It's reform or dire electoral straits for the centre-left

Social democrats must cast aside conservative impulses in order to survive. Passing the torch of modernisation and reform to the centre-right would be both self-defeating and detrimental to society at large.

Social democrats have to find the strength to reform, or they will be out of the electoral game permanently. The financial crisis, alongside structural challenges from demography and ageing to the rise of Asia, has made reform an imperative in every major industrialised nation. The most dangerous step social democrats could take would be to concede the mantle of reform to the centre-right. It might be tempting in the present context merely to defend the claims of vulnerable groups and producer interests, but it will lead inevitably to electoral defeat. If the left does not propose an agenda for progressive reform, the centre-right will dominate the political landscape - implementing reforms that are harsh and unfair. That is the lesson of the contemporary era.

There are three key areas of the social contract in member-states across the European Union where a strong, dynamic and reformist social democratic agenda is most urgently needed: labour markets, pension systems, and public service delivery. In each case, current systems disguise significant and enduring structural inequalities. The left should make the case for change, standing up for the forces of progressive reform, rather than defending the forces of conservatism:

• The labour market in Europe is characterised by significant ‘insider/outsider’ cleavages, barriers to employment participation, and protectionism.

• Public pension systems have historically neglected the structural inequalities endured by women and lower waged workers.

• At the same time, access to public services such as education and healthcare are still marked by significant class-based inequalities.

Of course, the wrong kind of structural reforms will simply antagonise current inequities, making the present situation worse. However, intelligently crafted innovation has the potential to liberalise existing policy regimes, promoting equity as well as efficiency. Reform is necessary to strengthen and embed support for taxpayer funded services, as well as a collectively financed welfare state.

On specific measures relating to employment, urgent action is needed to tackle soaring rates of youth inactivity (currently 43 per cent in Spain, the highest in the European Union), expanding the availability of targeted welfare to work assistance, and compelling the acquisition of basic skills such as literacy and numeracy. On pensions, measures are required that enhance incentives to save for the low waged through adjustments to the tax system and comprehensive tax reform, enabling women to compensate for years lost due to caring. At the same time, public services such as health and education need to continuously benchmark best practice in order to improve outcomes for the ‘hardest to reach’, particularly ethnic minority groups and those from low income households. The ethos of ‘one size fits all’ provision often fails to serve the least advantaged well. There is scope for opening up publically financed systems to a new and more innovative range of providers.

The fundamental aim of social democracy remains to bring together economic efficiency with social justice. The two are bedfellows, not opposites. To paraphrase the former French Prime Minister, Lionel Jospin, the centre-left believes in a market economy, but not a market society. Yet the centre-right in Europe have seized on the financial crisis to insinuate that the left is both inefficient and unfair. Inefficient because it cannot run a market economy without overspending, profligacy and waste; and unfair because economic incompetence ensures that social democrats will never credibly deliver on their promises in government. This underlies the sequence of historical defeats endured by social democrats in recent years across Europe. The centre-left has to show that in the post-crisis age, economic efficiency and social equity can be re-connected.

That means not only reform of labour markets, pensions and services, but strong measures to reform the banking sector, including breaking up banks which are manifestly ‘too big too fail’. The ethic of civic responsibility applies just as much to those at the ‘top’ of the wealth distribution, justifying further reforms to clamp down firmly on tax evasion and tax avoidance across the global economy. The overriding challenge for societies in the 21st century is ethical: how in a more interdependent world to raise standards and the level of responsibility among institutions and citizens. Ensuring that individuals take greater care of themselves in respect of health and lifelong learning; ensuring that people show greater responsibility to others through activity in the community and redistribution; and ensuring greater responsibility to the world at large through contributions to aid, development and environmental sustainability.

Historically, the challenge of advancing economic efficiency and social justice was integral to the social democratic reformist tradition championed by Brandt in Germany, Palme in Sweden, Crosland in Britain, and Gonzalez in Spain. It was encapsulated by the animating slogan of the Swedish Social Democratic Party: ‘secure people dare’. They recognised that social democrats had to be reformists driven by a mission of modernisation and change in the cause of a fairer, more equal society. Then, as now, they had to be advocates of bold reform not just in their own societies, but across the globe.

Patrick Diamond is a senior research fellow at Policy Network