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Syriza has not been radical enough

7 Jul

The Syriza-led government has been blamed for much of the current impasse between Greece and its creditors. It may not be responsible for the dire economic state of the country, commentators note, but it has done everything to make that situation worse. Accused of bringing Greece and possibly even the Eurozone to its knees all in the name of its radical Marxist doctrines, the problem of Syriza is in fact the opposite. Syriza has not been radical enough.

The dirty secret of the Greek crisis

A confusing aspect of the Greek crisis has been the extent of disagreement between Greece and its creditors. Commentators have regularly presented the Syriza-led government as a group of dangerous mavericks, led by a student radical and a celebrity academic-blogger. Impatience with what were considered unacceptable demands from the Greek negotiating team spilled out in recent weeks with Christine Lagarde in particular saying that Tsipras and his colleagues needed to ‘grow-up’ and act like adults rather than like truculent children.

This vision of an unbridgeable gulf between the radical demands of Syriza and the German-led austerian orthodoxy masks what is perhaps the dirty secret of the whole Greek crisis: the sheer moderation of the Greek government’s demands. Faced with such economic and social turmoil, the Greek response has been remarkably mild. The Greek demands include some consideration of debt relief, more flexibility on the implementation of structural reform programmes, a slight reorientation of budget cuts so as to hit less the poor and a bit more the well-off, and all this couched within a firm and heartfelt commitment to remain in the Eurozone. There is nothing radical here and as the recent report from the IMF suggests, it is almost conventional wisdom that some amount of debt relief will have to come at some point. We are thus faced with a complete breakdown in negotiations at a time when the actual gap between creditors and debtor is remarkably small. Syriza has been vilified for its extremism but the truth is that its position has not been nearly as radical as it should be.

Syriza’s utopian strategy

From the outset and including last Sunday’s referendum, the Syriza strategy has been based on a completely utopian premise: that the prime minister and finance minister can convert the rest of the Eurozone to a post-austerity economic programme where losses are written off and more breathing room is given to crisis-hit countries. This has been the Syriza wager: that it alone can convince the rest of the Eurozone to change course.

The difficulty is that on this point Syriza has missed the historical boat. Ever since the Maastricht Treaty, European integration has entered into a ‘new intergovernmental’ phase. Member states have moved forward with integration but have kept themselves at the heart of the process. Real and lasting delegations of power to supranational institutions has been kept to a minimum, with national governments preferring to beef up bodies such as the Eurogroup and the European Council. New agencies have been created instead of giving more powers to the European Commission. Even the current vice-President of the European Commission Frans Timmermans declared recently that “ever closer union” was dead. Syriza’s vision of debt mutualisation and hope for an ever closer and more politically integrated Eurozone has fallen on deaf ears. The future is lies in incremental change overseen by national governments.

The only real negotiating power Syriza has stems from the fact that whilst Eurozone membership has long had an existential quality for Greek citizens and the Greek political class, this is also true of other member states. They are also committed to keeping the Eurozone together as it appears to them as a condition of their own statehood. This is why the creditors keep coming back to the negotiating table even when they said they have had enough. There is real no alternative to the Euro for both Greece and the other members of the Eurozone.

Why is structural reform so difficult?

Part of the difficulty faced by the Greek government in its negotiations is that the implementation of structural reform amounts to a profound transformation of the Greek state. It is not laziness or hypocrisy that makes structural reform difficult in Greece.

The post-authoritarian Greek state was rebuilt along two lines. One involved a commitment to EC membership, with the EC serving as a guarantor of the modernity and economic development. Democratization in Greece was made conditional upon integration into EC institutions, as was the case in Spain and Portugal. The other was the ‘Pasokisation’ of the Greek political economy, where state-society ties passed through the dominant role of the Pasok party in redistributing public wealth.

This sort of clientelism survives today in the form of the government’s financial commitments to its public sector employees and pensioners. Reform of these sectors, as demanded by the Troika, amount to a profound restructuring of the social basis of the post-dictatorship Greek state. Hardly an easy task nor one that can be achieved through external monitoring by EU technocrats. The difficulty for Greece today is that the European dimension of its statehood no longer matches its domestic political economy. One of the two has to give.

The Left and self-determination

Syriza’s position has not been radical enough. It has tried to balance a commitment to Eurozone membership with an anti-austerity message. Far from being a strategic or even a tactical choice, this reflects a deep-seated ambivalence that takes us to a basic problem facing the European Left today: its position on national self-determination.

