Pier Domenico Tortola: I would like to begin our conversation with a very simple question: are you optimistic or pessimistic about Europe?
Mark Blyth: I hate binaries. But for the first time in a long time, I am guardedly optimistic, for several reasons: the first is that populism may have peaked: we have seen this with the Dutch election, and we can expect the French presidential election not to go to Le Pen in the second round. We also have some inflation, which is great because the whole continent is in debt. We have some growth—it is slow, but it is there. Also, we have Trump in the United States, who is a wonderful demonstration that you do not want to go down that road. Finally, Martin Schulz – who knew that a former bookseller could move the SPD from death to almost 30%? This shows that we are not necessarily at the end of social democracy. Social democracy is done if its role is to be no more than a helper for the neoliberalization of Europe. But if you actually signal that you want to go a different way, that can be a game changer.
Now, let me give you the other side of that story. The inflation that we are seeing now is linked to devaluation effects and an increase in energy prices. In other words, it is transitory: we will probably go back under 1% and possibly to deflation in the periphery within eight to twelve months. While we have better employment numbers, the vast majority of jobs are part-time, non-contract, zero hours, and generally outside standard labor market protection. This means that the young people who have already had their skills destroyed by a wasted decade, are now unable to get jobs that can take them through the most important years of their lives. This means in turn that you are going to have less consumption to pay back all the debt you accrued, both privately and publicly. When you factor in inflation, you have 1% real growth. This is not enough to change the balance of forces. In sum, there is another story in which it is entirely possible that Europe’s underlying problems actually have not changed for the majority of people. If that is the case, my guarded optimism changes back into pessimism.
PDT: But it sounds like you believe that the political “perfect storm” that many people were expecting for Europe in 2017 will eventually not happen.
MB: Well, the French election can actually still go wrong. The National Front case is different from other cases of right-wing populism. Usually Brexit and Trump-type voters are old. In France it is the old and also the young who support the FN. The party has a lock on the young in a way other populists do not. They take the anti-establishment rhetoric—and God knows the French establishment is pretty contemptible—and then they weld that to a leftist sounding economic programme. This makes many people forget the racism.
The story that the French elites tell themselves is that in the second round of the presidential election, should the FN get there, the entirety of the French political system, from the communists to the catholic right, is going to link up to elect this cypher called Macron, who has no party, no movement, nothing behind him, and empower him for the next five years just to stop people who want change—and, let’s face it, have a pretty good story for why things suck. To me, that has “Brexit” written all over it, in terms of the epistemic arrogance of the experts. Also, much of the election will be about turnout: will the communists and the catholics actually turn out to support Macron? We shall find out.
When the left moves to the middle […] it can obtain huge electoral victories, but afterwards is downward, downward, and then you are done, because the people who owe you hate you, and the people who elected you do not owe you anything and can always go somewhere else.
PDT: In this sense, Martin Schulz is fresh air because he is someone not too compromised with the establishment of his country, and who might be able to revive a Euro-friendly social democracy to re-capture that electorate which is now shifting to the right.
MB: For a long time, centre-left and centre-right globalists have believed that globalization would make everybody better off, and they spent 15 years ignoring the fact that the world was becoming fantastically unequal, with the people at the bottom bearing all of the costs. You get punished for that: your base is going to leave you, and they will not come back. When the left moves to the middle—look at Blair in Britain or Schroeder in Germany—it can obtain huge electoral victories, but afterwards is downward, downward. Becuase the people who owe you hate you, and the people who elected you do not owe you anything and can always go somewhere else.
Schulz seems to be able to arrest that decline. He talks about what is wrong in a way that people understand. Moreover, he is proving that it is not necessary for his party to be little more than a helper for global capital. Let me give you an example of what I mean. In September last year I was at the German Economics and Energy Ministry, which was headed by then SPD leader Sigmar Gabriel. I asked whether Gabriel was there, and they told me that he was in Wallonia beating up on the Belgians for opposing the Transatlantic Trade and Investment Partnership. This was the head of the SPD being sent to tell the left in Belgium that they should embrace a treaty that undermines their ability to do things like, for instance, set their environmental regulations. Schulz is starting to say that maybe we need a different agenda.
PDT: Many people’s take on this is that if you want to save the left and Europe at the same time you need to shift leftist politics and policies up to the supranational level, and implement more redistribution, either among states or among people—think, for instance, about the idea of a European unemployment scheme. The alternative to that is either renationalization or the ordoliberal policies with which we are stuck at the moment. Do you agree with this analysis?
MB: I am afraid this is like one of those mathematical problems with an answer which is technically true but impossible in practice. The truth is that at the moment there is zero appetite in Europe for integrating more. The EU was conceived as a very 20th, if not 19th century project. The idea was that we take this anarchic system of states and we fix that by creating a hierarchical one, by building more and more sovereignty at the supranational level. Now, besides all the democratic deficit problems that this creates, there is an efficiency problem in this way of doing things, because what you are doing is depriving yourself of information at the unit level while at the same time increasing the number of units in the project. The system becomes very clunky and vulnerable this way. You need redundancies, you need something that is “antifragile”, to use Nassim Taleb’s language. And that is best achieved by building a more horizontal federated system rather than a hierarchical and uniformist one.
Rather than pushing for more integration we should recognize that after 30 years of pushing people relentlessly towards homogeneity and markets, the nationalist backlash is there, even in the “good” countries. The key question then is: how do you turn this into a responsible nationalism?
