With these changes, the SPD enacted the two major pillars of what would become the modern social democratic program, namely making the party a people's party rather than a party solely representing the working class and abandoning remaining Marxist policies aimed at destroying capitalism and replacing them with policies aimed at reforming capitalism. The economic crisis in the Western world during the mid to late s resulted in the rise of neoliberalism and politicians elected on neoliberal platforms such as British Prime Minister Margaret Thatcher and United States president Ronald Reagan.
In , an agreement was made between several social democratic parties in the Western Bloc countries of Belgium, Denmark and the Netherlands and with the communist parties of the Eastern Bloc countries of Bulgaria, East Germany and Hungary to have multilateral discussions on trade, nuclear disarmament and other issues.
In , the Socialist International adopted its present Declaration of Principles. The Declaration of Principles addressed issues concerning the internationalisation of the economy. The Declaration of Principles defined its interpretation of the nature of socialism.
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It stated that socialist values and vision include "a peaceful and democratic world society combining freedom, justice and solidarity". It defined the rights and freedoms it supported, stating: "Socialists protect the inalienable right to life and to physical safety, to freedom of belief and free expression of opinion, to freedom of association and to protection from torture and degradation.
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Socialists are committed to achieve freedom from hunger and want, genuine social security, and the right to work". However, it also clarified that it did not promote any fixed and permanent definition for socialism, arguing: "Socialists do not claim to possess the blueprint for some final and fixed society which cannot be changed, reformed or further developed.
In a movement committed to democratic self-determination there will always be room for creativity since each people and every generation must set its own goals".
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The Socialist International congress was politically significant in that members of the Communist Party of the Soviet Union during the reformist leadership of Mikhail Gorbachev attended the congress. The Socialist International's new Declaration of Principles abandoned previous statements made in the Frankfurt Declaration of against Soviet-style socialism.
After the congress, the Soviet state newspaper Pravda noted that thanks to dialogue between the Soviet Communist Party and the Socialist International since that the positions of the two organisations on nuclear disarmament issues "today virtually coincide". The collapse of the Marxist—Leninist states in Eastern Europe after the end of the Cold War and the creation of multi-party democracy in many of those countries resulted in the creation of multiple social democratic parties.
Alhough many of these parties did not achieve initial electoral success, they became a significant part of the political landscape of Eastern Europe. In the s, Third Way politics developed and many social democrats became adherents of it. The social democratic variant of the Third Way has been advocated by its proponents as an alternative to both capitalism and what it regards as the traditional forms of socialism—including Marxian socialism and state socialism —which Third Way social democrats reject.
It officially advocates ethical socialism , reformism and gradualism which includes advocating a humanised version of capitalism, a mixed economy , political pluralism and liberal democracy. When he was a British Labour Party MP, Third Way supporter and former British Prime Minister Tony Blair wrote in a Fabian pamphlet in about the existence of two prominent variants of socialism, with one based on a Marxist—Leninist economic determinist and collectivist tradition that he rejected and the other being an ethical socialism that he supported which was based on values of "social justice, the equal worth of each citizen, equality of opportunity, community".
Prominent Third Way proponent Anthony Giddens views conventional socialism as essentially having become obsolete. However, Giddens claims that a viable form of socialism was advocated by Anthony Crosland in his major work The Future of Socialism According to Giddens, this claim "can no longer be defended". He says that with the collapse of legitimacy of centrally planned socialisation of production, "[w]ith its dissolution, the radical hopes for by socialism are as dead as the Old Conservatism that opposed them".
Giddens says that although there have been proponents of market socialism who have rejected such central planned socialism as well as being resistant to capitalism, "[t]here are good reasons, in my view, to argue that market socialism isn't a realistic possibility".
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Giddens makes clear that the Third Way as he envisions it is not market socialist, arguing that "[t]here is no Third Way of this sort, and with this realization the history of socialism as the avant-garde of political theory comes to a close". Giddens commends Crosland's A Future of Socialism for recognising that socialism cannot be defined merely in terms of a rejection of capitalism because if capitalism did end and was replaced with socialism, then socialism would have no purpose with the absence of capitalism.
