by Tony Judt
Moreover, the specific global market force that is advertised as most likely to scupper Western Europe—lower wages on other continents or in Eastern Europe—will not apply indefinitely. By January 1997, wages in South Korea were approaching two-thirds the level of comparable wages in Germany. Demand for skilled labor in Asian states and in certaincountries of Eastern Europe is bringing wages in some sectors close to or even above those earned in the poorest parts of the European Union. Already the majority of foreign direct investment from Western Europe goes to other high-wage countries. Within a few years, wage differentials alone will not be a factor in the case for cost-cutting except for certain industries where comparative advantage will always obtain. And all this ignores the more serious likelihood that Asian and other cutting-edge economies may not long remain a model even for themselves: The social inequalities and political repression that accompany cheap labor and stable investment environments will be vulnerable to comparisons with and disapproval from abroad—global forces in their own right.
But even if global market forces worked as advertised, they could not forcibly transform Europe’s public policy, because its dilemmas are not essentially economic. There are now more than eighteen million officially unemployed people in the European Union. Yet finding jobs for them is not the most serious social question in Europe today—and if jobs were found by significant reductions in wages and benefits, the better to compete with the costs of jobs in other places, the real problems would worsen. Seventeen percent of the present population of the EU lives below the official poverty line (defined as an income less than 50 percent of the average in a person’s country of residence). Significantly, the highest level of official poverty, after Portugal, is in Great Britain, where 22 percent of the population—over 14 million people—lives below the poverty line; yet Britain has the best record on job creation in the EU in the past half-decade.
The social crisis, then, concerns not so much unemployment as what the French call the “excluded.” This term describes people who, having left the full-time workforce, or never having joined it, are in a certain sense only partly members of the national community. It is not their material poverty, but the way in which they exist outside the conventional channels of employment or security, and with little prospect of reentering these channels or benefiting from the social liaisons that accompany them, that distinguishes them from even the poorest among the unskilled workforce in the industrial economy. Such people—whether single parents, part-time or short-term workers, immigrants, unskilled adolescents, or prematurely and forcibly retired manual workers—cannot live decently, participate in the culture of their local or national community, or offer their children prospects better than their own.
Their living and working conditions preclude attention to anything beyond survival, and they are, or ought to be, a standing remonstrance to the affluence of their “included” fellows. In France, where there are 3.5 million officially unemployed and a further 4 million in precarious work, fully 30 percent of the active population are exclus. The figures are significantly lower only in Scandinavia, where the welfare systems of better days are still substantially in place, albeit trimmed. Under any present version of the neoliberal project—budget cuts, deregulation, etc.—the numbers of the precarious, the excluded, and the poor (disproportionately present in communities of recent immigrant origin) are likely to increase, because work is disappearing in precisely the places, and at the occupations and skill levels, where most of the vulnerable population of Europe is now concentrated and will remain for the next generation.
In policy terms this is not purely or even primarily an economic conundrum. Rich countries can almost always find the resources to pay for social benefits if they choose, but the decision on how to do so is in the first instance a political one. There have always been two basic ways to finance these benefits. One is for the state to tax work: by charging workers and employers to help it pay for a variety of social services, including unemployment payments to those same workers if they lose their jobs. This makes labor and goods expensive (by adding to employers’ costs), but it has the appeal of a certain sort of equity; it also worked rather well in the postwar era of high-wage, full-employment economies, since it padded state coffers when the unemployed and pensioners were in short supply. The alternative, universal, system bills the whole nation, through direct and indirect taxation, for social services that are then made available to those who require them.
Today, with high unemployment, it is tempting to prefer the second, universal option, since governments are trying to reduce the cost of labor to employers (and with fewer people working there are fewer paychecks to tax). But the political risks entailed in charging every voter for services from which only some (the unemployed, the aged, the infirm) will benefitare high, though perhaps not as high as providing no services at all, since the handicapped, elderly, and jobless can all vote too.
There is now a third option, a version of which has been followed in the United States and now in the United Kingdom—cut benefits and gear unemployment and other compensatory payments to a person’s past work record (and income) and his or her continued willingness to find and take work if available. This is now said to be the appropriate social policy for a global economy: It penalizes unwillingness to take a job at the going rate, reduces employers’ costs, and limits the state’s liability.
