From London to Rome, Warsaw and Athens, mainstream politicians seem determined to give us yet more of the medicine that caused the problems in the first place: deregulation, marketization, privatization and cuts to schools, hospitals and environmental protection. The public does not seem to trust the establishment any longer, but it has learned that changing governments does not lead to any significant change of government policies. We seem to be stuck with neoliberal recipes, with no alternatives in place. The one billion bitcoin question is why?
With the 2008 financial meltdown and then the euro crisis, we all know the price of neoliberal economics. Inequality within and across countries is cascading, with no U-turn in sight. Public money is chiefly used to help large multinational banks, but not to help small investors getting off ground or researchers inventing new technologies. Tax havens are tolerated, while state pensions are being cut. Governments seem determined to clamp down on small unemployment benefits, but not on executive directors’ huge bonuses. Zero hour contracts are spreading, and trade unions portrayed as harmful relics of the past. No wonder those autocratic rulers of China and Russia are looking at present-day Europe with contempt and self-satisfaction.
There are three possible answers, which focus on actors, democracy and ideology.
Marxists would tell us that people with money can always manipulate politics, and when we see major parties accepting money from some of the biggest tax evaders we’re tempted to believe them. Even the anti-corporate Occupy Wall Street has taken donations from business leaders, while prominent NGOs have formed formal partnerships with multinational corporations. Oxfam has teamed with Nokia and Marks & Spencer, and Greenpeace with Unilever and Coca-Cola. The problem with the Marxist explanation is that neoliberal policies are currently benefiting only a tiny part of the “capitalist class”: the well-off middle classes of entrepreneurs are shrinking, and those truly profiting are now the famous 1% — or even 0.1%. Why do the majority of entrepreneurs put up with this?
Even more striking is the acquiescence of those dependent on shrinking salaries, public services and unemployment benefits. Street protests may be frequent in the indebted countries of southern Europe, but politicians advocating the end of neoliberal policies aren’t getting enough support to take over governments and change policies. Those hit hardest by the failures of the neoliberal project seem keener to attack migrants than bankers. Young people have rushed to the streets to oppose ACTA (the Anti-Counterfeiting Trade Agreement), which could curb their freedom to use the Internet, but they are mostly silent about the dismal prospect for employment. People disadvantaged by neoliberal policies must have reasons for this passive acquiescence, but it’s hard to know what they are.
Democracy vs markets
The shift from manufacturing to services has made it hard to orchestrate what was once called “industrial action” against unpopular or, if you prefer, damaging policies. Virtual social networks of “outrage and hope,” to use Manuel Castells’ label, are still unsure about their transformative potential. But why hasn’t there been any change of policy through the ballot box? Surely the role of democracy is to curb market excesses? The problem is democracy was invented at the time nation-states were capable of controlling their borders. This is no longer the case in the era of cascading globalization and the Internet. Businesses are likely to move abroad if governments decide to tax financial transactions or insist companies give certain rights to their workers.
For most employees, poor pay is better than no pay, zero-hours contracts preferable to no contracts, and unsafe work better than no work. This lesson was painfully learned as early as 1981 by France’s socialist president François Mitterrand. He won the 1981 presidential elections promising a “complete rupture” with capitalism and tried to stick to his promise by nationalizing some industries, increasing state spending and extending the rights of French employees. He soon had to deal with a revolt by financial markets, weakening of the franc, businesses moving abroad and angry voters. Mitterrand quickly reversed his policies and other socialist leaders in Europe took note. Tony Blair did not try to refute neoliberalism, but to give it a “human” touch, with rather mixed results. Even in Scandinavian countries, social provisions have been significantly reduced in response to corporate demands.
If “socialism in one country” à la Mitterrand is unworkable, can neoliberal excesses be curbed at the regional level? Is not the key purpose of the EU to protect Europeans from negative effects of globalization?
