Swapping one mirage for another: the Left’s turn away from social Europe

Witnessing the punishment inflicted on Syriza by the European Union (EU) as well as that party’s own inept handling of the Eurozone crisis, the Left is recoiling from the ‘good Euro’ strategy – the hope for ending austerity within the Eurozone – and beating a hasty retreat to the shelter of the sovereign state. We have seen explicit calls for the restoration of fiscal and monetary sovereignty to national states, and even calls to explore political alternatives outside of the EU itself. Yet if ‘social Europe’ has been exposed as a mirage, the European Left now risks embracing another chimera – the vision of a social-democratic national state.

The sudden rush to the sovereign state is a remarkably rapid turn-around for the Left as a whole. Although there has long been a rump of old social-democrats suspicious of globalisation and its associated supranational institutions, over the last thirty years the larger portion of the Left subscribed to globalist ideologies and institutions in one form or another. On one end of the spectrum, ‘Third Way’-style movements saw the embrace of political centrism, international competitiveness, free trade and EU integration as a necessary part of progressive politics. On the other end, anti-globalisation activists and non-governmental organisations hoped that the global coordination of various social movements would allow them to ratchet above the nation-state onto a higher, transnational plane of progressive politics. Part of the problem with the latest about-face back towards the state is that the Left itself is not clear about what it is turning away from, and what it opposes in the EU. Stathis Kouvelakis denounces the EU as ‘imperialist’, while Cedric Durand sees the EU as a proto-state defined and captured by neo-liberal capitalist interests.

Durand’s piece exemplifies some of the confusion with which the Left has approached the EU. On the one hand, Durand criticises the EU for being too large and cumbersome to be easily shifted, making it rigid and insensitive to popular will. On the other hand, he criticises the EU for its tiny bureaucracy, having insufficient institutional capacity to effect any meaningful social and political transformation. On the one hand, monolithic and sprawling, on the other a stripped-back proto-state focused only on neo-liberal imperatives. Durand charges the EU with failing ‘to keep diverse societies and social strata together in turbulent times’. The implicit contrast here is between the ‘bad’ EU proto-state, stripped back to its core capacities to serve the interests of neoliberalism, and the supposedly good, progressive national state. But there are several problems with this contrast.

First, it is a mistake to see the EU as a state at all, whether proto-, imperialist, neoliberal or otherwise. To conceptually distinguish the EU bureaucracy from the bureaucracy of its member-states as Durand does is a cardinal error. For what need does the EU have of its own independent bureaucracy, given that the EU itself is nothing more than the intermingling and regional coordination of these very same national bureaucracies? As Christopher Bickerton’s work has shown, the EU is not a new type of state, but a new protuberance from the old nation-state. The EU is the external manifestation of European states’ attempts to manage and defuse popular conflict and social struggle over the last third of the twentieth century, in which the defeat and retreat of social democracy was institutionalised at the pan-European level. Thus what both the pro- and anti-EU Left fails to recognise is that the EU is built on the failures and compromises of late Cold War-era social democracy.

Now that the EU itself is tottering, it would be a mistake to expect social democracy to emerge from the rubble, as the EU itself is built on the ruins of social democracy. Even Durand seems to implicitly concede this, given the limited content that he gives to national sovereignty: ‘Formulating policy proposals guaranteeing people a safety net during this transition will be key to facilitating new electoral victories, beginning with Spain’s elections this fall.’ Here, the minimal protections against destitution offered by old-style social democracy is offered as the defining criteria of state sovereignty in place of the imperative of popular self-rule.

Waiting to excavate the ruins of social democracy from beneath the crumbling EU will lead to nothing – as it is these ruins themselves that are the shaky foundations of today’s European order. In the face of the Left’s defeats in the 1970s, in the 1980s, many on the Left retreated to ‘social Europe’ in the hope that it would emplace supranational protections for the remnants of social democracy. It was contempt for mass democracy, representative institutions and popular support that sustained the Left in the delusions of ‘social Europe’, ‘global civil society’ and ‘global resistance’ over the last two decades. Tragic enough the first time, it would be a farcical error to repeat the same mistake now in reverse – retreating from the dissolved mirage of ‘social Europe’ into the empty desert that is national social democracy. Even while being remote from power, the leader of Podemos, Pablo Iglesias, already seems content to reside in this desert, as evidenced in in a remarkably cynical statement of political abdication when he discounted mass support in the name of compromise with Spanish social democracy.

One way to avoid this trucking in the politics of fantasy, whether pro- or anti-EU, is to see that the struggle against the EU is not the attempt defensively to rally the nation against supranational institutions in order to protect the welfare state, but that it is first and foremost a struggle to restore popular self-rule – or, in a word, sovereignty.

Philip Cunliffe

Look not to the peripheries

In recent weeks, Yannis Varoufakis, former Greek Finance Minister, has been under fire because of a secret group he ran, from February to June, whose purpose was to plan for a possible Grexit. Some have charged him with treason – primarily because his group hacked into the Greek Finance Ministry to acquire information they needed for the planning. Others defended him.

Whatever the stakes of this minor power struggle, it is a sideshow. In fact, Greece itself is not even the story. In this post-agreement moment, as the Tsipras government capitulates to the Eurogroup’s diktats, we need to grasp the dramatic failure of Syriza’s strategy in its proper context: the wider exhaustion of Left politics. The primary lesson is not (only) that Syriza failed but that the Left, across Europe, is politically exhausted. It is important to identify this weakness not only to acknowledge the limits of what Syriza could ever have done, but also to counter the emergent left-populist view that this is all about Germany.

To be sure, Tsipras deserves some blame. If the only planning for Grexit was happening in secret, on condition it never be made public and therefore never part of the bargaining strategy, then it was not just a pointless activity but a sign of Tsipras’ opportunistic willingness to use the Greeks as a stage army. They were there to vote, but never to have a real option granted. After all, for an exit to be a democratic act aimed at something like self-determination outside the Eurozone, it could not be a mere technocratic process of figuring out how to print and distribute notes, denominate payments, and sort out IOUs. It might have required seizing banks to prevent capital flight, nationalizing industries to prevent them being bought up by oligarchs who were hoarding euros outside Greece, rationing of certain basic supplies, even subsistence level economic production for a time. That is something the Greeks would have had to have been prepared for, something asked of them, and something which would have needed explicit popular backing. Tsipras made no effort in this direction and one has to think that he did not ultimately believe in his own people enough even to put the question to them.

Nevertheless, we should not lose sight of the extraordinary constraints that Tsipras and the Syriza government generally were under. They took power after Greece had already been through multiple rounds of austerity and seen roughly a quarter of its GDP evaporate. The financial thuggery by the European Central Bank, which engineered a quasi-bank failure in the last days of the negotiations by drastically reducing emergency funding, was illegal and extremely coercive. President of the Eurogroup, Jeroen Djisselbloem, doubled down on the threat, saying “we are going to collapse your banks.” It was clear that Schäuble wanted to turn Greece into something like debtor’s colony and was willing to take only that or let Greece go altogether. Even if Tsipras had, from the very beginning, made more effort to plan for the exit, looked for alternate sources of financing, pre-emptively printed drachmas, readied to seize the banks, moved to nationalize key assets, prepared capital controls, and taken the 50 other steps necessary to minimize the costs of exit, the democratic act would not have been a revolutionary step into a heroic, post-austerian future. It would have been a necessary, high-cost, step away from the clutches of the Eurozone.

The reason Greece was so limited in options is that Syriza had no meaningful support from the rest of the European Left. It had no support because the mainstream left parties, from the German SPD to the French Socialists, on through other Western European parties, have so fully committed themselves to the Eurozone and to some version of austerity that they were in no position to open the space within which a proper resistance to the Eurogroup’s divide-and-conquer sadomonetarism could be challenged. Syriza ran up against some world-historic limits that allowed someone other than the Left to dictate not just the basic terms but also the governing ideas of public discourse.

The best way to appreciate this is to note what could have been said but wasn’t. For one, it is striking how quickly the sovereign debt crisis of 2010 became pitched in nationalist terms, as a competition between creditor and debtor nations. In fact, the sovereign debt crisis had its origins in reckless lending by major French and German banks, which mirrored some of the profligacy and corruption of the Mediterranean spenders, and the majority of the money of the early bailouts was channeled into making those banks whole. This was true across the board but especially true in Greece. As Mark Blyth notes:

Greece was thus a mere conduit for a bailout. It was not a recipient in any significant way, despite what is constantly repeated in the media. Of the roughly 230 billion euro disbursed to Greece, it is estimated that only 27 billion went toward keeping the Greek state running. Indeed, by 2013 Greece was running a surplus and did not need such financing. Accordingly, 65 percent of the loans to Greece went straight through Greece to core banks for interest payments, maturing debt, and for domestic bank recapitalization demanded by the lenders. By another accounting, 90 percent of the “loans to Greece” bypassed Greece entirely.

The European people funded the bank bailouts, preserving their irrational financial system, and effectively nationalizing the debt through the Troika institutions. This could have been the start of more democratic control over the economy. Instead, the price of the bailouts was austerity for the southern countries, even less democracy (remember two elected governments, in Italy and Greece, were replaced by unelected technocrats), and worst of all the transformation of a conflict between the people and their economic system into a conflict between creditor and debtor nations. After all, once the majority of the debt was nationalized through the bailouts, the French, Dutch, other Northern Europeans, but above all the Germans, became creditors for the Italians, Spaniards, Portuguese and Greeks. The parties of the Left in these Northern countries could have tried to resist the nationalist impulse that coursed through the financial circuits of the European Financial Stability Facility/European Stability Mechanism, Emergency Liquidity Assistance, and other conduits of the bailout programs. They were, however, so thoroughly compromised by their commitment to the EU and the euro, not to mention their cooperation with what we now know as austerity, that there was no way out.

Consider the Germans. Any left-wing politician worth his salt could have pointed out that the way Schäuble talked about Greeks in public was likely how he talks about German workers in private. And, further, that Schäuble represented the interests of a fraction of German capital, not the German people as whole. Indeed, a German politician could have further pointed out that keeping Greece in but forcing it into deeper internal devaluation – namely, benefits reduction and wage repression – simply threatens to lower the wage floor for all of Europe, especially since the latest agreement also involved a direct assault on labor rights. However, the German SDP has been imposing wage stagnation on its own working class for the last two decades, most notably with the Hartz reforms of the early 2000s, imposed more or less in tandem with the rise of the euro. These reforms, pushed through when the SPD’s Gerhard Schröder was Chancellor, reduced benefits and contributed to wage stagnation. Even when the SDP lost to Merkel’s Christian Democrats, they agreed to be the junior partner in a governing coalition, in exchange for a few concessions, some lousy portfolios, and fealty to Merkel’s vision of Germany in Europe.

