Austerity policies in Europe: There Is No Alternative

One of Margaret Thatcher’s infamous slogans was “There Is No Alternative”, known also through its abbreviation TINA. For Thatcher this was a normative slogan, a part of her political, ideological struggle. She wanted to convince people that her neoliberal policies were the only possible, other alternatives have been left on the scrap heap of history. My use of the same wording in the title of this article is not meant to be normative, but rather descriptive. It describes the really existing political situation in Europe today. Thus, it also describes the enormous challenge which the trade union and labour movement in Europe faces, the lack of alternatives to the current neoliberal, austerity policies or, to say it bluntly, the deep ideological and political crisis of the left.

The background of the extreme austerity policies which are now being pursued in great parts of Europe are well known to most people. The financial crisis hit Europe at full strength in autumn 2008. To prevent a collapse of the world’s financial markets governments introduced massive economic rescue packages. These packages were crucial in preventing an economic breakdown after unrestrained speculation economies had been allowed to hold the field for a couple of decades. Most governments took up enormous loans to finance these packages, something which led them into a debt crisis.

Many people expected that the financial crisis, with its ruinous consequences, would mean the final goodbye to neoliberalism, speculation economies and the dominance of free market forces. This policy had led to a dramatic redistribution of wealth – from labour to capital, from the public to the private sector, and from the poor to the rich. The system was thus discredited – and now the politicians surely had to realise that systematic deregulation, privatisation and free-flow capitalism had failed – and had actually been directly destructive. The casino economy had to be stopped. In other words, the time had come for control and regulation. So many people thought.

But that is not what happened. The governments did not seize the opportunity to ensure increased democratic control and lasting public ownership of the financial institutions. There were admittedly, in the wake of the crisis, a number of proposals about regulating the financial markets and imposing taxes on financial institutions and financial transactions. The elites and the money-grubbers were obviously nervous for the reactions among people. However, actions of a sort which could threaten their interests, failed to appear. Proposals of this kind, therefore, have increasingly been toned down and postponed until the future. This was well illustrated by the G20 meeting in Toronto in Canada in June 2010, where the final declaration contained little more than the well-known neoliberal recommendations about removing further barriers to the free movement of capital, goods and services.

On the contrary, what we have seen are draconian austerity programmes, massive privatisation of whatever is left to privatise and enormous attacks on public sector wages, pensions and trade union rights – particularly in the most crisis-ridden countries. Pensions have been cut by up to 15–20%, while the wage level in the public sector has been reduced by anything from 5% (Spain) to over 40% (in the Baltic). Collective agreements and trade union rights are being set aside – not via negotiations with trade unions but via government decrees and political decisions. This has happened in at least nine European Union (EU) countries (the Baltic states, Bulgaria, Romania, Greece, Spain, Portugal and Ireland). If the trade union and labour movement is unable to contain this development, it may be facing a decisive and historic defeat in Europe.

How could this happen in a part of the world which has harboured some of the strongest and most militant trade union and labour movements in the world? Why have not opposition and resistance been stronger? How come that most of the proposals of regulation and increased democratic control have vanished like dew before the sun? And who could imagine that quite a few of the enormous attacks on public services, wages, pensions and trade union rights were carried out by Social Democratic governments – in Greece, in Spain and in Portugal, until they all were ousted from their government offices by frustrated voters and replaced by right wing governments?

This has to do with power relations in society and the deep political crisis on the left. It is not common sense but the prevailing balance of power, mainly between labour and capital, that decides what ‘solutions’ are chosen. If reason had prevailed, one would naturally have stopped the meaningless speculation economy via regulations, by gaining increased democratic control over banks and other financial institutions, by prohibiting short sales, hedge funds and trading with various high-risk, so-called financial instruments. One would have limited the free movement of capital across national borders and overturned a taxes, rates and dues system that lets the rich go free and encourages unrestrained speculation.

Within the prevailing power relations, however, this was not the policy of choice. The neoliberals and speculators who contributed most to causing the crisis are still in the driving seat – even when the crisis measures are drawn up and the bills are made out. The result is that the losses become socialised while the gains become privatised – yet again. Thus, austerity policies are implemented that further intensifies the crisis. The interests of financial capital are given priority. As many people have pointed out, the EU’s rescue packages are not primarily designed to save Greece, Ireland, Portugal and other countries that might follow, but the German, French and British banks and financial institutions that these countries had borrowed money from. While what is needed is stimulation of the economy, investments in infrastructures and in productive activities to create jobs, as well as a strengthening of the social security network, we are witnessing the opposite.

The role of the EU in what is now being enacted on the European continent is pivotal. In addition to the democratic deficit that is built into the EU institutions, they have to a great extent acquired their form and content during the neoliberal era. They are therefore dominated by the interests of capital – financial capital in particular. Through the Lisbon Treaty neoliberalism is constitutionalised as the economic system of the EU. The EU Commission, The European Central Bank and The International Monetary Fund (IMF) – popularly known as the triad – are now, together with national governments, using the crisis to further reshape societies to suit the interests of financial capital. For example, the IMF is now prescribing the same measures for the debt-laden EU countries which so far have been placed under administration by the IMF and The European Central Bank, as they have formerly imposed on developing countries and the Central and Eastern European countries via the so-called structural adjustment programmes. This is a recipe for depression and social crisis.

