The story about the economic failure of austerity in Europe is now well told. What I want to contend is that this tragic ordeal was not about misguided policy with unintended consequences, but rather it followed from the disrespect for democracy which was (and still is) supported by institutions and people with undemocratic tendencies. As a result, Europe is now economically unstable, but also democratically crippled for the future. There are however, a few steps that we can take to start reversing the current situation.
The public response to the economic crisis starting in 2007 was by most accounts ineffective. At the forefront of the resistance against the shockwave of the financial collapse of 2007-2008 were the different varieties of Occupy movements across the world. Yet, despite their efforts to mount a visible rejection of business as usual, we all failed to nurture this embryonic potential into a sustainable movement to at least provoke a change of policies. This happened despite the fact that their grievances about inequality were essentially shared by the majority of the public. Instead, what followed were years of extraordinary and vivid demonstration of who is, in fact, in control.
On the major issues government policies either evaded or explicitly contradicted the concerns of the people. Consider a recent survey by Pew Research that interrogated the attitudes of European citizens. It found that the main concern of the population is unemployment, and that the vast majority of people believes the economic system favors the wealthy. In a democratic society, governments would take measures to increase employment, and implement rules that would remove some of the benefits of the very wealthy. Obviously what happened almost everywhere was the opposite: unemployment-inducing economic austerity was the rule, big financial institutions were provided public welfare, and corporate profits hit new records. Consider two relevant examples: on one side the UK and on the other Greece.
The UK (where I currently reside) is doing far better than the rest of the EU, and has returned to economic growth. Yet, despite some good news, real wages are down to 2002 levels – which corresponds to the biggest drop in purchasing power in 50 years. In the skyscraper world of the UK, things are not quite the same: record breaking profits are being announced again, and the conservative mayor of London is asking for tax cuts for the very rich. The fact that none of this reflects public opinion seems of little importance (as long as they can get elected – but more on this later).
On the other end of the spectrum is the sad example of Greece. Since the beginning of the crisis, the economic output has declined 20% and, not surprisingly, unemployment is close to 30%. As a result of budget cuts on healthcare, Malaria has now returned to Greece, and HIV infections are on the rise. Hardly minor points. As David Stucker put it:
Had austerity been organised like a drug trial, with a board of ethics, it would have been discontinued, given evidence of its deadly side-effects and the failure of its purported economic benefits to accrue.
It’s hard to see how destroying the Greek economy and harming its population is going to solve any long term competitiveness problem. In fact for all countries under bailout programs, the debt to GDP ratio has increased rather than decreased. But that’s only a contradiction if you assume helping the Greeks (and others) was the goal.
What made this possible?
Government policies have been adversarial to public interests, and this has been encouraged by larger European powers and institutions. Overseeing the process has been the (unelected) president of the EU Commission Durao Barroso: a former maoist, who supported the Iraq war, and jumped ship as the prime minister of his own country causing a serious political crisis. To understand the current undemocratic climate, it’s worth being clear about the motives of austerity in southern Europe and Ireland. The reason for austerity budgets was never the (unjustified) theoretical belief that austerity in a time of crisis was a necessary or sufficient condition for future prosperity. The reason was the very justified belief that without it, no European (EU / ECB) or international (IMF) loans would be granted, and therefore there would be no money to pay basic services and salaries. This is why an “ethics board” (as David Stucker suggests) would have been pointless: it was never about healing the economies of the bailed out countries and helping their people. It was about making sure debt was paid back, and saving the highly leveraged European banks. The result was a lack of meaningful alternatives for the periphery, who were between a rock and hard place. Democracy and Sovereignty were also under austerity.
Martin Wolf, from the London Financial Times says:
Austerity has failed. It turned a nascent recovery into stagnation. That imposes huge and unnecessary costs, not just in the short run, but also in the long term: the costs of investments unmade, of businesses not started, of skills atrophied, and of hopes destroyed.
Why did we do it? It depends what you mean by “we”. Wolf again:
Some will insist that the eurozone countries had no alternative: they had to retrench. This is true in the sense that members have limited sovereignty, wed as they are to a single currency, and had to adapt to the dysfunctional eurozone policy regime. Yet it did not have to be this way.
