In my post of last January, I quoted excerpts from a
1932 article that journalist Paul Scheffer wrote for the Berliner Tageblatt. It painted
an audience’s expectation and attitude ahead of a speech by Adolf Hitler. What struck Scheffer was that most of these people
were what he called ‘de-classed” middle-class, that is, people who had lost
both their standard of living and their self-esteem, and who were waiting for a
miracle. My conclusion was that, as
momentous as the impact of the current crisis had been on European economies, it
would hit politics even harder. I argued
that the explosive development of social media would be a key contributing
factor. I stand by this assessment.
Subjected to an abrupt increase in unemployment,
taxes and cuts in social benefits, Europeans are looking for miracles, and this
situation provides fertile ground for demagogues and extremists. In Greece, Holland and Hungary, we have seen
the rise of extreme-right movements; in Spain we have seen the rise of
leftwing, nationalist parties. In
France, while a moderate socialist won the presidency, there has been an unprecedented
fragmentation of the political scene: splinter groups on the Left led by the
likes of Mssrs. Mélanchon and Montebourg are increasingly at odds with the
government as are the Greens; on the right, the UMP is splitting as it cannot
decide if it should follow a centrist but unimaginative path or one of assertive
populism. In Italy, the
anti-establishment party of Beppe Grillo is the second most popular political
party and center parties have receded the most.
As the fortunes of Europe are unlikely to brighten any time soon, I
expect an increase in centrifugal forces.
Faced with mounting pressure from the markets, most
governments delayed taking corrective measures, giving the unfortunate impression
that, in the end, they succumbed to outside pressure. This in turn contributed to weakening them
and the prospects for a consensual EU solution.
The need to tap outside rescue programs also contributed
to reviving long standing regional frictions, witness the North-South divide in
Italy, Catalonia and the Basque region in Spain and Scottish independence in
the UK.
If, as I believe, the European economies do not
rapidly improve, I expect that the above mentioned stresses will increase. At first, populism is likely to rise; after all,
it is easier to deflect popular anger towards the rich or large corporations
(witness the 75% tax or the skirmishes with Peugeot and Arcelor-Mittal), but as
these do not have bottomless pockets and are more mobile than the rest, new
tactics will be needed. The temptation
for governments to intervene ever more deeply into the economy may become irresistible. This would buy peace for a while, but it will
also bring the center of gravity of politics into a no-man’s land: no longer
liberal democracy, not yet illiberal democracy.
One can think of Argentina and Venezuela as the ultimate “models” for
such a drift.
Pervading this debate is the unrecognized influence
of culture, a major interest of mine, and something I touched upon in my post of
last March. It is an issue that most
commentators avoid as they view it as politically incorrect. That may be so, but it doesn’t mean that it
is irrelevant.
Culture is the glue that keeps groups of people
together and in relative harmony. Think
of the IBM or the Marine Corps cultures.
It is also what defines nations, and so, by essence, it changes very,
very slowly. Why would we still read about
Tocqueville’s America or Custine’s Russia otherwise?
In the context of the current crisis, it is worth
noting that there is a longing for but not a strong European culture; rather,
there is the appearance of one when dealing with other very large nations such
as China or the USA. There are however
very strong national cultures in Europe; these have had a significant impact on
the management of the Debt Crisis so far, and I believe they will be play a
major role in determining the survivors.
A great divide has been the so-called Recovery-Through-Growth
proposition, i.e., that countries should first seek accommodating monetary and
fiscal policies to overcome the current crisis, postponing tax increases and
spending cuts for later. President
Hollande has been its most vocal advocate.
The other side of the proposition is No-Pain-No-Gain, which is that the
bitter medicine won’t taste sweeter next year and problems are best tackled
early before they snowball.
It is interesting to note that France and Hungary are
in the first camp while Ireland, Portugal, the UK and Germany are in the second[1]. Spain and particularly Italy are in the
middle, leaning perhaps towards the latter group. Ireland is showing progress; Portugal is
still struggling but is in a much better shape than Greece. The UK was widely criticized for choosing
austerity and indeed paid the price with a slight contraction in GDP. What is remarkable is that these countries
chose to endure sacrifice – quite big in the case of Ireland and Portugal - yet
their populations didn’t rebel. They may
have paid a higher price in terms of GDP loss than others, but they will come
out of the crisis faster.
Italy, led by its Northerners, also took the path of
some reforms, although this may not be enough to avoid debt restructuring. There is no clear prospect for a majority
government next year. As for Spain, it
finally seems to have accepted the need for its intervened banks to face
reality (merger for some, assumption of losses by creditors and
shareholders). Its government is trying
to take unpopular measures but it enjoys spotty popular support and it must
deal with internal regional issues. As
to France, and as I noted in previous posts, it is so rich as to being able to
delay the day of reckoning. At the same
time, it suffers from an ill shared with others – the weakening of its
political center – as well as home-grown cultural idiosyncrasies – such as the
inability to do evolution when revolution is an alternative.
To my mind, national culture had a lot to do with
the choices nations have made and it will have a lot to do with the outcome(s)
of the current European crisis. This is
particularly so since unemployment is expected to rise and economic activity is
projected to be lackluster in 2013: national cohesion and resilience will thus
be painfully tested.
In sum, while economic progress has been made in Europe,
more hardship is on the way. This in
turn will put further stress on political systems which already show signs of
fragmentation and polarization. Politics
rather than economics will likely determine the outcome of the current debt crisis. So will national cultures; they help explain
the choices that countries have made and they will play a major role in mapping
the future outline of Europe.
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