Social Europe

politics, economy and employment & labour

  • Themes
    • European digital sphere
    • Recovery and resilience
  • Publications
    • Books
    • Dossiers
    • Occasional Papers
    • Research Essays
    • Brexit Paper Series
  • Podcast
  • Videos
  • Newsletter

Crisis Of Globalization: Restoring Social Investment Is Key

Robert Kuttner 23rd May 2018

Robert Kuttner

Robert Kuttner

Why is democracy under siege throughout the West? How much of the story is cultural or racial, and how much is economic? And can the slide into authoritarianism be reversed? I think it can.

In the course of researching these issues, I took a deeper look at the remarkable three decades after World War II, a period when the economy delivered for ordinary people and there was broad support for democracy. That era was unique in two key respects.

First, the economy not only grew at record rates for peacetime, but it also became more equal. Second—and not coincidentally—this was a period when raw capitalism was tightly regulated, on both sides of the Atlantic, economically and politically.

Banking was very limited in what products it could offer, and at what prices. It was almost like a public utility. There were no exotic securities like credit derivatives to deliver exorbitant profits and put the whole economy at risk. Globally, there were fixed exchange rates and capital controls, so bankers could not make bets against currencies and entire economies.

Organized labor was empowered. Unions were accepted as legitimate social partners and had substantial influence. This was true in both Europe and America.

Our job is keeping you informed!


Subscribe to our free newsletter and stay up to date with the latest Social Europe content.


We will never send you spam and you can unsubscribe anytime.

Thank you!

Please check your inbox and click on the link in the confirmation email to complete your newsletter subscription.

.

Government played a leading role in the postwar reconstruction and in other public investments. This mixed system worked better than any version of capitalism before or since. Not surprisingly, the far right had no support.

Glorious thirty

My generation grew up thinking of that social bargain as the new normal. But in fact it was exceptional. In a capitalist economy, owners of capital ordinarily enjoy an extra measure of political power. In the postwar era, that power was suppressed in the broader public interest.

The postwar social contract came about via a harmonious convergence of events, insights, leadership and politics. Western leaders were determined not to repeat the aftermath of the First World War. In that dismal period, there was no recovery program, speculative finance ran wild, austerity crushed growth, unemployment reached socially unbearable levels—and the result was Hitler and a second world war.

In the Depression and World War II, both the far right and the free-market right had been discredited by events. After the Great Crash of 1929, and the twin successes of the New Deal and the wartime mobilization, no serious person could contend that markets did best when left alone. The political influence of finance had been weakened, while the influence of labor and of the activist democratic state had been strengthened.

At Bretton Woods in 1944, the architects of the new international monetary and trading system were determined to create a kind of managed globalism. The new global economic order allowed commerce to resume but preserved plenty of space for each nation to run well-regulated, full-employment economies.


We need your support


Social Europe is an independent publisher and we believe in freely available content. For this model to be sustainable, however, we depend on the solidarity of our readers. Become a Social Europe member for less than 5 Euro per month and help us produce more articles, podcasts and videos. Thank you very much for your support!

Become a Social Europe Member

In July 1945, when Clement Attlee became Britain’s first Labour prime minister with a healthy working majority in Parliament, the UK’s war debt was over 240 percent of GDP. What did Attlee do? He did not pursue an austerity program to reassure the country’s creditors. On the contrary, he doubled down on public investment and built a welfare state. He could do this because the rules of that era precluded a speculative run against the pound.

A third of a century later, when Francois Mitterrand became the first Socialist President of France in 1981, he also attempted a bold recovery program with lots of public investment. But the rules of the global system had changed, laissez-faire finance was back with a vengeance, and speculators pummelled the French franc. Within two years, Mitterrand had to reverse course and pursue austerity.

Hyper-globalization

In the years since then, political and financial elites have redefined trade agreements to mean not just reciprocal cuts in tariffs but broader changes in global rules to make it easier for banks and corporations to evade national regulation.

Laissez-faire, discredited and marginalized after 1929, got another turn at bat(ting). Hyper-globalization was a key instrument. And that reversion had economic and ultimately political consequences.