This has left the only significant party with any capacity for opposition utterly compromised. How do you tell workers whom you have been telling to accept wage stagnation and benefits reductions that they should now turn around and spend more money bailing out Greeks? Why save Greek benefits when your own are being chipped away? The SPD has no answers, no capacity even to generate answers, and even if it had generated answers, it could have never presented itself as a credible opposition, able to support the Greeks. That is why the whole affair looked like a unified, German hegemonic operation. Not because Germany really does have a national interest in dominating Europe – no working class has a stake in intensified nationalistic conflict – but because the expression of class divisions has been suppressed by the mainstream Left party itself.

A similar story could be told about the French Socialist Party. As already argued on The Current Moment, the French Parti Socialiste (PS) is not a working class party. Indeed, the abandonment of the working class by the French Left goes some way to explaining the popularity of the Front National amongst the young working class French. They rightly judge that the PS no longer represents them. Hollande’s tepid support for Tsipras soon after the latter’s election quickly turned into hostility. Hollande’s intervention at the last minute to stop Schäuble’s push for Grexit was a matter of French national interests, not of ideological or class solidarity. Hollande calculated that a German-provoked Grexit would make life in the Eurozone quite a bit more difficult, with rules ever more rigid. A similar calculation was made by Italy’s Matteo Renzi.

The PS’s commitment to European integration and monetary union stems from Mitterrand’s u-turn on membership of the European Monetary System (and the Exchange Rate Mechanism within it) in 1984. Whilst Mitterrand justified his decision to remain in the EMS in the language of Europe and peace, it fitted with his wider goals. He had become convinced of the need to reform the French economy through domestic adaptation rather than to use devaluations of the French franc as a basis for economic competiveness. The EMS was a rules-based framework that would help Mitterrand to pursue this strategy. De Gaulle’s attempt at internal reform failed with the general strike of 1968 and a devaluation in 1969. The Barre Plan of 1976 had also failed, which was why Mitterrand’s alternative of ‘Keynesianism in one country’ had been so popular in 1981. When he abandoned it a few years later, he brought the PS in line with the now established view about the need for an external monetary anchor to encourage reform internally. Mitterrand’s conversion to the power of external rules has become a core belief within the PS and there was no chance that Hollande, Valls, Fabius or Macron would challenge this by supporting Syriza. For them, as for the rest of the European Left, there is no alternative to this way of conducting economic policy.

The failure we see is, therefore, not just one of parties taking the wrong stance, or being compromised by their past commitments. It is also the dearth of alternative, left-wing ideas. Being anti-austerity is no longer enough, and it hasn’t been for a long time. It is one thing to say that turning Greece into a debtor’s colony, or undermining the European welfare state, is immoral. It is another to have some conception of and belief in the alternative. No doubt one reason that Tsipras and Syriza were afraid of what Grexit would take is because few found it credible even to consider nationalizing the banks. They only got as far as capital controls, very likely an example of how halfway can be worse than none or all. But the point is that, beyond outrage, there isn’t much in the way of a credible Left alternative to what gets shoved down the people’s throats each time the dollars or Euros run out. In such a political and ideological climate, there is little the Greeks could have done.

In fact, the degree of hope invested in Syriza by the wider European Left, especially around the time of the referendum, was the product of political displacement – not so dissimilar from left-wing support for the ‘Yes’ vote in the Scottish referendum last year. Unable to lead directly, the Left will project its needs and desires onto anything that looks vaguely oppositional, and Syriza had the added advantage of having some actual left-wing elements in it. If Syriza failed to lead, their failure only reflected the wider Left’s failure to imagine itself leading a popular movement that is willing to take responsibility for running society out of the hands of a bankrupt elite.

This is a failure not only of Syriza, but of the only other significant movements that have emerged out of the European status quo. Consider Pablo Iglesias, leader of Spain’s Podemos Party. In July Iglesias took pains to distance himself from Greece and to commit himself, if elected, to staying in the euro. He then openly professed that there is nothing he can do to resist the anti-democratic character of the EU – despite claiming the right to lead 45 million people. What better sign that it is not only the technocrats of Europe that are queasy about democracy. The peripheries and the core are constrained by the weakness of the Left everywhere.

Alex Gourevitch

Why Syriza Failed

Recent events in Greece have baffled many observers. Prime Minister Alexis Tsipras walked out of talks with Greece’s creditors, calling a snap referendum on their proposals. It appeared to be crunch time. Tspiras denounced the EU’s ‘blackmail-ultimatum’, urging ‘the Hellenic people’ to defend their ‘sovereignty’ and ‘democracy’, while EU figures warned a ‘no’ vote would mean Greece leaving the Euro. Yet, even during the referendum campaign, while ostensibly pushing for a ‘no’ vote, Tsipras offered to accept the EU’s terms with but a few minor tweaks. And no sooner had the Greek people apparently rejected EU-enforced austerity than their government swiftly agreed to pursue harsher austerity measures than they had just rejected, merely in exchange for more negotiations on debt relief. This bizarre sequence of events can only be understood as a colossal political failure by Syriza. Elected in January to end austerity, they will now preside over more privatisation, welfare cuts and tax hikes.

How can we explain this failure? I argue three factors were key. First, the terrible ‘good Euro’ strategy pursued by Syriza, the weakness of which should have been apparent from the outset. The second factor, which shaped the first, is the overwhelmingly pro-EU sentiment among Greek citizens and elites, which created a strong barrier to ‘Grexit’ in the absence of political leadership towards independence. Third, the failure of the pro-Grexit left, including within Syriza, to win Syriza and the public over to a pro-Grexit position.

The ‘good Euro’ fantasy

The strategy pursued by Tspiras and his former finance minister, Yanis Varoufakis, has been dubbed the ‘good Euro’ approach. Essentially, they argued that a resolution to Greece’s economic depression could be found within the confines of the single European currency. The failure of previous governments to do this was simplistically assigned to the fact that they ‘never negotiated’ with the Troika but merely implemented its demands. Instead, Syriza would make common cause with other anti-austerity groups and sympathetic governments across Europe, pushing for more favourable bailout terms. This involved an attempt to ‘delegitimise’ the creditors by appealing – as Tsipras did even when denouncing the creditors – to the ‘founding principles and values of Europe’, supposedly norms of social justice like ‘rights to work, equality and… dignity’. From this perspective, the referendum was never intended to be a decisive moment for the restoration of Greek democracy and autonomy. It was merely called to strengthen the Greek government’s position when bargaining with the creditors, which is why Tsipras never stopped seeking another ‘bailout’ even as campaigning was underway.

But to any clear-eyed observer, this strategy was disastrous from the outset, because it rested on two flawed premises.

The first was that the allies Syriza sought were either too weak, or simply did not exist. Perhaps the most remarkable thing about the European response to the global financial crisis has been the near-total absence of any effective resistance to the conversion of a banking crisis into a fiscal crisis of the state and from there to the imposition of austerity. With the exception of Greece and Spain, elections across Europe have tended to shift goverments to the right, even – as in Britain – after five years of cuts to state spending. The lack of effective anti-austerity resistance itself reflects the wider collapse of left-wing political forces from the 1980s. The disarray of the rump parties of social democracy, clearly unable to offer any alternative to austerity, is merely the prolonged death rattle of this epochal defeat. This was never promising terrain for a ‘good Euro’ strategy.

One hope of Syriza was the rise of Podemos in Spain – like Syriza, a loose alliance emerging from street-level, anti-austerity protests. But, as Varoufakis rapidly realised, ‘there was nothing they could do – their voice could never penetrate the Eurogroup’. Similarly, while Syriza notionally classified EU governments as pro-austerity, anti-austerity and neutral, with pro-austerity governments ostensibly in the minority, it was unable to leverage any international support. The French – perhaps the main hope – promised support in private, but criticised Greece in public. Nor were the governments of other countries suffering from EU-imposed austerity sympathetic. In fact, Varoufakis recalls, ‘from the very beginning… [they] made it abundantly clear that they were the most energetic enemies of our government… their greatest nightmare was our success: were we to succeed in negotiating a better deal for Greece, that would of course obliterate them politically, they would have to answer to their own people why they didn’t negotiate like we were doing.’ It should therefore have been immediately clear to Syriza that the building materials for the progressive bloc it hoped to construct simply did not exist.

The second flawed premise was ‘leftist Europeanism’, the idea that the European Union is primarily about values of ‘social justice’, such that appeals to these values could overcome demands for austerity. Again, this notion was ludicrous from the outset. By the time Syriza was elected, the EU had already subjected the Greek people to grotesque abuses. These include: 25 percent unemployment (57 percent among youths) by 2012; the mass collapse of small businesses; a 25 percent rise in homelessness from 2009-11; a 75 percent rise in suicides from 2009-11; mass emigration; and a massive health crisis, with spikes in epidemic diseases and a drop in life expectancy of three years (a phenomenon generally only seen in war-torn countries), nonetheless followed by a further 94% cut in health funding from 2014-15. Even pro-EU liberals outside Greece are now reconsidering their naïve faith in ‘social Europe’ after what has happened there. To any Greek, the real values being pursued through the EU ought to have been crystal clear. As one Varoufakis advisor notes, ‘the only weapons… [Syriza brought] to the negotiating table were reason, logic and European solidarity. But apparently we live in a Europe where none of those things mean anything.’

 

Eurobarometer: percentage of EU citizens expressing trust in EU institutions. Source.

 

Eurobarometer: what does the EU mean to you personally? Source.

As Varoufakis and Tspiras discovered almost immediately, EU institutions have little to do with democracy, either. The informal Eurogroup of Finance Ministers, Varoufakis notes, makes ‘decisions of almost life and death, and no member has to answer to anybody’. ‘From the very beginning’ (i.e. from their first meeting in February), Varoufakis encountered a ‘complete lack of any democratic scruples, on behalf of the supposed defenders of Europe’s democracy’. Germany’s finance minister told him: ‘Elections cannot change anything’. Some ministers agreed with Syriza’s critique of austerity, but essentially said, ‘we’re going to crunch you anyway.’ What further demonstration did Syriza need that EU leaders are not interested in social justice, only containing the Euro-crisis – and thereby protecting their own shoddy financial institutions from debt default and contagion – by making Greece the whipping boy of Europe?

