Larry Elliott points to a fact which Marxists and rightists agree upon - that social democracy is parasitic upon capitalism. Like all parasites, it needs a healthy host and if the host becomes unwell, so does it. Larry says:
The model of the past 70 years has relied on decent levels of growth providing the resources not just to raise personal consumption levels but also to allow the expansion of welfare provision...
Social democratic parties thrive in times of abundance and wither in times of dearth. A growing economy allows parties of the left to increase investment in public spending and to redistribute resources from rich to poor.
I'd add that there are three inter-related problematic mechanisms here:
1. Baumol's cost disease. Public services such as health and education tend to have low productivity growth, and so their relative price rises over time which requires rising taxes. This is not (just?) because of public sector inefficiency. As Ronnie O'Sullivan among many others will confirm, even private education is becomes more expensive over time.
2. Tax morale. At least two things suggest that tolerance of taxation will decline in recession. One is simply that the harder-up people feel, the less willing they'll be to hand money over to the state. Another is that sustained recession tends to undermine trust in governments, and this increases resistance to tax.
3. The moral consequences of slow growth. Ben Friedman has shown that slow growth makes people meaner and more intolerant. This might explain why - against all logic - there's more talk of "scroungers" now than there was before the recession. This reduces support for redistribution.
For these reasons, Larry's right to say that - if we are in a world of slow growth - then social democracy is in deep trouble. Which means that the Left cannot any longer take the health of capitalism for granted. This should reignite interest in something Keynes said:
It seems unlikely that the influence of banking policy on the rate of interest will be sufficient by itself to determine an optimum rate of investment. I conceive, therefore, that a somewhat comprehensive socialisation of investment will prove the only means of securing an approximation to full employment.
He thought that such socialisation would be compatible with private ownership, with "all manner of compromises and of devices by which public authority will co-operate with private initiative." But what if such crony capitalism is either undesireable or ineffectual? It's then that the case for supply-side socialism becomes more powerful. Yes, both the parasite that is social democracy and the host that is capitalism might die. But something better could take its place.
A caveat: Yes, I'm simplifying here. Social democrats have always had ideas for promoting growth, ranging from fiscal policy through soft planning to the "education, education, education" of New Labour. But it's always thought that such policies were compatible with and conducive to capitalism and private ownership. But what if hierarchical managerialist capitalism is no longer compatible with decent growth?