Once upon a time, there was a large, intellectually hegemonic, somewhat totalising ideology rooted in a heterodox school of economics. Its advocates proposed to make massive changes to the structure of society and claimed that only such a revolutionary realignment could alleviate the contradictions and failures of the existing order and save the world from stagnation and misery. They claimed that their programme would produce immediate results, and that the only reason it wasn’t immediately implemented was because entrenched interests were manipulating the public against them.
Ultimately, advocates of these principles did gain power in many places and were able to implement elements of their programme. Some came to power through revolutions of various kinds that granted them the near-dictatorial powers they needed to make the changes they believed necessary. Others were able to convince electorates and even elites that theirs was the way of the future. They turned public dissatisfaction to their advantage, especially during economic downturns when people were willing to turn to new solutions and elites feared that the masses would turn against them.
And, they had some arguable successes, but no unambiguous ones. In some places, particularly those where effectively unlimited power had shifted to them, they often maintained highly inequitable regimes which grew harder and harder to justify, faced ever growing public disaffection, and turned to more oppressive and manipulative means to sustain control. This undermined their movement, but despite the best efforts of their enemies was not quite able to kill it off.
In states where more democratic methods had been used, the need to compromise with established interests and to sustain public consent forced them to accept measures often contrary to their initial programme. Their ideological identity tended to shift over time as winning elections grew more important than ideological purity and as the drawbacks of real power became apparent. Actually being held responsible for results forced many members of this tradition to accept their enemies’ interests as at least partially legitimate, and compelled them to less radical legislative programmes.
In some of those nations, these radical parties became increasingly manipulative and difficult to distinguish from their former enemies. But, in a few places, the necessary dilution of their programme brought about an ideological synthesis that appeared successful, and this success in turn showed that the radical programmes they had once advocated were perhaps unnecessary. In the end, ideology had no real hold on them, and the models and methods that seemed to work became the political and economic programme that they were identified with. Their former allies who operated more dictatorial regimes were easily repudiated.
But others were unable to accept that option. They included dissidents who had been burned by the growing authoritarianism of their own failed revolutions, or who were simply unable to accept that their early ideological purity had become superfluous. They were isolated and powerless, only able to function in the states where their former allies had become moderates, leaving them without meaningful public support. They fumed at the world’s unwillingness to go the way they wanted, and increasingly recast the history of the world in terms of their own ideological predispositions. The past became, in their minds, an unending conflict between an ideologically pure vanguard and scheming established interests, a story of their courageous champions betrayed by back-sliding traitors. Ultimately, the world moved on and these radicals virtually disappeared outside of intellectually protected milieux like privately-funded think tanks and universities.
Of course, by the now the astute reader will have recognised that I am talking about the history of neoliberalism.
Neoliberalism is rapidly becoming the socialism of the 21st century, and as proof, I offer you John Gillingham’s voluminous history of the European Union, European Integration 1950-2003: Superstate or New Market Economy. It recasts the entire history of Europe, and of EU institutions in particular, as the combat of a courageous vanguard of free-market activists against duplicitous unions, socialist political establishments, and entrenched, government-supported bureaucrats and monopolists. If Friedrich Hayek is the Karl Marx of this grand fairy-tale, the hero of the revolution – Gillingham’s Lenin if you will – is Margaret Thatcher. And when the revolution is repudiated – a process already well underway – I predict that Gillingham will be one of its academic Trotskyists, forever complaining about how compromises and betrayals prevented Europe and the world from fulfilling the historically inevitable mission of an entrepreneurial revolution. Just as socialist revolutionaries used to complain about how the workers are always willing to accept such bourgeois blandishments as job security, regular raises, long vacations and home and automobile ownership over the proletarian revolution, I foresee for Gillingham a future of bitching about how the people never could understand that good returns in the financial markets were more important than whether or not they had paycheques that could pay their bills.
