Just a thought coming out of the presentation David Miliband made at LSE the other day, and the op-ed by Krugman in the NYT this morning.
Miliband's talk made some neat points about the difficulties the left has in reassembling its traditional coalition, although without making any clear suggestions about how to address them (perhaps not surprisingly, given the problems any concrete suggestions might cause for his brother). Listening to him, it occurred to me that one of the problems the left has is that it traditionally stands for state intervention and redistribution, but that there is less and less scope to do this in inventive and popular ways, because an ever greater share of GDP is eaten up by more or less non-discretionary public spending: spending on healthcare and pensions particularly (which it is technically and politically impossible to prune down).
This is a particular problem for the left because the right will never cut these programmes seriously, but does want to cut everything else. So they can spin a largely fictional story about cutting government spending and therefore taxes, appealing to voters of working age, whilst reassuring core voters that the two big programmes for the elderly will be protected. The Republicans in the US are pretty adept at doing this, and the Democrats are confused about how to react.
In short, the left doesn't have the tools to do anything very innovative and progressive, because the fixed costs of running any western government are creeping ever closer to the effective limits of public acceptance of government intervention. Conservatives keep the elderly happy and starve everything else, and the left can only deliver marginal gains through interventionism (often in the area of childcare and family friendly policy - see research by Kimberly Morgan).
The only obvious way out of this is to grow productivity and, preferably, the working age population. But these are both very long-term projects, and not the kind of thing that brings immediate electoral dividents. The Scandinavians have pulled this off, but this doesn't seem to have stemmed the decline of the social democratic electorate.