Category Archives: Southern Europe

EU’s Ordoliberalisation and the Crisis in Southern Europe

Debate on the Crisis in Southern Europe

EU’s ordoliberalisation and the
crisis in Southern Europe

25th of June, 2020

Theodorus Papadopoulos 

The eruption of sovereign-debt crisis in 2009-10 marked the beginning of a period of rapid and deep transformation in Southern European (SE) societies. Drastic fiscal consolidation measures and far-reaching reductions in salaries, pensions, social welfare rights and employment rights were imposed by a ‘Troika’ of unaccountable international and EU actors (European Commission, International Monetary Fund, European Central Bank) as conditions for so-called ‘bail-out’ loans. Consecutive loan disbursements were only released after more aggressive structural reforms promoting privatisation, deregulation and deeper marketization of domestic economies were agreed in advance. Attempts to implement similar reforms were made by successive SE governments prior to the sovereign debt crisis but were met with strenuous resistance from trade unions and society at large. In this context, the sovereign debt crisis provided a remarkable opportunity for SE politico-economic elites to accelerate the dis-embedding of domestic political economies, under the strict monitoring of the EC-IMF-ECB ‘Troika’. The socio-economic impact, thus far, has been devastating, socially and economically. Unemployment and poverty soared, economic growth shrunk to unprecedented levels for peacetime (nearly 25% GDP loss in Greece alone), suicides increased, thousands of homes were repossessed (especially in Spain) and thousands, mainly highly educated, young people left southern Europe in search of work abroad. This transformation accelerated deep changes in SE’s familistic mode of social reproduction, changes that were already underway prior to the crisis, partly due to the rapid rise of private debt. Indeed, the security pillars of SE welfare regimes – e.g. employment protection of family’s primary earner, protection of home ownership and small property and adequate pensions – are severely destabilized.
 
The political fallout of the proliferation of socio-economic insecurity was twofold. First, public trust towards domestic and EU political elites and institutions collapsed. Second, numerous political movements emerged – in a classic Polanyian ‘double movement’ pattern – with some pursuing socially progressive and others ultra-conservative political agendas. Still, despite the electoral success of non-traditional parties – SYRIZA (Greece), 5-star movement (Italy), Podemos (Spain) – changing the direction of economic policy proved impossible. The main reason lies in the parallel, directly related, ordoliberalisation of European politico-economic governance that accelerated over the same period (Papadopoulos and Roumpakis, 2018). Under the pretext of improving economic coordination in the EU policy areas previously under national governments’ jurisdiction – most notably wage and collective bargaining agreements – are now open to EU intervention. Further, under the provisions of the Fiscal Compact Treaty member states’ budgets are required to be either balanced or in surplus. The Treaty requires rules to have a permanent and, when possible, constitutional character while severe penalties await member states that will dare pursue a different economic agenda. As Dr Schäuble, ex-German Federal Finance Minister, and self-proclaimed ordoliberal, stated: “elections cannot be allowed to change an economic programme of a member state’ (Guardian, 2016). As long as the political and policy hegemony of such views remains unchallenged the centrifugal tendencies in Europe will continue unabated and the prospects for recovery in southern Europe will remain anemic.  
 
References:
Papadopoulos, T., & Roumpakis, A. (2018). Rattling Europe’s ordoliberal ‘iron cage’: the contestation of austerity in Southern Europe. Critical Social Policy, 38(3), 505-526.

Guardian (2016) Yanis Varoufakis: Why we must save the EU. The Guardian, 5 April. Available at: https://www.theguardian.com/world/2016/apr/05/yanis-varoufakis-why-we-must-save-the-eu (accessed 29 June 2016).

Theodoros Papadopoulos

Department of Social and Policy Sciences,
University of Bath,
UK

Read the other essays on the Crisis in Southern Europe here: 

Maria Markantonatou, Greece
Michele Cangiani, Italy
Luis Enrique Alonso & Carlos J. Fernandez Rodríguez, Spain
Francisco Bozzano-Barnés, Spain
João Rodrigues, Portugal
César Rendueles, Spain
Antonio Palumbo, Italy

“Authoritarian Interventionism” in Greece

Debate on the Crisis in Southern Europe

“Authoritarian Interventionism” in Greece

25th of June, 2020

Maria Markantonatou

A decade since its outbreak, the crisis in Greece has left scorched earth. Wages, pensions and social benefits have been slashed, the public sector and welfare services have been shrunk, the bargaining power of working classes vis-a-vis their employers has weakened, the pre-crisis institutions of labour protection have been dismantled, the country still holds negative records in the EU in terms of unemployment and poverty, and public assets have been privatized. Polanyi’s quote below, in which he describes deflationary policies in the interwar period, could hold true for the crisis management imposed on Greece since 2010 by the country’s creditors in cooperation with various Greek governments (social democratic, right-wing, left-wing, and several coalitions):

“The repayment of foreign loans and the return to stable currencies were recognized as the touchstone of rationality in politics; and no private suffering, no restriction of sovereignty, was deemed too great a sacrifice for the recovery of monetary integrity. The privations of the unemployed made jobless by deflation; the destitution of public servants dismissed without a pittance (…) were judged a fair price to pay for the fulfillment of the requirement of sound budgets”[1].

