Pelle Dragsted on the Future of Socialism

The Danish author and ex-MP talks to us about the failures of the Third Way and charting a new path forward

At the turn of last century, the strain of classical social democracy that dominated post-WW2 Europe was embroiled in a crisis. Neoliberal capitalism had become the dominant economic and political regime, and the political strategy of straddling the line between state-communism and free market capitalism had lost its potency.

The social democrats had a choice: bring the private sector, and therefore capital, into the purview of the state or to capitulate to the interests of capital and move towards a reconciliation with neoliberal capitalism. They chose the latter.

Pelle Dragsted talks to us about the failures of the Third Way and charting a new path forward.

Pelle Dragsted, author of Nordic Socialism and former member of the Danish Folketing

(TNM: The Nordic Model; P.D: Pelle Dragsted)

TNM: One of the arguments you make in the interview you did with Jacobin, When the Pie Shrinks, is that the Danish Social Democratic government has in effect capitulated and pandered to the right. Do you think that any of these third-way social democratic movements will ever be able to truly forward the interests of labour without compromising with capital?

P.D: Third Way Social Democracy is understood as the political strategy defined by Tony Blair and Gerhard Schröder, but also by some Nordic social democratic governments like the government of Göran Persson in Sweden, Helle Thorning-Schmidt in Denmark and to some extent Jens Stoltenberg in Norway.

The term “Third Way” is kind of confusing, because originally classical social democracy was itself defined as a third way between state-led communism and capitalism. The socialist reformists of the Prague Spring also defined themselves as a third way – a socialism with a human face, and even some of the Eurocommunist defined their more reformist socialism as a third way.

“In fact the new third way politicians led a wave of privatization of SOEs, and invited profit oriented private corporation to deliver welfare services.”

But the new Blairist third way, was not a middle path between socialism and capitalism, it was a new third way between classical reformist social democracy and neoliberal capitalism. In other words, it was a move to the right, leaving behind some of the most important political and strategic elements of classical social democracy. It abandoned any idea of strengthening public and collective ownership. In fact the new third way politicians led a wave of privatization of SOEs, and invited profit oriented private corporation to deliver welfare services. Even the public institutions were forced to introduce market-oriented governance and competition through new public management.

The Third Way social democrats also carried through a number of attacks on social security, lowered employment benefits, and introduced different kinds of workfare schemes (forcing unemployed workers to unsalaried work). And embraced neoliberal globalization through trade and investment agreements that made it easier for capital to move jobs abroad. These reforms changed the balance of power heavily in favor of capital, and divided and demobilized the working class.

“In my view, the third way has been a total failure – and the main reason that social democratic parties in Europe lost power almost everywhere.”

The move to the right also had serious political consequences, paving the way for new right-wing populist parties appealing to the frustration and sense of betrayal felt in important parts of the working class. In my view, the Third Way has been a total failure – and the main reason that social democratic parties in Europe lost power almost everywhere, and was entirely wiped out in places like France, Greece, and the Netherlands.

So, to answer your question: I do not think that a Third Way social democratic movement will ever be able to forward the interests of labor. Not because they are compromising with capital - compromises with capital have been a central part of classical social democracy as well -  but because they surrendered to capital. They forgot that in order to make compromises you need at least two things: A direction – so that you know where you are heading and how compromises get you in that direction. And strength – that is an organized and self-conscious working class.  The Third Way social democrats actively disengaged and demobilized their working class bases.

In my view, compromising is not the problem, it is a necessity in a gradualist strategy for socialism. But compromises should be strategic, and move us in the right direction like they used to in the postwar decades.

Of course, another question need to be answered: To what extent is it possible for a classical social democracy to compromise with capital to gradually move towards socialism and economic democracy? When do you reach a point where the interests of capital is so threatened, that compromises is no longer possible?

On that question there a diverging opinions. The main critique from classical revolutionary socialists (like Rosa Luxemburg) of the reformist strategy, was that gradual socialist reforms were impossible because they would hit the profitability of capital, and lead to economic crises. But, as David Calnitsky argues that history has proven them wrong.

“For every step you take to democratize the economy, the power of capital will be weakened.”

In my book Nordic Socialism, I discuss these questions more thoroughly. An important point is that socialist reforms could be incremental.  For every step you take to democratize the economy, the power of capital will be weakened. For example: the creation of strong public investment banks or social wealth funds will make us less vulnerable to threats of capital flight.

I think we should avoid drawing hard conclusions on these questions.  The strategy should be to push for continuous reform that decommodifies new parts of the economy, distributes and democratizes ownership, and strengthens social security. Thereby changing the balance of power in favor of labor.

Of course, the strategy is also a question of where do we want to go. What is our goal? Is it a fully socialist economy – a centrally planned economy – or is it a more mixed-socialist economy with different kinds of ownership and a policy mix of markets and planning?

