On 5th December, I had the great pleasure of addressing a splendid audience at the Kreisky Forum, in Vienna. My theme was, surprise surprise, the European Crisis in its Global Context. Nevertheless, in view of the very special venue (dedicated to the late Chancellor Bruno Kreisky, and delivered in his former home), I was compelled to ask myself, and to address, the following question: Why has European social democracy abandoned the legacy of leaders like Kreisky, falling in line with a toxic economics and politics that thinkers like Kreisky would have dismissed in their sleep as pathetic claptrap? You can listen to my 40 min talk here, in full, in which I answer the question above during the last 5 minutes. Additionally, read on for a brief, written answer to that same question:
In the 1980s and 1990s, Europe’s Left (the social democrats in particular) abandoned the notion that labour, financial and real estate markets are profoundly inefficient, with inequality being a mere byproduct of that inefficiency; a byproduct which, nonetheless, feeds back into, and exacerbates, the inefficiency and instability of a capitalist society that allows itself to rely on the ‘free’ operation of these three (problematic) markets. Europe’s Left, at the time of the Rise of the Global Minotaur (i.e. from the late 1970s till 2008), increasingly forgot that
– the more financialised capitalism becomes
– the more labour is being treated like any other commodity
– the more our societies rely on house price bubbles as a source of rents and debt
the more unstable, crisis-prone and, ultimately, uncivilised capitalism becomes.
Capitalism experienced its heyday under people like Kreisky: Politicians who understood the above; leaders who were intensely sceptical of capitalism; who understood the importance of keeping financialisation, labour exploitation and real estate bubbles on a tight leash.
So, the question remains: How come Europe’s Left abandoned these cherished principles of a Bruno Kreisky, a Willy Brandt, and Olof Palme? Why has the Left fallen for the toxic economics and politics of our era? (E.g. the SPD today which is faithfully voting with Mrs Merkel come what may.)
My tentative answer is that Europe’s Left fell for the Global Minotaur’s old trick. They saw the rivers of privately minted money that the financial sector was printing (while labour was squeezed and real estate prices soared) and thought they could harness some of it in order to pursue social democratic policies! Rather than (as the social democrats of the previous, Kreisky era had to do) target the profits of industry, as a source of funding social programs, social democrats thought they could tap the rivers of cash produced in the context of financialisation. Let finance free to do as it pleased and then tap into some of its proceeds to fund the welfare state. That was their game and, at the time, it seemed to them a better idea, more fathomable, than having to be constantly in conflict with industrialists, seeking to tax them in order to redistribute. In contrast, bankers were quite easy going. As long as the ‘leftist’ politicians let them do as they pleased, they were happy to give them some crumbs off their gargantuan dinner table.
Indeed, some of these social democrats, for some time, were funded by the financial sector quite generously so as to run their welfare programs (e.g. the Blair government’s considerable boost in public spending, similar programs in Spain by the PSOE government, etc.). Alas, to be allowed that small portion of the financialisation torrent, for the purposes of social programs, social democrats had to swallow financialisation’s logic hook, line and sinker. They had to shed their distrust for unfettered financial, labour and real estate markets. They had to suspend their critical faculties. And so, when in 2008 the tsunamis of capital produced by Wall Street, the City and Frankfurt crashed and burnt, Europe’s Social Democratic side of politics did not have the mental tools, or moral values, with which to subject the collapsing system to critical scrutiny. They were, thus, ripe for acquiescence, for total capitulation, to the toxic remedies (e.g. the bailouts) whose purpose was to sacrifice working people, the unemployed and the weak for the benefit of the financiers. The rest is a very sad, never ending, history.