The De-Liberalisation of Europe

Germany retreats from economic liberalism
Grand Coalition could buoy EMU in short term
by Denis MacShane in London
Wed 23 Oct 2013
Germany is likely to retreat firmly from liberalism in the Grand Coalition that will probably be formed from laborious government-building talks now under way in Berlin. The result will comfort left-leaning governments in the other two big economies in the euro area, France and Italy, but may discourage foreign investors seeking to build up business in the euro’s heartlands.
Economic liberalism – sometimes, but wrongly, called neo-liberalism as an all-purpose insult – has had a 30-year run since the years of British prime minister Margaret Thatcher and US president Ronald Reagan. But we are now witnessing in Germany the de-liberalisation of European politics. Although one important strand of modern liberalism – the promotion of individual rights – stands upheld, another – the belief that less state, lower taxes and more rights for employers can generate economic growth – is unravelling.
In the short term, the swing to the left in the German parliament (despite a better-than-expected score in the 22 September elections for Christian Democrat (CDU) chancellor Angela Merkel) may improve cohesion in economic and monetary union (EMU).
But, presuming the Christian Democrats team up with the hitherto opposition Social Democratic Party (SPD), it’s still not clear how Berlin will pay for additional demands on public spending without increasing taxes. Whatever happens, the new Berlin government looks likely to maintain a hard line on bail-outs and transfers for struggling debtor states in EMU.
In the SPD’s guidelines for forming a Grand Coalition, the big-ticket demand is for a state-imposed legal minimum wage of €8.50 per hour. Merkel has indicated she is willing to live with this. The CDU’s more right-wing Bavarian partner, the Christian Social Union (CSU), has swung into line, though German employers remain opposed.
The new German government will be based on hard bargaining. Not all in the SPD’s 10-point wish list – ranging from more money for pensioners and healthcare through to higher spending on infrastructure – will be achieved. The SPD will demand a key economic or finance ministry post, with the septuagenarian Wolfgang Schäuble, Berlin’s chief enforcer of austerity on southern Europe, possibly being offered the largely decorative foreign ministry. The SPD has made clear it expects Merkel’s support for Martin Schulz, the left-wing president of the European parliament, to become EU Commission chief next summer.
Merkel’s trump card is that she incorporates many social democratic and Green policies including phasing out nuclear power. She worked reasonably well with the SPD in a previous coalition in 2005 to 2009 and has good personal links with top SPD politicians.
It’s no coincidence that the step back from liberalism is most visible in Germany, where there’s a strong egalitarian streak to politics. But in Britain, many see the liberal trend has stultified into excessive pay for the rich, rising inequality, a freeze on social mobility, and too much rentier and too little salaried capitalism. Lord (Maurice) Saatchi, the advertising genius who guided Thatcher to her election victories, has quoted Karl Marx’s critique of deregulated, self-serving capitalism. ‘The end result of competition is the end of competition. After years of internecine warfare amongst capitalists there would be fewer and fewer capitalists controlling vaster and vaster empires.’ Even the former Conservative prime minister, Sir John Major, felt that price gouging by energy companies justified a windfall tax. No-one it seems wants to defend classic economic liberalism.
When a top Tory begins to say Marx had a point, the journey away from liberal economics is clear. British Conservatives and Eurosceptic think-tanks like Open Europe have been proclaiming that Merkel’s re-election could bolster Berlin’s support for UK efforts to repatriate EU powers. These people have been banking on such an outcome to engineer a vote to stay in the EU in the 2017 referendum proposed by UK prime minister, David Cameron. With the new German government’s switch to statism, such hopes look likely to be disappointed.

Denis MacShane, Britain’s former Minister for Europe, is a member of the OMFIF Advisory Board.

