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Social Democracy, the “Third Way,” and the Crisis of Europe, Part 2

Historian and economist Alejandro Reuss is co-editor of Triple Crisis blog and Dollars & Sense magazine. This is the second part of a three-part series on the historical trajectory of European social democracy towards the so-called “Third Way”—a turn away from class-struggle politics and a compromise with neoliberal capitalism—and its role in the shaping of the Economic and Monetary Union of the EU. (See Part 1.) It is a continuation of his earlier series “The Eurozone Crisis: Monetary Union and Fiscal Disunion” (Part 1 and Part 2). His related article “An Historical Perspective on Brexit: Capitalist Internationalism, Reactionary Nationalism, and Socialist Internationalism” is available here.

What Went Wrong?

The rise of Third Way-style leaders to dominance in the social democratic parties of the largest European countries does not mean the parties were transformed root-and-branch to these politics, nor even that all the important politicians in these parties went over to Third Way politics. There were important intra-party struggles in all these parties. In the British Labour Party, for example, there is famously a divide between traditionally social democratic “Old Labour” and Blairite “New Labour.” In the German Social Democratic Party, a similar divide ultimately led to the left split off and the founding of Die (“The Left”). In none of these parties were old-style social democratic politics extinguished.

That said, it’s neither a correct nor a satisfying explanation to say that the parties were simply steered toward the right by misleaders. Rather, we have to trace the ebb of class-struggle politics in the social democratic parties of Europe—from radical origins, to the robust reformism of the social democratic heyday, to the quasi-neoliberalism of the present—to a combination of causes, some intrinsic to social democratic politics and some rooted more particularly in European and world events of the late 20th century.

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Pensions for All

Jomo Kwame Sundaram and Rob Vos

October 1^st is the International Day of Older Persons. Just another day? Perhaps, but it should remind us that the world’s population is ageing, brought about by the combined effects of declining mortality and fertility rates and longer longevity. By mid-century, one out of five people will be over 65 compared to over one in ten now.
This is dramatic enough. What is equally compelling is that eighty per cent of older persons in the world will be living in developing countries by then – within two generations.

This ageing of the world’s population is one of humanity’s major achievements. Yet, significant challenges are keeping in step with this historic and emerging trend. For example, can health systems adapt to growing and new demands for care? What about the sustainability of social protection schemes? How do we keep our pension systems viable? These are serious, but solvable challenges.

The challenges are greatest, of course, in developing countries, where the vast majority of older persons lack adequate income protection. In the absence of pension incomes or other social transfers for older persons, the risk of spending one’s older years in poverty rises sharply. Moreover, in most developing countries, poverty compels older persons to continue working as long as they are able to. But reduced capacities, limited job opportunities, low incomes and other factors often combine to reduce their earnings.

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Leaders Pledge Action to Control Superbugs

Martin Khor

AT the opening of the Summit of the United Nations General Assembly on Sept 20, it sounded much like the swan song of two of the regular stalwarts of this annual affair.

It is the last General Assembly to be attended by UN Secretary-General Ban Ki-moon and United States President Barack Obama.

Both made interesting speeches. Ban listed all the woes afflicting the world, especially terrorism, while praising the Paris agreement and the sustainable development goals as big achievements of his eight years as the UN leader.

Obama, sounding like a professor, gave a lengthy analysis of the state of the world and the role of the United States, earning a laugh when he said it sometimes seemed the United States was being blamed for all the ills of the world and at the same time it was being asked to solve all its problems.

At the lunch for heads of state and organisations, Ban and Obama praised each other for their leadership in the past eight years.

Someone at my table wondered aloud what would happen to next year’s lunch if Donald Trump, who is known to dislike and distrust the UN, won the US election. Perhaps, as leader of the host country, he would have the traditional lunch cancelled.

This year’s UN summit will be remembered most for its high-level event on anti-microbial resistance (AMR), held on Sept 22, with many heads of government and ministers speaking on the need to fight this crisis.

The leaders adopted a landmark Political Declaration on AMR that recognised that antibiotic resistance is the “greatest and most urgent global risk” and that “due to AMR many 20th century achievements are being gravely challenged, particularly the reduction in illness and death from infectious diseases…”

This is the first ever statement by the heads of all the countries that recognises the AMR crisis and in which they pledge to take action.

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Social Democracy, the “Third Way,” and the Crisis of Europe, Part 1

Alejandro Reuss

Historian and economist Alejandro Reuss is co-editor of Triple Crisis blog and Dollars & Sense magazine. This is the first part of a three-part series on the historical trajectory of European social democracy towards the so-called “Third Way”—a turn away from class-struggle politics and a compromise with neoliberal capitalism—and its role in the shaping of the Economic and Monetary Union of the EU. It is a continuation of his earlier series “The Eurozone Crisis: Monetary Union and Fiscal Disunion” (Part 1 and Part 2). His related article “An Historical Perspective on Brexit: Capitalist Internationalism, Reactionary Nationalism, and Socialist Internationalism” is available here.