Gillingham’s work does have some genuine virtues which I wish to encourage, and it is with these that I really ought to start. Gillingham is quite partisan, and his own ideology is clear and laid out almost from the beginning. I am far happier to see this than to find the same ideological claims marketed under a label of “objective.” Second, for a classical liberal (he refuses the label “neo-“) he is occasionally capable of showing some sympathy to people with other ideas. He appears to understand that compromise and give-and-take have been a part of the EU from its early origins and he does not consider this an inherently bad thing. Indeed, I found his early history of the EU quite informative and even compelling. Unlike real Euroskeptics, Gillingham – an American I should add – is quite sympathetic to the political goals of the early Europeanists. The devastation of WWII, the need to establish peaceful means for resolving conflicts and to restart economic growth were, in his mind and in mine, more than good enough grounds to accept some less than savoury compromises. Jean Monnet is, of course, demonised, but less so than in many recent Euroskeptical tomes. The relative unimportance of the European Coal & Steel Community and Euratom – both institutions which are given great weight in standard histories of the EU – is made plain in Gillingham’s book. De Gaule’s famous non to UK membership is actually defended on the grounds that the EU might well have become a mere trade pact had that happened. Gillingham sees in the EU the prospect of something much better: a mechanism for the establishment and propagation of a truly Hayekian entrepreneurial capitalism.
I guess I am sympathetic to Gillingham because I identify with him. We are both non-Europeans who see in the EU the prospect for something grander, something that would be good for the world, and something linked to very much minority ideologies in Europe that are far more widely accepted in our respective homelands. He dreams of the EU as a civilisation built on the rule of markets, a model of undirected self-organisation fulfilling everyone’s dreams of prosperity, democracy and human rights. I dream of an EU built on the rule of a borderless cultural and linguistic tolerance, a model of a community built on the notion of a shared fate where people can have real freedom and real equality despite very different kinds of lives. Both of us believe that the world needs such models.
Gillingham identifies a turning point in the history of EU that revolves around the election of Margaret Thatcher. He calls this “regime change.” The use of this already hoary Bushism does not help him. He credits – possibly even with some accuracy – Margaret Thatcher with the Single European Act and sees this as reinjecting life into the EU after it faded into insignificance in the 70’s. But, he sees the 90’s as an era when the EU stagnated and accomplished nothing. This perspective is perhaps a bit far from most people’s memories of an era when the EU rose in prominence in almost everyone’s mind, but makes perfect sense to someone of Gillingham’s predispositions. Movement towards freer markets, dismantling unions and abolishing social protections is progress. All else is regression.
One of my great frustrations with this book was my hope to find within it at least some historical insights that I could trust and build on, regardless of their ideological orientation. I only found real historical insight in the first part of this book. As soon as he starts talking about the 1970’s, I find myself sceptical of his claims, and after 1980 I can not take him at his word on any matter at all.
I had hoped to be able to write a sympathetic review, thinking that I could look past my ideological differences with Gillingham and see his book as a productive text. But it was with the beginning of Part III – 147 pages into this nearly 600 page tome – that I realised that I was going to end up writing a sarcastic and negative critique. The unique prospect of a Hayekite Europhillic vision – something Chris Brooke laments not finding among British Conservatives and which got some mention on Crooked Timber a while back – was sufficiently interesting and potentially useful to me that I was prepared to accept our inevitable disagreements over exactly what sorts of goals the EU should be trying to pursue.
Some of my readers will find this surprising, but I find myself frequently in agreement with the more free-thinking wing of Hayekism. I have long hoped to one day see the rise of a sort of “left Hayekism” able to accept his genuine insights, and even build on them, while rejecting his Whigish carping about how the world will go to hell in a hand-basket if we have socialised medicine or labour unions.
But I just can’t give Gillingham a positive review beyond the first 150 pages. From then on, the book becomes a free-market stroke fantasy that revels in the firm, and as far as I can tell basically religious, conviction that There Is No Alternative.
He starts with a discussion of the “Reagan Revolution” and the effects of deregulation in the US. For Gillingham, this is an unmixed blessing that brought “huge cost savings as well as remarkable improvements in service.” Perhaps I am assuming too much to think that he actually lived in America in the early 80’s, but I certainly did, and I remember that era. The examples of deregulation he cites – deregulation in the airlines, trucking and banking industries and the dismantling “Ma Bell” – produced some cost savings, in some cases, sometimes. A long run analysis involves building a contrafactual world in which deregulation didn’t take place, and all such model building is inherently subject to criticism. The airline industry for instance was already seeing significant price declines when it was deregulated, and current prices are in line with the pre-1980 trend.
