The left's resignation note

Dec 11th 2008
From The Economist print edition

Why the left in Europe is not benefiting from the economic crisis

Illustration by Peter Schrank

SOCIALISM in Britain died in 1983. Its demise can be dated to that year’s Labour Party election manifesto, branded “the longest suicide note in history”. This document combined ideological purity (highlights included the creation of a planning ministry, withdrawal from the European Community, exchange controls to stop capital fleeing overseas and unilateral nuclear disarmament) with a lunatic disdain for what voters wanted.

Today questions are being asked about the health of the European left, as the deepening recession fails to boost Socialist parties across the European Union. This baffles many. After all, the Anglo-Saxon obsession with untrammelled markets has been exposed as madness—or so leftist bigwigs claim. Across the capitalist world, once-strutting tycoons are begging for state bail-outs. Yet voters are not flocking to mainstream centre-left parties. A recent column in Libération, a leftish French newspaper, moaned that this was not just a “paradox” but an “injustice”.

For a clue to what is going on, consider the manifesto adopted earlier this month by the EU’s centre-left parties for next June’s European election. It is punchy enough, accusing conservatives of “blind faith in the market”. Under the banner of the Party of European Socialists (PES), the left touts lots of new regulations on finance, including limits on “excessive risk-taking and debt”. (Just how regulators would detect “excessive” risk in advance is left unexplained—plenty of banks would love to know the answer.)

A motif runs through the PES manifesto, offering a move away from “unregulated markets” towards the regulating wisdom of public authorities. And there lies the left’s problem. For the real argument is not one of markets v state. Even before the crash, that was a false choice: every capitalist economy has a mix of regulation and liberalism. Now the boundary lines are blurred everywhere, as banks are nationalised and cash is shovelled to favoured industries. Instead, the big divide is over globalisation, and whether to resist or embrace competition between different countries. On that front, the PES manifesto is a muddle. Indeed, it could be dubbed one of history’s longer letters of resignation.

As successive European economies tumble into recession, the thing that most frightens and angers workers is the risk of losing their jobs to lower-cost rivals. The PES manifesto dances around this issue. It talks of “managing” globalisation for the benefit of all and using Europe’s combined size and wealth as a labour market to defend “high social standards”. But it does not promise to stop factory closures or lay-offs.

This silence has two explanations. First, Europe’s centre-left parties are split over how best to protect jobs. At a meeting in Madrid to draft the PES manifesto, some west European parties wanted language about limiting the free movement of workers within the EU, says Denis MacShane, a British parliamentarian who represents the Labour Party in the PES. But representatives from new, lower-cost EU countries like Hungary, Poland and Lithuania rejected these ideas, insisting “free movement is one of the best things about the EU.” In the end, PES leaders fudged it, with a clause saying merely that reduced social standards and wage cuts should not give one country a “competitive advantage” over another “at the expense of workers”.

In Britain and the Nordics, centre-left politicians have moved away from protecting existing jobs towards protecting individual workers (through things like retraining if they are made redundant). Elsewhere, socialists still claim that the might of the state can be used to shield workers directly. In France some want laws to ban companies that are in profit from making workers redundant. Portugal, one of the four EU countries with a majority centre-left government, has unveiled plans to subsidise wages in the car industry for up to a year, as production lines are idled.

Such strategies are, alas, fated to collide with the second explanation for the PES’s silence: that efforts to resist globalisation rarely work for long. In their guts, European voters know this. When factories are earmarked for closure, workers may protest, and may even hope that leftist leaders will join the picket lines. But the factories tend to go anyway.

Driving the social model into the ground

The proudest trophy of the left is the European social model, a web of labour and welfare laws offering a “high degree of social protection”. The model emerged during the post-war boom, when living standards soared across western Europe. In his book “Postwar”, Tony Judt, a New York-based British academic, lists many causes: governments turned away from protectionism, people started having lots of babies, energy was cheap and Europe had much catching up to do (in 1957 only 2% of Italian homes had a refrigerator, but by 1974 94% did).

Crucially, the European social model also enjoyed an amazingly low degree of external competition. In 1960 a West German car worker had little to fear from Eastern Europe or Asia. Skodas and Nissans were pretty horrid; Chinese workers were lost to the madness of Mao. When China, India and the ex-Soviet block joined the capitalist world three decades later, the global labour pool grew from 1.5 billion to 3 billion: an explosion called the “great doubling” by Richard Freeman, a Harvard economist.

Never again will west European workers live in a world with so little competition. Honest European politicians know this—and so, deep down, do most voters. That is why trade unions are still shedding members. It is why the mainstream left cannot credibly promise to reverse globalisation, preferring instead to blame the crisis on ill-regulated markets. But attacking market follies is hardly a distinctive position (listen to Nicolas Sarkozy, France’s supposedly centre-right president). Europe’s centre-left is struggling because its 20th century rationale is dying. If it cannot find a less muddled message that explicitly embraces globalisation, this economic crash could deliver it a fatal blow.