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The European Union and the Fall of Social Democracy

Social Democracy originated as a political ideology with the goal of establishing “democratic socialism,” through reformist and gradualist methods. Social Democracy in Europe, as it developed in the post-WW II era, advocates reforming rather than replacing capitalism, through regulation of the economy, support for collective bargaining, social service provisions, and redistribution of wealth.  European Social Democratic parties, supported by trade unions, dominated through the 1970’s, in a period when world capitalism was still able to expand. Many policies such as universal health care, free education, and strong social services support for families, aged and disabled were established at that time. Since then, the social democrats have lost influence to centrist and right-wing parties.

Europe has often been cited as an example of how capitalism could be regulated and restrained to provide a decent life where everyone could thrive.  However, as recent events have unfolded it has become clear that Europe is subject to the same inexorable march of capitalism for expansion and profits, within the context of the qualitatively new laborless means of production, and that the so-called welfare state in Europe is being dismantled.

The European Union and Austerity

The European Union in its present form was established in 1993 by the Maastricht Treaty, and has developed a single economic market through a standardized system of laws that apply in all of the 28 member countries. Nineteen of them are in the Eurozone, using the same currency, the euro.  There are also many side treaties, such as the Schengen Agreement, which established open borders between most members of the EU.  The EU has seven supranational institutions, only one of which, the European Parliament, is elected by the citizens of Europe every five years.

The European Union was created for, and is dominated by, the needs of capital.  In this regard it is like NAFTA and other free trade agreements that the U.S. has enacted with other countries.  The European Court recently issued a ruling that labor laws and legislation in each country are subordinate to the free movement of capital.  The European Commission and the European Bank, together with the IMF, are commonly referred to as the Troika.

Instead of responding to the 2008 financial crisis by regulating banks and banning high risk financial dealings, the Troika, led by Germany, has been instrumental in the imposition of austerity policies. This is  what the IMF has always done in the developing world and what Emergency Financial Managers are doing today in the U.S..  Overall in the EU, the number of public employees has been cut by 20%, public sector wages have been reduced from 5-40%, and pensions 15%.  Of course this has meant the cutback of public services and the privatization of previously public entities.   Inequality in Europe is the highest it has been for 50 years.

The worst is in the countries of Greece, Spain, Portugal, and Ireland, which were “bailed out” in response to their sovereign debt crises.  A sovereign debt crisis is generally defined as economic and financial problems caused by the inability of a country to pay its public debt to banks. This usually happens when a country reaches critical high debt levels and suffers from (perceived) low economic growth.  Austerity measures, labor market reforms, and privatization were supposedly enacted to bring those countries economic stabilization. In reality the goal of the bailout plans was to save European banks and the euro, at the expense of the national economies in question. The debt load of the bailed-out countries has increased substantially, their national output has been seriously undermined, and unemployment remains high. The worst is 25% in Greece and 22% in Spain, and close to 50% for young people. In Ireland, 10% of the country’s population has emigrated looking for work.

Currently, Europe struggles to maintain a limited recovery.  In order to prevent a spiral of falling prices, the European Bank first tried negative interest rates and then went to quantitative easing to deal with a shortage of credit and high unemployment. The EU’s economy, especially that of Germany, is more and more tied with China as a trading partner, and is thus affected by China’s current economic downturn.  The Transatlantic Trade and Investment Partnership (TTIP) is a proposed trade agreement, a companion to the Trans Pacific Partnership.  Like the TPP would reduce the regulatory barriers to trade for big business, such as food safety law, environmental legislation, banking regulations and the sovereign powers of individual nations.

Popular and Political Response

In 2011, masses of young people protested all over Europe.  The May 15 indignados movement took over public spaces in 58 cities in Spain, much as Occupy Wall Street did in the United States.  In Portugal in March, more than 300,000 of the Geracao a Rasca, (Struggling Generation) demonstrated in 10 cities.  On October 15, 300,000 in Rome and a million people throughout Spain came out as well, with more in many other countries.  Greece had its own “Indignant Citizens Movement,” organized on Facebook.

These protests were a response to objective conditions and were inspired by the Arab Spring, rather than any established European parties or trade unions.  The traditional labor movement is tied to social democracy, which is paralyzed by its commitment to capitalism and the EU.   As writers have repeatedly shown, while social democracy  has always supported the establishment of a single market, the treaties and laws of the EU, which promote austerity and labor law reform, have outlawed their traditional Keynesian stimulus policies in any member country.

