The European Left and The Crisis Of Capitalism Norman Birnbaum

The European Left and The Crisis Of Capitalism Norman Birnbaum

At the end of the twentieth century, neither historical accident or social purpose seemed capable of halting the ascent of a new capitalism. What was new about it was the supreme self-confidence of its apologists, the ruthless certainty of its agents, the global reach of its operations---and the now passive, now sporadically agitated, character of the resistance to it. True, there were the demonstrations at Seattle and at Genoa, the Social Forum at Porto Allegre. There were even (very occasional) discreet invitations to (selected) adversaries of the new leviathan to cross the police lines guarding the participants at the Davos Economic Forum’s services of worship to explain their impieties. Pope John Paul II’s reminders of the Christian character of institutions of solidarity were ignored by many of his own flock, treated by others as a public exercise in sentimentalism which cost nothing and made some feel better.

Then came the crisis of 2008. Remember the crisis of the nineties in Asian countries like South Korea and Thailand---and the disdainful response of Western bankers, bureaucrats, economists, dutifully echoed by editorialists.and politicians. The Asians, this time, could hardly retaliate. They were, rightly, too frightened of the contagion spreading across time zones, as the availability of credit shrank and then disappeared—within and between nations and continents. In Europe, Iceland and Latvia were effectively bankrupt and had to be rescued by the International Monetary Fund, which imposed austerity measures otherwise applied only south of the Sahara. Ireland avoided the same fate only by imposing austerity upon itself –erasing two decades of gains in the standard of living.

In the United Kingdom, the government spent huge sums to save the threatened banking system. It did not need to spend much on saving manufacturing industry, since the leading industry in Britain was banking in the City of London, with its vast international operations. The European Central Bank, despite its inflationary obsessions and monetarist theology, suddenly lowered interest rates and printed money for immediate distribution throughout the Euro zone (especially in eastern Europe.) The government of Europe’s largest economy, Germany, after insisting on the soundness of the German banks rushed to rescue some of the nation’s major ones. The President of France rejected the usual admonitions about budgetary deficits or state intervention from the European Commission in Bruxelles. He would do what was necessary to restart the national economy. He noted that the epoch of Anglo-Saxon-type capitalism was over, even if he had previously proclaimed his intention to make French capitalism less French, that is, to reduce the omnipresence of the French state in the economy.

The public responded to the financial crisis , initially, with numbed shock. The European citizenry’s confidence in government, and especially in government’s capacity to master economic problems, has been declining. Witness reduced voting rates in elections across the continent in the recent past. Still, the solidity of banks, the reliability of public pension systems, were not in doubt. Now average Europeans were told that they had reason to fear the worst. Additionally, the

crisis affected regional and local government’s funding, and threatened the continuity of the many public services they provided. In the private sector, firings and layoffs, shortened working weeks, and the threat of more, intensified a general sense of apprehension. The reassurances proffered by governments, the televised spectacles of European and world leaders rushing to meetings to issue stereotyped statements, evoked even more anxiety. After all, governments had been offering reassurance for the past decades, in which (in Germany, for instance) incomes had declined and the labor market for the young was increasingly inaccessible. The shock did not generate a European wave of protest, much less widespread social turmoil. The European left could not organize protest, since it was was divided, disoriented---and ideologically disarmed.

The post-war European social contract integrated large segments of the labor force and their employers in publicly organized processes of redistribution, and defined citizenship itself in terms of decent minima of economic equality in a regulated market. Since the nineties, however, European socialist and social democratic parties have compromised with their earlier compromise with capital. Smaller groupings to their left, the post Communist parties agonizing after the collapse of the state socialist model, and rhetorically revolutionary conventicles of the obdurate, had brief moments of electoral prosperity but little staying power. Demanding a reorganization of society to save the earth and its inhabitants, the Greens have neither revived socialism or radically revised it in ecological terms, even if they.have had great influence on the larger parties. If any organisation has been in the front line, it has been the European trade union movement, itself reduced in numbers.

European socialism has been routinized by its own successes. It was paid the tribute of rejection of market sovereignty by much of modern European conservatism, by the social Christian parties and formations like the British Tories who claim to speak for “one nation.” The Christian Democrat Merkel and the secular Republican Sarkozy prefer cross class coalitions to market dogma. Meanwhile, Christian sensibilities marked the socialist and social democratic parties as well. British Labour had strong Methodist and Anglican roots, the Italian Communist Party before it dissolved itself into what is now the Democratic Party had close ties to Italian Catholicism. Socialist President of the European Commission Jacques Delors and Christian Democratic successor Romano Prodi were each adherents of Catholic social doctrine. Each acted as if the welfare state was here to stay---no matter which political grouping formed governments.

