Social Democracy has paid the price for its capitulation to financialisation. Now, writes Yanis Varoufakis, a reinvigorated Left must show the way forward.
Europe’s inane handling of the inevitable euro crisis has triggered an electoral result in the recent European Parliament elections that is a clarion warning that Europe is decomposing. And it is decomposing precisely because of the Left’s spectacular failure to intervene both during the construction of Europe’s economic and monetary union and, more poignantly, after the latter’s crisis had begun.
The international press has summed up the 2014 European Parliament election outcome as a sign that the economic crisis plaguing Europe has caused voters to be lured by the two ‘extremes’: the ultra-right and the extreme left. This is a verdict that the European elites, whose shenanigans are responsible for Europe’s deconstruction, are comfortable with. They see it as evidence that, despite ‘some errors’, they are on the middle road, with some wayward voters straying off the ‘correct’ path both to the left and to the right. And they hope that, once growth picks up again, the ‘strays’ will return to the fold.
This is a misrepresentation of current economic and political reality. Europeans were not lured by the two extremes. They drifted to one extreme: that of the racist, xenophobic, anti-European right. Extreme anti-European, leftwing parties saw no surge in their support anywhere in Europe. For four years now, European institutions are the field on which incompetence and malice compete with one another in a bid to win the prize for the most inconspicuous obfuscation of the truth: (a) that the Eurozone’s construction was faulty; and (b) that, once the never-ending crisis had began, the elites were solely interested in shifting banking losses from the banks’ asset books onto the shoulders of the weaker citizens.
If the financial sector has been stabilised, it is because the combination of massive central bank liquidity and stringent austerity propped up finance, shielded bankers (without cleansing the banks), and reflated many of the burst bubbles. And this at the cost of untold damage on Europe’s real economy, social fabric, and democracies. The interesting question, however, is: Why has the Left not benefited from the trials and tribulations of the Eurozone’s neoliberal design and from the great pain inflicted upon the majority by the neoliberal ‘cure’?
The obvious reason is that, prior to 2008, Europe’s ‘official’ Left had invested considerable energy to be co-opted into the neoliberal cabal that designed and implemented the faulty Eurozone architecture. Post-2008, once the neoliberal design began to crumble, the parties carrying the torch of the social democratic tradition did not recoil from playing an enthusiastic role as enforcers of ruthlessly reactionary economic policies. It is, therefore, not a great wonder that they are now paying the electoral price.
The Greek socialist party, whose government sought out and celebrated the first Eurozone ‘bailout’ (which was to act as template for Ireland’s and Portugal’s ‘bailouts’, not to mention the fiscal straitjacket and labour market reforms that followed elsewhere, especially in Spain and Italy), has been diminished from 43% of the popular vote to less than 8%. Spain’s PSOE and the Portuguese socialists were similarly beaten into a pulp by a despondent electorate that refuses to vote for them even though the conservative governments that took over in 2011 are even more despised. Ireland’s Labour Party is in strife for having legitimised the wholesale ransacking of the Irish people by unscrupulous European bankers, under the brutal watch of the ECB and the Troika. Holland’s Labour Party, originator of the ‘Polder Model’ and guarantor of Dutch social democracy for fifty years, is languishing at 10% of electoral support.
The social democrats of Austria and Germany are equally incapable of speaking out against self-defeating austerity or in serious defence of their constituents. As for the French socialists, the less said the better: having made a song and dance about the need for a European New Deal, Mr Hollande capitulated to Mrs Merkel before one could say ‘fiscal compact’. Tragically, the day after his party collected a pitiful 15% of the votes in the 2014 European election, to the National Front’s worrying 25%, Mr Hollande’s Prime Minister promised tax cuts to a baffled socialist party audience.
Be that as it may, the question remains: Why? What explains European social democracy’s slide into reactionary policies and, thus, oblivion? My answer is that, some time in the 1990s, Europe’s ‘official’, social democratic Left fell into the trap of believing that the welfare state need no longer be financed from a portion of profits exacted by political means from industry and commerce. Instead, they could finance the welfare state by tapping into the rivers of privately minted money that the financial sector was printing (while waged labour was being squeezed and real estate prices soared).
Rather than constantly clashing with industrialists and merchants in order to extract from them a share of their profits, social democratic parties of government believed that a Faustian bargain with financiers could: (a) yield more funds for social programs, (b) end their conflict-ridden relationship with industry, and (c) allow them to hobnob with the rich and powerful, as partners, while still lavishly funding public hospitals, schools, unemployment benefits, the arts etc. It seemed like a dream come true for suited men who did not want to abandon the working class to its own devices but who had had enough of class struggle.
Faustian bargains come, alas, with clauses written in blood. Europe’s social democrats, lured by the cacophony of money-making in the financial sector, numbed by the myth of some ‘Great Moderation’, and excited by the mystical notion of ‘riskless risk’, agreed to let finance free to do as it pleased in exchange for funds with which to prop up welfare states that were relics of a bygone post-war social contract. That was the social democrats’ game. At the time, it seemed to them a better idea, more fathomable, than having to be constantly in conflict with industrialists, seeking to tax them to redistribute. In contrast, they found a cosy relationship with bankers more amenable and easy going. As long as the ‘leftist’ politicians let them do as they pleased, the financiers were happy to let them have some crumbs off their gargantuan dinner table.
Alas, to be allowed these crumbs, social democrats had to swallow financialisation’s logic hook, line and sinker, including the neoliberal design of the Eurozone. And so, when in 2008 the tsunamis of capital produced by Wall Street, the City and Frankfurt evaporated, Europe’s social democratic side of politics did not have the analytical tools, or moral oeuvre, with which to subject the collapsing system to critical scrutiny. They were, thus, ripe for acquiescence, for total capitulation, to the toxic remedies (e.g. the ‘bailouts’) whose purpose was to sacrifice working people, the unemployed, and the weak on the altar of the financiers. Indeed, they even volunteered to implement the ‘necessary’ cruel policies as if in denial of their acquiescence to a Faustian bargain that was to prove their demise.
European social democracy cannot survive its pre-2008 historic analytical error and its post-2008 complicity in organised misanthropy.
Europe, at the same time, cannot be saved without a revival of a Left capable of subjecting the Eurozone’s construction to critical reason.
Unless a reinvigorated Left can inspire Europeans to challenge the toxic policies at the heart of Europe’s deconstruction, the only winners will be racism, nationalism and the emerging regime that I refer to as Bankruptocracy.
Yanis Varoufakis is the Greek Minister for Finance.