Mitt’s Faulty History
An essential talking point of the Mitt Romney campaign is the candidate’s tortured invocation of the 's' word. Barack Obama is a socialist. His favorite models are socialist Europe. Romney then goes on to add with his characteristic sneer that Europe does not work even in Europe. How strange a world this is. A Democratic President who discourages prosecution of the crudest fraud by investment bankers and sanctions cuts in Social Security is deemed a socialist. And Western Europe nations, which were never socialist and were long regarded as staunch bulwarks against Communism, are now vilified. With the passing of the Cold War and the “War on Terror” losing some of its luster, perhaps a new demonology of socialism and those effeminate Europeans will catapult him into the Presidency.
Romney’s rather tainted portrait of Barack Obama, who at his best advocates only a tepid commitment to equality of opportunity, has received just criticism on the left media. Less attention has been devoted to the routine slurs of Europe. Even such mainstream media as the New York Times suggest that “rigid labor markets” and overly generous vacations are the cause of Europe’s woes. Thus the European story is politically and economically important, not merely to shed light on Romney’s lies and distortions but also to guide future policy over here.
Romney is right about one thing. Economic policy in Europe is failing, but not for the reason he cites. Western Europe has never been socialist. With the partial exception of the British Labour Party’s attempt to own and control “the commanding heights,” of the British economy, iron, coal, and steel, in the immediate post World War II years, European economies have relied on private corporations and markets. From the fifties on Germany and France especially worked to expand trade and markets within Europe.
Social democracy did, however, have a major presence in Europe. Unfortunately for most Americans this term is indistinguishable from socialism. Yet the distinction is important. Europeans sought to draw on the dynamism of the free market while smoothing its extreme oscillations by providing generous safety nets for the most vulnerable and for those who failed in the economic turbulence. Lost sight of completely today is the quarter century of economic growth in Western Europe that was far more robust and more equitably distributed than the gains of the post Reagan and Thatcher years.
Not only were European states not socialist, even the social democratic experiments differed among themselves in important ways. The notorious limitations on firing workers, often cited as a cause of unemployment woes in France and Italy by the US press, are hardly universal in Europe. Denmark, for instance, accepts considerable labor market displacement but cushions unemployment with extensive aid and retraining programs.
Social democracy, however, was no utopia, and an inclination to exaggerate its virtues or to be obtuse to its limitations may have contributed to its contemporary troubles. European social democracies were increasingly part of a world capitalist system that itself was volatile and dependent on material resources from unstable regions of the world. And Europe’s very success in catching up with the US in the post World War II period was one source of future problems. US economic stagflation of the seventies owned something both to OPEC and to increasing international competition, which in turn served to depress world demand for exports. (See Robert Kuttner, Europe’s Right Turn, American Prospect October 2011.)
Seventies crises gave corporate conservatives in Europe an opportunity for counterattack. But rather than repudiate the still popular welfare states, many conservatives sought to undermine their foundation. Capital markets were opened up, giving both industrial and financial capital leverage to destabilize governments that pursued overly progressive taxes or regulatory regimes. Such leverage has become especially strong in the case of the single currency, adopted by many European nations a decade ago. Thus even Sweden has been forced to scrap some of its active labor market, including its solidarity wage but still could engage in progressive tax policies because, unlike Italy, it retains its own currency and is less vulnerable to runs on its banks and bonds.
But in general, European social democrats were ill prepared for the conservative attack. Many even embraced financial deregulation, both as a means to attract new jobs and to bring more of the working class new amenities without raising distributional issues. Unfortunately, however, financial deregulation has led to bubbles that helped sustain neoliberal consensus for a while, but at great eventual cost. The private sector, including publicly insured banks, took on dangerous levels of debt. Indeed, European governments allowed a degree of leverage not tolerated even in the US. But the association of social democrats with this failed policy that in effect transferred private banks’ debt to the public ledgers has reduced their popularity and helped fuel the push to government austerity.
In a longer term perspective, social democratic parties and their adherents had done to little to mobilize more broadly—and across borders-- not only for fair distribution of rewards and full employment policies but for broader changes in workplace organization so that ordinary workers could have a voice in product choice, financing, and long term planning. Such gains could have been achieved without, indeed in contrast to, centralized statist control of enterprise or over reliance on taxation to achieve economic justice. They would have constituted a renewal of the social democratic vision. In addition, most European social democratic parties were slow in grasping the importance of environmental issues, and slow to address ethnic tensions, thus opening up fizzures on the Left that would play especially large in political systems that provide various forms of proportional representation. (European social democracies grew out of initiatives of separate national working class elements.)
Today, most social democratic parties compete with conservative over how best to achieve austerity, thereby plunging Europe deeper into recession. With the private sector badly leveraged, Europe needs the fiscal stimulus that an ambitious green infrastructure program financed by its larger economies might provide
The failure of Europe to live up to the social democratic vision rather than that vision itself underlies Europe’s crisis. In this sense, Mitt Romney and European social democrats have more in common than either would like to acknowledge.