New Statesman & Society leader, 1 July 1994
John Major's use of the British veto at the European summit in Corfu to prevent the appointment of Belgian Prime Minister Jean-Luc Dehaene as Jacques Delors' successor at the head of the European Commission was, of course, largely motivated by domestic considerations. Contrary to the Tory spin doctors' view in the wake of their party's "not as bad as expected" humiliation in the European elections, Major's position in his party remains extremely vulnerable. Kicking Johnny Foreigner, particularly if he's a fat Belgian federalist, goes down a treat with the xenophobes on the Tory right – and that reduces the likelihood of a credible challenge to Major's leadership this autumn.
But it would be wrong to consider Major's performance entirely through the prism of British politics. Dehaene would have been vetoed even if the British Tories were riding high in the polls – and not just because he is a Euro-federalist. Dehaene is from the left of European Christian Democracy, a man who could have been expected to pursue an economic agenda as President of the Commission not unlike Delors' social-democratic one. He is the sort of person, in other words, who might have revived those reflationary, public works elements of Delors' white paper to which the British government has so successfully led the opposition over the past few months. And that is precisely what the Tories don't want.
For them, unemployment is a good thing: it keeps wages low and workers cowed. It can be reduced only by people "pricing themselves into jobs". Moreover, as things stand, the Tories reckon that they have done enough to scupper any possibility of Euro-Keynesian measures to attack the mass unemployment that is eating away at the social fabric of the entire continent – and they are well pleased. It's certainly no time to risk some social-Christian do-gooder trying to dream up schemes to set people back to work.
That such a point of view is both morally bankrupt and economically illiterate should be apparent to anyone – but the unfortunate fact is that the Tories and their allies on the free-market right have done serious damage to the prospects for a Euro-Keynesian response to the unemployment crisis, and that has important implications for the left throughout Europe.
Euro-Keynesianism remains the best way of attacking European unemployment. Demand needs to be increased throughout the continent, and the impossibility of any individual European state going it alone with reflation was amply demonstrated by the failure of Frangois Mitterrand's socialist experiment in the early 1980s: combined European action, preferably through European Union institutions, is just about the only way for the EU countries to reflate without causing massive balance-of-payments problems.
But the political balance in Europe is now such that implementation of a Euro-Keynesian strategy is unlikely. Right-wing election victories in France and Italy in the past 18 months have reinforced the already strong pro-austerity consensus among EU governments, and Delors' hopes that his white paper's programme of deregulation would buy off opposition to its proposals for large-scale public spending proved wrong. It is going to take a few left election victories if Euro-Keynesianism is to have a chance.
So does that mean that there is nothing practically that can be done about unemployment? By no means. Stimulating the overall level of demand in the economy is only part of the picture: even within the constraints of austerity, there are actions that can be taken that would significantly cut the dole queue.
What is not needed is further labour market deregulation as part of a desperate attempt to reduce west European wages to Polish or even Malaysian levels. West European competitiveness is never going to be a matter of undercutting Asian or east European sweat
shops: western Europe's future has to be high-skill and technologically advanced. In line with this, as social democratic parties throughout western Europe argue, it is crucial that education and training are constantly improved.
But, as John Prescott has said very clearly during the Labour leadership contest, improved education and training do not of themselves generate very many jobs. Other measures are also needed. Progressive redistribution of income and wealth through the tax and benefits systems has a beneficial effect because poor people tend to spend a greater proportion of their incomes on domestically produced goods. Shifting consumption from private to public sector by raising taxes to pay for public transport and construction programmes stimulates the economy because public works programmes involve few imports. Taxation can also be used to provide incentives to entrepreneur-ship and to subsidise public-sector service jobs. The benefits system can be reformed to make it easier for people to come off social security and go to work.
Whether such measures are enough to ensure full employment, in the sense of everyone who wants a job having a job, without politically unsustainable levels of tax is, however, a moot point. It could be that even the most vigorous feasible application of policies for job-creation reduces unemployment only by a little. What then? It is here that we have to start to think much more radically, about schemes for sharing out the available work – by cutting weekly working hours, reducing the age of retirement, encouraging job sharing, making it easier to take years off work to study at any age and so on – and about the possibilities of developing a "twin economy" partially isolated from the normal economy and with its own money, as advocated by the think tank Demos. It is a mark of the conservatism of British politics that such ideas are anathema to every established party.
