Europe, Capitalism, and Socialism

In the Spring of 2005, workers’ votes in France and the Netherlands made the difference in defeating the draft European constitution and ending socialist party control of the German state of Baden-Wurttemberg. In the few weeks after those momentous events, most politicians and reporters offered one basic explanation. It tells us much more about the agenda of the explainers than about what is to be explained.

Their simple story proceeds in steps. First, European workers voted their anger over sustained high unemployment (read: workers see no farther than their paychecks). Second, that unemployment is the fault of Europe’s social welfare programs and protection of workers’ jobs and incomes. Third and final step: European workers must learn the “lessons of economic science” and thus recognize that “flexible labor markets” (read: sustained reductions in social welfare and worker protections) are the only way forward for European unity and prosperity.

This story crudely applies the neo-liberal logic drawn from the standard elementary economics textbooks that now suffocate most university classrooms. It also misses the remarkable protest and change now unfolding in Europe partly because it so uncritically embraces a deeply flawed neo-liberal catechism.  

The point of “flexible labor markets” is to enable employers to pay workers less, control them more, fire them more easily, and outsource where and when they choose: in short, employers want to replicate in continental Europe the conditions already enjoyed by their British and US competitors. Right away this would benefit employers and cost workers in Europe. It might in the long run also lead employers to hire more workers (since they can pay each worker less). It might in the long runincrease the competitiveness and sales of European products (if employers lowered their prices or improved product quality). That is the rosy prediction and “analysis” offered by supporters of a neo-liberal unified Europe. On the other hand, “flexible labor markets” might instead simply redistribute income, wealth, and power from workers to employers. It might drive workers to respond to lower and less secure wages by taking more jobs, laboring more hours, and borrowing massively to maintain their living standards. That, after all, has been the actual story of the US and UK over the last quarter century.

The logical flaw in neo-liberalism is this: no one can know in advance all the economic and social effects of a “flexible labor market.” No one can guarantee that what might happen actually will. To claim otherwise is not economic “science” but rather bought-and-paid-for economic propaganda. The key historically demonstrated facts are these: (1) employers pursue neo-liberal “reform” to make more money and enhance their power, and (2) employers cannot control all the other effects of neo-liberalism. The employers’ political, journalistic, and academic supporters do not admit, let alone examine or document, the negative consequences that neo-liberalism can deliver to workers.

That is why those supporters were surprised and challenged by the workers’ votes in the recent European elections. Those workers’ incomes and/or job securities had been reduced over recent years by neo-liberal “reforms” identified as necessary for European “unity.” So they worked more and took on debt. Their mounting stress strained family life and reduced civic participation. Such painful adjustments, as always, bred social tensions. Nationalist and right-wing leaders found opportunities to deflect workers’ mounting anger about deteriorating economic and social conditions against immigrant communities and job outsourcing. However, workers with no affection for the right also found the dominant neo-liberal conception of European unity increasingly unacceptable.

In this situation, the left in European politics began an historic split that became very public in the recent French, German, and Dutch elections. Especially inside the large socialist parties, those workers who opposed the neo-liberal unification of Europe turned against the leaders who supported it by voting “no”on the proposed new (and neo-liberal) European constitution. Because Germany’s socialist leader, Gerhard Schroeder, did not allow a plebiscite on the new constitution, workers opposed to it expressed themselves by voting the socialist party down in Baden-Wurttemberg. The party immediately split with the departure of their popular leader Oskar Lafontaine who declared his interest in working with the further left Party of Democratic Socialism (now the Left Party) for a different kind of unified Europe. In France, millions of socialists voted against the new constitution, thereby directly contradicting their party leaders’ support for it. This immediately opened the political space for a new left political effort combining disaffected socialists with the French Communist Party which opposed the new constitution.

It remains to be seen whether and how the new political situation and possibilities will be realized. An emergent new left would need to design a systematic alternative to neo-liberal European unification and communicate it effectively to the voters. To do this, it will have no option but to return to the basic class issues that capitalist development itself has returned to the forefront of European politics.

Europe’s capitalists want neo-liberal unification to enable them to compete effectively with non-European capitalists. As the latter do in their countries, European capitalists want freely to confront European workers with a simple threat: either accept less or we move production abroad. European capitalists promote a unification whose implications for European workers could not be clearer or starker. If European workers and their organizations capitulate, they will accelerate the downward spirals of wage loss, job insecurities, deepening debts, and social stresses that are already the capitalist norm elsewhere.

The only other option for a new European left is to rediscover the socialist alternative and adjust it to the new conditions. This will require confronting capitalists with a counter-threat: either maintain our hard-won working conditions, job protections, and social benefits or else we remove capitalists from their ownership and control of European productive enterprises. Since European capitalists will likely reject the threat, European socialists will need to draw and implement the hard lessons from the successes and failures of the last century’s socialist experiments. They will need to mobilize working class solidarity without obliterating differences, debates, and the space for initiatives from below. They will need to develop modes of organizing productive enterprises that will make the workers their own bosses. The issues of socializing productive property, democratically planning the economy, and above all the ending class exploitation will once again rise to the highest priority of political debate and struggle.

The remarkable historical twist here should not be missed. It was the rise of capitalism in Europe that produced socialism as its self-criticism, the profoundest contradiction and alternative to capitalism. In the intervening decades, capitalism and socialism became global. The rest of the world played its unique and powerful roles in shaping both global capitalism and global socialism. By the end of the twentieth century, global socialism encountered extreme problems and suffered many reverses. Global capitalism rejoiced at its sudden chance to expand again and seemingly without criticism or opposition. It proclaimed itself as the end of history, socialism as forever defeated, and the neo-liberal phase of global capitalism as the unstoppable wave of the future. How remarkable that it is once again in Europe — although not now, of course, in Europe alone — that a new movement of socialist criticism is emerging. Produced by the latest neo-liberal phase of capitalism, it may well become its greatest challenger yet and this time perhaps its gravedigger.

Rick Wolff is Professor of Economics at University of Massachusetts at Amherst. He is the author of many books and articles, including (with Stephen Resnick) Class Theory and History: Capitalism and Communism in the U.S.S.R. (Routledge, 2002).