People's Democracy

The Dilemma of the European Left

Prabhat Patnaik

THE recent developments in France take one back to May 1968. The militancy of the workers, the coming together of the workers and the students, the wave of sympathy for the striking workers, the open defiance of “the logic of the system”, are all reminiscent of May 1968. There is however a fundamental difference. In May 1968, the workers were not striking for any economic demands; theirs was a political challenge, “ a contestation of the structures”, to use a contemporary phrase; and president De Gaulle actually broke up the uprising by using economic measures, announcing an across-the-board wage increase, which, coming out of the blue, divided the workers. Today the demand itself is economic, that the age at which pensions can be accessed should not be increased; and president Sarkozy is using political measures, such as getting parliamentary approval for his reforms, and using the State machinery against the strike, to defeat the workers.

The workers today not only do not have any political demands, which shows how far political transformation has receded from the agenda of even the most militant of present-day workers’ struggles; they do not even have any alternative vision of an economic arrangement different from the present one, which could act as a transitional demand leading to a politicisation of the current struggle over a period of time. In other words the present struggle, remarkably militant though it is, is not only not informed by any alternative vision, of an arrangement different from capitalism; it is not even informed by any alternative vision different from European capitalism in its present form. It is an uncompromising struggle to defend the gains of the Welfare State, but within capitalism as it exists today. The uncompromising nature of the struggle is admirable; but the absence of any perspective on how to resolve the contradiction between the Welfare State and the demands of contemporary capitalism is a serious flaw. This absence in turn is traceable to a fundamental problem faced by the European Left.

INDUBITABLE

FACTS

The fact that wage cuts, if resorted to by each country to overcome its crisis, aggravate the crisis for all; the fact that exchange rate depreciations, if undertaken by each country as a means of resolving its crisis, aggravate the crisis for all, are indubitable. These measures could work in the case of one single country in raising its aggregate demand through an increase in its net exports, provided it was alone in following them and no other country adopted similar measures. But when all follow such measures they collectively ensure a worsening of the crisis for each one of them. What appears to each individual country as rational, is in the aggregate irrational.

The opposite is also true. What is collectively rational, may be individually irrational, in the sense that if all countries followed similar measures then all would be better off, but if a single country followed this measure while others did not then it would come to grief. A rise in wages everywhere for instance in the midst of a crisis, or a synchronous increase in the fiscal deficits in all countries, will improve the situation for all. But if only one country increased its wages while others did not, then in a universe of liberalised trade its aggregate demand is likely to decrease through a reduction in its net exports; likewise if one country increased its fiscal deficit while others did not, then in a universe of financial fluidity it runs the risk of financial outflows and hence insolvency.

It follows that if Welfare State measures have to be strengthened as a means of overcoming crisis, then quite apart from the political objections to any such move from capitalists, and in particular from financial quarters (who dislike all forms of State activism except those that directly serve their own interests), there is another fundamental hurdle. And this consists in the fact that such measures should either be adopted collectively by all, or by an individual country provided it de-links itself from the universe of liberalised trade and financial flows. And exactly the same holds for the defence of Welfare state measures.

Now, co-ordinated action involving all major actors in the global economy, does not appear feasible at present. On the other hand, the Left in no country in Europe is thinking in terms of de-linking its economy from the vortex of globalisation: indeed all segments of the European Left are resolutely opposed to any revival of protected national economies. Besides, such a revival does not also make much sense for the comparatively small, already globally well-integrated, and not even potentially self-reliant, economies of EU. A country as large and diversified in its production structure (relative to requirements) as India can easily survive if it de-links itself from the vortex of liberal global trade and financial flows, but the same cannot be said of Greece or even France. Hence an expansion or even a defence of the Welfare State, which requires either a “national”-level de-linking from the global economy, or co-ordinated action at the global level itself, appears exceedingly difficult in the present context.

