Dilemma in Europe

May 15, 1968, Sorbonne University, Paris: Student protesters who demanded a say in a stifling post-War society. Soon they were joined by factory workers and others.-AFP

The Left's defence of the welfare state is hampered by its inability to suggest an alternative to capitalism where its resistance can succeed.

THE recent developments in France take one back to May 1968. The militancy of workers, the coming together of workers and students, the wave of sympathy for the striking workers, and the open defiance of the logic of the system are all reminiscent of May 1968. There is, however, a fundamental difference. In May 1968, the workers were not striking for economic demands. Theirs was a political challenge, a contestation of the structures, to use a contemporary phrase, and President Charles de Gaulle actually broke up the uprising by using economic measures, announcing an across-the-board wage increase, which, coming out of the blue, divided the workers. Today, the demand itself is economic, that the age at which pensions can be accessed should not be increased, and President Nicolas Sarkozy is using political measures, such as getting parliamentary approval for his reforms, and the state machinery to defeat the workers.

The workers today do not have any political demands, which shows how far political transformation has receded from the agenda of even the most militant of present-day workers' struggles; they do not even have any alternative vision of an economic arrangement different from the present one, which could act as a transitional demand leading to a politicisation of the current struggle over a period of time.

In other words, the present struggle, remarkably militant though it is, is not informed by any alternative vision of an arrangement different from capitalism; it is not even informed by any alternative vision different from European capitalism in its present form. It is an uncompromising struggle to defend the gains of the welfare state, but within capitalism as it exists today. The uncompromising nature of the struggle is admirable; but the absence of any perspective on how to resolve the contradiction between the welfare state and the demands of contemporary capitalism is a serious flaw. This absence, in turn, is traceable to a fundamental problem faced by the European Left.

The fact that wage cuts, if resorted to by each country to overcome its crisis, aggravate the crisis for all; and the fact that exchange rate depreciations, if undertaken by each country as a means of resolving its crisis, aggravate the crisis for all, are indubitable. These measures could work in the case of a single country in raising its aggregate demand through an increase in its net exports provided it was alone in following them and no other country adopted similar measures. But when all follow such measures, they collectively ensure a worsening of the crisis for each one of them. What appears to each individual country as rational is in the aggregate irrational.

The opposite is also true. What is collectively rational may be individually irrational, in the sense that if all countries followed similar measures then all would be better off, but if a single country followed the measure while others did not then it would come to grief. A rise in wages everywhere, for instance in the midst of a crisis, or a synchronous increase in the fiscal deficits in all countries, will improve the situation for all. But if only one country increased its wages while others did not, then in a universe of liberalised trade its aggregate demand is likely to decrease through a reduction in its net exports; likewise, if one country increased its fiscal deficit while others did not, then in a universe of financial fluidity it runs the risk of financial outflows and hence insolvency.

Two ways to do it

It follows that if welfare state measures have to be strengthened as a means of overcoming the crisis, then quite apart from the political objections from capitalists and in particular from financial quarters (who dislike all forms of state activism except those that directly serve their own interests), there is another fundamental hurdle. This consists in the fact that such measures should be adopted either collectively or by an individual country provided it delinks itself from the universe of liberalised trade and financial flows. And exactly the same holds for the defence of welfare state measures.

Now, coordinated action involving all major actors in the global economy does not appear feasible at present. On the other hand, the Left in no country in Europe is thinking in terms of delinking its economy from the vortex of globalisation: indeed all segments of the European Left are resolutely opposed to any revival of protected national economies. Besides, such a revival does not make much sense for the comparatively small, already globally well-integrated and not even potentially self-reliant economies of the European Union.

A country as large and diversified in its production structure (relative to requirements) as India can survive easily if it delinks itself from the vortex of liberal global trade and financial flows, but the same cannot be said of Greece or even France. Hence, an expansion or even a defence of the welfare state, which requires either a national-level delinking from the global economy or coordinated action at the global level, appears exceedingly difficult in the present context.

