Taylor_Europes Left and the Unemployment Crisis_2009

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P O L I T I C S A B R O A D

Europes Left and theUnemployment Crisis

R O B E R T T AY L O R

Europe is suffering from its highest level ofunemployment in more than a generation,

and European social democrats have beenunable to formulate an effective political

response.

One in ten of Europes workers are without

paid work. The number amounts to more than

twenty-four million people, and looks set to rise

across the continent even if the European

economy as a whole starts to grow again next

year. The jobs outlook is particularly bleak for

the young, those aged eighteen to twenty-five.

Recent school leavers and university graduates

face a particularly tough time. It is estimatedthat one in five of them are destined in the

immediate future for a life without paid work.

In Eastern Europe the jobs crisis is even more

acute, with the resulting threat of widespread

social and political unrest. Only a handful of

smaller West European countriesnotably the

Netherlands and Denmarkmay be able to

avoid the worst, but even there unemployment

in 2010 will probably reach levels not seen since

the Great Depression.

The jobs crisis in Europe may be here for along time. Those optimists who see mass unem-

ployment as a temporary stage on the road back

to a buoyant labor market will be disappointed.

Job forecasts from authoritative bodies such as

the International Labor Organization, the Paris-

based Organization for Economic Cooperation

and Development, and the European

Commission make for grim reading. Whatever

happens over the next few years to Europes

financial markets and its banking system, we

are likely to see high levels of joblessness in thereal economy of goods and services, for a long

time to come..

What does massive unemployment mean for

democratic politics on the continent? There are

dangers of rhetorical hyperbole in likening

Europes current unemployment crisis to that of

the inter-war years. The European Assembly

elections last June did not suggest that fascismis on the march after half a century of lying

dormant. Only a handful of far right candidates

were returned to Strasbourg, and these were

confined to a few countriesHungary, Belgium,

and (dismally) the United Kingdom. Efforts to

exploit the deepening jobs crisis with appeals to

racism and xenophobia proved less successful

than might have been expected. Although there

is no reason for complacency about the social

and economic distress we can expect, current

political signs suggest that right-wing populismwill remain on the fringes.

Despite this, the European election results

were a disaster for mainstream social

democracy. The lengthening jobless queues

failed to provide any genuine boost for the Left.

In most countries, the social democratic parties

suffered substantial losses. Only Greece,

Denmark, and Sweden defied the trend. Social

democratic parties sought to make the

continents unemployment crisis their main

public policy priority, but they failed to reap anyobvious electoral dividend. Much of the

European electorate remained unconvinced

that the Left can provide credible answers to the

crisis.

At the same time, political parties that advo-

cated neoliberal solutions of unfettered markets,

low taxes, deregulation, and a minimalist state

made few advances either. The German Free

Democrats, who performed reasonably well,

were the only exception. Perhaps unsurpris-

ingly, the U.S. model of capitalism remains asunattractive across most of the continent now

as it did before the economic crisis.


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The real winners of the elections turned out

to be the parties of the mainstream center-right.

In Germany, Chancellor Angela Merkel, and in

France, President Nicolas Sarkozy were the big

beneficiaries. The center-right made impressive

gains as well in Spain, the UK, Italy, and

Poland. But what has mostly been overlooked is

the primary reason why the center-right proved

to be such a resilient force. It was not because it

was identified with any narrow conservatism or

nationalism. Rather, it reflected the values and

policies of the continents famed social model of

which the center-right was always a crucial co-

founder. The Left in Europe lacks a coherent

narrative, argues John Monks, general

secretary of the Brussels-based European Trade

Union Confederation. It is the center-right[politicians] who are sitting in the drivers seat

because they accept and are carrying out what

are basically Keynesian economic policies of

public expenditure and fiscal stimulation to deal

with the crisis. Monks regards both Merkel and

Sarkozy as social democrats in all but name and

believes most European governments have

gone as far as they can in implementing

measures to bail out the banks and stabilize the

financial system.

Even more significantly, most West Europeanstates have responded to the jobs crisis in a

positive way by adapting the flexible social

market approach and offering protections and

incentives for companies and workers in key

areas of the economy. Europes center-right

governments have become the sturdy defenders

and promoters of social democracy in their

responses to the unemployment crisis.

The German experience is especially

revealing. The Christian Democratic/Social

Democratic government in Berlinin closealliance with the countrys employer associa-

tions and trade unionshas sought to mitigate

the consequences of decline in Germanys

manufacturing export sectors with measures

designed to assist companies through the crisis.