Red Tape and Missionary Positions

Social Europe Journal 23 Oct 2013
Business Should Talk To Europe To Cut Red Tape

It’s the time of the year when business leaders proclaim yet another ‘Cut Euro Red Tape’ campaign. Different spokesmen for business queue up to say they want to see less regulation from Europe that they claim is holding back British business.
These are serious men who make serious money. Their view should not be dismissed. As North America and Asia grow strongly Europe does need to ask if every aspect of the way it regulates its economy adds or lessens growth. Europe does have a great number of regulations as do national administrations, professional bodies, regional employer federations and regulatory agencies. But as the more important business leaders troop into Downing Street to tell cabinet ministers what needs to be done they may be making the category error mistake of missionaries throughout the ages – that of preaching to the converted.
Like churches and third world NGOs arguing over the years that the Common Agricultural Policy did damage to third world farmers the UK’s preferred missionary position on EU reform almost always fails to provide satisfaction. The real targets for the CBI, EEF, Marc Bolland of Marks and Spencer, or Simon Walker of the Institute of Directors and other business bosses should be their fellow business leaders in Europe. Telling Iain Duncan Smith or Chris Grayling or Teresa May or the Daily Telegraph and Daily Mail there is something wrong with Europe is preaching to the converted.
Oxfam, Cafod, Save the Children and other excellent campaigners against poverty in developing countries also wasted years of lobbying time telling each other how iniquitous EU trade policies were. They should have caught a flight to Dublin or the Eurostar to Paris to convert the churches and pro-poor lobbies in Ireland or France to call for an end to the CAP. That would have been real missionary work. Similarly, British business needs to find support in German or Dutch or Belgian employers circles for their views. Picking up a megaphone in London and hoping you will be heard in Brussels is a low-return option.
Business leaders also need to ask themselves some tough questions. The most obvious one is to ask why, if EU rules, are so destructive of business do so many competitor firms on the continent thrive on them? If it is EU regulations holding back Britain from competing in the world why are German, or Dutch or Swedish firms operating under the same rules able to export so much more than the UK does?
A big problem is goldplating – Whitehall seat polishers adding on their own interpretations to a general EU regulation so as to cover their own backside to any future legal challenge. But that is a made-in-London problem not one to blame on Brussels. One demand is that the EU should not interfere in shale gas exploitation. So far there is no evidence of this. It is Nimbys in Sussex who are seeing off shale gas drilling in Britain just as Nimbys everywhere stop serious housing construction. In France, to placate les verts, President Hollande has announced a complete moratorium on shale gas exploration until after the 2017 presidential election. In Germany, Angela Merkel has renounced nuclear power so the chances of her supporting fracking are zero. If UK business really, really wants shale gas to arrive there is serious UK and EU persuasion to be undertaken. Blaming Brussels is a poor substitute.
One of the biggest sources of anti-EU feeling in Britain is the sense that European rules permit any number of European workers to come and “take” British jobs from British citizens. Without entering into lump of labour fallacies it is true that employment agencies offering blocks of labour without any of the obligations that come with full-time employment and lack of training dampen the possibilities of indigenous workers getting well-paid employment. So to remove core labour rights may make sense to the bottom line but also sends millions of voters into the arms of UKIP as they blame the EU not for too much social rights protection but too little.
Since Margaret Thatcher signed the Single Act in 1985 there have indeed been thousands of rules aimed at regulating and harmonising the single market. Many of them have been demanded by British business leaders and put in place by pro-business EU Commissioners like Lords Cockfield, Brittan and Mandelson.
The best advocate for the business case for EU reform would be if French, German, Dutch and other business leaders adopted similar positions. But that means engaging with Europe not sniping from the sidelines or even from within the cabinet room in Downing Street. Time for the CBI, EEF and IOD to speak European?

British papers snub Europe debate. Sad

The Guardian 22 October 2013

Why does the British press avoid debating EU membership?

Denis MacShane attended a European conference in Brussels last week. The event’s main sponsor was the French newspaper, the Nouvel Observateur. Several other European papers acted as sponsors too.