The broadly shared prosperity and well-managed markets of the postwar boom evaporated. Increasingly, the gains only went to the top and the livelihoods of the rest became more and more precarious. Those who suffered the displacements of globalization were looked down on as economic losers.

It took a while for economic resentment to reach boiling point. Two factors supercharged the political reaction. One was the collapse of 2008—the result of the same anything-goes financial antics that were supposedly ended in the 1930s and 1940s, but resurrected in the 1980s and 1990s.

In the aftermath of the collapse, economic displacement intensified. In Europe, austerity policies added to the misery. And then, pouring oil on the flames, economically conservative but socially liberal elites tried to pursue generous policies towards immigrants and refugees.

The new globalists, epitomized by the annual Davos meetings, failed to grasp that when you deprive the locals of their livelihoods, it is asking a lot to expect them to open their hearts and their villages to strangers. In one European country after another, neo-fascist parties became the second or third largest.

Race card

People not only turned against governing parties; they started turning against democracy itself—a terrible echo of the 1920s, the very catastrophe that the architects of the postwar order had hoped to avoid.

In America, race and immigration played a comparable role. When the economy was rock solid and prosperity broadly shared in the 1960s, it was possible for the civil rights movement to make major gains with the support of substantial numbers of whites. In Britain, the Brexit vote was a similar mash-up of economic frustrations and cultural resentments.

Today, as police killings of young black men attest, the struggle for racial justice is not over. But downwardly mobile whites are far from sympathetic. Figures like Donald Trump and his strategist Steven Bannon succeeded in racializing economic grievances. Bannon once told me that he hoped Democrats would talk about race every day.

In 2016, Democrats played right into the trap. The campaign of Hillary Clinton seemed one part coziness with Wall Street and one part identity politics. This was not a winning recipe, especially in the economically depressed heartland. Trump succeeded in depicting the globalists not only as people who don’t care about your job, but the very people who want to take away your guns, abort unborn babies, disparage you as losers, and snicker at your religion. Cultural, racial and economic grievances blurred.

The grand bargain of the postwar era enjoyed political tailwinds. Today, we face political headwinds. Is there a solution? Can we expect more and more disaffected and displaced citizens to turn to neo-fascists as we watch our economy divide and our democracy collapse? Dare one be an optimist?

Social investment

In 1939 and 1940, the Great Depression was over, but unemployment seemed stuck at well over 14 percent, and economists worried that this was the best the economy could do. Machines were displacing human workers.

Then came the war, which was catastrophic for Europe, but provided a massive recovery program for America, driven by immense levels of public investment funded by surtaxes on the wealthy and war bonds pegged at low interest rates. In less than a year, US unemployment dropped to about two percent.

What we need today is the same kind of social investment program, but without the war.

There is a European variant and an American one. That sort of investment would create lots of good jobs, restore economic possibilities, and would demonstrate that government is capable of delivering for ordinary people. The twin threats to democracy and a decent society are dire—but still reversible.

One can even imagine the slogans that need to be taken back from the far right: Make America Great Again, Make Europe Great Again.

This is the third in a new SE series, The Crisis of Globalisation, co-sponsored by the Hans Böckler and Friedrich Ebert Foundations

Robert Kuttner

is a journalist, writer, and economist, and author of nine books, most recently A Presidency at Risk. He is the co-founder and current co-editor of The American Prospect, created in 1990, and a senior fellow at the think tank Demos. He was a twenty¬year columnist for Business Week and continues to write columns in The Boston Globe. He is one of five co-founders of the Economic Policy Institute, and currently serves on its board of directors. He has taught at Brandeis, Boston University, University of Massachusetts Boston, and Harvard’s Institute of Politics.