It “did not have to be this way” but it was engineered to be so. Countries in the Eurozone, abdicated from having traditionally sovereign institutions like their central banks. This was a political decision taken by European governments to semi-integrate Europe and make sates semi-sovereigns. Indeed, the Semi-sovereigns seemed fine… Until they needed the fundamental institutions of national financial and economic management. The mindset was such that democratic control over local governments by the people, and control over European institutions, wasn’t seen as a priority.
The people were complicit in the loss of sovereignty. Take the example of democratic participation in Portugal (where I am from, and one of the countries most affected by the EU). During the same period when institutions were being made less and less democratic, the people of Portugal became less and less interested in participating in the common political process. Voter turnout in the most important elections severely declined.
Legislative elections decide the prime minister, and European elections decide the compositions of the Portuguese seats in the European parliament. Voting is only a crude measure of democratic participation, but the trend is unmistakable and it reflects a people’s lost of interest in deciding their government, and consequently the laws and rules under which they live – local or European. Of course decisions to join the common currency were made by the representatives of an increasingly depoliticised public electorate who seemed not to care about these matters. In a culture without democratic engagement, non-democratic decisions are made easier and more likely.
Other examples of undemocratic tendencies.
The wider culture of ignoring the public has had implications in other areas of government. While it’s hard to prove a connection, it doesn’t take a big leap to put together the disregard for the public interest on the economy with the disregard for the public interest on other fronts. Who would be surprised to find that governments that ignore the public’s views on inequality to favor the wealthy, also disregard civil liberties, collect bulk data on everyone’s internet activity including images from webcam usage of the average law abiding citizen, and harass the press who exposes these activities. All the time, preposterously proclaiming to do so for “national security”? (perhaps an expression just as ambiguous as “economic growth”). While the example is from the UK, there can be little doubt that if the intelligence agencies of southern Europe had these capacities, they would also be put to the service of larger interests.
Discussion of these topics is of course minimal and, sadly unsurprisingly, in the aftermath of the largest economic crisis in several generations, politicians now entertain themselves talking about migration, a fear and concern that they decisively propagate. It seems as if the major problem for the British public is now that other people want to come work and pay taxes here. The fact that EU migrants contribute to the public purse more than the average British citizen is just a fact to be ignored of course. Important issues, like the largest real wage drop in 50 years in the face of record corporate profits, are hardly debated. Elsewhere in Europe, like Finland, Greece, Hungary, France, Switzerland, and others, anti-immigration parties are growing by making the same point: the largest problem for Europe now is somehow the movement of people. This strategy guarantees that the issues that most concern the public, like an unfair economic system and lack of jobs, can be blamed on other people, while meaningful debates are avoided and powerful distractions are created.
Some suggestions for the present and future.
Austerity wasn’t a policy mistake, it was the expression of an undemocratic culture. In summary: a lack of concern for meaningful democratic choice, and the existence and power of undemocratic institutions, facilitated the emergence of decision makers who do not address public concerns. As a result, inequality is not reversing but rising, unemployment is a problem largely unaddressed, European institutions remain undemocratic, and governments have taken the right to act upon their citizens as they wish without having to give justifications. Like a child who tests how far they can go without being reprimanded, governments are finding out that they can go pretty far and still keep the European public in line. It is a terrible precedent for democratic rule.
Democratic pressure has to be felt in the centers of power. The centralized and institutional nature of the source of European policies and attitudes has consequences for those who wish to oppose it. Namely that protests should focus on putting pressure on powerful European institutions and countries. There is no scarcity of embassies, consulates, IMF offices, etc, full of European diplomats and officials who report to those who hold the power and who make decisions that we all have to live by. Citizens of countries under “bail out programs” cannot vote or directly participate in the political process that makes these decisions but protests can legitimately be directed at representatives of the EU/ECB/IMF. If the center of power changes, we must make sure the pressure of democratic demands follows right behind. Decision-makers should be made to feel the weight of their decisions. If not by votes, then by other means.
It’s also necessary to correct the mistakes of poorly planned European integration. With the calming down of the European economic crisis, the issue of reforming its structure has largely subsided – this is a mistake. We need to either increase democratic accountability of European decision centers, or we need to devolve sovereignty back to states – but we can’t have it both ways.