I was interested by his revelation that British papers were approached but, despite there being no request for funds, were not interested. So I am delighted to offer MacShane, a former Labour minister for Europe, a guest spot here to reflect on the absence of our press at the conference.
More than 8,000 people, most of them young, attended three days of debates earlier this month around the theme “reinventing Europe”.
They heard from not just the great and the good of Europe – such as Jacques Delors and Valery Giscard d’Estaing, who bring a curl to the lip of true-born English Eurosceptics – but a range of other speakers.
They included novelists Douglas Kennedy from America and Peter Schneider from Germany, opera director Gerard Mortier, Nobel peace prize laureate Martti Ahtisaari, US senator Peter Galbraith and the chief executives of some of France’s biggest firms.
The only British politician to attend was the Ukip MEP William Dartmouth. The organisers, the left-wing weekly, the Nouvel Observateur, tried hard to get Labour MPs or MEPs to come but none, ahem, were available.
They also asked British papers – such as the Guardian, the Independent, the Financial Times, the Economist and the New Statesman – to be co-sponsors of the event along with Spain’s El Pais, Italy’s La Repubblica, Belgium’s Standard, Poland’s Gazeta and France’s biggest-selling daily, l’Ouest-France.
All the British papers said no, or didn’t even bother to reply, despite the sponsorship being without payment and the chance to be in the company of some of Europe’s best papers.
The event, held in the Palais des Beaux Arts in Brussels, was like a giant Fabian new year conference or Hay Festival. It was far from a federalists’ feast. Ideas on what to do about Europe, and what Europe means or should be after its unhappy start to the 21st century decade, ricocheted all over the spectrum.
Are we to assume from the lack of interest by both Britain’s politicians and Britain’s media that our nation wants no part in the debate now taking place between the next generation of Europeans?
Must pro-Europeans in Britain resign themselves to talking to each other?
Why are Britain’s more open-minded journals so wary of being associated with European debate when, whether from Warsaw or Madrid, those editors think the future of Europe is worth discussing and supporting?
It is a standard trope of English media-political discourse that there is no interest in Europe, which leaves the ground open to anti-Europeans.
So we hear non-stop attacks on the EU from Nigel Farage’s Ukip and Conservative party fellow travellers, as we do from the Europe-hostile press owned by off-shore proprietors.
Anti-EU campaign organisations, like Open Europe and Business for Britain, are out in force at every opportunity.
But those in favour of European construction appear to cower under the duvet, too frightened to utter a word.
Ed Miliband is a committed pro-European but did not use the word “Europe” in his address to the Labour party conference. He is being pulled this way and that on the question of a referendum.
In a powerful column in the Guardian last week Jackie Ashley urged him to avoid a referendum at all costs. That view isn’t shared by many, including shadow cabinet members who think the EU referendum is a seal-the-deal offer to voters.
Labour’s yes-no internal, and relatively private, conflict on an EU referendum will continue at least until after the 2014 EU and local government elections and the need for Labour to set out its stall to win power in 2015.
So Labour is likely to stick to the view that it’s better, for the time being at least, to say as little as possible.
The argument is that Europe is low on voters’ priorities and there is little point in stirring up a Euro hornets’ nest.
Newspapers that remain silent are partly responsible for that situation. So, with the next Nouvel Observateur conference on Europe scheduled for Athens, may I respectfully ask Alan [Rusbridger], Amol [Rajan], Lionel [Barber] and Jason [Cowley] to call its editor, Laurent Joffrin, and take part?

Forget the European Legislature, It’s the Choice of the Executive that Counts

It’s Not the Choice of MEPs but of Commission that Counts

Denis MacShane

In ten weeks next summer Europe’s new leadership will be chosen. It is the most important moment in Europe’s history since the Treaty of Rome. The current leadership in Europe is by most reckoning a problem, not yet a solution. It is deeply conservative and such centre-left parties as win power alone or in coalition are unable to offer an alternative.
National leaders like Mrs Merkel have insisted on orthodox austerity economics for Europe reminiscent of the reparations era economics of the 1920s. France is out of the leadership of Europe until President Hollande can find some way of restoring economic energy or perhaps in agreeing to a major sharing of national sovereignty. David Cameron has put Britain on the sidelines until his In-Out referendum in 2017, which many believe will lead to Britain quitting Europe.
The European Commission under the 2-term José Manuel Barroso is seen as the weakest since the Treaty of Rome. The President of the Council, an innovation under the Lisbon Treaty, has made little difference. The European Parliament now persuades just two in five European citizens to vote in its election.
So next summer, all the elected and selected leadership posts in Europe come up for grabs. 766 members of the European Parliament have to be elected. The Presidents of the Commission, the Council, the Parliament, the Eurogroup and the EU Foreign Minister have to be chosen.
France’s president Hollande last week told the Nouvel Observateur that ‘Next May, the European Parliament could be for the large part composed of anti-Europeans. It would be regression and a threat of paralysis.’ In part Hollande is trying to stir his socialist party into action. The latest opinion polls show Marine Le Pen’s extreme right Front national with 24 per cent of the votes in the European Parliament elections. But in Britain, the latest European Parliament election polls gives Labour 35 per cent against 22 per for UKIP, with the ruling Conservatives, like the ruling Socialists in France, coming third.
That is embarrassing but will not dent the overall dominance of the European Parliament by mainstream democratic and broadly pro-European parties.
In fact, in Greece it may well by the leftist Syriza that does well in the European Parliament election just as the eclectic, erratic leftists of Beppe Grillo’s Cinque Estrella movement may get the protest votes against the left-right coalition in power in Rome In Poland, PiS, the Law and Justice party headed by Lech Kacynzksi will do well as Polish voters tire of the Civic Platform government. PiS on the right and Syriza on the left are not classic EU system parties but neither uses the Europhobic language of Marine Le Pen and Nigel Farage. In turn, the FN in France with its roots in anti-semitism and racism and the anti-Europe UKIP in England are not the same and do not cooperate.
Germany’s anti-Euro party, Alternative für Deutschland, will win a seat or two. But Hollande is wrong to see all these anti-system parties as a coherent, unified block that can threaten paralysis. Hungary’s increasingly nationalist Fidesz party faces criticisms similar to those made against Jorg Haider and his Austrian Freedom Party in 2000. But Fidesz sits in the European People’s Party in contrast to Britain’s Conservatives who quit the EPP and formed a group with PiS and others in the European Parliament .
So the anti-EU parties like split. Some are openly anti-Jewish like Hungary’s Jobbik and some openly anti-Muslim like the Dutch PVV. But they form at best about 10 per cent of 766 MEPs. The biggest federalist voice in Strasbourg is Daniel Cohn-Bendit who leads a group of 58 Green MEPs who if added to the 274 centre-right MEPs, 195 centre-left MEPs and 85 Liberal MEPs form a more than comfortable block for a broad pro-EU majority in the European Parliament.
The Socialists in France may lose some seats but Labour in Britain will win some as should the Socialists in Spain so the overall balance will be maintained.
The real challenge will not be to secure a European Parliament free of anti-Europeans but to choose a set of executives that can lead Europe out of its current morose state. This is Hollande’s real opportunity and Merkel’s real challenge. To devote serious thought and invest serious time in discussing with fellow EU leaders how to find a quartet of presidents – Commission, Council, Eurogroup and Parliament – as well as the Foreign Affairs representative to lead Europe out of its current state of economic misery giving rise to extremist scape-goating politics particularly against foreign faces.
The European Parliament election will see a low turn-out and not much real change in its composition. The real task is to create a leadership team that can transform the European Union before it’s too late.

