The overwhelming labor reforms that the French government is currently finding very difficult to introduce, are also posing a crucial dilemma for the entire Eurozone. The ‘liberalization’ of the labor market has already traumatized Italy and the rest of the south European countries like Greece, Spain and Portugal. The northerners have already ‘solved’ this problem, by accepting, like Germany, that the one third of the labor force will have to do with badly paid, insecure and largely uninsured ‘mini jobs’.
In this respect, there is a double duality that tears apart the EU. For one thing, the member states in the north, which have paid the price and are now posting foreign account surpluses, enjoy a quasi fiscal equilibrium and are considered as ‘savers’. On the contrary, the southerners have lately just started tackling the problem of the ‘rigid’ and ‘overprotected’ labor market. Currently, France and some months ago, Italy are the clear examples of this second category. In general, the southerners are thought as heavy borrowers and the northerners are the lenders. Being in the former group is not always the case for France.
The internal dualism
Apart from this trans-national duality, the efforts to liberalize the labor market have also created an internal duality in all EU member states and the western world in general. It’s the traditional political parties which did that. In most cases in Europe, it’s the traditional social democratic and the center-right parties, which have planned and realized this ‘liberalization’ of the labor market and have severely cut down social protection spending.
It’s globalization stupid…that has transformed the once loving the middle classes political parties, into fervent supporters of wealth concentration and keen planners of the establishment of the two thirds society. In the US it was both main political parties, the Republicans and the Democrats, who worked towards this direction. Currently, the Republican Party leadership is a kind of ideological hostage to the extreme right wing neoliberal Tea Parties, who support the abolishment of any kind of labor protection and social safeguards.
Politics shift to the extreme right
The GOP leadership goes as far as to propose the abolishment of tax collection service, the famous and successful IRS. In any case, the entire US political system has shifted to the right. Not to forget, that in Dwight D. Eisenhower’s years, the highest income tax rate for the American super rich was an amazing 92%, to be cut down today to less than half that factor. And mind you, Eisenhower was not a communist!
To be noted that, invariably, all center left political forces until some years ago, supported high income tax rates. The opposite was true for the center-right political parties. Today, the entire established western political system vies to favor the concentration of wealth, by reducing income tax on the rich, cutting down social protection spending and liberalizing the labor market from ‘complicated’ and ‘unproductive’ rules.
In Europe it was Britain under Margaret Thatcher that opened the way to this direction, followed by Tony Blair who accomplished the task of destroying the institutions which protected the working middle classes. Trade union power and labor protection laws of post WWII were gradually but greatly diluted. The same was true for all aspects of social protection policies.
In Germany, the first grand coalition government of Angela Merkel’s Christian Democrats and Gerhard Schröder’s Socialists of October 2005 introduced new legislation, which undercut social protection in general and greatly relaxed the protective labor laws. The institutionalization of the badly paid and largely uninsured ‘mini jobs’ is a characteristic example of the contemporary labor market reform policy in Europe. Not to say anything about the drastic cut of unemployment allowances and other social security measures.
The result is that, today, half of EU’s youths aged between 16 and 30 feel socially and economically excluded, with percentages varying from 27% in Germany to 93% in Greece. Not a surprise then, that after of two decades of wealth concentration and economic exclusion of large parts of society, the European extreme right (as in Austria) or the extreme left (as in Greece) or even political harlequins like Beppe Grillo in Italy, gain momentum and threaten not only the European edifice, but even the social coherence of their own countries.
The rise of Donald Trump in the US is also the product of the same socio-economic developments, but in a distinctively American way. In Europe, the fascist spectre is not any more a nightmare of the past, but it’s a real threat of today. Poland, Hungary and Slovakia have come very close to that point, to mention only the EU candidates for autocracy, while Russia and Turkey have already arrived there.
Towards generalized autocracy?
As expected, those more than a decade old developments have deeply affected the EU bureaucracy. Mind you, that the EU’s ‘constitution’, the Lisbon Treaty, is the most neoliberal charter in the Western world. It doesn’t include any references to social protection or just distribution of wealth.
It’s not surprising then, why there is an ongoing discussion in the high levels of EU bureaucracy about the alleged ‘competitive deficit’ of the Union, vis-à-vis the rest of the world. At the same time, the ‘democratic deficit’ goes on widening, with the construction of the European Banking Union as an institution accountable to no directly – elected bodies. Let’s return to the ‘competitive deficit’.
Discovering a ‘competitive deficit’
Despite the huge overall foreign account surpluses of the euro area, leading dignitaries of key EU institutions like the European Central Bank and the Commission insist that the long expected revitalization of the economy, has as a precondition the ‘reform’ of the regulative environment. Mario Draghi, the President of the ECB has been very explicit on that. He has repeatedly said that “the monetary policy cannon do it alone”.
He perceptibly presses the political leaders to further relax social protection by reducing public spending and reform the protective labor legislation. According to the neoliberal theory, those ‘restrictions’ cause ‘frictions’ in the functioning of the economy. There is no other reform in the minds of those who press for it.
What is going on in France?
It is true however, that France was a ‘laggard’ in this respect. This country had not followed the German recipe of economic policy mix, and, as a result, the international system considers France as a ‘patient’. Actually, France has legislated in the past some labor friendly measures. The 35 hour week was introduced by Lionel Jospin’s and Martin Aubry’s Plural Left government of 2000. In the same line of thinking , the government of Francois Hollande until recently insisted on spending more on social protection and didn’t touch the labor protective legislation – well, not any more!
It seems that suddenly the Hollande administration has succumbed to the neo-liberal economic theories and the new world order. The Paris government now directly targets the workers’ rights by facilitating layoffs without reason. It also plans to dent the role of trade unions, in a truly Thatcherite tradition.
To do that, Francois Hollande wants to make the personal and company labor contracts legally stronger, than the sectorial ones, thus completely wiping out the trade union’s role in the labor market. His government has also decided to cut down government spending by €50 billion by next year. There is good evidence that this will mainly harm the low income segments of society. What does the EU have to say about all that?
The EU watches happily
The deafening silence from Brussels during the many weeks of street fighting and industrial action in France is completely understandable. There is no doubt that the EU bureaucracy is currently wholeheartedly in favor of what Francois Hollande presently fights to do. However, the Brussels bureaucrats are not allowed to be seen as taking the side of the government in the confrontation with the trade unions.
Seemingly, everybody is nowadays against the trade unions. In France the National Front of Marine Le Pen went so far as to request that the ‘Nuit Debout’ gatherings in the Parisian Place de La République to be forbidden. It’s a good opportunity for working people who vote for National Front, to understand what will happen to them, if similar political forces are elected to govern.
Do they know what they are doing?
Returning to the general picture, it’s unfortunate to watch the political establishment in the western world systematically undercutting working people’s rights, as if there were no other way to revive the economy from the eight years old financial crisis. This is exactly what the French government is doing during the past few weeks.
Still, this policy may create a worse dead end, because by reducing the spending power of workers/consumers, the internal dynamic of the country is weakened and the economy will be increasingly depending on exports. There are two loopholes to that. Firstly, France is not Germany and secondly, the developing world may not be able any more to continue growing. Then a new crisis may be looming about.
If our economic and political elites continue on the same policy line, then they should count the risk of losing control. A new crisis may bring about unseen before developments. In such a prospect the political power may shift to people like Donald Trump, Beppe Grillo and Marine Le Pen or to trainee magicians like Alexis Tsipras and Pablo Iglesias. Then what?