Over the last few decades, European social democracy has abandoned national sovereignty, preferring to throw its lot in with the European Union. This is what gave the recent referendum in Greece its terrible pathos. On the one hand, the ‘No’ was a powerful affirmation of a Greek desire to reject the terms of the agreement with its creditors. On the other, the ‘No’ lacked any real content as no-one was willing to contemplate exit from the Eurozone. The Greeks are left to celebrate their ‘No’ whilst their future remains out of their hands.

To seek ‘ever closer political union’, as thinkers like Jurgen Habermas do, is to pursue a dream that is even less likely to be realized today than ever before. It was often said that those who believe in national democracy are the fantasists and dreamers, the “small state nostalgists” as Habermas calls them. In fact, the real fantasists are those who think that a democratically organized supranational Europe can emerge out of an institution like the Eurogroup or the European Parliament. Compared to that fantasy, exit from the Eurozone appears a much more tangible option that Syriza should embrace instead of shy away from. They talk the talk of national sovereignty but do not follow it through.

Dismantle the Eurozone

The right response to the current crisis is to dismantle the Eurozone. As it stands, there is no way of reconciling national democracy with a continued commitment to Eurozone membership.

Ever since it was created, the common currency has served to sharpen the differences between national economies in Europe. Diverging rates of competitiveness were masked by easy access to credit, something which ended in 2009. We are left with a situation where national populations are expected to bear the full brunt of adjustment whilst governments have no freedom of manoeuvre in either monetary or fiscal policy.

These sorts of expectations about internal adjustment to wages and prices are what brought the Gold Standard to an end, precisely because it became incompatible with national democracy. Only the involution of national democracy and the abandonment by the Left of its belief in national self-determination has allowed the Eurozone to survive thus far. It should be dismantled in order that national populations across Europe have a greater control over their fate.

Chris Bickerton


More German than Left

6 Jan

This post is the first in an occasional series on the European Left and the Euro-impasse that we will run over the course of the next few months. We shall begin with a series of posts from the editors and guest contributors on the German Left.


More German than Left

The German Left has always been a lynchpin for the international left. For that very reason it has also been a disappointment. From the failed hopes of 1848 to Ferdinand Lasalle’s cooperation with Bismarck; from Bernsteinian revisionism to the SPD’s vote for war credits during WWI; from the failed revolutionary years of 1918-1923 and the split between communists and socialists in the interwar period; from post-war, Brandt-era ambivalence and indecision to the decisive abandonment of socialism by the 1980s, the German Left’s potentiality never quite measured up to its actuality. Nobody has been sharper on its failings than its own progeny. Marx’s famous critique of Lasalle, Luxemburg’s condemnation of reform, to name just two, mark not only the missed historical possibilities but the dashed hopes. There was a moment but it was never realized.

Today, Germany remains the center of Europe, and the German Left the only agent able to shape a different course than the current sadomonetarism emanating from the Bundesbank. The election of Hollande in France yielded the sop of high marginal tax rates, but within the context of a concession to austerity. Some brief sparks were ignited in Greece, during last year’s election campaign, but the leader of Syriza – Alexis Tsirpas – blinked and eventually caved into the prevailing ‘bail-out in exchange for cuts’ consensus. The SPD’s lukewarm reaction to Syriza, replicated in many other Left parties across Europe, contributed to its capitulation.

The historical difference now is that there is not much reason even to view the German Left as…Left. Angela Merkel’s recent appointment to a third term as chancellor, under a Grand Coalition including the SPD, involves a nominal turn leftward on condition that everyone accept more of the same with respect to the major economic issue of the day: the euro and its debt problems. Sabine Lautenschläger’s nomination to replace Jörg Asmussen at the ECB came with a promise to increase German pressure to focus on inflation rather than employment. As Wolfgang Munchau recently commented, among the rather narrow mainstream alternatives, the idea of debt mutualization and bank backstopping appears to have finally lost out to “austerity and price deflation.” The SPD, meanwhile, happy for scraps at the table, refuses to fight for leadership of Germany, let alone Europe.

