What positive agenda for EMU reform?

Progressives have to take the initiative

In a January 22, 2018 article for Social Europe,1 László Andor takes a closer look at the vague concept of “austerity”. Its polysemy creates confusion and obfuscates the truth of what policy mix is being pursued or implemented. Austerity means different things to different people and, consequently, is an inappropriate term both for formulating policy as well as criticising certain measures or the conventional wisdom.

Mr. Andor’s scintillating analysis can be read as a partial critique of the powers that be, though it applies just as well to people on the left of the political spectrum. Progressives could not put forward a credible alternative prior to—and during the height of—the euro crisis and have since failed to lead the efforts on determining the future of Economic and Monetary Union. Part of the reason is that the midpoint of their politics is negation. They “reject”, they “fight against”, but ultimately expend much of their energy in reacting to what others put on the table, rather than emphasising their own proposals. More work needs to be done in articulating the alternatives. As Mr. Andor puts it:

“No austerity” is not a policy. If austerity is used to describe ideological, neoliberal or conservative policy choices, an alternative (progressive or enlightened) economic strategy has to be defined in a positive way, that is listing the possible measures austerians overlook, oppose or refrain from using.

As regards the EU, a differentiated critique of austerity is needed not only for the sake of analysis but also for charting the progressive way forward. Outlining what needs to be done, as opposed to what needs to be undone, can lead to more fruitful political discussions and decisions.

Concepts and their meta-narratives matter greatly

Words carry multiple significations that are linked to cultural images, associations between meanings and events, and value judgements. Fastened upon them is a nexus of narratives that further elaborate those beliefs and embed them in everyday life in a variety of ways, including as practical morality. The interpretation of new phenomena can thus be filtered through those predispositions to inform the public debate where [new] opinions are formed.

Take the word “PIGS” as a case in point. That was the seemingly innocuous acronym coined to refer to the southern EU countries that were beset by the economic downturn in the early years of the Great Recession: Portugal, Italy, Greece, Spain. The acronym was often accompanied by imagery that would present those countries as pigs; hogs with a voracious appetite for money.

The way this relates to austerity is three-fold:

  1. Gain the moral high ground. Describes the problem as one of human frailty manifesting in the vice of irresponsible consumption/spending.
  2. The crisis is self-inflicted. Implies that those people are overly fed, cannot control their destructive propensities, and can thus enjoy some trimming of their ‘fat’.
  3. Dehumanise and desensitise. The depiction of humans as animals is a common technique in propaganda to help ease any moral restraint on the potential pain inflicted on the target.

Couched in those terms, austerity was spun as largely positive. A corrective to a lifestyle of sin, of gluttony. A policy mix for cutting the excesses. As such, the arguments against the proposed measures were all too conveniently dismissed in advance as self-serving rationalisations of the modus vivendi. It was extremely difficult to get the message across that there were systemic forces at play. That the crisis was amplified by both the history (path dependencies) and the very design of the euro architecture. That the brunt of the barbs had to be directed to certain mega-banks for their irresponsible exposure and excessive leverage (for indulging in “casino capitalism” or for generating the debt-driven bubbles). That prior to the crisis the EU had no sufficient mechanisms for assessing and addressing systemic risk. That the absence of a fiscal and a financial union was creating centrifugal tendencies which took the form of localised feedback loops between stressed sovereigns and fragile banks, as well as system-wide fragmentation. And so on.

At the height of the crisis, none of that ‘nuance’ mattered to the general public. It seldom made the headlines. It was all about rescuing those “lazy PIGS” from themselves and punishing them accordingly so that they would not do it again. Otherwise, the spotlight was on some doomsayer predicting the imminent collapse of Europe’s single currency, while attaching a high probability rate to the exit of Greece from the euro—Grexit—within the next three months or so. So much drama and nonsense!

At any rate, the nuance was not lost. Often without much fanfare, European policy-makers were addressing the design flaws of the EMU. The Stability and Growth Pact was revised and complemented by an array of regulations, including two new treaties: the fiscal compact and the treaty establishing the European Stability Mechanism. Bank supervision was overhauled as new EU agencies were established. The European Systemic Risk Board was created, while the European Central Bank gained prudential powers. Economic coordination was streamlined, while the European Commission started assessing the outlook of the system as a whole, rather than just look at each country in isolation. The list goes on. The gist is that the critiques against the crass misrepresentation of events epitomised in the “PIGS” narrative were effective to some extent.