Stimuli and rollback

Of course, feasible or not, the fact that the European Left has not raised the demand for globally coordinated fiscal action is somewhat surprising. During the Great Depression of the 1930s, several authors, including some German trade unionists and also John Maynard Keynes, had asked for a coordinated fiscal stimulus among major capitalist economies as a means of overcoming the crisis. Something of that sort was talked about at the beginning of the current crisis, too, and several countries did in fact undertake fiscal stimuli. But the stimuli were weak, and a clamour for rolling them back began soon, because of which there is now an actual rollback in some countries, such as Britain, and an attempt at a rollback in others, such as France, which is being resisted.

At a superficial glance it may appear that the fiscal stimuli provided in the wake of the crisis were quite strong, since fiscal deficit as a percentage of gross domestic product (GDP) rose dramatically in major capitalist economies. But much of the increased fiscal deficit was for shoring up the financial system and had little effect on stimulating aggregate demand. So, while the so-called stimulus was not much of a stimulus to aggregate demand, though the increased fiscal deficit deceived people into believing otherwise, what is now being attempted to prune this deficit will certainly impinge adversely on aggregate demand.

Class implications

Besides, the class implications of the post-crisis fiscal policies in the capitalist world are staggering. The enhanced fiscal deficit was meant to aid finance capital, but its curtailment comes at the cost of the welfare state. In other words, the welfare state is being sacrificed and workers' living standards are being rolled back as a post-facto price for buttressing the position of finance capital. A more brazen example of class aggrandisement masquerading as respectable economic theory cannot be imagined. But the European working classes' fight against this aggrandisement takes the form not of attacking the totality of the underlying arrangement or suggesting an alternative totality, but of merely resisting the attack on the welfare state within this very totality.

Third alternative

Apart from the two alternatives for defending and strengthening the welfare state mentioned above, that is, national-level delinking from globalisation and global fiscal coordination, there is a third possible way open to Europe: a unilateral fiscal stimulus by eurozone countries alone. Even without waiting for a coordinated fiscal stimulus involving all major countries, and I mean a genuine stimulus that increases aggregate demand, not handouts to finance, eurozone countries could simultaneously and synchronously expand government expenditures financed by fiscal deficits.

Some of the increased demand generated by such expansion will no doubt leak out to non-European economies. But the very fact of a coordinated fiscal stimulus in Europe will cause a weakening of the euro and thereby keep such leakages down. Besides, the countries to which such leakages should be accruing in the most pronounced manner, namely China and other newly emerging economies, are precisely the ones least affected by the crisis and hence with the least magnitude of slack as a consequence of it. Their capacity to take advantage of the newly created demand, therefore, is limited.

The increase in aggregate demand effected by a coordinated fiscal stimulus in Europe, therefore, will largely create an increase in demand for European goods and services. Europe's increased demand, in short, will stimulate largely its own production. And in case the leakage from a European stimulus is too great, or the financial instability caused by it is too severe for Europe, then the E.U. as a collective could abjure free trade and free financial flows and impose trade and capital controls.

Reactionary nationalism

The problem with this alternative, however, is that even though single-country nationalism is not viable in Europe, it is far from being dead. On the contrary, with the expansion of the E.U. it has become stronger; and in the wake of the crisis, which has caused substantial unemployment everywhere, it has become stronger still. Since the impact of the crisis itself within Europe is uneven, and since, as a result, the potential benefits of a coordinated fiscal expansion across Europe will also be uneven, the question will naturally be raised: why should the German state get into deeper debt for alleviating the unemployment problem in Greece? Or, why should the Dutch state get into deeper debt for sustaining the welfare state in Poland? Any such pan-European plan, therefore, will give boost to reactionary nationalisms across Europe, which will strengthen the Right and stimulate fascist tendencies. And financial interests, opposed to all forms of state activism except those directed towards their own benefit, will promote such right-wing and fascist forces to roll back pan-European fiscal expansion plans.

