Time for Another Reinvention Time for Another Reinvention Socialist parties emerged as dynamic, powerful forces at the turn of the twentieth century. After decades of decline, can they revive themselves in the twenty-first? Former Greek Finance Minister Yanis Varoufakis speaks at the Brookings Institution. (Steve Purcell / Flickr)

Leftism Reinvented: Western Parties from Socialism to Neoliberalism

by Stephanie L. Mudge

Harvard University Press, 2018, 524 pp.

To understand the obstacles facing the left today, we can start with Yanis Varoufakis’s ill-starred turn as Greece’s Finance Minister. Varoufakis came to office with one overriding ambition: to free Greece from the austerity regime imposed by the European Community and the International Monetary Fund. His argument was straightforward. Greece needed substantial relief from a debt burden that could not possibly be repaid, and austerity made a return to economic growth impossible.

Varoufakis used traditional Keynesian arguments to offer his European interlocutors a win-win solution that would make possible renewed growth in Greece and eventual repayment of Greece’s pared-down foreign debt. Europe’s leaders would have none of it. Even social democratic ministers turned away, praising him for his cleverness, then joining with their more conservative counterparts to force neoliberal solutions on Greece. How did Keynesianism become utopian? How did social democrats learn to speak the language of neoliberalism? How, in short, did we get here?

These are the questions that Stephanie Mudge (a colleague of mine at U.C. Davis) seeks to answer in her challenging new book, Leftism Reinvented: Western Parties from Socialism to Neoliberalism. Mudge transverses more than a century of European socialism to offer a persuasive and powerful explanation for the rise of what she terms “neoliberalized leftism” in both Europe and the United States. Along the way, she lays down a series of markers for other academics. First, she is working to revive serious analyses of political parties, treating them not simply as puppets in the hands of activists and donors but as sites where experts and intellectuals build coalitions that shape policy outcomes. It is imperative to look at who has been recruited by these parties to write the party platforms and formulate their economic programs. Second, she is trying to build a bridge between the social sciences and history by making individual biographies central to her narrative. She is here reacting against the bias towards structural analysis in sociology and political science, where all too often a focus on institutions renders individual people invisible.

The result is the kind of big book that has become increasingly rare in these times of tightly focused academic monographs. Drawing from history, sociology, political science, and political economy, Mudge has produced an account that transforms our understanding of how European and American left parties changed over the twentieth century and raises important questions about how the left must reinvent itself in the twenty-first.

Mudge splits her analysis into three distinct historical epochs. The first period (1880s–1920s) covers the emergence of socialist leftism in Europe, where the German Social Democratic Party played the dominant role. This section leaves out the United States, whose Socialist Party was electorally marginal. In this first period, the major European socialist theoreticians rose through party ranks as journalists and agitators. They typically had no formal economics training and only marginal links with academic economists. But their writing and speeches played a critical role in winning the support of many working-class voters for socialism. When their parties eventually led governments, these men followed orthodox economic prescriptions, calling for balanced budgets and adherence to the gold standard.

This was most consequential in the case of Rudolf Hilferding, the leading theorist for Germany’s Social Democratic Party. In 1932, Hilferding used his leadership position in the party to block a proposal for large-scale public spending that could have reversed Germany’s rapidly rising rate of unemployment—and potentially averted Hitler’s rise.

In Mudge’s second period (1930s–1960s) leftist parties—now including the Democrats in the United States—embraced John Maynard Keynes’s key prescription of increased government spending to counter economic downturns. This turn began in Sweden when Ernst Wigforss, a PhD linguist with close connections to the so-called Stockholm School of economics, led the Social Democrats to embrace deficit financing and a significant expansion of the public sector. Wigforss set the pattern for this period. Left parties across Europe and the United States recruited professional economists to succeed the earlier social theorists such as Hilferding. They were the ones who formulated the parties’ promises to voters and made the critical decisions about economic policy when their party was in power. But their rhetoric differed greatly from that of their socialist predecessors. Economic growth and full employment, not socialist transformation, became the new ideal.

