4 September 2019

Europe’s politicians fiddle as liberalism burns


With the support of the Atlas Network, CapX is publishing a new series of essays on the theme of Illiberalism in Europe, looking at the different threats to liberal economies and societies across the continent, from populism to protectionism and corruption.

They have learned nothing, and forgotten nothing.” – Talleyrand on the Bourbon elite

Introduction: The end of the grand consensus  

The current fear of European illiberalism – that the venerable continent’s hard-won gains of the second half of the twentieth century are in the process of being destroyed from within – is both hysterical and prescient at the same time. On the surface, the answer as to whether the liberalism will hold in the centre of Europe (France, Italy, and Germany) is an easy one: ‘Of course it will.’

Following the nightmares of the first half of the twentieth century, and succoured by the security umbrella provided by NATO, the centre of Europe—West Germany, France, and Italy—underwent a startlingly successful transition to places of peace, prosperity and amazing political consensus. Parties in all three countries, from both the centre-left and the centre-right, reached overall agreement about the championing of European liberalism.

In practice, this meant a united, committed defence to individual liberties, backed by a fervent desire not to let anti-democratic forces–either from within like the Italian Red Brigades, the German Red Army Faction, or the French OAS, or from without like the USSR—unduly threaten their budding democratic systems.

The new consensus also centred around a belief in a (relatively) open form of capitalism as the motive force for their economies, constitutionally-limited governments, and democratic accountability through the practice of regular elections. Now, this sounds obvious, boring, and simply ‘the way things are.’ But it amounts to nothing less than an intellectual revolution, as the new consensus had never been ‘the way things are’ until this hinge point of history had been reached.

A quick political tour of the Big Three makes it eminently clear that the grand consensus is presently holding. In France, able President Emmanuel Macron–despite the yellow vest protests which threatened his presidency–is now firmly back in charge. Better still, in his Jupiterean, neo-Gaullist manner, Macron has modestly taken it upon himself to pose as the world’s leading politician defending liberal values. Even Marine Le Pen, his principal far-right, nativist, protectionist opponent does not break with liberal political traditions. She is patiently waiting for the next French presidential election in April 2022 to wreck her revenge.

Likewise, in Germany, even in the do-nothing sunset years of Chancellor Angela Merkel, that tired, vanishing symbol of European liberalism, none of her genuine rivals espouse overtly illiberal policies. While there are many in the far-right AfD and some in the far-left Linke who might not so secretly dream of a world without the Bundestag, their party leaders are concentrating on winning power at the ballot box, and not through anti-democratic, illiberal means.

In practice, all the parties that might be at the heart of the next German coalition–the centre-right CDU, the centre-left SPD, and the rising (once populist) Greens–are all firmly wedded to basic liberal precepts. So there seems no immediate cause for worry.

Even chaotic Italy has just shed the first populist government in the centre of Europe, with the new tie-up between the populist Five Star movement and the establishment centre-left PD conducted entirely by parliamentary means. Strikingly, it is the aggressive populist leader Matteo Salvini—often seen as the face of Western European illiberalism—who is howling about how the voters have been deprived of a chance to go to the ballot box, anointing his party as the dominant force in Italy. The irony mustn’t be lost that this purveyor of populist fear is demanding more democracy, not less of it.

And yet, beneath all this there is indeed something rotten. While Europe’s post-1945 peace is easily holding in the centre of Europe, the economic boom and the social security it allowed for – what the French call Les Trente Glorieuses (1945-1975) – has given way to a Europe unable to grow at the necessary economic rate to avoid strategic decline as well as societal dislocation.

This is the fuel for the fire that has directly led to the dramatic collapse of the Western European centre-left and centre-right parties—the defenders of the grand liberal consensus—who have dominated the heart of Europe since the end of the Second World War. With their dominance now gone, and in many cases with their very survival far from assured, the continuance of the liberalism that is their greatest achievement seems more in peril than at any time in the past.

As its elite fiddles, Europe burns

Across the geopolitical spectrum, Europe (and its elites) finds itself imperilled. The continent as a whole finds is becoming ever more strategically and militarily peripheral, as defence spending slips to comically inadequate levels (with the exception of France and the UK).

The continent is increasingly economically sclerotic, with persistently Depression-era levels of youth unemployment in Italy and much of the south, as well as insufficient rates of growth over the past two decades. For example, Italy still finds itself with a smaller economy today than it possessed in 2008, before the start of the Great Recession.

While the past two decades have seen China rise to Great Power status and the US maintain its position as the most important economy in the world, Europe has slouched down the slope of decline, unable to keep up with the fast pace of globalisation. If we set 2% growth of GDP per year as about the rate at which advanced industrial societies must grow in the modern era to be healthy, the story becomes clearer. In 2018, the US grew at a robust 2.9%, while Germany and France managed a lacklustre 1.5%, with Italy limping in a 0.9%.

At present, fully 90% of future world economic growth lies outside Europe. Today, the EU countries comprise 7-8% of the world’s population, account for roughly 25% of global GDP, but consume a staggering 50% of the planet’s social spending. Something obviously has to give here, but mainstream EU politicians, the defenders of the liberal order, have no answers to this obvious existential problem; worse, they have yet to even raise the question.

