Oct 1 2005

Europe Says No–to Pundits’ Advice

“Painful reforms” find few takers

Nothing rankles bigfoot journalists more than seeing the conventional wisdom they so painstakingly craft, distill and disseminate each day simply ignored—or worse, rejected en masse—by large numbers of people. That seems to be how most U.S. pundits and correspondents interpreted this spring’s rejection of the proposed European constitution by voters in the Netherlands and France.

For years, the American press has watched in horror as continental Europe—especially France and Germany—stubbornly held out against wholesale Thatcherite economic “reform,” clinging to the sort of social protections and economic regulations that the media’s corporate owners despise. Buttressed by a phalanx of investment-bank economists who furnish them with the needed quotes, American foreign correspondents, opinion writers and jet-setting world-affairs mandarins have developed a cottage industry devoted solely to lecturing the Europeans on the need for “painful economic reforms.” Yet the Europeans have often refused to obey—and for a Washington pundit, there is no greater insolence.

The proposed reforms, being indeed painful, must be carefully presented, in a tone of cool assurance, as “inevitable”—regardless of the voters’ preferences. But the Europeans have sometimes succeeded in thwarting efforts to introduce the “inevitable” policies, thereby revealing the uncomfortable fact that they were never inevitable in the first place.

When this happens, it leaves the Washington pundit class with no choice but to write sulky, exasperated columns accusing the Europeans of being sulky and exasperating—of refusing to live in the “real world,” the world inhabited mainly by the journalists themselves and their investment-banker sources. The cycle is completed when a new round of European “reforms” is proposed and their inevitability once again resurfaces. (As in any political campaign, it is best not to insult the voters just before election time.)

In the wake of the French and Dutch referendums, the U.S. media were in full sulking mode. “Instead of embracing change with the vigor and élan that has been their historical trademark, many French seem afraid and petulant as they cling to a heroic image of their country that no longer matches reality,” Time reporter James Graff complained on the eve of the French No vote (Time European edition, 5/30/05), scoffing that the French seek to “penalize Central Europe’s embrace of low corporate taxes, and loosen the reins on deficit spending.”

Washington Post economics writer Robert J. Samuelson (6/15/05) announced “The End of Europe,” depicting the voters’ judgment as merely the symptom of a larger problem: “Many Europeans—maybe most—live in a state of delusion,” he wrote. Europe “faces a bleak future of rising domestic discontent and falling global power” unless it raises economic growth. “One way to revive economic growth would be to reduce social benefits, taxes and regulations,” Samuelson suggested, deeming this happy ending to be unlikely.

The mainstream media ruled out, virtually unanimously, the idea that there can be any debate over the sources of high unemployment in the big European countries; the bankers’ remedy is the only one worth discussing. Yet the facts are not so one-sided. It should not be too much to expect reporters to note occasionally that in Scandinavia, where taxes are far higher, unions much stronger and unemployment benefits a great deal more generous than in France or Germany, unemployment rates are low—4.4 percent in Norway, 5.4 percent in Denmark and 6.4 percent in Sweden last year (OECD Economic Outlook, 6/05).

Nor should it have escaped the press’s attention that Europe’s notoriously tight monetary policy might be a culprit in producing slower growth rates than in the U.S. Beginning in the mid-1990s, Federal Reserve chair Alan Greenspan unexpectedly allowed U.S. unemployment to fall far below his own previously declared “natural rate,” then waged a relentless stimulative campaign to combat the 2001 recession.

In a curious inversion of logic, Newsweek’s Karen Lowry Miller briefly considered this point, in an article for the magazine’s Atlantic edition (5/30/05), before dismissing it: “Though politicians have blamed [the European Central Bank] for not boosting growth, that was never part of its formal mandate, which (unlike the U.S. Federal Reserve) focuses [solely] on inflation fighting.” Europe’s real problem, she explained, is that “national politicians are afraid to force through the deregulation needed to promote a flexible, competitive economy.”

The proposed constitution would have introduced no new free-market reforms on its own. But the campaigners against the treaty opposed it on the grounds that its procedures would have made existing neoliberal policy measures harder to amend and new progressive initiatives more difficult to envision; it would lock in the deflationary tendencies of the central bank, and weaken Europe’s prospects of developing a common foreign policy as a counterweight to the U.S. (New Left Review, 5-6/05).

Although some marginal far-right European parties, along with purists on the laissez-faire right such as the Wall Street Journal editorial page (6/6/05) and the Economist (6/4/05), attacked the constitution from the opposite direction, it was the left-wing leadership of the anti-treaty movements in France (where the Communists and ATTAC took the lead) and the Netherlands (where the most active opponent was the small Socialist Party) that inspired the hostile reaction from U.S. pundits.

Witness the nearly hysterical column by New York Times Berlin correspondent Richard Bernstein on the new German political party recently launched by former finance minister Oskar Lafontaine, a leading leftist opponent of the constitution treaty. (Originally published in the International Herald Tribune on July 29, a toned-down version of the piece ran in the August 1 Times.)

Baldly describing the Left Party, a grouping of dissident Social Democrats and former East German Communists, as “an unsettling new feature” of German politics, Bernstein savaged “its reliance on false economic premises [and] its soak-the-rich demagogy,” and called its economic program “the sort of prescription that most economists think would turn Germany . . . into Ukraine, without Ukraine’s optimism about the future.”

On the surface, it may seem surprising that local debates over domestic economic policy in faraway countries would elicit such vitriol and anguish in American journalists. But there is a subtext to the coverage that is not hard to discern. The very persistence of egalitarian economic policies in these rich and democratic countries sends an unhealthy message to Americans, who themselves are frequently the subjects of urgent media campaigns insisting that they docilely accept whatever “painful reforms” are now dictated by “modern realities”—whether it’s CAFTA, cuts in Social Security, or, as a Washington Post editorial suggested not long ago (8/17/04), “capp[ing] the number of heart surgeries” paid for by Medicare.

Since it might seem too “political” to spell out this deeply political subtext, most pundits don’t. But following the failed referendums in Europe, conservative New York Times columnist David Brooks (6/2/05) cautiously broached the subject. “Forgive me for making a blunt and obvious point, but events in Western Europe are slowly discrediting large swaths of American liberalism,” Brooks wrote.

Most of the policy ideas advocated by American liberals have already been enacted in Europe: generous welfare measures, ample labor protections, highly progressive tax rates, single-payer health care systems, zoning restrictions to limit big retailers, and cradle-to-grave middle-class subsidies supporting everything from child care to pension security. And yet far from thriving, continental Europe has endured a lost decade of relative decline.

On the “other” side of the political divide, Brooks’ fellow Times writer Thomas Friedman was aiming for a similar point (6/24/05). Sure, it’s easy to make fun of the French, Friedman wrote in his inimitable style: “What a bunch of antiglobalist Gaullist Luddites! Yo, Jacques, what world do you think you’re livin’ in, pal? Get with the program! It’s called Anglo-American capitalism, mon ami.” But Friedman had a far more serious point to make. The European sickness was threatening to spread to America. Right here at home, he warned, U.S. Congressmembers, “many of them Democrats,” were threatening to vote against CAFTA, and for the same reason: “A protectionist fear of competition in a world without walls.”

In case it wasn’t clear why so much effort is expended denouncing the Europeans, Friedman (6/24/05) quoted former Bush foreign-policy planner Richard Haass: “We should not assume that this backlash . . . that is going around is just a French malaise or Dutch elm disease. It could happen here.”