The only common characteristic of socialist doctrines is their ethical content. Socialism is the pursuit of ideas of social cooperation, universal welfare, and equality—ideas brought together by a condemnation of the evils and injustices of capitalism.
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It is based on the critique of individualism and depends on a 'belief in group action and "participation", and collective responsibility for social welfare'. Although Giddens dissociated himself from many of the interpretations of the Third Way made in the sphere of day-to-day politics—including New Labour —as he reiterated that the point was not a succumbing to neoliberalism or the dominance of capitalist markets, but rather to get beyond both market fundamentalism and traditional top-down socialism to make the values of the centre-left count in a globalising world ,    Paul Cammack has condemned the Third Way as conceived by Giddens as being a complete attack upon the foundations of social democracy and socialism in which Giddens has sought to replace them with capitalism.
Cammack claims that Giddens devotes a lot of energy into criticising conventional social democracy and conventional socialism—such as Giddens' claim that conventional socialism has died because Marx's vision of a new economy with wealth spread in an equitable way is not possible—while at the same time making no criticism of capitalism. As such, Cammack condemns Giddens and his Third Way for being anti-social-democratic, anti-socialist and pro-capitalist that Giddens disguises in rhetoric to make appealing within social democracy.
The party has lost its soul, and what has replace it is harsh, American style politics". Corfe claims that the failure to develop a new socialism has resulted in what he considers the "death of socialism" that left social capitalism as only feasible alternative. Cramme and Diamond note that belief in economic planning amongst socialists was strong in the early to midth century, but it declined with the rise of the neoliberal right that attacked economic planning and associated the left with a centralised planned economy , conflating it with the command economy akin to the Soviet Union and other Marxist—Leninist states.
They claim that this formed the foundation of the "Right's moral trap" in which the neoliberal right attacks on economic planning policies provokes a defense of such planning by the left as being morally necessary and ends with the right then rebuking such policies as being inherently economically incompetent while presenting itself as the champion of economic competence. Democratic and market socialists have criticised the Third Way for abandoning socialism, arguing that the major reason for the economic shortcomings of Soviet-type economies was their authoritarian nature rather than socialism itself and that it was a failure of a specific model, therefore social democrats should support democratic models of socialism rather than the Third Way.
Economists Pranab Bardhan and John Roemer argue that Soviet-type economies failed because they did not create rules and operational criteria for the efficient operation of state enterprises in their administrative, command allocation of resources and commodities and the lack of democracy in the political systems that the Soviet-type economies were combined with.
According to them, a form of competitive socialism that rejects dictatorship and authoritarian allocation and support democracy could work and prove superior to the market economy. In the s, the social democratic parties that had dominated some of the post-World War II political landscape in Western Europe were under pressure in some countries to the extent that a commentator in Foreign Affairs called it an "implosion of the centre-left".
The decline subsequently proved to not be isolated to Greece as it spread to a number of countries in Western Europe, a phenomenon many observers described as Pasokification. In , support for social democratic parties in other countries such as Denmark and Portugal was relatively strong in polls. Moreover, the decline of the social democratic parties in some countries was accompanied by a surge in the support for other centre-left or left-wing parties such as Syriza in Greece, Unidos Podemos in Spain and the Left-Green Movement in Iceland.
Several explanations for the European decline have been proposed.
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Some commentators highlight that the social democrat support of national fragmentation and labour market deregulation had become less popular among potential voters. For instance, French political scientist Pierre Manent emphasised the need for social democrats to rehabilitate and reinvigorate the idea of nationhood.
The article claims that the SPD subsequently lost half of its former electoral coalition namely blue-collar voters and socially disadvantaged groups while efforts to gain access to centrist and middle-class voters failed to produce any compensating gains. Furthermore, the article concludes that the only possible remedy is for the SPD to make efforts to regain former voters by offering credible social welfare and redistributive policies. Skarstein emphasised the contrast between social democrats' strong commitment for helping people on the international scene on one side and their strong commitment in favour of welfare policies for the nation's own population on the other.
