Social Democracy Now

In an article published recently in the Guardian, economist Jeremy Rifkin - the idiot who forecast the coming of a logical impossibility (the 'hydrogen economy') and who recently established his bona fides to pontificate about European issues with his well-received book The European Dream - wrote that 'the current economic debate in Europe threatens to polarize public opinion - pitting unrestrained market forces against the bureaucratic dictates of a welfare state.' Rejecting such a polarization, he argues that the 'task at hand is pursuing an intelligent and sophisticated course that maintains a balanced tension between the entrepreneurial spirit of capitalism and the social solidarity of socialism without either vision vanquishing the spirit of the other.' His conclusion is that 'A reformed European social economy that allows both aspects of human behavior to flourish is a model for the rest of the world to follow.' Rifkin may not realize it, but he is only making the same point as Tony Blair when he declared this week that 'The issue is not between a free-market Europe and a social Europe' but the creation of a modern social Europe.

The problem with such rhetoric, however, is that 'social Europe' as it exists today already represents the minimal tolerable version of a social democratic vision of Europe. That Rifkin and Blair can talk as if reform were possible without totally betraying the idea of social Europe shows how very little they know about its present, greatly reduced state. They seem to be alluding to an idealized version of social Europe which continues to haunt the business press like a never-forgotten nightmare but which can no longer be found anywhere in reality, with the possible exception of the Nordic countries.

The rhetoric of EU reform emanating from people like Blair and Rifkin has to be rejected because it is utterly ahistorical. Blair and Rifkin would have us believe that there is some objectively definable entity that can be labelled social Europe which suffers from a congenital inability to change and which must do so urgently now or else it will 'fail' or 'die.' Such rhetoric is altogether unfounded, not least because there have already been thirty years of public sector cutbacks and welfare state reform in Europe, all of which were supposed to have helped it on its way to economic nirvana.

One of the obvious areas in which extensive reforms have taken place is unemployment compensation, which neoliberal commentators are addicted to stigmatizing as overgenerous. However, net replacement rates have been falling in most European countries for 20-25 years. In the Netherlands, for example, the rate peaked at 89.5 percent in 1978, while Denmark’s replacement rate peaked at 84 percent in 1983, France’s at 76 percent in 1987, and Sweden’s at 86.5 percent in 1988. No European country has replacement rates like that today. (The highest rate is in Switzerland where the figure is around 76 percent.)

The scholarly literature on European welfare state retrenchment is vast, but it seems to have altogether bypassed Rifkin and Blair, who only demonstrate their lack of credibility as commentators on the state of Europe by continuing to think of Europe as it was a generation ago. Neoliberal reformism having been pursued relentlessly for thirty years - particularly intensely in the 1990s - there is today really very little socialistic left about Europe. In most European countries, the social democratic vision has been pared down to a modest welfare buffer which only looks impressive once it is contrasted with the pathetic excuse for a social safety net that exists in the English-speaking countries. Viewed in an objective and unsentimental fashion, the European economy features a few more concessions to social democracy than have been made in the English-speaking capitalist countries.

What's more, wages have collapsed throughout continental Europe over the last ten years. In 1995, hourly compensation costs per worker were higher in Italy, France, the Netherlands, Belgium and Germany than in the U.K. Today, costs are lower in Italy, exactly the same in France, while the gap between British and Dutch, Belgian and German costs have been greatly reduced. The following table shows the extent of the difference for workers employed in the manufacturing sector between 1990 (the blue bar) and 2000 (the brown bar):



This chart shows that the crucial year was 1999-2000, when hourly costs per manufacturing worker fell from seven dollars above the U.S. to seven dollars below:



Costs per worker were therefore already lower in Europe than in the U.S. in 2000 than they were in 1995, and have only fallen further in the last five years. Indeed, by 2003 hourly labour costs were virtually identical in France, Germany and the U.K.:



It would therefore be absurd to suggest that Europeans are any longer the beneficiaries of overgenerous welfare systems and high wages. To talk about Europe in such terms is to be talking about something that essentially vanished between 1995 and 2000.