The demographic problem is especially stark. The worsening old age dependency ratio—the relationship between the number of pensioners in a society versus the size of the working-age population—cannot be wished away. The numbers are especially alarming in Germany, the undisputed economic motor of Europe. The old-age dependency ratio was 33% in 2018 and is expected to rise to a crippling 52% by 2030. Over this period of time, the number of German pensioners will skyrocket by 5 million, even as the number of workers declines by 6 million.

The broad policy responses to Europe’s demographic and economic challenges are as clear as they are unpalatable. Increase taxes (hardly possible), decrease benefits and raise the retirement age (hardly popular), or take in significantly greater numbers of immigrants (given the societal strains exposed in Germany by the recent refugee crisis, hardly likely).

In the honest but telling wail of Jean-Claude Juncker, then Prime Minister of Luxembourg, and now outgoing EU Commission President: “We all know what needs to be done, we just don’t know how to get re-elected once we’ve done it.” This European policy and political failure is what has set the populist cat amongst the establishment pigeons

Europe also finds itself intractably politically divided: East-West over migration issues and North-South over the endless Eurozone crisis. In the face of these daunting policy challenges, its establishment centre-left and centre-right leaders—the champions of the liberal order—have so far offered precious little in the way of policy solutions to these existential problems.

Elite failure opens the door to the populists

Literally every political entity throughout history has had an elite; most are arrogant, self-centred, and (to a degree at least) corrupt and un-meritocratic, as they are jealous to preserve their rank and privileges. This has been true for all societies since the Athenians

Those unattractive qualities are usually put up with by the rest of the people if that elite delivers for the society as a whole, some mixture of peace, prosperity, a safeguarding of the polity’s overall status in the world, and the vague idea that the elite keeps the polity whole. But beyond the peace largely delivered by NATO, Europe’s current elite has clearly failed on all the rest of these counts, opening the door to anti-establishment parties of all sorts who can rightfully criticise their doleful record.

The political difference in Europe is not just that the continent’s elites have failed on nearly every single count, it is that they continue to behave badly. But today’s failed elites are not tolerated in the same way as yesterday’s successful elites were in Europe from the 1950s-1970s, when the continent was the fastest growing part of the world.

The example of Francois Fillon, the scandal-plagued centre-right Gaullist candidate for the French presidency in 2017, is instructive. After–in time-honoured French tradition–placing several members of his immediate family on the public payroll despite the fact they did little or no work, Fillon just could not understand why the whole of his country was making such a big deal out of what had until recently been common practice. His hopeful campaign quickly sank without a trace. Failed elites are just not going to be given the same societal latitude as successful elites managed in the past.

If Germany, France, or Italy, had even marginally successful growth numbers of 2% of GDP, there would be no populist, anti-establishment problem; however, endemic failure to solve problems relating to its economic decline mean populism, and the threat to the liberal-championing establishment, is here to stay.

Along with this across-the-board economic malaise, the other cause for popular disquiet with the European elite is its signal failure to craft a common refugee policy. Years before the rise of Salvini, Italian governments begged both the EU and the other major European powers for help with the influx of refugees from Africa. Receiving precious little, it is no wonder Salvini’s popularity skyrocketed as gave up hope of help and took it on himself to brutally deal with the problem.

Likewise, Angela Merkel blithely taking in a staggering 1.1 million (mainly Syrian) refugees in 2015, without the ghost of a coherent policy for assimilating them, looked like madness to many ordinary Germans, with the Chancellor unwittingly rejuvenating the fading far-right AfD. By making a policy mess of the common liberal view of the free movement of people, Europe’s tarnished elites have called many of their own sacred cows into broader question.

The three dangers

At the broadest political level, what’s happening in the heart of Europe now makes a great deal of sense when looked at through the prism of dramatic establishment party decay. In Italy, the old centre-right (Berlusconi’s Forza Italia) is merely the handmaiden of Salvini’s League. The old PD centre-left has been bounced into a ‘coalition of the desperate’ with the populist Five Star party to avert even further electoral decline.

In France, Fillon’s centre-right Gaullists and the centre-left socialists have all but collapsed in favour of the centrist Macron and the rightist, populist Le Pen. Even stolid Germany has begun to wobble, with Merkel and the centre-left SPD experiencing their worst election results last year in decades, as the formerly populist Greens and the rightist, populist AfD gain on them.

There is a common process at work here; an arrogant, out of touch liberal elite—which has failed and is so far gone it barely recognises this—decadently making little effort at self-criticism, let alone self-renewal and policy reform. It is unsurprising that the liberal creed espoused by this common French, German, and Italian elite has also suffered, becoming increasingly discredited even as true illiberal forces have yet to take their place.

The problem isn’t that the illiberal barbarians are at the gate; it is that liberal elites are not even bothering to man the walls in its defence.

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Dr. John C. Hulsman is Chairman of the global political risk consultancy John C. Hulsman Enterprises, and author of 'To Dare More Boldly: The Audacious Story of Political Risk'