The Greek fetish of European membership

Unsurprisingly, critics had declared the ‘good Euro’ strategy a failure as early as February, while Varoufakis’s post-resignation interviews reveal that its chief executors also swiftly recognised its flaws. So why did it ever appear a good idea in the first place? Ultimately, Syriza was elected on a platform both of ending austerity and remaining in the Euro – the latter position being shared by all of its main political rivals and by 80 percent of the public. This contradictory position reflects the attachment of Greek citizens and elites to ‘Europe’ as a refuge from their domestic political difficulties, and thus a reluctance to confront and resolve these difficulties alone.

As The Current Moment’s co-editor, Chris Bickerton, has shown, this is part of a general trend across the EU. From the 1970s, faced with crises of rising expectations and increasing social unrest, European elites have – through varying national trajectories – tried to create a new social, political and economic settlement by entrenching themselves within international elite networks. The EU’s structures are generally not supranational authorities but rather elite solidarity clubs, where ministers pursuing unpopular ‘reform’ agendas can draw upon each other’s support against their respective populations, thereby basing the content and legitimacy of their actions not on democratic mandates but on the legalistic European processes of policy coordination and harmonisation. By linking virtually every state apparatus across European borders, elites have thereby transformed once-sovereign nation-states into EU ‘member-states’, heavily constrained, with popular sovereignty deliberately negated. European elites can no longer imagine life outside of these structures, because it would represent a vast step-change: a need to re-engage with their own populations as the sole source of their authority, and the need to articulate clear political visions for their nations instead of relying on the latest EU action plan to guide their polities.

Each member-state has followed its own particular trajectory into this dismal arrangement. In Portugal, Spain and Greece, the process was strongly marked by their 1970s transition from authoritarian rule. In much the same way as the recent Scottish referendum proposed to make Scotland independent of the United Kingdom but immediately constrain its autonomy by retaining EU membership, these southern European nations emerged from authoritarian rule only to constrain democratic choice by swiftly joining the then European Economic Community. For the Greeks, joining ‘Europe’ was apparently a way to help draw a line under the past. It signalled their rejection of military rule, their ‘identity’ ‘as Europeans’, their distinction from authoritarian neighbours like Albania and Turkey. And it precluded the return of authoritarianism by locking Greece into various intergovernmental agreements and processes that entrenched liberal rights. The same motive and process had guided the formation of the European Convention on Human Rights in the early post-war years, and the later flight of Eastern European states from ‘Brezhnev to Brussels’, as Bickerton puts it.

Thus, for wide swathes of the Greek public, and especially the liberal and left elite, membership of the EU is valued precisely for its constraints. The fear, as Varoufakis himself clearly articulated, is that the beneficiaries of Grexit would not be the ‘progressive left, that will rise Phoenix-like from the ashes of Europe’s public institutions’, but rather ‘the Golden Dawn Nazis, the assorted neofascists, the xenophobes and the spivs’. His successor, Euclid Tsakalotos, issued similar warnings from the foreign ministry. Their fear was essentially of what the Greek people would do, left to their own devices.

This concern is hardly unique to Syriza. Across Europe, the dominant – perhaps only – elite justification for European integration is that its only alternative is a return to nationalism (or worse) and war. The Greek version of this politics of fear is simply mediated through the recent historical experience of military rule. Syriza’s embrace of this pessimistic narrative clearly signified a profound lack of faith in its own capacity to lead Greeks towards a more progressive future as an independent nation.

This quite widespread ideological attachment to Europe was undoubtedly reinforced by the apparent economic benefits of EU membership before the Euro crisis. In 1974, when the Colonels’ regime fell, Greek GDP per capita was just $2,839. When Greece joined the EEC in 1981, it was $5,400. By 2001, when Greece joined the Euro, per capita income had more than doubled to $12,418. Under the Euro, average incomes then nearly tripled to $31,701 by 2008. Greece literally appeared to go from third world to first in the space of two generations. In real terms, of course, the increase was always smaller – from $12,829 to $24,148 from 1974-2008 – but this was still a significant ‘catching up’ with other European states. As is now widely recognised, much of the post-2001 boom was fuelled by reckless borrowing and its benefits were always maldistributed, with a narrow oligarchy dominating a state-led patronage system. This is undoubtedly why the Greek oligarchy, while evading the consequences of austerity itself, has waged a strong pro-EU campaign, including through the media organisations it dominates, and is implacably opposed to Syriza, which had pledged to ‘destroy’ the ‘oligarchy system’. However, economic benefits also flowed to a wider coalition, with handouts like early pensions for professional groups and public sector unions supportive of the status quo.

Greek GDP Per Capita, current US$. Source.

 

 

Greek GDP Per Capita (Purchasing Power Parity) 1990=100. Source.

Combined, these factors seem to have made many Greeks leery of Grexit, even as the economy shrivelled. For some, when the crisis struck, there was apparently a guilty sense of the chickens coming home to roost – that ‘the party was over’ – with two-thirds of Greeks actually supporting austerity in 2010. Although this support collapsed over the next four years, fuelling the rise of Syriza, fear of the unknown remained very strong. Even in the most favourable scenarios, restoring the drachma would be hugely destabilising in the short to medium term and risk undoing the residual benefits of Euro membership. This motivation seems particularly strong among those with most to lose.

All of this helps explain the structural constraints facing Syriza leaders upon their election. The Greeks were both tired of austerity and yet fearful of exiting the Euro. Consequently, they demanded an end to austerity within the Euro. Squaring this circle was an impossible task.

But this should not let Syriza off the hook. Insofar as Syriza leaders understood that these popular demands were incompatible, they ought to have exercised political leadership by trying to lead the Greek citizenry towards a more rational position. The most crucial step was to outline a compelling vision for a Greek economy independent of the Euro, where life might be tough for a few years (but probably no tougher than under perpetual EU-imposed austerity), and recovery was eventually possible via the currency devaluation that every sane economist argues is both essential for Greece’s recovery and impossible within the Euro. This Syriza comprehensively failed to do.

Despite their leftist élan, its leaders seem just as incapable as their European counterparts of imagining a future for themselves and their country outside the strictures of European integration. Syriza’s failure remains one of leadership and strategy, irreducible simply to popular attitudes. The Syriza leadership has now embraced a deal that it openly admits is rotten, claiming ‘there is no alternative’. This merely signals a refusal to accept political responsibility for articulating an alternative. Ultimately, they – like the leaders of Europe’s other ‘member-states’ – are too afraid of the consequences of genuinely restoring autonomous, democratic decision-making to their nation. As Stathis Kouvelakis comments, this reflects their ‘entrapment in the ideology of left-Europeanism’. When Greek officials denounce the ‘almost neo-fascist euro dictatorship’, they are heaping the blame entirely on German sadomonetarism while evading their own failure to rebel against it, however difficult that rebellion would undoubtedly be.

As a consequence of this hesitancy, Syriza leaders spurned the growing social basis for a pro-Grexit line, which emerged despite, not because of, them. While in January 2015, 80 percent of Greeks favoured remaining in the Euro, by the time of the referendum this figure had fallen to 45 percent, with 42 percent favouring the serious consideration of Grexit.

The left’s failure to produce Grexit

This leaves one remaining question: why were those on the left, able to see all of the foregoing problems, unable to change Syriza’s course? After all, much of the above criticism of the ‘good Euro’ strategy was initially articulated by figures within Syriza, most notably Costas Lapavitsas, Stathis Kouvelakis and others members of its ‘Left Platform’. The Greek far left has also long demanded Grexit. Left Platform figures had adopted a position of ‘no more sacrifices for the Euro’ in 2012/13 and have long argued for default and Grexit, with apparently growing support. 44 percent of Syriza’s Central Committee backed the Left Platform’s call to break from negotiations and pursue a radical ‘plan B’ in late May. Tsipras was reportedly being constrained by their resistance in parliament in June. After the referendum, the Left apparently won over a (bare) majority of Syriza’s Central Committee to oppose capitulation, backed by many grassroots activists. Yet, only 38 Syriza legislators (out of 149) rebelled against the government (six of whom merely abstained). Although this left

Tsipras dependent on opposition legislators to survive, in subsequent votes that number has shrunk to 36 (with Varoufakis among the defectors), while Left Platform ministers have been sacked or resigned. Amazingly, the ‘good Euro’ strategy persists.

Part of the explanation for this is the nature of Syriza itself as a loose coalition rather than a traditional leftist party. Initially merely an electoral coalition, formed to contest the 2004 elections, Syriza became a party only in 2012, merging 13 political groups ranging from social democrats to hard-line Marxists. Syriza’s dominant parliamentary faction has always been Synaspismós, itself a democratic socialist coalition, led by Tsipras. Syriza’s ‘Left Platform’ – comprising the ‘Left Current’ and ‘Red Network’ – are relative newcomers and, even when joined by the Communist Organisation of Greece (KOE), also a Syriza member – simply lack the numbers required to impose their preferences.

Moreover, despite the 2012 merger, Syriza did not develop party structures capable of discussing, determining and imposing a collective ‘party line’. This looseness permitted a high degree of open internal dissent and had a ‘horizontalist’ flavour much celebrated by contemporary critics of traditional leftist parties. But the downside is that this organisational form effectively permitted the central leadership to determine policy, while more critical elements simply became a sort of internal ‘loyal opposition’.

Syriza’s leftist elements were not unaware of this, but were compelled to join the party having failed in their initial quest to form a broad, anti-EU alliance with the anti-capitalist left. As Kouvelathis describes it, the Left Platform crowd joined Syriza in 2012 only after these proposals left were rejected by the main component of Antarsya (Anticapitalist Left Cooperation for the Overthrow), a far-left coalition formed in 2009. The KKE, the Communist Party of Greece, also remained aloof. The sticking point was apparently the ultra-leftists’ insistence on a programme of immediate rupture from the Eurozone as the bulwark of ‘neoliberalism’. However, as noted earlier, in 2011/12 this position had virtually no popular support. Nor, reflecting the long-standing decline of Greece’s far left, did these far-left parties have any electoral standing.

Essentially, while Syriza had the wrong line but at least the capacity to get elected, the radical left arguably had the correct political line but lacked any capacity to translate it into policy. Following a crisis common to all European states in the 1980s, the Greek far-left has been extremely fragmented, remaining, despite the formation of horizontalist alliances, unable ‘to actually articulate an alternative project’, and producing ‘catastrophic electoral results’, according to Antarsya’s Panagiotis Sotiris. This strategic ineptitude led them, unlike Syriza, to fail to translate their mobilisation of Greeks in the 2011 ‘movement of the squares’ into party organisation and electoral success. This was arguably a serious failure of the horizontalist model with its renunciation of forming parties capable of seizing the state. As Sotiris laments: ‘we never realized that the question was about power… reclaiming governmental power. At that point, we did not have this position, but Syriza had it’.