At the time Polanyi was living in Vienna and working for the economic journal Österreichischer Volkswirt, he experienced the imposition of a structural adjustment program imposed on Austria by the League of Nations (1922). The program bears parallels to the one in Greece regarding the policies implemented (austerity, liberalization), the outcomes (recession, unemployment) and the political methods (approval of loan tranches by the commission only after evaluation of the reforms undertaken). Austria strived to re-establish the gold standard and Greece to remain on the euro standard, and both countries had to cope with trade and fiscal imbalances.

Polanyi described these policies as “authoritarian interventionism”[2] and this description is accurate for Greece too. What we saw in the previous decade was the ECB’s political and disciplinarian rather than simply techno-economic role, the deep power asymmetries between member states, and the serious social effects of austerity. Most importantly, we saw a series of systematic efforts to put aside democratic political outcomes (national elections, referenda) that did not suit Eurozone’s disciplinarian neoliberalism, and an unprecedented pressure by Eurozone officials, which went so far as to remove undesired politicians, political parties and governments. In Polanyi’s words, a “crisis of confidence” in the interwar period had the result that “the political forces responsible for the [economic] messes were promptly made to disappear from the scene”[3]. For him, such attacks on democracy were at the heart of liberalism as an ideology and as a practice.

A decade after the Eurozone crisis, another crisis broke out, that of the COVID-19 pandemic. An increase in the EU budget and some new funds to cover emergencies have been decided, and there were some previously unthinkable proposals, such as the issuing of joint bonds. Such policies aim to stimulate specific industrial sectors of some Northern European countries and bail out some big companies. However, there is no guarantee that the Greek model of conditionality will not be repeated later in another country or that the burden will not be shifted to working classes, as it happened after 2010.

 

[1] Polanyi, Karl (2001). The Great Transformation: The Political and Economic Origins of Our Time. Boston: Beacon Press, p. 148
[2] Ibid., p. 242
[3] Polanyi, Karl (n.d.), The Fascist Virus, Karl Polanyi Institute for Political Economy, 18-08

 

Maria Markantonatou

Assistant Professor at the Department of Sociology,
University of the Aegean,
Lesvos, Greece

Read the other essays on the Crisis in Southern Europe here: 

Maria Markantonatou, Greece
Michele Cangiani, Italy
Luis Enrique Alonso & Carlos J. Fernandez Rodríguez, Spain
Francisco Bozzano-Barnés, Spain
João Rodrigues, Portugal
César Rendueles, Spain
Antonio Palumbo, Italy

Italy: New Problems are not New

Debate on the Crisis in Southern Europe

Italy: New problems are not new

25th of June, 2020

Michele Cangiani

The emergency of the pandemic disease has given rise in Italy to worries, studies and debates, ranging from immediate to long-term issues, and from internal to European and global problems.

The particular case of the health care system can be a meaningful start point – even if here it won’t be possible to go much further. In the years 2010-2019 public health expenditure increased in Italy by 0,9% per year on average, with an average inflation of 1,07%. In 2018 the expenditure was 10% higher than in 2009, compared to an average of 37% in OECD countries. In those years, the planned increase in healthcare spending was cut by € 37billion. The turnover of doctors and nurses has been stopped or reduced in most Regions, since a spending cap was imposed on regional budgets. In 2017 hospital beds were 3.2 per 1,000 inhabitants, while the European Union average was 5 beds. In the same year, the 23.5% of total expenditure was ‘out of pocket’: the highest in the EU (16% average of the other member states). A growing number of Italians – 1/3 of the total, according to a recent esteem (Eurispes) – have to give up or postpone treatments; other get into debt for paying for them. Health care has been increasingly privatized. In the Region Lombardia, 40% of the total expenditure goes to private organizations, which are generally not prepared to face emergencies like the present pandemic, because this would require ‘unproductive’ investment. Generally speaking, the choices regarding which activities will be carried out follow criteria of economic rather than social convenience.

