by Tony Judt
The SEA expanded Community powers into many policy areas—the environment, employment practices, local research-and-development initiatives—in which the EC had not previously been involved, all of which entailed the dispensing of Brussels funds directly to local agencies. This cumulative ‘regionalization’ of Europe was bureaucratic and costly. To take one tiny example that can stand for hundreds: Italy’s Alto Adige/South Tyrol region, on the country’s northern frontier with Austria, was officially classified by Brussels in 1975 as ‘mountainous’ ( an uncontentious claim); thirteen years later it was officially declared to be over 90 percent ‘rural’ (no less self-evident to any casual traveler), or—in Brussels jargon—an ‘Objective 5-b Area’. In this dual capacity the Alto Adige was now eligible for environmental protection funds; grants to support agriculture; grants to improve vocational training; grants to encourage traditional handicrafts; and grants to ameliorate living conditions in order to retain population.
Accordingly, between 1993 and 1999 the tiny Alto Adige received a total of 96 million écus (worth roughly the same amount in 2005 euros). In the so-called ‘Third Period’ of European structural funding, scheduled to run from 2000-2006, a further 57 million euros were to be put at the province’s disposal. Under ‘Objective Two’ these monies were to be disbursed for the sole benefit of the 83,000 residents who lived in ‘exclusively’ mountainous or ‘rural’ zones. Since 1990, a government department in Bolzano, the provincial capital, has been devoted exclusively to instructing local residents how to benefit from ‘Europe’ and European resources. Since 1995 the Province has also maintained an office in Brussels (shared with the neighboring Italian Trentino province and the Austrian region of Tyrol). The official website of the Province of Bolzano (available in Italian, German, English, French and Ladino, a variety of the Swiss Romansch dialect) is enthusiastically Europhile, as well it might be.
The result, in the South Tyrol as elsewhere, was that—costly or not—integrating the continent ‘from the bottom up’, as its advocates insisted, did seem to work. When the ‘Council [later the Assembly] of European regions’ was launched in 1985 it already comprised 107 member regions, with many more to come. A certain sort of united Europe was indeed beginning to come into focus. Regionalism, once the affair of a handful of linguistic recidivists or nostalgic folklorists, was now offered as an alternate, ‘sub-national’ identity: displacing the nation itself and all the more legitimate in that it came with the imprimatur of official approval from Brussels and even—albeit with distinctly less enthusiasm—from national capitals as well.
The residents of this increasingly parcelized Community, whose citizens now professed multiple elective allegiances of variable cultural resonance and daily significance, were perhaps less unambiguously ‘Italian’ or ‘British’ or ‘Spanish’ than in decades past; but they did not necessarily therefore feel more ‘European’, despite the steady proliferation of ‘European’ labels and elections and institutions. The lush undergrowth of agencies, media, institutions, representatives and funds brought many benefits but won scant affection. One reason was perhaps the very abundance of official outlets for disbursing and overseeing the administration of European largesse: the already complex machinery of modern state government, its ministries and commissions and directorates, was now doubled and even tripled from above (Brussels) and below (the province or region).
The outcome was not just bureaucracy on an unprecedented scale but also corruption, induced and encouraged by the sheer volume of funding available, much of it requiring the exaggeration and even invention of local needs and thus all but inviting the sorts of venal, local abuses that passed unnoticed by the Community’s managers in Brussels but risked discrediting their enterprise even in the eyes of its beneficiaries. Between a reputation for policy-making by distant unelected civil servants, and well-stocked rumors of political back-scratching and profiteering, ‘Europe’ in these years was not well served by its own achievements.
The familiar shortcomings of local politics—clientelism, corruption, manipulation—that the better-run nation states were thought to have overcome now resurfaced on a continental scale. Public responsibility for occasional ‘Euroscandals’ was prudently shifted by national politicians onto the shoulders of an invisible class of unelected ‘Eurocrats’, whose bad name carried no political cost. Meanwhile the ballooning Community budget was defended by its recipients and promoters in the name of cross-national ‘harmonization’ or rightful compensation (and fuelled from the Community’s seemingly bottomless funds).
‘Europe’, in short, was coming to represent a significant ‘moral hazard’, as its carping critics, in Britain in particular, gleefully insisted. The decades-long drive to overcome continental disunity by purely technical measures was looking decidedly political, while lacking the redeeming legitimacy of a traditional political project pursued by an elected class of familiar politicians. Insofar as ‘Europe’ had a distinctive goal, its economic strategy was still grounded in the calculations and ambitions of the Fifties. As for its politics: the confident, interventionist tone of pronouncements from the European Commission—and the authority and open chequebooks with which European experts descended on distant regions—bespoke a style of government rooted firmly in the social-democratic heyday of the early Sixties.
