June 1998

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Blairism may not work elsewhere in Europe 

by Erkki Tuomioja

No-one can remain indifferent to the example of a party which sweeps into power with a record majority – even if it won a smaller proportion of the popular vote than the Sandinistas did in Nicaragua when they lost the country’s first free elections. After the elections Labour has of course managed to increase its approval rating to historical heights. What relevance, if any, this success has for the European left in general and the Nordic social democracy in particular is another thing.

Brilliant and successful as Labour’s election strategy and campaign were, I have reservations about the same strategy working elsewhere. Having listened to some of the gurus employed by the New Labour in its election campaign, I think that a good part of their advice was more or less irrelevant for the left in most other countries and in some cases more likely to lead to electoral disasters rather than success if applied in the Nordic countries.

Labour’s internal reforms have nothing revolutionary about them from a European point of view. Essentially they have meant that Labour has now – partly – liberated itself from trade-union guardianship and otherwise adopted statutes and practices which have been more or less normal practice in most European social democratic parties.

As to New Labour’s post-election performance, the verdict on Blairite policies must be left open for the time being. Even if they do turn out to be a success in the British context, there is no a priori reason to think that they could or should serve as a model for other European countries.

The starting point is rather baffling: why should American and British experiences and policies on welfare reform be of particular value or significance when debating the future of the welfare state, when these two countries are not welfare states in any sense that is familiar to and accepted by most people in the Nordic countries?

The USA has, of course, never been seriously claimed as a welfare state. The UK, on the other hand, has had a reputation of a welfare model with the Beveridge Plan and the reforms carried out by the post-war Labour government. Even so, it can be argued that these two countries between them have more similarities in their liberal or residual social policies than with other, corporatist, institutional or social democratic welfare regimes. They certainly have the most unequal distribution of income as well as the highest instances of poverty to be found in the OECD countries.

Anthony Giddens seems to interpret this as showing that the welfare state has not been particularly successful in combating poverty and reducing income inequality. Looked at from the Nordic countries – where the welfare state has been extraordinarily successful in eliminating poverty – an alternative interpretation would be that neither the US or the UK can be called welfare states.

This has not, however, prevented the US and the UK from being those countries which foster the most radical, not to say hysterical critique and condemnation of both welfare and the welfare state.

Thus any search for a "Third Way" portraying neo-liberalism of the Reagan-Thatcher variety as one pole and social democracy as the other is of rather doubtful relevance in a European context.

The social policies of the Nordic countries and most European countries are different from those in the US and UK in their universalistic approach to social insurance, benefits and public services. It is indeed true that the welfare of the Nordic variety does benefit not only the least privileged but also those who are well-off. It is also true that the more well-off have more earnings-related benefits and that they are able to use free libraries, education and even health services more than less-well off people do. The better-off do, however, also contribute more to the costs of the welfare state both through taxes and social security contributions.

This is intended. The result is a considerable redistribution of income on the one hand and enhanced social cohesion on the other, with the vast majority of the population sharing common experiences in maternity wards, day-care centres, schools, health centres and other social amenities. Much effort has been directed towards preventing the emergence of a marginalised underclass through both social and physical investment. Social housing and city planning policies, for example, have consciously tried to avoid creating socially segregated neighbourhoods.

Thus, contrary to what Giddens says, social democracy of at least the Nordic kind is not about class politics of the old left, but about overcoming and eliminating old class distinctions and contradictions. Needless to say this is not a product of authoritarian policies – they would never have been successful – but of democratic multiparty politics in a pluralist and liberal society.

The Nordic welfare regimes are of course high tax regimes with a high degree of state intervention. But to call this corporatism of the kind where the state necessarily dominates over civil society, as Giddens portrays it, is misleading. A central feature of the Nordic welfare model is that it involves both civil society and local government with a high degree of real autonomy in the actual running of welfare services.

In fact most social democrats would today rather use the concept ‘welfare society’ in lieu of ‘welfare state’. This particular example of newspeak should not be interpreted as an indication of surrendering the state’s responsibility for the overall provision of welfare services and social security. Couldn't we rather say that these do not necessarily have to be produced by the state itself.

Nor is it easy to comprehend what is meant by "a new mixed economy" as opposed to the old one in the Nordic context, where battles over public ownership as such have never had the central position as they used to have in Britain.

