Economic and Social Policy and the Problems of the Eurozone and European Integration
The latest (February) issue of Harpers’ Magazine has an interesting discussion of Europe and the eurozone, “How Germany Reconquered Europe: the Euro and its Discontents.” Some of the big questions of European unity, democracy, and national sovereignty are debated in broad and direct terms not often seen in other analyses:
“The basic lesson of the past ten, twenty years – even of the past hundred years – is that the upper limit, not only of democracy but of political legitimacy, is the nation-state…” (John N. Gray, London School of Economics.)
Then there is the Franco-German relationship, which is central to the eurozone:
It is a rich discussion, in many ways, of the historical, cultural, and practical problems of European unification and to a lesser extent, the eurozone. However, it is missing something that is of central importance, which is implicit in some of James Galbraith’s comments but not sufficiently spelled out. That is the neoliberal political project of the eurozone and its policy-makers, the deliberate attempt to re-make Europe and move it as far as politically possible away from its prior social-democratic underpinnings.
It was not because of the power of financial markets or because the Germans didn’t want to “help” the Greeks that Europe suffered through about three years of recurring crises, in which the continued existence of the euro was thrown into question, until August of 2012. It was because the European authorities were using these acute crises, and did not want to resolve them, until they had extracted certain “reforms” from the weaker European economies (and possibly even some of the stronger ones, if we consider the European Fiscal Compact and what the French government has been doing recently). We know this because as soon as the European Central Bank (ECB) wanted to do so, it put an end to these crises in a matter of weeks, in July-August of 2012, by effectively establishing a ceiling on the interest rates of Italian and Spanish bonds – something it could have done at any time in the prior three years.
We also know this because the political agenda of the troika (the ECB, European Commission, and IMF) is spelled out pretty clearly in the IMF’s comprehensive reports on regular consultations with European governments. A review of 67 IMF reports on the 27 European Union countries during the four years from 2008 through 2011 shows a remarkably consistent pattern: reduce the size of government, reduce the bargaining power of labor, cut spending on pensions and health care, and increase labor supply.
Any discussion of the European or eurozone project should have this struggle over economic and social policy at its center. While the problems of differing belief systems, cultures, and building common political institutions are real and fascinating, what really makes all these problems immensely more difficult right now is that the European elite is trying to impose very regressive and unpopular changes on their citizens. This is being done in the name of European unity, and it has not only brought record (now 12.1 percent) unemployment in the eurozone, it is also guaranteeing that high unemployment will persist for many years, and that even when (if) unemployment returns to normal levels, wages and social benefits will be lower and income will be more unequally distributed.
Past European economic integration was a different project, providing, for example, hundreds of billions of dollars of subsidies to the poorer countries in order to help bring their workers’ living standards up toward the average. By contrast, the neoliberal project which has been accelerated by the euro and then its post-Great-Recession crisis has an opposite aim.
The European elite, including the Germans, are plenty internationalist. So, while I agree with Gray’s thesis on the centrality of the nation-state, it is difficult to separate this question from the policies that Europe’s internationalist leaders want to impose. What if their project were a social democratic one, like that of Europe’s earlier post-war integration? What if there were leadership that prioritized employment and recovery instead of austerity and regressive “reforms”? We would not be seeing the rise of fascist parties and anti-immigrant activity in Europe, or the threat of growing European disunity. Although social democratic leadership is far from current politics, it is nothing radical and has a large base of support among Europeans.
These questions take on even more importance because the same problems plague the world’s other supra-national institutions, such as the IMF, World Bank, and World Trade Organization. Until these institutions – like those of the eurozone -- can be weaned from their neoliberal, anti-democratic agendas, the nation-state will indeed remain “the upper limit, not only of democracy but of political legitimacy.”