PostPolitik - The blog of Alessio Postiglione

Europe, where art thou? Following Podemos’ victory in Spain, we feel threatened by a new wave of euroscepticism. However, if we consider Podemos as eurosceptic, we miss a decisive point of view regarding the nature of that party and also of the crisis we have been facing since 2008.

In the case of Podemos, its brand of euroscepticism does not oppose Europe as a political project but, rather, the mechanism of the concentration of capital induced by the common currency. It is a scepticism towards the Euro as opposed to Europe itself.
Podemos owen JonesNothing new under the sun. Any “great transformation” in economics – as with the establishment of the Euro – accelerates the change that incessantly revolutionizes the economic structure from within: Schumpeter called it a “creative destruction”. Innovation always implies that old sectors of the industrial complex are swept away by newcomers. It is a struggle of the fittest, where darwinian selection is made harder because, by liberalizing the markets, new players have to compete. Notwithstanding the assumptions of Adam Smith, liberalizing and enlarging free markets does not lead to competition but to an increase in capitalistic concentration. We might call it the unintended consequences of laissez faire. As Karl Polany revealed in his masterpiece “The Great Transformation”, self-regulating markets are neither the result of spontaneous social evolution nor a natural phenomenom induced by the “natural” utility maximization behaviour of human beings, according to the homo oeconomicus paradigm.

Self regulating markets are created by governments and politicians that dictate social behaviour by the “authoritative allocation of values”, as defined by David Easton.

To allow the market mechanism to be sole director of the fate of human beings and their natural environment […] would result in the demolition of society.

Polanyi argues that economic activity is embedded within a social and economic context, whereas Liberalism hypostatizes and reificates economy, by disembedding the market from society in order to establish hegemony of economy on society and politics.

During great transformations we see, on one hand, the forces of economic liberalism seeking to spread the role of market forces – freeing up labour markets, for example – while on the other, a reaction from society demanding social protection.

Liberalizing and accelerating pro-cyclical transformations of the economy may produce better output in the long run. However, as Keynes noted, in the long run we are all dead. That is the reason why, in the short term, different social groups, with different values and ideologies, arise with one goal in mind: to soften the social costs of the great transformations. This explains the spread of “protective counter-movement”.
Right or Left, nothing changes: they all advocate economic benefits to compensate the loss caused by the creative destruction that is triggered by the birth of new markets induced by the Euro. “Protective counter-movements” are the effect of a struggle between the ‘dis-embedding’ force of the free market and the ‘re-embedding’ reaction of social protection.
In fact, the main political divide is not between right or left, but between liberals and protectionists.

podemos

The main point is that the allocation of costs and benefits of great transformations are unequal. The Capital gets advantages and the Labour pays the price. The rich get richer and the poor get poorer. It is no surprise that, when a new self regulating market is created by a pro-liberalization government, the overall output may increase but so does that of the Gini index, which measures inequality.

Thus, the problem is that the European political system has refused to “authoritatively allocate values” to markets. In post democracies, we are experiencing the primacy of economics on politics, as the political system is not compensating the political losers of the great transformation. The Welfare states – which used to protect the victims of great transformations – have been reduced and are unable to pay. For this reason, the protective counter-movements begin to blame the Euro instead of asking for a better governance. As they perceive their governments cannot afford to compensate them, they threaten to exit, because their voice seems unheard, as explained by Albert O. Hirschman in “Exit, Voice, and Loyalty“.
It is key to highlight that their request, which apparently claims that less Europe means “less power to the Euro”, implicitly implies “let’s build a political Union!” That is why I wonder “Europe, where are you?”. For Spinelli or Schumann, the pivot of Europe would have been the political union, not the single market.

As a consequence, if we do not handle the crisis at a political level, we will not succeed. If we do not compensate those hit by liberalization, we will face tougher reactions that include the surge of radical parties.
Is this the Europe we meant to build?

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