Of course, feasible or not, the fact that the European Left has not raised the demand for globally co-ordinated fiscal action is somewhat surprising. During the Great Depression of the 1930s, several authors, including some German trade unionists and also John Maynard Keynes, had asked for a co-ordinated fiscal stimulus among major capitalist economies as a means of overcoming the crisis. Something of that sort was talked about at the beginning of the current crisis too, and several countries did in fact undertake fiscal stimuli. But the stimuli were weak, and a clamour for rolling them back began soon, because of which there is now an actual roll-back in some countries, like Britain, and an attempt at a roll back in others like France which is being resisted.

On a superficial glance it may appear as if the fiscal stimuli that were provided in the wake of the crisis were quite strong, since the fiscal deficit as a percentage of GDP rose dramatically in major capitalist economies. But much of the increased fiscal deficit was for shoring up the financial system and had little effect on stimulating aggregate demand. So, while the so-called stimulus was not much of a stimulus to aggregate demand, though the increased fiscal deficit deceived people into believing otherwise, what is now being attempted for pruning this deficit will certainly impinge adversely on aggregate demand.

STAGGERING

IMPLICATIONS

Besides, the class implications of the post-crisis fiscal policies in the capitalist world are quite staggering. The enhanced fiscal deficit was meant to aid finance capital; but its curtailment comes at the cost of the Welfare State. In other words, the Welfare State is being sacrificed, workers’ living standards are being rolled back, as a post-facto price for buttressing the position of finance capital. A more brazen example of class-aggrandizement masquerading as respectable economic theory cannot be imagined. But the European working classes’ fight against this aggrandizement takes the form not of attacking the totality of the underlying arrangement, or suggesting an alternative totality, but of merely resisting the attack on the Welfare State within this very totality.

Apart from the two alternatives for defending and strengthening the Welfare State mentioned above, viz. national-level delinking from globalisation, and global fiscal co-ordination, there is a third possible way open to Europe, and that is a unilateral fiscal stimulus by Euro-zone countries alone. Even without waiting for a co-ordinated fiscal stimulus involving all major countries, and I mean a genuine stimulus that increases aggregate demand, not hand-outs to finance, Euro-zone countries alone could simultaneously and synchronously expand government expenditures financed by fiscal deficits.

Some of the increased demand generated by such expansion will no doubt leak out to non-European economies. But the very fact of a co-ordinated fiscal stimulus in Europe, will cause a weakening of the Euro, and thereby keep such leakages down. Besides, the countries to which such  leakages should be accruing in the most pronounced manner, namely China and other “newly-emerging economies”, are precisely the ones least affected by the crisis and hence with the least magnitude of “slack” as a consequence of it. Their capacity to take advantage of the newly-created demand therefore is limited. The increase in aggregate demand effected by a co-ordinated fiscal stimulus in Europe therefore will largely create an increase in demand for European goods and services.

Europe’s increased demand in short will stimulate largely its own production. And in case the leakage from a European stimulus is too great, or the financial instability caused by it is too severe for Europe, then the EU as a collectivity could abjure free trade and free financial flows, and impose trade and capital controls.

The problem with this alternative however is that even though single-country nationalism is not viable in Europe, it is far from being dead. On the contrary, with the expansion of the EU it has become stronger; and in the wake of the crisis which has caused substantial unemployment everywhere, it has become stronger still. Since the impact of the crisis itself within Europe is uneven, and since, as a result, the potential benefits of a co-ordinated fiscal expansion across Europe, will also be uneven, the question will naturally be raised: why should the German State get into deeper debt for alleviating the unemployment problem in Greece? Or why should the Dutch State get into deeper debt for sustaining the Welfare State in Poland? Any such pan-European plan therefore will give boost to reactionary nationalisms across Europe that will strengthen the Right, and stimulate fascist tendencies. And financial interests, opposed to all forms of State activism except those directed towards their own benefit, will promote such Right-wing and fascist forces to roll back pan-European fiscal expansion plans.

