A Fresh Economic Paradigm for Social Democracy

A Fresh Economic Paradigm for Social Democracy

July 2012

The global financial crisis has destabilized the world economy to the point where it raises legitimate questions about the future of the neo-liberal economic model. Many social democrats believe that this has created an obvious opportunity for them to step in and redirect the course of countries’ economic policymaking. However, it is naive to think that, after long terms of market deregulation, countries will simply adopt social democratic policies without period of transition. Despite the positive election results in France and in some other European countries, social democrats must change their common approach if they really want to offer an effective alternative to conservative policies and recapture public support. Determining the global economy means creating a new social and economic paradigm, integrating all segments of the global market system. Regarding public services, the system functions better with social democratic principles than the market without regulation.

Social democracy was the ruling orthodoxy of many governments between the 1930s and the 1970s, until neo-liberal economic ideology came to the forefront in the 1980s. Today, however, it is becoming more and more obvious that the current version of the free-market model displays many significant fiscal and financial imbalances. Those who prefer to overlook the model’s irreparable flaws and assert that economic recovery is under way are simply wrong. Despite temporary improvements, the global crisis has not come to an end. Recent macroeconomic figures show that Chinese factory output is barely growing, and that the U.S. job market is faltering. Uncertainty over the future of Greece, Italy, and Spain persists, risking the stability of the eurozone. The roots of all these problems are so deep that the mentality giving rise to them has to be challenged.

The hegemony of neo-liberal economic policies after the 1980s created worldwide economic systems focusing only on growth. GDP expansion was considered the sole criteria of success. Yet lingering poverty and lagging measures of public health and education, as well as increasing risks to the environment, make clear that this approach does not really work. Today, there is overwhelming agreement on the idea that, as an indicator, GDP by itself does not constitute a reliable standard for the development level of countries. A striking alternative is the “wellbeing index” produced by the OECD. Turkey obtains the worst scores among OECD countries in both matters. The global crisis offers us an opportunity to appreciate the fact that policies that do not give priority to human development are not sustainable.

As a result, the crisis has opened a new global window of opportunity for social democrats. We need a new market economy model that will be tamed, stable, equitable and efficient. We need to capture the full benefits of global markets, while at the same time minimizing the risk of disruption. Turkish people, and people all around the globe, yearn for societies with more freedom and opportunity. A totally unfettered market and unlimited speculation have led the global economy to the edge of a disaster. Social democrats are in a position to offer a solution that preserves the free market and innovation while also protecting the public interest through appropriate regulation.

Social democrats need, first of all, to come up with measures to combat the current crisis. Economies in difficulty need a combination of short-term tactics such as budget cuts and tax increases, and long-term strategies in order to increase countries’ competitiveness. Short-term tactics should be wisely constructed so as not to harm social cohesion, and the weakest must be protected. Long-term strategies should be based on four pillars: regulation, social cohesion, technological and environmental sustainability, and a globalist approach.

Social democracy must respect market forces, but it also has to regulate them. These regulation mechanisms should be transparent, both at the national and global levels, and aim to both promote innovation and restrain unlimited risk-taking. They should also seek to reverse the growing income disparity. Preserving and increasing social cohesion should continue to be a major social democratic objective. Every individual should have access to food, health care, education, energy, and infrastructure. Yet policymaking should promote meritocracy and equality of opportunity. For Turkey, we have to focus on social economic policies, strengthen the social state principle of the country, find solutions to lower regional disparities, eradicate poverty, and create employment. The example of Luiz Inacio Lula da Silva, commonly known as Lula, President of Brazil from 2003 to 2010, also offers valuable examples on social policy. We can create a Turkish “Borsa Familia” to help households with low incomes (for example, those on below 100 dollars per month in our country), grant pensions to all citizens above 65 years old, and help the children of families in need get a decent education.

We also have to focus on green energy to protect our environment and energy safety. The need for ecological sustainability should be seen not as an economic burden, but a condition for economic development. Social democrats may aim to create jobs by financing new green energy projects. Efficient cooperation between public and private sectors is a key to success in value-added sectors and industries. Likewise, good governance can embrace technological innovation to find new routes around the broken financial system. The example of crowd-financing, in which online communication facilitates peer-to-peer lending and borrowing, shows how this can work. Such solutions combine the innovation fostered by the free market at its best with the attention to public goods (such as a clean environment or access to capital) that is social democrats’ top priority.

This new paradigm should be global. Solidarity should transcend national borders. The developed world cannot act at the expense of developing countries, seeing them only as targets for resource exploitation. We must understand that the current economic crisis is a global one, and it can only be solved at a global level. Transnational alliances must be built to work toward the necessary solutions.

At the local level, every social democratic party must work hard to open the boundaries of freedom to a greater extent, renew the state-individual relationship, and establish a functioning judicial system that guarantees the rule of law and a participatory political system that will promote transparency, accountability and good governance. In view of the human development index, there is a tight correlation between democracy and prosperity. Totalitarian and hybrid regimes are in the lower segments of the index, while real democracies remain solidly in the top 20. So, we know that without democracy and freedom there will not be any economic progress. The wellbeing of a society depends on the quality of its democracy more than just the economic indicators.

Turkey’s case constitutes an evident example of this fact. The figures may suggest solid economic growth, but since the nonfunctioning, hybrid regime does not protect basic human rights, Turkey is only 92nd on the listing of the human development index. From the “Economic Freedom” index to the “Doing Business” index, in every independent report Turkey falls in the middle of the pack, not near the top where it should be. This is unfortunately not surprising, when one considers our dysfunctional judiciary and antidemocratic political system, which promotes single-man dictatorships within political parties and parliament. These are problems that social democrats in Turkey must deal with. We must transform the system into one that guarantees human rights, protects minorities and vulnerable groups. This is why our party’s motto is “Turkey: the Country of Hope and Freedom,” ideas that we will make come true.

Social democracy, revised for the 21st century, has the ability to promote the advantages of the market economy while reining in its excesses. In so doing, it can better manage economies while protecting social justice and creating equality of opportunity for all. The window of opportunity opened by the financial crisis should not be wasted. If we are able to successfully change our paradigm, we will be bold enough to come to the rescue of the global economic system and our countries, and we can change this century to an age of prosperity, equality and justice.

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