Putting it differently, despite European integration, pan-European consciousness remains weak, too weak perhaps to sustain a coordinated fiscal stimulus across Europe for the defence and strengthening of the welfare state in all member-countries as a means to overcome the crisis. If the Union government in India announces a package for the north-eastern States or if it increases the fiscal deficit for undertaking larger expenditure in a particular part of the country, this does not provoke a storm of protests elsewhere. The reason, which lies juridically in the fact that India constitutes a single nation-state, lies effectively in the existence of a reasonably strong pan-Indian consciousness. A pan-European consciousness of this kind does not exist, which forecloses for the Left this third option as well.

The dilemma of the European Left, therefore, is that while it must resist the rolling back of the welfare state, it cannot suggest an alternative to the existing economic arrangements of capitalism within which alone its resistance can be successful, and which can then constitute a transitional demand for a political offensive of the working classes. A coordinated global fiscal stimulus is infeasible (though the Left must ask for it more loudly than it does); a national-level de-linking from globalisation is impractical and invokes single-country nationalisms that the European Left opposes; and a pan-European coordinated fiscal stimulus runs the risk of stimulating reactionary single-country nationalisms that will strengthen the Right and fascist elements.

Nonetheless, the European Left must press for a coordinated fiscal stimulus among eurozone countries for the defence and strengthening of the welfare state as a means of combating the crisis. For this it has to overcome a certain intellectual reservation that exists within its own ranks, which consists in a distrust of all nationalism, including even any pan-European supra-nationalism. Such a distrust of nationalism, which is not confined to the European Left alone but characterises Left thinking elsewhere too, is no doubt justified to a degree.

Nationalism, even when it is of the inclusive anti-imperialist kind that we find in the Third World, has the potential to become closed and reactionary; in the context of Europe, where nationalism has been a weapon not of defence against imperialism and aggression but of perpetrating imperialism and aggression, this reactionary potential, even of a pan-European Left-led supra-nationalism, is immeasurably greater. The Left naturally shrinks from it and sections of the Left visualise a direct transition from the current regime of globalisation to a global socialist order.

But when such a direct transition is not possible, when globally coordinated working class actions are not on the horizon, when resistance to the consequences of neoliberalism is taking militant but localised forms, the Left has no alternative but to accept a more or less prolonged transitional phase of national or pan-national (as in the case of Europe) delinking from the current global order before the world can witness a new form of internationalism that is driven not by finance capital but by socialist praxis.

True, if this isolated delinking gets inordinately protracted, then the distortions intrinsic to it may become too strong to resist. But if the unit of resistance to neoliberal globalisation is large enough (like the E.U. as a whole), then, given the internationalist perspective of the resistance itself, the chances of thwarting the reactionary potential of the nationalism that such resistance unleashes transitionally are that much greater. At any rate, to invoke this potential as an argument for reconciling oneself to neoliberal globalisation, until the arrival out of the blue of some promised dawn when the entire order can be changed in its totality, is unproductive.

For us in India there is a sense of deja vu about this debate. Nobody was more sensitive to the reactionary possibilities of nationalism than Rabindranath Tagore, and nobody, despite being aware of these reactionary possibilities, was as clear-sighted about the necessity of nationalism as a weapon of struggle against imperialism as Mahatma Gandhi. The Left, especially the European Left, since Europe is becoming the leading theatre of resistance to the depredations of neoliberal capitalism, has to be equally clear-sighted today. It has to come out with alternative transitional demands that necessarily entail a retreat from contemporary globalisation.

Slavoj Zizek wants not a withdrawal from the European project but a carrying forward of this project to a European working class upsurge. But the French, German and Greek workers cannot be expected to combine on a revolutionary project if they are not united even on a set of transitional trade union demands. Until this unity comes about, the militant resistance of the French or Greek workers, even though heart-warming, will not translate itself into productive political action.