Facing Europe’s huge challenges

The outlines of a new progressive narrative for Europe are emerging amid the smoke from forest fires and the war in Ukraine.

A Green and Global Europe, Nathalie Tocci, Polity Press, 2023

Resilient Welfare States in the European Union, Anton Hemerijck and Robin Huguenot-Noël, Agenda Publishing, 2022

EU Industrial Policy in the Multipolar Economy, Jean-Christophe Defraigne et al (eds), Edward Elgar, 2022

A Modern Migration Theory: An Alternative Economic Approach to Failed EU Policy, Peo Hansen, Agenda Publishing, 2021

How the West Lost the Peace: The Great Transformation Since the Cold War, Philipp Ther, Polity Press, 2023

Russia Against Modernity, Alexander Etkind, Polity Press, 2023

It has become commonplace to suggest that Europe faces a rolling, accumulating and interconnected ‘polycrisis’: the climate and biodiversity catastrophe, the Russian invasion of Ukraine, the ravages of inflation and the growing human flow desperately seeking a haven within the continent—not forgetting the possibility of new waves of global pandemic. These books variously offer explanations and prescriptions—which also turn out to be interlinked—for aspects of Europe’s ‘polycrisis’ and how to surmount it.

The challenges are simply of too great scale for individual European Union member states—as the chaotically buffeted United Kingdom, having elected to go it alone in a spasm of collective narcissism, shows all too clearly. Indeed, because they are worldwide rather than European, Europe is also called upon to offer compelling global as well as European solutions.

Green and global

For Nathalie Tocci, director of the Istituto Affari Internazionali in Rome, ‘Europe’s green agenda has given the Union a new lease of life’. Without it, all else risks becoming meaningless, given ‘the existential nature of the climate crisis’.

But for Prof Tocci Europe’s rationale now ‘can only be global’—nowhere moreso than on climate change and the energy transition. With Europe’s postwar association with peace now too dim for today’s generations and the prosperity promised by the single market’s reliance on the great simplicities of neoclassical economics beached by the 2008 crash and subsequent austerity, by ‘painting its flag green’ the EU can ‘help save the planet while reviving itself politically’.

The scale and necessary speed of the transition are such as to require massive investments, including in ensuring it is socially just and so politically sustainable. Already it seems the European People’s Party is looking to join the far-right populists at next year’s European Parliament elections in seeking to stir up a backlash among those insecure about the social impact of the green agenda.

While Tocci points to the National Recovery and Resilience Plans, the Just Transition Fund and the Climate Social Fund, she warns that these only amount to the ‘tip of the iceberg’ of what is required. Yet the EU’s fiscal rules, currently in process of revision, still represent an ordoliberal injunction against deficit spending, failing to recognise the crucial difference between investment and day-to-day expenditure and the need to protect the former. The recently adopted EU Chips Act, for instance, is much too modest.

Social investment

Anton Hemerijck and Robin Huguenot-Noël concur that, in the absence of a genuine EU fiscal policy, ‘social investments’ should be discounted from the deficit and debt rules. The Maastricht treaty from which these ultimately derive embodied the ‘supply side’ economics of the late 20th century, which deemed price stability, fiscal conservatism and market ‘liberalisation’ keys to productivity and employment. Hemerijck and Huguenot-Noël show instead that expansive European welfare states investing in their citizens, from early childhood education and care to active ageing, have engendered virtuous circles of employment and productivity enlarging the revenues on which they depend.

This social-investment paradigm, they argue, proved the ‘unsung hero’ of the Great Recession, cushioning the big welfare states in particular through the credit crunch and the eurozone crisis. And they conclude that the climate crisis should not now imply a turn away to ‘hard’, infrastructural investment: ‘Resilient welfare states are the sine qua non for a “just transition”.’

While the EU only accounts for a low and rapidly falling percentage of global emissions, for Tocci it has a much larger historic responsibility, owed to the global south, and is the only region with a plan for climate neutrality and a pathway for this decade. If there is ‘common cause’ with the United States, a ‘critical mass’ can be obtained worldwide, ‘difficult for others to ignore’.