Because the differences between the European and the Anglo-American economic models are now extremely modest, calls for the creation of a 'modern' or 'reformed' social Europe are clearly disingenuous. Further reform can involve nothing less than the wholesale imposition of the Anglo-American model. Blair is trying to fool his European audience when he suggests that this is not his aim. He is doing his transparent old trick of mouthing social democratic platitudes as a means of greasing soft-headed social democrats up for the frying pan.

It seems to me that Rifkin, whether he realizes it or not, has fallen into the trap by which Blair and the neoliberals plan to do away with Europe's modest welfare buffer altogether. Anyone who lends the least support to the idea that Europe needs to reform itself is effectively complicit in a massive brainwashing exercise according to which people are supposed to delete from their memory cells the fact that Europe has already seen extensive economic reform. The reasons such apologists for neoliberalism as Blair and Rifkin continue to talk about reform as if there hadn't been any are twofold. First, they don't want Europeans asking the obvious question, which is what the point of all that reform in the past was, if it hasn't helped Europe improve its international competitiveness. Second, they want to distract the European public from the fact that, for neoliberals, no amount of reform is ever enough. The reform du jour is always the one that will usher in the millennium. As for the reforms of the past - well, just forget all about them. Pretend they never happened.

So now, as Blair turns the heat up on the social model he claims to be unsustainable in the 21st century, it's time Europeans began asking hard questions about the reforms elite commentators insist they need. For example, how helpful have cutbacks in unemployment benefits been? As we saw above, they have been falling throughout Europe since the 1970s. Yet despite the decline in net replacement rates – the most drastic reduction on the European continent took place in Denmark, where between 1983 and 1999 they fell by 20.5 percent - unemployment rates have continued on a broadly upward, rather than downward trend. On this basis, there is not the least reason to assume that further reductions in benefits will lead to substantial reductions in unemployment. The question has to be asked whether further welfare retrenchment will have any beneficial effects at all.

At this point, it should be readily apparent what the neoliberal game plan is. Make a great fuss about this or that reform then promptly forget about it once it's been achieved. Never give anyone time to stop and think, lest they ask the question why the reform that was once so urgently needed has failed to generate the anticipated results. Just shift the conversation to the next reform and tell Europeans that they need it urgently or else they will go to hell in a hand basket. Once that reform has been implemented, tell them about some other reform they need urgently, lest they go to hell in a hand basket. And so on, ad infinitum.

In short, neoliberals live in a kooky Alice in Wonderland world where there is always jam tomorrow, but never jam today. Empty promises are, in fact, all they have to offer Europeans. What Europe needs today are not further concessions to 'entrepreneurialism' (which is actually in a better condition in Europe than in the Anglo-American world, whose economies are actually fuelled by housing bubbles, easy credit, imperialism, armaments exports and financial speculation) but obdurant and unyielding insistence upon preserving the pitifully few concessions to social democracy that Europeans have managed to wring out of capitalists in the last sixty years. There is nothing Europeans need to give up. Not a damned thing. They have already given up far too much.

NB: Superb commentary on Blair's attack on Europe by Chris Marsden here and Julie Hyland here. Finally, for those who don't already know, the real cause of the EU's economic ills, especially Germany's, is not overly generous social arrangements but an overvalued Euro.

Now that the European elites have lost a major battle in their war on the living standards of the European people, don't expect them to behave as if they have lost the war. What will happen next is that there will be redoubled efforts to achieve radical change at the national level. It's pretty clear already that the focus will be on France's 10.2 percent employment rate - which is virtually the only real reason the elites were able to give as to why the French should have voted for the EU constitution.

