Looking ahead EU must get the economics right

Larry Elliott

People love their own country more than they love the abstract notion of the European Union.

The dream is over. For the past 17 years, large parts of the left and centre-left in Britain have believed in the vision presented by the then president of the EU Commission Jacques Delors at the UK Trade Union Congress back in 1988. Delors said to the assembled brothers and sisters: do you want an alternative to mass unemployment and attacks on the working class? Then sign up to my vision of Europe. What might be called the “sensible left’’ duly signed up. It liked the talk of solidarity and internationalism, but there was more to it than that. The Delors vision also appealed to some of the less attractive traits of the left - the worship of power, the notion that there is always a big solution to the smallest of problems, and the feeling, identified by Orwell long ago, that there is something unseemly about loving your own country. Ever since, it has been urging that Britain fulfil its destiny and whole-heartedly back the “project’’. It has turned a blind eye to sky-high levels of unemployment, seen simply as transitional costs on the way to the promised land. It has contented itself with the comforting thought that euro-scepticism, fanned by the right-wing press, is something peculiar to Britain.

The events of the past week have shattered this cosy little fantasy. In France and the Netherlands, opposition to the constitution was strongest among the poor, the young and the excluded. Some big lessons now need to be learned. The first is to understand how it was that in France and the Netherlands last week, and in Sweden in 2003, a big initial lead for the yes camp was turned into a resounding no vote by polling day. The reason is that those making the case for the euro and ever-closer union do so with the arguments and language of management consultancy. They talk of “the project’’ making markets more efficient. The

“no’’ camp does not talk of “projects’’. It taps into the things that matter to people: the urge for security, identity, a sense of belonging. Like it or not, people love their own country more than they love the abstract notion of the European Union. A second lesson is that unless Tony Blair is a secret masochist, there will be no referendum on the constitution in Britain. Thirdly, the left has to wake up to the fundamental reason for the unpopularity of Europe. It is that the Delors model was perhaps appropriate for the Europe of the 1940s but not the Europe of the 21st century. Europe’s social model, which was rightly envied from this side of the Channel in the 1980s, was only affordable if there was strong enough growth to generate the tax revenues to pay for the welfare state. Delors, with his rigid, inflexible command and control model, ensured that unemployment would be high, growth low and the costs of the social model unaffordable.

The non-sensible left has always had its doubts about the “project’’. The Keynesians said that the euro, far from leading to stronger growth, would actually become a job-destruction machine. The greens said forcing the pace of integration from the top down was not only economically daft but also anti-democratic. It would, they said, lead to political disengagement. The argument of the anti-globalisers was that despite all the talk of creating a social Europe, monetary union was actually a Trojan horse that would be used as a means of spreading neo-liberal ideas and big business values across the continent. The events of the past four years, culminating in the no votes of the past week, suggest that the Keynesians, the greens and the anti-globalisers were right. Europe has not grown; it has stagnated.

Finally, the left needs to realise that the priority now is a set of policies that will raise Europe’s

derisory growth rate.

In macro-economic policy, however, there is no doubt that the British model is superior. Take Italy, which would be far better off outside the eurozone, with the flexibility to set its own inflation target and a floating currency to compensate for its lack of competitiveness. It turns out that there was a point to all those small currencies after all. Expansionary macro-economic policies should be combined with active labour market policies that have been shown to work in keeping the jobless total down in countries such as Denmark, Sweden and, until recently, the Netherlands. But that means accepting European countries should be able to pursue the goals of full employment and prosperity in their own way, rather than submit to a catch-all blueprint that lacks political legitimacy. Those who say a retreat from the integrationist approach would mean Europe failed to punch its weight globally could not be more wrong. Influence is a function of success, not size. The only time Europe has had a real impact on American policy was in the 1960s, when Lyndon Johnson’s Great Society was a homage to the generous welfare state made possible by rapid post-war growth in the nation states of western Europe. Europe will only wield influence once more when it gets its economy right. It now has the chance to do just that. —The Guardian