A Challenge to Social Democrats: Where Is Your Blueprint for Europe?

By Steven Hill, Social Europe Journal, October 24, 2011

Is it time for social democrats to take the lead in drafting a Constitution for the new Europe?

When I spoke last June in Barcelona at the annual conference of the Social Democrat/Socialists in the European Parliament, I asked the audience a rather pointed question: what is your political program and solutions for the economic crisis that distinguishes you from the center-right? Because when I read various writings and websites from social democrats, including on this Social Europe Journal, I can’t really tell. The Social Democratic message is not clear, the program is too vague, indecisive and hedging. And I don’t just mean about how to deal with the current crisis — what is your blueprint for Europe going forward?

Let’s get more specific:  if you don’t like what Angela Merkel has done, what would you do differently, especially that has a political chance of being enacted? This is no time for pie-in-the-sky, it’s a time for serious proposals. It would be interesting to create a forum asking Social Europe Journal writers to answer this question:  “You are the Chancellor of Germany — what policies will you pursue? More European integration? A full-fledged transfer union? If so, what would that look like, what are the details?”

For example, are social democrats as well as Social Democrats in favor of a United States of Europe or not? Certainly some high-profile leaders have said as much, including Helmut Schmidt, Gerhard Schroeder, Frank-Walter Steinmeier, Poul Rasmussen and others – but so has center-right European Commission President José Manuel Barroso, with former conservative Chancellor Helmut Kohl adding a qualified “Amen.” Various Green Party leaders also have stated their call for “more Europe.” So a U.S. of E has become like asking various Christian religions if they believe in the Bible. All say yes, yet they practice their religion very differently. The devil – if you’ll pardon the expression – is in the details.

And that’s what is severely lacking – sufficient detail. Recently I asked one of the leaders of Social Europe Journal: “Let me put it to YOU then — do you believe the resolution to the current crisis is a United States of Europe? Yes or no?” His answer was fairly vague: “Yes, we have to integrate more.” But how much more? And in what areas? This crisis is at least two years old, surely at this point a bit more specificity is in order, isn’t it? Is it too hard to say the words, “United States of Europe” in your TV interviews and articles? Or is that not really what you mean?

This social democratic leader went on to hedge a bit:  “We will see a multi-speed Europe in my opinion, that needs to be properly designed and democratically legitimated.” OK, but what would more integration in a multi-speed Europe look like? What are the details? Which countries are in and which are out, and at which speed? What office or agency will look over fiscal policy in each zone? What democratic institutions will provide legitimacy? And isn’t multi-speed the same as “economic segregation,” in which the continent will be separated into “wealthy Europe” and “poor Europe,” with the latter being unstable and prone to crisis which will breed a volatile politics at wealthy Europe’s doorstep?  Isn’t that one of the things that the European Union was designed to prevent?

I try to imagine how “multi-speed” would work in the United States. Wealthy USA, composed of New York, New Jersey, California, Illinois and other states, would be integrated in one zone and poor USA with Mississippi, Alabama, Louisiana, Arkansas, New Mexico and others would be in a second zone. Would that be workable? It’s only because of decades-long fiscal transfers from wealthy states like New York and California to these other poorer states that “poor USA” hasn’t sunk even further. The wealthy states pay for the poor states — in return for more economic and political stability and a larger market — that’s how a transfer union is supposed to work.  In a European fiscal union Germany and Netherlands would pay for Greece and Portugal, the euro zone’s Mississippi and Alabama, for a long, long time. Is that part of your conception of integration in a multi-speed Europe? Yes…or…no?

Because you can’t have it both ways. It’s easy to criticize Angela Merkel for the policies she has pursued, yet in reading the many writers on Social Europe Journal, as well as other social democratic thinkers, my sense is that there is not as much unanimity as one might suppose over what Social Democrats would do if they were holding power in the various member states. In part because these are very complex matters with long term implications, and also because, yes, the devil is in the details. Even two years into this crisis, it’s easier to leave those hard knock details fuzzy and stay on the offensive, criticizing those who are making the tough decisions.

