The worst economic crisis since the Great Depression is throwing countries across Europe into turmoil–and spurring struggles unseen in years. Eric Ruder looks at what the future may hold.
February 13, 2009 | Issue 690
THE FINANCIAL turmoil that began in the summer of 2007 in the U.S. is spreading around the globe with frightening speed and devastating consequences for working people.
The bursting of the bubble in the U.S. housing market in the summer of 2007 was the catalyst for full-blown economic crisis in country after country in Europe.
Now, the economic disaster is sparking mass protest and revolt on a scale not seen in two decades. Britain’s Guardian newspaper described the new political reality in a January 31 article titled “Governments across Europe tremble as angry people take to the streets.” It begins:
France paralyzed by a wave of strike action, the boulevards of Paris resembling a debris-strewn battlefield. The Hungarian currency sinks to its lowest level ever against the euro, as the unemployment figure rises. Greek farmers block the road into Bulgaria in protest at low prices for their produce. New figures from the biggest bank in the Baltic show that the three post-Soviet states there face the biggest recessions in Europe.
It’s a snapshot of a single day [January 30] in a Europe sinking into the bleakest of times. But while the outlook may be dark in the big wealthy democracies of Western Europe, it is in the young, poor, vulnerable states of Central and Eastern Europe that the trauma of crash, slump and meltdown looks graver.
Exactly 20 years ago, in serial revolutionary rejoicing, they ditched communism to put their faith in a capitalism now in crisis and by which they feel betrayed. The result has been the biggest protests across the former communist bloc since the days of people power.
Europe’s time of troubles is gathering depth and scale. Governments are trembling. Revolt is in the air.
– – – – – – – – – – – – – – – –
ON JANUARY 29, a quarter of France’s 5 million public-sector workers honored a general strike call, and up to 2.5 million people joined protests in 200 French cities to express their disgust with austerity measures proposed by French president Nicolas Sarkozy.
Last summer, Sarkozy was basking in what he considered solid public support for his “reforms” aimed at undercutting the power of France’s labor unions. “These days, when there’s a strike, no one notices,” he quipped.
Now Sarkozy is noticing–along with the rest of the world.
“The mammoth demonstrations were designed to send a warning of discontentment to the conservative government of President Nicolas Sarkozy,” Time magazine reported.
“Workers in France are angry about what they see as insufficient government efforts to protect both public- and private-sector jobs. People are also upset that union and employee concerns over stagnating salaries and slumping purchasing power were ignored when the government drew up its $34 billion economic stimulus package.”
In fact, most French workers feel that the “stimulus package” bails out the bankers without doing anything to address the attacks on public services, pensions and the skyrocketing unemployment rate.
Despite the inconvenience of the strike’s impact on public transportation and government attempts to isolate the strikers by calling for unity in the face of the crisis, 70 percent of the French public backed the general strike, and a significant number of private-sector workers stayed away from work or joined the street protests in solidarity.
The protests were largely peaceful, including a march of 300,000 in Paris, where a group of marchers tried to head toward Sarkozy’s residence. Police repeatedly charged the group, swinging their batons and firing tear gas. The crowd responded by setting garbage cans on fire, turning over a car and trying to set up a barricade.
Meanwhile, in Iceland, once thought to be one of Europe’s most prosperous and stable societies, it took scarcely more than a week for the country’s banking system to crash and its currency to implode, making Iceland the first (and unlikely the last) national bankruptcy.
“Iceland is now a country whose currency, the króna, has collapsed, whose debt incurred by banks deregulated in the mid-1990s is 10 times larger than the country’s gross domestic product, and whose people have lost most of their savings and face debts and mortgages that can’t be paid off,” journalist Rebecca Solnit wrote in an article on TomDispatch. “Meanwhile, inflation and unemployment are skyrocketing, and potential solutions to the crisis only pose new problems.”
Over 20 years, Iceland’s political leaders turned the country into a neoliberal dream, privatizing the banking industry, digging up wilderness to build aluminum smelters and deregulating the lucrative fishing industry.
The new unbridled capitalism produced a super-rich elite with private jets, mansions and yachts, while the rest of the population was encouraged to borrow in order to spend.
“[T]he principal fuel for Iceland’s boom was finance and, above all, leverage,” according to Fortune magazine. “The country became a giant hedge fund, and once-restrained Icelandic households amassed debts exceeding 220 percent of disposable income–almost twice the proportion of American consumers.”
Within weeks of Iceland’s crash, what many observers had considered an island of content consumers was transformed into a nation of angry demonstrators who banged pots and pans in the streets, braved tear gas and riot police, besieged the world’s oldest parliament building, drove the neoliberals from government and installed a coalition of Left Greens and Social Democrats. They dubbed their movement the Saucepan Revolution.
“In economics, they talk about the invisible hand that regulates the market,” Icelandic author Andri Snaer Magnason told Solnit. “In Iceland, the free market became so wild that it was not fixed by an invisible hand, but an invisible guillotine. So, in one weekend, the whole class of our newly rich masters of the universe lost their heads (reputation, power and money), and all the power and debt of the newly privatized companies fell into the hands of the people again.”
– – – – – – – – – – – – – – – –
ALL THIS is spelling the definitive end of the neoliberal era ushered in some 30 years ago by political and business leaders who pushed through financial deregulation, cutbacks in social spending programs from health care to higher education, and attacks on labor–all in the name of efficiency, prosperity and other supposed virtues of the free market.