The problem for the European left is that Germany is the core. Without the SPD breaking from its benighted belief that the rest of Europe needs to follow its decade of ‘virtuous’ wage-suppression, not to mention its ruinous embrace of European-wide internal devaluation, there is little wiggle-room for the rest. The dismal LTROs, ELA, and other monetary efforts, which receive only reluctant German support as it is, all come with the austerian string attached. The German Left has accepted the basic equation that since their workers have been sucking it up, it’s time for everyone else to do the same. This demonstrates a distinct lack of trans-European solidarity, let alone serious assessment of the possibilities. Moreover, the unwillingness of the German Left to articulate a clear alternative strategy means it tacitly participates in the increasingly nationalist terms in which the whole Euro drama has been cast. Ugly nationalist stereotypes have been trotted out to explain everything from ‘Mediterranean’ stagnation to the so-called dangers of eastern immigrants to the ‘virtues’ German prudence. In the absence of a conflict within Germany between concrete alternatives – alternatives that can be repeated across Europe – Germany appears unified around trying to punish the rest of Europe. And as Marx once said: “relations…appear as what they really are.” The German Left really is, at this point, more German than Left. The Left in Germany (and elsewhere for that matter) has never been rewarded for being the junior partner in a national coalition, but until it becomes willing to take risks and challenge its major opposition, it will remain what it appears to be. It could be more.

Sturm und Draghi

23 Dec

The announcement that the ECB “unleashed a wall of money” to prop up ailing European banks has been greeted with general positive noises, and some confusion. The money is €489 billion in three-year loans, meant to inject liquidity into a tightened banking system, and to allow the banks to, among other things, buy up sovereign debt that the ECB won’t buy directly. The confusion arises from the relationship between the words and actions of Mario Draghi, the recently arrived president of the ECB. Draghi has been at pains to say that the ECB will not act as a lender of last resort, buying up sovereign debt that nobody else wants, without a major EU treaty-change that includes enforced austerity. As he said in an interview with the Financial Times “We have to act within the Treaty. In general, there must be a system where the citizens will go back to trusting each other and where governments are trusted on fiscal discipline and structural reforms.” Yet, as any number of commentators have noted, providing this wall of money seems to be a kind of end-run around the treaty problem. Though it might not work in the long-run, it is taken by the likes of Paul Krugman as the admirable ‘subtlety‘ of eurocrats, finding solutions within the legal arrangements.

There is of course something positive about the head of an unelected, somewhat secretive, yet enormously powerful institution formally stating that he must follow existing law – the EU treaty in this case. Indeed such affirmation of the treaty is especially important given that many have called on Draghi simply to ignore the treaty and backstop the sovereign debt of southern European countries, or argued that it wouldn’t really violate the treaty. But there are deeper, more widespread political problems here, not least with Draghi’s own political game. If, in fact, Draghi and the ECB were merely playing the responsible Big Bank, keeping its head down and following the rules, and leaving the politics to the politicians, then that would be…something. But it is quite evidently not what Draghi has been doing.

The two-timing – saying one thing, and coming up with new, inventive ways of doing the other – illuminate something of a power game that the ECB is playing. Publicly, Draghi is holding back the ECB backstop under conditions – namely, judicially or politically enforceable limits on fiscal policy of European states, inscribed in a new treaty. That is a straight-up political demand, backed by the power that only the ECB possesses: the economic power to bail-out the southern states and European banks. It is a political demand, moreover, made upon already hurting European publics to endure not just a period of contraction, but a major restructuring of the relationship between their states and their economies. The idea behind the rewritten treaty, in other words, is not just to impose the pain of austerity measures, nor even to dismantle the welfare states, but to inscribe the logic of constraint and lowered expectations into the new supranational and by extension national political institutions.

Draghi, of course, is not the only political agent here – Merkel has led the charge for treaty-change with austerity written in. But her actions are unabashedly and professedly political, and understood to be so.  Draghi’s statements and positions are taken to be somehow the words of an expert, nevermind the ‘subtle’ coercions of offering a continental bailout only on strict terms. Draghi’s views are supposed to be the limited advice of an economic expert, and one who in some sense a neutral actor, outside and above politics – like the institution he runs. What makes the political ploy here worse is the power that backs it. As noted, the ECB is the only one with the potential to offer a bailout, or at least commit to printing enough money to buy up debt, which might calm the bond markets and save the banking system. In certain ways, then, Draghi is not just more German than the Germans, but has a power they don’t have.

Of course, the two-timing – such as the wall of money – reflects the fact that the ECB is not all powerful. Or at least, that it is not so flush with power resources that it can wait out this game of financial chicken longer than those unwilling to make the sacrifices Draghi demands. After all, waiting too long makes backstopping a whole lot more expensive, risky and potentially less effective – no doubt one reason Draghi felt compelled to engage in this recent refinancing operation. But it has to be said that Draghi is playing a political game, one that favors certain interests over others, with potentially far-reaching consequences depending on the ultimate political and legal changes.