Return of Social Europe

This article appeared in The Globalist 10 October 2013

The Return of Social Europe
Will Angela Merkel’s big win in the recent German elections usher in more leftist labor policy?
By Denis MacShane, October 10, 2013

The law of unintended consequences is the iron rule of European construction. What was meant to be an ever-closer union of peoples has turned into a centrifugal force driving Europeans apart.
Now we see that the biggest electoral victory for conservatives in recent European history – Mrs. Merkel’s triumphant return as German Chancellor – is about to open a new era of leftist influence in the European Community.
For more than a year, Europe had been waiting for the outcome of the German elections. Merkel’s reelection was meant to launch new initiatives in Europe. Germany’s own stuttering growth was expected to zoom upwards if there was a clear win for the country’s pro-business center-right.
Before the election, British Euroskeptics were opining that a victorious Mrs. Merkel would forge a new alliance with David Cameron to turn the EU into their dream world of repatriated powers. That would allow Britain to be free of Brussels’ bureaucracy and constraints.
Yet, even as Mrs. Merkel’s domestic political opponents lie scattered on the field, she does not know how to turn her triumph into a permanent reordering either of the German or the European political economy.
Nor does she know how to help her buddy, the British prime minister, who needs serious assistance from Berlin to navigate through the rapids of Euroskepticism, EU reform and his referendum due to take place in 2017.
The red coalition dance
In the meantime, important changes will take place. Merkel’s most preferred coalition partner, the German Social Democrats and their trade union allies are inclined to go for more French-style, government-driven regulation of the labor market.
They are demanding a legal minimum wage of €8.50 an hour and laws restricting part-time work. This turn to legal enforcement of pay and working time is a major rupture with the post-1945 German tradition of arriving at pay and workplace conditions on the basis of negotiations held between a small number of big industrial unions and employers – and hence held outside the realm of government.
The German preference for union-employer voluntary agreement stood in stark contrast to the 35-hour-week law legislated by the Socialist government in France in 1999.
Unlike their French counterparts, German unions have also shown flexibility in accepting wage freezes and changes to working time. But now, as more and more low-paying jobs and part-time work nudge the structure of the German labor market in the direction of Britain, or even the United States, the unions and their political allies in Mrs. Merkel’s possible coalition are calling for a turn to government-driven labor market legislation.
For economic liberals and especially UK Prime Minister David Cameron’s Conservatives looking for German leadership to get the EU economy moving again, this turn to statist labor market legislation will be a disappointment.
The green coalition dance
Nobody knows the ultimate outcome of the coalition negotiations in Germany. Mrs. Merkel may turn away from the Social Democrats, or they may turn away from her, in order not to be swallowed up and lose votes, as happened when they formed a coalition with her in 2005.
As Stephan Richter argued in the Financial Times , she can also form an effective coalition with the Greens now that she has said “Nein, Danke” to nuclear power – the original core tenet of Green ideology. But guess what? The Greens are friends of trade unions and labor market regulation as well and also want the state to rig energy markets in favor of windmills and solar panels.
So the odds are that German trade unions can shape new labor market laws in Germany. For the European left, that will be proof that the long era of promoting liberal economics is now over as the state comes back into play. It would be akin to snatching victory from the claws of defeat, considering how few left-of-center parties are actually parts of European governments today.
It fits into this emerging pattern that the European Commission has just produced a report saying that trade unions should be consulted on future economic decisions in Europe and governments should set out score-cards showing rises in inequality and unfair income distribution.
The birth of British euroskepticism
Twenty-five years ago, Jacques Delors, then the EU Commission President, changed British politics when he made a powerful speech to British trade unions in favor of a more “Social Europe” and against Margaret Thatcher’s union-hostile policies.
Mrs. Thatcher riposted a few days later with a speech at Bruges accusing Delors and Brussels of introducing socialism by the back door. September 1988 thus saw the birth moment of British euroskeptic ideology, which has poisoned British political life ever since.
Following Mrs. Merkel’s victory and her need to form a coalition with the reds or the greens, it paradoxically appears that “Social Europe” is on the way back.
In terms of votes and seats, Mrs. Merkel won big. But in terms of policy signals turning away from the liberal economics of the past two decades and turning more towards government dictating wages and prices, the odds are that the left and Social Europe will emerge as the real winners.

