The death notices had appeared in the newspapers, the mourners had assembled in the church, the eulogy was pronounced and the coffin carried to the graveside. Then, at the last moment, the corpse rose from the dead. The death of social democracy had been proclaimed by luminaries as various as Tony Benn, Ralf Dahrendorf, John Gray and Anthony Giddens. Unfortunately, no one told the voters of Europe.
With social democrats in power in most EU member states, this is the nearest thing to a social-democratic moment in European history. Communism is dead, fundamentalist left socialism discredited, the political right in retreat, even disarray. The European project, which has been symbiotically connected with social democracy from the beginning, has just made a huge step up; and most of the regimes that will decide how to exploit the opportunities are social democratic, or at any rate led by social democrats.
The implications are open to argument. Are Britain's Blairites social democrats? Yes, if you read their lips. No, if you watch their hands. Gerhard Schroder's vision of social democracy differs from Oskar Lafontaine's. The Italian PDS is not the French Socialist Party. Social democrats have always been revisionists. They have always had to modify their doctrines to take account of the latest mutations in an endlessly mutating capitalism. The capitalist renaissance of our time has transformed the political and intellectual debate and the social and economic terrain. Social democrats do not all respond in the same way; it would be astonishing if they did. Now, even more than in previous decades, it is wiser to think of social democracies than of social democracy.
Yet the social democracies of Europe have at least one thing in common. Everywhere, the social-democratic rebirth of the 1990s is a response to the capitalist rebirth that preceded it. The triumphalist neo-liberals of ten years ago, who assumed that the collapse of socialism would drag social democracy down with it, had forgotten their history. Just as the social, cultural and moral dislocation engendered by the brutal laissez-faire capitalism of early 19th-century Britain eventually provoked a counter-movement - which proceeded slowly, gradually and largely without benefit of theory - so now rampant capitalism has created a movement to subject market forces to human needs. This time, the reaction has been quicker. And the chief beneficiaries are social democrats.
But not necessarily for ever. The peoples of Europe turned to social democracy because it was there, the most obvious port in which to shelter from the neo-capitalist storm. If the shelter turns out to be illusory, if the growth of insecurity, inequality and alienation is not halted, reborn social democracy will have no claim on electoral loyalties. The German social-democratic pioneer, August Bebel, once described anti-Semitism as the "socialism of fools". Today, religious and ethnic fundamentalism, xenophobic nationalism, moral authoritarianism and the scapegoating of the vulnerable might be called the fool's social democracy. They, too, offer escape routes - deceptive and dangerous ones, no doubt, but still seductive - from the insecurity, injustices and tensions that are the hallmarks of unbridled capitalism.
Cultural tribalism is the other side of the coin of the global free market. The archaic collectivism of blood and soil is the unacknowledged half-brother of freebooting individualism. Tribal drumbeats sound more loudly in the former Soviet bloc and the third world than in North America and western Europe. But the moral majority in the US, the Europhobic nationalists who control the British gutter press, the National Front in France and the Italian neo-Fascists and Lombard League all dance to the same fundamentalist music as Serbian zealots in Kosovo, Hasidic zealots on the West Bank, Muslim zealots in Algeria and Hindu zealots in the Indian BJP.
It is true that, by the standards of past history, the political cultures and moral economies of present-day Europe are still remarkably tolerant and generous. But these qualities are legacies of the golden age of tamed welfare capitalism and expanding social citizenship. The moral capital accumulated in the golden age has been steadily run down in the past 20 years. The challenge for reborn social democracy is to renew that moral capital, to renew the social and economic foundations of the open society. If it succeeds, it will deserve as well of the present generation as the architects of the postwar settlement deserved of theirs.
Though Europe's reborn social democrats have to start from different points - contrast Britain and Germany, for example - it is not difficult to outline a common public philosophy for the 21st century, broadly social-democratic in economics and broadly social- liberal in politics. The classic social-democratic theme of market failure would be amplified and rephrased, and its connections with the equally classic social-democratic themes of common citizenship and resource redistribution would be re-emphasised. Markets fail; and their failures are systemic, not accidental. They have to be supplemented and regulated, and their outcomes corrected. The central state is not the only agency capable of doing this, but public power of some kind is indispensable.
The relationship between democratic self-government and the capitalist free market is not as easy and harmonious as western shock therapists imagined after the fall of communism and as the apologists for Tony Blair's Third Way still think. It is tense and problematic. As Hayek knew well, the promise of equal citizenship, which is fundamental to democracy, is inevitably in tension with the inequality that is no less fundamental to capitalism. Either democracy has to be tamed for the sake of capitalism, or capitalism has to be tamed for the sake of democracy. The capitalist market economy is a marvellous servant: that was why the mixed economies of the west outperformed their Soviet-bloc rivals. But for democrats it is an oppressive, at times vicious, master. The task is to return it to the servitude that the builders of the postwar mixed economy imposed on it, and from which it has now escaped.