Of course, as mentioned, the point is not that Draghi is some all powerful financial witch-doctor, who can wave his magic wand – or not – and get the world to do his bidding. In fact, the other striking feature of the debate around ECB actions is the way in which it speaks to the restoration of a certain status quo ex ante. Although the financial crisis of 2008, and its potential sequel in Europe, produced numerous arguments that mainstream economics had been discredited, and that a “new economic paradigm” was needed, what is striking is just how little has changed. Before the crisis, the dominant view was that a period of Great Moderation had been achieved, largely thanks to the machinations of expert central bankers who fiddled with interest rates. One of the background assumptions of this view was that monetary, rather than fiscal, policy was a finer instrument of economic engineering, not least because ‘less political’ and thus less prone to the messy distortions of democratic politics. Central bankers were gods, or at least master governors, to be appreciated and listened to (despite their continued interest in things like wage suppression). Little moves with interest rates were guessed at and awaited; the public divined, parsed, and poured over statements by the likes of Greenspan a bit like Kremlinologists looking for the relevant post-Cold War obtuse institution of power. Everybody knew that their economic fate was largely out of their hands, but thankfully in trusted hands.

Now we are supposedly on the other end of that paradigm, yet caught in the Sturm und Draghi of another bewildering central bank’s enigmatic words and actions. It is hard to accept how it is that so little could change. Or worse yet, how much the old pattern in certain ways has become even more entrenched. The most significant economic decisions are placed in the hands of undemocratic figures, even when this means toppling national governments (Italy, Greece) to replace them with technocrats. And the dominant common sense is in favor of austerity, rather than rational, democratic control of the economy. The dead-weight of ideological conformity and (hopefully changing) public passivity is what stands out most strongly. At the end of the day, the power of a figure like Draghi is a back-handed reflection of the relative absence, or at least weakness, of alternatives. The truth in the conspiracies about bankers manipulating everything is so much that central bankers favor certain interests but dress up their policies as the public interest (which they certainly do). Conspiracies are a distorted registration of the weakness of the Left, a distortion dangerous because it replaces the political weakness of a potential movement with the comforting illusion that power is beyond anyone’s reach in the first place. Draghi and his ilk should be put in their place and own up to the political game that they play. But they won’t do it voluntarily, and it will take another kind of politics to expand rather than shrink the horizon of economic possibility.

Can the European Central Bank really save the Eurozone?

10 Aug

The Belgian economist, Paul de Grauwe, has been calling for some time for a comprehensive reform of the Eurozone’s institutions. Contagion, he argues, is inevitable in a currency union that lacks adequate political power. There is no way out of the Eurozone crisis other than more political union. It would appear de Grauwe has the ear of European Central Bank chief, Jean-Claude Trichet: over the weekend the ECB started buying up Spanish and Italian government bonds, at rates low than those being offered by the market. Another step towards the ECB acting as a lender of last resort.

De Grauwe’s account of the crisis is simple and compelling. He argues that government bond markets in a currency union like the Euro are “inherently fragile”. They are basically issuing debt in a currency the value of which they have no real control over. Greece, Spain, and Italy all issue their debt in Euros and yet they do not control the value of the Euro in the same way that the UK or Switzerland control the value of the Pound and the Swiss Franc. Governments in London and Bern can, in extremis, force their central banks to print more money. There will always, in theory, be enough money to pay back bondholders. In the Eurozone, there is no such guarantee as the ECB is not a lender of last resort. And this makes the Eurozone inherently fragile. In practice, the ECB has been buying bonds of crisis-struck member states but it has done so as an exception, not as the rule.

De Grauwe’s recommendation is then simply to give the ECB responsibility as lender of last resort in the government bond markets of Eurozone member states. This should put a stop to contagion, according to de Grauwe. But will it? Defaults have occurred in the past in countries that both issue their own currency and have control over their national central banks. Why should the Eurozone be any different?

De Grauwe’s analysis supposes that there is an institutional quick fix to the Eurozone’s problems. This is akin to suggestions made in the US, covered in the Current Moment, about resolving the debt burden via low interest rates and some easy money provided by the US Federal Reserve. Two problems stand out here. The first is that the problem the Eurozone faces is not an institutional one but it is the inability of some Eurozone member states to return to growth. Until national income in troubled Eurozone member states grows faster than state expenditure, or until a realistic prospect of this arrives onto the horizon, the debt crisis will continue. The European Central Bank, even as lender of last resort and notwithstanding the esteem with which central bankers are held today in macro-economic circles, cannot restore profitability to national economies of the Eurozone.