This third alternative, however tidily it responds to global market forces, ironically presumes the very spectrum of circumstances whose disappearance has brought it about: the availability of employment, no sustained interruption of work experience by involuntary unemployment, and, above all, a normal wage high enough so that the percentage of it paid out in unemployment compensation will suffice to keep a person or family out of poverty until work is available. It presupposes the sort of worker and working profile that is now rapidly vanishing in just those places where such policies are being considered or implemented. The result can only be greater poverty, a growing gap between those with steady work and those without it, and ever more men and women excluded from the working, earning, tax-paying community that will understandably look on them with fear and suspicion.24
These are the losers—the de-skilled, the unskilled, the part-time, immigrants, the unemployed—all of whom are vulnerable because of the state of the economy but above all because they have lost the work-related forms of institutional affiliation, social support, and occupational solidarity that once characterized the exploited industrial proletariat. It is they who are least able to benefit from the hypothetical added value of a global economy, or even an integrated European one: They cannot readily go somewhere else to find work, and even if they did, they would not find the social and psychic benefitsthat once accompanied it but would just be exclus somewhere else. Capital can be separated from its owner and move around the world at the speed of sound and light. But labor cannot be separated from its owner, and its owner is not just a worker but also a member of one or more communities—a resident, a citizen, a national.
True, all labor is potentially mobile across job skills, space, and time. But it is wildly unrealistic to expect people to change both their working skills and their home every time global market forces dictate it. And in any case, the crucial variable here is time: The transformation of an economy may be a rapid affair, but the accompanying social changes cannot be wrought at the same rate. It is the gap between economic change and social adjustment, a gap that has already lasted half a generation and will probably endure for years to come, that is causing the present dilemma and has become, by analogy with the great Social Question of the nineteenth century, the critical issue of our time.
In late-eighteenth- and early-nineteenth-century Britain, the visible havoc wreaked on the land and the people by unrestricted economic forces was noted, regretted, and opposed by poets and radicals from Oliver Goldsmith to William Cobbett. The problem of the excluded— landless laborers, pauperized weavers, unemployed bricklayers
, homeless children—was attacked in various ways, culminating in the New Poor Law of 1834, which introduced the workhouse and the principle of least eligibility, whereby relief for the unemployed and indigent was to be inferior in quality and quantity to the lowest prevailing wages and conditions of employment, a model of welfare “reform” to which President Bill Clinton’s recent legislation is directly, if perhaps unknowingly, indebted. The conventional arguments against state intervention were widely rehearsed: The free workings of the economy would eventually address the distortions attendant on agricultural enclosure or mechanization; the regulation of working hours or conditions would render firms uncompetitive; labor should be free to come and go, like capital; the “undeserving” poor (those who refused available work) should be penalized, etc.
But after a brush with revolt during the economic depression of the 1840s, British governments adjusted their sights and enacted a series of reforms driven in equal measure by ethical sensibilities and political prudence.By the later years of the century the erstwhile minimalist British state had set upper limits on working hours in factories, a minimum age for child employment, and regulations concerning conditions of work in a variety of industries. The vote had been granted to a majority of adult males, and the labor and political organizations that the working population had struggled to establish had been legalized—so that in time they ceased to be disruptive to the workings of capitalism and became effective sources of social integration and political stability. The result was not planned, but it is incontrovertible: British capitalism thrived not in spite of regulatory mechanisms but because of them.
In continental Europe things worked a little differently. There, the impact of economic change, often driven from abroad, was not muted by piecemeal social legislation, both because legislatures responsive to political demands were not yet in place and because farms and factories were unable to withstand foreign competition without protection. In such places, most notably France, there was a long-standing expectation that the state would provide when all else failed, a habit of mind encouraged by the state itself. Those crucial moments when the state (or the king) failed to come through are what we associate with the great crises of the Age of Revolution: 1787-90, 1827-32, and 1846-50, when the response to economic dislocation and social protest all across the continent took the form of a repeated sequence of revolt, reform, and repression.
The nineteenth-century Social Question, as described and interminably debated in the middle decades of the last century, was this: How could the virtues of economic progress be secured in light of the political and moral threat posed by the condition of the working class? Or, more cynically, how was social upheaval to be headed off in a society wedded to the benefits that came from the profitable exploitation of a large class of low-paid and existentially discontented persons?
The response of European states to the problem of managing the social consequences of the early Industrial Revolution owed almost nothing to contemporary theories that purported to describe the inevitable, structural nature of the forces at play. Economic liberalism, whether as a description of the workings of capitalism or as a prescription for economic policies, had little impact on political decision making or even social policy. That is why we have today, or had until recently, a unique and uniquely stable combination—of market economies, precapitalist social relations and moral expectations (notably our intuitive distaste for extremes of social insecurity), and interventionist states, directly inherited from the enlightened absolutist monarchies of the not-so-distant past—that characterizes the fortunate Western inheritance.