The Italian case of the evolution of the health care system meaningfully represents the economic, ideological and political results of the neoliberal transformation, which unsuccessfully attempted to escape the systemic crisis of capitalism. The reform of 1978 instituting the National Health Service (Servizio Sanitario Nazionale) was an outcome of the previous epoch, in which new rights of “social citizenship” (T.H. Marshall) were acquired. That reform attempted at a democratization grounded on two complementary principles. One was universalism: a general national system would provide health care for all citizens, independently of personal revenue. The other was the role in controlling and addressing the Service entrusted not only to the Ministry of Health, but also to local administrations, trade unions and patients’ associations. In fact, both efficiency and democracy were subsequently corroded. Interferences by the alliance between political and business interests were not amended by the increasing administrative and fiscal regional autonomy. Besides, regional differences widened.

Neoliberal strategies, politics and attitudes were bolstered by the conversion of former socialist parties and by the neoliberal frame of the European Union’s constitution. Peculiar national conditions made membership in the EU less favourable, and the crisis harder, for Italy than for other countries. There is, to begin with, the decay of Italian industry, caused by low investment in innovation, acquisitions by foreign investors, capital flight, delocalization, and privatization of state-owned industries, some of which had a leader position in the world. The political class has been more inclined to collusion with big and small corporative interests than capable of promoting a farsighted policy, addressed to innovation-driven growth, ecological conversion, education, research and welfare. A substantial reduction in tax evasion and elusion was never pursued.

Besides, governmental intervention has been limited by the constraint of the public debt, which slowly decreased after Italy’s entrance in the euro zone, but augmented with the crisis (the ratio to GNP was 134,5% at the end of 2018). This was also the result of counterproductive austerity measures, which contributed to depress production and to augment unemployment and inequality (Gini Index reached 0.334 in 2018, while the EU average was 0.31). For the current year, Fitch Ratings estimates a 9.5% drop in GDP for Italy – 8.2% for Europe. Austerity measures were imposed by the EU, and higher interest rates have been paid on the debt, in spite of a positive trade balance and 30 years of surplus of the primary budget balance.

Today’s news is the European Commission’s plan of a €750bn recovery fund, being a first attempt at instituting Eurobonds, that is, a common European debt, with the purpose of financing well-addressed investments. A taboo would thus be challenged, together with financial greed, provided that some ‘virtuous’ members of the Union, including those practicing fiscal dumping, will not continue to deny their consent.

Michele Cangiani

Professor of Economic Sociology
Department of Philosophy and Cultural Heritage
Università Ca’ Foscari Venezia
Italy

Read the other essays on the Crisis in Southern Europe here: 

Maria Markantonatou, Greece
Michele Cangiani, Italy
Luis Enrique Alonso & Carlos J. Fernandez Rodríguez, Spain
Francisco Bozzano-Barnés, Spain
João Rodrigues, Portugal
César Rendueles, Spain
Antonio Palumbo, Italy

Crisis and Sacrifice in Spain

Debate on the Crisis in Southern Europe

Crisis and Sacrifice in Spain

25th of June, 2020

Luis Enrique Alonso (left), Carlos J. Fernández Rodríguez (right)

In May 2010, Spanish prime minister José Luis Rodríguez Zapatero undertook unprecedented measures to fight the Great Recession, the worst economic crisis experienced in the country since the end of the Civil War. The massive unemployment figures and the mounting pressures from European authorities forced Zapatero to embrace austerity measures never seen before (reduction of civil servant salaries, cuts in welfare, plenty of reforms) in order to stop the escalating public debt and deficit. The fatal combination of the financial crisis and the sudden collapse of an astonishing (and grotesque) real estate bubble simply drove the economy into a dead end, and the government suddenly realized that this crisis could not be solved anymore by currency devaluation, but by budget adjustments enforced by the EU and ECB authorities.

Unable to control the economic situation, both Zapatero’s and later Rajoy’s government (Rajoy was the leader of Partido Popular, the conservative party which won absolute majority in the end of 2011) deployed agendas based on austerity. Rajoy’s government in particular developed very drastic measures, all supported by the EU authorities, including reforms in the labour market, rescue of financial institutions and massive cuts whose effects in Spanish society have been profound. After a second recession and a loan from the troika to save the financial system, the economy recovered – but way too slowly. 

The outcome is a more fractured and unequal society, marred by a weakening welfare, low salaries, social discontent, child poverty and many challenges ahead. This stimulated the emergence of social movements that opposed strongly what Polanyi coined as a “market mentality”[1], that is, the one-sided and narrow approach to economics that basically underpinned all the economic measures during the crisis. The bipartisan model that was dominant in the Spanish democracy for decades faded away after the discontent, and new parties emerged: the left-wing populism of Podemos and, after the polarising events in Catalonia (including a failed attempt to reach independence from Spain in 2017), the far right populism of Vox, making the political scene far more volatile and unstable.

