Rethinking Europe in the crisis

Ernst Stetter

The central message of this collection is that the ground has shifted. The financial crisis discredited the neoliberal agenda, which had been in the ascendant since the 1980s. European social democracy found itself on the back foot, having bought into the dominant paradigm through the centrist approaches of the third way and the neue mitte. The economic and political landscape has irrevocably changed and the most vital challenge for progressives is to lead a shift to a new paradigm, from a preference for financial capitalism to version of economic relations that benefits citizens. This is about establishing a new progressive narrative, which would pave the way to a better society.

It is high time we rethought European policies towards the crisis. Four years on we remain in an unacceptable situation. GDP and GDP per capita are still below the pre-crisis level. Unemployment remains at historically high levels: in September 2012 the rate in the eurozone was 11.6 per cent of the labour force. Even worse, youth unemployment increased dramatically, with 17.7 per cent of 15-to-29-year-olds now unemployed in Europe. There is a high risk that this will last and we will face a long-term high level of structural unemployment, which is affecting growth and public finances. The consequences are clear: increased poverty and a deepening social crisis.

We have a duty to address the manner in which we approach contemporary capitalism. The work of FEPS has sought to build a comprehensive narrative of how financial capitalism has reached its present predicament. Through co-operation with partners such as the Fabian Society, FEPS has aimed towards what Ed Miliband might call ‘responsible capitalism’. It is for this reason that FEPS has been so pleased to co-operate on this pamphlet. The articles contained herein go right to the heart of the problems facing present day capitalism. However, they go further and offer routes out of the mire.

In the post-war years, European social democracy acted as a brake on capitalism, allowing the market to operate freely but responsibly, paying a social dividend. Thus, the welfare states of Europe served as a basis for decades of peace, prosperity and comparative equality. The monetarists and neoliberals of the latter part of the 20th century changed all of this, stripping back the social protections and allowing the captains of financial capitalism to act with impunity amid a regime of light touch regulation. This also altered the capacity of the welfare state to cope, based as it was on the administrative structure of the nation state.

Social democracy must face this reality in ways which do not simply involve bowing to the markets. In terms of the labour market, this collection makes a strong case for corporate governance reform, showing that, as Maurice Glasman writes, “labour is a source of value and its representation on the corporate body of the firm means that its value can be reproduced.” Even in the age of globalised capitalism, it is possible to put traditional progressive values at the heart of the economy, making markets serve the people. The collection also looks at migration as a labour issue, which can be dealt with progressively.

Perhaps the most international solution to the international problems posed by the globalised nature of financial capitalism is the financial transactions tax. Such a tax could strengthen public finances across European nations including the UK, as Stephany Griffith Jones argues in her essay.

Of course, the proceeds from such fundraising measures can be used to stimulate more productive economic activity, and thus a smarter and more inclusive model of growth. Publicly funded investments in areas of potential productivity but relative uncertainty can stimulate further private investment and produce a substantial multiplier effect. It can produce further innovation and, if financial resources can be raised at EU level, this can be put to good co-operative use to gather the critical mass to make Europe a hub of innovation. At a municipal level, a localised banking sector can help stimulate economic recovery through local knowledge of small and medium sized enterprises.

Innovation is at the heart of the progressive paradigm shift. Innovation in economic and fiscal policy will produce the technical innovation required to bring growth and better living standards through the 21st century, both from social and environmental perspectives. Equality and sustainability must be at the heart of the progressive paradigm and policy interventions related to education, skills, taxation, and corporate governance should be core parts of this platform.

Europe is on the eve of important challenges, with elections in two ‘founding’ member states of the EU next year – Italy and Germany – and there is the need to prepare thoroughly for the next European elections in 2014. The challenges we face are profound and it is not simply a question of winning elections, it is a question of proposing real alternatives for social democracy after the crisis; framing a truly social contract with citizens, based on progressive values.

I am more convinced than ever that these times necessitate pan-European progressive answers. National solutions cannot resolve the crisis. The questions facing today’s society are not about the next set of elections or if a nation is for or against Europe. The questions are: what do progressives stand for? And what are the policies of Europe, and its member states, achieving?

Furthermore it is also about expressing a hope for the future – a chance to shape our 21st century Europe by assuring a solid and values-based economic and social alternative.

This pamphlet is a contribution to enhancing the debate about Britain’s ‘next economy’, which in turn could help to shape the ‘next Europe’. The future in the UK and in Europe lies in solid economic development. Without alternative economic policy approaches, high (full) employment cannot be guaranteed and this is the precondition for the wealth and prosperity of a nation and of our continent.

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In The Great Rebalancing : How to fix our broken economy, senior economists and policy experts set out significant and specific new proposals for what rebalancing the British and European economy actually means in practice, seeking to put flesh on the bone on calls for a more ‘responsible capitalism’ and spelling out in more detail than we’ve seen before what the left’s next economy could look like.