Introduction

It is an irony of contemporary European politics that the essentials of a neoliberal project - the subordination of society to market discipline - is being consolidated by social democratic governments (eg. Crouch 1997). This articulation of social democracy with economic liberalism, pursued in a political project referred to as the 'Third Way', sets high demands on ideology in the Gramscian sense, understood as a multi-levelled phenomenon that contains and fuses a wide range of more or less coherent discursive forms from 'common sense' to 'philosophy' (Gramsci 1971: 326-43, 348-51, 367; Hall, Lumley & McLennan 1977: 46-52; Mouffe 1979: 185-88, 190-92, 195-98; Simon 1982: 58-66).[i]

Ideology in this sense is a material practise, with the function to 'cement' (or better, interpellate) multifarious, stratified and antagonistic segments of society into a broad political direction. Politicians and mass-parties play a strategic role in this practice as 'organic intellectuals' as it is they who take on the task to ensure this coherence. In this practice they deploy a number of discursive techniques at different levels of communication and action in civil and political society. These discursive techniques, ranging from 'spin-doctoring' in the tabloid media, to internal party work, to policy-formulation, assume different forms depending on what specific context of civil and political society they are directed. In terms of content, provided that it is possible to achieve operational coherence at the policy-level, heterogeneity in 'the message' and even factionalism is not necessarily a weakness, but rather a strength, since this increases the range of interests and identities that can be integrated into the political project. In other words, the successful mass-party elaborates and mediates different and heterogeneous interpretations of 'common sense', with a coherent and operational political strategy within the state (and other public authority agencies) that also are consistent with socio-economic developments. As Häusler and Hirsch (1989: 306) put it in their study of 'catch-all' parties in Germany:

The party system represents the component of the regulative network of institutions within which antagonistic and pluralistic attitudes are produced, articulated, adjusted, formed and connected in such a way that relatively coherent state action, safeguarding the reproduction of the system as a whole, is rendered possible and legitimate…The parties' regulative capacities are due to large degree to their internal structure: they hardly ever constitute hierarchically and rigidly organised, closed, homogenous and single-purpose oriented apparatuses, but rather decentralised, heterogeneous, organisational networks, relatively open to their environment. Parties represent complexes of a multitude of 'vertically'(internal factions and groups) and 'horizontally' (regional and local subdivisions) divergent separate organisations. Their heterogeneous internal structures enable parties to entertain 'pluralistic' relations within an intricate and contradictory institutional 'environment' ['civil society']…Parties remain open to the state apparatus whose personnel they actually or potentially recruit, as well as towards a diverse societal environment. [This heterogeneity] represents a decisive precondition for its regulative function of articulating and processing antagonistic interests and norms.

But, as they continue:

Simultaneously, however, this structure produces a permanent contradiction that has to be dealt with internally between the incorporated plurality of interests on the one side and programmatic and political unity and administrative capacity to act on the other.

It is with reference to this last point that also social scientists and philosophers under certain conditions may play a crucial role, alongside 'spin-doctoring' and piecemeal, 'technocratic', 'nuts and bolts' policy formulation. Philosophers and social scientists may provide ideological discourse with a special logical coherence, direction, and authority, by drawing on ‘scientific’ and philosophically grounded arguments. Hence, the capacity of politicians to address the 'permanent contradiction between the incorporated plurality of interests on the one side and the programmatic and political unity and administrative capacity to act on the other' might be enhanced. The economic corps has played a crucial role for neo-liberalism in this context. However, after the end of the ‘euphoric’ (Thatcherite) phase of neo-liberalism, it seems that this economistic discourse has not proved to be adequate for social legitimation (see Bieling 2001).

It is interesting to note therefore that the cosmopolitan intellectual[ii] of the Third Way per excellence is a sociologist, whose past lies in the milieu of the ‘New Left’, and who seeks to fuse neo-liberal economics with more ‘social’ and communitarian sentiments. I am referring to Tony Blair’s ‘allegedly favourite intellectual’, the Director of London School of Economics, Anthony Giddens. His The Third Way: The Renewal of Social Democracy (1998) has the stated aim to be an ideological treatise for a ‘modernised’ social democracy. There can be little doubt of his success. There is ample evidence that the aforementioned endorsement of the British Prime Minister is more than self-promotion on the back of the jacket of a book, and that he plays a leading role as such for 'New Labour' in Britain (Hall 1998; Rose 1999 cf. Straw 1998). Furthermore, the fact that social democratic neo-liberalisation does vary on specifics within a certain range in different European political societies (just as the formulation of the 'third way' message varies to different referent-groups within a country) does not prevent Giddens' treatise to serve a 'cosmopolitan' philosophic-ideological function for other social democratic parties outside Britain. Indeed, Wolfgang Merkel (2000) gives a detailed account of the variations of social democratic neo-liberalisation in different European countries, including the more corporatist Dutch 'Polder Model' and the politics of retrenchment in Sweden in the 1990s. But he also shows that Giddens 'Third Way' is a common source of intellectual reference and justification. Merkel's benevolent review of the 'Third Way' is itself an indication of the fascination for Giddens' 'Third Way' in Germany after SPD's electoral victory in 1998 (on this, see Sandner 2000). A more significant indication of this is the joint Blair-Schröder (1999) paper on general policy-principles addressed to 'Europe's social democrats' during the elections to the European Parliament in 1999. Even those who oppose the 'Third Way' are compelled to specifically address Giddens (eg. Petrella 1999; Lafontaine 1999)

In this chapter and the one that follows, I will review and critique the discourse of the ‘Third Way’ exactly on the level where Anthony Giddens seeks to pitch it: as a social-scientific/philosophical justification of a neo-liberalisation of social democracy. This strategy of review and critique has two merits: First, the self-reflexivity and logical coherence of the social-scientific and philosophical discourse allows me to specify exactly in what sense the ‘Third Way’ is neo-liberal, and how it attempts to articulate neo-liberalism with social-democratic principles. Second, a critique pitched at this level becomes a direct antithesis to the academic-intellectual version of the ‘Third Way’ discourse. This, it is hoped, will contribute to an understanding of how an alternative left strategy of social democratic articulation, more in line with the European democratic socialist tradition, might render compatible successful social mobilisation and programmatic policy-unity and capacity.