However, even before the current crisis, the European social model was being undermined by two processes which put the European left on the defensive. One was the challenge to European economic stability (the capacity to sell in domestic and foreign markets and to maintain employment and living standards) of the rise of Asian industry. The integration of what had been Communist eastern Europe in the European Union made it possible for western European capital to exploit a cheaper labor force in the east—and reduce the bargaining powers of western European labor. The second process was an ideological and institutional counter-attack by capital, arguing that western Europe could no longer afford its late twentieth century social model. The European Commission used its powers, continuously consolidated and extended, to impose upon the nations with the most developed welfare states budgetary limitations, deregulation and privatisation of the state economic sector. The western European parties most enthusiastic about the European Union as a way to defend their own welfare states by extending them across borders (like the German Social Democrats) have become victims of both the enlargement of the Union and its democratic and social deficits. The European Parliament, directly elected but with invariantly low electoral participation, has insufficient power to stop the technocrats at the European Commission from a systematic attack on the national welfare states. The new European Union Treaty of Lisbon, about to come into effect, does not strengthen in any major way the European welfare state. The European Commission retains its power to interfere with economic and social policy in the separate member nations. (The Commission is trying to stop the German government from keeping the Opel automobile firm operating since, the Commission alleges, the government is disregarding open competition. That tens of thousands of jobs are at stake bothers the Commission not at all.)

What explains the paradox of a European public committed to welfare states within their own countries and subjected to a European Union working in the opposite direction? European wide coalitions of capital have been more effective, politically, than their socialist and trade union counterparts. At important turning points, the European socialists lacked the resolve, political imagination and ideas to oppose finance and industry in the EU capitol, Bruxelles. Their adversaries ostensibly accepted class compromise in the separate states---and systematically undermined it on a European scale. Critical scrutiny of the working of the EU by the European publics is rare: there is, instead, diffuse discontent and resentment of the distant Bruxelles bureaucracy.

The bureaucracy performed lamentably in the crisis. More precisely, it left matters to the national governments it was supposed to complement and even in major matters supplant. True, there was a political hiatus in 2008. A new parliament was elected in the spring (with reduced representation of the parties of the left) and the Commission President, the Portugese Christian Democrat Barroso, was single mindedly pursuing his own reappointment by the several governments.

The major institutional contribution of the European Union in the crisis has come from the European Central Bank. Its President, Jean-Claude Trichet, insists that its primary task is monetary stability---and that full employment and a socially

purposeful direction of the economy are not its business. This had a p[arallel in Great Britain when Blair’s then new Labour government in 1997 renounced the setting of interest rates and placed it entirely in the hands of an autonomous Bank of England. In extremis, Trichet joined Bernanke of the Federal Reserve and the world’s other central bankers in reducing interest rates and printing money to meet the credit crisis of 2008.

Most of the other significant steps to confront the crisis, however, were taken by the separate European governments—acting in their own economies or occasionally by direct coordination in the G-8 or G-20 groups. These steps included broad programs of direct grants or loans to banks, and scattered and unsystematic measures to assist firms threatened with bankruptcy. These entailed occasional partial wage subsidies, and emergency programs to extend unemployment assistance. Much was done as a response to immediate situations and little or nothing as part of a new interventionist or regulatory regime. No large programs of public investment were advanced or adopted. The US stimulus plan adopted by the Congress in the early Obama weeks is rather more “socialistic” than the measures adopted by European governments like those of the UK or Spain, or Germany. In Germany, the Social Democrats (now voted out of office) held the Ministries of Finance and Labor in a coalition government. The Social Democratic Finance Minister was more vocal about public indebtedness than unemployment. The Christian Democrats managed to present themselves as custodians of the German social model.

The Europeans concentrated on salvage operations in the banking system, and often declared their unwillingness (on account of the possibility of future state indebtedness) or inability (on account of limited resources) to aid municipal and regional governments or what remains in Europe of public entrerprise. It is true that as the credit crisis spread and reduced employment, employee and employer contributions into uemployment reserve funds diminished---making government action to compensate for shortfalls in a period of rapidly rising unemployment imperative.

It cannot be said that the social democratic and socialist parties fled their responsibilities. They defined these in conventional, market consonant, terms. Much of the programmatic demand for permanent nationalization of part at least of the financial sector, to be accompanied by rigorous re-regulation, came from the parties to the left of the major formations, the Green movements ---and the unions. They mobilised the academic expertise and moral support of the diminishing segment of the European intelligentsia which has remained critical of capitalism, on grounds of efficiency and ethics. They placed before the public the idea of a large response to the crisis, not the restoration of the previous situation but a new relationship of public and private, state and market. They were joined in the main social democratic and socialist formations by those leaders and thinkers, often young, with alternative projects and usually not by the senior leaders of the parties. Those projects included extensive renewals of infrastructure in environmentally positive ways---and the reconstitution of equality of access to education in a situation in which the constraints of class, in several nations, negated the democratising mission of schools and universities.