However, one thing I do remember quite clearly is how deregulation in each of those areas drastically reduced the quality of service. Airlines service was a mess for years, especially after the acrimonious end to the PATCO strike and the constant din of bankruptcies. Telephone service under the “Baby Bells” and the new long distance providers was somewhat cheaper – eventually – but reliability did not return to 1980 levels for a decade, and most of us who were teens in that era mostly remember cheap phones with bad sound that broke a lot. Trucking moved from a stable source of employment for many underskilled people to an industry that pays minimal wages, offers no benefits, and has a major stimulant abuse problem. And as for banking, it is still difficult to determine if there were any gains at all when the costs of the S&L scandal are taken into account.
There were certainly legitimate grounds for regulatory reform in many areas. Rational and reasonable reforms might well have been advanced in the early 80’s, perhaps in a parallel universe where there was a second Carter administration. But that was not what happened in the first Reagan administration. What happened was a free-for-all where for the first time industries could write their own regulations and could expect what regulatory codes were still on the books to go unenforced. It cost Americans money, safety, security and in some cases their lives. To fail to set these costs against the gains in financial markets is dishonest.
Gillingham goes on to claim that “[t]he American recovery from the 1980-1982 recession was rapid, disflationary, and rested on a changed economic and political context.” It was certainly not rapid, not when compared to previous recoveries, and Volcker’s disinflationary policies caused enormous damage by keeping wages falling through the recovery nd the “boom” that followed, reaching their 1979 levels only in the mid-90’s.
Gillingham’s history of free-market “regime change” around the world cites virtually no statistics. There is a reason for that: The statistics don’t lend support to his narrative. American wages fell during that period, median household income was largely stagnant, and what little growth there was in household income rested on the rise of the two-income family and on longer working hours. This process was utterly devastating to a great many Americans. If you intend to make a case that “regime change” was necessary I expect you to at least acknowledge the immense damage done.
Gillingham goes on to chronicle the “success” of these sorts of policies elsewhere. He neglects the costs in each case that I know anything about, and cites statistics for none. He regards New Zealand, for example, as the grand success story of free-market reform. I have yet to meet a New Zealander prepared to agree. Declines in real wages, loss of income security, declines in market competitiveness in some cases, increases in corruption – none of these things happened in Gillingham’s fantasy world, or at least don’t seem to merit mention. The closest he comes is in his remarks about New Zealand’s reform:
The timeliness and effectiveness of economic reform in New Zealand did not, to their shock and amazement, win the socialists another term in office. In 1990 a resurrected National Party swept them out of office as thoroughly as they had blown away the Nationals only four years earlier. Even in New Zealand, pain outweighted gain.
Gillingham neglects to point out that economic growth was actually negative during the 1984-1990 Labour administration and anaemic through the whole 90’s, averaging 0.5% annually for the next 15 years. Confronted with these statistics, I’m sure he would either claim that the reforms were incomplete, that growth failure was the result of the previous policies and would have been even worse without reform, or that this was a consequence of external phenomena in the global market. I’m sure he wouldn’t realise that those claims are identical to the ones that used to be made for the Soviet Union.
This complete lack of statistics, or even evidence of having been on the planet in the 80’s, makes me profoundly distrustful of him. Denmark’s economic success is attributed to its adoption of liberal economic values despite its continuing use of partially centralised collective bargaining. Sweden’s failure is attributed to low productivity growth, even though the US had even lower productivity growth, and is never set against its near full employment. French privatisation is attributed with its economic recovery, even after admitting that it was a deeply corrupt process driven by political considerations. Amusingly enough, he supports the 35-hour work week initiative of “crypto-Trotskyite” French ex-PM Lionel Jospin, because Jospin’s compromises led to it really becoming a labour flexibility initiative that enabled employers to cut back workers’ hours. No adequate explanation for Italy’s economic growth is offered at all. A believer in government non-intervention and transparent economic policies really ought to have to explain this. Gillingham even offers a half-hearted (or maybe quarter-hearted) endorsement of Franco and the franquists who remained in the Spanish administration.
It goes on and on. Britain under Thatcher is a bastion of growth and light in the darkness of Keynesian and socialist Europe, a liberating beacon of freedom from trade unions, from income support and from social solidarity. No effort is made, no consideration given, to any actual economic data. There is never the slightest hint that all was not always well in the UK in the 80’s. Never do you get the impression that British industrial output did not reach its 1979 levels until 1987. Nowhere is there the suggestion that if manufacturing productivity grew in the UK, it might have been because so many plants were shut down, or that productivity growth essentially stopped in 1986 when plant closures stopped. No meaningful defence of the economic policies Gillingham considers essential to the EU is even attempted.