In the next section of this chapter, I review Giddens theory of the Third Way. In this review, I will in particular pick up on Giddens rejection of de-commodification and social citizenship in the universal welfare state as the basis of a viable social democratic political strategy. This is because the maintenance of these principles are, contrary to Giddens' contention, the very precondition for the democratisation and pluralisation of politics that also Giddens insists are necessary to address legitimation and governability deficits in his call for 'no authority without democracy'.

The remainder of the chapter is organised so as to support this argument. I do so, firstly, through a direct critique of Giddens' position where I point to the inherent contradictions between his principle of 'no authority without democracy' and Giddens other principle of 'no rights without responsibilities' (which is based on an uncritical reading of neo-classical economic critiques of the welfare state). I conclude that Giddens attempt to combine participatory and developmental democracy with neo-liberal economics is implausible.

Finally, in the concluding part of the chapter I introduce the reader to the 'Swedish model', which is generally accepted as the closest approximation of an ideal type social democratic welfare state, based on the principles of universal social citizenship and de-commodification. I do so by invoking the works of Ulf Himmelsrand and his collaborators as well as that of Bo Rothstein and others. On the basis of the results of their research on the Swedish case, I advance a positive and concrete case in favour of the universal social citizenship state and de-commodification. Contra Giddens, I argue that this type of welfare state provides an appropriate institutional form to address the legitimation and governability deficits of the welfare state. As a result of this exercise, only Giddens' critique of the economic-rational aspects of the universal social citizenship state remains unaddressed. Given the importance f the Swedish welfare state for the social democratic ideal type, it is not surprising that the Swedish case is particularly pertinent in this context as well. Indeed, Giddens' economic critique of 'traditional social democracy fundamentally rests on a reference to the 'moral hazard thesis' of the economist Assar Lindbeck as developed in his diagnosis of the crisis of the Swedish economy in the 1990s. I will return to this argument in chapter 2, where I argue that this argument is based on a faulty reading of Swedish politico-economic developments in the 1980s and the 1990s. However, the last section of this chapter will refute the contention that traditional social democracy had no conception of 'supply side' economic rationality by pointing to notion of 'misrationalisation' in social democratic ideological discourse.

The 'Third Way' of Anthony Giddens

Left, Right and the Hegemony of Neo-Liberalism

It should be made clear from the beginning that when it is here suggested that Anthony Giddens contributes to the hegemony of neo-liberalism, it does not imply that his views are identical to Thatcherism/Reaganism. This is worth pointing out, because many recent commentators on the 'Third Way' have sought to refute the idea that the 'Third Way' is neo-liberal. As indeed Merkel (2000: 100-01) points out, contra market-fundamentalists Giddens accepts that there is a need for a social 'safety-net', as trickle-down economics is unlikely to ensure a tolerable level of welfare for the poorest strata of society. Giddens himself is adamant to state that he is not so much interested in dismantling the welfare as he is in reconstructing it (Giddens 1998: 113). Giddens also subscribes to a form of participatory and 'developmental' democracy that would be quite alien to the more 'protective-democratic' ethos of Thatcherism, and is more consistent with the ethos of the libertarian factions of the 'New Left' of the 1960s and the 1970s.[iii] In this context, Giddens is also concerned about the reproduction of morality and ethics in society. Echoing the thinking of Daniel Bell (1976) on the right and Jürgen Habermas (1976) on the left, he doubts that markets are capable of producing the necessary ethical framework for trust and work- discipline that also the market economy requires. Giddens is also taken by Putnam's (cf. 1993) idea that such ethical norms can serve as a 'public good' that in fact enhances the functioning of the economy (social capital) - a point that is lost on neo-classical utilitarians, with their economistic outlook. According to Nicolas Rose (1999: 474-78), it is in this preoccupation with the manufacturing and reproduction of ethics as the legitimate political endeavour of an 'enabling state', flanking the 'community', that we find the novel 'inventiveness' of Third Way politics.

Nevertheless even if it is accepted that Giddens and Third Way discourse differs from Thatcherism and Reaganism, this does not mean that it is not commensurate with neo-liberal hegemony. Hegemonic politics is not primarily about articulating a common vision, but rather about ‘[articulating] different visions of the world in such a way that their potential antagonism is neutralised’ (Laclau 1977: 161). It is exactly this that Giddens does. If successful, the effect of his particular variant of a politics of commodification, and a politics of no alternatives would be to broaden and consolidate the appeal of neo-liberalism. It would consequently include, for example, the established workers in transnational corporations, teachers, social workers, those in the voluntary sector and perhaps intellectuals of the '1968' generation, who have now reached middle age. There would be contestation and difference in such a hegemonic socio-political bloc (what Gramsci calls a 'power bloc'), but there would be an intersubjective agreement about the necessity of subordinating social life to commodity-economic discipline.

In order to get a more concrete sense of how this neoliberal interpolation works, we can refer to Giddens himself, who is quite conscious and deliberate with respect to this in his characterisation of the Third Way as a politics 'beyond' the old 'left and right'. This becomes especially clear in his discussion of the meaning of ‘left’ and ‘right’ as adopted from Norberto Bobbio.

When parties and political ideologies are more or less evenly balanced […] few question the relevance of the distinction between left and right. But in times, when one or the other becomes so strong that it seems ‘the only game in town, both sides have interests in questioning that relevance. The side that is more powerful has an interest, as Margaret Thatcher proclaimed, in declaring ‘there is no alternative'. Since its ethos has become unpopular, the weaker side usually tries to take over some of the views of its opponents and propagate those as its own opinions. The classic strategy of the losing side is to produce a ‘synthesis of opposing positions with the intention in practice of saving whatever can be saved of one's own position by drawing in the opposing position and thus neutralizing it’(cf Bobbio 1996: 16). Each side represents itself as going beyond the old left/right distinction or combining elements of it to create a new and vital orientation, [and thereby a new left-right polarity]. (Giddens 1998: 41, cf Bobbio 1996).

