Wolfgang Streeck’s guest post (below) points to one of the key mysteries of the contemporary Eurozone crisis: how could those Southern Mediterranean countries, economically so buoyant from the early 2000s onwards, see their fortunes change for the worse so quickly? Today we are used to deriding them as basket cases, as the “PIGS”, yet in the last decade they were among the most dynamic economies in the Eurozone. What went wrong?
The standard answer is that national governments in these countries failed to tackle the special interests that are holding them hostage. Bloated public sectors are the obstacles to the much-needed supply-side reforms. The role of the European Union, the European Central Bank and the International Monetary Fund is, on this reading, to compel national governments to make the difficult choices and to take on these special interests. Streeck’s post suggests that something else is at work. These Southern Mediterranean economies are marked by the post-fascist social compact forged between political and economic elites in these countries and the interaction between these compacts and other European economies under the aegis of the European Union. Class compromise in Southern Europe has been achieved and sustained through economic aid from the North.
This point powerfully chimes with a theme of previous Current Moment posts: that the social, economic and political development of Southern Mediterranean societies has, for a number of decades now, been inescapably bound up with wider European institutions and policies. These countries are “member states” par excellence: their national existence expressed through the wider European framework. Streeck’s post highlights the negative consequences that flow from this: the relationship with the rest of Europe has had the effect of freezing the social development in these countries such that an indigenous nationally-oriented middle class did not develop, helping explain the poor performance of these countries today.
It is worth exploring some of the wider implications of Streeck’s argument. One is whether or not the same pattern will be followed in other parts of Europe. The social development of the formerly planned economies of Central and Eastern Europe has taken its own course. These countries have certainly evolved into “member states”, their national governments deriving as much authority from their participation in European summits as from their relationships with their own electorates. Yet some of these countries have managed to carve out for themselves their own role in the European division of labour, a consequence of the highly trained and educated workforce that existed at the time of the collapse of the Soviet bloc and the relatively low wage levels compared to Western Europe. A more difficult question is regarding the Balkans. Will European subsidies substitute for national economic development in the same way as occurred in Southern Europe? The primacy placed on national reconciliation by Northern European governments suggests that any dynamic and conflictual processes of social transformation in the Balkans, necessary perhaps if economic development in the region is to really take-off and be sustained, will be snuffed out by European elites afraid of a new outbreak of ethnic violence in the region.
Another implication of Streeck’s argument seems to be that economic development in the future for countries like Greece and Spain will only come about as a result of a fundamental process of social change, where existing class relations are radically modified. The current condition of these societies, where their existence is so firmly tied to Europe, inhibits such change. The place of national governments within pan-European institutions shelters them from the contradictions and dynamics visible at the national level. The European Union itself has customarily staved off class conflict through payments made directly to its members, to individual regions and to social groups like farmers. Instead of looking to Europe for solutions, growth in Southern Europe will only come from an internal confrontation with the social structures, relations and traditions inherited from their national past.