Puheenvuoro Vasemmistoliiton Eurooppaseminaarissa

Austerity and the Crisis of Democracy

The Greek reality shows the results of the current austerity policies in a very grim way. Youth unemployment is at around 50 per cent, wages have been lowered with 20 per cent, pensions cut 20-40 per cent and 150 000 public jobs are to be reduced. Suicides have doubled in two years, and emigration from the country has grown sharply. Now the political elite of the EU is trying to extend this policy made in Greece, Ireland and Portugal during the last two years to the whole of Europe by the new fiscal regulations and automatic sanctions.

In this speech, I will firstly analyze four different dimensions of the crisis of democracy, connected to the euro crisis. Thereafter I will list some suggestions for how I think the European left should respond.

The crisis of democracy in Europe today has several different dimensions.

Firstly, all austerity measures taken to solve the crisis has been directed at ordinary citizens and taxpayers in Europe. Cuts have thus been directed at those not in charge for, nor gaining from, the structures that created the crisis. This is one aspect of the current crisis of democracy in Europe. The first European wide protests against these austerity policies were seen in the beginning of 2011, with the rise of several movements in Southern Europe. The Spanish democracy-movement later spread to other European countries and was merged with the Occupy-movements all around the world. These were the first responses to the austerity measures taken in Europe, but also a protest against the prevailing and dominating financial policy of neoliberalism, practiced practically everywhere in the Western part of the globe.

Since then, different groups and movements of precarious young and old, some calling themselves “youth without future”, have been participating in protests. Young persons protest against low wages and high unemployment, and against new laws weakening unemployment protection and cuts in education. If nothing changes, we might see a lost decade in Europe.

The Spanish youth protested against the lack of political choice, directing their demand of more democracy as a protest against the whole establishment. In most countries, these movement have directed their critique against all political parties as well as the European economic and monetary union. Practically all parliamentary parties have been seen as one conformative block, together legitimizing austerity measures by talking about carrying responsibility at economically difficult times. The crisis measures have followed the same pattern in all of Europe. Austerity measures, especially those linked to bail out packages, have been directed primarily at low- and middle-income earners. This development has now been strengthened through the new fiscal treaty.

Secondly, the crisis of democracy has also meant that no structural changes that would solve the crisis have been done. For political reasons, it has been easier for the dominating parties in European countries to continue buying time through bail out-package after another, which have proved inefficient to solve the crisis, than to implement structural changes in the monetary union, as pushing bigger hair cuts to the toxic debts and securities and demand bigger reforms of the banking system in Europe. The result is that the economic problems of the countries receiving the bail out packages have grown, at the same time as debts of the countries participating in the packages and in the stability mechanisms also grow. Private debts are made public, as responsibility for the debts is moved to European tax-payers through the bailout-packages. A growing number of academics and politicians have acknowledged that structural changes are necessary for the crisis to be solved, but political tensions inside the different countries of the monetary union has made structural change impossible to demand. The price of these political difficulties is being paid by ordinary citizens and those who are already in the weakest societal position suffer the most.

Thirdly, the current crisis of democracy in the monetary union is deepened by the fact that many decisions also have weakened the representative and parliamentary power of citizens. Decisions are in practice taken by the troika (which means IMF, ECB and EU) of which only the EU has at least some kind of democratic mandate. The new institutions formed, for example the European Stability Mechanism, does not depend on any democratically elected decisions makers approval and is not under the control of democratically elected representatives. Since the ESM is not an official EU institution, the legislation of the EU is not applicable on it. The fiscal treaty also means that the power of the commission is enhanced, by giving the commission power to follow up on national budgets of the member countries, and by the power to order financial sanctions to countries which budgets are not in accordance with the budgetary restrictions in the treaty. By signaturing this fiscal treaty countries are further limiting their fiscal political sovereignty.

Fourthly, and perhaps most importantly, the euro crisis has meant the institutionalizing and strengthening of right-wing ideology and neoliberal policies. The current measures for “solving the crisis” has meant further development of EU as a neoliberal project. The neoliberal reforms have become more authoritarian at same time when the structural and institutional reasons of the euro crisis have remained unsolved. The problem, from a democratic perspective, is that political economic discourse is further narrowed and the right-wing economic hegemony enhanced. From a leftist perspective, the problem is how new neoliberal paradigms have been formed. In public discourse, the reasons for the crisis has been framed as lazy Greeks and public debt, an analysis which completely overlooks the financial crisis of 2008, the growth of not only public debt but also, and foremost, private debt and the role of the structures of the monetary union in the crisis. All over Europe, political parties are repeating phrases about “no other options”and at the same time similar discourses are being heard at national level. In this crisis the slogan of Margaret Thatcher – There Is No Alternative – has been taken to a whole new level.

So, what is there to be done and why.

The left all over Europe needs firstly to firmly and consequently oppose austerity measures directed at ordinary citizens. The austerity measures have proved ineffective in solving the crisis, and have already led to great human suffering. In Finland the left usually refers to cutbacks made in the 90’s when discussing the growth of inequality at national level, now similar and much bigger cuts are being made in Europe.

Instead of playing the nationality-based blame game at the terms of the right, the left needs to communicate the role of the institutional structures of the EU. Instead of austerity measures, the left should propose an agenda of tax reforms and investments. Tax reforms need to be made to strengthen the base of public administration and diminish income inequality in countries all over Europe. The left should also propose large investment programs to secure employment, strengthen aggregate demand and keep the economy going. Keynesianism has for many years been considered nearly as old-fashion “soft” social democracy within the socialist left in Europe, but now it seems that pushing Keynesian reforms is almost to be defined as a radical left approach to the crisis.

The left also needs to acknowledge and participate in the ongoing hegemonic struggle about the concept of debt. The right is in the process of trying to present public debt as a problem per se, comparing public debt to that of households, regular persons and companies. The right is making debt the primary economic issue, turning reducing public debt into the primary economic concern. The fiscal treaty is one example of how reducing debt is going to be used as an excuse to cut public expenditure, thus being prioritized before securing public service and welfare for all.

Debt has throughout history been a means of controlling citizens, forcing people to work and to consume, also restricting them geographically. Banks have commonly never been under the democratic control of these citizens, thus restricting possibilities to do socially just fiscal and monetary politics. Now this means of control is being broadened to states and public institutions, enhanced by the development of turning private toxic debt to public toxic debt. Demands for change in these structures are necessary, such as publicly owned banks, splitting of banks in accordance with their functions and personal responsibility for leaders like in Brazil. There, the boards of the banks are personally responsible for their investment decisions. When the financial crisis of 2008 began, Brazilian banks didn’t make big losses since they hadn’t speculated.

Lastly, it is not possible to change the directions of these developments on a national level, because both the structural problems leading to the crisis and reforms are done internationally. Leftist parties and movements need to clearly ally with citizens movements and the labour unions, to form a common movement of resistance against austerity and to propose and defend structural changes on an international level. The role of the European Central Bank must be changed so that independent states are not dependent on bankrupt banks. The banking sector of Europe need to be cleared from the toxic financial waste. As a part of the structural reforms, the left needs to form an analysis of the European Monetary Union. We need to evaluate whether it is possible to democratically  reform the EMU in a way that will solve the inherent structural problems of the monetary union and to develope the EU into a socially just and ecologically sustainable union.

Democracy needs to be restored to the EU, but political movements also need to prove Margaret Thatcher wrong, by showing that there are parliamentary and non-parliamentary alternatives that are pushing for changes.

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