Hence, in The Third Way Giddens proceeds to lay out a ‘new left polar-position’. But this is to be understood as a polarity within the ‘politics of no alternative’ as defined by Thatcher: ‘a synthesis of opposing position, which draws in the opposing position and neutralises it, to save whatever can be saved’. It is exactly in this neutralization, however, that the hegemony of the opposing position is affirmed. It has become 'common sense'.

The Economics of the Third Way

What, then, more specifically is Giddens’ understanding of the ‘politics of no alternative’? And, especially, in what sense can one say that he accepts the politics of a neo-liberal common sense? Giddens argument can be subdivided into the categories of 'economic-rational constraints' and 'legitimation constraints'.

With regards to economic-rational constraints, even according to Merkel, who otherwise goes to some length towards distancing the 'Third Way' from neo-liberalism:

Giddens and New Labour share with neo-liberalism the rejection of statist macroeconomic intervention in the market economy. They also accept the fiscal-conservative policy of budget consolidation, eschew increases in social expenditure and advocate the independence of the European Central Bank (Merkel 2000: 100 my translation).

Giddens himself is actually quite a bit subtler concerning some aspects of a free market system than what this characterisation suggests. Giddens is in fact rightly concerned about the myopic and speculative character of deregulated global financial markets, which he reasonably argues requires framework of public multilateral regulation (Giddens 1998: 147-53). Merkel, however, captures the way that Giddens' thinking is interpreted in political circles, and pronouncements of social-democratic 'modernisers', such as Blair, Schröder, and Bodo Hombach, who have few propensities to question the role of global financial markets as objective and reliable arbitrators of economic rationality (eg. Held 1998: 25 cf. Blair 1998; Blair and Schröder 1999; Hombach 2000: 9-13). Nevertheless, and more fundamentally, Giddens accepts the microeconomic aspects of the neo-liberal economic argument. He considers traditional social democratic social and economic policy to be anachronistic as he maintains that it undermines competitiveness in the modern global economy. This is because the institutions of social protection against market-effects that traditional social democracy has promoted allegedly generate disincentives, sub-optimal economic behaviour, and inefficiencies. Consequently, such protection, reflected in the expansion of public sector expenditure, should be avoided. Hence, Giddens offers a sophisticated rationale for Blair and Schröder's contention that 'public expenditure as a proportion of national income has…reached the limits of acceptability' (Blair & Schröder 1999: 164). Given that British and German public expenditure is much lower than those of Denmark, Norway and Sweden, it should be noted that this implies that these social democratic leaders consider the public expenditure of the Scandinavian social democratic welfare state regimes to be unacceptably high.

The neo-liberal aspects of Giddens’ argument, then, pertain specifically to issues of economic rationality. He states quite plainly that the ‘old style’ social democratic claim that capitalism can be humanised by public intervention has been rendered passé by the ‘death of Marxism’, sealed by the collapse of the East Bloc. Moreover, social democratic theory - also in its Keynesian variant - was, he claims, always inadequate because of its lack of concern for, and conceptualisation of, the ‘supply-side’ aspects of markets, pertaining to innovation and productivity. According to Giddens, both Marx and Keynes took productivity for granted. Traditional social democracy was also inadequate, he continues, due to its underestimation of the importance of markets as informational devises. These inadequacies were revealed in the 1980s, ‘with intensifying processes of globalisation and technological change’(Giddens 1998: 4-5).

Giddens’ economic critique of ‘old style’ style social democracy focuses on the theme of risk and its role in society. The welfare state, as advocated by social democrats, has up until now been based on the minimisation of risk for the individual, based on the idea of social pooling. Individuals have been able to 'unconditionally' claim social entitlements from public programmes in case of, for example, illness, unemployment and old age. While Giddens does not advocate an outright abolition of risk pooling, he does argue that such protection against risk cannot and should not be absolute or 'unconditional'. Welfare policy should not only minimise risk, but also:

harness[..] the positive or energetic side of risk and provide […] resources for risk taking. Active risk taking is recognised as inherent in entrepreneurial activity, but the same applies to the labour force. Deciding to go to work and give up benefits, or taking a job in a particular industry, are risk infused activities - but such risk taking is often beneficial both to the individual and to the wider society (Ibid.: 116).

For Giddens, risk taking is essential, given the imperatives of technological innovation in the competitive globalised economy. With respect to this point, he is particularly critical against 'unconditional' social citizenship entitlement, that traditionally have been advocated by social democrats', and that were institutionalised in the Scandinavian welfare states. It is exactly in this context that Giddens relies on a reference to the work of the Swedish economist Assar Lindbeck on the crisis of the Swedish economy to substantiate his argument. It should be pointed out that this reference is the only reference he offers as evidence. Lindbeck is an influential advocate of neo-liberal reform in Sweden, who played a prominent role in the policy formation of the Conservative-led coalition government headed by Carl Bildt in the early 1990s. [iv] Lindbeck interpreted the crisis of the Swedish economy in the 1990s essentially to be one of moral hazard caused by the Swedish welfare state. According to the moral-hazard thesis, public insurance protection against unemployment and illness makes people alter their behaviour in ways that makes them sub-optimal market actors. This results in higher levels of absenteeism and lower levels of job-search (Ibid.: 114-15, cf. Lindbeck 1995). This is held to undermine economic competitiveness, and by extension, the economic preconditions of the welfare state.