What's more, their unemployment rate has already been cited as one of the main reasons why the French allegedly noted 'no' to the constitution - in other words, the result is being spun as an expression of discontent with the Chirac government over persistently high unemployment. However, the reality is that the vote represented a vote against the kinds of neoliberal policies generally touted as the solution to unemployment. There is no evidence that the unemployment rate itself was a major factor in the 'no' result. Indeed, the ability of the French to vote 'no' to a constitution imbued with neoliberal ideology suggests that they simply did not buy the claim that neoliberal reformism amounts to an unemployment reduction strategy. Why, if the French were really voting on the basis of their concerns about unemployment, would they have rejected a constitution which encapsulated the economic ideas which would allegedly reduce unemployment?

There will therefore be mounting panic about the level of unemployment in France, as bit by bit the French are propagandized into believe that tackling unemployment will require nothing less than root-and-branch demolition of the French social model. The beginning of the offensive can be discerned in the first speech made by the new French prime minister, Dominique de Villepin, which made unemployment his priority during his first 100 days in office. 'Villepin said fighting joblessness would be the "big battle" of his team. "I will lead it personally," he said on TF1 television. "We can no longer accept more than 10 percent unemployment in our country."' (SOURCE)

What will be missing from the coming panic will be any critical input into the debate over unemployment. No one will ask the two really significant questions, which are 1) whether countries which have implemented neoliberal reforms aimed at reducing unemployment actually do have lower unemployment rates than countries with high levels of social protection such as France; and 2) whether pursuit of a short-term goal (in this case, reducing unemployment by what at best could be a couple of percentage points) justifies reforms so far-reaching that they would change the lifestyles of the French and even the face of France itself forever.

Although the French 10 percent figure receives a great deal of attention, it is not obvious that this figure is all that bad. What has to be taken into consideration is hidden unemployment - i.e., the substantial proportion of unemployment which has been transmuted into inactivity or which has been disguised by devious statistical strategies, such as counting people who work as little as an hour a week as if they were employed. Australian economist Frank Agbola has estimated French unemployment for the period 1980-2001, and finds that while the average unemployment was 10 percent, adding in hidden unemployment increases the rate to 14.2 percent (Table 2). Although this is high, it is still lower than the equivalent figure for Spain (22.4 percent) and Canada (18.4 percent). (Figure 6 also shows that total - official plus hidden - unemployment has been falling in France since 1998.)

The reason why France's unemployment rate is not so bad is that the country suffers from lower hidden unemployment than the English-speaking countries and the Netherlands, all of which boast lower official unemployment rates. The reason for this, in turn, is that the English-speaking countries and the Netherlands have indulged in extensive manipulation of unemployment rates, not least by shifting significant proportions of the unemployment to the disability lists. Although the U.K.'s official unemployment rate is among the best in the EU, this is partly because it has a higher proportion of its unemployed on disability than in other countries. As David Webster writes:

The UK has the highest rate of working age sickness of all 15 European Union (EU) countries. The UK rate of 7.0% compares with only 2.1% in Germany and 0.3% in France.* FIGURE 3 shows that, as commentators frequently point out, Britain compares favourably with the rest of the EU in terms of ILO unemployment, with 8 countries having a higher rate. But if the working age sick were to be added to the unemployed, Britain would become the third worst, after Finland and Spain.

It is far from clear, therefore, that France has a worse unemployment rate than the U.K. If the opposite is in fact the case, as I believe, then this is a very good reason why, if they wish to reduce their unemployment rate, the French should steer clear of neoliberal reforms. Wherever they have been implemented, neoliberal reforms lead to a marked growth in hidden and precarious unemployment. In terms of the overall cost to society, the net benefit is small or non-existent.