Unsurprisingly, then, the Left Platform group threw in its lot with Syriza. But in so doing, it inevitably became somewhat marginalised and constrained: outnumbered within Syriza by centre-leftists and balanced within government by Syriza’s coalition partners, the right-wing Independent Greeks (ANEL). Through this Caesarist balancing act, as Kouvelakis recounts, ‘the government, the leadership, became totally autonomous of the party’. The lack of democratic structures within the loosely constituted party has permitted Tsipras to dominate: the Central Committee has not convened for months. But nor, it seems, has the Left Platform been willing to precipitate a full-on confrontation. Even when voting against the post-referendum ‘bailout’, it carefully manipulated its vote to try to avoid removing Tsipras’s majority support from within his party, the loss of which has traditionally triggered elections in Greece. (Ultimately, so many non-Left Platform Syriza MPs rebelled that this majority was lost anyway, although no election has been called.)

But these questionable tactics, an inevitable part of the difficulties of party politics, are probably secondary to the larger strategic failure, which was to neglect to present the citizenry with an alternative plan for Greece’s future outside the Euro until early July. Kouvelakis now admits this was a serious mistake.

It is not that the plan took forever to draft: it was already in hand long ago, but there was ‘internal hesitation about the appropriate moment to release it.’ This apparently stemmed partly from fears that Greece was ‘ready’ for Grexit. Lapavitsas has long argued for a managed and ‘orderly’ Grexit, but as late as 10 July he openly doubted whether any preparations had been made. Varoufakis’s subsequent revelation that only five officials had been tasked with this suggests that he was correct (as well as signifying his utter disinterest in alternatives to striking deals with the creditors). Essentially, reflecting its marginal position in the ruling coalition, the Left Platform was dependent on the governing part of Syriza to lay the technical ground for their Grexit strategy, which they clearly had no interest in doing. Its members had also become swept up in day-to-day events, Kouvelakis recalls, being ‘neutralized and overtaken by the endless sequence of negotiations and dramatic moments and so on… it was only when it was already too late… that [our] proposal was finally made public… This is clearly something we should have done before.’ The Left Platform thus failed to provide the leadership that their Syriza colleagues refused to provide and that their compatriots so badly needed.

Conclusion

What lessons can we draw from this sorry tale?

The main one is that the European left must shed its illusions about European solidarity. First, the EU is not, and has never been, a font of democracy and social justice. The left, broadly defeated at home through the 1980s, has increasingly put its faith in supranational institutions to protect human rights and social protections, including the EU’s ‘social chapter’. That this only ever expressed the left’s domestic weakness was starkly revealed when European elites combined after 2008 to inflict austerity on their own peoples, and domestic resistance was utterly ineffective. Appealing to EU leaders to uphold norms of democracy and social justice, as Syriza did, is clearly futile. Syriza should be credited with one achievement. It has finally pulled away the veil, forcing everyone to recognise the EU’s true character.

But, secondly, it is equally illusory to put one’s faith in European parties, peoples and social movements, in the hope of a transnational alliance capable of generating more progressive outcomes. This hope for a ‘counter-hegemonic bloc’, long expressed by Gramscian scholars of the EU, has been peddled for 20 years without success, expressed in forms like the European Social Forum, which ultimately go nowhere. Sadly, Syriza found little to no effective support beyond their own borders. Again, this reflects the collapse of progressive political organisations capable of turning humanitarian sympathy into meaningful political action.

This experience strongly suggests that the prevailing European order cannot be effectively contested by progressive forces at the European level. They are simply too weak and isolated. After all, part of the elites’ purpose in rescaling governance to the European level is precisely to outmanoeuvre opposition, which is rightly assumed to be less able to organise regionally than nationally. This suggests that progressive forces must operate primarily on the more hospitable terrain of the nation-state. They need to lead a movement among their own people, even if it means arguing with them, rather than relying on those abroad who already agree with them. This implies a need to recover space for this activism by reasserting the autonomy of domestic politics from European regulation – i.e., by reclaiming popular sovereignty.

Despite growing left-wing Euroscepticism, this step seems to remain anathema to most. Syriza’s leadership were openly leery of popular sovereignty, warning of a fascist revival. This fear is widespread among European elites, suggesting a strong suspicion of the masses, perhaps especially among supposed progressives. But even Syriza’s Left Platform seemed wary of articulating the necessary steps for the restoration of Greek autonomy, despite their clear premonitions of disaster. This is a sign of how deeply the ‘member-state’ mode of politics has been entrenched over several decades. It will be a hard habit to kick.

Another lesson concerns the organisational form and content of anti-EU resistance. Broad coalitions, rooted in societal mobilisations, are crucial, but insufficient without strong party organisation. Syriza’s formation as a party helped create the structures and programme necessary to help turn popular mobilisation into political power. It thereby achieved what every fashionable, ‘rhizomatic, horizontalist network’ – from Occupy to the Greek far left – has failed to: to exert some grip over state power and thus potentially leverage over social change. Yet, its absence of strong internal democracy also allowed its leaders to pursue an unworkable strategy and even betray the expressed wishes of the electorate. Against the Eurocrats for whom ‘elections cannot change anything’, the task is to rebuild truly democratic parties capable of articulating an alternative and attractive vision for the future of European societies.

Lee Jones

 

 

Why Torture a Victim Whose Will Is Already Broken?

The draft of the agreement between the Greeks and the Eurogroup is out and, as everyone has noticed, it is not just an act of revenge, it is a piece of legislative torture. It contains old demands, like pension reductions and higher taxes to fund primary surpluses, as well as new demands, like reduction in the power of unions and a massive privatization of state assets using a separate fund controlled by Greece but monitored by the EU’s institutions. In fact the document asks for a massive legislative program touching on every aspect of Greek economic life – tax policy, product regulation, labor markets, state-owned assets, financial sector, shipping, budget surpluses, pensions, and so on. This legislation is demanded within the next few weeks. Such a package is the kind of thing one sees during or just after wartime, not as the product of democratically negotiated decisions. Let’s remember that the programme on which Tsipras and the Eurogroup agreed is something asked of a country that has already experienced a very severe depression, already implemented a number of constraints requested by creditors, has 25% unemployment and a banking crisis. What is the point of torturing a victim whose will is already broken? To destroy all opposition.

I think this should not be read as a proposal for restoring growth to Greece or even as the reflection of an economic blindness in Europe but as the reflux of the EU political project, of which the euro is the purest expression: the preference for technocratic domination over popular sovereignty. This program describes an architecture of rule, one that expresses utter indifference to the attempt by peoples to manage their affairs democratically, and one that demands enormous reserves of discretionary power for the Eurogroup. Note not just the scope of the Eurogroup’s demands but the molecular level of detail with which they lay out demands. For instance, as part of their package of “ambitious product market reforms,” they insist on changes in “Sunday trade, sales periods, pharmacy ownership, milk and bakeries, except over-the-counter pharmaceutical products, which will be implemented in a next step, as well as for the opening of macro-critical closed professions (e.g. ferry transportation).” Then there are the new demands, like “rigorous reviews and modernization of collective bargaining [and] industrial action,” which is Eurospeak for rubbing out labor rights. Other demands make it clear that these decisions are not only extensive and fine-grained, but designed as much as possible to remove responsibility and control from the Greek people and their government. The “scaled up privatisation programme” is to “be established in Greece and be managed by the Greek authorities under the supervision of the relevant European Institutions.” And the “quasi-automatic spending cuts in case of deviations from ambitious primary surplus targets” are “subject to prior approval of the [European] Institutions.”

Most telling of all, “The government needs to consult and agree with the Institutions on all draft legislation in relevant areas with adequate time before submitting it for public consultation or to Parliament.” That is to say, on every above named area of reform – from tax policy to labor markets – the government must consult first with its European managers. The piece-de-resistance, however, is that the Greeks are maximally accountable to the Eurogroup while the Eurogroup is minimally accountable and maximally arbitrary. Having listed its demands the document then says, “The above-listed commitments are minimum requirements to start the negotiations with the Greek authorities.” Later, the document says that an ESM programme is possible “Provided that all the necessary conditions contained in this document are fulfilled.” There is no guarantee the money is forthcoming. In other words, the Eurogroup retains maximum discretion to decide that Greece has failed to meet any of the impossible demands made upon it, while the Greeks possess no similar ability to hold the Europeans to account for their failures. Recall, for instance, that the agreement requires Greece to run budget surpluses that the Germans and French have never managed to achieve and that the ECB recently refused to extend sufficient emergency financing to the Greek banks, essentially engineering a near bank-failure in direct violation of its mandate to provide emergency liquidity to illiquid banks.

There are those who think that you can be pro-Euro and anti-austerity. As this round of negotiations show, the economics and politics of the euro are not separated like that. The Euro is a political project. It is unification without sovereignty. It is the delegation of national sovereignty to groups of finance ministers and supranational bodies whose main task is to suppress the re-appearance of the very source of their power. The political institutions and practices that have grown up around the euro and the EU are based on the belief that exercises of sovereignty are dangerous, irresponsible, and unaccountable. Although these institutions are in one sense nothing more than the product of agreements between nations, their raison d’etre is to prevent any further, outright expression of that sovereign power. That is why they insist on total subjection to their decisions, and why Greece became about more than Greece. The Greeks dared to assert popular sovereignty at the only level it is currently possible to do so. The bitter irony being that the discretion demanded by these post-sovereign entities is less accountable than when exercised as the outright power of a democratically elected government. And no less vindictive.

Alex Gourevitch

 

The SPD under Merkel

As part of its continuing series on the European Left, The Current Moment publishes an article by Wolfgang Streeck on the SPD under Merkel. Wolfgang Streeck is a director at the Max Planck Institute for the Study of Societies in Cologne, Germany. Widley recognized in Germany and abroad for his work in sociology and political economy, Wolfgang Streeck’s most recent book is published this month in English with Verso, under the title Buying Time: The Delayed Crisis of Democratic Capitalism.