Pluralism, Democracy and the Welfare State

When it comes to legitimation constraints, however, Giddens argument is distinctly not neo-liberal. It is rather reminiscent of the arguments of some neo-Marxists in the 1970s, especially Habermas (1973) and Offe (1985).[v] According to this argument, the neo-conservative ambition to totally dismantle the welfare state fails to recognise that the 'golden epoch' of laissez faire in the 19^th century necessarily presupposed a particular substructure of tradition that now is gone. The patriarchal extended family, and quasi-feudal community was important in this context. These secured important reproductive functions, such as child rearing, health care, age care, and care for the poor. They provided informal networks that ensured that exposure to life-risks did not threaten social order. This particular construction of a communal life-world also ensured the reproduction of ‘self evident’ norms (especially through religion) that provided the necessary motivational inputs for the economy (‘work ethic’) and for the cementing of consent to public authority (‘law and order’). This substructure was undermined by the process of market-driven restructuring itself, and the welfare state has taken over many of these essential functions. There is no going back to this pre-modern society and the welfare state serves necessary reproductive functions that the market itself cannot provide. In this sense the welfare state is ‘irreversible’ (Giddens 1998: 70-77). This is the central premise behind Giddens claim for the need to develop a 'left polar position' within the 'politics of no alternative' as defined by neo-liberalism.

But, according to Giddens, this is not an argument for post-war nostalgia. Following the arguments of the aforementioned neo-Marxists again, Giddens turns the argument of the 'undermining of tradition' against 'traditional' social democracy and the Keynesian welfare state. For example, its conception of full employment presupposed a ‘traditional’ form of family, with a male ‘breadwinner’ and housewife, which no longer is tenable. Furthermore, its bureaucratic, uniform and centralised solutions to social service provision, were of an undemocratic, authoritarian and increasingly anachronistic character. Apart from these aspects of social policy, pertaining mainly to the 'inner' socialisation of human nature, both neo-conservatives and social democrats have been inadequate in their treatment of 'outer-socialisation': the manner in which human activity transforms the ecological 'environment'.

This part of Giddens argument is derived from Ulrich Beck's notion of ‘risk society’. The basic idea behind this notion is that the ecological sphere has been manipulated and transformed ('socialised') by human activity to such an extent that there is no ‘original nature’ to which to return anymore. Hence, humans in modern society have to cope with the question of how they ‘construct’ ecology and how they manage ecological risk. However, the ecological interventions and their human implications are so complex that it is no longer possible to rely on experts and the bureaucratic state to devise a regulatory framework based on unambiguously objective scientific conclusions. Given the nature of 'outer socialisation', there will always be scientific controversies, and probabilities of risk that in the last instance require a subjective evaluation on behalf of society as a whole. Such an evaluation can only can be generated fairly and legitimately through active civic involvement in ecological risk assessment (Ibid.: 59 cf. Beck 1994).

Discussing these developments under the heading ‘individualism’, Giddens argues that the effect of these socialisation processes and transformations have been a ‘proliferation of lifestyles’ requiring more cultural pluralism (Giddens 1998: 34). In addition, the patriarchal family structure, with a stay-at-home housewife has been undermined. There has also emerged a kind of anti-politics, where people abandon their involvement and loyalty to mass-political organizations, like parties and trade unions. This does not mean that people have become egotistical and apathetic. Present generations show a greater sensitivity towards moral concerns than previous generations, ‘but they do not accept traditional modes of authority and legislation of lifestyles’ (Ibid.: 36) associated with the parties and interest group organizations that emerged in the early part of the 20^th century. Rather, they tend to be drawn to single-issue politics (Ibid.: 49-53).

These developments, Giddens continues, pose a threat to social solidarity as organized through present institutions and policies - especially the conditions of the homogenous working class community have been undermined. But at the same time the developments in question suggest that new forms of solidarity are possible, and a politics of the third way should seek to devise the appropriate institutions and policies to foster this. (Ibid. p. 37). For Giddens, as well as the neo-Marxists of the 1970s, the general formula in this context is to democratise political authority structures, including the welfare state, in order to create spaces for human self-fulfilment.

Social cohesion cannot be guaranteed by the top-down action of the state or by appeal to tradition. We have to make our lives in a more active way than was true of previous generations, and we need more actively to accept responsibilities for the consequences of what we do and the lifestyle habits we adopt (Ibid: 37).

Policy-Norms: 'No Authority without Democracy'; 'No Rights without Responsibilities'

The themes of self-fulfilment call for a politics where 'no authority' is granted 'without democracy'. Hence, Giddens advocates devolution, decentralisation, freedom of choice, diversity and pluralism, as well as a limit on scientific and bureaucratic management in the denaturalised world. On the other, considering also his aforementioned analysis of the economic constraints he also calls for a politics of 'no rights without responsibility', as opposed to 'unconditional' social citizenship entitlements: positive welfare intervention by a 'social investment state.

Active labour market policy ([re]-training of the labour force and 'life-long education') are included as measures of 'positive welfare' and 'social investment'. But so are also proactive encouragement of entrepreneurial initiatives. The premise here is that ‘Europe still places too much reliance upon established economic institutions, including the public sector, to produce employment’ (Giddens 1998: 124). Under social investment heading comes also the idea of abolishing statutory pension-ages. Due to the general improvement of health, the elderly should not be forced into retirement, but should be allowed to continue to work. Furthermore, Giddens envisages a more individualist and flexible type of pensions saving. Pensions should be individualised both on the savings and withdrawal side in order to allow people to organise their work in the life cycle according to their individual needs and tastes. This means that welfare states should allow, and rely on, an increased proportion of private pension savings. This type of arrangement, Giddens maintains, would mobilise the old as a resource, and would serve to prevent the fiscal crisis associated with the increase of pensioners today (Ibid.: 118-20).

Concerning flexibility of entry and exit on the labour market, Giddens advocates measures that would allow people to pursue individual strategies to combine work with reproductive functions and life-long learning (through ‘family friendly workplace policies’ such as child-care, telecommuting, work-sabbaticals). (Ibid. 118-26). Furthermore, since Giddens’ belongs to those who doubt that it is possible to return to full employment in the post-war sense, he also envisages ‘active redistribution of work’. But this, for him, should be left to the practices in the private sector, as effective public legislation is unlikely ‘without counterproductive consequences’ (Ibid.: 126-27).[vi] It should also be pointed out that Giddens is not adverse to labour market regulations (‘labour market rigidities like strict employment legislation do not strongly influence unemployment’). But they can only be accepted if they do not encourage moral hazard. More generally, Giddens argues that benefit-systems connected to the labour market 'need to be reformed where they induce moral hazard, and more risk-taking attitude [needs to be] encouraged', because above all, according to Giddens '[h]igh unemployment is linked to generous benefits that run indefinitely' (Ibid.: 122).