One crucial implication is that the public domain of citizenship and service should be safeguarded from invasion by the market domain of buying and selling. In the public domain, goods should not be treated as commodities or proxy commodities. The language of buyer and seller, producer and customer, does not belong in the public domain and nor do the practices that that language implies and legitimises. Doctors and nurses do not "sell" medical services; students are not "customers" of their teachers; policemen and policewomen do not "produce" public order. Neo-liberal attempts to force these relationships into a market mould - and still more the neo-liberal assumption that market relationships are the only important relationships outside the private sphere of family and friendship - undermine the service ethic, hollow out the institutions that embody it, corrode the trust relationships on which it depends and rob the notion of common citizenship of an important part of its meaning.
By the same token, wealth should be redefined to include well-being. One crucial component of well-being is the socialisation of risk and decommodification of welfare that lies at the heart of the European social model that the capitalist renaissance has put in jeopardy. Another is the social capital represented by a diverse, pluralistic civil society, culturally and ethnically heterogeneous and rich in intermediate institutions. A new social democracy would borrow heavily from the old Christian Democratic principle of subsidiarity - the principle that decisions should be taken on the lowest level of government appropriate to the issue concerned. Many of the policies needed to restore social capital - the regeneration of old industrial cities, for example - are best carried out by localities and regions. Others can be made effective only by the institutions of the European Union: for example, policies to curb the kind of social dumping implied by the neo-liberal (and new Labour) fetish of "flexible labour markets", to prevent exchange-rate instability and to discipline the financial markets.
As Lafontaine has realised, the only force that can countervail the sovereignty of the global market place, and protect the solidaristic values of European social (and, for that matter, Christian) democracy, is the sovereignty of a federal Europe. For social democrats, European federalism is not an optional extra. It is an indispensable part of any serious social-democratic project. But the European Union should not become an American-style melting pot. Part of the point is to safeguard the quintessential European values of variety and autonomy. European federalism must transfer authority and competence downwards to regions and localities as well as upwards to the Union; European citizenship must be multiple, not singular.
The greatest difficulties are intellectual - perhaps emotional, perhaps even spiritual - rather than practical. They have to do with a mind-set; with a nexus of implicit assumptions, held all the more tenaciously because they are rarely put into words and thereby opened up to challenge and debate. Thanks in part to the sheer longevity of the Thatcher-Major era, and in part to the pre-existing deformations of British capitalism and the British state, that mind-set is much more deeply entrenched in Britain - not least around Tony Blair's cabinet table - than in continental Europe.
Two of its aspects are specially pernicious. The first - a weird mixture of vulgar Marxism and bastard Cobdenism - might be called economism. This is the assumption that the economy is, in some mysterious sense, prior to society, that economic considerations should trump other considerations, that society should be tailored to fit the economy instead of the economy to fit society. That notion lay at the heart of the laissez-faire utopianism of the early 19th century. In a different guise, it helped to inspire the reverse utopianism of the central planners of the old Soviet Union. It has surfaced again among today's globalisation theorists - left as well as right. It echoes through the rhetoric of Alistair Darling, Gordon Brown, Bill Clinton and Robert Reich, just as it echoed through the rhetoric of Margaret Thatcher and Ronald Reagan. Untamed capitalism will not be re-tamed until it is laid to rest.
Intertwined with economism is futurism - the notion, as fundamental to the Third-Wayers of the 1990s as it was to the Thatcherites of the 1980s, that we know what the future is going to be; that we have no choice but to embrace it; that those who have embraced it are entitled, by virtue of their superior insight, to lead the rest of us towards it; that, in Thatcher's famous phrase, "there is no alternative". This is a marvellous example of what Isaiah Berlin once called "theodicy". It is an attempt to justify what might otherwise appear to be evils by an appeal to a higher power - no longer God, but history. It offers us a route out of the painful realm of choice and moral argument, and into the comforting realm of necessity. It implies that change is an exogenous force, operating on mere human beings from the outside; that there is only one modern condition, which all rational people will recognise once it is pointed out to them; and that because of all this those who swim with the tide of history have no need to defend their decisions with moral arguments or to argue for their policies on moral grounds.
It also implies that the renascent capitalism of our times is the unique and unchallengeable embodiment of modernity; that resistance to it is futile; and that the most public policy can do is to help the society and economy to "adapt" to it. This is a modern version of the deterministic economic liberalism of 150 years ago and the equally deterministic Marxism of 100 years ago. For classical economic liberals and classical Marxists too, the global market place was the embodiment of an all-conquering modernity, to which only the sentimental and backward-looking would fail to bow down. The 19th-century determinists were wrong. I think their modern descendants will be wrong as well.
But that is not the chief objection to them. Much more important is that their whole approach negates the commitment to human autonomy that has always differentiated the social-democratic tradition from mechanistic Marxism on the one hand and High Tory traditionalism on the other.
The writer is the principal of Mansfield College, Oxford