Social-democracy had its apogee in the period 1945 to the late 1960s. At that time, it represented an ideology and a movement that stood for the use of state resources to ensure some redistribution to the majority of the population in various concrete ways: expansion of educational and health facilities; guarantees of lifelong income levels by programs to support the needs of the non-"wage-employed" groups, particularly children and seniors; and programs to minimize unemployment. Social-democracy promised an ever-better future for future generations, a sort of permanent rising level of national and family incomes. This was called the welfare state. It was an ideology that reflected the view that capitalism could be "reformed" and acquire a more human face.
The Social-Democrats were most powerful in western Europe, Great Britain, Australia and New Zealand, Canada, and the United States (where they were called New Deal Democrats) – in short, in the wealthy countries of the world-system, those that constituted what might be called the pan-European world. They were so successful that their right-of-center opponents also endorsed the concept of the welfare state, trying merely to reduce its costs and extent. In the rest of the world, the states tried to jump onto this bandwagon by projects of national "development."
Social-democracy was a highly successful program during this period. It was sustained by two realities of the times: the incredible expansion of the world-economy, which created the resources that made the redistribution possible; and United States hegemony in the world-system, which ensured the relative stability of the world-system, and especially the absence of serious violence within this wealthy zone.
This rosy picture did not last. The two realities came to an end. The world-economy stopped expanding and entered into a long stagnation, in which we are still living; and the United States began its long, if slow, decline as a hegemonic power. Both new realities have accelerated considerably in the twenty-first century.
The new era beginning in the 1970s saw the end of the world centrist consensus on the virtues of the welfare state and state-managed "development." It was replaced by a new, more rightwing ideology, called variously neo-liberalism or the Washington Consensus, which preached the merits of reliance on markets rather than on governments. This program was said to be based on a supposedly new reality of "globalization" to which "there was no alternative."
Implementing neo-liberal programs seemed to maintain rising levels of "growth" on stock markets but at the same time led to rising worldwide levels of indebtedness, unemployment, and lower real income levels for the vast majority of the world's populations. Nonetheless, the parties that had been the mainstays of the left-of-center social-democratic programs moved steadily to the right, eschewing or playing down support for the welfare state and accepting that the role of reformist governments had to be reduced considerably.
While the negative effects on the majority of the populations were felt even within the wealthy pan-European world, they were felt even more acutely in the rest of the world. What were their governments to do? They began to take advantage of the relative economic and geopolitical decline of the United States (and more widely of the pan-European world) by focusing on their own national "development." They used the power of their state apparatuses and their overall lower costs of production to become "emerging" nations. The more "left" their verbiage and even their political commitment, the more they were determined to "develop."
Will this work for them as it had once worked for the pan-European world in the post-1945 period? It is far from obvious that it can, despite the remarkable "growth" rates of some of these countries – particularly, the so-called BRICs (Brazil, Russia, India, China) – in the last five to ten years. For there are some serious differences between the current state of the world-system and that of the immediate post-1945 period.
One, the real cost levels of production, despite neoliberal efforts to reduce them, are in fact now considerably higher than they were in the post-1945 period, and threaten the real possibilities of capital accumulation. This makes capitalism as a system less attractive to capitalists, the most perceptive of whom are searching for alternative ways to secure their privileges.
Two, the ability of the emerging nations to increase in the short run their acquisition of wealth has put a great strain on the availability of resources to provide their needs. It therefore has created an ever-growing race for land acquisition, water, food, and energy resources, which is not only leading to fierce struggles but is in turn also reducing the worldwide ability of capitalists to accumulate capital.
Three, the enormous expansion of capitalist production has created at last a serious strain on the world's ecology, such that the world has entered into a climate crisis, whose consequences threaten the quality of life throughout the world. It has also fostered a movement for reconsidering fundamentally the virtues of "growth" and "development" as economic objectives. This growing demand for a different "civilizational" perspective is what is being called in Latin America the movement for "buen vivir" (a liveable world).
Four, the demands of subordinate groups for a real degree of participation in the decision-making processes of the world has come to be directed not only at "capitalists" but also at the "left" governments that are promoting national "development."
Fifth, the combination of all these factors, plus the visible decline of the erstwhile hegemonic power, has created a climate of constant and radical fluctuations in both the world-economy and the geopolitical situation, which has had the result of paralyzing both the world's entrepreneurs and the world's governments. The degree of uncertainty – not only long-term but also the very short-term – has escalated markedly, and with it the real level of violence.
The social-democratic solution has become an illusion. The question is what will replace it for the vast majority of the world's populations.