For all their laudable efforts to transcend the shortcomings of national political calculation, the men and women who were constructing ‘Europe’ in the Seventies and Eighties were still curiously provincial. Their greatest trans-national achievement of the time, the Schengen Agreement signed in June 1985, is revealingly symptomatic in this respect. Under the terms of this arrangement France, West Germany and the Benelux countries agreed to dismantle their common frontiers and inaugurate a shared regime of passport control. Henceforward it would be easy to cross from Germany to France, just as it had long been unproblematic to move between, say, Belgium and Holland.
But Schengen signatories had to commit themselves in return to ensuring the most stringent visa and customs regimes between themselves and non-participating countries: if the French, for example, were to open their frontiers to anyone crossing from Germany, they had to be sure that the Germans themselves had applied the most stringent criteria at their points of entry. In opening the internal frontiers between some EC member states, therefore, the Agreement resolutely reinforced the external borders separating them from outsiders. Civilized Europeans could indeed transcend boundaries—but the ‘barbarians’ would be kept resolutely beyond them. 241
XVII
The New Realism
‘There is no such thing as Society. There are individual men and women,
and there are families’.
Margaret Thatcher
‘The French are starting to understand that it is business that creates
wealth, determines our standard of living and establishes our place in the
global rankings’.
François Mitterrand
‘At the end of the Mitterrand experiment, the French Left appeared more
devoid of ideas, hopes and support than it has been in its entire history’.
Donald Sassoon
Every politically significant revolution is anticipated by a transformation of the intellectual landscape. The European upheavals of the 1980s were no exception. The economic crisis of the early Seventies undermined the optimism of Western Europe’s post-war decades, fracturing conventional political parties and propelling unfamiliar issues to the center of public debate. Political argument on both sides of the Cold War divide was breaking decisively with decades of encrusted mental habits—and, with unexpected speed, forming new ones. For better and for worse, a new realism was being born.
The first victim of the change in mood was the consensus that had hitherto embraced the post-war state, together with the neo-Keynesian economics that furnished its intellectual battlements. By the late 1970s the European welfare state was starting to count the cost of its own succes
s. The post-war baby-boom generation was entering middle age, and government statisticians were already warning of the cost of supporting it in retirement—a problem that loomed closer on the budgetary horizon thanks to widespread reductions in the retirement age. Of West German males aged 60-64, for example, 72 percent were working full time in 1960; twenty years later, only 44 percent of men in this age group were still employed. In the Netherlands the fall was from 81 percent to 58 percent.
Within a few years the largest generational cohort in Europe’s recorded history would cease to contribute taxes to the national exchequer and would begin to extract huge sums—whether in the form of guaranteed state pensions or, indirectly but with comparable impact, by making increased demands upon state-maintained medical and social services. Moreover, being also the best-nurtured generation ever, they would almost certainly live longer. And to this concern was now added the growing cost of paying unemployment benefits, by 1980 a major budgetary consideration in every Western European state.
These widespread anxieties were not unfounded. The post-war welfare states rested upon two implicit assumptions: that economic growth and job creation (and thus government income) would continue at the high levels of the fifties and sixties; and that birth-rates would remain well above replacement level, ensuring a ready supply of new tax-payers to pay for their parents’—and grandparents’—retirement. Both assumptions were now open to question, but the demographic miscalculation was the more dramatic of the two. By the beginning of the 1980s, in Western Europe, the population replacement ratio of 2.1 children per woman was being met or exceeded only in Greece and Ireland. In West Germany it stood at 1.4 per woman. In Italy it would soon fall lower still: whereas in 1950, 26.1 percent of Italians—more than one in four—was under 14 years old, by 1980 that figure stood at 20 percent, or one in five. By 1990 it would fall to 15 percent, approaching one in seven.242
In prosperous Western Europe, then, it appeared that within two decades there would not be enough people around to pay the bills—and prosperity itself seemed to be the culprit, together with reliable contraception and a growing number of women working outside the home.243 The result was ever higher charges on those in a position to pay. Already the cost of pension and national insurance provision in some places (France, notably) weighed heavily on employers—a serious consideration in a time of endemic high unemployment. But direct charges on the national exchequer were a more immediate concern: as a percentage of GDP, government debt by the mid-1980s was reaching historically high levels—85 percent, in the Italian case. In Sweden, by 1977, one-third of the national product was taken up by social expenditures, a budgetary charge that could only be met either by deficits or else by raising taxes on the very constituencies—employed workers, civil servants and professionals—on whom the Social Democratic consensus had hitherto depended.
Public policy since the 1930s rested on a broadly unquestioned ‘Keynesian’ consensus. This took for granted that economic planning, deficit financing and full employment were inherently desirable and mutually sustaining. Its critics offered two lines of argument. The first, quite simply, was that the array of social services and provisions to which Western Europeans had become accustomed were not sustainable. The second argument, offered with particular urgency in Britain—where the national economy had staggered from crisis to crisis for most of the post-war decades—was that, sustainable or not, the interventionist state was an impediment to economic growth.