In fact, you can skip the whole of chapters 8 and 9 by simply assuming that Gillingham was born in 1994 and knows nothing about the 80’s except what he’s read in the Wall Street Journal and certain carefully selected issues of The Economist. A look at his endnotes is quite revealing. His discussion of the Thatcher years is cribbed almost entirely from Thatcher’s autobiography Downing Street Years and Nigel Lawson’s The View from No. 11. His account of the failure of the welfare state in the rest of the world is also taken from exceedingly few sources – all in English – and the ones I recognise are all quite aligned with Gillingham’s ideology.
From the beginning of Part III onwards, it gets worse. Gillingham’s great contribution to European studies is his claim that the Thatcher revolution brought about European “regime change” – a definitive break with the Keynesian and socialist ways of the past, brought on by what appears to be a very Marxist conception of economic contradictions and dialectical movement. The understanding that he brings to pre-1980 political figures who do not share his ideology does not extend to those socialist, Keynesian and labour unionist establishmentarians who dare to resist the revolution afterwards. The evidence of historical insight and research he offers us at the beginning of his book is drowned by a series of pithy insults and folk claims about the political plans of various states, parties and leaders that could have been copied from the Wall Street Journal editorial page.
The quality of Gillingham’s endnotes reflects this new lack of focus. He ceases all at once to be a historian, totally neglecting primary sources, no longer checking his remarks for credibility or consistency, and starts just copying stuff from the mainstream business press. The first part of this book cites first hand accounts, biographies and autobiographies, in-depth analyses, economics papers, and even official archives. After chapter 9, he increasingly draws on obscure political science journals, and in part IV even those are replaced by Business Week, The Economist, The Daily Telegraph, Die Zeit and the German daily of record FAZ.
I don’t think I am asking too much out of a historian to go further in-depth than a Lexis-Nexis search.
Chapter 12 chronicles and ridicules efforts to build a European demos – a sense of peoplehood like a nation-state – without which Gillingham believes that political integration is impossible. Gillingham is right that Europe does not have a demos (another neologism that I suspect will grow old fast). His case for where Europe ought to go is predicated entirely on this notion that there is no prospect of political integration, so only market integration is possible. The free market is expected to do everything, including building a sense of unity and commonality capable of keeping the peace in Europe.
But what is so interesting to me about the EU is the prospect of integration without a demos. A mere free-trade zone is a profoundly uninspiring subject of study. There have been multinational free-trade areas in the past, and there are others in the world besides the EU. They have not stopped wars and have a mixed record for bringing prosperity.
Chapter 13 looks at the effects of regime change on the individual member states, one by one. It is one of his more interesting chapters because Gillingham finds himself endorsing almost every form of state interventionism which he has spent the last 350 pages condemning. After attacking France for the close links between the state and giant corporations and ridiculing Delors’ and Mitterand’s desire to build European corporate giants to compete in the global market, he praises Finns for doing exactly that with Nokia. He also gets almost everything about Nordic and British education systems wrong, claiming that they are substantially moving towards a “merit based system” like the UK. He praises Berlusconi for his courageous stance against the trade unions and muses about the prospect of an Italian Thatcher. The Netherlands comes in for an investigation in greater depth, where he finds much of its stability and prosperity to come from social cohesion, co-ordinated wage bargaining between employers and unions, and pegging the guilder to the Deutschmark. This is a bit surprising for a man who is against making social cohesion a goal of public policy, against trade unions and against the Euro.
As for France, his discussion draws exclusively on clich?s that lead me to believe he knows little or nothing about the country that he hasn’t seen in the British or American press. His history of “regime change” in France has 34 endnotes, of which two derive in part from newspaper articles published in Le Monde and Le Figaro. The rest: Business Week, Time, The Economist. Is it just me, or should someone who thinks France is the problem and Britain is the answer be at least critical enough to consider that an all-Anglo set of news sources might not be fully informative?
Germany, in contrast, he actually knows something about. He claims that Germany has only “three truly healthy world-class companies operating internationally as market leaders: Allianz Versicherung, SAP, and BMW.” This Business Week article, from this AFOE post, suggests otherwise. He advocates using big German companies to finance start-ups, showing how well this process has worked in the US, but he violently opposes such initiatives as dirigiste in France. Gillingham demands that the rest of Europe forget about “Rhenish capitalism” as an alternative model because it is a unique and unexportable product of particular social conditions, but then fails to consider the possibility that the same could be said for “Anglo-Saxon capitalism.”