Home ・ Economy ・ Crisis Of Globalization: Restoring Social Investment Is Key

Most Popular Posts

schools,Sweden,Swedish,voucher,choice Sweden’s schools: Milton Friedman’s wet dreamLisa Pelling
world order,Russia,China,Europe,United States,US The coming world orderMarc Saxer
south working,remote work ‘South working’: the future of remote workAntonio Aloisi and Luisa Corazza
Russia,Putin,assets,oligarchs Seizing the assets of Russian oligarchsBranko Milanovic
Russians,support,war,Ukraine Why do Russians support the war against Ukraine?Svetlana Erpyleva

Most Recent Posts

Gazprom,Putin,Nordstream,Putin,Schröder How the public loses out when politicians cash inKatharina Pistor
defence,europe,spending Ukraine and Europe’s defence spendingValerio Alfonso Bruno and Adriano Cozzolino
North Atlantic Treaty Organization,NATO,Ukraine The Ukraine war and NATO’s renewed credibilityPaul Rogers
transnational list,European constituency,European elections,European public sphere A European constituency for a European public sphereDomènec Ruiz Devesa
hydrogen,gas,LNG,REPowerEU EU hydrogen targets—a neo-colonial resource grabPascoe Sabido and Chloé Mikolajczak

Other Social Europe Publications

The transatlantic relationship
Women and the coronavirus crisis
RE No. 12: Why No Economic Democracy in Sweden?
US election 2020
Corporate taxation in a globalised era

ETUI advertisement

Bilan social / Social policy in the EU: state of play 2021 and perspectives

The new edition of the Bilan social 2021, co-produced by the European Social Observatory (OSE) and the European Trade Union Institute (ETUI), reveals that while EU social policy-making took a blow in 2020, 2021 was guided by the re-emerging social aspirations of the European Commission and the launch of several important initiatives. Against the background of Covid-19, climate change and the debate on the future of Europe, the French presidency of the Council of the EU and the von der Leyen commission must now be closely scrutinised by EU citizens and social stakeholders.


AVAILABLE HERE

Eurofound advertisement

Living and working in Europe 2021

The Covid-19 pandemic continued to be a defining force in 2021, and Eurofound continued its work of examining and recording the many and diverse impacts across the EU. Living and working in Europe 2021 provides a snapshot of the changes to employment, work and living conditions in Europe. It also summarises the agency’s findings on issues such as gender equality in employment, wealth inequality and labour shortages. These will have a significant bearing on recovery from the pandemic, resilience in the face of the war in Ukraine and a successful transition to a green and digital future.


AVAILABLE HERE

Foundation for European Progressive Studies Advertisement

EU Care Atlas: a new interactive data map showing how care deficits affect the gender earnings gap in the EU

Browse through the EU Care Atlas, a new interactive data map to help uncover what the statistics are often hiding: how care deficits directly feed into the gender earnings gap.

While attention is often focused on the gender pay gap (13%), the EU Care Atlas brings to light the more worrisome and complex picture of women’s economic inequalities. The pay gap is just one of three main elements that explain the overall earnings gap, which is estimated at 36.7%. The EU Care Atlas illustrates the urgent need to look beyond the pay gap and understand the interplay between the overall earnings gap and care imbalances.


BROWSE THROUGH THE MAP

Hans Böckler Stiftung Advertisement

Towards a new Minimum Wage Policy in Germany and Europe: WSI minimum wage report 2022

The past year has seen a much higher political profile for the issue of minimum wages, not only in Germany, which has seen fresh initiatives to tackle low pay, but also in those many other countries in Europe that have embarked on substantial and sustained increases in statutory minimum wages. One key benchmark in determining what should count as an adequate minimum wage is the threshold of 60 per cent of the median wage, a ratio that has also played a role in the European Commission's proposals for an EU-level policy on minimum wages. This year's WSI Minimum Wage Report highlights the feasibility of achieving minimum wages that meet this criterion, given the political will. And with an increase to 12 euro per hour planned for autumn 2022, Germany might now find itself promoted from laggard to minimum-wage trailblazer.


FREE DOWNLOAD

About Social Europe

Our Mission

Article Submission

Membership

Advertisements

Legal Disclosure

Privacy Policy

Copyright

Social Europe ISSN 2628-7641

Social Europe Archives

Search Social Europe

Themes Archive

Politics Archive

Economy Archive

Society Archive

Ecology Archive

Follow us on social media

Follow us on Facebook

Follow us on Twitter

Follow us on LinkedIn

Follow us on YouTube