Mudge’s final period begins with a change in the economics profession during the 1970s. Milton Friedman and his followers successfully challenged the dominance and scientific status of Keynesian economics, shifting the mainstream of the discipline to a much more favorable view of markets. Whereas Keynesian economists had sought to manage national economies to achieve optimal economic outcomes, their successors—Mudge calls them Transnational Financial Economists (TFEs)—saw their role as instructing politicians on the importance of allowing markets to regulate themselves. Socialist politicians had by now become completely dependent on professional economists to formulate their economic platforms, and they continued to heed the advice of the discipline even as it moved rightward—even when the recommendations would prove disastrous for the working-class voters who had been the party’s loyal supporters. This was the era of the “third way,” and though the intra-party fights over strategy were ferocious, it was the self-described party modernizers who emerged triumphant.

There are, of course, multiple grounds for challenging Mudge’s account, especially in the U.S. case, where campaign financing looms so large in shaping electoral outcomes. The decline of unions increased the Democrats’ dependence on rich donors, and Bill Clinton’s alliance with the Wall Street–friendly Democratic Leadership Council was the logical outcome of that dependence. During Clinton’s presidency, the most influential economic advisor pushing the administration toward neoliberalism was not the academic Larry Summers but Robert Rubin, former chairman of Goldman Sachs.

Yet Mudge’s argument focuses our attention on the critical question of what kind of economic program these parties could offer voters. Ever since Francois Mitterrand’s socialist government was forced by capital flight and speculative assaults on France’s currency to retreat from its ambitious expansionary policies in 1983, it has been obvious that Keynesian remedies alone are insufficient in an era of economic globalization. Opponents of the neoliberal turn had great difficulty formulating a realistic policy that could deliver the goods for voters, putting them at a continual disadvantage in their battles against the Clintons, the Blairs, and the Schröders.

Mudge’s argument allows us to see more clearly the problems confronting today’s efforts to bring these parties back to the left. We have seen from the electoral successes of Bernie Sanders and Jeremy Corbyn that denunciations of the free market and rising economic inequality now have considerable resonance. But these calls for a fairer distribution of economic rewards still lack what Keynesians had in the 1930s through the 1960s: a compelling strategy for expanding economic output. To make matters worse, they now face the additional burden of producing growth while also assuring environmental sustainability. The history of the period between the World Wars shows that pursuing income redistribution during periods of economic constraint encounters fierce resistance.

Then there is the question of who would serve as party theorists in the newly invigorated left parties. Mudge does not offer any explicit guidance on this issue, but she hints at one answer: a new version of the socialist theoreticians who helped create these left parties over a century ago. Such individuals don’t have to be autodidacts. They might even have advanced degrees. But they need experience with electoral campaigns that connect them to the people they are seeking to represent, force them to test their ideas in front of popular audiences, and build connections with large networks of activists.

These activist intellectuals also have to be engaged in an ongoing dialogue with left academics—including economic thinkers from outside the economic mainstream—who can assist in developing and legitimating alternative social and economic policies. Here, again, Varoufakis serves as a negative case. He was virtually alone among Greek academics in formulating his positions and often had to depend on foreign experts for assistance.

Most critically, these new socialist theoreticians cannot rest content with ideas from the nineteenth or twentieth centuries. They need a socialist theory that analyzes gender and racial oppression along with class inequality and recognizes the necessity of meeting global environmental challenges. Above all, they need a theory that combines a deep commitment to democratizing all spheres of social life with a pragmatic strategy for working within existing and very flawed institutional structures.

These new cohorts of socialist theoreticians must also have the credibility to displace the legions of spin doctors and established political advisers who continue to wield disproportionate influence in these center-left parties. Think of the role that Rahm Emmanuel played in reinforcing Obama’s inappropriate political caution in the early months of his first term when he faced an unfolding global economic crisis, or the small army of consultants who guided Hillary Clinton’s disastrous 2016 campaign.

Just cataloging these multiple requirements suggests that in the U.S. we are still some years away from having the people, the networks, and the ideas needed for this third reinvention. But at the rate that the world is now spinning towards authoritarianism, war, and environmental disaster, time could well run out before this next reinvention is ready. The old slogan—socialism or barbarism—is once again an apt description of our times.

Fred Block’s new book is Capitalism: The Future of an Illusion (University of California Press).