At the same time, Giddens insists that ‘adequate’ state-pensions will remain a necessity for the sake of 'social cohesion'. It is unclear, however, what ‘adequate’ might mean when risk-minimisation is replaced with risk-management as the guiding-principle for policy. This is connected to a continued commitment to the view that it is necessary to have programs that are 'universal'. 'Universal' is in this context understood in a very specific and limited sense: Basic entitlement should ensure that those on the bottom of the social income-hierarchy do not become so destitute that they are ‘excluded from the mainstream of society’. At the same time programmes should also provide those in the upper income-brackets with a sufficient utility, to ensure they do not to ‘exit’ public schemes altogether, and lose their (tax) ‘loyalty’ to them. Examples of programs that should be configured for this end are those in the areas of education and health (Ibid.: 107-08). Anti-poverty programs will also continue to be necessary, but they should be designed so as to facilitate ‘community care’ (Ibid.: 110).

It should be emphasised, however, that the most significant measures available for the pre-emption of social exclusion in a ‘society where work remains central to self-esteem’ are labour market policies. And, given the technological revolution on the labour market with its attendant secular trend towards reduced demand for unskilled labour, the solution to this problem must be the aforementioned investments in lifelong learning, and retraining, where the individual takes individual responsibilities in order to assert this right. In other words, benefit-systems connected to the labour market 'need to be reformed where they induce moral hazard, and more risk-taking attitude [needs to be] encouraged' (Ibid.: 122).

Critique

I will not argue against the Beckian conception of risk society, nor Giddens general argument concerning 'no authority without democracy'. The critical-theoretical research by Habermas, Offe and others on the combined legitimation- and rationality- crisis of the Keynesian welfare state convincingly support the essence of such arguments. The problem is rather that this aspect of Giddens argument is irreconcilable with the neo-liberal aspects of his argument - those pertaining to 'no rights without responsibilities'.

Of course, Giddens would deny this. And, indeed, he does have an argument that links his neo-liberal economics with his radical participatory politics. He makes the link through a particular, and problematic, reading of Beck's 'risk society'. This reading allows him to treat the imperative for democratic civic involvement in ecological risk management as equivalent and synonymous with individual for the management of his/her pension, unemployment and health. In this context ecological risk, social risk and economic risk are treated as if they had the same ontological quality: taking responsibility for the environment and one's mutual fund become one and the same.

Providing citizens with security has long been a concern of social democrats. The welfare state has been seen as the vehicle of social security. One of the main lessons to be drawn from ecological questions is that just as much attention needs to be given to risk. The new prominence of risk connects individual autonomy on the one hand with the sweeping influence over scientific and technological change on the other. Risk draws attention to the dangers we face - the most important of which we have created for ourselves - but also to the opportunities that go along with them. Risk is not just a negative phenomenon - something to be avoided or minimised. It is at the same time the energising principle of a society that has broken away from tradition and nature. (Ibid. pp. 62-63)

This connection of financial, social and ecological risk is necessary to hold the neoliberal economics and the radical democratic aspects of Giddens' argument together. But, this extension of Beck’s conception of ecological risk to social and economic risks is a conflation.

From the point of view of political and ideological practice this conflation is ingenious, because it reconciles within the neo-liberal social democratic project, conflicting demands, pertaining on the one hand to economic imperatives, and on the other imperatives of legitimacy, social representation, and civic participation. As a result it justifies on a philosophical-theoretical level a broad alliance of interests that otherwise would not be reconcilable. This parallels the practical politics of 'New Labour' in Britain, and its aim to be all inclusive. Chantal Mouffe (1999) and Stuart Hall refer to this as an attempt to construct a 'politics without enemies', which, however, in fact ignores real and concrete political cleavages and antagonisms in an unequal society. According to Hall New Labour:

'speaks as if there are no longer any conflicting interests which cannot be reconciled. It therefore envisages a "politics without adversaries". This suggests that by some miracle of transcendence the interests represented by, say, the ban on tobacco advertising and 'Formula One', …ethical foreign policy and the sale of arms to Indonesia, media diversity and the concentrated drive-to-global-power of Rupert Murdoch's media empire have been effortlessly "harmonised" on a Higher Plane, above politics (Hall 1998: 10).

As such, Third Way discourse, both in its New Labour variant and in Giddens' discussion of risk, function as an elaborate rationale for mediating and preempting social conflicts that may arise from real and concrete cleavages and contradictions. Yet, as Stuart Hall continues, a project that intends to radically modernise society that does not disturb any existing interests 'is not a serious [radical] political enterprise' (Ibid.)

Of course, one cannot deny that 'positive sum games' and social compromises are possible. Indeed, it is difficult to envisage any social democratic politics, past, present or future, without it. But such positive sum games are based on particular conditions. Giddens conflation of risk obscures rather than clarifies an analysis of these conditions, and pretends that there is scope for positive-sum solutions where there are none. (On the conception of the socio-economic aspects of these conditions, see the section on 'a theory of capitalist regulation' in chapter 2). It is far-fetched indeed to suggest that Beck's conception of ecological risk is of the same ontological quality as the kind of risk that is associated with the management of financial assets, which so severely constrain welfare states through globalised financial markets. The same goes for the kind of risk that wage-labour faces on the labour market. Furthermore, the ‘human energies’ required in the pursuit of a job and in the choice of a mutual fund, on the one hand, and on the other hand in civic involvement and in the reasonable consideration of our actions in light of ecological risk are hardly one and the same. In fact one can reasonably follow the classical works by Marx and Polanyi on the nature of alienation in the capitalist wage relation to argue that these 'human energies' stand in a relation of mutual conflict and contradiction to one another. This is especially the for the socially unprotected worker without 'human capital', who enters the labour market under subordinate conditions. Moreover, if it is at all possible to reconcile them, it requires a continued commitment to the 'traditional' social democratic project of humanisation of capitalism - that is, de-commodification. Giddens does not give us a single reasonable argument as to why and how the contradictions analysed by Marx and Polanyi have been resolved and no longer obtain. To invoke the collapse of the Soviet Union as a method to dismiss these arguments ('the death of Marxism'), as Giddens does, is not valid as the collapse in question has no bearing on the analysis in question.[vii]

