By Philip Stephens
Published: June 11 2009 18:54
Surely it was only yesterday that the west was engulfed by the crisis of capitalism? Markets buckled under the strains of the credit crunch. Portraits of Adam Smith made way for freshly-burnished busts of John Maynard Keynes. Popular rage against greedy bankers promised to restore politics to parties of the left.
Pace the doomsayers who predicted imminent Armageddon, liberal market capitalism has survived: somewhat humbled and, in the case of the financial services industry under much tighter official supervision, but recognisably much as it was. Governments have stepped in to prop up markets rather than to dismantle them. Nationalising the banks has been a means to an end rather than an end in itself.
The global economy is still in shaky condition. Recovery will be long and painful – and not just in those countries where prosperity had been built on the feeble foundations of unrestrained credit. Britain is paying the price of its borrowing spree in the ruinous state of its public finances; prudent Germany faces a still deeper economic slump because of the collapse of its export markets. Bailing out the banks has meant turning private profligacy into public debt.
That said, predictions of a return to the 1930s have proved as misjudged as the reckless complacency of policymakers and economists during the boom years. This week banks started paying back some of the money they borrowed from taxpayers. As for the predicted lurch to the left, it has not materialised. I have not seen anyone rushing to imitate the Russian model of state capitalism.
True, the economic crisis cemented Barack Obama’s claim on the US presidency. But the Democrats would have won anyway. The Republicans were finished before the collapse of Lehman Brothers. Mr Obama, in any event, promised to fix the economy, not to turn it over to socialism.
In Europe, the imagined crisis of capitalism has turned into an implosion rather than a resurgence in the fortunes of the ideological foes of the free market. Last week’s elections to the European parliament, held across 27 countries, told the story. The results showed voters flocking to parties of the centre-right. Socialists and social democrats almost everywhere received a drubbing.
Among the principal winners at the polls were Angela Merkel’s Christian Democrats in Germany, Nicolas Sarkozy’s centre-right UMP in France and the Italian Silvio Berlusconi’s People of Liberty coalition. Socialists in office and in opposition crashed to defeat.
The government of Spain’s José Luis RodrÃgues Zapatero was defeated; Gordon Brown’s Labour administration in Britain was humiliated. The Social Democrat partners in Ms Merkel’s coalition government took only a fifth of the vote. The socialist opposition in France fared even worse.
To the extent that the elections saw a backlash against global capitalism, it came in gains recorded by smaller, extreme-right parties. The advance of xenophobes in countries such as the Netherlands, Hungary and Britain was cause for dismay. But it did not much change the bigger political picture.
The failures of the centre-left parties each have a particular explanation. The French socialists have for some years been imprisoned by infighting and weighed down by obsolete ideology; Ms Merkel has consistently outplayed her centre-left coalition partner. The Italian left is floundering in the face of a prime minister who has ruined his country’s reputation abroad but retains solid support at home.
Socialists and social democrats have been outflanked as their opponents have moved quickly to occupy political space that might have been claimed by the left. Why should voters turn leftwards when Ms Merkel and Mr Sarkozy have sounded as indignant as any about the shenanigans of “Anglo-Saxon” capitalism?
It has helped, of course, that the European model of welfare capitalism has always been the property as much of the continent’s Christian, as of its Social Democrats. Ms Merkel’s disdain for hedge funds and Mr Sarkozy’s tirades against market fundamentalism have struck reassuring notes among voters.
There was something more to the election results, though, than the tactical adroitness of the centre-right. Support for the market economy has proved resilient. Disillusioned as they are with the excesses – and enraged as they should be by the larceny of some bankers – Europeans have not been clamouring for command-and-control capitalism.
If they are now suffering from the contagion that is the downside of globalisation, they show no great enthusiasm to surrender the upside. Granted there have been growing calls for governments to bail out faltering industries. As unemployment climbs further, the siren calls of economic nationalism will probably be louder.
But Europeans have also become accustomed to globalisation’s gains: the flat-screen televisions and personal computers, the cheap clothing and the abundant food.
In the privacy of the voting booth, a majority concluded that if the market system needed fixing it was sensible to entrust the task to politicians with demonstrable competence. Demands from the left (and from the far right) to raise the drawbridge against globalisation won only patchy support.
The voters want it both ways: protection against the unavoidable insecurities of economic integration and access to all the advantages of globalisation. But whoever said electorates were consistent? The answer is active rather than big government – calculated to preserve open markets while providing a buffer against the shocks.
This is the insight that parties of the centre-left need to rediscover. Much as the global crisis has severely damaged confidence in the invisible hand of the market, voters do not want to see it replaced by the clunking fist of an over-mighty state. I detect precious little appetite across Europe for higher taxes.
What was missing last week was a centre-left prospectus recognising the benefits of globalisation while promoting wider distribution of its opportunities. A helping hand, if you like. Beating up on capitalism may satisfy old ideological prejudices but it does not answer the demands of voters for prosperity and fairness. The market’s resilience rests on a capacity to adapt. There is a lesson there for the left.
philip.stephens@ft.com
Copyright The Financial Times Limited 2009
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