In this picture, the lack of political alternatives on the left is striking. The current deep ideological and political crisis on the broad left can only be understood in the context of the rather socially peaceful post World War II period, the heydays of the social welfare state and the existence of a class compromise between labour and capital in Europe. This historic compromise was the result of a very specific historic development, in which capitalist forces gave concessions to the well organised working class in Western Europe to damp its radicalism and win workers’ support in the cold war against the Soviet Union. However, in the dominant trade union and labour movement these historic specific achievements gradually formed the basis for a generalised social partnership ideology which became more and more delinked from the analyses of the power relations on which it was built. Thus, it also led to a certain depoliticisation and deradicalisation of the trade union and labour movement. The historic role of the Social Democratic parties became to administer the class compromise, rather than to mobilise the working class for further social progress. This is very well illustrated by the fact that the political and ideological crisis really hit those political parties as the class compromise started to disintegrate from around 1980 – and capitalist forces launched their neoliberal offensive.

What we have seen in Europe over the last 30 years is therefore governments which have pursued some kind of neoliberal policies whether they have been right wing, centre or so-called centre-left governments. The Social Democratic Parties in the EU member countries have, without exception, supported all the neoliberal constitutional amendments of the EU, and the entire construction of a Singel Market, which in reality has been a systematic project of deregulation, privatisation and undermining of trade unions and social welfare. The few examples we have seen of political parties to the left of Social Democracy joining governments as junior partners of Social Democratic Parties (the French Communist Party 1997-2002, the Italian Rifondazione Comunista 2006-8, the Norwegian Socialist Left Party 2005-today) have proved anything from negative to disastrous. None of them have been able to contain neoliberal policies, and they have therefore lost confidence among workers.

Most of the European trade union confederations are clinging to what in EU language is called the ‘social dialogue’. This means that they act as if the post World War II class compromise is still intact, and that bi- and tripartite cooperation between labour, capital and the state is still the most effective way of promoting the interests of workers. That the class compromise has come to an end, and that the social forces with which they seek dialogue are attacking public services, wages, pensions and the very fundamental trade unions rights day and night, do not seem to weaken most European trade union organisations’ belief in social partnership and social dialogue as the main way forward.

The enormous austerity policies and the attacks on the trade unions are, socially and politically speaking, a deadly cocktail – and the historical evidence, especially in Europe, is extremely frightening. Anyway, the social struggle and the fight for social welfare in Europe are entering a new phase. The crisis polarises differences and provokes confrontations particularly at the local and national level. General strikes are back on the union agendas in many countries, particularly in Greece, where the population is being exposed to draconian measures that threaten their general economic and social living conditions. In Portugal, Italy, Spain, France, Ireland and Great Britain general strikes and mass demonstrations have also been carried out, though with differing degrees of strength and intensity. The outcome of these struggles is, however, extremely uncertain. The European social model, such as we know it from its heyday, has at any rate been abandoned in reality by the European elites, even if they continue to pay lip-service to it.

A solution to the crisis, built on solidarity, will require massive mobilisation in order to change the balance of power in society. Only if the trade union and labour movement is strong enough to pose a threat to the existing economic order, will the speculators and their political servants start to give in. That is why support for those who are now fighting to contain this cutback policy is so crucial. The restructuring of the political left seems to be part of the task. Either the trade union and labour movement will manage to defend the social progress gained via the welfare state, or it risks being left with a right-wing authoritarian and socially degraded Europe. A great part of the social progress of the last century is at stake.

This column was first published by the Global Labour Journal

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  • http://www.facebook.com/Fiskalpakt Sozialdemokraten geg

    Great text! I hope our comrades will read this. Mr. Hollande seems to me the first Social Democrat to put together a comprehensive strategy against Mrs. Merkel's Austerity-Europe.

    http://www.facebook.com/Fiskalpakt

  • Laura S.

    Well written article. Mr Wahl can present a good alternative to austerity measures in contemporary politics. I agree with him that we lost the opportunity to seize control over the banking sector. By bailing out the bancrupted banks, we just started a new period of the same problems, which will raise again. Majority of the EU states are highly indebted, but it does not mean that we should stop to build consenzus among the classes. Without the employment and certain standard of living, there will be less money collected on taxes, hence states will become more indebted than before. We can not continue to build our society on what prof. Stiglitz called Privatizing Profits, Socializing Losses. We need to start investing money into labour and services. Privatization and austerity measures will only slow down the downward spiral, we have already taken. Mrs Merkel and other european leaders have no vision of future. There is no overall strategy about common european policy on this theme. Bailing out Greece and trying to save other EU countries is no solution at all.

  • Gray

    What EXACTLY shall labor fight for? Wahl doesn't specifically provide any clear policies. Apart from some overly general ideas (shifting the balance of power, reigning in capital interests) he's as clueless as the unions and left wing parties he writes about. So, he proves his own point. Interesting, but not really helpful.