By now, the answer is no. This is partly because the EU is not in charge of taxation and its competence in the field of social policy is symbolic. Moreover, the EU progressively embraced the neoliberal agenda of deregulation, marketization and privatization. When in the middle of the euro crisis, the Greek socialist prime minister, George Papandreou, announced his intention to hold a referendum on the acceptance of the neoliberal terms of a Eurozone bailout, he was forced to step down under the pressure of his fellow European leaders. Clearly, democracy will not win over markets with the help of the EU.
Neoliberals do not see a competition, let alone a conflict, between democracy and markets. They would rather talk about an ideological competition between the political left and right. The left is nostalgic for a big state regulating markets, despite the spectacular fall of communism with its inefficient statism. While it is true that the Left is unable to propose a viable ideological alternative to neoliberalism, the raw empirical data do not support neoliberal triumphalism. Neoliberal policies over the past three decades have generated a remarkable income concentration (for which read “inequality”) but have brought about mediocre economic growth. There is also little doubt that these policies have contributed to the 2008 financial crisis and the subsequent crisis of the euro. At the same time, there is no evidence suggesting that a meaningful redistribution undercuts growth. Even the IMF has admitted that the opposite is true. Its 2014 report — Redistribution, Inequality and Growth — concludes that lower net inequality is robustly correlated with faster and more durable growth.
So are we being brainwashed by neoliberal propaganda? To some extent yes. Neoliberals combat the big state’s regulating of markets and fostering of redistribution quite selectively. They are alarmed when the state helps pensioners and unemployed, but happy when the state helps failing banks and inefficient car factories. They dislike state support for public schools and hospitals, but like state support for private schools and hospitals. They constantly demand state intervention to advance the neoliberal economic model and complain when the state is too weak to comply with their demands. Above all, they try to convince the public that neoliberal policies represent rational choice and that all possible alternatives are naïve, dangerous, if not crazy. By defining the notion of what is normal and thus legitimate, they succeeded in acquiring an ideological monopoly. In this sense, Francis Fukuyama’s thesis about the end of history seems vindicated, at least for now.
And the prize goes to…
Neoliberal policies across Europe are being implemented because elites and large segments of the electorate see them as the “only game in town”. Hardship is spread unevenly within and across countries, and even those who are on the losing side do not see a viable alternative. Governments are happy to address some of the immediate needs of the poor, but unwilling and unable to fundamentally change policies and jump into the unknown. For instance, the centre-left government of Matteo Renzi has just decided to give €80 to 10 million disadvantaged Italian citizens while embracing the neoliberal package imposed by the EU. David Cameron is underwriting mortgages for first-time house buyers in the UK, yet is determined to stay on his “tested” neoliberal course. It will take years, and more hardship, for any viable alternative policies to be conceptualized, articulated and then translated into the mainstream language of ideology.
Successful alternatives would have to be comprehensive and not just deal with one aspect of economic policy such as taxation or banking regulation. They would have to envisage a new compromise between the winners and losers from transnational market competition because the system in which “the winner takes all” is not compatible with human rights and democracy. They would have to restore a new balance between the public and private domains. The public sphere does not need to be identified only with the state; some regions, cities and European bodies have already proved capable administrators of public issues. However, it is increasingly evident that sound education, health, social welfare, culture, defence and policing cannot be provided solely by the private sector following free market principles. In fact, the free market can hardly function without strong public authorities able to legislate, enforce and arbitrate fair rules of market competition. Democracy would also need to be reinvented because the current model of territorial representation is not suited to handling trans-border economics, security and communication. Europe would also need a new model of integration that recognizes local conditions and offers flexible, decentralized ways of governance based on meaningful incentives.
Even our brightest public intellectuals such as Ulrich Beck or Thomas Piketty are unable to give a satisfactory answer to our one billion bitcoin question. The winner will probably be announced several years from now, which explains why the award is in bitcoins rather than euros. After all, the euro may no longer be in circulation at the time of the awards ceremony.
This article originally appeared on the website of Le Monde Diplomatique under the title, ‘The one billion bitcoin question’.