May 09, 2002
A lurch to the Right will be good for business
anatole kaletsky
The election in France and the electoral consequences of the assassination of Pim Fortuyn in The Netherlands seem to confirm the view that I have been expressing on this page since last autumn: a conservative tide is sweeping through European politics this year. This tide started to rise in the French presidential election. It will probably be felt in The Netherlands next week, wash back over France in June’s legislative elections and then move to Germany, where the conservative Edmund Stoiber is pulling steadily ahead. Of course there are special factors in the French and Dutch elections. But shifts to the Right in Austria, Italy, Denmark, Portugal, Norway and Germany’s state elections could also be explained away by supposedly localised events. The point is now surely approaching when the accumulation of all these “special factors” has to be recognised, even by sceptics, as a genuine trend.
The causes of this shift to the Right have been much debated and I have little to add to this discussion: I agree with most commentators that this swing is motivated not by Thatcherite economic liberalism but by the loss of national identity and control. Where I differ from conventional wisdom is on the consequences of Europe’s shift to the Right.
I believe that if the French legislative election produces a majority for the new centre-right Government — which now seems very likely, if only because the French have understood that “cohabitation” is an anti-democratic cancer which empowers an unaccountable State while betraying voters of all political persuasions — then 2002 could go down in history as a watershed year. It could mark a new beginning not only for European politics but also for Europe’s economy and for its relations with Britain and the United States.
Most political and financial analysts recoil with laughter from such grandiose comments. The consensus view is that a centre-right government would make little difference in France and even less in Germany. Analysts from Wall Street and the City of London have spent so many years demanding “ Anglo-Saxon” economic reforms from the governments of Europe that they now apply a simple Thatcher-Reagan gauge to every European politician and find that none remotely fits the template. This is hardly surprising, since nobody could dream of leading a modern continental country by apeing a politician from a totally different culture who was elected more than 20 years ago.
When set against the Thatcher-Reagan model, both Jacques Chirac and Edmund Stoiber are derided as protectionists, corporatists and economic dinosaurs — instinctive meddlers, who interfere with free markets, subsidise business they view as “national champions”, trample on the rights of shareholders and restrict competition, especially from abroad. All this may be true. And even if they were, at heart, Thatcherite reformers, both M Chirac and Herr Stoiber will do their utmost to avoid sounding like free-market ideologues in their forthcoming encounters with the voters.
But the fact that continental politicians refuse to pay public homage to Margaret Thatcher does not mean that they are social democrats in disguise. In fact, on the three issues that are most crucial for European economic reform at the moment the continental Centre-Right is likely to have a very different outlook from the floundering social democrats. These issues are taxes, labour regulation and monetary policy.
Starting with taxes, both Herr Stoiber and M Chirac have already promised to cut high marginal rates. Indeed, there are rumours that the new French Government of Jean-Pierre Raffarin could introduce a 5 per cent tax cut by decree even before the June election, challenging the Socialists to oppose it if they dare during the election campaign. Even more importantly, the attitude to labour regulations will probably become more business-friendly. The power of organised labour could be severely constrained in Germany if Herr Stoiber wins September’s election. Organised labour would lose its veto power over German economic policy and a weakening of national wage agreements should be guaranteed by the economically suicidal wave of strikes launched this week by the powerful IG Metall union. In France, M Chirac may not want to confront trade unions directly, but he will recognise that one of the main factors behind the National Front’s unexpected success has been the Poujadiste ferment among small businessmen against the 35-hour week. In both countries, therefore, a swing to the Right could inaugurate a period of lower taxes, labour deregulation and more pro-business microeconomic policies.
The essential point can be summarised like this: the rising European right-wing leaders may well be interventionists, protectionists and corporatists. But there is a big difference between a business-friendly corporate state promoting the interests of business and a left-wing corporate state dominated by organised labour. Jacques Chirac, Edmund Stoiber, Silvio Berlusconi and the other conservative leaders of Europe are pro-business corporatists. They want to shift the balance of power in labour markets from unions to employers. They want to cut taxes, especially on businesses and families with higher incomes. And they want to make government policy in cl ose co-operation with national business leaders. In many ways, this new European corporatism might resemble the pro-business, nationalist protectionism of George W. Bush. Parts of this programme might repel Thatcherite free-market purists (though Margaret Thatcher herself was far from a pure Thatcherite) but it would represent a major change from the programmes of the Jospin and Schröder Governments which were beholden to unions and suspicious of business power.
Macroeconomic policy could also be strongly affected by Europe’s right-wing tide. The national pride which is central to every conservative party’s political ideology has been shattered by the humiliating performance of most European economies under the management of the European Central Bank (ECB). For Germany, in particular, the descent from the top to the bottom of almost every international economic league is a cause of national embarrassment and shame.
Moreover, the deflationary policies of the European Central Bank can be justifiably blamed for many of the forces driving the neo-Fascist upsurge across Europe. Within the next year or so, therefore, political pressures for a more expansionary ECB policy could become overwhelming. A consensus could even develop for fundamental revisions to the Maastricht treaty to bring monetary policy under direct political control or at least to impose on the European bank the more rational and successful practices of the Bank of England and the US Federal Reserve.
Finally, the swing to the Right in continental Europe could have major implications for relations with Britain and the United States. As discussed on this page two weeks ago, a resurgent European nationalism could challenge America’s assumption of absolute global hegemony and help to control the swaggering arrogance of the American Right. In Britain, it could have the opposite effect. It could reconcile the Tories to Europe, while alienating Labour and shattering the political unity that Tony Blair would need to have any chance of winning a referendum on the euro.
We must remember that Labour became a pro-European party only in the 1980s, largely because the European Union was seen as a bastion to protect Britain’s Fabian ideals against the barbarism of Mrs Thatcher. But if Europe now swings to the Right, we could see a reversion to the grassroots Labour attitudes of the 1960s: the Common Market was seen as a bosses’ conspiracy to impose capitalism through the back door on Britain, the last best hope for social democracy in a sea of blue.
Even today, many trade unionists and Labour politicians support EU initiatives, including the euro, mainly as defensive mechanisms against the rightist leanings of Mr Blair’s “Third Way”. Hence the abuse heaped on Mr Blair for hobnobbing with right-wing leaders such as Silvio Berlusconi and José-María Aznar instead of spending his time with “fraternal socialist leaders” such as Lionel Jospin and Gerhard Schröder. By the end of the year, though, Labour’s Europhiles could face an awful dilemma: there may be no socialist leaders left for fraternal meetings with Mr Blair.
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