The idea of a united Europe was not unique to neoliberal politicians or financial capitalists, even if their vision was the one that ended up winning out. Rather, this idea cut across the entire political spectrum, from forces clearly associated with giant capitalist corporations and high finance to those associated with the working-class movement. Just as there have been “anti-Europe” or “euroskeptic” forces on the political left and right, there were also diverse forces in favor of European unification, each with its own vision of what a united Europe could be.

Going back to the mid-20th century, leaders of the social democratic, reformist left envisioned a future “Social Europe.” The European Social Charter, adopted by the Council of Europe in 1961, promulgated a broad vision of “social and economic rights,” including objectives like full employment, reduction of work hours, protection of workers’ rights to organize and bargain collectively, rights to social security and medical assistance, protection of the rights of migrants, and so on.

Figures on the revolutionary left, like the Belgian Marxist economist and Trotskyist leader Ernest Mandel, advocated a “United Socialist States of Europe.” This was an expression not only of revolutionary internationalism, but also of Mandel’s view that the working class could no longer confront increasingly internationalized capital through political action confined to the national level.

In other words, the question was not just whether Europe would become united, but (if it did) what form such unification would take.

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Battling Apple and the Giants

C.P. Chandrasekhar

On the 30th of August European Competition Commissioner Margrethe Vestager dropped a bombshell at the tax doors of the world’s leading multinational corporations. After a lengthy investigation she ruled that Ireland must recover from the local Apple subsidiary up to 13 billion euros ($14.5 billion) in unpaid past taxes, adding on interest on delayed payments, which could take the total to as much as 19 billion euros ($21 billion).The ruling was based on a decision that tax benefits provided to Apple’s subsidiaries in Ireland through two tax rulings amounted to ‘state aid’ that was illegal under EU rules.

The penalty, though huge by past standards, is not the issue here. With as much as $230 billion of cash and liquid securities (which can be easily converted to cash) at hand, Apple would not have to stretch itself to meet this bill. The real issue is whether Apple’s tax accounting, which is considered legal by the Irish government, can be challenged by investigators acting on behalf of the European Commission. It is taken for granted by the world’s biggest companies that they can transfer profits earned anywhere to locations that are tax havens as part of their “tax planning” decisions. The method through which this is often done is to charge inflated book prices (“transfer prices”) for goods or services sold by the parent or a third country subsidiary (depending on which is located in a country that imposes lower taxes) to the subsidiary in the country from which profits are to be transferred out. This inflates costs and reduces profits on paper in the country from which incomes are being siphoned out. The practice could mean both, that the effective income tax incidence on these companies globally is less than that on smaller companies and even individuals, and that some countries from where the profits of these multinationals are earned would be deprived of tax revenues on those incomes. These problems have been accentuated in the neoliberal era, since countries pursuing neoliberal trajectories are keen on attracting foreign investors into their economies, and are competing with each other to offer them a range of concessions, including concessions that facilitate this kind of tax avoidance, which is legal and does not constitute tax evasion.

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The Clean Power Plan’s Day in Court

Elizabeth A. Stanton

In one week, the D.C. Circuit of the U.S. Court of Appeals will begin hearing oral arguments regarding the Clean Power Plan—that’s the Environmental Protection Agency’s rule limiting carbon emissions from existing power plants that the Supreme Court put on hold in February. In staying the rule, the Supreme Court flagged concerns that EPA had failed to take the rule’s economic impacts into account. The 27 states challenging the rule have focused their arguments instead on its legal niceties claiming that the federal government is overstepping its authority.

Of the 27 states suing the EPA, 21 have already achieved their 2024 emission reduction targets and 18 have enacted policies that put them on track to reach their 2030 targets. Reuters quotes EPA Administrator Gina McCarthy as saying, “We are seeing reductions earlier than we ever expected. It’s a great sign that the market has already shifted and people are invested in the newer technologies, even while we are in litigation.” Economics are driving large-scale adoption of wind and solar generation around the country at the same time that low natural gas prices mean less reliance on coal-fired generators.

Carbon emission are falling and will continue to fall in the electric sector—without help from federal climate regulation. But in the absence of a strong national climate policy these reductions will not cut emissions quickly enough for the United States to play its essential role in keeping global warming below 2 degrees Celsius. It is no exaggeration to say that the decisions made by the D.C. Circuit and U.S. Supreme Court will set a precedent for federal regulation of carbon pollution that will have long lasting impacts felt around the world.