To show how very misleading the U.K. unemployment rate is, Webster uses the "Want Work Rate" (WWR). This figure is the sum of the official (ILO) unemployed and the economically inactive wanting work divided by the sum of all those in work or wanting work. He writes:

In 1999, France had almost exactly the same WWR as the UK (13.0% compared to 12.9%). But France counts 91% of people not in work but wanting work as ILO unemployed, compared to the UK’s 44%. This, together with the evidence cited earlier, strongly suggests that France is much better off in labour market terms than the UK. Because it has held on to the Beveridge principle of adequate unemployment benefits, it has maintained its unemployed people in a state of greater social inclusion and better health; and, whether overall worklessness is compared in terms of the WWR or of the sum of the ILO unemployed and the working age sick, this has led to a true rate of unemployment which appears to be no worse than Britain’s and may well be better.

In short, France's real unemployment rate is higher than 10.2 percent but it is not necessarily higher - and probably is not higher - than the rates of countries like the U.K. and the Netherlands which have implemented labour market and welfare reforms of the sort which, it is claimed, are required to reduce France's unemployment rates. As Chirac said himself a few years ago, “[I]f unemployment is lower in Britain than in France, it owes no thanks to the virtues of economic liberalism but because the English fiddle their figures.” (SOURCE).

If further neoliberal reforms were implemented in France, the gains would be entirely illusory. The desired reduction of the unemployment rate would be achieved mainly by transferring the unemployed to other categories. To be sure, some people would make the transition from unemployment to precarious employment, but the numbers would be relatively small and in any case this would only have disastrous long-term effects by eroding the foundations of France's 'stunningly good' lifestyle. There is no evidence that the remedy would be any better than the disease. Nor is it a foregone conclusion that such reforms would enable France to attract more foreign direct investment as a means of stimulating job creation. In this respect, it is hard to envisage the country doing much better than it is doing now. After all, France is already the 3rd largest recipient of FDI, as this UNCTAD diagram shows (figures are billions of US dollars):



My conclusion is that the French should grit their teeth and endure their present unemployment rate until the political will exists to implement a serious response to unemployment. They should not let their legitimate concern with unemployment be exploited as an opportunity for the wholesale destruction of a social model which ranks among the most widely admired in the world.

*In another passage, Webster points out that 'At Spring 2000 just over a third (34.1%) of the 2.3m working age inactive sick in Great Britain said they wanted to work. As a proportion of the UK working age population, this is more people than are inactive sick in total in Germany or France. If these people were counted as unemployed, they would add 2.7 percentage points to the UK ILO rate, bringing it to the same level as Germany.' Social research has established that most inactive sick would prefer to work if suitable jobs - i.e., jobs that took account of their health problems - were available. In a hypercompetitive, neoliberal economy, of course, people with health problems go to the back of the jobs queue - perhaps even behind healthy jobseekers with criminal records.

Whatever thoughts I might have had that British and European newspapers were capable of reporting the news in a balanced manner - at least by contrast to American or Australian newspapers - flew out the window the moment the French people decisively rejected the EU constitution by a decisive majority. In the 48 hours during which the referendum result was reported and analysed, I checked around 20 different media outlets to find out how the French decision was being explained. The earliest coverage was, with a handful of exceptions, extremely biased. Anyone would think that the French had just voted to introduce suttee, legalize infanticide or something equally unforgivable.*

Although there is probably no election or referendum in recent history - in Europe, the U.S. or anywhere else - in which the voters so obviously went to great lengths to be well-informed about the matter at issue, it was very hard to find a single report that credited the French public for having considered the EU constitution carefully and made a wise and prudent decision as to its merits. The discourse about the referendum result was pervaded by the view that the French somehow owed it to the rest of Europe to consent to a constitution that most everyone admitted would only undermine their privileged lifestyle.