Perhaps worst of all are the hints of recognition from Gillingham that the kinds of policies he has in mind are impossible to implement without near dictatorial authority. He makes just such a claim for the Labour government in New Zealand after the destruction of the opposition in the 1984 election, and says the same sorts of things about other states that he recognises as successes. The liberal policies of Hayek are not, it seems, properly compatible with parliamentary democracy and require a Man on a Horse to actually be implemented. This is especially irritating in light of his fashionable complaints about the “democratic deficit” in Brussels.
Then comes a clearly painful section where he is forced to criticise Thatcher’s latest Euroskeptic screed, Statecraft: Strategies for a Changing World, where she demands that the UK give Brussels an ultimatum: her reforms or the UK pulls out. She, according to Gillingham, “repudiates her greatest European accomplishment: the Single European Act.” Should Britain fail to get the Europe it wants, it should, in her mind, join NAFTA. Gillingham at least has the sense to realise that hell will freeze over first.
After that, I have to confess that I just skipped forward 70 pages to his conclusions, missing out on his discussion of enlargement and Europe’s technology policies. His timid and respectful disagreement with the Iron Lady was more schlock than I can take.
Gillingham concludes on a bizarrely optimistic note, considering that he does not seem to have much faith in Europe’s current direction. He hopes that a new impetus might come from a new Thatcher, and that Hayek’s market-integrated Europe might yet come to pass. But, there seems to be no real enthusiasm in him, and I have even less myself for his goals.
Gillingham’s unhindered neoliberal triumphalism really undermines any effort to learn something from this book. If I just took his brief discussions of individual countries’ transformations in the 80’s and 90’s, and put them next to, for example, Enlightened Capitalism, a not yet published book by Lane Kenworthy of Emory University that I found out about through Crooked Timber, I would come to a very different set of conclusions about Europe and offer very different policy advice:
- Investing in education and retraining can pay off in lower unemployment and greater productivity. Picking winners and using state support to build corporate giants can work as well, at least in manufacturing, but if a government is engaging in this practice it must do so with an eye towards profit rather than as a make-work programme. Finland succeeded by following just this path.
- Labour flexibility without income supports is politically unfeasible in a genuine democracy. Most workers simply aren’t stupid enough to vote themselves into immediate unemployment in return for some long-term job growth that might or might not actually happen. Better to find institutional mechanisms to moderate labour demands than to shut out unions. Better to offer income support outside of the market – negative income taxes, universal income guarantees, government as the employer of last resort, or other sorts of benefits which do not create employment traps – than to simply toss people out of work. Doing these things does not seem to interfere with hiring or job growth. If necessary, use employment subsidies directly instead of menacing “workfare” programmes. This is basically what the Dutch and the Danes have done.
- Replace fixed payroll taxes with benefits offered out of general revenue. This has actually been fairly effective in France at raising incentives to employment. It means that tax revenues have to be made up somewhere else. If classical liberals and neoliberals really believe that labour market inflexibility is the main barrier to economic growth in Europe, I would expect them to support making up that lost revenue through higher capital gains taxes, which tend to be quite low in Europe. They won’t, but that’s because I don’t think any of them really believe that their agenda will have the desired effect on employment or growth.
I don’t know how well these conclusions could survive an orchestrated argument against them, but they seem to me far more likely to succeed, and far better supported by actual European circumstances, than the Europe Gillingham wants to build. I could even claim that the EU is presently advancing these kinds of causes because it tends to force its members into more uniform income and employment policies, and the best policies do seem likely to emerge from that process.
Unlike Gillingham, I think there has been a great deal of progress, especially in those periods when Gillingham sees nothing of importance going on in Brussels. A single currency has given Europeans something of a sense of a common fate, and the growing mobility both of labour and capital has offered Europeans a new dimension of substantial freedom: freedom of movement. Like Gillingham, I see in the EU a hope for a new model of internationalism and the burial of nationalist rivalries without the extinction of differences. But, to see in the market the sole agent of this transformation is to reduce it to the kind of internationalism that led to WWI, to the Great Depression, to communism, and even in the end to the Keynesianism and state-driven economies that he so clearly hates.
The single path he advocates, to which he believes that there is no alternative, is not really an alternative at all.