One exception were the parliamentarians in the European Parliament, but the Parliament is (alas) notorious for being the place where many European parties send those who would make their colleagues in the national parliaments uncomfortable. Moreover, its powers under the new European treaty remain limited.

A contrast between British Labour and the center right party of French Presidentr Sarkozy illustrates what has been happening. Prime Minister Gordon Brown was long thought of as the keeper of the party’s socialist conscience—especially when he as Chancellor of the Exchequer (Treasury Secretary in our terms) opposed Tony Blair on matters of public expenditure. In fact, Brown before he became Prime Minister did very little to reorient Britain’s economy away from its dependency on the financial industry in the City of London. When the crisis broke, Brown was conspicuous for rushing to reinforce the banks and vociferous in his demands for coordinated international action to rescue the financial industry worldwide----hardly calculated to displease the City of London, since much of its operations were international. Now that the British state is heavily indebted on account of these expenditures, Brown ---facing a serious electoral challenge by the Tories—will limp into next spring’s general election with no credible project for extending or even reforming the welfare state. All he can promise is to be judicious in reducing public expenditure. Labour’s warnings on Tory intentions are no doubt well founded---but since the party, in government since 1997, has for most of the time been at pains to depict itself as rejecting an egalitarian or redistributionist agenda, it is unclear what program of its own it can offer.

Nicholas Sarkozy was elected as President of France as in the Gaullist tradition. Apart from an emphasis on France’s independence in matters European and international, that is a modernised version of the older French tradition of Bonapartism. It involves a strong central state with a redistributive role intended to reinforce national solidarity—and an entrepreneurial one intended to set standards of national efficiency. Sarkozy met the crisis with a series of strident denunications of the sovereignty of the market and now proposes to revise international standards of economic measurement. He suggests that national income statistics should specifically measure health and longevity, and should attempt to quantify issues of quality of life. Truer measurements of real income, he declared with much plausibility, would show France far closer to the US in national income per capita than the nominal indices now in use. Our own Joseph Stiglitz as well as the critical French economist Paul Fitoussi were among his advisors. Meanwhile, Sarkozy has insisted that France will not be bound by the attachment of the European Commission to deregulation and privatisation. A half century ago, British Labour argued that the UK should not join the EU’s predecessor, the European Common Market, since Britain’s socialist project would be blocked by the united forces of continental capitalism. In the current crisis, however, a French President of the center-right is more willing to reconfigure capitalism than a British Labour Prime Minister deferring to the City of London.

The official German response to the crisis was, at first, denial.. The Minister of Finance, the technocratic Social Democrat Peer Steinbrueck, and the Chancellor, the ideologically evasive Christian Democrat Angela Merkel, suggested that it was due to American economic indiscipline. As it became clear that German banks were as unisciplined and irresponsible as American ones, and as the credit crisis had immediate effects on an economy heavily dependent upon exports, the government (amidst very audible internal disagreements) lent money to the banks. Amidst even louder disagreement, it provided wage subsidies to enable stricken firms to keep workers on payroll—if only part-time.

The German situation was complicated by the imminence of the national elections which were held at the end of September. The Social Democratic Chancellor candidate, Foreign Minister Frank-Walter Steinmeier, depicted the Chancellor as devoid of conviction---and sought to mobilise those who had deserted the party (either to electoral passivity or to vote for the Left Party) by warning of the consequences of a coalition between the Christian Democratic Union and its Bavarian sister party, the Christian Social Union with the one German party unambivalently espousing market capitalism, the Free Democrats. The warnings did not work, and the Social Democrats dropped from thirty-five percent of the vote to an historic low of twenty-three percent. Their voters either abstained (participation was also at a new low for post-war Germany, at seventy percent) or voted for the Left party, which gained votes, especially in the western part of the nation. The Left is a hybrid party. In the east it comprises the heirs of the party which ran the Communist state. In the west it attracts those disillusioned with the Social Democrats for their program of economic rationalization, which involved the downsizing of the welfare state when they last had the Chancellorship, from 1998 to 2005 under Gerhard Schroeder.

The German trade union federation conspicuously refrained from endorsing the Social Democrats, a break with tradition explained by its leadership as due to the ideological diversity of the membership. Schroeder as Chancellor headed a coalition with the Greens, who in the recent election drew about as many voters as the Left, eleven percent. The German Greens are floating in socio-economic space, and it is difficult to see how they can make good their commitment to social renewal. Even if these parties had overcome severe antagonisms and real differences to form a bloc, they would not have had a parliamentary majority.