Spain is one of the countries in which the PSOE, the main social democratic party, has been in government for a longer period of time than any other party since the transition to democracy in However, it has also declined like the European social democratic parties, losing half of its electorate between and and gaining its worse ever result since the restoration of democracy.
Some authors consider him and his government the last hope for Europe to retain its social democratic heritage  and some believe they would act as an example to like-minded politicians in other countries. Several social democratic parties like the Labour Party under Jeremy Corbyn have rejected the Third Way and moved back to the left on economics. The Social Democrats believes that both perception of it being neoliberal and soft on immigration during the era of neoliberal globalisation likewise contributed to its poor electoral performance in the early 21st century.
Social democratic policies were first adopted in Imperial Germany in the s and s when the conservative Chancellor Otto von Bismarck put in place many Social Democrats ' social welfare proposals to hinder their electoral success after banning them with the Anti-Socialist Laws , laying the ground to the first modern welfare state. Those policies were dubbed as State Socialism by the liberal opposition, but the term was later accepted by Bismarck. Similar policies were later adopted in most of Western Europe, including France and the United Kingdom see the Liberal welfare reforms ,   both by socialist and liberal parties.
In the United States, the progressive movement , a similar social democratic movement more influenced by liberalism than socialism , supported progressive liberals like Democratic presidents Woodrow Wilson and Franklin D. Roosevelt , whose New Freedom and New Deal adopted many social democratic policies. With the Great Depression , economic interventionism and nationalisations became more common worldwide and the post-war consensus which lasted until saw Keynesian social democratic and mixed economy policies put in place, leading to the post-World War II boom where the United States, Soviet Union, Western European and East Asian countries in particular experienced unusually high and sustained economic growth , together with full employment.
Contrary to early predictions, this high growth also included many countries that had been devastated by the war such as Japan Japanese post-war economic miracle , West Germany and Austria Wirtschaftswunder , South Korea Miracle of the Han River , France Trente Glorieuses , Italy Italian economic miracle and Greece Greek economic miracle. With the s energy crisis , the abandonment of both the gold standard and the Bretton Woods system along with Keynesian social democratic, mixed economy policies and the implementention of market-oriented , monetarist and neoliberal policies privatisation , deregulation , free trade , economic globalisation and anti- inflationary fiscal policy , among others , the social democratic welfare states were put in doubt.
The United Nations ' World Happiness Report shows that the happiest nations are concentrated in social democratic nations, especially in Northern Europe, where the social democratic Nordic model is employed. This is at times attributed to the success of the Nordic model in the region, where similar democratic socialist , labour and social democratic parties dominated the political scene and laid the ground to their universalistic welfare states in the 20th century. The Nordic countries, including Denmark, Finland, Iceland, Norway and Sweden as well as Greenland and the Faroe Islands, also ranked highest on the metrics of real GDP per capita , economic equality , healthy life expectancy , having someone to count on , perceived freedom to make life choices , generosity and human development.
Numerous studies and surveys indicate that people tend to live happier lives in social democratic societies rather than neoliberal ones. From a purely socialist point of view, social democratic reform is criticised because it serves to devise new means to strengthen the capitalist system which conflicts with the socialist goal of replacing capitalism with a socialist system. The American democratic socialist philosopher David Schweickart contrasts social democracy with democratic socialism by defining the former as an attempt to strengthen the welfare state and the latter as an alternative economic system to capitalism.
According to Schweickart, the democratic socialist critique of social democracy is that capitalism can never be sufficiently humanised and that any attempt to suppress its economic contradictions will only cause them to emerge elsewhere. For example, attempts to reduce unemployment too much would result in inflation and too much job security would erode labour discipline.
Marxian socialists argue that social democratic welfare policies cannot resolve the fundamental structural issues of capitalism such as cyclical fluctuations , exploitation and alienation.