While the collapse of the housing market bubble and the mismanagement of many financial institutions was perceived by Spanish people (and particularly the movement of the indignados) as the cause of the crisis, governments and important economic national and international actors developed a different narrative, claiming that Spanish people were simply living beyond their means [2] (not unlike other Southern Europeans). That was the justification for launching harsh social and economic measures that punished the weaker groups of society, such as housing evictions, erosion of labour rights, salary cuts, welfare reductions and more during this decade. And all those measures were carried out in order to keep on financing the monstrous Spanish debt and saving the financial system, in a logic that resembles too well of a human sacrifice. The common people have been the scapegoats of the crisis, which has helped to placate the markets [3]. This social dynamic shows not only how market logic has colonized societies, institutions and governance, justifying the myth of the self-regulated market Polanyi warned us about [4], but also how the development of a new neoliberal model of governance will likely increase social and economic tensions in the near future. The post-COVID-19 scenario, with its dramatic outcomes in terms of lost lives and jobs, will serve as a litmus test of neoliberalism as a social and economic policy. 

[1] Polanyi, K. (1947): “Our Obsolete Market Mentality”, Commentary, 3(2): 109-117.
[2] See e.g. Alonso, L. E., Fernández Rodríguez, C. J. & Ibáñez Rojo, R. (2015): “From consumerism to guilt: economic crisis and discourses about consumption in Spain”, Journal of Consumer Culture, 15 (1): 66-85.
[3] Alonso, L. E., Fernández Rodríguez, C. J. (2013): Poder y sacrificio: los nuevos discursos de la empresa. Madrid: Siglo XXI.
[4] Polanyi, K. (2001): The Great Transformation: The Political and Economic Origins of Our Time. Boston, MA: Beacon Press.

Luis Enrique Alonso

Professor in Sociology
Universidad Autónoma de Madrid
Spain

Carlos J. Fernández Rodríguez

Senior Lecturer in Sociology
Universidad Autónoma de Madrid
Spain

Read the other essays on the Crisis in Southern Europe here: 

Maria Markantonatou, Greece
Michele Cangiani, Italy
Luis Enrique Alonso & Carlos J. Fernandez Rodríguez, Spain
Francisco Bozzano-Barnés, Spain
João Rodrigues, Portugal
César Rendueles, Spain
Antonio Palumbo, Italy

May the Greeks’ Disappointment never happen again

Debate on the Crisis in Southern Europe

May the Greeks' disappointment
never happen again

25th of June, 2020

Sylvie Constantinou

When a government of the radical left was elected by the Greeks at the beginning of 2015, Y. Varoufakis, its finance minister, displayed a watchword that aroused enthusiasm: justice before everything! So we must stop believing opinion makers and all those who hasten to cancel the result of the elections, when it doesn’t match with their cynicism. According to him, “There are no circumstances when we must do what is right not as a strategy but simply because it is … right”[1]. Indeed, subsequent events showed that the “reality” was quick to catch up the ideal. It was time to put away social justice to Greek calendars and to earn one’s living.

Varoufakis had just shown[2] the foolproof consistency of the global economic system: the conglomerates skillful in extracting labor productivity are never short of money. The whole world rushes in order to lend them the means to destroy the planet and its inhabitants and back. Is the market economy doomed to function like this global Minotaur? The political leaders will not find the answer to this question in reading J. M. Keynes and Y. Varoufakis, but rather K. Polanyi, whose life and thought have embodied the idea of justice first. And a way to achieve this, according to one of the guiding threads of his work, is that the countries can do without credit to finance their economy. This thesis found an extension in the work of the economist B. Friot, who showed[3] in his genealogy of “the political and economic origins of our time”, that the salary system recycles instantly the huge flows of social contributions generated by a work-based economy. These flows feed a fund single (it’s more efficient) that secure employees permanent income. No credit or tax based system, that is, in fine, savings based, is able to compete with the salary system, which drains to it funds, without need to activate greed and self-interest, a sufficient cash flow to be used for social purposes decided by the people. The social security funds could be quickly activated, as they were after the Second World War in France (1946). Having proven their capacity to finance the public health service, before they are weakened by neoliberalism transmitted by European Union, they could finance well beyond, the needs resulting from the time lags between production and consumption, as well as the vagaries of trade and life.

The message sent by the Greeks five years ago reminded us of the imperative of dignity, of right of peoples to live as they see fit, because contrary to the contemptuous rumors that elites run in the pay of annuitants, they contribute to collective prosperity, by accepting part of the European model: participation in European trade. Greeks are an industrious and commercial people, but also very attached to their common social life. Many other countries could recognize themselves in such a portrait. Replacing credit with economic and social contributions is the only practical means available today to preserve their sociality.

