians will be required “to accept difficult and unpopular budget cuts.”
Rudd may decry extreme capitalism but he sees no alternative to the market despite its obvious failures. Rudd’s “social democracy” too is all about accommodation—providing a guarantee to the banks deposits but no guarantee for bank workers’ jobs. Similarly he has handed out millions to car companies but car workers are required to work short time.
Rudd’s economic stimulus package may be building school assembly halls but the education revolution he espouses—the school league tables, the performance pay, the funding for private schools—is straight out of the neo-liberal handbook. Rather than nationalise ABC Learning when it went bankrupt, the Rudd government left it to the market and hundreds of child care workers lost entitlements and jobs.
Unless the very logic of capitalism is challenged the abuses will continue. It was not failure of market regulation that brought on the global financial crisis, but a failure of the market itself. Kevin Rudd may favour state intervention to stabilise markets but the cost of bailing out the corporations will be—and is being—born by working families!
Rudd’s prescriptions for restoring the health of the economy are also straight out of the neo-liberal globalisation handbook. The key focus of Rudd’s tax review, he argues in the SMH, is “…our ability to attract investment and international business.” Future prosperity relies on driving up productivity. But productivity was driven up under Hawke and Keating by increased casualisation, and workers working harder and longer. Rudd’s version of social democracy is politically bankrupt. It has more to do with giving some ideological gloss to his policies than providing an alternate vision to neo-liberalism.
For all the good of the stimulus package in staving off some elements of the recession, behind Rudd’s rhetoric lurks the same market forces that brought on the crash and will again demand that workers pay. Like Hawke and Keating before him, Rudd will be a willing accomplice.

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