TNM: You conceive of a socialism that currently exists within market economies. The public sector, which makes up a quarter of an economy, providing goods and services like medical care, education, transport etc. is complemented with democratic ownership in the private sector as well through things like consumer co-operatives, and worker co-operatives. Essentially the argument to me seems that as the democratic control and ownership over this private sector increases, the interests of capital feel threatened. Do you believe that this sets up an inevitable confrontation with capital? What would this look like in the 21st century? How do we ensure that there is no capitulation of the interests of the working class this time?

A central idea in my book, Nordic Socialism, is that we should stop thinking about capitalism and socialism as totalities; as systems that cover the whole economy or society. Instead we should acknowledge that every economy is a hybrid where different modes of production exist side by side. And that socialism is already here in important parts of the economy. That should be obvious in the Nordic countries, where not only the welfare institutions, but also important corporations and investments are owned by and governed by the state or other public entities. Around 30 percent of the workforce in the Nordics is employed in the public sector. They do not create profit for capital owners but create value that is mostly distributed freely (thereby decommodifying big parts of the economy) by taking it out of the market economy. Converting services that we originally had to buy on the market into social rights accessible for everyone without market transactions. 

But it isn’t only in the public sector that we have democratic and distributed ownership. The Nordics also have a long tradition of cooperative ownership. In all the Nordic countries, the biggest or second biggest supermarket-chain is a co-op. In Denmark alone, it has 1.8 million members. The same goes for the energy sector, where important parts of the production and distribution of electricity, heating and water are owned by consumer co-ops. In the housing sector, more than one in five of every housing units is collectively owned by co-ops. Even in the financial sector we have quite strong of a co-operative presence.

"Co-ops do not strengthen the oligarchic power as capitalist profits do. In contrast, they are creating a counterweight to this oligarchic power.”

These co-operatives are often a part of the market economy (the co-operative housing is partly decommodified), even though they are still very different from capitalist corporations. Because they are democratically governed, and the leadership is elected by the members, and therefore are oriented toward their interests as consumers, workers or small producers.  But most importantly, because their profits are distributed among their members, and therefore do not contribute to the concentration of wealth between a tiny elite. They do not strengthen the oligarchic power as capitalist profits do. In contrast, they are creating a counterweight to this oligarchic power.

So, my central idea is that societies and economies are not either capitalist or socialist. They are hybrids. And the relationships between sectors are not fixed or static, but in constant rivalry. In Denmark from 1870 to the 1970s we witnessed a strengthening of the democratic (or socialist) sector of the economy. Firstly, by an impressive wave of co-operative ownership and later by the expansion of public ownership, and decommodified welfare. This expansion made the economy less capitalist and more socialist. Since the 1980s we have witnessed the opposite; an expansion of capitalist ownership at the expense of the democratic sectors. Through privatization of publicly owned companies and demutualization of cooperatives and banks. In that period, the oligarchic power of capital grew stronger, and the democratic influence over the economy was reduced.

“The idea of capitalism as a totality has made the left all too blind to the important parts of the economy that exist outside, and sometimes in opposition to, capitalist logic and power. “

But the important historical lesson is that this can be reversed. We can make our societies and economies more socialist and less capitalist again.  But that requires that we acknowledge the existence of a democratic sector in our economy, and do not ignore it or regard it as “just a part of the capitalist economy” as the left traditionally has done. The idea of capitalism as a totality has made the left all too blind to the important parts of the economy that exist outside, and sometimes in opposition to, capitalist logic and power.

You asked if I think that the democratic or socialist sectors exist “inside market economies”. I will also challenge this way of understanding the economy. Because when we talk about the division between market economies and planned economies we shouldn’t view them as dichotomic. It is wrong to understand economies as either market economies or planned economies. Because no historical economy has ever been pure market or pure planning.  Not even in the darkest times of Stalinist central planning were market forces entirely absent. And the same goes the other way around. The economies that we call market economies in fact use a lot of economic planning – even the US. But even more the Nordics. Planning can be dirigiste – industrial policies, Keynesian countercyclical fiscal and monetary policies, or more direct interventions in the economy. In the Danish case, the entire public sector – from nursing homes to universities to hospitals are planned sectors in the economy.

So, my point is that an economy can be more or less socialist when it comes to ownership, it can also be more or less socialist when it comes to distribution – more or less democratically planned.  We do not, and should not, choose between a total market economy and a total planned economy.

I do not think that a totally planned economy is an attractive alternative either. The experience from this kind of experiment is quite clear. Planning may function well in simple economies, but in modern, highly diversified, and knowledge-based economies, it is intractable. And besides that, it will inevitably lead to massive centralization and very little consumer choice. On the other hand, I acknowledge the Marxist critique of the anarchic and crisis-prone character of market forces. The climate and biodiversity crises have further underscored the problems of the many negative externalities of profit-driven market exchange.

Therefore, I think that we should move in the direction of a more democratically planned economy. Both by introducing more dirigiste planning, not the least in the transformation to a new green economy. But also by decommodifying new parts of the economy, transforming dental care, public transport, wi-fi and housing from commodities to accessible social rights.

In the last half of my book, I am proposing concrete reforms that could make our economies more socialist. By expanding democratic ownership (public and cooperative), by decommodifying new parts of the economy, and by introducing more economic planning and thereby reducing the negative impact of market forces.

