Monday, 1 October 2012

SLD’s Economic Programme Offers an Example for the European Left

On the one hand austerity and on the other…. well what exactly?

This is the dilemma that is posed for the left in Europe today. Is there a viable alternative to the policies of the neo-liberal right, who propose yet more cuts and liberalisation as a way out of the economic crisis?

The economic crisis has created a degree of political uncertainty in Europe. Ruling parties have found it difficult to remain in power, often punished by the electorate as economic conditions and living standards have worsened. The left has been particularly hurt when it has helped to introduce these austerity programmes, as they most harshly affect its own electorate. For this reason, the social democratic parties in countries such as Greece and Spain have undergone huge declines in support and have been left severely weakened and marginalised as the right has returned to power. 

Despite these defeats left parties are still able to be re-elected in many European countries. In fact, it is quite possible that the victory of Hollande and the Socialist Party in France, will be followed by similar victories for the German SPD and British Labour Party. There is a very real prospect that centre-left governments will be formed in three of the leading European countries over the next couple of years. Is it therefore not exaggerated to talk about a crisis of the left in Europe?

The short period in which Hollande has been in office highlights the problems facing the left when in power. Hollande has essentially accepted the general economic course of his predecessor and is continuing with the policy of austerity. Hollande was able to win the Presidential elections because he could harness the support of broad sections of the left, including parts of the far-left from Front de Gauche. This vote is now quickly dissipating, with approval ratings for Hollande falling by ten percentage points between July and August.

This should stand as a warning to the wider European left. The leader of the British Labour Party, Ed Miliband, has already announced that he will continue with the Conservative Party’s programme of cuts, only that these will be less extreme. The party’s shadow Finance Minister – Ed Balls – was jeered at this month’s trade union conference when he repeated this commitment. We may expect that if carried out in practice such an economic programme would lead to a Labour government becoming quickly unpopular as it fails to improve the living standards of the population.

Although some parties to the left of social democracy, proposing clear anti-austerity programmes (such as Syriza in Greece) have grown in recent years, these still remain minority parties restricted to a few countries. In order to counter austerity, the social democratic parties have to help unite these wider sections of the left in order to form effective governments with clear alternative economic programmes. 

The problem for European social democracy is that it has not had a coherent programme for government since the end of the 1970s. Once the post-war consensus and economic boom began to dissipate, then it was the right (first through Margaret Thatcher in the UK) that put forward the clearest economic programme of reform. This neo-liberal consensus became consolidated once mainstream social democracy had begun to accept the main precepts of this economic doctrine.

The most famous example of this was Tony Blair’s ‘New Labour’ governments in the UK, that adopted the so-called ‘third way’ as its theoretical blueprint.  Neo-liberal economics were accepted as a means for economic development, with the proviso that this would be  accompanied by some elements of economic redistribution, as the ‘trickle’ down of wealth helped to improve the living conditions of those at the bottom. 

After being briefly lured by the attractions of the third way, the vast majority of European social democratic parties distanced themselves from it. Those parties that followed its precepts, suffered huge falls in electoral support (not least the SLD in Poland, whose vote declined from around 40% to 11% in just four years). Even support for the British Labour Party declined sharply, losing 5 million votes between 1997 and 2010.

The era of third way free-market social democracy came to an end with the outbreak of the economic crisis from 2008. As the speculative bubble burst, so the façade of economic development dissipated. Neo-liberalism (and its third way variant) lost its hegemonic appeal and was reduced to aggressive spending cuts, whilst shifting huge amounts of public money into the financial sector that had initially caused the crisis. When the left goes along with these economic policies then it is no longer offering a ‘trickle down’ of wealth or prosperity for all, but increased hardship for the majority.

The seriousness of the present economic downturn means that the left can no longer rely upon the private sector and free-market to provide the means for its own programme of social redistribution and welfare support (however progressive and well-meaning these may be.) It is also futile to only advocate ‘pro-demand’ policies (such as raising wages and benefits) as these do not tackle the fundamental issue that underlies the present crisis. The left therefore has to develop its own ‘supply’ side policies for economic growth.  A good starting point is to return to one of the most important theses of Keynesianism, i.e. that in a period of an economic downturn the state should increase its investment. In Keynes’s own words there needs to be 'a somewhat comprehensive socialisation of investment' meansing that significant sections of the financial and productive sectors of the economy are taken into state hands in order that investment is directed into those areas that are most beneficial for a country's society and economy.

It is therefore a welcome development to see the SLD placing the issue of public investment at the centre of its new economic programme. This recognises the positive impact that public infrastructural investment, partly funded by EU money, has had on the Polish economy. It commits to continuing this and widening it out to creating three new economic areas around the country that would direct public investment into sectors such as machinery, precision industry, the car industry, electronics and pharmaceuticals, renewable energy and IT. Although there has been some concern that this does not go far enough  and that a public investment programme should encompass things such as housing, education and transport (not to mention the financial and banking system) this is undoubtedly a significant programmatic step-forward for the left. Combined with its commitment to returning to a more progressive income tax (although unfortunately not business tax) rate, imposing a tax on financial transactions and abolishing junk contracts, then we may say that the SLD currently has one of the most progressive and daring economic programmes of all the European social democratic parties. 

The SLD faces a momentous task in regaining the support and trust of the electorate, much of which was lost during its third way period when it was advocating such things as a flat-income tax rate. Yet even if it were to return to pwer it would face huge challenges in carrying out its programme of public investment It would meet large opposition (both domestically and internationally) to its aim of strengthening the economic role of the state. Nevertheless, the left could find support for its plans within sections of society who are normally not asssociated with the left, especially as the present reduction in government investment is leading to a decline in iindstrial production, employment and economic growth.  

Those of us who have been critical of the SLD, when it was advocating a neo-liberal economic programe, should welcome its recent economic declarations as being a step in the right direction.

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