Social democracy is in essence an armistice in the class war - labour agrees not to rise up and expropriate the owners of capital if those owners reciprocate with fair wages, good working conditions and paying taxes to support a welfare state. The benefit to both sides is that it minimises the need for coercion and makes possible the continuance of democratic freedoms. It's becoming hard to escape the conclusion that the 1% have broken that armistice and have no intention of renewing it. Reviving the world economy requires putting money back into the pockets of working people whose wages have been falling in real terms for several decades, but are now plummeting under the deficit-reducing policies of governments. It seems less and less likely that this can be achieved by democratic means, and after a century of social democratic experiment it might still come to a repudiation of all debt and the expropriation of private property. It didn't have to end this way: regulation of the sort devised by Keynes and Roosevelt might have been modernised and extended given the will, but that will is conspicuously lacking. This neat little video by David Harvey offers a reminder of those Marxist facts of life that never went away under social democracy.
There are crackpots on the extreme right who seem to believe that some kind of fascist/neo-feudal regime - under which the rich retire into gated communities and buy the protection of private armies and high-tech surveillance equipment - offers a possible resolution of the crisis. A moment's reflection will tell you that the extraordinary technological achievements of recent decades have only been made possible by mass-consumption and could never be supported solely as luxury goods (the economies of scale of silicon chip manufacture or lithium batteries are prime examples). The unfolding environmental crisis means that such mass-production is already problematic and requires regulation in the same way as finance capital, but that can never happen under "free market" conditions. The only alternative to a restoration of social democracy is slow decline into chaos as systems we've come to depend upon, like transport and the internet, begin to collapse. Meanwhile Ed Balls tells us that Labour will not reverse Osborne's cuts. Happy 2012!