“Will such an incremental reform-program lead to a inevitable confrontation with capital? I think that rather than ending in a single final showdown, we should think of it as a long series of confrontations.”

Will such an incremental reform-program lead to a inevitable confrontation with capital? I think that rather than ending in a single final showdown, we should think of it as a long series of confrontations. When the co-op sector expanded in Denmark last century, they were in constant confrontation with capitalist corporations who sought to stop their access to loans and investments. Also, during the development of the welfare state, the forces of capital fought the new social rights. So, confrontations will be a natural part of a democratic socialist reform process, like any other societal change that redistributes power and privileges. But we should not think of it as a singular showdown. Of course, certain reforms can trigger more aggressive reactions from the capitalist elites, as we witnessed in Sweden with the Meidner plan to democratize the ownership of big corporations (you should definitely make an episode about the Meidner Plan if you haven’t done it already) or after the victory of Mitterrand and the communists in France the early 80s.

I think that we should be careful in the sequencing of reforms. As I said earlier, reforms should be incremental, because every socialist reform is reducing the power of capital, thereby making the next reform more viable. So you don’t start by carrying through the most radical reforms. Step by step, you redistribute power from capitalist oligarchs to the majority.  I do not claim that it will be easy, but I’m quite sure that it is the most attractive way to achieve a democratic socialist economy.

TNM: How do you encourage the youth of today to keep hope?

I think we have reasons for optimism. In the decades following the fall of the Soviet regime, socialism was discredited.  The entire left was marginalized – even unjustly so. Even the major part of the left that hadn’t had any sympathies for the Stalinist regimes. Also the social democrats that fought Stalinism from the very beginning began to doubt their socialist ideas and supported and carried through neoliberal reforms. The sense of the end of history and the final victory of capitalism was widely accepted.

But in the decades that followed the financial crisis this situation has changed. The bailouts of banks and financial institutions that unleashed the crisis, and the grotesque inequality within capitalism fueled new progressive movements. In the last years, the growing awareness of a looming climate catastrophe has fostered a new generation that has a strong sense of the negative impacts of a capitalist market-economy on our planet and future.

In the political field, socialism is back in town. New progressive parties have achieved important successes. Like Syriza in Greece, Podemos in Spain, Corbynism in the UK, and the movement around Bernie Sanders in the US. And lately, Gabriel Boric in Chile.

“[American Leftists] should be very proud. They succeeded in bringing the left out of decades of marginalization and to the very center of the political arena.”

I know that in the UK and the US, the left has a sense of defeat because they were so close to winning, but failed. But I think that they should be very proud. They succeeded in bringing the left out of decades of marginalization and to the very center of the political arena. They showed that it is possible to gain widespread support for progressive ideas among broad segments of the populations, and to create alliances between young progressives, traditional unions, and minorities on a class-centered discourse. And when it is possible once, it is possible again – the next time carrying a wealth of learned experience.

More importantly, because this movement was actually were very close to winning elections and taking power, they were forced to develop concrete socialist policies. To think hard about how you take the first, second, and third steps towards a more socialist and democratic economy. Think tanks like Common Wealth, the Democracy Collaborative or Peoples Policy Project have done tremendous work in developing socialist reform proposals forward.

When the financial crisis hit, the left was unprepared. We didn’t have reform proposals or concrete policy suggestions. Socialism had for decade been a slogan more than a set of policies. This time we are much better prepared.

Another important thing: this generation does not carry the weight of the Stalinist socialism. For them, socialism does not equal centralized state bureaucracies but rather welfare states and social justice. When I visit colleges to speak to younger people about my book and ask them what countries they are thinking of when I say “socialism”, the majority point to the Nordic countries, and not to the USSR or China.


TNM: Capitalism seems all encompassing sometimes, how do we continue the fight for a more just society?

I think that we have an important task ahead of us: confronting the idea that capitalism is all encompassing. Because it isn’t true! Even though capitalism is dominant in our economy, it isn’t everywhere. We have a public sector – especially in the welfare states. It is owned and governed by the people through our elected representatives, not by capitalist elites. This has decommodified important parts of the economy.

As long as capitalism has existed, people have organized and created businesses and economic activities outside and against capitalist logic and governance.

We also have an important co-operative part of the economy. Credit unions, workers co-ops, consumer-owned energy-production etc. Democratically governed and collectively owned. The public and the co-operative sector shows us that it is perfectly possible to develop a more democratic economy. That it isn’t a utopia or illusion, but something that already exists. As long as capitalism has existed, people have organized and created businesses and economic activity outside (and against) capitalist logic and governance. Today we can organize and expand this democratic sector, at the same time increasing our political and parliamentary influence at the local, regional, and national level.

The task is the same: to organize in unions, in movements, and in political parties. To develop concrete socialist policies that are attractive and convincing. It was through this kind of work that democratic socialists throughout the last century have succeded in changing the lives of millions of workers. We can do that again. Socialist policies and changes are not just possible, they are necessary to overcome the central challenges of out time.