If the EU turns outwards it can put its stamp on a world otherwise seething (legitimately) with a sense of climate injustice, which China and Russia can geostrategically instrumentalise. Tocci, adviser to the former European high representative for foreign affairs and security policy, Federica Mogherini, worries however that there is not the ‘all of government’ approach, within and without the union, required. The prospective return of Frans Timmermans, vice-president of the European Commission responsible for the European Green Deal, to Dutch national politics is not reassuring in that regard.

Industrial districts

Should Europe’s lead not be followed globally, Tocci warns, it could become increasingly lacking in competitiveness with a hollowed-out industrial base. The volume edited by Jean-Christophe Defraigne and colleagues addresses the deficit of an industrial policy in Europe, where since the 1980s neoliberalism ‘had considered the term obsolete’ and ‘powerful industry lobbies’ have been able to capture the commission.

The European Green Deal is just such a policy. But the Treaty on the Functioning of the EU confines the union’s role in this arena to supporting, co-ordinating and supplementing the member states and bars any ‘distortion of competition’ (illegitimate ‘state aids’), in line with the orthodox-economics nostrum, of Pareto efficiency, that optimal allocation of resources will stem from unregulated markets.

It thus lacks the necessary ‘supranational tools’, say the authors—including a budget confined to less than 1 per cent of EU gross domestic product—to achieve the aggregations into transnational ‘industrial districts’ required today. So it is unable to match the power of the US or China, risking it becoming ‘increasingly irrelevant’ in their ‘global rivalry’. The Green Deal Industrial Plan for Europe launched by the commission in February essentially repackages existing funds.

Lack of solidarity

Tocci also signals how, until it came to the exodus from Ukraine, the EU exhibited a ‘profound lack of solidarity’ in providing a common solution to refugee inflows. Peo Hansen shows that this lack of solidarity—even of human empathy towards refugees perishing in such numbers in the Mediterranean—stems not only from the xenophobia less manifest when the skin colour changed from brown and black to white.

Behind the EU deals with authoritarian regimes in Turkey and Libya to curb people movement and the blind eye turned to pushbacks in Greece, Prof Hansen detects the influence of ‘sound finance’, with its implication that migrants are a ‘burden’ on the welfare state and (because they will only be later integrated into the labour market) refugees a bigger burden still. Hence even Germany and Sweden, most receptive during the major inflow of 2015, gradually regressed to the European mean in later years, despite the relative success of their integration experiences.

Hansen shows how this played out in his native Sweden. Magdalena Andersson, then social-democrat finance minister, said in the autumn of 2015 that Sweden’s refugee reception was ‘financially unsustainable’. Public institutions monitoring the country’s fiscal outlook agreed with the Ministry of Finance. Along with the central bank and the European Commission, they forecast the budget balance going into the red in subsequent years, linking this to the expenditure on refugee reception and integration.

Yet they were all wrong. The government balance remained in the black—indeed the 2016 and 2017 surpluses were the highest in nearly a decade. The orthodox economists had simply failed to take into account the impact on demand, and so government revenue, of this Keynesian investment in newcomer Swedes.

Hansen points out that Sweden is totally dependent on these new members of its labour force. Close to 30 per cent of those working in social care are foreign-born, overwhelmingly of refugee backgrounds. Looking only at the financial resources devoted to refugee programmes misses the real resources their labour injects, ‘rejuvenating Sweden’s labour stock’.

Indeed, one can go further. The Intercultural Cities programme of the Council of Europe, now attracting the membership of more than 160 cities around the world, has clearly demonstrated the ‘diversity advantage’—in economic innovation, social dynamism and cultural vibrancy—of well-managed integration. This has now been translated into a model framework for national integration plans, including their multi-level governance, adopted by the 46 member states of the council last year after the exit of Russia—which had been supporting destructive amendments—in the wake of the invasion of Ukraine. This provides an important standard behind which progressives can rally against the populists.

Pendulum swing

The collection of essays by the historian Philipp Ther starts from the question: how could the aftermath of the cold war see peace shattered ‘in an accelerating cascade of crises’? Prof Ther follows the central-European historical sociologist Karl Polanyi, who in The Great Transformation identified a pendulum swing in the history of capitalism between laisser faire and the social embedding of markets, the latter defining Europe and the US in the postwar period. The pendulum swung back to laisser faire in the 1980s, with what Ther shows to be disastrous socio-economic results for the individuals and regions now deprived of social support, associated with the political resurgence of interwar populism.