 

[1] Varoufakis, Y. “No time for games in Europe”, New-York Times, 17 February 2015.

[2] Varoufakis, Y. The Global Minotaur, Zed Books, London, 2011.

[3] B. Friot, Puissances du salariat (2012, 2ème édition).

Sylvie Constantinou

Independent Researcher
Former Territorial Official
(Administration of Social Sector)

Read the other essays on the Crisis in Southern Europe here: 

Maria Markantonatou, Greece
Michele Cangiani, Italy
Luis Enrique Alonso & Carlos J. Fernandez Rodríguez, Spain
Francisco Bozzano-Barnés, Spain
João Rodrigues, Portugal
César Rendueles, Spain
Antonio Palumbo, Italy

Spain, the Southern European Crisis, and the EU

Debate on the Crisis in Southern Europe

Spain, the Southern European Crisis, and the EU

25th of June, 2020

Francisco Bozzano-Barnes

There is a profound feeling of fin d’époque in the world that fills us with anxiety. Uncertainty prevails, as a result of a world multifaceted crisis and a virus that are cuasing humanity great suffering, death, chronic illness and devastation. This is symptomatic of living dangerously. It is not the virus that is causing the crisis it is our constant encroachment of the ecosystem and the planet. [1] We knew this, but the system, its cultural priorities and those in power, although advised, turned a blind eye. Those who spoke were not heard. Only double talk was listened to. Such as what an influential Spanish economist describes in the EU:

“There are two fallacies that we have no other choice than to accept in order to grant independence to the monetary authority [in the EU] without violating the basic principle of the modern democratic state: it is the parliament that has the power to establish the fiscal policy objectives, defining state revenues and expenditures. (…) The ECB really acts like an absolutist monarch, substituting the parliament to decide wishfully about the expenses incurred by governments and who should pay for them. In brief, in the European Union, there is no real democracy”. [2]

Northern European countries can’t have it both ways: No mutualised financial aid to flee from the undisciplined South, while ignoring community rules since they have the wealth to aid their companies with higher subsidies. This won’t work for anybody, says Juan Torres López. [3]

According to Javier Pèrez-Royo, a Spanish Constitutional expert, the issue infront of the German Constitutional Court was not the BCE, being instead the financial joint response to COVID-19. [4]

Austerity has caused great suffering in Greece, Italy and Spain. Being generally less competitive and more dependent and unequal, the North-South and rural-urban disparities have grown. Also affecting their ability to respond to the pandemic. [4]

Today, the insistence on credit without conditionality and insufficient funds for sustaining life and the economy, without debt mutualization will fracture the EU, and the previous apologies to Greece will become proof of recurrent mistakes, with the aggravation that, today, this is not caused by a financial crisis like in 2008.

The market mentality is behind these mistakes, and the world movement of Black Lives matter could be understood as a countermouvement, as Karl Polanyi saw.

“Popular support for fascist countermovements in response to the dysfunctional economy of the 1930s has inescapable similarities with contemporary political nationalist and xenophobic opposition to the ruling establishment today [as a response to neoliberal policies]”. [6]

Strengthenning and broadening democracy, increasing systemic resilience, endurance, serving the public interest, weakening obstacles to sustainability, favouring equality in all its facets and proximity over globalization need to inspire the way out of this crisis.

[Translations from Spanish were done by the author.]

[1]https://www.publico.es/sociedad/causas-covid-19-jane-goodall-nuestra-falta-respeto-animales-causado-pandemia-coronavirus.html
[2]https://blogs.publico.es/juantorres/2020/05/11/von-der-leyen-recuerda-a-su-pais-que-la-ue-no-es-una-democracia/
[3]https://blogs.publico.es/juantorres/2020/05/13/la-comision-europea-dinamita-el-mercado-unico/
[4]https://www.eldiario.es/contracorriente/sentencia-panfleto_6_1026507354.html
[5]https://espacio-publico.com/que-nos-estamos-jugando-en-esta-crisis/comment-page-1#comment-6900
[6]Kari Polanyi-Levitt, Polanyi’s Vista of a Socialist Transformation; Freedom of Action and Freedom of Thought, Montreal, 2017, page 17

Francisco Bozzano-Barnes

Independent Researcher

Read the other essays on the Crisis in Southern Europe here: 

Maria Markantonatou, Greece
Michele Cangiani, Italy
Luis Enrique Alonso & Carlos J. Fernandez Rodríguez, Spain
Francisco Bozzano-Barnés, Spain
João Rodrigues, Portugal
César Rendueles, Spain
Antonio Palumbo, Italy

Cyprus: Small, Quiet and Easy to Handle?