The economic crisis has brought to the surface the contradictions within and between the Christian denominated parties --- on industrial policy, on taxation, on social expenditure.These parties have electoral clienteles, in small and large firms, but also (in Bavria particularly) have corporatist traditions which cede a large economic role to government. Chancellor Merkel in coalition negotiations with the Free Democrats has already made it clear that she will play the role of defender of the welfare state against her coalition partners. How much authenticity she can claim is a question—but she did manage, in the election, to temporarily reconcile opposing perspectives. Whether she can do so for the next four years is very doubtful, but some large part of the electoral

decline of the German Social Democrats has to be attributed to the Christian parties’ success in portraying themselves as the effective managers of the welfare state.

Like the French government, the German one criticised the European Commission for its relative passivity in the crisis. That is a theme which also voiced by the Green, left and socialist parties in the European Parliament. Having lost seats in the 2009 European elections, these parties were unable to prevent the re-election of Commission President Manuel Barroso--- very attached to the global leadership of the US and to the ideology of the market. . That the European left in elections in the midst of crisis did poorly is evidence for a deep programmatic crisis. Singly or united, the European left parties lack a convincing project.

As in the United States, the European media, parties and publics expended disproportionate energy on deploring executive salaries in the private sector. In the United States, the discussion is an ephemeral substitute for the systematic analysis of class relations which is missing from our public sphere. In Europe, churches, parties, unions and an appreciable segment of the intelligentsia have been discussing alternatives to capitalism ever since the Industrial Revolution. . Nonetheless, much of the current European public discussion has also been an exercise in trivialization.

A decidedly untrivial contribution to the discussion, was the submission to the Pittsburgh G-20 meeting of September by the global trade union alliance----formulated with a large contribution from the European Trade Union Confederation. The document takes full account of the internationalization of the economy, sketches specific streps for the reform of international economic institutions, severely criticises the complacency of governments and their propagandistic certainties about recovery. Indeed, it depicts the notion of recovery as illusory in view of the certainty of increase in unemployment and decline in the standard of living in nations poor and rich---and as a transparent device to avoid a political discussion of the causes of the crisis. More and not less economic stimulus is required, argue the unions---and advance a project for the planning of long term investment in human and social capital. What is most compelling in the document is its joining of developmental and environmental themes to measures for increasing economic equality and political participation within the industrial democracies. Whether this will be limited, largely, to the intellectual vanguard of the trade union movement while ordinary members and their families and neighbours drift into political passivity, is a question only a series of elections in the next years can answer. The document does suggest that some on the left are intellectually equal to the challenges of the epoch.

Certainly, the amount of popular protest in the streets, strikes and seizures of workplaces, measured against the anxiety induced by the crisis and the prevailing levels of unemployment (ten percent is the average in the European Union) was strikingly limited. In France there were some ritualized gestures (holding managers of firms hostage overnight), but for a nation in which demonstrations are an art form, both organized and spontaneous activities were sparse. That was true across Europe. A benign explanation is that for many, the routine working of the welfare state (high and continuous unemplyment payments, the continuation of health insurance) was reassuring. A less sanguine view is that, especially given the disappointment and disorientation induced by the failures of the entire spectrum of parties of the left, a considerable amount of frustration and anger is temporarily being restrained. The xenophobia of many of the groupings of the right is, frequently, combined with hostility to capitalist elites. Modern European history is replete with social fascism. Should democratic socialism and its social Christian equivalent fail to restore and improve the economy, it would be unwise to suppose that European society will simply lapse into resigned quiesence.

Notes.

See the excellent analysis by Robert Taylor, “Europe’s Left And The Employment Crisis,” Dissent, Fall, 2009 and the acute paper by Matt Browne, John Halpin, Ruy Teixeira, “Beyond The Third Way,” Social Europe, October, 2009.

The trade union documents can be accessed at >0909t-g20pittsburgh-en-pdf<

and >etuPolicyBrief1-2008.pdf<

Very good reportage on the local incidence of the crisis can be found in the blog of Le Monde, “Engrenages—Les Francais Face A La Crise,” 10 October, 2009.

The continuing analysis of the European left by Werner Perger in Die Zeit is

another valuable source.

See also, Norman Birnbaum, After Progress: American Social Reform And West European Socialism In The Twentieth Century, Oxford University Press, New York, 2001 and Viven Schmidt, Democracy In Europe: The EU And National Politics, Oxford University Press, New York, 2006.

Norman Birnbaum is University Professor Emeritus, Georgetown University Law Center and on the editorial board of The Nation. He is writing a memoir, working title: From The Bronx To Oxford---And Not Quite Back.