1. David Grant suggests that I take free trade and the globalized markets that it is generating to be inevitable processes. This is not the case. They are the result of economic policy decisions and international agreements. Like him, I see free trade as an engine of development that has the potential to produce the wealth necessary to improve living standards and eradicate poverty in the third world. However, precisely because global markets, like all markets, are social artefacts rather than forces of nature, their design reflects the interests of the forces that control them. If they are shaped entirely by private capital and the political agencies which represent it, then the wealth that they produce will be concentrated in the hands of a small business elite. In order to achieve an equitable distribution of this wealth that serves the interests of labour and consumers, as well as producers and investors global markets must be constrained and socialized by political interests that also represent the former. Private business alone cannot promote social or environmental rationality. Moving from the robber baron capitalism of the nineteenth and early twentieth century to the welfare state of the post war years involved such a social rationalization of the market within western countries. This achievement is now seriously threatened by the emergence of global markets that bypass the constraints and redistributative mechanisms of the traditional welfare state. Refashioning them for the global market place is the primary challenge of a renewed social democracy.

2. Grant asks about how I envisage the role of the state in a globalized social democracy. On the model that I am sketching nation states do not disappear, but they enter into federative structures that define open, socialized markets. The EU provides a precedent for this approach. However, to work on a genuinely global scale such a federation will have to include underdeveloped countries and provide for significant investment in them. The emergence of an integrated socialized market of international dimensions will require an extended and complex historical process, as did the transformation of the European Common Market into the European Union.

3. Grant requests that I clarify the grounds and extent of my opposition to the obsessive campaign of privatization that is the focus of much neo-liberal economic policy. Clearly I am not proposing nationalization of industry and finance on the Soviet model. My concern is with the destruction of the robust public domain of services, infrastructure, and utilities that have formed the backbone of the modern welfare state. These have been steadily eroded by the juggernaut of neo-liberalism that has dominated many western economies for the past twenty-five years. These policies have produced disasters like the privatization of British rail and the water companies, the steady decline in British higher education through underfunding, the undermining of the NHS by internal markets and cuts in primary care staff, and the widespread dissipation of municipal services. Neo-liberalism has promoted a massive shift in public policy away from social investment in order to achieve low taxes on business and capital. This has generated a sharp rise in social inequality and a significant reduction in economic mobility for the poor and the middle classes. Wealth is increasingly monopolized by a shrinking economic elite that represents a diminishing proportion of the population. The emergence of global markets has greatly facilitated these patterns. Mobile investment capital and production can maximize profit by moving to low wage countries that impose minimal burdens of corporate taxation and regulation. Neo-liberal trade negotiators seek to use the World Trade Organization as an instrument for undermining public services and social investment in the markets that free trade agreements open up to external competition. They construe these services as a form of government protection that prejudices the interests of private companies looking to enter the fields of heath, education, transportation, and energy. A social democratic approach to free trade will formulate trade agreements and regulatory mechanisms to protect public services, equitable taxation, fair labour practises, and environmental concerns as part of a socialized open market.

4. Celso Rocha points out problems with global unions. In fact, I indicated that such unions would emerge only after vigorous local unions were first established in the low wage economies of the new emerging industries. These will engage in protracted industrial struggles which, if successful, will contribute to a rise in the standard of living in those countries that will contribute to the convergence of economic conditions in the developing countries and in western economies. This process will require a considerable amount of time. On the approach that I am proposing it will also be facilitated by the social investment and regulatory constraints of the international free trade agencies designed to promote a socialized global market.

It should be clear that I am sketching a general approach for redefining the social democratic project, rather than a set of detailed policies. This sketch is intended to provide the basis for ongoing discussion through which the viability of this approach can be tested and clarified. I am grateful to Grant and Rocha for raising important issues as part of this discussion.

Shalom Lappin is Professor of Computational Linguistics in the Department of Philosophy, King’s College, London

In large parts of the developing world the failure of the secular nationalist groups that secured independence from colonial rule to deliver either prosperity or democracy has produced a deeply reactionary response in the form of revolutionary Islamist movements seeking to establish a universal caliphate. In the West a significant part of the radical left has embraced these movements as agents of anti-imperialism. They have substituted the advocates of jihad for the working class as the vanguard of the revolution. In so doing they have exchanged a programme of class struggle for the politics of cultural identity and created a new socialism of fools. Not a small part of the liberal-left has indulged in a more nuanced version of this bizarre alliance.

The deep sense of instability unleashed by threatening economic changes has been skilfully exploited by the right in the service of xenophobia and racism. Immigrants are presented as a threat to social cohesion and security. Both the radical left and the xenophobic right converge on a fear of globalizing economic patterns and a retreat into protectionist solutions. This is, in effect, a Luddite response that seeks to deal with change by suppressing it. Dalliance with the romance of jihadist fantasies on the left and the rise of racist tribalism on the right are threatening the foundations of liberal democracy in Europe.

In the context of integrated global markets and capital mobility the traditional instruments that social-democratic governments have employed in the past to constrain the power of capital within the welfare state are no longer effective. National labour unions, corporate regulation, a redistributive tax system and extensive universal public services are increasingly difficult to sustain in an environment in which advanced digital technologies and free trade agreements permit companies to move production and investment to low wage economies in order to maximize profit. Labour enjoys no such mobility. Social-democratic governments are discarding their traditional role as agents of progressive reform. Instead they make do with pale efforts at ameliorating the devastation caused by the onslaught of the neo-liberal juggernaut in the public domain and in the work place. Third Way politics is, in general, little more than an attempt to soft-pedal the resigned embrace of neo-liberal economic policies by defeated social democrats as the latest word in progressive thinking.

In order to renew the social-democratic project it is necessary to reformulate it in international terms. Rather than opposing globalizing patterns, social democrats should seek to harness them for social benefit. An internationalized social democracy will seek to prevent the concentration of the new wealth generated by expanded trade in the hands of a small corporate elite. It will formulate global mechanisms for redistributing this wealth to workers and consumers in a way that counterbalances the power of international corporations.

One way to achieve this objective is to promote the creation of strong unions in the new industries emerging in developing countries. Organizing labour for effective collective bargaining in these industries will raise the standard of living in the countries in which they are taking root. This process will lead to the gradual convergence in living standards in the developing world and the West. It will also contribute to the democratization of the former.

Properly negotiated free trade agreements can provide a second important instrument for advancing a new international social-democratic programme. Such agreements will not simply open up markets to international competition. They will require the companies that enter these markets to contribute to the public services and social infrastructure of the countries from which they profit. They will impose fair labour laws, equitable taxation on profits and stringent environmental constraints as conditions for participating in the international market place that they define. Free trade agreements can also be used to cultivate democratic institutions and respect for human rights, as we have seen in the case of EU expansion in Eastern Europe and the Balkans. In order for free trade agreements to be instruments of progressive social change and regulation they must be negotiated by governments committed to a new international social-democratic agenda rather than by the representatives of corporate and financial interests.

Shalom Lappin is Professor of Computational Linguistics in the Department of Philosophy, King’s College, London