The German state is providing subsidies of

between 60 percent and 67 percent of net

wages to workers in firms in the auto,

chemical, and metal industries to meet the

extra cost incurred in shortening the length of

the working week for a limited period of time,

without loss of pay. The resulting agreements

have been reached through the existing system

of collective bargaining. Companies such as

Bosch, BMW, and Opel are using such schemes

to retain their skilled employees through the

crisis. Public resources are also being channeled

into enhanced skills training. Generous

severance schemes are assisting in the rede-

ployment of workers. The relatively generous

benefits of the welfare state in Germany are

being upheld and even improved to make sure

that workers who lose their jobs do not suffer

any dramatic fall in their living standards. Plans

to make labor more flexible in response to

what is happening are also being encouraged as

Germanys well-established social market

continues to reflect a broad political consensus

in response to mass unemployment. State

subsidies for part-time work and shorterworking hours in the private manufacturing

sector seems to have had some positive impact

even if they upset liberal economists and

breach European Union legislation. A similar

approach on employment subsidies can be

found in France, Denmark, and the

Netherlands. In fact, it has found wide support

across much of the continent. Only New

Labour in Britain continues to oppose the use

of state financial support to underpin part-time

work.A recent study by the Brussels-based

European Trade Union Institute has demon-

strated the widespread use of collective

bargaining agreements at plant and company

level to ease the employment consequences of

the crisis. There is much more flexibility in

Europes labor markets than its critics recognize.

As the ETUI paper argues, The existence of an

inclusive multi-level system of collective

bargaining is an important condition for the

adoption of cooperative company plant levelagreements on flexible working time.

Governments and employers across the

continent are seeking common ground with

trade unions to develop coordinated approaches

that can ease the dangers of social tension and

slow down or avert plant closures and layoffs.

The traditional institutions of Europes indus-

trial relations systems are proving adaptable

enough to meet the jobs crisis in a structured

way through social dialogue at all levels. In

practice in the past, capital and labor were

always more pragmatic and consensual than

their often militant class war rhetoric might


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suggest. Despite the obvious strains, this

remains true in these harsher times.

It would be wrong, however, to see these

developments as part of any grand design for

the future of Europes world of work. They

remain essentially ad hoc and limited, and they

are based on the assumption that the current

troubles in the labor market are only temporary.

The return of mass unemployment on the

continent is thought to result from cyclical

factors like lack of demand and stagnant export

marketsas well as from structural change in

the occupational composition of Europes labor

force. This is why almost all the European

countries have launched public spending

programs to improve infrastructure such as

roads and railways, encourage the creation ofenvironmentally green products, and

strengthen information technologies.

There is also wide agreement that urgent

action must be taken to improve the position of

young workers, particularly those with few or

no educational qualifications or recognized

skills. Greater resources for skills training and

vocational education are in evidence across

Europe. Employers are being encouraged

through the provision of tax cuts and incentives

to hire school leavers and university graduates.Trade unions are cooperating with companies in

agreed programs to ease entry into full-time

employment for the young. In some countries,

notably Britain, action to help the under

twenty-five-year-olds into paid work is coupled

with tough welfare-to-work policies designed to

encourage those in the most vulnerable parts of

the labor market to take up paid employment.

But all these publicly funded measures to tackle

joblessness are bound to be limited. Next year

and beyond, governments will need to exerciserestraint in their spending programs and

introduce cutbacks to ease their countrys

burgeoning debt burdens.

For the time being, the combination of fiscal

stimulation and flexible employment strategies

may ease social and political tensions, especially

when these measures are combined with a

determination to uphold the generous benefits

paid by European welfare states to the unem-

ployedmost of whom receive up to 60 per

cent of their previous weekly net earnings.

But severe limits remain on whether any of

these measures can become permanent. They

offer temporary palliatives, not lasting solutions.

The social democratic Left argues that it will

require a radical shift in economic and financial

strategies to create the conditions for a return of

real employment growth and good jobs, but

in the immediate future, as I have suggested,

the pressure is in the other directionfor cuts

in public expenditure, reductions in national

debt, and a degree of fiscal restraint that

together threaten to overwhelm the tentative

signs of economic recovery. It seems that fear of

inflation remains stronger in Europe than fear

of unemployment.