The second problem is a political one. De Grauwe has nothing to say about the political implications of transforming the ECB into a lender of last resort. Some are beginning to wonder about the democratic quality of these developments but generally it is considered an afterthought to a more pressing set of institutional questions. This repeats the patterns of the past: innovations at the EU level are subsequently presented to domestic populations as a fait accompli, to be given a stamp of approval by voters. Why this should work now, when previous efforts to do the same failed miserably, is anyone’s guess. The Eurozone’s debt crisis, if resolved, is likely to be followed by a political crisis as the EU scrambles to find legitimacy for its new powers.

Who pays?

25 Jul

Reaction to the second Greek bail-out plan has been largely positive. Most commentators have described it as a step in the right direction. Critics of the EU in the financial press have been cautiously optimistic about the plan. Politically, a key component of the plan is its inclusion of private investors. This had been the basis of a long struggle between Eurozone member governments, with Germany in particular insisting that any solution needed to involve the private sector. This reflected the German government’s belief that not only taxpayers should be left shouldering the burden of dealing with the Greek debt crisis. Lying behind the inclusion of private sectors was the hope this might lessen some of the populist critiques of the existing bail-out strategies: not only the people have to pay, but the bankers too. When German leader, Angela Merkel, has to defend the plan in front of German parliamentarians after the summer break, this will no doubt figure as part of her argument.

Looking at the figures of the proposed plan, it is clear that private sector involvement only represents a very small part of what is still overwhelmingly a government-backed plan. The precise nature of private sector involvement is unclear as the EU’s final communiqué pointed to a variety of different options. The FT breaks down the plan in the following way. Of the 109 billion Euros plan, 34 billion Euros will be of the traditional bail-out kind, as offered to Greece, Ireland and Portugal in earlier bail-outs. The remaining 75 billion Euros will in various ways be directed at encouraging private sector involvement. 20 billion Euros will be used to buy back Greek bonds on the open market. Another 35 billion Euros will serve as a pot of money to guarantee the new bonds being offered to private investors. In order for them to give up their existing and more immediate claims on Greece, in exchange for claims with a much longer maturity, private investors are being offered gold-plated, triple A-rated debt.  The last 20 billion Euros, writes the FT, will be used “to repair damage of buy-backs, swaps and roll-overs”.

Overall, it is estimated that private bondholders will be encourage to accept a loss of around 20% in the current value of their loans, relatively little as defaults go. The main provisions for Greece come overwhelmingly from other Eurozone member governments. Much of the political discussion has been around sharing the burden of support for Greece across both Eurozone publics and those private investors who saw in Greece in the 2000s an opportunity for making money. This battle pitched Germany against France, with the ECB a virulent opponent of any kind of private sector involvement tantamount to a default of some kind. The current plan suggests that for all the talk of burden-sharing, the picture remains one of private losses nationalized through pan-European bail-outs. An unsurprising result that reflects the particular configuration of economic and political power which prevails today across the Eurozone.

The end of independence

11 Jul

The claim that the European Central Bank was independent of any political interference was always a little difficult to substantiate. Membership of its governing committee was rigidly tied to nationality even though members were expected to vote in the general European interest. Recently, French President Nicolas Sarkozy insisted that Italy retire one of its members in order to avoid there being two Italians – and no Frenchmen – within the upper echelons of the ECB. Neutral indeed. Nevertheless, the ECB’s creation was perhaps the best expression of the belief that short-termist and self-serving politicians need to keep their hands out of the monetarist policy pot. In the monetary policy jargon, this is all about ensuring that central banks can issue ‘credible commitments’ to the markets. So when they say they are going to be tough on inflation, everyone believes them.


Recent events have suggested that the ECB’s independence is being steadily mined by the ongoing Eurozone crisis. One reason is because of the faultlines exposed by the crisis, with the ECB being firmly located on one side of the growing gulf between creditor and debtor interests across Europe. The ECB, and particularly its out-going director, Jean-Claude Trichet, has consistently argued against anything that might look like default on the part of those countries signed up to an EU bail-out package. In so doing, the ECB has put itself forward as the leading defender of the private creditor interest in Europe. Neutral indeed. Most recently, the ECB declared its intention to raise Eurozone-wide interest rates 0.25%, from 1.25% to 1.5%. This is in order to quell inflation, the result of food and energy price-hikes, which some think will provoke higher wage claims in the Eurozone’s bigger economies. The response from Ireland, Greece and Portugal was immediate: does the ECB not realize that in raising rates it is making it even more difficult for these countries to repay their loans?