 

***

Since the fall of 2013 Germany has been governed by a Grand Coalition, led by the Christian Democrats under Angela Merkel and including as junior partner the Social Democrats under Sigmar Gabriel. Arguably the union of Black and Red was nothing more than the formalization of an informal cohabitation that had followed the end of the first Grand Coalition of the new century in 2009. Now that the opposition in the Bundestag has been reduced to a tiny and politically dispersed minority, it seems not much of an exaggeration to consider the government firmly in the hands of a centrist national unity party into which the two former Volksparteien have peacefully dissolved.

What is remarkable is how happy the two parties are with their reunion, and how stable their share in the vote has remained since 2009: the CDU/CSU attracting roughly 40 percent of the electorate – at steadily declining rates of turnout – and the SPD being stuck at around 25 percent, a result that was considered catastrophic in 2009 when it was attributed to having been the smaller party in a Merkel cabinet. Now the SPD seems content with having ceased to be in serious completion for the Chancellorship, if not forever then for a very long time.

There are several reasons for the stability of the current power-sharing – or better: cooptation – regime and its apparent prospects for a long life. Angela Merkel seems much to prefer the SPD over the coalition partner of her second term, the FDP. With the Social Democrats on board, she is no longer at risk of being forced by her party, or tempted by her own passions if such she has, to hurt the feelings of pensioners, the unemployed, or the remaining clients of the welfare state by pursuing neoliberal “reform”, at least in Germany. While the SPD is less given to electoral-political panic, being (still) sufficiently far away from the five-percent hurdle, the FDP may never recover and disappear in the no-man’s land outside of the Bundestag. Moreover, if the SPD were for some reason to break away from Merkel, there are now Greens, eagerly waiting to claim the place of the SPD as the CDU’s partner in government – and the SPD knows this. Having abandoned their old leadership after the disappointing election results of 2013, the Greens are still angry with themselves for having rejected Merkel’s invitation to coalition negotiations. Merkel can now choose between two comfortable majorities, one with the SPD and one with the Greens, and next time around she may actually want to change partners once the SPD will have done the dirty work of revising the Energiewende in line with the interests of the German export industry and, perhaps, the private households suffering from steadily increasing prices of electricity. More on this below.

Meanwhile, Red-Green-Red, a government formed under SPD leadership and including the Greens and the Left, looks ever more remote as a practical possibility. The Greens, having finally abandoned their leftist inclinations, will not let entering a government that includes Die Linke get in the way of their being perceived as a thoroughly buergerliche, middle-of-the road party with a socially progressive and environmentally conscious agenda. And while the Left has worked hard to style itself as a staunch supporter of “Europe” – which in Germany is now the same as the Euro – its empathy with Russia in the crisis over Ukraine is likely to make it even more of an outcast in the German party system than it already is, not least because of the SPD’s untiring denunciations.

Inside the SPD Sigmar Gabriel, party leader and minister of economic affairs, is now fully in control. Not least this is because Merkel, by making major substantive concessions to him during the coalition negotiations, including a disproportionate representation of SDP ministers in the cabinet, made it easier to forget the party’s crushing defeat of 2013 that ut received under his leadership. Moreover, Gabriel’s candidate for Chancellor, Steinbrück, miraculously disappeared only two or three days after the election, as though he had never existed; nobody has heard from or of him since. Steinmeier, Gabriel’s other former rival, is happy to be back at the Foreign Office, in the post he already occupied in the first Grand Coalition 2005 to 2009 when the party was sufficiently impressed with him to make him candidate for the Chancellorship, to disastrous effect.

As to Gabriel, his junior partnership with Angela Merkel has given him the means to heal the rift between the SPD and the unions, with two policy moves he extracted from the CDU/CSU. The first is the introduction of a general minimum wage, the second an effective lowering of the pension age for a select group of workers. Both measures are still in the legislative process and details are contested between the SPD and factions in the Christian-Democratic Parties. The Chancellor, however, as one would expect, sticks firmly to the Coalition agreement and there is no doubt that the two measures will eventually be passed in one form or other.

The prehistory of the impending minimum wage legislation is rather curious. For a long time the unions had opposed any legal regulation of low wages, in order to protect collective bargaining. The first to break ranks was the service sector union, Verdi, which after the Hartz reforms had finally lost control over the low wage end of the labor market. With a delay of a few years IG Metall, still the most powerful among the unions, concurred, which it might have done much earlier given that there are practically no low wage workers in its constituency. Now the SPD can offer a legal minimum wage as a tribute to its union allies, and as a sign that social-democratic participation in government carries real benefits for workers – which in this case is actually true.

Pension reform, too, serves to mend fences with the unions. Under the first Grand Coalition the then Social-Democratic party chief and Minister of Labor, Franz Müntefering, almost single-handedly raised the legal age of retirement to 67 years, bypassing the SPD in what was practically a coup-de-état with the support of Merkel. The new legislation will allow workers with more than 45 years of service, including times of unemployment, to retire at age 63, at full pension. The matter is more complicated than it looks and more complicated than its supporters and detractors make it look. What is true is that it will benefit mainly the core union constituency of male manual workers. In exchange, the SPD has swallowed an even more expensive pension increase for mothers with children born before 1992, which was and is a pet project of the Christian Democrats trying to get back the female vote. Like the minimum wage, both pension reforms are fought tooth and nail by German economists, a neoliberal monoculture of astonishing internal conformity that has never been more predictably opposed than now to anything looking only slightly like it might be social-democratic.

In addition to minimum wage legislation and pension reform, three issues in particular will dominate the agenda of the Grand Coalition. Ultimately they will decide upon which constellation of political forces Merkel’s fourth term – and nobody seriously doubts that she wants and will get one – will be founded. The first is Europe. Here the SPD was always in agreement with Merkel, in government or out. It is true that once in a while it deployed anti-Merkel rhetoric to attract the Euro-idealistic segment of the middle class, as represented primarily by the Greens. In this vein, before the 2013 election Gabriel made several attempts to win the backing of intellectuals such as Jürgen Habermas, for what he pretended to be a social-democratic alternative to Merkel’s European policy. The message, although mostly coded and subtle, was that Merkel did less than required to mitigate the suffering in the South. But the only practical consequence, if any, was that Merkel won and the SPD lost among those afraid that “Europe” would become too expensive. It seems that this was why Merkel felt no need to be vindictive about the Social-Democratic attacks.

In fact, when coalition negotiations began after the election, the first deal that seems to have been struck on the very first day was that the SPD gave up on the Europeanization of government debt (“Eurobonds”) so dear to the heart of the Greens and the progressive middle-class milieu, in return for the CDU agreeing to the legal minimum wage. Both CDU/CSU and SPD know that more than symbolic assistance for the crisis countries would be costly at the ballot box although the SPD, to Merkel’s delight, had to pretend for the consumption of the “progressive” part of its constituency that it did not care about this. In truth, Merkel, Schäuble, Gabriel, Steinmeier and the forgotten Steinbrück have for long formed an Einheitsfront, knowing they must defend the Euro to the hilt as it is the lifeline of the German export industry, not just of its employers but also of its unions. For the German economy, European Monetary Union means a favorable external exchange rate plus fixed prices for their products in a captive “internal market” protected from political distortion in the form of a readjustment of national currencies. The German political class knows that at some point this will have to be paid for, but they are determined to keep the price as low and as invisible to voters as possible. One way of doing this is insisting on “reforms” in debtor countries, another offering financial support for social programs in Greece or Spain that are small enough not to make a dent in German public finances but also too small to make one in the South’s misery. Much more important is the tacit backing by both CDU and SPD of the European Central Bank’s various covert measures to bail out the ailing Southern European banking industries and surreptitiously refinance the debt of the Mediterranean states, in contravention of the Maastricht Treaties. While the Christian Democrats pretend they don’t know, the Social Democrats claim credit with their pro-Euro supporters for not getting in the way of the ECB’s “emergency measures”.

The so-called “European elections” were officially framed in German politics in two not readily compatible ways at the same time and by the same players. First, they were depicted as a Manichaean battle between the “good Europeans” united in the CDU/CSU/SPD/Greens/FDP Einheitsfront and the “enemies of Europe” – the “Anti-Europäer” – represented mainly by a new center-right party, AfD, which had formed to demand an end to monetary union. During the election campaign all controversial issues among the governing parties, most of them just pseudo- controversial anyway, had been hidden away (no mention any more of “Eurobonds”!), just as at the European level all impending critical decisions had been postponed (like banking union and the various additional “rescue operations” it will require). This left as common objectives for both Christian and Social Democrats a higher voter turnout and keeping the AfD as small as possible. Both goals were in part achieved as the 7.0 percent won by the AfD remained below the protest vote in many other countries, and turnout increased for the first time in decades in a national election, from 43.3 to 48.1 percent.

Second and simultaneously, the election was presented as a competition between two individuals, both long-serving European functionaries with indistinguishable European convictions, running Europe-wide for the Presidency of the European Commission on behalf of their respective “party families”: the Luxemburger Christian Democrat Jean-Claude Juncker and the German Social Democrat Martin Schulz. Merkel had more or less enthusiastically allowed her party to participate in the charade, apparently on condition that she rather than Juncker was featured on the CDU election posters. The SPD, on the other hand, insisted that the “winner” of the contest had to be appointed President, even though nothing like this can be found in the Treaties, and although Schulz never had a realistic chance of gaining a majority in the Parliament. Remarkably, throughout the campaign the SPD presented Schulz under the slogan, “From Germany, for Europe”, in obvious contradiction of Schulz’ pan-European rhetoric outside his home country. The nationalist frame in which the Social-Democratic “European” candidate was advertised paid off handsomely. While the Christian Democrats lost 2.6 percentage points and ended up at 35.3 percent, the SPD gained 6.5 points (up from 20.8 percent in 2009, which had been the party’s lowest result ever) to finish at 27.3 percent.

The election over, it is again the time of the European Council, the representation of national governments, which today means the time of Angela Merkel. If she wants she can now act as the informal leader of her “party family” and try to install Juncker at the head of the Commission. For the required majority in the European Parliament she will need the support of the Social Democrats, which she might get if she offers Schulz a post as Commission member, maybe as Vice President. This she would be able to do by sacrificing the sitting German commissioner, a former Christian-Democratic Minister President of the Land of Baden-Württemberg who, conveniently, happens to oppose Merkel’s anti-nuclear energy policy. Sending Schulz to Brussels on the German ticket would make Merkel’s German coalition partner happy: not only would it transport the German Grand Coalition to the European level – where Christian Democrats and Social Democrats had always worked together hand-in-glove – but the SPD had during the coalition negotiations demanded the German post on the Commission, without the two sides having come to an agreement. Moreover, a Schulz appointment would usefully demonstrate, if such demonstration was still needed, that Merkel knows how to punish disobedient members of her camp. Alternatively, Merkel could, after a period of indecision, disregard the election results altogether and appoint a Commission President able to get the approval of the British – which would exclude both Juncker and Schulz. This would be a positive signal to the rising numbers in Europe, not just in the UK, who favor a repatriation of competences from Brussels to the nation-states. In particular, it would be a good preparation for the impending negotiations with London on a revision of the Treaties in this sense. Germany, it would appear, should have a strong interest in keeping Britain inside the EU, if only as reassurance against all too ambitious integration projects as are likely to originate in Southern member countries and could be quite costly from a German perspective. Ultimately, perhaps after some public fuss, the SPD, in charge after all of the German Foreign Ministry, will go along with this as it always has.