More fundamental problems face any socialdemocratic approach to the continentsemployment crisis. We have failed to

examine what is wrong with our current

world of work, argues David Coats, assistant

director of the London-based Work

Foundation. So far, labor market measures

are protecting those in full-time jobs, mainly

in private manufacturing. Workers in that

sector tend to belong to trade unions and

have recognized and badly needed skills;

they are covered by strong legal regulations

and collective bargaining agreements. Butthey represent a shrinking elite. They are the

insiders in what is becoming an increasingly

fragmented and diffuse work force. The insti-

tutions of the European social market model

were designed for them and for a relatively

stable employment system.

Today there are millions more who do not

belong to a trade union, who are not covered by

collective bargaining, and who do not have

strong, legally enforceable rights. In Germany,

companies are using the state-provided short-time working subsidy to hang on to the skilled

workers they hope to employ effectively in the

future. But at the same time, they are

dismissing agency workers employed on short-

term contracts and those who are temporary

and unskilled. The massive growth in the

private services sector and the expansion of

small firms makes it much more difficult to

pursue public policies based on the social

model. At the European as well as nation-state

level, the informal sector remains unorganized

and unrecognized. There is an obvious danger

that social democrats will focus too much of


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their attention on the well-being of the core

labor force and not enough on the outsiders.

For migrant workers, many employed in

private services and small firms, for contract

workers, for women, the disabled, unskilled

youth, and many other victims of the job crisis,

the mainstream parties of the center-left have

had little to offer. What is missing from too

much social democratic thought is any credible

strategy of engagement with the new world of

work. Unless these parties and their trade union

allies respond in more creative ways, the

outsiders are going to look elsewhere for

political help.

In important ways, the European labor marketis regressing to the structures of the nineteenth

centuryto the world of insiders and outsiders,

of the skilled and the unskilled, the organized

and unorganized. The breakthrough of the labor

movement came when it was able to reach out

to the uneducated and the vulnerable, to all

those whose working lives were characterized

by insecurity and exploitation. In the early part

of the last century, socialism or social

democracy became the all-embracing political

ideology that provided the inspiration and hopefor millions of workers across national frontiers

and brought a strong coherence to center-left

politics. Of course, there can be no return to

such a world. But unless we can develop a new

social democracy that reflects the needs and

demands of todays fragmented and incoherent

workforce, the center-left will face a long period

of decline and stagnation.

Can anything be done at the European

Union level to combat the crisis? Before the

arrival of mass unemployment, the social modelwas under threat in Brussels. Calls for policies

that uphold social solidarity and cohesion went

unheard. Efforts to modernize or expand the

EUs social dimension, to rebalance the rights of

capital with those of labor, were often frus-

trated. The return of mass unemployment has

tested the existing social model and for the most

part has underscored its importance in ensuring

stability.

A new center-left European agenda for

employment is urgently needed. Measures that

establish minimum standards to deal with

gender, ethnic, and other forms of inequality

and discrimination in the workplace must be

implemented. Stronger social rights are required

to reassure workers that they can agree to

change without fear of exclusion. These are

obvious steps, but much more is necessary.

The social settlement first constructed in

Western Europe after 1945 proved highly

successful in creating prosperous democratic

societies based on steady economic growth, a

commitment to redistribution and equality, and

a radical improvement in the well-being and

status of workers. Todays unemployment crisis

challenges European leftists to establish a new

social market model that reflects the realities of

a very different world of work. This will not be

easy. In recent years the European Uniona

distinctively social democratic projectwasunable to generate business innovation, strong

labor productivity, and better skills training and

education. Now the downfall of neo-liberal

capitalism and a revived sense of the impor-

tance of an activist state open the way for the

continents center-left to seize the initiative.

Critics of Europes social model in the past often

argued that its principles and practices were

formidable obstacles to the establishment of a

prosperous and competitive European economy.

In fact, the opposite is true. A strong socialmodel is the precondition for the future success

of the EUs project, and the return of mass

unemployment gives an added urgency to what

social democrats need to do.

But in 2010 Europes mainstream left will

face a formidable problem. This year, govern-

ments of all shades have sought to rescue the

banks and the European financial system

through massive injections of borrowed capital.

This has resulted in soaring public debts that

cannot be sustainable for long and need to beserviced and paid back. As a result we are going

to experience savage cuts in public spending

and rising taxes in Europe that endanger any

economic recovery and condemn millions more

workers to a life without work. The nightmare

of a resurgent right-wing populism may then

return with a vengeance.

Robert Tayloris an associate member of Nuffield College,

Oxford. He is writing a history of parliamentary socialism in

Britain.



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Taylor_Europes Left and the Unemployment Crisis_2009

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