Debate on the Crisis in Southern Europe

Cyprus: Small, Quiet and Easy to Handle?

25th of June, 2020

Gregoris Ioannou

A decade after its outbreak, the crisis has left its mark in various dimensions on the society of the Republic of Cyprus. Quasi-monopoly conditions have been established in the banking sector as two major banks, a private one and the Cooperative Bank, were dissolved into the other two major private banks which now fully dominate retail banking. Employment in the public sector deteriorated for new recruits who no longer enjoy the wages, benefits and pensions that were in place a decade ago. Precarious work expanded in both the public and the private sectors affecting disproportionally new entrants to the labour market and social inequality has increased. Although collective bargaining has been somewhat decentralised and weakened there was no overhaul of the industrial relations system like in Greece. Also, while some privatisations did occur, the key services of electricity and telecommunications remain still largely in public hands despite the legislative and administrative measures undertaken to privatise them while the privatisation of the ports has backfired with business groups now complaining of the private monopoly established which drives prices up.

The Cyprus crisis was effectively a banking crisis which could not be resolved by the state spilling into the “real economy” and provoking recession, deterioration of state finances and causing initially a fiscal crisis and subsequently a sovereign debt crisis. The Troika intervention had two parts: a series of fiscal austerity measures involving public sector wage cuts and increases in taxation (primarily indirect) and a bail-in scheme in the banking sector whereby one private bank was split into two – the “bad section” liquidated and the “good section” merged into the other major private bank which was restructured. The restructuring involved the devaluation of its ownership base and the drawing of capital from depositors effectively changing its ownership pattern. Social policy was redesigned in line with neoliberal principles and active labour market policies were pursued. The fact that the Cyprus’ industrial relations system were already sufficiently liberalised, and the fact that the main issue was the banking system made the Troika less adamant to press for a comprehensive legislative change in employment field.

There were limited anti-austerity mobilisations and the political system was able to absorb social discontent. The politics of “good behaviour” followed by the elites as Polanyi termed it [1], was largely accepted by the citizens as well. However, during the peak of the crisis in March 2013, popular mobilisation was successful in forcing the political parties to block the first universal bail-in agreed in the Eurogroup meeting (all accounts, all banks) and forced a second Eurogroup meeting to decide a bail-in scheme restricted to the two problematic banks and the uninsured accounts. In those weeks opposition to the Eurozone peaked as measured in polls, however it subsided in the months ahead. The Left wing government in office during the crisis was severely discredited and the Right wing government under which the Memorandum of Understanding was signed was able to claim that it had no responsibility for it, while when growth returned a few years later it was even able to claim a success story. Overall the political system was discredited, trust dropped, and abstention rates grew but other than the strengthening of the far right, there was no significant upheaval – no overt shrinking of existing political parties and no emergence of new players. 

[1] Polanyi, Karl, The Great Transformation: The Political and Economic Origins of Our Time, Boston, Beacon Press Books, 2001, p.14

Gregoris Ioannou

Research Fellow
School of Law, University of Glasgow
Scotland

Read the other essays on the Crisis in Southern Europe here: 

Maria Markantonatou, Greece
Michele Cangiani, Italy
Luis Enrique Alonso & Carlos J. Fernandez Rodríguez, Spain
Francisco Bozzano-Barnés, Spain
João Rodrigues, Portugal
César Rendueles, Spain
Antonio Palumbo, Italy

Commodification and Countermovements: Portugal against the Trend

Debate on the Crisis in Southern Europe

Commodification and Countermovements:
Portugal against the Trend

25th of June, 2020

Elísio Estanque

The dawn of the modern era and the industrial revolution showed that the triumph of economic rationality was based on the inseparable relationship between theory and practice. At the theoretical level, the economic field has become the center of disputes between different conceptions (on the one hand, liberalism, on the other, the mentors and critics of “political economy”, namely A. Smith and K. Marx), but the implications of this “Great Transformation” unfolded in two main lines of analysis: one focusing on the capitalist production relations and the class struggle (K. Marx), and another centered on the role of the market; each of them divided by critical or positivist approaches.

The so-called savage capitalism, inspired by the liberal doctrines of the economy, found in manufacturing and factory regimes in the 19th century its main antidote, that is, the workers’ movement. In fact, as K. Polanyi proclaimed, the “free market” law as a source of “self-regulation” was never more than a myth. Therefore, when society’s essential resources – such as land, labor and money – became commodities for the new capitalist market, society reacted: “Such an institution could not exist for any length of time without annihilating the human and natural substance of society; it would have physically destroyed man and transformed his surroundings into a wilderness”[1].