The state, these critics insisted, should be removed as far as possible from the market for goods and services. It should not own the means of production, it should not allocate resources, it should not exercise or encourage monopolies, and it should not set prices or incomes. In the view of these ‘neo-liberals’, most of the services currently furnished by the state—insurance, housing, pensions, health and education—could be provided more efficiently in the private sector, with citizens paying for them out of income no longer (mis-)directed to public resources. In the view of one leading exponent of free-market liberalism, the Austrian economist Friedrich Hayek, even the best-run states are unable to process data effectively and translate it into good policy: in the very act of eliciting economic information they distort it.
These were not new ideas. They were the staple nostrums of an earlier generation of pre-Keynesian liberals, brought up on the free-market doctrines of neo-classical economics. In more recent times they were familiar to specialists from the work of Hayek and his American disciple Milton Friedman. But with the Depression of the 1930s and the demand-led boom of the Fifties and Sixties, such views had been typically dismissed (in Europe at least) as politically myopic and economically anachronistic. Since 1973, however, free-market theorists had re-emerged, vociferous and confident, to blame endemic economic recession and attendant woes upon ‘big government’ and the dead hand of taxation and planning that it placed upon national energies and initiative. In many places this rhetorical strategy was quite seductive to younger voters with no first-hand experience of the baneful consequences of such views the last time they had gained intellectual ascendancy, half a century before. But only in Britain were the political disciples of Hayek and Friedman able to seize control of public policy and wreak a radical transformation in the country’s political culture.
It is more than a little ironic that this should have happened in Britain of all places, for the economy of the UK, though intensively regulated, was perhaps the least ‘planned’ of any in Europe. There was constant government manipulation of price mechanisms and fiscal ‘signals’; but the only ideologically-driven aspect of British economic life were the nationalizations first introduced by the Labour government after 1945. And even though the case for ‘state ownership of the means of production, distribution and exchange’ (Clause IV of the Labour Party’s 1918 constitution) had been retained as Party policy, few of Labour’s leaders paid it more than lip service, if that.
The core of Britain’s welfare state lay not in economic ‘collectivism’ but in the country’s universalized social institutions, anchored firmly in the early twentieth-century reformism of Keynes’s liberal contemporaries. What mattered to most British voters of Left and Right alike was not economic planning or state ownership but free medicine, free public education and subsidized public transport. These facilities were not very good—the cost of running a welfare state in Britain was actually lower than elsewhere, thanks to under-funded services, inadequate public pensions and poor housing provision—but they were widely perceived as an entitlement. However intensely such social goods were condemned by neo-liberal critics as inefficient and under-performing, they remained politically untouchable.
The modern Conservative Party, from Winston Churchill to Edward Heath, had embraced Britain’s ‘social contract’ almost as enthusiastically as the Keynesian ‘socialists’ of Labour and for many years had kept its feet firmly planted in the middle ground (it was Churchill, after all, who remarked back in March 1943 that ‘there is no finer investment for any community than putting milk into babies’). When, in 1970, Edward Heath brought a group of free-marketers together at Selsdon Park near London, to discuss economic strategies for a future Conservative government, his brief and decidedly ambivalent flirtation with their rather moderate proposals brought down upon him a thunderstorm of derisory condemnation. Accused of seeking to return to the Neanderthal primitivism of the economic jungle, ‘Selsdon Man’ beat a hasty retreat.
If the British political consensus collapsed in the ensuing decade it was not because of ideological confrontation but as a consequence of the continuing failure of governments of all colours to identify and impose a successful economic strategy. Starting with the view that Britain’s economic woes were the result of chronic under-investment, managerial inefficiency and endemic labour disputes over wages and job demarcation, both Labour and Conservative governments tried to replace the anarchy of British industrial relations with planned consensus along Austro-Scandinavian or German lines—
a ‘Prices and Incomes Policy’ as it was known in Britain, with characteristic empirical minimalism.
They failed. The Labour Party was unable to impose industrial order because its paymasters in the industrial unions preferred nineteenth-century style confrontations on the shop floor—which they stood a good chance of winning—to negotiated contracts signed in Downing Street that would bind their hands for years ahead. The Conservatives, notably Edward Heath’s government of 1970-1974, had even less success, largely thanks to the well-founded, historically-engrained suspicion in certain sectors of the British working class—the coalminers above all—of any compromise with Tory ministries. Thus when Heath suggested closing a number of uneconomic coal mines in 1973, and tried to impose legal constraints on the power of trade unions to initiate labour disputes (something the Labour Party had first proposed, then abandoned, a few years before) his government was stymied by a wave of strikes. When he called an election to decide, as he put it, ‘who runs the country’, he narrowly lost to Harold Wilson, who prudently declined to take up the cudgels himself.