The No's Have It

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Alex Callinicos examines the problems facing Europe's ruling class.

Europe In Crisis' has been a regular fallback for headline writers over the decades. But now, after the referendums in France and the Netherlands, the European Union really is in crisis. Various factors have gone into the making of this crisis, some of which have been in the foreground of the debate on the proposed European Constitution - for example, the implications for the EU of enlargement to incorporate East and Central Europe.

Revolt against the elites

But the decisive factor lies much deeper. In France above all, the victory of the No camp marked a further stage in the long term crisis of political representation that is increasingly hollowing out all the advanced capitalist democracies. This crisis, in Europe at any rate, is driven by the profound commitment of the European ruling classes to neo-liberalism - that is, to the policies of the Washington consensus.

In France the conversion of the elites to neo-liberalism began on the right during the presidency of Valéry Giscard d'Estaing in the late 1970s and on the reformist left under François Mitterrand in the early 1980s (ironically, Mitterrand appointed Laurent Fabius, now the leader of the No camp in the Socialist Party, as prime minister to implement his government's turn to the market).

The result has been to open up an increasing gap between the establishment, deeply wedded to what the French call the pensée unique (roughly, the single ideology) of neo-liberalism, and the mass of working class people whose lives have been increasingly destroyed by the implementation of these policies. Popular reaction has taken the form of, on the one hand, withdrawal from official politics and, on the other, massive social revolts.

Stage One in this process came with the mass public sector strikes of November-December 1995. Provoked by a package of free market 'reforms' imposed by the newly elected president, Jacques Chirac, and his prime minister, Alain Juppé (recently convicted on corruption charges), the strikes forced Chirac to retreat.

The 'plural left' coalition headed by Socialist Party leader Lionel Jospin won a surprise victory in the legislative elections of May-June 1997 thanks to the political radicalisation produced by the 1995 strikes, which was also one of the sources of the contemporary anti-capitalist (or, as it is called in France, altermondialiste) movement. Brought to office by a revolt against neo-liberalism, the Jospin government proceeded to implement yet more neo-liberalism, privatising more than the preceding six governments combined. Its punishment came on 21 April 2002, the first round of the presidential elections and Stage Two of the crisis of representation. Amid massive abstentions, with one in ten voters backing the candidates of the far left, Jospin was beaten by the Nazi leader Jean Marie Le Pen, who went into the second round against Chirac.

Re-elected by default, Chirac appointed Jean-Pierre Raffarin prime minister with a mandate to drive through neo-liberal 'reforms'. This provoked another social revolt - the mass teachers' strikes of May-June 2003. Thanks to the trade union bureaucracy (particularly the leaders of the 'left' CGT federation), the strikes were beaten, but the social malaise produced by long term mass unemployment and the progressive erosion of the welfare state continued to feed tremendous bitterness and discontent.

The victory of the left No...

29 May 2005, when the European Constitution was defeated in France by a decisive 55:45 percent margin, marked Stage Three of the crisis of representation. Commentators have puzzled over the fact that France, an original signatory of the Treaty of Rome in 1957, was turned against its own creation. But it is important to understand that for the past 20 years at least the process of European integration has centrally involved hard-wiring neo-liberalism into Community institutions. This started with the Single European Act of 1985, strongly supported by Margaret Thatcher as a means of creating more competition on a European scale.

Then came the Maastricht Treaty of 1991, which laid the basis for European monetary union (EMU) and the launch of the euro in January 1999. The terms on which EMU was agreed required governments participating in the single currency to adhere to strict spending and borrowing targets and handed over control of interest rates to a democratically unaccountable European Central Bank modelled on the ultra-monetarist Bundesbank. This setup, and the strength of the euro against the dollar have been largely responsible for the economic stagnation and high employment endemic in much of the eurozone.

The European Constitution was supposed to be about giving the EU the effective decision-making processes required for a union now composed of 25 states and expected to incorporate more. But in two critical respects it marked an intensification of the competitive pressures to which European societies are now exposed.