What would you do if you were Chancellor Merkel?
OK, discussions about a United States of Europe are about the long term, but what about the short term? If you were Chancellor Merkel, what steps would you take to pacify the current eurozone crisis? More fiscal stimulus? Increased imports from Greece to northern Europe? Allow guest workers from Greece and Portugal? Eurobonds? A haircut for investors in Greece, and Ireland and Portugal too? WHAT ARE THE DETAILS?

While most of these short term challenges are not likely to be resolved until after new elections are held in key countries – especially France and Germany – it’s not too early to entertain the “social democratic option.” But even here, matters seem to be murkier than one might expect.Many of the writers on Social Europe Journal have strongly condemned the current austerity approach, and most seem to adhere to Paul Krugman’s call for more fiscal stimulus as a vehicle for creating economic growth and jobs. Of course, it’s easy to call for more government spending – of money that your government doesn’t have – when you are an academic or op-ed writer and not a policy maker.

But in the absence of a broader plan and inspiring vision — a bigger narrative that explains how not only more spending but reform of past practices and a rejiggering of budget priorities is going to save the day – it is an uphill climb to build political support for more fiscal stimulus. Stimulus hawks like Krugman say it is necessary to deal with the short term crisis first through more economic growth before moving on to either the long-term challenges over greater European integration or global warming (since more stimulus spending = more consumption = more carbon pumped into the atmosphere; the fact is, this economic crash has provided the biggest breather in decades for the increasingly carbon-choked environment). But in fact it’s the loss of confidence by financial markets in the long-term vision of Europe that is making everything jittery as jello. The markets can see that wealthy Europe has enough money to bail out poor Europe – but how often will it have to, for how long into the future, and amid how much contagion, that’s what the bonds traders want to know. Can the current situation be put on a sustainable footing that lasts for years to come, that’s what everyone is doubting right now. The world is waiting for a convincing vision of what Europe will look like in 2020, not just 2012.

Certainly austerity for the eurozone appears to be reaching its end game, and a Greek default of some amount looks inevitable. But what is the Social Democratic response to the very real problem of moral hazard? I have heard relatively little proposed on this front. One writer called for Eurobonds that cover only part of Greece’s public debt “so as to avoid the problem of moral hazard,” a rather halfhearted measure that does nothing to help Greece increase its competitiveness. Stefan Collignon’s How to Save the Euro has an intriguing proposal for “deficit permits” between member states that can be traded, much like pollution permits can, between states with surpluses and others with deficits. It’s a clever idea, but doesn’t appear to deal with a puzzling situation like that of Greece which hid its debt during years of ballooning salaries, pensions and public sector workers on the government payroll, creating an untenable situation that now (hopefully) is being rolled back to sustainable levels. Yet for a transfer union the question of moral hazard is key and must be accounted for in exacting detail for any proposal to be taken seriously.

Wanted: a vision for Europe in 2020
So what will Europe look like in 2020? Or a better way to ask that question might be: what does Europe want to look like in 2020? Certainly that is one area in which Chancellor Merkel has failed – not in her short term policies that have successfully kicked the can down the road, giving German taxpayers time to get used to the idea of permanently subsidizing the Mississippi’s and Alabama’s of Europe — but in her failure to provide a vision, a roadmap, of how Europe is going to work as it steps further down the yellow brick road into the 21st century. Yet Social Democrats have hardly provided a new or compelling vision for this either.

In fact, the various Social Democrat parties seem determined to win the next round of elections by being merely the anti-Merkel party, having proposed no real resolutions or blueprint of their own. A financial transaction tax — which Social Democratic leaders stated support for at the Barcelona conference, though not much else — is supported even by Merkel and Sarkozy now, and hardly deals with the greater question of more integration or not. Perhaps keeping the United States of Europe rhetoric to a minimum is a smart campaign strategy so as to not alarm certain swaths of the electorate as a new round of elections approaches, but in the meantime Europe is twisting in the wind, directionless.