The second reason is more subtle but also more important. Whilst being officially a non-political body authorized to deal exclusively with Eurozone monetary policy, the ECB has been getting steadily more involved in fiscal policy, notably in providing cash-stricken Eurozone members with much needed liquidity. The ECB, like any central bank directed by political concerns, has been acting as lender of the last resort. It has for some time been keeping the Greek banking system afloat. To date, the ECB has provided about 100bn Euros in loans to Greek banks, in exchange for Greek government bonds classified as junk by the markets.


The official reason why Trichet declares himself so fervently against any default by Greece is that it will create “contagion” in the markets: if Greece defaults, will private investors not believe that Portugual and Ireland will also do the same? But there is another reason why a Greek default would be a problem for the ECB. It would force it explicitly out of its independence shell and into the terrain of political choice. With Greece in default, the ECB could abandon the country’s banking system by ending its loans. Or it could make its role in fiscal policy explicit, providing finance to governments shut out of international markets. This is a choice both Trichet and national governments would rather avoid as it would force them to reveal their cards about whether they support closer political union within the Eurozone. Whilst central bank heads and member states may disagree on this point, they all seem to agree that they’d rather not be forced to have a public debate about it. A Greek default would make that debate increasingly difficult to avoid.

A social investment pact for an anti-social Europe

6 Jul

Recent news about the Eurozone has been dominated by pictures of protesters in the streets of Athens. Europe has become synonymous with austerity and cuts. The message from Brussels, Berlin and Paris is that fiscal rectitude is the only way out of the crisis.

Some within the tradition of European social democracy are arguing against this current. They claim that more competitiveness needs to be complemented by what they call ‘social investment’. The call for a social investment pact has been made by a number of prominent figures within European politics and within the academy. A recent article by Frank Vandenbroucke, Anton Hemerijck and Bruno Palier was entitled ‘It’s a social investment pact that Europe needs!’ Vandenbroucke is a member of the Belgian senate, former social affairs minister and a prominent figure within the Belgian socialist party. Hemerijck is dean of the social sciences faculty at the Free University of Amsterdam and Palier is a researcher at SciencesPo, Paris.

The term social investment itself dates from the end of the 1990s and refers to attempts at mitigating the social costs of labour market reform. It is the missing ‘social’ component to what many on the left consider heartless supply-side policies. Vandenbroucke and his colleagues claim that before the current crisis, European governments were reasonably successful at raising labour market participation rates through welfare reform whilst also protecting social provision. This is what they call “flexi-security”. The idea of social investment is included in the European Union’s long-term economic plan, Europe 2020, a set of employment, growth and social policy objectives that follow on from earlier plans, such as the Lisbon Strategy of 2000.

The impact of social investment on inequality across Europe is difficult to determine. Central is the idea of an equitable reform of public services but whether this has been achieved anywhere in Europe is much contested. It is certainly true that over the last decade welfare state reform has not followed a rigidly neoliberal line, ruthlessly forcing people off welfare and into precarious and poorly-paid work. The term social investment captures a distinctive feature of contemporary welfare state reform in Europe that points to something ideologically more complex than what the term ‘neoliberal’ would allow.

But there are reasons to be wary of a call for a social pact for Europe. For a start, there is a major gap between those calling for this social pact and those for whom it is intended. As argued elsewhere on this blog, the specific content of reforms, whether it be financial or social, will reflect those involved in conceiving and implementing them. There is something paternalistic about a set of ideas and policies that rest on such a gap between proponents and recipients. It is also odd to push the idea of social investment at a time when mainstream politics seems so anti-labour. In a recent wave of public sector strikes in the UK, British Labour Party leader Ed Milliband declared the strikes “wrong” because they were an inconvenience for working parents. Milliband, no doubt, is a firm supporter of the idea of social investment.

It is also unclear whether the social investment idea is anything more than an attempt to soften the bumpy journey towards a more unequal society. The focus is on helping individuals “adapt”, re-skill and manage their transition towards a more flexible labour market. That leaves the biggest question relevant for social equality – wages and the distribution of the social product across society as a whole – untouched. With a Eurozone growth model based on wage restraint and recycled export revenues, what contribution can social investment make? The idea of a social investment pact appears more as a complement to an anti-social Europe than a real challenge to it.

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