The first arises from enlargement. Petty nationalist fears about Polish plumbers aside, there is not the slightest doubt that East and Central Europe are seen by the European multinationals as a reservoir of cheap and often skilled labour that can facilitate their efforts to restructure and remain competitive. An interesting American study of outsourcing by K Bronfenbrenner and S Luce, called The Changing Nature of Corporate Global Restructuring, notes that US companies tend to move production at the same time 'near-shore', usually to Mexico, and 'off-shore', typically to China. The study continues, 'We found several cases where European countries simultaneously shifted production to Eastern Europe and China. This most likely occurred for the same reasons that a US company would shift to Mexico and China: to keep some production cross-border but not off-shore, so it still can be quickly, cheaply, and easily accessed through ground transportation.'

The European Commission's Bolkestein draft directive on services proposed allowing companies based in East and Central Europe to compete in west European countries with relatively high levels of labour protection for the provision of public services by workers receiving the inferior wages and conditions prevailing in their home states.

Secondly, the constitution itself would reinforce the neo-liberal trend. The Financial Times (24 May 2005) conceded just before the French referendum, 'At the heart of the French predicament is that Europe itself is tilting towards a free-market approach, epitomised by José Manuel Barroso's European Commission.

'To the extent that the European Constitution makes EU decision-making easier, and harder for countries to block initiatives, there are perhaps grounds for concern for a country that wants to hold back the advancing liberal tide.'

But 'the advancing liberal tide' in Europe didn't represent a 'predicament' for Chirac and Raffarin, or for the leadership of the French Socialist Party. They, along with big business and the bulk of the media, backed the constitution. The astonishing achievement of the campaign for a left No - a coalition of Socialist Party dissidents, the Communist Party, altermondialistes and the revolutionary left - was that they made neo-liberalism the central issue in the referendum.

The No's could not have won in France without a massive rebellion against their leaders by the rank and file of the Socialist and Green Parties and the CGT. Large majorities of manual and white collar voters, along with the young, voted against the constitution. This was a continuation of the rebellions against the elites of November-December 1995 and 21 April 2002. One French Marxist told me it was the first real victory for the left in more than 20 years.

The crushing defeat of the ruling Red-Green coalition in Germany in the state elections in North Rhine Westphalia, a week before the French referendum, falls into the same pattern. Chancellor Gerhard Schröder effectively acknowledged this, calling for new parliamentary elections to give him a mandate to continue with his programme of 'reforms' aimed at drastically weakening the welfare state.

It was anger at these measures - particularly the Hartz IV attack on unemployment benefits - that led working class voters to desert the Social Democratic Party (SPD). The SPD leadership sought to appease them by, in the weeks before the poll, adopting an anti-capitalist rhetoric portraying speculators as locusts, but this didn't fool anyone.

...or of the American Empire?

The left's victory in France was achieved despite the intervention of one of the most influential contemporary radical intellectuals, Toni Negri. He called for a Yes vote in Paris on a platform with the Socialist Party leader Julien Dray and Dany Cohn-Bendit, once a leader of May 1968, now a right wing Green MEP. Negri explained in Libération, 13 May 2005 that he was a 'revolutionary realist', who had taken a 'pragmatic' decision to support the constitution as the lesser evil: 'The constitution is a means of fighting Empire, this new globalised capitalist society. Europe has the chance of being a barrier against the pensée unique of economic unilateralism: capitalist, conservative, reactionary. But Europe can also construct a counter-power against American unilateralism, its imperial domination, its crusade in Iraq to dominate petrol. The United States has understood this well, and has, since the 1950s, fought like a madman against European construction.'

The idea of the EU as a counterweight to US hegemony is, of course, defended by many mainstream European politicians such as Chirac and the German foreign minister, Joschka Fischer. Negri's own version of the argument seems particularly confused. In Empire and Multitude, his books with Michael Hardt, Negri presented Empire as a new transnational form of capitalist power, but here he seems to equate it with American imperialism, which he normally presents as a kind of reactionary throwback.

Muddles of this sort aside, Negri's assertion that the US opposed European construction from the start is quite simply nonsense. Studies such as Alan Milward's The European Rescue of the Nation State have confirmed beyond serious dispute that the US, from the 1940s onwards, promoted European integration in order to establish a secure and reliable junior partner in the second major zone of advanced capitalism.