At this point in time it is very easy for people to say: we will ‘take back control’ because we on the left do not have a project to fight for, and because we have given up so much. Efficiency, the single market, the notion of borderlessness: all of this makes sense to people like you and I, who travel, speak multiple languages, and have the assets to take advantage of those possibilities. But to the vast majority of Europeans it does not make much sense. So, either we go beyond hierarchy and start thinking about how to have a more heterogenous system that keeps the European ideal alive, or we are done.
I tend to think that the driving force of populism is economic. But to the extent that populism has a cultural-ideational component, the problem remains that you cannot run history backwards and try things again. You have to live with the experience you have.
PDT: But is the nationalist backlash not also a failure of intellectual and political leadership, in the sense that the advantages of European integration have not been made visible enough to voters?
MB: I tend to think that the driving force of populism is economic. But to the extent that populism has a cultural-ideational component, the problem remains that you cannot run history backwards and try things again. You have to live with the experience you have. There was a period in the 1980s, after the Single European Act but before the launch of the euro, when the project could have been about pooling sovereignty and building a compensating European social model. This would have acted as a shock absorber, and it would have given people a joint piece of property, a joint identity. But we allowed instead macroeconomics to become deflationary for a decade in order to fit everybody in the same monetary straightjacket. That project has not been a great success, and you cannot pretend it did not happen. This goes beyond leadership. The fact is that we have created a world in which the solution of integrating further is actually not a solution, or a sufficient one in any case. We need to think differently. We need a plan B to fix the European system.
PDT: What bothers me a little about what your analysis is that it seems to imply that if social democracy wants to win the battle against right wing populism, it has to chase its agenda. After all, as you have noted, Eurosceptic populism is adopting some of the social proposals that should belong to the left.
MB: I know, this is a real dilemma. Which is why I think that what Schulz is doing is so interesting. What will happen in Germany is going to be very instructive for the left. Generally speaking, what I would like to see is more than simply a left-wing version of populism. And there are things one could do that may make a difference in this sense. You can, for example, get all the states to coordinate in the field of taxation to get some actual revenues back in the pot. Further, how about we shut down Luxembourg? The reason why it’s per capita GDP is so high is that everybody is hiding their money there. It is an offshore taxhaven right in the middle of Europe—this is ridiculous. How about we give Ireland five years to stop cheating everybody else on corporate taxes? There are real things we could do, which do not involve hierarchical structures but instead involve countries agreeing on a horizontal level to eventually finance an agenda which may bring people back into the fold.
Remember that the way that social democracy has traditionally worked is that “policy made politics”. That is, if you want power and produce policies that benefite people, they come back to you. What we do now instead is, to use David Cameron’s rhetoric, having governments do more with less—not just now but forever. When you have an income distribution that is extremely skewed, then you have people with private options who do not care what the policies are, and then you have people with no private options who are constantly cut down. This is not just a populism problem, it is a basic credibility problem: the left cannot keep doing things that hurt its electoral base.
PDT: Let’s change the focus a little: given that you are Scottish, I must ask: how do you see the Brexit process ending, and what do you think will eventually happen to Scotland?
MB: I do not know the endgame on this, but the incentives are pretty clear. The Scottish National Party has built itself as the anti-austerity party, yet they never raise taxes. Scotland lives off of subsidies from the British government. They are old, they are legendarily unhealthy, so you do not exactly have the most productive and dynamic society there. Their implicit budget deficit is estimated between 7% and 11%—and forget about oil taking care of that, because oil will stay long and low for the next ten years. So how do you even make money on these premises if you are independent?
There is no way Scotland can run a nice welfare state with an implicit deficit of 7-11% and no currency of its own. If in the long term the British economy is going to become the most neoliberal system in the G20, and you are attached to that, the you do not have many good options.
Here is the writing on the wall: if you get a “hard Brexit”—which you will—the way that Britain is going to make its money will be by being a low cost, relatively high skill export platform that is going to slash everything to a bare minimum in terms of labour protection etc., to become a giant version of Latvia, with the City of London stuck in the middle of it. Now, if it is going to go that way, and you have a part of that country whose economy is roughly one eleventh the size of the British one, which lives off of transfers that are going to disappear, you can either starve to death or you can try and be independent and go on a crash diet. This is the choice that Scotland is facing. Whether or not they will join the EU—and whether the EU will be there when they are out of the UK—are open questions. But there is no way Scotland can run a nice welfare state with an implicit deficit of 7-11% and no currency of its own. If in the long term the British economy is going to become the most neoliberal system in the G20, and you are attached to that, the you do not have many good options.
PDT: And you are convinced that Brexit will take the UK in that direction?
MB: Absolutely, It has to. There is no alternative. They could have said that the Parliament has to make the final decision, or they could have said the referendum is not binding, but instead they were so confident and arrogant about terrorizing people that they blew the whole thing up. And now they to live with the consequences.
Photo Credits CC Chatham House
Also published on Medium.
MARK BLYTH is the Eastman Professor of Political Economy at Brown University. His research revolves around the origins and role of ideas in political systems, European political economy, and the functioning of macroeconomic systems more generally. He is the author, among others, of Great Transformations: Economic Ideas and Institutional Change in the Twentieth Century (Cambridge University Press, 2002) Austerity: The History of a Dangerous Idea (Oxford University Press, 2013), and The Future of the Euro (co-edited with Matthias Matthijs) (Oxford University Press, 2015)