Between a rock and a hard place: After the EU elections

The EU elections revealed a further surge of support for right wing ‘rejectionist, nativist, nationalist’ (Rawnsley 2014)i and sometimes racist policies. But this wasn’t only about immigrants. There was also disillusionment with the idea of European Unity per se and with the policies pursued by the European Commission. The single currency left governments with wage and public spending cuts as the only way to improve their economic competitiveness. But the additional burden of austerity policies, pushed especially by Germany, and designed to deal with government debt, deepened the chronic economic insecurity experienced by an increasing number of Europeans even before the 2008 crisis. Meanwhile Europe’s private banks have only been partly stabilized and they have so far evaded stringent austerity policies despite years of unwise national and inter-country lending (Elliott: 2014)ii – an omission that has not gone unnoticed by voters.

Arguably, the political crisis revealed by the Euro-elections, layered on top of the largely unresolved economic one, leaves European voters and member states stranded between a ‘rock’ and a ‘hard place’.

The Rock

On one side, if the policies promised by right wing leaders such as UK’s Nigel Farage and France’s Marine le Pen succeed in weakening or even dismantling the EU in its current form then we are presumably returning towards a version of pre-1939 Europe: competing nation-states with re-instated border and customs controls, national currencies and monetary/fiscal policies, much greater control over labour mobility and perhaps national military/security systems, too. Given the wish to reconfigure national sovereignty – whatever that may mean in today’s globalized world – and enhance national economic competitiveness, further strategies seem likely including: restrictions on capital movements, some protectionism (as the National Front has promised in France) while enhancing labour market flexibility and further reducing wage costs to attract more foreign investment than rival nations.

Here, the freedom to break with the EU Charter of Fundamental Rights , including the protection of labour rights spelled out in Chapter 1V, is surely one of the main strategies planned by these anti-European parties. This is also true for some British Tories whose talk of returning powers to Westminster is partly linked to the same desire to lower labour costs and conditions as a boost for growth unencumbered by Brussels’ constraints. (Strangely, retrieving a degree of national sovereignty in regard to the much greater powers exercised by global capitalism does not appear to cause the same nightmares!).

Apart from immigration and leaving the EU, UKIP’s polices are somewhat unclear. Nevertheless, what stands out is its apparent determination to lower taxes in order to cut government down to size and incentivize businesses and consumers while building on Tory privatisation policies including in respect to the NHS. But reduced tax revenues will leave governments even less able to fund welfare and public spending than now, while raising the cost of health at a time when wages are likely to fall. Moreover, there is no guarantee that this return to ‘beggar my neighbour’ national economics will transform the prospects of most Europeans apart from the super rich (Lansley 2011)iii and perhaps skilled/educated professionals who have more chance of competing with their less well paid equivalents in the Global South.

It is tragic as well as ironic that many of those who voted for UKIP – retired or relatively low-paid employed manual and service workers and small business proprietors (UKIP voters have a lower average income than supporters of other parties) – will be the same people who will likely suffer most from the polices Farage and others like him across Europe seem intent on following.

 

The Hard Place

Turning to the EU, the alternative ‘hard place’ it appears to offer is hardly more attractive for most citizens than a Europe of revived economic nationalism. Firstly, there are few signs that EU leaders will break substantially with neo-liberal economics: keeping interest rates relatively high, prioritizing anti-inflation policies, fussing over the extension of competition rules and market de-regulation, reducing labour costs, raising worker productivity and privatizing public enterprises (Milne 2014)iv. But Europeans and others have been exposed to such policies for nearly forty years and many have benefitted only meagrely, if at all (Elliot op. cit.)ii. Instead, real wages were falling for many of the most vulnerable in most countries even before 2008 and job insecurity has intensified along with unemployment, particularly among Europe’s young.

Secondly, in December 2013 the European Commission published Horizon 2020: Work Programme 2014-2015. This invited academics to submit research proposals designed to investigate the Commission’s ideas concerning how Europe can best compete in the future global economy. The following quote (pp.5-6) makes their ideas abundantly clear:

What is required is a change in how Europe’s economy operates – a change that will release the many strengths Europe can bring to bear in tomorrow’s economy of high innovation, knowledge and skills. This is why Europe 2020 places research, technology and innovation at the forefront of activities designed to help Europe exit the current economic crisis and build smart, sustainable and inclusive growth …(and) drive-up performance across Europe … to boost competitiveness and support the creations of jobs and new sources of growth.

