Friday, 8 May 2015

A Polanyian double movement in Europe? Too early to say

David Begg: On Tuesday 5th May Professor Eduardo Silva, from Tulane University, New Orleans, delivered a lecture in Maynooth University on the topic ‘Learning from Latin America: Lessons from the periphery in a time of austerity’. Professor Silva was in Ireland as part of the University’s distinguished visiting scholar’s programme. The core message from the lecture was that neoliberalism and austerity, if pushed beyond certain limits, can lead to social mobilisation and the rise of the left. This is the message from Latin America and Professor Silva challenged his audience to reflect on whether this could happen in Europe, or is Europe different?

Silva has written extensively on popular resistance to neoliberalism and austerity in Latin America. He uses a Polanyian framework to explore how a ‘Double Movement’ can materialise to oppose the emergence of market society and demand political action to protect citizens from the ravages of market forces (Silva, 2012).

Karl Polanyi (1886-1964) was of Hungarian extraction. He worked for a time as a Journalist in Austria in the 1930’s but had to flee to Britain because his Christian Marxist views put him in conflict with the rising tide of fascism. He lectured for a time with the Worker’s Educational Association before taking up an academic appointment in the United States. While there in 1944 he published his masterpiece ‘The Great Transformation’. Fred Block (2003) described it as an indispensable reference in current debates about Globalisation, and it has achieved the status of a canonical work for economic sociology and international political economy. The book advances three theses in the course of a forensic deconstruction of market liberalism, viz:

  • That land, labour and money are fictitious commodities and cannot be traded in markets in the same way as other goods;
  • That the economy must always and everywhere be embedded in society and not the reverse;
  • That history shows that society will always try to defend itself from the corrosive impact of the market – A concept Polanyi described as a ‘Double Movement’.

This latter thesis in a Latin American context was the focus of Professor Silva’s Lecture. What can we say about how it might apply to Europe in the wake of the 2008 financial crisis?

Our starting point must be to recognise that Europe is not homogeneous. The effects of austerity have been most acutely felt on the periphery. Yet there are significant differences between the Southern Periphery and its Northern counterpart. The Nordic countries are much more open economies with a long tradition of democratic corporatism going back to the 1930’s in which the economy is embedded in social relations. Fiscal prudence coexists with sophisticated systems of welfare provisions and collective bargaining in a social democratic market economy model. The social market economy exists in Continental Europe too but it has a more Christian Democratic bias. By contrast Ireland and Britain are closer to Liberal Market Economies.

That said, it is undeniable that since the 2008 financial crisis monetary policy has dominated. The principal reason lies in the institutional architecture of EMU. Monetary policy – and the austerity it commands - is reposed in the European Central Bank (ECB). There is no countervailing social institution to balance the centralised, independent power of the ECB. Social policy is largely a national competence and there is not likely to be established anytime soon an institution capable of melding 28 separate welfare systems into one. Bluntly this means that the core objective of price stability – the only remit of the ECB – trumps the needs of the 26 million unemployed.

Has there been any evidence of a ‘Double Movement’ against austerity in Europe? The answer is in the affirmative, but it has been fragmented, incoherent and largely ineffectual. For sure there have been protests and even riots in some countries. There has been the emergence of radical right and radical left parties and many working people have drifted in this direction away from social democratic parties.

It must be acknowledged that Social Democrats, and I include the European Trade Union Confederation in this family, have struggled to provide leadership to their natural constituency. There are a number of reasons for this. First of all, the counter revolution against the post war settlement and the so called ‘Golden Age’ of social democracy was a double movement of the right (a prospect Polanyi hardly envisaged) which established a neoliberal order with an erroneous but seductive narrative based on metaphors which seemed like common sense, e. g, the proposition that a country’s finance has to be managed like that of a household. The argument that there is no alternative to neoliberalism has remained remarkably resilient (Crouch, 2011).

Secondly, the colonisation of the European Integration Project by neoliberalism has left Social Democrats who believe in an ideal of ever closer union in an impossible position. Like Henry Ford’s proverbial black car, you can have any kind of Europe you want so long as it is a neoliberal one. The alternative is to join a populist crusade against the EU, against immigration and in favour of nationalism if you want to oppose austerity. This has left Social Democrats without the machinery to effect a major change in direction.

Of all these impediments to a better fairer Europe the most important ultimately is to win the battle of ideas. That would be the real Polanyian Double Movement.

What prospects then for a renaissance of social democratic values in Europe?  In the long run they must be good. Austerity had not worked in Europe. Seven years from the start of the crisis growth is anemic, deflation hovers and belated quantitative easing may indeed be too late. Austerity has been so debilitating that the means to counter another exogenous shock hardly exists. Europe is ageing at a rapid rate and the necessity to provide for the costs of this may create new cleavages between retired and economically active people.

One possible antidote to the productivity costs of ageing is immigration but this is already causing a serious backlash. Inequality and precarious work are undermining the fiscal capacity of states to provide the necessary social investment to deal with the problem. Most of all the neoliberal elites will find the legitimacy of their programme eroded by their failure to deliver the outcomes promised. European integration will be unable to move forward, because the permissive consensus upon which it has proceeded for fifty years is no longer there. On the other hand the clear lesson from the crisis is that one cannot have a currency union without a fiscal, banking and, ultimately, political union. In short Europe is stuck in neutral gear.

If a double movement is indeed to be reflected in the battle of ideas how will we know it has happened? I suggest that it will be when the remit of the ECB is aligned with the Federal Reserve in the US where policy must have regard, not just to inflation, but to the general state of the economy and employment. Polanyi was an Institutionalist and this would be an institutional change of enormous importance.

In ‘The Great Transformation’ Polanyi identified the poor law of 1834 and the crisis of self-regulating markets in the late 19th centuries as turning points is history. Europe may be facing another such critical juncture.

Polanyi omitted to put any time frame on when a Double Movement might happen. Will it happen in Europe? As Zhou Enlai replied to Richard Nixon in 1978 when asked what he thought of the French Revolution ‘’It’s too early to say’.

David Begg is Director of TASC

Polanyi, Karl (1944) The Great Transformation: The Political and Economic Origins of our time. Boston MA. Beacon Press
Crouch, Colin (2011) The Strange Non Death of Neoliberalism, Cambridge UK, Policy Press.
Block, Fred (2003) ‘Karl Polanyi and the writing of The Great Transformation’. Theory and Society
Silva, Edwardo (2012) ‘Exchange Rising’ Karl Polanyi and Contentious Politics in Contemporary Latin America’.University of Miami

1 comment:

Patrick Kinsella said...

Wow, great post, and a good starting point for a crucial discussion. I have to add: David seems to see Social Democracy as as a victim, when in fact SD leaders (not just Blair/Miliband/Gilmore/Burton) have been complicit in surrendering to neo-liberal [I hate the woolly term, but most will know what I mean] ideology. Why have 'labour' parties accepted the logic of austerity and withdrawal of state services when we can see the consequences: high unemployment and declining living standards for so many? Let's talk about sensible policies that can win popular support...