It is true that George W Bush's administration has showed signs of shifting towards a policy of divide and rule, playing 'New' against 'Old' Europe. But this move does not have universal support even within the administration (which, since Bush's re-election, has seriously courted the EU), let alone within the US ruling class as a whole. The majority position is probably that well expressed by Philip Gordon, a leading US policy intellectual based at the Brookings Institution in Washington, in an article in the Financial Times (17 May 2005) directed at elements in the Bush administration who might welcome the defeat of the constitution: 'At a time when the US desperately needs a strong united and outward-looking European partner, a French No would produce the opposite. It would seriously undermine prospects for EU enlargement to include key American friends such as Turkey and Ukraine. It could lead to divisive, unworkable proposals for an EU "core group" that would exclude US allies in Britain and Europe. And it would be a significant victory for the anti-American, anti-capitalist, anti-globalisation activists who form a core part of the rejectionist camp.'

Euro crisis looming?

From this perspective, then, the No victory is a significant defeat, not just for the neo-liberal agenda in Europe, but also for American imperialism. Immediate reaction to the French and Dutch referendums has concentrated on the complex political game of musical chairs as European governments manoeuvre to shift the blame onto each other and squabble over the EU budget. But potentially much more serious is the crisis that may develop around the euro.

The launch of the euro was one of the great success stories in the recent history of the EU. It took place despite the near-collapse of EMU's predecessor, the Exchange Rate Mechanism (ERM), in 1992. Essentially what happened was that the financial markets recognised the strength of the political determination on the part of the big European players - above all, France and Germany - to make the euro work, and allowed the single currency to be introduced without significant disruption.

More than six years after the euro was launched, things don't look so good. The eurozone has stagnated economically. As a result France and Germany have successfully defied the limits on public spending and borrowing laid down in the 1996 Growth and Stability Pact. Strike one against the credibility of the euro.

A potential strike two could be produced by a fault-line that has been largely hidden up to now. In the run-up to the euro launch interest rates across Europe converged. This means that governments in relatively weak economies like Greece pay almost the same interest on their borrowing as do those in the strongest economy, Germany. This reflected the financial markets' belief that the debts of all the eurozone economies were being underwritten, in effect, by the EU.

But, if the crisis over the constitution leads to political paralysis and division right across Europe, this could change. Spreads - the extra interest that a debtor that isn't rated highly by the markets has to pay - on government debt in the weaker EU states could suddenly widen. The differences between European economies could once again become targets of the kind of financial speculation by hedge funds that drove the pound and the lira out of the ERM in 1992.

Strike three could come if a country actually withdrew from the euro. This is supposed to be impossible, but there is now serious speculation that Italy might pull out. The Italian economy is struggling under a burden of recession, rising inflation, and high government debt. In the past Italian governments got out of this kind of fix by devaluing the lira to stimulate exports and growth, but this option is closed by membership of the euro. Now the Northern League, a major coalition partner in Silvio Berlusconi's government, has started a campaign to bring back the lira.

The radical left's chance

The British media have had much fun with the initial reaction of EU leaders to the French and Dutch referendums, which was to insist that the process of ratifying the constitution should continue. This attitude of course typifies the arrogance of European elites that helped to provoke the No votes in the first place.

But the response of Tony Blair and Gordon Brown is just as contemptuous of democracy. They see the crisis over the constitution as an opportunity to press ahead with their own agenda - affirmed by the EU summit in Lisbon in March 2000 and strongly supported by the European Commission - of neo-liberal 'reform'. The Blair court have been spinning that the leaders of 'Old Europe' - Chirac and Schröder - are on the way, and are most likely to be replaced by younger centre-right politicians - Nicolas Sarkozy in France, Angela Merkel in Germany - who share this agenda.

In other words, the cure offered by New Labour for a revolt against neo-liberalism is yet more neo-liberalism. This is a recipe for yet more revolts in the future. The critical question is, who will benefit politically?

Will it be the racist right - relatively marginal in the French referendum, but a political force with real social roots not just in France but right across Europe? Or will it be the radical left that gives voice to the growing rebellion against the elites? The British elections and French referendum offer hope that this second alternative can prevail, but nothing can be taken for granted. We have an enormous challenge ahead.