A good example is the Finnish system of pensions which rather uniquely combines elements of both a basic minimum income guarantee and earnings-related general pensions as well as private sector provision of universal and mandatory pensions through legislation. The state pensions institute provides a tax-financed minimum pension for everyone, topped by earnings-related pensions which after thirty years of work-history come up to 60 % of former wage levels. There is no fixed ceiling to what a pension can reach, but neither is there a market for private pension schemes.

Earnings-related pensions are founded and financed by contributions from both employees and employers. Each employer can choose the private insurance company which provides the pension coverage, but the investment policies of companies are regulated and the pensions system as a whole is liable to cover the pensions that a mismanaged company could endanger.

After recent adjustments to the contributions to and benefits from the system it should be financially sound even taking into account the continuing increase of the proportion of pensioners in the population. The viability of the pensions system – as of any social security in any country – could, of course, be endangered by a new recession and/or less-than-expected growth rates. This growth dependency, however, is a challenge common to all welfare regimes in all the OECD countries to which not even Blairism has been able to provide an answer in its rhetoric, much less practice.

One could, I presume, call the Finnish pensions system an example of the Third Way. Other examples of comparable welfare state management could be taken from other European countries, such as the workforce schemes in Sweden to which Giddens himself has referred to.

I am not claiming that everything is fine with the Nordic welfare states. On the contrary there are grave problems of which the most pressing are those connected with the high costs of the welfare regimes. The problems were evident already well before the end of the full employment most Nordic countries were able to enjoy for years. But the problems became acute when unemployment in Finland, for example, shot up from practically zero to 18 % as social costs skyrocketed with the social safety nets functioning precisely as they were intended while taxable incomes fell.

While the welfare state cannot be blamed for the economic crisis it is evident the resulting public sector deficit cannot be balanced with tax increases. On the contrary there is a need for cutting income taxes at least for low-income groups and even for a slight reduction of the tax rate as a whole.

Not all of this can be achieved through growth and better employment. Cuts in social expenditure – which have primarily affected income-transfers, not services – are also necessary. The Nordic social-democrats have not, as haven't most centrist parties, either, resorted to trimming down social expenditure through any desire to dismantle the welfare state. Attacks against the welfare state have no significant political or public support despite prominent academic and media support for neo-liberal measures. Not even the prospect of massive tax reductions, which dismantlers of the welfare state dangle before people has succeed in mobilising opinion behind the neo-liberal agenda, except for some of the very rich.

What is therefore now being done in the Nordic countries aims at making the welfare state economically and socially sustainable. That it also aims at making it capable of acting as a trampoline to help the unemployed return to work may be an example of using new terminology but this is not either. The original idea behind Nordic welfare policies has been specifically to activate those who would otherwise be marginalised and incapable of participating fully as producers and consumers and as citizens in our societies.

Although unemployment in Finland is now coming down at an encouraging rate it remains much too high at 13 %. It begs the question whether generous unemployment benefits, labour market rigidity and/or too equal a distribution of income are to blame for persistent unemployment as neo-liberals claim. In fact, adjustments have been and will continue to be carried out to correct excesses in all respects discussed above and they can be expected to contribute to ameliorating the employment situation, but they do not aim at fundamentally changing the character of the Nordic regimes.

This reflects an important characteristic of social democracy, namely its readiness to implement reforms on a pragmatic basis with the aim of finding solutions that work, without being slave to either old dogmas or new fashions. This may sound too good to be true, but as an approach to social challenges it is at least as valuable and, in the European context, surely more workable than the search for an ephemeral Third Way.

The Third Way as expounded by New Labour spokesmen implies that the left must reform its policies because they have failed. This is something most European social democrats would not agree with. Reforms and new thinking are certainly needed, not because of social democratic failure but because the life-time full employment conditions of Fordist mass production and consumption and of Keynesianism-in-one-country on which the Nordic model was originally built do not exist any more.

Blairism deserves the benefit of the doubt. But until it has more solid achievements to its credit it would do well to contain the high-power marketing of its ambition to be a beacon to Europe which risks overstepping the fine line between the high-minded and the ridiculous.

Nevertheless there is one example of Blairism which has been and will continue to be a beacon for continental social-democrats: namely the Blairism of George Orwell whose appeal for fundamental decency in human relations and rejection of all forms of totalitarianism will always be valid guidelines for us all.

 

Erkki Tuomioja, MP, is the Chair of the Finnish Social Democratic Party Parliamentary Group. This was one of the keynote speeches at the seminar Blairism - a Beacon for Europe? held at the Finnish Institute in London on 29 May 1998.

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