Implemented with particular fervour in the former Soviet bloc after the fall of the Berlin wall and the collapse of the Soviet Union, this ‘shock therapy’ of privatisation and marketisation issued in a ‘social and economic catastrophe’ in Russia, from which, as a Polanyian counter-movement, Vladimir Putin’s anti-European Russia nationalism was to emerge—antithesis of the ‘common European home’ promoted by the last Soviet leader, Mikhail Gorbachev. In this ideology, Ukrainians have played the role of ‘traitors to the great Russian nation’ and Ukraine thus became a state to be erased from the map.

Despite the warning of Russia’s 2014 occupation of Crimea, for Ther western elites, especially in Germany, ‘were too slow to realize and still do not fully understand that Russia’s two wars against Ukraine are also a declaration of war against the EU and a free Europe’. Germany had pressed ahead with the Nord Stream 2 pipeline, increasing its dependency on Russian fossil gas.

Indeed, for Alexander Etkind—another history professor at the Central European University in Vienna—Putin’s ‘special military operation’ is not just a war on Ukrainian statehood. It is also ‘a broader operation against the modern world of climate awareness, energy transition and digital labor’.

Baleful influence

A thread running through these books has been the baleful influence, over the decades since the 1970s fossil-fuels producers’ supply cut, and associated inflation, of the disingenuous scapegoating of Keynesian economics for what we can now see simply as the first signs of the emerging ‘polycrisis’. The True Believers in the classical tradition John Maynard Keynes had so effectively dismantled in his General Theory misrepresented the inflation of those times as the consequence of not allowing markets—especially labour markets—to clear unhindered.

‘Neoclassical’ economics, as it then became known, provided the intellectual foundation for the politics of neoliberalism, which in reality left society to the tender mercies of burgeoning corporate monopolies exercising unbridled power over markets. Financial titans engaged in more and more risky rent-seeking (against an implicit, ‘too big to fail’ public subsidy), precipitating the 2008 crash, while Big Oil and Gas literally fuelled (while simultaneously obfuscating) the gathering ecological disaster.

A Polanyian movement for these times, then, would clearly aim to supplant economic orthodoxy, re-embedding markets in a European public sphere flushed with investment for social wellbeing, in line with the European Pillar of Social Rights, and driving a green energy transition and industrial revolution, including through an enduring successor to the Recovery and Resilience Facility. As an antidote to populism, this Europe would support universal norms and international human-rights obligations when it comes to peace and people movement, rather than subjecting these to a misplaced ‘business’ or ‘fiscal burden’ calculus.

Ready audience

It is equally clear from these various texts, though, that the EU lacks the competences and resources to be adequate to such enormous challenges. The European Parliament elections next year will be an opportunity to be straight with European citizens that—as the experience of the Conference on the Future of Europe indicated—much greater federal ambition is required to make those ‘supranational tools’ available, including through progressive and green individual and corporate taxation to enhance the EU’s ‘own resources’.

Yet that could find a more ready audience than some might think. Hemerijck has been involved in a project between the European University Institute and the polling organisation YouGov, running since 2018, called ‘Solidarity in Europe’. Against the backdrop of the pandemic and the war in Ukraine, its annual iterations have seen a growing readiness for solidarity, higher taxes for welfare and EU leadership of crisis management.

The project has also tested what kind of Europe its citizens want, offering four options for this political community:

• a ‘global’ Europe, leading on climate, human rights and peace;
• a ‘social’ Europe, emphasising fair and equitable living standards;
• a ‘protective’ Europe, defending the European ‘way of life’, and
• a ‘market’ Europe, focused on market integration.

In 2022, 23 per cent supported the first and 27 per cent the second; just 19 per cent supported the third and fourth in each case.

Especially in light of the emerging dalliance of the EPP with the far right—take the extraordinary agreement in July among the commission president, Ursula von der Leyen, the Dutch prime minister, Mark Rutte, the Italian populist premier, Giorgia Meloni, and the authoritarian president of Tunisia, Kais Saied, on a deal to keep refugees at bay—it is not hard to see the alliance which could be forged behind a progressive vision for Europe, ahead of the EP elections, with at its core the Socialists & Democrats, the Left and the Greens. This could carry over into a potential progressive majority in the parliament—in a five-year term crucial for the future of the planet.