The Primacy of Politics Social Democracy and the Making of Europe’s Twentieth Century Political history in the advanced industrial world has indeed ended, argues this pioneering study, but the winner has been social democracy – an ide- ology and political movement that has been as influential as it has been misunderstood. Sheri Berman looks at the history of social democracy from its origins in the late nineteenth century to today and shows how it beat out competitors such as classical liberalism, orthodox Marxism, and its cousins, fascism and National Socialism, by solving the central chal- lenge of modern politics: reconciling the competing needs of capitalism and democracy. Bursting onto the scene in the interwar years, the social democratic model spread across Europe after the Second World War and formed the basis of the postwar settlement commonly but misleadingly labeled “embedded liberalism.” This is a study of European social democ- racy that rewrites the intellectual and political history of the modern era while putting contemporary debates about globalization in their proper intellectual and historical context. Sheri Berman is an associate professor of political science at Barnard College, Columbia University. She was previously an assistant professor of politics at Princeton University. Berman is the author of The Social Demo- cratic Moment (1987). She has written articles for top political science journals including Perspectives on Politics, World Politics, and Compara- tive Politics, as well as publications such as Foreign Affairs, Dissent, and World Policy Journal. The Primacy of Politics Social Democracy and the Making of Europe’s Twentieth Century SHERI BERMAN Barnard College, Columbia University Cambridge, New York, Melbourne, Madrid, Cape Town, Singapore, São Paulo Cambridge University Press The Edinburgh Building, Cambridge ,UK Published in the United States of America by Cambridge University Press, New York www.cambridge.org Information on this title: www.cambridge.org/9780521817998 © Sheri Berman 2006 This publication is in copyright. Subject to statutory exception and to the provision of relevant collective licensing agreements, no reproduction of any part may take place without the written permission of Cambridge University Press. 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For those who understood the problem and came up with the answer Contents Acknowledgments page ix 1 Introduction 1 2 The Background and the Foundations 20 3 Democratic Revisionism Comes of Age 47 4 Revolutionary Revisionism and the Merging of Nationalism and Socialism 66 5 From Revisionism to Social Democracy 96 6 The Rise of Fascism and National Socialism 125 7 The Swedish Exception 152 8 The Postwar Era 177 9 Conclusion 200 Index 219 vii Acknowledgments This book has been a long time in the making and I owe many debts to many people who made getting through this ordeal easier. First, I want to thank those who provided comments on all or part of the manuscript or who helped move the book along in other ways: Mark Blyth, Consuelo Cruz, Peter Hall, Harold James, Kate McNamara, Bo Rothstein, Anna Seleny, Kathryn Stoner- Weiss, Michael Walzer, and editors at Dissent, the editors of Social Philosophy &Policy, and the anonymous reviewers at Cambridge University Press. Parts of the argument from this book were also presented to audiences at George- town University, Harvard University, McGill University, Princeton University, the Remarque Institute and the Center for European Studies at New York University (NYU), the University of Chicago, and the University of Toronto. I want to thank all those who came to those talks and asked hard-hitting and insightful questions. They pushed me to think more clearly about what precisely I was trying to say and do with this book. Second, I want to thank the many people who helped me prepare the book for publication: Lew Bateman and Andy Saff at Cambridge University Press and, more generally, Johannes Beber Bernd Hilmar, Dan Kurtz-Phelan, Arissa Sidoti, and especially Gideon Rose, whose editing is as slow as it is miraculous. Third, I want to thank those orga- nizations that provided the funding and other support that helped make this book possible: Goteborg¨ University, the Institute for Advanced Study, Princeton University, and the Remarque Institute and the Institute for European Studies at NYU. And in the non-academic realm, I want to thank my family – Gideon, Isaac, Lucy, and the cats – for putting up with the obsessions and endless argu- ments. Finally, although I can’t really thank him, I would like to acknowledge my debt to Karl Polanyi. It was his The Great Transformation that got me thinking about this book’s issues many years ago. ix 1 Introduction For the first half of the twentieth century, Europe was the most turbulent region on earth, convulsed by war, economic crisis, and social and political conflict. For the second half of the century, it was among the most placid, a study in harmony and prosperity. What changed? Two narratives commonly emerge in answer to this question. The first focuses on the struggle between democracy and its alternatives, pitting lib- eralism against fascism, national socialism, and Marxist-Leninism. The second focuses on the competition between capitalism and its alternatives, pitting lib- erals against socialists and communists. In both cases, liberalism triumphed. Democratic capitalism proved the best form – indeed, the “natural” form – of societal organization, and once Western Europe fully embraced it, all was well. This account obviously contains some truth: The century did witness a strug- gle between democracy and its enemies and the market and its alternatives. But it is only a partial truth, because it overlooks a crucial point: Democracy and capitalism had been historically at odds. Indeed, this was one point on which classical liberals and traditional Marxists agreed. From J. S. Mill to Alexis de Tocqueville to Friedrich Hayek, liberals have lived in constant fear of the “egalitarian threats of mass society and democratic . politics, which, in their view, would lead, by necessity, to tyranny and ‘class legislation’ by the prop- ertyless as well as uneducated majority.” Karl Marx, meanwhile, expressed skepticism about whether the bourgeoisie would actually allow democracy to function (and workers to take power), but felt that if they did, democracy might contribute to bringing about an end to capitalism–apotential, of course, that he, unlike his liberal counterparts, welcomed.1 The story of the twentieth cen- tury, and the reason that its second half was so different from its first, is thus to a large degree the story of how capitalism and democracy were rendered 1 Clas Offe, “Competitive Party Democracy and the Keynesian Welfare State: Factors of Stability and Disorganization,” Policy Sciences, 15, 1983, 225–6. 1 2 The Primacy of Politics compatible, so much so that we now see them as inextricably linked and as the necessary and sufficient preconditions for social stability and progress. In practice, this rendering entailed a dramatic revision of the relationship that existed among states, markets, and society up through the early twentieth century; it meant creating a capitalism tempered and limited by political power and often made subservient to the needs of society rather than the other way around. This was as far a cry from what liberals had long advocated (namely, as free a rein for markets and individual liberty as possible) as it was from what Marxists and communists wanted (namely, an end to capitalism). The ideology that triumphed in the twentieth century was not liberalism, as the “End of History” story argues; it was social democracy. This book tells its story. Capitalism Before delving into this story, it is worth stepping back a bit to remind our- selves of how contested the relationship among states, markets, and society has been since the onset of capitalism. Most people today take capitalism so much for granted that they fail to appreciate what a recent and revolutionary phenomenon it is. Although trade and commerce have always been features of human societies, only in the eighteenth century did economies in which markets were the primary force in the production and distribution of goods begin to emerge. As these markets spread, they transformed not only economic relation- ships but social and political ones as well. In pre-capitalist societies, markets were embedded in broader social relation- ships and subordinated to politics. Thus, the institutions, norms, and prefer- ences of traditional communities governed markets’ reach and operation. From the most traditional societies up through Europe’s mercantalist age, decisions about the production and distribution of goods were made not by markets but by those with social and political power. Although markets existed, they were strictly constrained and regulated: [N]ever before [modern capitalist] time were markets more than accessories of economic life. As a rule, the economic system was absorbed in the social system.... and [w]here markets were most highly developed, as under the mercantile system, they throve under