Kuttner putting in perspective the European electoral defeat of Center Left parties

Robert Kuttner of the American Prospect and Demos gives us the context of the political part of political economy of the next few years.

Left Out in Europe
by Robert Kuttner

The European left, such as it is, got clobbered in the recent elections for the European parliament. In the next parliament, center-right parties will have almost twice as many seats as social democrats. Of left parties, only the Greens gained slightly. Far-right nationalistic parties picked up strength.

This should hardly come as a surprise. Over the past generation, especially in places like Britain, Germany, and the Netherlands, Europe's center-left has worked hard to neuter itself as an opposition force, rivaling free market parties in an embrace of high finance and heedless globalization.

In the late 1990s and early in the present century, Gerhardt Schroeder of the Social Democrats, then the German Chancellor, was a leading sponsor of financial market liberalization. He also went to great lengths to weaken labor protections. His British counterpart, Britain's Tony Blair, went Schroeder one better in putting all of his economic eggs in the basket of Britain's financial elite. Blair intensified the financial policies of Tory Margaret Thatcher. As in the US, the seeds of the current financial collapse were sown under nominally left-of-center governments.

The Italian left has vanished almost entirely. In France, factional and personal disputes have prevented the Socialist Party from offering a coherent alternative to President Nicolas Sarkozy, who offers a characteristically French, paradoxical combination of nationalism and social protection.

For a generation, the European center-left has embraced essentially the same version of global laissez-faire and liberated finance as the center-right parties, tempered by only a marginally better version of the welfare state. The common formula is: liberalized capital markets; freer global trade; reduced protections for workers; flatter taxes. The very phrase, "center-left" is an emblem of the capitulation to global finance. Thus, leading moderately left parties have scant alternatives to offer voters at a time when free market capitalism has thoroughly disgraced itself.

Alienated voters either stay home or vote for the far right. It's an old story--and given what we know of twentieth century European history, a terrifying one.

The ideological lines are further blurred because the center-right also defends the welfare state. But everywhere, the cost of paying for the failures of capitalism is rising, leaving all of the mainstream parties with a fiscal crisis. Because of these costs, the welfare state in much of Europe has become a defensive fortress--a society of insiders and outsiders. The insiders are civil servants and a dwindling number of workers with secure jobs. The outsiders are increasing numbers young people, women, and immigrants, who cannot find good jobs and do not enjoy the full social protections. This bargain is not stable, either economically or politically.

The short term winners are the center-right parties, which form the governing party in most of the nations of the European Union. But they hardly offer the voters much either. The leader of the British opposition, Tory David Cameron, hasn't a clue how to help Britain recover from economic collapse. But he is likely to win the next election. The ruling coalitions in France, Germany, and Italy are not delivering economic recovery. But absent a believable left, they will continue to govern.

The EU, once a possible instrument of social democracy on one continent, itself has become something of a Trojan Horse. Its basic document, the Maastricht Treaty, makes free movement of capital, goods, services, and persons a core constitutional doctrine. Social protections are secondary.

Thus, the European Court of Justice has recently issued rulings defending the rights of nations such as Poland, Estonia and Latvia, with lower social protections, to impose their standards on the core nations of the EU. German contractors can end-run Germany's good labor standards by hiring Polish sub-contractors. Construction and transport firms from the Baltics can undermine Sweden's system of collective bargaining. Hedge funds based in London can buy Scandinavian firms and erode the local social compact. This has become Europe's version of a race to the bottom.

The politics of the EU compound the constitutional problem. The Commission of the EU, based in Brussels, could adopt stronger social defenses if it so chose. But center-right parties currently have a strong majority of governments of Europe's 27 member states. So policies to constrain the regime of global finance cannot win support. The British Labour government, nominally part of the center-left, invariably votes newer member states that have center-right governments, against anything that could be considered a restraint on free capital movements.

The exceptions to this sorry picture are the Social Democratic parties of Scandinavia and to some extent of Spain. The Nordic Social Democrats have insisted on a social model that spends enough money to provide security combined with flexibility. Denmark supports liberal trade, but there are powerful quid pro quos. When a Danish worker changes jobs, it is usually to move to a better job, with the mobility subsidized by the state. There are hardly any low-wage workers in Denmark, and no welfare state of insiders and outsiders, except for some immigrant groups. And Denmark did not suffer a financial collapse because it did not abandon bank regulation.

There are currently conservative governments in Stockholm and Copenhagen, but they don't dare tamper with the basic formula. The former Danish Social Democratic Prime Minister, Poul Nyrup Rasmussen, is currently Europe's leading advocate of much tougher regulation of financial capital.

Rasmussen might have been the next president of the Commission of the EU, had the left not been trounced. And so the vicious circle continues. The left offers little to voters, and the right keeps being elected.

This is surely a moment for a compelling program to constrain capital in the broad public interest. Capitalism has demonstrated once again why it is not capable of being self-regulating. American progressives used to look longingly to Europe, with its stronger trade unions and its more comprehensive social protections. Those are still there, but unraveling under assault. What's missing on most of the continent is political leadership, vision, and nerve.

Robert Kuttner