The quality of public debate sparked by the Clean Power Plan’s day in court will benefit from a grounding in facts not just about climate change and the U.S. role in changing the composition of our global atmosphere, but also in the legal issues at the core of the challenge to and stay of the rule. Here’s some recommended reading to that end:

· A helpful blog piece from the Institute for Policy Integrity explaining the challenge in the context of U.S. law and history

· A brief history lesson from the Law360 website describing the U.S. legal decisions that paved the way for the Clean Power Plan

Cross-posted at the author’s blog, lizstantonconsulting.com.

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The End of U.S.-Led Economic Globalisation?

Jayati Ghosh

There is much angst in the Northern financial media about how the era of globalisation led actively by the United States may well be coming to an end. This is said to be exemplified in the changed political attitudes to mega regional trade deals like the Trans Pacific Partnership Agreement (TPP) that was signed (but has not yet been ratified) by the US and 11 other countries in Latin America, Asia and Oceania; and the Trans-Atlantic Trade and Investment Partnership Agreement (TTIP) still being negotiated by the US and the European Union.

President Obama has been a fervent supporter of both these deals, with the explicit aim of enhancing and securing US power. “We have to make sure America writes the rules of the global economy. We should do it today while our economy is in the position of global strength. …We’ve got to harness it on our terms. If we don’t write the rules for trade around the world – guess what? China will!”, he famously said in a speech to workers in a Nike factory in Oregon, USA in May 2015. But even though he has made the case for the TPP plainly enough, his only chance of pushing even the TPP through is in the “lame duck” session of Congress just before the November Presidential election in the US.

However, the changing political currents in the US are making that ever more unlikely. Hardly anyone who is a candidate in the coming elections, whether for the Presidency, the Senate or the House of Representatives, is willing to stick their necks out to back the deal.

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The New Extreme Reality of Floods

Sunita Narain

Bihar chief minister, Nitish Kumar, whose state is submerged under water reportedly told the prime minister that he wants to cry. We should add our tears to his. This year’s floods not only have the imprint of our gross and near criminal mismanagement, but also mark the beginning of the world risked because of climate change. This should worry us. In fact, scare us. We need to realise that we do not have the luxury of delayed action and petty party politics. In this climate-risked world, where we are hit by a double whammy, we need to ensure that not only do we get development right, but we also need to do this at a scale and speed we have never done before.

The 2016 floods are huge in its scale—virtually all parts of the country have been hit by devastation. And remember, it is not just about some water that enters homes. Floods claim lives, destroy property and crops. In this way, all the years of developmental efforts are lost in one stroke. It is also clear that we worry about floods only when it affects the urban population. Even during the deadly 2013 Uttarakhand floods, the tragedy reached our television screens only because of the large numbers of people who died or were trapped in the swirling waters. Floods do not, otherwise, get serious media coverage. We do not know how bad the situation is or how it is getting worse. Floods then have become part of the cycle of boredom; they will come every year. So, what is new?

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The Wrong Side of a Long, Long History of Resource Extraction

Elizabeth A. Stanton

Elizabeth A. Stanton, PhD, is an independent consultant with more than 15 years of professional experience as an environmental economist, and has authored more than 80 reports, policy studies, white papers, journal articles, and book chapters on topics related to energy, the economy, and the environment.

Thanks to abundant coverage by social media, the nation watched this week as activists protesting the construction of a pipeline to transport oil through the Dakotas, Iowa and Illinois put their own safety at risk to protect a Native American cultural site. A Pinkterton-esque goon squad used pepper spray and attack dogs to clear the site for unscheduled excavation, resulting in injuries, hospitalizations, and an outraged public.

Energy Transfer Crude Oil Company—the developer of the Dakota Access or Bakken Oil Pipeline—asserts a public need for the 1,172-mile pipeline and promises jobs, tax revenues, and a boost to the economies of the affected states. Advocates arguing against this pipeline’s construction have found these claims to be unfounded. Energy Transfer bases its statement that the Dakota Access Pipeline is necessary on the business opportunity to get more Bakken oil to market sooner, and not on any public need that would be served by a greater flow of oil from the Dakotas to Illinois. The company’s claim that farmers need the pipeline to open up space to ship grain on trains that currently transport oil was soundly debunked by expert witnesses and even by Iowa’s Utility Board in issuing its approval of the project. There is no reason to believe either that Midwest grain shipments will be curtailed in the future or that building the pipeline would reduce any rail shipping constraints should they arise.

And while the private benefits of building the Dakota Access Pipeline are clear, any benefit to the public is harder to discern.

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What We’re Writing/What We’re Reading

What We’re Writing

Fei Yuan and Kevin P. Gallagher, Repositioning Chinese Development Finance in Latin America: Opportunities for Green Finance.

Jomo Kwame Sundaram, Poverty Cut by Growth Despite Policy Failure.

What We’re Reading

Prabhat Patnaik, Globalization and the World’s Working People.

220+ Law and Economics Professors Urge Congress to Reject the TPP and Other Prospective Deals that Include Investor-State Dispute Settlement (ISDS).

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