Some quotes from my diss. Two important studies are Moschonas and Bhaduri, but that is what I found most helpful four or five years ago.
In the Name of Social Democracy Gerassimos Moschonas gives an institutional definition of social democracy--centralized wage bargaining, fiscal policy as instrument of full employment as well as central bank accommodation thereof, mildly progressive tax structure. I shall call a theory social democratic if it implies that such an arrangement would work, i.e. could stabilize capitalism with output growth, low inflation, some bottom up real wage improvement over time, and contained inequality. Social democracy as a practice is state centric; as a theory it is meant to guide the state as a rational supra-class institution towards economically and normatively sound policy. Social democratic theory tends to identify the main source of irrational policy as rentiers who are worried about their incomes being inflated away in a full employment context. To some extent industrial capitalists are said to object to social democratic full employment policy if it undermines the power of the sack and thus leads to problems of labor indiscipline and wages racing ahead of productivity gains. However, through the cooperation and restraint of the unions, social democratic policy is thought by its defenders to be able to contain wage-led inflation even while ensuring that workers do enjoy the benefits of rising productivity in rising real wages.
But, pace Bogdanor, this project gave way before globalization.
Amit Bhaduri has provided the best summary that I have yet read of the transition: "The policy of demand management is also politically ambiguous, in so far as either the state or private business can be relied upon to undertake the necessary investment for expanding aggregate demand. Since the stimulation of private investment is an alternative route to managing demand, measures aimed at achieving this, for example reduced taxes on corporate profits or restraint on wages, become justifiable in the Keynesian framework. These measures constitute the case for a politically conservative style of demand management based on profit, and private investment driven economic expansion within the Keynesian intellectual traditionŠThe original underconsumptionist thesis of wage-led and consumption driven economic expansion, which argued essentially that a 'high wage' is beneficial to both classes, finds its antithesis in this case of profit and private investment driven capitalism. And, both are based on the Keynesian theory which assigns centrality to aggregate demand in determining output and employmentŠ Keynesianism in this wider sense also leaves ambiguous the economic basis of social democratic politics or the necessity of the welfare state, by accommodating different forms of cooperative capitalism. Helmut Schmidt, as the social democratic chancellor of then West German, articulated this conservative alternative by pointing out, 'The profits of the enterprises today are the investments of tomorrow, and the investments of tomorrow are the employment of the day after' (Le Monde 6 July 1976). It symbolized complete reliance on private industry, and its willingness to invest to solve the problem of unemployment, rather than creating jobs through direct expansion of public investment. The economic role of the nation state was thus circumscribed by the need to maintain, above all, a favorable climate for private investment. This view was an intellectual watershed. It marks the beginning of a new conservative era in advanced capitalist countries, when it becomes increasingly difficult to distinguish social democratic from conservative policies, in so far as the economic role of the state become directed towards strengthening the role of private business. According to this new conservative view of demand management, if cooperation between capital and labour is at all to be attained, it is better attained through the agency of private business, but not through direct state intervention, as the earlier version of social democracy had advocated."
Documenting the limits up against which Scandinavian social democracy came, Moschonas (2002) underlines that the SAP (the Swedish Social Democratic Party) itself weakened centralized collective bargaining and "resorted--what a historical irony!--to the arsenal of governments without any trade union base of support: price and wage freeze, anti-strike measures, reductions in social security expenditureŠThe SAP's return to government in 1994, amid grave economic difficulties (large budget deficit, weak currency, rising unemployment), led it pursue of a policy of severe austerityŠWith triumph of market logical, and a particularly strict budgetary and fiscal policy, the Keynesian inheritance has vanished." (191) It also seems difficult to generalize from the Scandinavian experience of low unemployment and low inflation between 1950-1990 (which should not be idealized as it came with increasing industrial conflict in the 1980s). Some would explain this happy result as the consequence of the government being able to run highly stimulative monetary and fiscal policy since workers (made secure by government retraining and unemployment policies) were willing to moderate wage demands to be commensurate with productivity gains . However, it could be that high taxes could be afforded since the Swedish industrial structure was weighted towards what remained highly profitable consumer good and capital goods industries; countries with a fuller panoply of industries may not be so willing to allow the tax burden needed to finance social protection, and the eventual weakness in the profitability of Swedish industry indicates that this may have been the case. The trajectories of France and Germany also seem more relevant to the US experience, and these have been in the neo liberal direction especially in the last decade.
Moschonas's phenomenologically rich descriptions deserve quotation at length. Here are some examples: "Šthe pursuit of policies of deregulation and competitive rigour by social democracy has, for the first time in its history, directly challenged what was most dear, hallowed and enduring in its ideological and political tradition: the socially and economically active role of the state, and the interests of the most disadvantaged groups in the population. In effect in its conscious and explicit adhesion to a moderately but clearly neoliberal mode of regulation, social democracy has made the decisive ideological leap: for the first time so openly and systematically , it has elevated the market and devalued the utility of the economically active stateŠFurthermore, in the race for competitive disinflation and rigour, the governmental left has, despite its social discourse, departed in practice from the defence of wage-earners, and particularly the 'poorest of the poor'. Social democracy has thus been transformed from a political force for the moderate promotion of equality within a socioeconomic system that is by definition inegalitarian, into a force for the moderate promotion of inequality in the face of forces that are even more inegalitarian In other words, it has been transformed from a force that has long since renounced its anti-capitalist vocation into a force that is even abandoning its anti-plutocratic vocation (as Vilfredo Pareto termed it)." P. 292-93 Also: "As our brief examination of the French and British cases has shown, the social-democratic art of laying on both registers--deregulation and a certain re-regulation; the market and the state--is far from having been abandoned. And there are good economic and social reasons for that. In this sense, the new politics of the social democratsŠ can be summarized thus: the 'economic state" withdraws in favour of the market and the 'philanthropic' state timidly re-emerges to reduce social costs created by the marketŠ[T]he center of gravity in this tricky--and quasi-schizophrenic--game of accommodating contrary logics and influences weighs clearly and heavily in favour of liberalism. From this angle, the latest period may legitimately be considered that of 'accommodation to 'the preferences of capital'. In the round, the adoption of orthodox policies and tendential decentralization of the structures of wage bargaining have called into question four central pillars of the social-democratic approach: the policy of wage solidarity, which tended in the direction of the equality of wage labour, and hence working class unity; the policy of full employment, which has been definitively jettisoned, the policy of wealth redistribution in favor of labour (though social democracy's impact on the distribution of income between wages and profits was traditionally modest); and the policy of power redistribution in favour of the wage earning class and--above all--its trade union representation (inside and outside the workplace). I am therefore obliged to observe that the adoption by contemporary social democracy of policies of neoliberal inspiration, and the crisis of tripartite, centralized coordination--a modus operandi largely (but not exclusively) specific to social democracy--have impaired the politico-economic originality of the social democratic alternative. It must equally be observed--drawing on Rand Smith's classification--that social democracy has passed from a 'market modifying" type of strategy to a market adapting strategy." p.200-201. See also pp. 160-61. Weir (1992) documents the shift in the US state from a moderate to less moderate instrument of inequality; her focus is on the retreat from the state's commitment to full employment policy.