As Martha Nussbaum (eg. 1990) has argued, the fundamental point was already present in the work of Aristotle. According to him leisure is required for civic involvement and ethical deliberation in the polity. This means that 'free and equal' citizens must be certain that the satisfaction of their basic human needs are guaranteed and hence are not dependent upon success in the marketplace. These needs include the goods required for the reproduction of the human body and a reasonable protection against pain. But furthermore; the potential cognitive capabilities, their capacities for practical reason, affiliation with fellow human beings, and relatedness to nature must also be fully encouraged and nurtured; and, the autonomy of humans as individual must be respected. Only when these needs are satisfied can humans leave the 'realm of necessity' and enter the 'realm of freedom' as citizens capable of civic involvement in a democratic polity. What is more, in a democratic society, these needs need to be secured for all citizens. Especially the development of the capacities or practical reason and affiliation - the 'architectonic functions' - are required for humans to organise themselves democratically and ethically in society. In the Economic and Philosophical Manuscripts (1844) it was Marx's point exactly that the leisure required, and these architectonic functions, could not be adequately produced for the rugged possessive individualist of capitalist society. Adequate amounts of leisure and security are certainly not granted to the wage labourer in precarious consumer-service employment (a type of employment that, as argued in chapter 2, is becoming increasingly typical in contemporary capitalist society). Furthermore though, also those who are affluent in capitalist society are constantly compelled to face the risks and competition on the market. As a result, all their energies also have to be concentrated on the reproduction of the conditions that are necessary for their existence, and the development of the architectonic functions are thus neglected. If it is at all possible to ensure that the architectonic functions required for ethical deliberation and involvement in capitalist society are developed, it would have to be through the counteracting force of welfare-state. And, indeed, social welfare reform constituted exactly a response to this Marxist challenge of bourgeois society. These measures would have to be deliberately geared towards a de-commodification that is forceful enough to ensure the architectonic functions are present for all citizens in a democracy (Nussbaum 1990).

The problem with Giddens' conflated extension of Beck's management of ecological risk to the management of risk in the labour and financial markets, is that the latter type of risk correspond exactly to the kind of commodification of human life that undermines the architectonic functions. The result of this is that Giddens' sets utterly unreasonable demands on the citizen. One wonders where one might find Giddens’ heroic competitive, flexible and mobile individual who at the same time is a nurturing parent, rooted in a community, in which he/she has time and energy to invest civic involvement. That is, an individual who could arbitrate in complex scientific debates about the wisdom to allow genetically manipulated produce. It would be a repressed super-ego indeed that in this context would refrain from engaging in power-charged strategic language games driven on by economic interests imposed by necessities as defined by the terms of market participation. When the individual then fails to live up to these demands, it is presumably the role of 'etho-politics' to discipline (and punish?) the individual. It is as if the entire weight of the social contradictions of modern capitalism is to be born by the individual, who has no social rights at all to claim 'without responsibilities'. The highly unequally distributed incidence of this weight, that stems from the unequal terms on which individuals participate on the labour and capital markets, is too obvious to require further elaboration.

In contrast to the conclusions that Giddens' draws from Beck's analysis of 'risk society', I would put forward those of Claus Offe (1996: pp. 31-57). Like Giddens, Offe argues that Beck's risk-society requires explicit ethical civic involvement, and in this context he invokes the Habermasian notion of 'discourse-ethics'. To be sure, Habermas has developed a powerful critique of bureaucratic intervention in everyday life, because such interventions tend to undermine the informal communal networks in which intersubjective moral norms - Aristotle's architectonic functions - are reproduced. But Habermas' critique is not only one of state bureaucracy. This is only one aspect of a broader critique of the tendency in modern society to overextend technocratic 'systems-steering' of society. In contrast to Giddens, Habermas and Offe continue in this context to be concerned also with the dangers of the commodity-logic of the capitalist economic system and its 'colonisation' of these communal networks. In recent work, Offe is particularly concerned with the threats of social marginalisation that is inherent in private insurance. Such insurance gives powerful incentives to those with purchasing and market-power to exclude others, in order to reduce risks and costs on premiums. More generally, neo-liberal deregulation promotes residual measures, where only 'those in need' will be protected. This, however, tends to constitute different welfare constituencies as fragmented and marginal groups, who can easily be targeted as minority 'special interests' when further cutbacks are called for, or as neo-liberal political constituencies call for 'tax cuts'. This perpetuates rather than mitigates the fragmentary tendencies of post-traditional society (Offe 1996: 105-20; 147-200). Whilst Giddens claims that the 'Third Way' is committed to prevent such social exclusion, he does not provide any reasonable evidence that it is up to this task. This also applies to the question of organisation of work and the labour market. To be sure, new technology allows for reduction of work time and more skilled and 'humanising' work practice, but as I will discuss in further detail in the next chapter, neo-liberalism is likely to pre-empt rather than promote such a 'post-Fordist' development.

Offe situates this analysis within a broader critique of the specific mode of social regulation that deregulated capitalism promotes. Such modernisation subordinates all other aspects of social life to the exigencies of the market-system. Certainly, one effect of this development has been a revolutionary expansion of production possibilities and an increase of the range of choice of individuals. However, this development has generated a complex array of external effects, while the capacity to counter these external effects is undermined by the same development. In part the capacities to counteract the external effects are reduced because capitalism fragments social agency and undermines the terms of discourse ethics. But there is also a regulative dimension to the problem: Since all other forms of social action are subordinated to the market, the complex set of external effects can only be countered ex post through residual measure when the effects already have occurred. This leads to a daunting regulatory agenda with many policy-conflicts that cannot be met. In contrast to this, Offe calls for forms of regulation that prevents these external effects ex ante (Offe, 1996: pp. 1-30).