The second issue the SPD will somehow have to master is the implementation, drawn out over more than a decade, of the balanced budget constitutional amendment passed by the first Grand Coalition under Merkel in 2009. As CDU-CSU and SPD had passed the amendment together, it would be hard for both to defect from it. On the other hand, while the language that was inserted in the Constitution is extremely detailed and technical, making the amendment the longest ever and entirely unreadable for the general public, loopholes can always be found to mitigate spending cuts if need be. As long as the general economic situation in Germany continues to be as good as it is now, the consolidation of public finances, which has already begun, will cause only little pain and budget balancing can remain a joint undertaking. Already, however, the 2014 pension reform was counter to the spirit of austerity under which the Schuldenbremse was installed, and the moment tax revenues will begin to stagnate or decline, the higher pension entitlements will make themselves painfully felt. Among the budget items that may then become politically contentious are the still very high annual transfers to the Neue Länder, the former GDR. For a government that will for political if not for other reasons have to defend these against spending cuts, it will be impossible to advocate new fiscal transfers to the Southern and, increasingly, the South-Eastern member states of EU and EMU, regardless of whether through Brussels or on a bilateral basis. Obviously this will further constrain German options in Europe and in the defense of the common currency. While this is unlikely to destabilize the Black-Red coalition, what may become critical is that the Länder, which together account for half the public spending in Germany, may have a harder time than the federal state to consolidate their finances as required for them by the amended federal constitution. It so happens that most of the Länder are today governed with strong Social-Democratic participation, and some Länder Prime Ministers are powerful figures within the SPD. Bringing them in line with the Federal Government’s fiscal consolidation policy will be a strong test for the SPD national leadership and the Social-Democratic cabinet members, and one that they may well fail.

The third and final of the three critical issues for the Social Democrats under the Grand Coalition is energy. When Merkel ended the nuclear age in Germany by command decision during the panic after Fukushima, she with one stroke gained for herself the option of a Black-Green coalition. In this, perversely, she could count on the support of the SPD, which had long identified itself with the Greens’ anti-nuclear energy stance, in spite of considerable skepticism among the unions, who were concerned about jobs, and among local governments, often Social-Democratic, who worried about a secure energy supply. When general enthusiasm about the Energiewende had dissipated and the immense difficulties of replacing nuclear energy wholesale with renewables began to make themselves felt, Merkel cunningly conceded energy policy to the SPD, by agreeing to move it from the ministry for the environment to the economics ministry which the SPD had claimed for its party leader. Gabriel will now have to square several circles at the same time. First, he will have to find ways to end and perhaps reverse the rise in energy prices for private households caused by the heavy subsidization of renewables. Second and at the same time, he must reassure the Green element in the SPD that he will not fall behind Merkel with respect to the pace and scope of the “energy turn”. Third, German industry has meanwhile become more restive than ever over the rising price of energy, and firms are beginning to talk about relocating production to countries where energy is cheaper. The same fear is expressed by unions in the manufacturing sector, in particular the union of chemical workers, which happens to represent also the energy-producing industry, including the operators of nuclear power plants. Fourth, the European Union in Brussels has become suspicious about what it perceives to be public subsidies (“state aids”, in Brussels jargon) to lower the costs of energy for manufacturers in energy-intensive sectors – which, in turn, are in fear of Brussels depriving them of their benefits. Fifth, citizens, including some of those who had applauded the end of nuclear energy, are becoming averse to the construction of the new power lines required for the transport of wind energy from the north to the south of the country. For Social Democrats, the main battlefield will be the retail price of electricity for low-income households, followed by employment in manufacturing and energy production. No doubt Merkel had every reason to hand the responsibility for Energiewende to her partner, with the Greens waiting in the wings for when Gabriel will have to throw the towel under the intensifying pressures from different and incompatible interests. This, then, may be the hour of Black-Green.

 

The meaning of Merkel’s victory

Originally published in the October issue of Le Monde Diplomatique

Angela Merkel and her Christian Democrat party (CDU/CSU) have won a resounding victory in Germany’s general election. Merkel has broken what had become an established rule of European politics since the beginning of the crisis: incumbents don’t get re-elected.

Merkel had seen this at first hand as close working relationships with other European politicians were felled by electoral fortunes. The peculiar alliance of France and Germany (“Merkozy” to the European press) was undone as Nicolas Sarkozy lost out in the 2012 French presidential election to his Socialist challenger, François Hollande. Mario Monti, another favourite partner of Merkel, was routed in Italy’s election earlier this year by the comedian-cum-blogger Beppe Grillo and his Five Star movement. Incumbents have lost out across southern Europe — Spain, Greece, Portugal — as voters hope that a change in government might mean a change in fortunes. There has been no decisive shift left or right, just a broad and sweeping dissatisfaction with existing governments. Apart from Germany.

Merkel’s re-election doesn’t mean that nothing has changed in Germany or that it has been blissfully untouched by the Eurozone crisis. Looking at the substance rather than at the party labels, we see shifts. The more dogmatically free-market FDP, Merkel’s coalition partner in the outgoing government, failed to secure any parliamentary representation at all. The Left Party, Die Linke, a persona non grata for mainstream German politicians because of its roots in East German Stalinism and its opposition to NATO, now has more parliamentary seats than the German Greens. If the Social Democrats (SDP) enter into a coalition with Merkel’s party, then Die Linke will lead the opposition within the Bundestag.

The policies of Merkel herself have steadily drifted leftwards as she has taken on ideas first floated by the SDP. From military conscription to a minimum wage and rent controls, Merkel has adopted policies that first came from the left. This had the effect of emptying much of the campaign of any traditional ideological conflict. German voters have not been divided by the politics of left and right, given the vastly similar programmes adopted by the main parties. Merkel has even given up on nuclear power, in a move that pulled out from under the feet of the Green Party their most distinctive policy position. Instead, the campaign was fought around the language of risk and of personality. Germans preferred Merkel’s low-key, homely aspect to Steinbrück’s debonair image and, seeking reassurance in the widespread depoliticisation, voted for Merkel’s motherly, risk-averse approach.

Political stability in Germany reflects its unique position in Europe as the country that has survived the crisis. Not unscathed, as the leftwards shift suggests, but markedly better off than any other country. Having reformed itself in the early 2000s, German industry rode an export-led boom that continues today. As trading partners in Europe — from Eastern Europe through to southern Mediterranean economies — crashed and burned from 2009 onwards, Germany compensated by expanding sales in non-European export markets. What it lost by way of demand in Europe it has gained in emerging markets, especially in Asia. Germany’s current account surplus, at $246bn over the last year (6.6% of GDP), is greater than China’s. Along with a more flexible labour market that is keeping unemployment low (but part-time employment high), we have the material foundation for Merkel’s victory. But though this foundation is solid, Germany is not booming. Since the early 2000s, German wage growth has been very limited. Moreover, few Germans own their own homes, meaning that they have not experienced the same wealth effects of rising house prices felt by a chunk of the British middle- and upper-middle class, the Dutch, Italians and Spaniards. They have been saved from the effects of collapsing property prices but have not known the heady days of year-on-year price rises. Merkel’s cautious optimism reflects the attitude of a large part of the German working and middle class who feel that their relative prosperity is precarious and needs to be closely guarded.

The meaning of Merkel’s victory for the rest of Europe is mixed. It is possible that Merkel will soften her stance to some extent now the election is over, though we should not expect any sudden U-turns on something like Eurobonds. A slow recalibration of the Eurozone economy is more likely, as crisis-hit countries like Spain and Ireland regain some competitiveness via internal adjustments to wages and prices. Where Merkel may compromise is on measures to boost domestic demand. If Germans were to consume a little more rather than save so much, that would help pull other Eurozone economies out of their deep depression. Though something like this may happen, any recalibration will still occur within the context of a Eurozone marked by massive disparities in wealth and spatially organised around a clear logic of centre and periphery.

Making the best of a good crisis?

A recent debate has emerged around the use European elites can make of the Eurozone crisis. According to the Naomi Klein theory of social change, backed up recently by Paul Krugman, crises are used by capitalists as opportunities to reform economies in their favour. Whether such crises, or “disasters” to use Klein’s turn, are wars provoked by outside interventions (Iraq) or financial crises of the kind we are seeing today in Europe and elsewhere, the point is that crises are good for those who favour neoliberal policies.

In the context of the austerity versus stimulus debate, Krugman suggests that the reason why austerity is preferred is not that it works (it clearly isn’t working) but it is because stimulus might work. If European economies begin to grow again, then the window of opportunity to replace “social Europe” with a neoliberal alternative will have gone. Successful stimulus will only strengthen the case against deeper structural reform. Krugman notes that this view is already entering into the evaluation of Japan’s recent attempt at monetary stimulus: cautious voices are pointing out that if this works, then there will be no incentive to tackle the country’s underlying problems.

There is quite a bit wrong with this explanation for austerity, however compelling it may seem at the intuitive level. Everyone likes to bash those far-sighted capitalists – the elusive 1% – who conspire behind closed doors to get what they want at the expense of everyone else, the 99%. But this is more a conspiracy theory than it is an explanation of why governments are committed – for the time being – to the austerity agenda. Profiting from a crisis is one thing. Creating a crisis in order to implement a cunning plan is another. In Europe, there is no doubt that authors of the bail-outs have tried to calibrate carrot and stick, using the difficulties of the present crisis in countries like Greece and Portugal as a way of encouraging structural reform. They have also cautioned against any suggestion that the crisis is over, believing that such talk will undermine the commitment of national elites to the reform programme. All this, however, is a far cry from the notion that crises are manufactured as opportunities for neoliberally inspired reforms.

