June 25, 2016
Originally published in the Blog Alternativas.
The Austrian economist Friedrich August von Hayek, one of the fathers of neoliberalism, wrote in 1939, more than twenty years before the creation of the European Economic Communities, an essay in which he defended a European federal union that would advance the liberal agenda. In a federation with a single market for goods, without barriers to the free movement of capital and labor, the price differences would only reflect costs of transportation. Factor mobility would undermine the ability of states to tax because, if taxes were higher than in neighboring countries, these would cause the flight of capital and workers. This competitive pressure would limit the revenue-raising capacity of the state and therefore that of implementing protectionist policies and social welfare. Hayek opposed the nation state because he knew that only it could develop social welfare policies that require consensuses and sacrifices which only citizens of a nation are willing to accept in behalf of other groups of their own community but not of individuals or groups of another nation.
“In the national state, current ideologies make it comparatively easy to persuade the rest of the community that it is in their interest to protect “their” industry or “their” wheat production…. The decisive consideration is that their sacrifice benefits compatriots whose position is familiar to them." (Hayek, 1948)
In the case of an interstate federation, Hayek thought that this type of bonds and feelings of belonging would not exist and that it would therefore be more difficult to advance an agenda of protectionist and social policies.
In an interesting essay, Glyn Morgan, Professor at Harvard University [i] compares Hayek's view with that of the German sociologist and philosopher Jurgen Habermas, a thinker associated with social democracy. Habermas recognizes the achievements of the nation state, the most positive being the creation of the welfare state that guarantees all citizens a measure of social rights and subordinates the capitalist economy to the general interests. However, Habermas seeks for a justification of the European project. The process of European integration managed to put an end to a history of bloody warfare that culminated in World War II. However, it would be delusionary to pretend that citizens would continue to show enthusiasm for a European project limited to quelling old national quarrels. That is why Habermas introduces an argument, which the Left has picked up as a mantra: the globalization process would render the nation-state powerless and obsolete, eroding the social state and democracy. The state would be compelled to reduce taxation on an increasingly mobile capital weakening its ability to implement social policies. To attract capital, states would be forced to accept competitive reductions in tax rates. Maintaining competitiveness in open markets would require imposing wage devaluations.
"the globalization of commerce and communication, of economic production and finance, of the spread of technology and weapons, and above all of ecological and military risks, poses problems that can no longer be solved within the framework of nation-states or by the traditional methods of agreement between sovereign states. [ii] "
To address these threats the various states respond in an uncoordinated and uncooperative way. Therefore, Habermas believes he has found a rationale for the European project in the preservation of the values of the social state.
Hayek and Habermas arrive at diametrically opposite conclusions about the consequences of a process of European integration. The former believes that the federation will end the social state, the latter thought that it will save it. In spite of Habermas, the nation state is still alive and has shown a greater capacity to deliver prosperity, economic growth and social equity than the failed European project. If Habermas were correct then the crisis of the nation state would be a global phenomenon but strangely enough it seems only confined to Europe. In other continents this venerable institution seems to be living its best times. Countries such as South Korea, Chile, Canada, New Zealand, Australia or Uruguay offer increasing levels of prosperity to their citizens. Great nations like China or the US do not appear to be at risk of integrating into larger federations. Within Europe itself, the countries that recovered earlier from the global financial crisis and demonstrate higher levels of happiness among the population, survey after survey, did not join the European project: Switzerland, Iceland and Norway. Within the EU, those countries not participating in the monetary union such as Sweden, Denmark, the United Kingdom and Poland have also had a superior economic performance after the onset of the global financial crisis.
The evidence suggests that the European Union is a 'Hayekian' federation. The European project is elitist and its treaties have a neoliberal inspiration at the service of big capital. The European Union, far from consolidating an advanced social state, has been undermining it systematically. Brandishing the threat of globalization the EU promised the working and middle classes a better world for which they would prepare us with training and investments in R&D making us super-competitive. The promised utopia has become a dystopia for the working class and the youth, especially in southern Europe.
That is why the surrender of the traditional social democratic parties is so perplexing, having fallen into what we might call the "Habermas error" they delude themselves in arguing that Europe would strengthen the social state despite the stubborn evidence to the contrary. This shortsightedness of the Social Democrats can perhaps be explained by cooptation of these old parties by neoliberalism — this seems to be the case of politicians who, like Felipe González, reneged Marxism early on; or perhaps because they mistook the Hayekian federation with an internationalist project. In this case, the Social Democrats may have an overly vague definition of internationalist because so is capitalism, probably with even more enthusiasm and conviction.
The discontent of the popular classes, lacking a progressive beacon that could explain and guide it, betrayed by parties that had surrendered to the European project, in stark contradiction with the principles they claim to uphold, has been channeled in some countries through right-wing formations. With simpler messages and waving the flag of identity, these have won over the angry voter.
Last week a majority of the British people voted to leave the EU. The media of the establishment have stressed that the vote for Brexit was majoritarian amongst the elderly and supported by a minority amongst young people. They seem to have paid less attention to the fact that the support for Brexit was also majoritarian among low-income citizens. For the politically correct elite, voting for Brexit would have been a thing of aged ignoramus and reactionary voters. One of the main supporters of the European project in Spain, Xavier Vidal Folch wrote the next day "without acrimony, we believe that the decision of the voters was perhaps not the most logical, rational nor desirable," –for the interests of his class, if I may add- "but perhaps it was the most obvious, after four decades of relentless propaganda against Europe ". He apparently forgets about the systematic bombardment from the media, the business world and the "respectable" politicians about the infinite evils that will befall if Britain decides to leave the EU.
Those parties from the left or right that dare question the European project are disparaged as "nationalistic", "regressive", "xenophobic" or worse, "populist". Their humble voters may verbalize it better or worse, in the company or not of the cowering social democratic parties, but in reality they only want their nation state back so that they can recover dignified living conditions. The British working class, "those chavs", did not vote last Thursday with their heart; they voted with their heads.
[i] Morgan G., Hayek, Habermas, and European Integration. (2003)
[ii] Habermas, J. The Inclusion of the Other: Studies in Political Theory. (1998)