CRITICS OF THE interventionist state today level two convincing charges against it. The first is that the experience of our century reveals a propensity and a capacity, unimaginable in earlier times, for totalitarian regulation and repression not only of people but of institutions, social practices, and the very fabric of normal life. We now know and cannot ignore what the Fabians, the founding theorists of social democracy, the utopian dreamers of collectivist systems of society, and even the well-meaning proponents of paternalist social engineering did not know, or preferred to forget: that the overmighty state, under whatever doctrinal aegis, has an alarming and probably unavoidable propensity to eat its own children as well as those of its enemies.
The other lesson we should have learned from the experience of our age is that, murderous or benevolent, the state is a strikingly inefficient economic actor. Nationalized industries, state farms, centrally planned economies, controlled trade, fixed prices, and government-directed production and distribution do not work. They do not produce the goods, and as a consequence they do not distribute them very well, even though the promise of a more equitable system of distribution is usually the basis of their initial appeal.
Neither of these lessons is entirely new. Eighteenth-century critics of mercantilism knew why state-regulated economies were inefficient and self-defeating. The opponents of autocratic monarchies, from the English Puritans through the French Enlightenment to the Russian novelists of the last century, had long since itemized the sins and deficiencies of unrestricted central power and its stifling effect on human potential. What the twentieth century teaches is simply an updated version of Lord Acton’s dictum: Absolute state power destroys absolutely, and full state control of the economy distorts fully. The short-lived disaster of Fascism and the longer-lasting tragedy of Communism can be adduced in evidence of processes known to our forebears but of which Colbert’s system and the ancien régime were but pale anticipations. We now know that some version of liberalism that accords the maximum of freedom and initiative in every sphere of life is the only possible option.
But that is all we know, and not everything follows from it. The lessons of 1989 obscure almost as much as they teach, and, worst of all, they tend to obscure a third lesson: that we no longer have good reason to suppose that any single set of political or economic rules or principles is universally applicable, however virtuous or effective they may prove in individual instances. This is not a plea for cultural or moral relativism, but it is not incoherent to believe that a system of economic management might work in one place and not another, or to recognize that, within limits, what is normal and expected behavior by a government in one free society might understandably be thought intolerable interference in another.
Thus the application of neoliberal economic policy in the United States is possible, in part, because even some of those who stand to lose thereby are culturally predisposed to listen with approval to politicians denouncing the sins of big government. The American combination of economic insecurity, social inequality, and reduced or minimal government intervention in the field of welfare legislation, for example, would prove explosive in societies where the state is expected to have a hand in such matters and gets the benefit of the doubt even when it appears to be abusing its power. Thus, for reasons that are cultural and historical rather than economic, the U.S. model is not exportable and even across the breadth of the Atlantic Ocean causes quivers of distaste and anxiety among otherwise sympathetic foreign observers.
The British case, which bears some resemblance to the U.S. one, is in certain respects a little closer to the European norm. The British state has never played a very important part in people’s lives, at least as they perceive it; it is society that binds the British together, or so they had long believed. Reinforced by the myth and memory of wartime unity, British people in the postwar decades were notably sensitive to hints that selfish group claims were being favored by the state at the expense of the common good. Indeed, Margaret Thatcher effected a small revolutionin her country precisely by playing on a widespread fear that some sectors of society—the labor unions in particular—had gained access to the state and were using it to sectoral advantage. That she herself expanded the role of the state in other spheres of life—notably justice and local government—and used central authority to benefit other sectoral interests is beside the point. The British were suscepti
ble to the suggestion that their difficulties arose from the omnipresence of an inefficient and vaguely threatening central power, though they had no desire to squander the achievements of state-administered social legislation in the fields of health, welfare, and education, as the Tories’ final, ignominious defeat revealed.
But the British example is equally inapplicable to the continental European case—and not just because of the amusing European propensity to speak of Anglo-American neoliberalism as though the British and U.S. experience and examples were interchangeable. There are doubtless many European Socialists and liberals who would like to emulate Tony Blair. But the price of that would be to pass through the experience of Margaret Thatcher (without whom Tony Blair would still be an obscure Labour politician with no original ideas of his own), and no European politician of any hue imagines for a moment that his own country could survive that. It is not just that Thatcher produced double-digit unemployment and destroyed the traditional manufacturing base of the British economy, while briefly lining the pockets of the middle class with the windfall proceeds from privatization: Some of that has already happened in France, Belgium, Spain, and elsewhere. But Thatcher demolished the theory and much of the practice of the providential state, and it is that which is unthinkable across the channel.25