The neoliberal program, led by Ronald Reagan in the U.S. and Margaret Thatcher in Britain, was already underway when the collapse of the USSR and its satellites in Eastern Europe gave it fresh impetus.
In the early 2000s, apologists for the free market explained away the collapse of Enron and other corporate hucksters. They said the use of shady accounting practices to hide losses and fleece stockholders was the product of a few bad apples, and after sending a few corporate executives to prison, things went back to normal.
Then the U.S. housing bubble burst. And though there was some degree of fraud and incompetence in the mortgage lending industry, the real roots of the meltdown weren’t so remarkable.
The crisis was the logical, predictable and devastating consequence of an economic system set up to maximize private benefit as its first and highest principle. And now that the crisis of the unfettered market has engulfed the globe, some of the old dogmas of neoliberalism are being re-examined, even by their proponents.
After decades of demanding that government get out of their way so they could reap maximum profits, some captains of industry and finance are looking forward to the return of “big government”–but only as a way to get their hands on taxpayer money to socialize the losses.
As dire as the financial crisis and economic slowdown are in the U.S. to this point, they are worse in Europe, especially in the poorer countries of Eastern Europe, which have even fewer resources to stop the bloodletting.
“While the UK, Germany, France and others plough hundreds of billions into public spending, tax cuts, bank bailouts and guarantees to industry, the east Europeans (plus Iceland and Ireland) are broke, ordering budget cuts, tax rises and pleading for international help to shore up their economies,” according to the Guardian. “The austerity and the soaring costs of repaying bank loans and mortgages taken out in hard foreign currencies (euro, yen and dollar) are fuelling the misery.”
– – – – – – – – – – – – – – – –
THE POLITICAL impact of such a rapid economic downfall is only starting to become clear.
In Iceland, Johanna Sigurdardottir, the new prime minister and the world’s first openly lesbian head of state, has called for the resignation of central bank chief David Oddsson, the man many hold most responsible for Iceland’s economic collapse. But Oddsson is refusing to budge–so far.
Whether Oddsson and his neoliberal co-thinkers will manage to hang on depends on the newly engaged forces of workers and the left that have now been thrust onto center stage.
Across Europe, the same question of how to respond to the crisis is emerging in country after country. What’s more, the economic collapse is superheating the response of anxious and angry populations to other political events as well.
In Greece, for example, the police murder of 15-year-old student activist Alexandros Grigoropoulos sparked a wave of school occupations and massive street battles with police. But the outrage at police repression quickly fused with anger at the economic crisis, culminating in a general strike by Greek unions on December 10.
These protests in turn inspired actions by Greek farmers, who have set up roadblocks to press the country’s conservative government to address the dismally low prices they receive for their produce. Already, the government has agreed to allocate $650 million in subsidies for farmers.
In France, Olivier Besancenot, the presidential candidate of the Revolutionary Communist League (Ligue Communiste Révolutionnaire, or LCR) who received 4 percent of the vote in the 2007 elections, has been thrust into the ranks of the country’s leading political figures.
“Besancenot, a postman in his day job, is a star,” according to an early February edition of Newsweek. “And as storm clouds gather, he has become the country’s most influential opposition figure. Besancenot has achieved a 60 percent popularity rating, with 45 percent of those polled saying they want to see him have more influence in the future, ahead of mainstream leaders like the centrist François Bayrou (44 percent) and new Socialist leader Martine Aubry (42 percent).”
In late January, the LCR met to formally dissolve its organization of 3,000 and launch a broader New Anticapitalist Party (NAP), which now has 10,000 members. With Besancenot’s high profile lending more excitement to the founding of the NAP, the French political spectrum could move sharply left–which is especially encouraging given the 10 percent vote that fascist National Front candidate Jean-Marie Le Pen got in 2007.
As they have in the past, Europe’s far-right parties will seek to pin blame for the economic crisis on immigrants, trade unions and the left, but so far, the first response has gone in a leftward direction in most places.
Even in Switzerland, where the far-right Swiss People’s Party (SVP) launched a 2007 campaign to ban the construction of minarets, the distinctive feature of Muslim mosques–this in a country where only two such religious buildings exist–Swiss voters overwhelmingly rejected the SVP’s latest anti-immigrant effort, with 60 percent voting to extend the right of workers from any country of the European Union (EU) to move freely to the EU’s newest members, Romania and Bulgaria.
The SVP had pushed for a referendum on the issue, claiming that extending such rights of movement to Romanian and Bulgarian workers would lead to job losses for Swiss workers, higher taxes and a rise in crime, but their effort backfired.
As millions of people in Europe struggle to make sense of their new economic plight, an array of political questions will test the left in general and the revolutionary left in particular, even in places where they have been weak historically.
For the first time in more than a generation, huge numbers of people are looking for a radical alternative to free-market capitalism. As people take to the streets, they are debating how to fight the assault on living standards and what should replace the free market.
Whether or not they are familiar with the slogan “Another world is possible” made popular by the global justice movement of the late 1990s, millions have concluded that another world is necessary.
No one knows how long it will take for the riots, strikes and student struggles in Europe to reach this side of the Atlantic on a greater scale. But sooner or later, they will. Our side should start getting ready now.