In other words, the excesses of mercantilism generated the opposite effect, allowing new progressive forces, namely the social struggles lead by the trade union movement. Without it the institutionalization of labor law and the regulation of markets would never have been possible. As we know, the entry into the new millennium brought about new phenomena, but those somehow convey similar logics. Again, the role of the market ideology became decisive. On the other hand, as in the past, countermovements forced to curb mercantilist deregulation. Again, the 21st century, crisis, austerity and individualism has not failed to provoke new waves of resistance.

The wreckage of social rights that we have witnessed in recent decades, particularly in Europe, were a result of the triumph of the new neoliberal ideology. This was the engine of the growing power of financial markets and the growing dominance of largest corporations over states and democratic institutions, aggravating social inequalities, labor rights and injustices. As a result, civil society was challenged to resist. However, despite the global scale of the economic and financial crisis of 2008-2009, its impact was felt differently due to the socio-economic asymmetries and institutional weaknesses of each country. The greater the peripheral economies the greater severity of the impact.

In the case of Portugal, the violent austerity during the recent international financial assistance by Troika (2011-2014) resulted in a huge social setback, particularly for the most vulnerable segments of the working and middle classes. On the other hand, the violence of the measures and the surrender of the right-wing government to the power of international creditors contributed to awaken the Portuguese from their lethargy.

Since March 2011, there has been a cycle of spontaneous social movements that, side by side with the organized strength of trade unionism, helped to defeat in November 2015 austerity policies, and contributed to the emergence of a new majority of the left (alliance between left-wing parties PS, PCP and BE). The path was opened for social policies that stopped and restored a large part of the cuts and reduction of rights imposed by the previous government. Thus, despite the persistent constraints imposed by the obligations imposed on Portugal, as a member of the EU, the country has remained on a progressive route, resisting the growth of the far-right. We do not know, however, until when.

[1] Polanyi, K. (2001): The Great Transformation: The Political and Economic Origins of Our Time. Boston, MA: Beacon Press, p. 3.

Elísio Estanque

Professor at the Faculty of Economics,
Researcher at the Centre for Social Studies
University of Coimbra
Portugal

Read the other essays on the Crisis in Southern Europe here: 

Maria Markantonatou, Greece
Michele Cangiani, Italy
Luis Enrique Alonso & Carlos J. Fernandez Rodríguez, Spain
Francisco Bozzano-Barnés, Spain
João Rodrigues, Portugal
César Rendueles, Spain
Antonio Palumbo, Italy

Karl Polanyi for Portugal

Debate on the Crisis in Southern Europe

Karl Polanyi for Portugal

25th of June, 2020

João Rodrigues

In The Great Transformation, Polanyi warned about the dystopian consequences of the institutional uniformity imposed by liberal utopias, treating as commodities elements that could or should not be commodified, such as money, a product of statecraft, or labour, life itself. In 1944, he hoped that “Out of the ruins of the Old World, cornerstones of the New can be seen to emerge: economic collaboration of governments and the liberty to organize national life at will.” [1] In the struggle between democratic sovereignties and international capitalism, the former could win if the countermovement of social protection had socialist inclinations and relevant policy instruments.

More than seventy-five years later, seen from Portugal, one has ample reasons for pessimism. Since the nineties, Portugal has participated in a European neoliberal experiment of a federal bent. As Polanyi warned us, “the idea of federation” can be a “nightmare of centralization and uniformity”. [2] The centralization was post-democratic and asymmetric in its institutional configurations and territorial effects. Democracy was hollowed-out by the divorce between the Central Bank and the national Treasury, by the imposition of maximum freedom for capital to arbitrate between different fiscal and social regimes, leading to supranational pressures for national races to the bottom.

The Euro tends to generate anti-labour policies ripping apart the protections created since the democratic revolution of 1974. Without policy instruments, locked in strong currency, this European periphery endured a prolonged stagnation for two decades, combined with huge current account deficits, until the Great Recession. The crisis, from 2008 onwards, ended up generating the troika and confirmed the Washington Consensus that morphed into a Brussels-Frankfurt Consensus. In the end, the Eurozone was not akin to the Gold Standard because the ECB recognized that money was the product of public authority – Mario Draghi’s “whatever it takes”.

For Portugal the situation was ambiguous: enduring the Eurozone’s straitjacket while transforming itself into a “Florida of Europe”, and having a slow motion recovery with low interest rates. In 2015, the countermovement of protection led to a government that tried to effect something that Polanyi considered important: “It should need no elaboration that a process of undirected [and also of directed] change, the pace of which is deemed too fast, should be slowed down, if possible, so as to safeguard the welfare of the community”[3]. Neoliberalization was indeed slowed down, but not reversed. There are no policy instruments for that, nor is there yet a national-popular collective will to recover them.