Krugman makes the added point that elites chose austerity over stimulus because they feared the latter could be too successful. He invokes the work of the Polish Marxist Michal Kalecki and his notion of the political business cycle. According to Krugman, Kalecki’s idea explains why businessmen don’t like Keynesian economies. In fact, Kalecki argues something much more specific. At issue for Kalecki is not the ability of Keynesian deficit spending to return crisis-ridden capitalist economies to the status quo ante, which is what Krugman and others imply. Kalecki’s point is not about the stabilizing effects of Keynesianism but rather about its transformative and radical political effects. These are not internal to Keynesianism itself – Keynes was far from being a radical on this point – but are part of the political consequences of Keynesian policies (hence the title of Kalecki’s famous 1943 essay, ‘Political Aspects of Full Employment’).

Kalecki argues that full employment, as a policy goal, is both feasible and attainable. However, politically, the problem with maintaining full employment is that it empowers the working class to the point that it begins to challenge the basic contours of the capitalist economy itself. Full employment has a creative effect by way of ideas and actions that threatens the fabric of capitalist society. It holds up the prospect of a better society and stimulates people to think about how that alternative could be achieved. Kalecki’s point is that stimulus makes a return to the status quo ante more difficult and that is why owners of capital will do everything to frustrate governments who identify full employment as their main goal.

In today’s context, what is striking is that the austerity versus stimulus debate is had against a backdrop of consensus around the nature of the economic system. Both are means to an agreed end and Krugman’s argument for stimulus is that it works better than austerity in this regard. Kalecki’s point about stimulus was that it throws open, because of the mobilisation and politicisation of workers, the question of what the ends are and of what kind of economic system we would like. If we want to bring back Kalecki to the present discussion, it is this aspect that we should emphasize. And to resist Krugman and Klein’s conspiratorial accounts of intended crises and infinitely cunning capitalist elites.

François Hollande, a year on

A year into his Presidency, François Hollande is struggling. Of all the analyses made of his first year in office, very few have been positive. At The Current Moment, we commented extensively on the elections a year ago and on Hollande as a leader (see here, here and here). A few points are worth reiterating to make sense of today’s widespread disappointment.

It is important to remember that what secured Hollande’s victory a year ago was the prevailing anti-Sarkozy sentiment. Some of that feeling came from a rejection of the substance of Sarkozy’s presidency and so signalled a real endorsement of Hollande’s agenda. But much of the anti-Sarkozy feeling came from a reaction against his style: showy, celebrity-focused, hyperactive, lacking the gravitas expected of the President of the Republic. This list could go on.

Far from challenging this superficial rendering of politics as a matter of competing styles and personalities, the Socialists launched their own brand: normality, embodied in the rotund (but much-slimmed) cheeriness of François Hollande. He enjoys football, he makes jokes, he will govern through the country’s institutions and not above or alongside them. The notion of the ‘normal presidency’ never really stuck, not least because it lacks any capacity to inspire. But it did just enough to give Hollande the election victory on May 6^th. Other factors counted too of course: his promise of a 75 per cent tax on incomes above 1 million Euros was timed perfectly to play on the anger felt towards high earners living in luxury at a time of social crisis. Even then, Hollande’s victory was wafer thin. He edged in front of Sarkozy by very little in the first round (28.63% to Sarkozy’s 27.08%) in comparison to Sarkozy’s thumping victory against Ségolène Royal back in 2008. In the second round, Hollande secured 51.64% of the vote, to Sarkozy’s 48.36%.

Throughout the campaign, the gap narrowed between the two leading contenders, transforming what many thought would be a sure victory for the Socialists into a very narrow one indeed. Hollande, an unremarkable figure until then, tipped by few as a likely winner for the presidency, certainly held his nerve. More than anything else, though, he was in the right place at the right time. This explains why his popularity has plummeted. Constructed on the back of the antipathy towards Sarkozy, the fading memory of the latter brings with it a steady erosion in Hollande’s popularity. This is not a problem of voters forgetting the past too easily. It is a product of the negative and opportunistic campaign of the Socialists in 2012.

Hollande’s difficulties today are also to do with what has happened since May 2012. The gay marriage bill has been pushed through but at the expense of a widespread societal mobilization against it, one that brought many people out of their provinces and onto the esplanades of the country’s capital. This author remembers seeing dozens of coaches, all full to the brim, tearing through the Bois de Boulogne on a Sunday morning on their way to an anti-gay marriage demonstration and all coming in from well outside of the capital and its surrounding suburbs.

One event that hit the government particularly hard was the Cahuzac affair: the admission by a government minister, the minister for the budget no less, after many months of denial, that he had a bank account in Switzerland which he kept hidden from the French taxman. The reason the Cahuzac affair has been so damaging for the government is that Hollande’s critique of capitalism, and in particular those private companies and private individuals that escape paying taxes, was always a moralistic one. Hollande presented his case against finance as a moral crusade: it was a war against the vulgar anti-egalitarian materialism of the financial class, fought in the name of the republican values of common good and a sense of patriotic duty attached to contributing to the public coffers.

Cahuzac’s secret Swiss bank account struck at the heart of this moral crusade by bringing those corrupt values into the heart of Hollande’s cabinet. In some ways, Hollande can’t be blamed for having trusted someone who then betrayed him. To misjudge someone’s character is something we have all done at some point. For Hollande, the difficulty was that there was nothing other than this moral crusade underpinning his critique of capitalism. What could have been dismissed as a mere personal failing on the part of an individual, had Hollande’s critique been more substantial, has had the effect of a devastating blow.

This crusade against finance has also been exposed to the harsh winds of the continuing national and European crisis. On this, the French government has managed to achieve very little. A central plank of Hollande’s campaign was his promise to rewrite the European Fiscal Compact, notably by injecting into it a strong growth component. Even at the time, it seemed improbable that Hollande – after the election – would travel to Berlin and tell Angela Merkel what to do. Unsurprisingly, very little in the Compact was changed and Hollande has so far struggled to dent Merkel’s determination to stick to her austerity agenda in the run up to elections in Germany in the Autumn. Promising a radical shake up of France’s sclerotic economy, Hollande commissioned a report from prominent industrialist, Louis Gallois. Focused on competitiveness, Gallois suggested a number of ‘shock’ measures which the government chose to ignore. Hollande may still pursue a reform agenda, by bringing Gallois or someone like Pascal Lamy into a more technocratic cabinet after a summer reshuffle. But there is little momentum in either the reforming or the staunchly anti-austerity direction, leaving all sides unhappy at the government’s immobilism.

Hollande has tended to make his case by courting fellow travellers, latching onto Southern European leaders like Rajoy, or more recently Enrico Letta, whose national difficulties expose the limits of the German austerity agenda. Alliance-building, however, is no substitute for a programme. As remarked upon by Current Moment co-founder Alex Gourevitch, the fact that the case for austerity is currently unravelling has more to do with the pain it is inflicting on European societies and rather less to do with any political alternative being proposed by its growing army of critics.

Buying time and running out

Guest book review of Wolfgang Streeck’s „Gekaufte Zeit: Die vertagte Krise des demokratischen Kapitalismus“. Berlin: Suhrkamp, 2013.

By Philip Mader, Governance Across Borders editor and postdoctoral fellow at the Max Planck Institute for the Study of Societies in Cologne, Germany

Democratic capitalist societies have been “buying time” with money for the past four decades – first via inflation, then public debt, then privatised Keynesianism – but are running out of resources for postponing the inevitable crisis. As a result, we now find ourselves at a crossroads where capitalism and democracy part ways. That in a nutshell is the thesis of Wolfgang Streeck’s new book, currently only available in German, but being translated for publication with Verso.

The book is based on a series of three “Adorno Lectures” given by the director of the Max Planck Institute for the Study of Societies in the summer of 2012 at the renowned Institut für Sozialforschung in Frankfurt (other lecturers in recent years included Judith Butler and Luc Boltanski). Its radical language and conclusions may be surprising for those who remember Streeck’s days as advisor to the “Bündnis für Arbeit” initiated by Germany’s former Chancellor Gerhard Schröder, which precipitated far-reaching labour market and social security reforms, or of Streeck’s demands for institutional reforms to forge a more competitive and flexible low-wage service sector in Germany modelled on the USA (Der Spiegel, 1999). But crises bring new beginnings, and Streeck’s defense of democracy against its subjugation to the market is auspicious. His analysis of the economic, political and ideological straightjacket that states have found themselves in, not just since the crisis but certainly more pronouncedly in its wake, ties together a revamped analysis of capitalism with a compelling critique of the “frivolous” politics of European integration. With some wit, a characteristic taste for good anecdotes, and above all great clarity, Streeck studies the processes of the moyenne durée which produced the “consolidation state” as the supreme fulfilment of a Hayekian liberal market vision, and which brought us to the impasse of the current period.

The book begins with a critical appraisal of how useful the Frankfurt School’s crisis theories from the 1960s and 1970s still are for explaining today’s crises. While their works are by no means invalidated, Streeck contends that yesteryear’s crisis theorists could scarcely imagine how long capitalist societies would be able to “buy time with money” and thereby continually escape the contradictions and tensions diagnosed by their theories of late capitalism. He explains the developments in Western capitalism since the 1970s as “a revolt by capital against the mixed economy of the postwar era”; the disembedding of the economy being a prolonged act of

successful resistance by the owners and managers of capital – the “profit-dependent” class – against the conditions which capitalism had had to accept after 1945 in order to remain politically acceptable in a rivalry of economic systems. (p. 26)*

By the 1970s, Streeck argues, capitalism had encountered severe problems of legitimacy, but less among the masses (as Adorno and Horkheimer had expected) than among the capitalist class. Referring to Kalecki, he suggests that theories of crises have to refocus on the side of capital, understanding modern economic crises as capital “going on strike” by denying society its powers of investment and growth-generation. The 1970s crisis, and the pathways that led out of it, thus were the result of capital’s unwillingness to become a mere beast of burden for the production process – which many Frankfurt theorists had tacitly assumed would happen. Capital’s reaction to its impending domestication set in motion a process of “de-democratising capitalism by de-economising democracy” (Entdemokratisierung des Kapitalismus vermittels Entökonomisierung der Demokratie). This ultimately brought about the specific and novel form of today’s crisis and its pseudo-remedies.