Putting it differently, despite European integration, pan-European consciousness remains weak, too weak perhaps to sustain a co-ordinated fiscal stimulus across Europe for the defence and strengthening of the Welfare State in all member countries as a means to overcome the crisis. If the Union government in India announces a North-East package, or if it increases the fiscal deficit for undertaking larger expenditure in some particular part of the country, then this does not provoke a storm of protests elsewhere. The reason, which lies juridically in the fact that India constitutes one single nation-State, lies effectively in the existence of a reasonably strong pan-Indian consciousness. A pan-European consciousness of this kind does not exist, which forecloses for the Left this third option as well.

DILEMMA OF THE

EUROPEAN LEFT

The dilemma of the European Left therefore is that while it must resist the rolling back of the Welfare State, it cannot suggest any alternative to the existing economic arrangements of capitalism within which alone its resistance can be successful, and which can then constitute a transitional demand for a political offensive of the working classes. A co-ordinated global fiscal stimulus is infeasible (though the Left must ask for it more loudly than it does); a national-level de-linking from globalisation is impractical and invokes single-country nationalisms that the European Left opposes; and a pan-European co-ordinated fiscal stimulus runs the risk of stimulating reactionary single-country nationalisms that will strengthen the Right and fascist elements.

Nonetheless, the European Left must press for a co-ordinated fiscal stimulus among Euro-zone countries for the defence and strengthening of the Welfare State as a means of combating the crisis. For this however it has to overcome a certain intellectual reservation that exists within its own ranks, which consists in a distrust of all “nationalism”, including even any pan-European “supra-nationalism”.

Such a distrust of “nationalism” which is not confined to the European Left alone but characterises Left thinking elsewhere too, is no doubt justified to a degree. Nationalism, even when it is of the inclusive anti-imperialist kind that we find in the third world, has the potential to become “closed” and reactionary; in the context of Europe where “nationalism” has been a weapon not of defence against imperialism and aggression but of perpetrating imperialism and aggression, this reactionary potential, even of a pan-European Left-led “supra-nationalism”, is immeasurably greater. The Left naturally shrinks from it and sections of the Left visualise a direct transition from the current regime of globalisation to a global socialist order.

But when such a direct transition is not possible, when globally-coordinated working class actions are not on the horizon, when resistance to the consequences of neo-liberalism is taking militant but localised forms, the Left has no alternative but to accept a more or less prolonged transitional phase of national or pan-national (as in the case of Europe) de-linking from the current global order before the world can witness a new form of internationalism that is driven not by finance capital but by socialist praxis.

True, if this isolated de-linking gets inordinately protracted then the distortions intrinsic to it may become too strong to resist. But if the unit of resistance to neo-liberal globalisation is large enough (like the EU as a whole), then, given the internationalist perspective of the resistance itself, the chances of thwarting the reactionary potential of the “nationalism” that such resistance unleashes transitionally, are that much greater. At any rate, to invoke this potential as an argument for reconciling oneself to neo-liberal globalisation, until the arrival out of the blue of some “promised dawn” when the entire order can be changed in its totality, is unproductive.

For us in India there is a sense of déjà vu about this debate. Nobody was more sensitive to the reactionary possibilities of “nationalism” than Rabindranath Tagore, and nobody, despite being aware of these reactionary possibilities, was as clear-sighted about the necessity of “nationalism” as a weapon of struggle against imperialism as Mahatma Gandhi. The Left, especially the European Left, since Europe is becoming the leading theatre of resistance to the depredations of neo-liberal capitalism, has to be equally clear-sighted today. It has to come out with alternative transitional demands that necessarily entail a “retreat” from contemporary globalisation.

Slavoj Zizek wants not a withdrawal from the European project but a carrying forward of this project to a European working class upsurge. But the French, German and Greek workers cannot be expected to combine on a revolutionary project if they are not even united on a set of transitional trade union demands. Until this unity comes about, the militant resistance of the French or the Greek workers, even though heart-warming, will not translate itself into productive political action.