Meanwhile, the current crisis of public health reveals that the national state is the space where the popular classes still have the protective institutions, like the British-style National Health Service, worth fighting for. Enfeebled by the permanent austerity imposed by the Brussels-Frankfurt Consensus, accepted internally by the dominant elites, the NHS endured because it is tremendously popular. Neoliberal utopias are never alone. Realism and a sense of common decency are still present.

The principle of habitation, of a humane society, that Polanyi so strenuously defended demands the dismantlement of the neoliberal institutions created by European Integration. We need less and better integration. Portugal still needs the “liberty to organize national life at will”. All European countries have the same need, in order to attend to their unique circumstances, while practising a functional international cooperation. Is there a decent alternative?

[1] Polanyi, K. (2001): The Great Transformation: The Political and Economic Origins of Our Time. Boston, MA: Beacon Press, p. 262.
[2] Ibid., p. 262.
[3] Ibid., p. 35.

João Rodrigues

Assistant Professor at the Faculty of Economics
University of Coimbra
Portugal

Read the other essays on the Crisis in Southern Europe here: 

Maria Markantonatou, Greece
Michele Cangiani, Italy
Luis Enrique Alonso & Carlos J. Fernandez Rodríguez, Spain
Francisco Bozzano-Barnés, Spain
João Rodrigues, Portugal
César Rendueles, Spain
Antonio Palumbo, Italy

The Spanish Double Movement

Debate on the Crisis in Southern Europe

The Spanish Double Movement

25th of June, 2020

César Rendueles

Since the outbreak of the so-called Great Recession in 2008, Spanish politics has experienced a series of Polanyian shocks. In fact, the Spanish case is an excellent example of the Polanyian concept of the “double movement”.

For thirty years, the Spanish political system was characterized by great stability predicated on the hegemony and alternating victories of its two largest parties: the Socialist Party and the People’s Party. Together, they accounted for 80% of the vote. The ideological difference between the two parties was somewhat artificial since their programs coincided in some key elements. In particular, the two converged in their allegiance to economic orthodoxy, which involved the containment of public expenditure, the deregulation of the labor market, and severe limitations on redistributive politics. The legitimacy of the bipartisan system came from a growing economy that offered promises of upward social mobility, and had the European Union as its model of progress and modernization. However, this rosy picture was, to a large extent, just a mirage. The levels of unemployment, precarity, and inequality were particularly high, and the welfare state did little to redistribute the wealth. Yet, for a while, the semblance of prosperity constituted an effective source of social cohesion.

The 2008 economic crisis blew up that social consensus in just a few months. The economic impact was devastating: millions of people lost their jobs, hundreds of thousands were evicted from their homes, and poverty rates skyrocketed. Also the bipartisan system that had dominated Spanish politics for three decades began a rapid decomposition due to a citizen mobilization unprecedented in recent Spanish history. It was a burst of social outrage, ideologically undefined. Basically, the Indignados called for a recovery of the political sovereignty usurped by the market and a reform of democratic institutions. In fact, the best-known slogan of the Indignados in 2011 seemed to be taken from a book by Karl Polanyi: “We are not merchandise in the hands of politicians and bankers.” New political actors emerged soon, trying to channel that energy to assault the institutions, and for some time it really seemed possible that a new popular force with transformative aspirations would take power.

Since then, the progressive forces have encountered important limits and, in fact, what is happening is that, again following a Polanyian pattern, vigorous reactionary and authoritarian political alternatives are also emerging. It is, of course, a process well known in many European countries. In Spain, it is still an emerging phenomenon and it is not clear that it will be consolidated. However, in the context of the coronavirus crisis, with the country literally militarized, in a state of alarm and with permanent patriotic calls for national unity against the pandemic, the window of opportunity for a post-neoliberal radical right seems evident. In the last decade, therefore, Spain has been experiencing with great force a key element of the Polanyian diagnosis: the decomposition of the utopia of the free market and the recovery of political sovereignty opens up both possibilities of emancipation and authoritarian risks.

César Rendueles

Associate Professor, Faculty of Social Work
Universidad Complutense of Madrid
Spain

Read the other essays on the Crisis in Southern Europe here: 

Maria Markantonatou, Greece
Michele Cangiani, Italy
Luis Enrique Alonso & Carlos J. Fernandez Rodríguez, Spain
Francisco Bozzano-Barnés, Spain
João Rodrigues, Portugal
César Rendueles, Spain
Antonio Palumbo, Italy