To sum up, there is a lot of merit in much what Giddens has to say about social democratic renewal - about environmental risk, diversification of lifestyles and the undermining of traditional authority which makes democratic deepening not only desirable but also arguably necessary. But he ignores the empirical evidence and the theoretical arguments that point towards the destructive effects that self-regulating markets have on the conditions required for such developments, and the extent to which he seems to underestimate the need for countervailing regulation - the old fashioned project of a humanisation of capitalism.

Traditional Social Democracy Reconsidered

The case for the continued relevance of traditional social democracy understood in terms of welfare state universalism, social citizenship and decommodification can be made with reference to the most sophisticated of the works on the Swedish model by the so-called Scandinavian power-mobilisation school. That is, the work of Ulf Himmelstrand and his collaborators (1981). Himmelstrand et.al. took very seriously the 'extended contradictions' of the welfare capitalism that Habermas and Offe had identified. Himmelstrand et.al.'s response was not to deny that the welfare state had played its part in generating these. Furthermore, they were also aware of the fact that also the Swedish welfare state of the 1970s had its limitations and problems and that it was not exempt from the aforementioned contradictions. Nevertheless, they argued that the institutional framework of universalism and de-commodification that social democracy as a hegemonic force had generated in Sweden created favourable conditions and potentials for redressing these problems. They understood the welfare state in reformist Marxist terms as an ambiguously progressive legacy, which had led to improvement of life-chances of the mass population, but that also had its limits and contradictions. However, the universal welfare state, they argued, created to power resources required to take the reformist project further and address these contradictions.

First, Himmelstrand et. al. pointed to the importance of the institutions of the universal welfare state for the political reproduction organised labour as a collective actor (Ibid.: 105-209). This was not only a question of devising full employment-policies, unemployment insurance schemes, solidaristic wage policy, and universal benefits so as to reproduce the industrial working class as a collective actor (though, it was that too). With careful empirical analysis they showed that these institutions counteracted the tendencies of fragmentation of working-class agency in the post-modern and post-industrial phase of development. In particular, these institutions encouraged the growing stratum of white-collar professionals in the expanding public service sector to identify themselves as 'wage earners'. This 'extended working class', they argued, could potentially exercise 'ethico-political leadership' over society as a whole, and make the universal welfare state part of the 'common sense' through which 'post-modern' demands for ecological renewal, pluralism, and decentralisation could be made. This could potentially create the space for social democracy to propose decentralisation through measures such as 'industrial democracy' and decentralisation of social service delivery within a reconstituted welfare state that remained committed to universal entitlements.

True, traditional social democratic organisations, such as the blue-collar trade union federation (LO), is unlikely to be the agency to redress the problem of the post-war welfare state in an immediate sense, beyond questions of work-environment and industrial democracy. But subsequent work has shown that struggles of so-called 'new social movements' for, for example, gender equality[viii] and immigrant-rights[ix] can actually or potentially be comparatively propitiously pursued within the universal welfare state. Hence, these struggles might be productively articulated to the hegemonic project of such an extended working class. As a result, these groups tend to develop loyalty to the universal welfare state and the principle of social citizenship. What is more, although people acquire a plurality of subject-positions, their position in the extended working class as reproduced by the universal welfare state implies that these are related to class unity at the level of work. For example, Jenson and Mahon (1993) have pointed to the tendency towards 'wage-earner' feminism in the Swedish trade union movement, which shows particular concerns for issues of nurturing, caring and reproduction in society. More recently, Rothstein (1998) has argued that it is only a universal welfare state that can formulate its norms of entitlement on a sufficiently abstract level in order to be independent of a particular conception of the content of the 'good life'. This would seem to be necessary in order to allow for a sufficiently wide range of concrete expressions of the good life as implied by the subjective pluralism that characterises contemporary society. On the basis of these works one can argue that there is no reason to presume that 'traditional' social democratic institutions cannot potentially cope with what Giddens calls 'individualism'. Rather, the de-commodifying universal welfare of the Swedish that seems particularly well suited for this.[x] There is, of course, no guarantee that these potentials are realised. In chapter 6 we will point at the disintegrative effect the neo-liberal macroeconomic policy has had for such politics in Sweden.[xi]

Secondly, Himmelstrand et.al. argued that this hegemonic extended working class provided a good potential socio-political basis for addressing the governability crisis of the welfare state. When embedded in the aforementioned welfare state institutions, such a working class can potentially develops an integral perspective of social life and its environment. The habitus of a highly organised working class is such that it potentially integrates a wide range of contradictory incentives and concerns. Whilst it might not be in a position of finding an 'optimising' strategy to deal with the contradictions modern life, it is in a better position to develop a wide ranging 'satisfising' strategy. As wage earners the members of such a class obviously have an incentive to ensure high wages and a good work-environment. Furthermore, they also have an incentive in long term innovation in enterprises, since their work depends on this. But in order to integrate these contradictory incentives, the organised working class needs guarantees that profits will be reinvested so as to ensure such employment and this led Swedish trade unions to demand a radical variant of workers' ownership in the shape of the so-called 'wage earner funds'. In addition, Himmelstrand et.al. argued that workers in their capacity as inhabitants of communities were affected by environmental degradation, and in materially secure conditions, where the welfare capitalism ensured them a certain standard of living, they could potentially be mobilised for an environmentally sustainable development (Himmelstrand et.al.: 130-38). Again, the organisations that most immediately represent the workers as workers, the trade unions, were not to be seen as the immediate agents of such a complex articulation. Rather, this role would fall on the social democratic party. This party, synthesising and representing a 'general will' of a broader movement, whose branches include the trade unions as well as other popular movements (folkrörelser)[xii], and linking this movement to the state, would be charged with the role of constructing an integral strategy of economic reform, social welfare reform, ecological reform, and a reform of the subjective definition of solidarity.