It seems churlish to criticize these doubtless attainable priorities which appear to offer the only possible way forward for Europe in a world of rapidly industrializing but high-tech rival economies enjoying much lower wage levels. Space does not allow a full examination of counter arguments but here are a few concerns:

  1. Even if these policies boost economic growth, the latter is only weakly correlated with poverty reduction and reduced inequality. This is especially the case at a time when, according to Piketty (2014)v, long term future rates of growth in the West are likely to remain low making it even more likely that capital accumulation and wealth inequality will continue to accelerate. Moreover, without tough redistributive government policies and/or a major swing of political power back to working and middle class citizens – policies anathema to neo-liberals and most EU leaders – it is hard to see how the latter can be reversed.
  2.  

  3. Assume that Europe continues to follow the standard formula for capitalist economic growth, tied-in to pursuing ever higher levels of science-backed technological innovation and productivity: Can this generate, not just sufficient employment for the majority of low-skilled and low-educational achievers (or even for a large proportion of youngsters with higher educational qualifications), but also jobs that provide security, higher living standards and dignity? We may not wish to admit it but, even if everyone was an educational high achiever and obtained science doctorates, only a limited number could hope to find employment and incomes commensurate with their qualifications. Millions would still need to work in lowly-skilled service and other jobs where the oversupply of labour will keep wages relatively low.
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  5. Perhaps most worrying of all is the question of how the much vaunted technological change surging across the world, and eagerly championed by the European Commission, will benefit the majority of Europe’s citizens who are not part of the top two deciles of highly educated professionals and managers. According to Brynjofsson and McAfee (2014)vi
    , technological advance brings many advantages at low cost including a multiplication of ideas, insights and innovations. However, it is also linked to ‘an unprecedented reallocation of wealth and income’ (p.128) and is reducing the demand for many kinds of worker. They describe how even in China workers in some branches of manufacturing are being replaced by machines (p.183)vii.


In Sum

The EU needs to do something to justify its existence to its citizens; simply providing more of the same will not do if it permits continually rising inequality. Of course, the super-rich and the growing techno-managerial class at the forefront of innovation may spend their rising incomes in ways that create new jobs for service workers. Indeed it is at both the bottom and top ends of the occupational hierarchy that work opportunities are expanding (Manning 2004)viii. However, there will be keen competition for these service jobs and their value-added to national wealth is low compared to high-tech jobs. Most will be incapable of providing the kinds of long term security, incomes and work satisfaction that so many across Europe – and elsewhere – are desperate to retrieve for themselves and their descendants – if there are to be any: In many EU nations birth-rates (already low) have declined markedly since the onset of the crisis. To attempt to offset low birth rates through increased immigration is hardly likely to appeal to EU voters contemplating supporting right wing parties.

For the moment, it appears EU voters will have to decide whether the wrong answer to their woes is better than no answer.

Paul Kennedy

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i Rawnsley, A. (2014) ‘Why David Cameron is right in his bid to junk Mr Junker’, Observer, 8 June , p.35. Available at http://www.theguardian.com/commentisfree/2014/jun/08/juncker-eu-commission-president-cameron-opposition

ii Elliott, L. (2014) ‘EU’s voters will do little to end the crisis’, The Guardian, 19 May, p.19. Available at http://www.theguardian.com/business/2014/may/18/eurozone-problems-european-elections

iii Lansley, S. (2011) The Cost of Inequality: Why Economic Equality is Essential for Recovery, London, Gibson Square

iv Milne, S. (2014) ‘Only left populism can halt the rise of Europe’s far right’, The Guardian, 15 May, p. 32. Available at http://www.theguardian.com/commentisfree/2014/may/14/rise-of-europe-far-right-only-halted-by-populism-of-left

v Piketty, T. (2014) Capital in the Twenty-First Century, Cambridge, Massachusetts, Belknap Press of Harvard University

vi Brynjolfsson, E. and McAfee, A. (2014), The Second Machine Age: Work, Progress and Prosperity in a Time of Brilliant Technologies, New York: W.W.Norton

vii For an Eomic analysis of this phenomenon, see Keynes: 2030 from 1930

viii Manning, A. (2004) ‘We can work it out: the impact of technological change on the demand for low-skilled workers’, Centre for Economic Performance, Discussion Paper No 640, June. Available at http://eprints.lse.ac.uk/19948/

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