That the French do enjoy a privileged lifestyle was conceded by many of the pro-constitution commentators. Jody K. Biehl of Der Spiegel, one of the most biased commentators of all, wrote, 'anyone who has spent time in France knows, the lifestyle ... is stunningly good.' David Ignatius of the Washington Post wrote, 'Living in France for four years, I came to appreciate what a wonderful country it is, with a quality of life that is truly the envy or the world.' Nor is there any reason to doubt that the French lifestyle is 'stunningly good,' especially in comparison to the grim conditions that prevail in neoliberal England. In the context of the growing British diaspora in France (and, to a lesser extent, Spain), a host of English writers, including Phil Daoust and Alexander Chancellor, have written eloquently in praise of the superior quality of life in France. By what kind of twisted logic are the French to be faulted for objecting to a constitution which would have only undermined their 'stunningly good' lifestyle and placed them on the fast track to the kind of lifestyle Daoust and Chancellor depict with entirely appropriate distaste?

Even if you disagree with the referendum result, the French people deserve credit for having purchased copies the constitution in huge quantities and with often having waded through the better part of what is generally conceded to have been an horrendous read. Political engagement on this scale would never occur in the U.S. (where hardly anyone in Congress read the Patriot Act before it was passed, let alone ordinary citizens) or Australia.

But instead of receiving credit for their high level of civic participation, a single line emanates from the European and international media with virtual Stalinist unanimity: the French people have made an unspeakably stupid decision. In fact, it is the reporting of the decision that was unspeakably stupid. Der Spiegel's Hans-Jürgen Schlamp, for example, summarised the spirit of the French vote in the word 'negativism' - a contemptuous term irrationally implying that no one should ever vote no to anything.

The extremely biased reporting I am criticising here follows from the overwrought belief that the decision was a disaster which will throw Europe into chaos. There is no basis for such claims. How could a vote over a document which did not even exist two or three years ago precipitate a continent-wide meltdown? After all, the Europeans having lived for many, many years without a common constitution, it is hard to see what difference its rejection could possibly make. Despite titling its section of articles about the referendum "Europe in Crisis", The Independent conceded that the abandonment of the constitution would make scant difference:

What difference will we notice if the constitution does not come into effect?
Very little. The EU has already put into effect the Nice Treaty, which allows for the enlargement that took place last year when 10 new, mainly ex-Communist countries were admitted, and for Romania and Bulgaria to join in 2007. But hopes of streamlining decision-making and making the EU more efficient will be lost.

Crisis, what crisis?
Another unspeakably stupid line of argument was that it is absurd for the French to repudiate a constitution 'they' allegedly framed themselves. Wrote Biehl, 'when it comes down to it, the French were voting on a document they suggested, wrote and from which they ostensibly stood to benefit.' Not for Biehl are such subtle distinctions as that between Valéry Giscard d'Estaing and the French people as a whole. (Could Biehl be operating under the illusion that Giscard d'Estaing is the repository of the general will of the French people?)

Let there be no mistake: the 'non' voters have been treated by the British and European mainstream media with the same ill-tempered contempt that the American media treated the French 'surrender monkeys' for failing to back the neoconservatives' war against Iraq. It is truly amazing how bitterly the French people were attacked for their decision, one which only confirms my belief that democracy is healthier in France (and a number of other European countries) than anywhere else on the planet. The truth is that while there may be much wailing and gnashing of teeth in Brussels and the offices of the central banks and the big corporations, most Europeans are pleased enough. Most French people are positively delighted.

The recent triumph of democracy in France is, however, tarnished by a political class which, quite unashamedly, lapsed into hysterics and abuse at the popular victory. Here is just a small sample of just some of the truly patronizing comments which litter the reportage about the referendum, together with a one-word heading highlighting the theme being used to discredit the French decision. The reader will notice that the referendum result is attributed overwhelmingly to base passions - above all, fear - or old ideas from the past ('nationalism,' 'nostalgia') and an inability to accept change. There is also an attempt to connect the vote with that hoary old cliche, French arrogance - surely a case here of the pot calling the kettle black.