In other words, the security of the universal welfare state and the minimisation of social risk would allow such a working class with sufficient leisure and freedom to consider in an integral manner these 'external effects' and contradictions of advanced capitalism. Moreover, industrial democracy - counteracting the deskilling of Taylorist production - and the progressive reduction of working time would encourage the development of architectonic functions for a more active citizenship.

It should be emphasised that the universal-abstract conception of social citizenship is needed to integrate different fractions of this wage earner collective as well as other non-class subject positions that they might occupy (as women, parents, immigrants, etc.) to prevent social divisions and distributive conflicts between different groups. It is only through this broader conception of social citizenship that one can envisage a 'discourse ethics' emerging, that would allow citizens to cope, for example, with the environmental risks that Giddens raise by invoking Beck (see Offe, 1996). But to be meaningful at all in this context, universal entitlements need to be set at generous levels, and services need to be of a high quality. This means that they are costly and that they require high tax-rates (Rothstein 1998). It also means that redistributive questions are best resolved ex ante at the level of the wage-relation (universal benefit-systems are not effective for re-distribution as such, but they provide social protection potentially without state intrusion into the lives of citizens) Such ex ante redistribution, however, requires a tight discipline on capital. In other words, social wage relations need to be modified ex ante before the capitalist labour market generates its external effects on the lifeworld.

Underpinning this is a particular ideological-intellectual knowledge perspective. In Swedish social democracy, these ideas centred on a notion of ‘misrationalisation’ in advanced capitalism. The notion was introduced to Swedish socialists from a particular reading of Austro-Marxist Otto Bauer in trade union debates on strategy in the 1930s (De Geer 1978). According to Bauer, misrationalisation occurs when there is a discrepancy between private-economic rationalisation (implemented by individual enterprises in order to increase its profits) and societal rationalisation. The reduction of costs of production for the individual capitalist is not the same as the reduction of costs for society. Bauer argues that in advanced, functionally differentiated and organically complex capitalism, the tendency is towards increased instances of misrationalisation. This tendency has its origin in the fact that wage labour is a commodity in capitalist society that the capitalist purchases only as long as s/he needs it. However, the costs for (re)-production of labour power falls on society as a whole (and in the case of laissez faire, the cost is distributed to each individual wage-labouring household). The discrepancy between private and social rationalisation can only be bridged where economic-production and social reproduction are unified within the same organisational principle or meta-principle (for Bauer, the socialist state).

In this ideological conception, rationalisation as a principle is affirmed. However, the naive equation of rationalisation with the unleashing of market forces is profoundly problematised. What Swedish social democrats took from Bauer as a guiding principle in their pragmatic search for appropriate welfare state mechanisms, was the idea that economic and social rationalisation had to be viewed from an integral and holistic perspective. Furthermore, they accepted the argument that a common organisational meta-principle was needed (often referred to as 'planning'), and that the reproduction of labour was at the core of the problematic. What was required was an integral welfare state (pace Mishra 1984), that had at its regulatory core, institutions that could promote economic rationalisation at the same time as this rationalisation was checked for social concerns. Swedish social democrats postulated certain political goals of social security, that were held to be consistent with socialist principle as they were achievable within the present development of productive forces. From this vantage point, they enquired empirically and experimentally what form of social organisation was the most suitable to meet the ends in a given instance. Markets actors that could not deliver were to be eliminated, and where appropriate, replaced by public or cooperative forms.

This principle is not easily applied in practice, and in subsequent chapters we shall see how socio-economic power relations resulted in particular interpretations of the meaning of 'misrationalisation' where certain concerns were excluded. One central problem here, of course, is that the consistent application of the principle is politically explosive in what in essence remains to be a capitalist socio-economic order: It implied a serious challenge to the absolute discretion of private ownership of the means of production. As a result, Swedish capitalists have continuously fought off the most radical and logically consistent political implications of this thinking, such as the wage earner funds and Gunnar Myrdal's notions of democratic planning in the immediate post-war period. Nevertheless, Swedish social democracy in the post-war period was sufficiently strong to maintain this principle through the mode of regulation that was based on the co-called Rehn-Meidner model, which related supply and demand side aspects of economics to the redistributive principle of decommodification. (This will be discussed in detail in chapter 4). In other countries, the capacity to control the ‘supply side’ has been weaker - perhaps particularly in Britain, where Labour in the end only came to subscribe to a vulgar variant of demand-side Keynesianism, without any elements of integral planning. But this 'retreat to the demand side' was a signal compromise from the position of weakness. Seen from this perspective, Giddens characterisation of the demand-side orientation as the essence of social democratic ideas is not only wrong, but also ironic - it is not the essence of traditional social democracy, it represents the dilution of traditional social democracy, which resulted from its compromise with social liberalism.

In contrast to this 'integral' welfare state perspective, Giddens in fact conceives of what Titmuss (1971) called a 'residual' welfare state. In the residual model, the market mechanism is not modified ex ante but construed as the basic mechanism of social organisation. Welfare state measures are merely used as 'correctives' ex post when people cannot for 'valid reasons' manage to make ends meet through market participation. This type of welfare state thinking is not new. It is the type that has tended to characterise western capitalist societies, especially in the Anglo Saxon world. Furthermore the extent of its prevalence is inversely related to the mobilisational power of the organised working class and social democracy (Esping-Andersen 1985a). If anything, Giddens - and neo-liberals more generally - merely advocate a purer type of residualism. Such a welfare state, however, is full of Offe's ex post contradictions. Though justified in a society that on the level of ideals privilege 'individual freedom', this type of welfare state by necessity must be selective and intrusive, as it is forced to economise on scarce welfare state resources. Hence the freedom of its clients is restricted and violated. This is as a result of the constraints that the unregulated capitalist market economy sets on it, in terms of limited rates of taxation, and inequalities implied in unregulated labour markets. As neo-Marxist political economy established already in the 1970s, this type of welfare state is not propitious to the freedom required for democratic participation and inclusion in social life. It is Giddens disregard of these contradictions between the terms of capital accumulation and his goals for social inclusion and democracy that constitute the essential problem with his Third Way.