Even Merkel’s harshest critics like Krugman and Wolfgang Munchau must know that these are complex matters and the devil is in the details. That’s why no one has bothered to sit down and draft the details for a new Europe, instead they just carp from the sidelines. But Merkel, to her credit, is at least thinking about the many horns of the dilemma. “It is essential to return to a sustainable growth path,” she has been quoted saying. Advancing her own theory for the economic meltdown, she said that a primary cause was that “we did not have sustainable growth. In many countries growth was built on debt and [speculative] bubbles.” What Merkel has been saying is that the world needs to figure out how advanced economies can provide for their people without having roaring growth rates, asset bubbles and hyper consumption, and also how to develop in a way that is ecologically sustainable. Krugmanomics, which is based on massive government stimulus spending to boost aggregate demand, consumption and job creation, is neither economically nor ecologically sustainable. What is the Social Democratic response to this multi-horned dilemma?

Merkel has become much vilified, a target for both the left and right. But one day she will be seen as an important transitional figure between what was and whatever the new Europe is becoming. In the absence of any better answers coming from any other quarter — including Social Democrats — she has ably held the fort while chaos has swirled outside the gates. She has slowly inched forward – yes, toward more integration — in a very volatile political and economic situation.

In the meantime, it’s clear that the Social Democrats, like Europe itself, are lacking not only in vision and the devilish details but confidence as well. They are seemingly stuck in a mentality that they inherited when Europe viewed itself as the junior Cold War partner, sitting in the backseat while America sat up front driving the vehicle. Sitting in the backseat has its benefits;  you don’t have to take much responsibility for the direction of the vehicle, you can always defer the hard questions to the driver. How else to explain that in a recent Social Europe Journal poll, three of the top five most influential thinkers for center-left Europeans are Americans, including Paul Krugman? The European intellectual left’s lack of confidence and boldness, as well as its long-standing infatuation with so much ‘American,’ causes it to fail to put forward its own comprehensive program and to look toward someone like Krugman as their compass. Yet Krugmanomics is a dead end for Europe, he’s even a dead end for America (for reasons too many to elaborate here, but primarily because Krugman fails to recognize that if Americans want more stimulus spending they must raid the money from the military budget, which currently is America’s very inefficient vehicle for ongoing stimulus and job creation).

As I have been saying, this crisis is going to take a couple of decades to resolve. Don’t forget that a younger America fought a civil war over “states rights” (and the related issue of slavery) a full 70 years after its first government in 1789; the tensions between central governments and member states never really disappear. You could see them in the U.S. in the 1960s during the civil rights era, and even today in the insurgence of the Tea Party movement. These dilemmas will test Europe’s desire and political will to stay together for years to come, and will continue to test its vision. And if it’s true that the only blueprint that will resolve these tensions is a U.S. of E — which seems to be what many of the political elites from across the political spectrum are concluding — then the changes that are required will not be accomplished with a few tweaks and band aids. It will require treaty change, and that will take additional time. It will require a vision for how a U.S. of E will actually work, and yes, the devil will be in the details.

Time to draft a Constitution
Here’s what makes sense to me at this point: the writers and readers of Social Europe Journal should get in front of events and lead the drafting of a basic constitutional framework for the new Europe. By drafting a guiding blueprint you will help end the paralyzing fuzziness and provide a tangible and comprehensive vision that others can see. Right now most people can only detect bits and pieces that get discussed amidst great tension in reaction to the latest headlines. It’s like a jigsaw puzzle with many of the pieces missing, which only leads to more frustration. With a comprehensive blueprint you could start circulating the draft, soliciting comments and feedback, and begin building a consensus around which a movement can form. It is hard to imagine even Social Democratic parties leading boldly on this without some kind of grassroots movement behind it, yet right now all the populist sentiment is for scaling back Europe or even breaking parts of it up. Where is the counter force to that?

So imagine yourselves as George Washington, James Madison, Thomas Jefferson and Alexander Hamilton – or as Otto von Bismarck, or Winston Churchill, Konrad Adenauer and Jean Monnet. If they were put into a room to draft a new European Constitution, what would they propose? What would YOU propose?

Because here’s the danger: if the Social Democrats aren’t confident enough, and if the Social Europe Journal audience can’t at this point, two years on, come to agreement on a basic framework, then this “discussion” becomes just a never-ending rehashing — no, even worse, an endless handwringing, over and over and over — that says “We are in crisis.” Over and over and over. That will only contribute to a sense of perennial upheaval settling into the body politic which will breed cynicism, insecurity and paralysis, and undermine the long-term European project. After a while, the European public will simply want the crisis over, one way or another. And instead of picking more Europe, they may pick less.