PASSIONS
'Driven by nationalism, xenophobia, by dogmatism or nostalgia, [the no voters] wanted to get rid of a Europe that blotted their horizon, that upset their customs and imposed changes.' - Jean-Marie Colombari of Le Monde.
'It was an outcry of anger, of pain, of fear and desperation that drove the citizens of France to the polls in masses.' Romain Leick of Der Spiegel.
POPULISM
'Sunday's vote ... came at the price of a populist wave which has washed over France like a tsunami.' Romain Leick of Der Spiegel
ARROGANCE
'July [a pro-yes vote French newspaper] rightly points out in his editorial the self-aggrandizing nature of the vote. France proves it "exists because all alone, it is able to unhinge Europe," the sickened editor writes of his nation's hunger to prove its own power. "On your knees, Europe, in face of our no!"' - Jody K. Biehl of Der Spiegel
NOSTALGIA
French politicians are now saddled with 'an electorate which is nostalgically clinging to the old social model in which the state takes care of its citizens.' - Johan Huizinga of Radio Netherlands.
FEAR
France suffers from 'feverish fear of reforms to the social system.' - Romain Leick of Der Spiegel
'Behind all the show, however, lies a deep fear that the good life the French have long known will soon end.' - Jody K. Biehl
'Maybe what happened in France on Sunday was the manifestation of a feeling that has been latent across Europe for a long time: the evaporation of faith in the European model and a renunciation by Europeans of an institution that they no longer see as protective but rather as threatening.' - Jody K. Biehl of Der Spiegel
PROTECTIONISM
French politicians ' need to wake the French [people] from their dream, and tell them honestly: "No, we no longer have the dominant influence we once had in Europe, nor will we get it back. We can't put up a protectionist dam on our own against the neo-liberal world market either.' - Johan Huizinga of Radio Netherlands
TIMIDITY
'Fear of losing all that sweetness has France trembling.' - Jody K. Biehl of Der Spiegel (after conceding that the French enjoy a 'stunningly good' lifestyle!)
'the French have become closet conservatives. As much as they want to be part of a growing, entrepreneurial world, they are not willing to make the sacrifices necessary for 21st century life.' - Jody K. Biehl of Der Spiegel (after conceding that the French enjoy a 'stunningly good' lifestyle!)

Such passages invite many questions. Here are just a few: Since when has preferring a state which takes care of its citizens to the neoliberal alternative been reducible to 'nostalgia'? On what basis does the media determine that, in affirming their support for the current social model, the French people are motivated by 'nostalgia' rather than by, say, enlightened self-interest? On what basis is the status quo described as an 'old' social model? How very 'old', in fact, is the French social model? Since when did a people enjoying a 'stunningly good' lifestyle need to make 'sacrifices'? Who says the 21st century has to be the century in which the 'stunningly good' lifestyle the French currently enjoy has to go down the drain? What good is 'a growing, entrepreneurial world' if it requires the sacrifice of a 'stunningly good' lifestyle? Instead of a constitution threatening the 'stunningly good' lifestyle of the French, how about a constitution that would help other Europeans reach a similar standard of living themselves? Wherefore the intensity of the smear campaign against the French voters? What damage have they really done by deciding that the status quo, whatever its defects may be, is preferable to a new state of affairs which would probably compel them to forfeit their 'stunningly good' lifestyle? What, indeed, is the point of economic life if it is not to allow a people to achieve a 'stunningly good' lifestyle? Why is a vote implying faith in the French social model interpreted as a 'feverish fear of reforms'? Why are the French supposed to favour the 'European model' over their own social model? Why should they be faulted for choosing the one that suits them best?

NB: For the record, there are a number of examples of genuinely insightful commentary. Of these, I would draw attention to the following:

"French Say 'Non' in Thunder!" by Diana Johnstone

There is also an excellent interview with Johnstone about the referendum here.

"The US Media and the French Referendum" by Patrick Martin (by far the best thing written on the referendum result so far)

"European votes reveal the alternative" by Alex Callinicos and

"The no vote was a shout of defiance" by Jonathan Steele

*Reporting has subsequently become more balanced. The views described here represent what might be called the first wave of reaction.