The vacuum of leadership left by traditional social democracy’s move to the right, as well as that of Socialist parties, has polarized European politics and given rise to or strengthened other parties of both the left and the right.  Most notable on the left have been Syriza of Greece and Podemos of Spain.  Examples on the right are the Danish Peoples Party and France’s National Front, which have grown significantly, exacerbated by the migrant crisis and the terrorist attacks in Paris.

Launched in January of 2014, Spain’s anti-austerity party Podemos, within a year had the support of 28% of the population.  The existing radical left coalition Syriza in Greece became an anti-austerity unitary party in 2013 and by 2015 was in leadership of the country.  As dramatic as the rise in popularity of these parties has been, they cannot effectively respond to the anti-austerity demands of their supporters within the bounds of capital’s grip on the EU and the Eurozone.  Being in the Eurozone means they lose complete control of their financial system in their respective countries. The majority of people do not understand that they have to leave the Eurozone to enact anti-austerity policies.

There are also developments in existing parties.  In Ireland, Sinn Fein, most known for heading the Irish Republican cause has converted itself into an anti-austerity party.  It has been consistently polling over 20% of the vote, as a fight is mounted against the new water charges, a punitive austerity measure imposed by the Troika.  UKIP, the United Kingdom Independence Party, is a right-wing populist party, which has gained popularity since the recession and is heading up a current campaign known as “Brexit,” to get the UK out of the European Union.  In all parts of Europe, new coalition governments abound, as all the parties jockey for position.

The Refugee/Migrant Crisis

Europe has also been thrown into turmoil by the entrance of millions of political and economic refugees over the past two years.  The top nationalities include Syrians (48%), Afghanis (21%) and Iraqis (9%), but also included are many from Sub-Saharan Africa.  EU member countries have received about 1,900,000 asylum requests in 2014/2015, two thirds of them in Germany, Sweden, Italy and France.   An indication of the complexity of the situation is that Germany, a country of 80 million, accepted one million migrants, partly because they have a worker shortage.  Sweden has also accepted many refugees, straining their well-known “welfare state,” which was primarily designed for only Swedish citizens.

The origins of the migrant crisis are extensions of the scramble for global positioning and markets engendered by the global economic crisis.  It goes beyond Syria: The U.S./UK invasion of Iraq, in which 1.5 million died, and the subsequent occupation ignited sectarian conflicts which have displaced millions.  Another factor is the violence of ISIS in the Middle East, an outgrowth of the invasion.  Africa is also affected by its history of colonization by Europe, the demand of Western multinationals for minerals for tech production, which leads to warring militias and the effects of not-so-natural disasters of drought, desertification, and famine.

The EU has given assistance to its member countries for refugee aid, to deflect the impact, as it desperately seeks to maintain the open border policies of the Schengen Agreement, which are essential for regular commerce.  The EU has also agreed to give extensive cash aid to non-EU Turkey, in order to keep the two million asylum seekers in Turkey, instead of crossing into Greece.  France, Germany, Austria, Sweden and Denmark have all introduced temporary border checks to control migrants, in a suspension of the Schengen Agreement.

What does this mean for the American people?

The consequences of the global capitalist crisis within the context of the qualitatively new laborless, electronic, automated means of production are reaching all parts of the world.  As people and parties try to deal with those consequences, they first try to reform capitalism into a “kinder, gentler system” or turn the clock back to what they see as better times.  The experience of social democracy in Europe helps to illustrate why that path is a dead end and that we need to chart a new course.

In these times, the political landscape is changing rapidly.  As we are learning in the U.S. presidential election, splits and polarizations appear that give us the opening to reach new people. Even more dramatic changes are in store and we have to be able to take advantage of the opportunities and circumstances that are presented to us to carry out widespread propaganda about the true nature of the crisis, a new way of looking at the world, the vision for a cooperative society, and the road to get there.

May/June 2016 Vol26.Ed3
This article originated in Rally, Comrades!
P.O. Box 477113 Chicago, IL 60647 rally@lrna.org
Free to reproduce unless otherwise marked.
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Photo of Protest

30,000 March in Support of
Chicago Teachers Union Strike
Photo by Ryan L Williams
used with permission

The age-old vision of a world without scarcity, without exploitation, class domination, organized violence, and stultifying labor has been the dream of millenia. The new completely socialized labor-eliminating means of production ... sets the basis for its realization. Now human history can begin, the light of the individual shining in the full brightness of liberated life, that can only be realized within true equality and cooperation: communism, a cooperative society.

'Without Vision, the People Perish'
Rally, Comrades ! May/June 2011

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