The rest, as they say, is history. In the second part, Steeck outlines how public debt rose with the neoliberal revolution, something mainstream economics and public choice quickly and falsely explained away as an instance of the “tragedy of the commons” with voters demanding too much from the state. However, the rise in debt came in fact with a curtailment of the power of democracy over the state and the economy. First, the good old “tax state” was ideologically restrained – starving the beast – and gradually found itself rendered a meek “debtor state” increasingly impervious to any remaining calls for redistribution by virtue of its objective impotence. Then, the resulting power shift to what Streeck calls the state’s “second constituency” – the creditor class, which asserts control over its stake in public debt and demands “bondholder value” – generated a standoff which Streeck observes between the conflicting demands of Staatsvolk und Marktvolk. The fact that the debtor state owes its subsistence less to contributions from the taxpaying “state people” and more to the trust of its creditor “market people” leads to a situation in which debtor states must continually credibly signal their prioritisation of creditors’ demands, even if it harms growth and welfare. Creditors, in their conflict with citizens, aim to secure fulfilment of their claims in the face of (potential) crises. The ultimate power balance remains unclear, but the “market people’s” trump card is that they can mobilise other states to fulfil their demands, leading to a kind of international financial diplomacy in their interest.

The archetype of such a transnational financial diplomacy, Streeck contends in the third and final part, is Europe under the Euro, where we encounter an even more wretched type: the “consolidation state”. Consolidation, Streeck argues, is a process of state re-structuring to better match the expectations of financial markets, and the consolidation state is a sort of perverse antithesis to the Keynesian state, acting in vain appeasement of the financial markets in hope of one day again being permitted to grow its economy. Its story begins with Friedrich Hayek, whose 1939 essay The Economic Conditions of Interstate Federalism Streeck presents as a strikingly accurate blueprint for the modern European Union, complete with references to the common market as assuring interstate peace. The European “liberalisation machine” slowly and successively reduced national-level capacity for discretionary intervention in markets; but it was European Monetary Union which ultimately rendered one of the last powerful (yet blunt) instruments available to states impracticable: currency devaluation. The resulting multi-level regime, a regime built on an unshakable belief in European “Durchregierbarkeit” (roughly: the capacity to govern Europe) and driven by a bureaucratic centre (or centres) increasingly well-insulated from democratic meddling, completes the actual European consolidation state of the early 21^st century. Within this kind of hollowed-out supra-state individual countries have to fulfil their duties to pay before fulfilling any duties to protect, and recent “growth pacts” like Hollande’s are mere political showmanship. In the present framework even more substantial programmes would be likely to fail, Streeck argues with reference to Germany’s and Italy’s huge and hugely unsuccessful regional growth programmes. Stemming the decline of the southern Europe with transfer payments while adhering to monetary union with Germany is as much an impossibility as it is fuel for future discord.

Now, with tighter financial means, the cohesion of the Brussels bloc of states depends on hopes invested in neoliberal ‘structural adjustment’ with a parallel neutralisation of national democracies by supranational institutions and a targeted cultivation of local support through ‘modern’ middle classes and state apparatuses, who see their future in western European ways of business and life. Additional packages for structural reform, stimulus and growth from the centre are mainly of symbolic value, serving as discussion fodder for the greater public and for the mise-en-scène of summit decisions, as well as for politically and rhetorically absorbing whatever is left over of social democracy. Finally, puny as these may be financially, they can also be used to distribute loyalty premiums and patronage to local supporters: instruments of elite co-optation by doling out advantages in the Hayekisation process of European capitalism and its state system. (p. 203)

What can be done? It would be wrong to describe Streeck’s conclusions as optimistic. The capacity of populations or politicians to resist the imperatives of the consolidation state appears small, even where he argues that popular opposition is key, pointing to some rays of light in recent social movements. Streeck characterises present capitalist society as a “deeply divided and disorganised society, weakened by state repression and numbed by the products of a culture industry which Adorno could hardly have imagined even in his most pessimistic moments” (p. 217). It is furthermore politically held in check by a transnational plutocracy which has far greater sway over parliaments and parties than citizens. Given the likely failure of the consolidation state at restoring normality, we have thus arrived at a crossroads where capitalism and democracy must go their separate ways.

The likeliest outcome, as of today, would be the completion of the Hayekian social model with the dictatorship of a capitalist market economy protected against democratic correctives. Its legitimacy would depend on those who were once its Staatsvolk learning to accept market justice and social justice as one and the same thing, and understand themselves as part of one unified Marktvolk. Its stability would additionally require effective instruments to ensure that others, who do not want to accept this, can be ideologically marginalised, politically dis-organised and physically kept in check. […] The alternative to a capitalism without democracy would be democracy without capitalism, at least without capitalism as we know it. This would be the other utopia, contending with Hayek’s. But in contrast, this one wouldn’t be following the present historical trend, and rather would require its reversal. (p. 236)

Small acts of resistance, Streeck notes, can throw a spanner in the works, and the system is more vulnerable than it may appear; the Draghis and Bernankes still fear nothing more than social unrest. For Streeck, projects for democratising Europe, calls for which have recently gained momentum, can hardly work in a Europe of diverging interests. They would have to be implemented top-down, and furthermore have to succeed both amidst a deep (public) legitimacy crisis of Europe and against an already firmly embedded neoliberal programme with a decades-long head-start.

Streeck places his highest hopes in restoring options for currency devaluation via a kind of European Bretton Woods framework; “a blunt instrument – rough justice –, but from the perspective of social justice better than nothing” (p. 247). Indeed, a newly flexible currency regime would re-open some alternatives to so-called “internal devaluation” – nothing but a euphemism for already-euphemistic “structural adjustment” – and thereby permit a more heterogeneous political economy within Europe which could better match cultural differences (the book’s references to which sometimes seem to teeter on the edge of calls for national liberation). The Euro as a “frivolous experiment” needs to be undone, Streeck claims. But would that really mean a return to social justice? States like Great Britain or Switzerland hardly suggest a linkage, least of all an automatic one. Furthermore, declines in real wages from currency devaluation can mirror those of internal devaluation, merely with the difference of how politically expensive the process is (and it would still likely be central bankers, not democratic institutions, taking the decision). A return to national currencies looks like an all too easy way out, falling short of political-economic transformations for restoring some semblance of social justice to capitalism – let alone social justice as an alternative to capitalism.

Nonetheless, Streeck’s is a forceful argument in favour of preserving what vestiges remain of national sovereignty in face of capitalism’s attacks on democracy, as tools for gradually pushing back the transnational regime of market sovereignty. He concludes that the greatest threat to Western Europe today is not nationalism, but “Hayekian market liberalism” – whether the one could be the dialectical product of the other remains another question. Above all his analysis of capital as a collective player capable of acting with guile (Williamson) to ensure capitalism remains in its better interests – intellectual traces of Streeck’s days as a scholar of collective bargaining, perhaps – is clearly one of the most innovative approaches to understanding the class dimension of the political economy of the present crisis. His anatomy of the type of regime we increasingly have to deal with, the consolidation state moulded to address capital’s own legitimacy crisis yet sacrificing democratic legitimacy in the process, perhaps offers the most cogent picture of the present multi-level political economy of debt in Europe (and beyond). Taking back the consolidation state and re-appropriating democracy from capitalism’s clutches at the crossroads, of course, is a task beyond the reach of any book.

(*All quotations are the reviewer’s own translations from the German original.)

The time inconsistency of austerity politics

 

At his last European Council summit meeting, at least for the time being, Italian Prime Minister Mario Monti gave some parting advice to his fellow leaders. Written up as a four page letter and reported on in the FT, Monti argued that the main problem with austerity policies is that there was too big a lag between the positive effect of reforms and their negative bite. Giving his own version of the old adage that things have to get worse before they get better, Monti explained that this doesn’t fit very well with the rules of the electoral cycle. The promise of austerity and supply-side reforms is that they bring gains by way of employment and growth in the long term. The difficulty is that politicians are judged according to pain they bring in the short-term. Something needs to be done to bridge the gap in order that reform agendas are not derailed, as he thinks they have been in Italy. From the perspective of the European Commission or the German Bundesbank, the issue is how to make sure that in the time in between enacting reforms and feeling their positive effects, susceptible policymakers are not tempted to give up on earlier promises and go for quick fixes, like expansionary fiscal policy or other Keynesian pump-priming tricks.

This discussion raises a number of issues. As a trained economist, Monti no doubt knew that his argument was a restatement of what macro-economists call the problem of time inconsistency. This is the notion that policy rules – such as a commitment to balance budgets over the medium term – lack credibility when they are made sequentially. As soon as a firm commitment is spread over a length of time, the possibility arises that short-term considerations will assert themselves. Such policy commitments are thus time inconsistent – they fail to hold over time and thus need to be insulated as much as possible from political pressures.

If this is Monti’s analysis, two questions arise. The first is what if the policy rule has no credibility in the first place – irrespective of whether we are talking about the short, medium or long-term? The commitment of EU member governments is that austerity combined with supply side reforms equals a return to growth. We are into our fifth year since the outbreak of the current crisis in 2008, austerity policies have themselves been in place for a number of years, up to three to four years in some countries. Austerity is nothing new, nor is the idea that supply side reforms boost growth and employment, and yet these policies are not being seen to deliver. Monti’s analysis of current difficulties in Italy and elsewhere, that rests upon the idea of extended lag between introducing reforms and securing their rewards, in fact places a great deal of faith on the idea that these reforms will eventually work. At issue today is not people’s short-termism. It is the more fundamental issue of whether cutting spending and raising taxes in a recession is any way to stimulate growth.

The second question is about what Monti suggests we should do. If we return to the idea of time inconsistency, then we find a very clear recommendation. Institutions should be created that make it as difficult as possible to renege on a policy commitment. This is the famous recommendation to favour rules over discretion. These institutions should be given the responsibility for contentious political agendas – like keeping down government spending, being hawkish on inflation, reform labour markets – in order that legislatures and electorally accountable executives are not tempted to go for short-term fixes.

The problem is that we are not in the 1970s anymore. Profligate legislatures have not been driving today’s budgetary crises. The contrary is true, as we see from the Netherlands through to the UK and Spain. Moreover, today’s crisis happened in a world of rules, not of discretion. Problems of sequential policymaking were hived off to independent central banks, independent budgetary offices, fiscal councils and an array of European rules and regulations in the field of macro-economic policy. As a result, the problem surely lies in something deeper and more fundamental than simply the institutional environment for elected policymakers. This won’t stop European commissioners and national politicians arguing for the strengthening of European rules. In fact, as the Fiscal Compact has shown, this seems to be the dominant framework with which European policymakers are working today. We should be wary of such explanations. A policy framework dedicated towards the curtailment of expansionary policies has given us a European continent saddled with debt and a global debt crisis. There is something more to this than the theory of the time inconsistency of optimal policy rules.