All of these insights have now become common knowledge and are influencing the debate on the future of Europe. Even the European Commission has acknowledged the deficiencies of the original EMU and the need for thoroughgoing reforms.2 It falls on policy-makers and other influencers to remain vigilant of hidden prejudices and to always seek to engage constructively with the findings of science.

Words and their meta-narratives are powerful instruments when combined with pre-conceived categories of right or wrong, good or bad, etc. Exposing them is sometimes necessary to develop policies that are optimal under the circumstances. Progressives are not immune to ‘ideology’ though. What is true for the downsides stemming from the vagueness of “austerity”, is also the case for such darling notions as “neoliberalism”, “capitalism”, “globalisation”.

A two-part reform agenda of incrementalism

Cutting to the nub of the issue, the left, broadly understood, has to be programmatic. It needs to tell people exactly what it wants and how it intends to achieve it. Being practical and precise is of paramount importance. It is what engenders trust over the long term. It also shows preparedness to govern, to lead the way.

Yet that is but a starting point. For the left must also be mindful of its own tendency for sectarianism and ideological purity. Ideals and pragmatism need not be at odds with each other. On the contrary, they must be combined in a two-part agenda that (a) takes a firm positive/constructive position on current affairs, and (b) uses the ideal as a guide on what to aim for next.

In the European context, the peculiarities of the integration process need to be taken into account. It is what will define the modal features of this agenda. Specifically, it has to become clear that change in Europe takes time. Things move slowly, following extensive deliberation and negotiations on a multitude of fronts. The EU is not susceptible to disruptive change, nor is it likely that it will enable some revolution from the top. To work within the EU means to adapt to its pace.

As such, the vision of what we may call ambitious pragmatism (as contrasted with the common type of pragmatism, which is conformist) can only be realised as incrementalism.

Furthermore, the agenda needs to be at least Europeanist in outlook. Though not in the sense of becoming a cheerleader for every EU programme, nor to echo the vacuous motto of “more Europe”. Europeanism in this sense has to be about a couple of related magnitudes: (i) knowing exactly what the EU is and which are the relevant avenues or domains for concerted action, and (ii) adding a cross-border dimension to the traditional analyses of inter-subjective phenomena, so as to treat EU Member States as part of an inter-connected whole and develop policies with both the national and supranational spheres in mind.

Last but not least, there needs to be more self-criticism insofar as dogma is concerned. By that I mean that leftists are often dismissive of both the ideas and the motives of people they disagree with. It is no surprise that some have even considered left wing populism as the solution to right wing populism. That is fundamentally misguided. To change society means to engage with people we may disagree with. Engagement requires a spirit of dubitativeness, inquisitiveness, and dialecticism. It also needs parrhesia (to speak the truth in honesty). Explain with facts and conceptual analysis what is wrong with other people’s views. Which is to say that you should understand them first. Do not just resort to labelling things a certain way and rejecting them without much thought. Listen to what others say. Try to empathise with where they are coming from and consider whether there may be sense to their judgement.

Stay close to the citizen

Much of this article is about theory and philosophical concerns. It would, however, be disastrous to turn progressive politics into some pastime activity for resolving esoteric arguments. Analysing words and their narratives or understanding the position of other political forces are means to the end of formulating a positive agenda. And that is so because no plan can only be about propositions. The public debate is no monologue. Progressives need to be prepared to counter the advances of others, to expose their weaknesses or, at least, to help reformulate their valid points in a spirit of compromise and consensus. This is certainly true for Europe, where coalitions of forces tend to shape policy on a case-by-case basis, such as in the European Parliament.

As for the future of the EU/EMU, the vision should be consistent with ambitious pragmatism. Do as much as possible within the confines of the Treaties. When conditions are favourable, push for Treaty change in the direction of a fully fledged fiscal and political union.

  1. Austerity: From Outrage To Progressive Alternatives by László Andor. Published in Social Europe on January 22, 2018. ^

  2. One such admission is documented in the reflection paper for the future of the Economic and Monetary Union. Consider my commentary on the EU reflection paper about euro reform. Published on June 4, 2017. ^