Social democracy for the 21st century
The AI revolution, climate change and the social care crisis demand an active state
Today on Arguably, I explain why social democracy still offers answers in an age of crisis. This piece is free but become a paid subscriber now to ensure you receive all of our essays, columns and interviews.
A Swedish Social Democratic Party conference (Jeppe Gustafsson/Shutterstock)
Seventy years ago, in The Future of Socialism, Tony Crosland struck a note of unashamed optimism: “If our present rate of economic growth continues, material want and poverty and deprivation of essential goods will gradually cease to be a problem,” he wrote.
Today, the postwar abundance that Crosland invoked is a distant dream. The situation is more reminiscent of the malaise described in his later collection Socialism Now (1974): “Slow growth has already exacted a heavy toll. Working-class living standards are lower than they should be. Public expenditure is continually subject to painful crisis cuts. There is never enough money for all sorts of excellent purposes”.
Faced with the UK’s slow-burning crisis, a battle of ideas of the kind that Labour has long needed – and that we called for in Arguably’s founding essay – has finally begun. But the dangers are already clear. From the right, Tony Blair’s essay has been celebrated for its withering critique of the government’s economic policy; from the left, Blair has been assailed for not referencing inequality. The risk is that we become trapped in a false binary of the kind that has plagued this country over the last decade: are you for growth or for equality?
Let’s clear away some of the misconceptions that typify this debate. First, economic growth is still the best way to raise living standards. It’s often stated that ordinary people don’t benefit when GDP rises, but the data is clear: unlike in the US, average earnings in the UK have not decoupled from growth (here’s an unfashionable stat: after post-crash stagnation, real wages have actually risen for the last three years). Out of desperation, the government has flirted with short-term gimmicks such as food price caps, but the real answer is to double-down on long-term, pro-growth reform: removing the planning restrictions that thwart housebuilding and projects such as HS2, rebuilding our relationship with Europe, accelerating AI adoption and raising public and private investment to boost productivity. A media that routinely asks politicians why prices have risen – as if Japanese-style deflation would be desirable – has a part to play here too.
But, second, none of this means ignoring inequality. It’s true, as has been widely noted, that income inequality has been relatively stable since the early 1990s, but this still means we are living with the Thatcher-era surge and its social consequences. And inequality takes multiple forms: the gap between London and the South East and the rest of the UK is now wider than that between East and West Germany and North and South Italy, not least due to disparities in transport investment (as Andy Burnham has long complained). Then there is the rise of what Eliza Filby calls the “inheritocracy”, with divides in home ownership widened by those able to turn to the “bank of mum and dad” as others remain stranded in the rental sector. So, yes, we must go for growth, but also remain alert to the inequalities that thwart opportunity and help fuel populism (Reform and the Greens both perform best among financially insecure voters).
The combination of a dynamic economy and a good society is what allowed western Europe to achieve the highest living standards the world has known. But this social democratic tradition finds itself derided from all sides, even dismissed as a historic anomaly for which the political and economic conditions no longer exist. Yet look at some of the challenges that will define this century – the AI revolution, climate change and the social care crisis – and the best answers are centre-left ones.
Blair is right to speak of the extraordinary power of AI, capturing both its economic potential and its dangers. Anthropic restricted the release of its Claude Mythos model on the grounds that it could exploit thousands of “zero-day”vulnerabilities in every major operating system and web browser.
“We should be thinking about regulating AI the way you regulate cars and aeroplanes,” Dario Amodei, the company’s CEO, recently told the Financial Times. “Everyone realises they have enormous economic value, but they need to be built carefully. If they aren’t built right, they can kill you.” In other words, this is a paradigmatic example of the case for interventionist government.
Elsewhere, in his essay “The Adolescence of Technology”, Amodei warned that 50 per cent of all entry-level white-collar jobs will be disrupted within five years. Whether or not you believe this projection, one thing is clear: the future will demand an active state that helps shape technology for the common good. That’s why now is the time for Britain to emulate Denmark’s “flexicurity” model, which combines loose hiring and firing laws with generous unemployment insurance and an active retraining policy (Denmark spends 1.2 per cent of GDP on labour market policies, compared to just 0.3 per cent in the UK). Such an approach would also help address the scandal of nearly one million NEETs, failed by an overly passive state.
Next turn to net zero. The question of whether or not to approve new North Sea oil and gas exploration has generated much heat – David Lawrence made the progressive case for Arguably here – but it does little to change the fundamentals. We are in the middle of a great transition away from fossil fuels and towards renewables that will eventually pay off – the cost of solar power has fallen by 90 per cent in the last decade alone – but that imposes painful interim costs. Consumers and firms can’t bear too much of the burden, so the state must intervene. A vital new Centre for British Progress report proposes moving electricity levies into general taxation, cutting household bills by £115 per year and reducing costs by 7 per cent for businesses (alongside wider reforms to a “flabby electricity system” that has been “enriched by subsidy and rent-seeking”).
Finally, take the social care crisis, perhaps the best example of the British state’s unfinished business. Here we have a broken model that bankrupts councils, burdens the NHS and leaves one-in-seven people facing catastrophic costs of more than £100,000. But there is an alternative: as Dan Mead has argued, we should nationalise the funding (but not delivery) of social care, introducing a new contribution levy while replacing council tax with a proportional property tax that would leave most paying less. Once again, this is a natural mission for the centre left: establishing a new model of collective insurance against the hazards of old age and bad luck.
Grappling with these challenges means getting serious about the trade-offs that the current government has too often ducked. And it means that any political project guided by the dogmatic goal of shrinking the state and cutting taxes at all costs will not deliver. Instead, by pooling our resources, we can grasp the economic opportunities of this age and shield ourselves from the risks. Social democrats don’t have to succumb to nostalgia or fatalism – the 21st century is still theirs to shape.