John le Carré – Not The FCO I Knew

This review was published in Tribune


The Delicate Truth  by John le Carre, Viking, £18.99


John le Carré is a key pillar of the English elite. He is an old Etonian,  Oxford groomed, a former diplomat, and essential to keeping the English control mechanism show on the road. This elite – what Hazlitt called ‘the thing’ – is not homogenous. It learnt long ago that controlling power needs non-conformity as well as compliant acceptance. Unlike religious or ideological systems of elite rule – all power to the Pope or Politburo – capitalist systems of elite domination need propagandists who mock and purport to expose the system. Thus cry the real power-wielders, “Us, an elite? Good heavens no!  How can this be so when we have the products of Eton (Le Carre), Winchester, (Seumus Milne), or Westminster (Tony Benn), regularly lacerating us and saying what wicked chaps we are?”

Each time le Carré claims to expose the wickedness of big pharma, hedge funds, Russian oligarchs, arms traders and now in his latest novel, the wicked collusion of the FCO with killer mercenaries the objects of his attack come back stronger. He has to resort to such caricature and exaggeration that no one takes his charges seriously but just enjoys turning the pages or watching Rachel Weiz, Bill Nighy and Ranulph Fiennes in films made from his books.

Even le Carré’s nom de plume which means ‘the square’ in French is an amusing jest. How can anyone who says the British are up to no good be square? This playfulness has been at heart of many of his novels and the latest is no different.  There was an early le Carré which got into part of the heart of the cold war and the rather feeble efforts of British spies to inform their masters about Soviet intentions. It is hard to know of a single example where they succeeded. Stalin’s takeover of East Europe was foretold by George Kennan in a Foreign Policy article. Khrushchev’s 20th CPSU speech on Stalin’s crimes had been circulating widely in draft form in the communist world but came as a surprise to Whitehall. Russian tanks rolled into Budapest, Prague and Kabul without British intelligence knowing what was going on.

Instead le Carré focused on the hangover caused by his fellow Old Etonians like Guy Burgess and Donald MacLean who like so many thought the Soviet Union was the only bulwark against fascism. Unlike Soviet admirers such as the Fabian Webbs, Eric Hobsbawm or Denis Healey who joined the communist party at Oxford these OEs, with all the effortless superiority of their formation, thought they could actually help their cause by handing over documents to Moscow.

They were traitors but the much larger group of Stalin apologists in liberal- left political life and key institutions like unions, universities, and the media did far more damage to Britain and prevented the emergence of an authentic British social democracy after 1945.  Orwell once wrote that if a bomb exploded under the main stand at Twickenham in the 1930s the chances of fascism arriving in England would be blown sky high. Le Carré thinks if he explodes a novel underneath Whitehall-banking-global capitalism shenanigans all that is rotten in the state will be exposed and rendered harmless.

If only. His latest book is a good example. The villain is a New Labour Foreign Office minister. Time for a  confession here as I worked for 8 years as PPS and minister at the Foreign Office in the years of a confident Labour government before Iraq and impending Brownism and bank crisis robbed the Labour government of confidence and morale. Le Carré’s Labour minister is beyond belief. He wears £1000 Lob shoes on each foot when in my experience, Marks and Spencers offers the upper range of shoes that junior ministers could afford. He is allowed to meet alone and by himself order an FCO diplomat to go and indulge in criminal activity with private American security goons in Gibraltar. There is more chance of a baby with the runs being allowed to crawl without a nappy over a Persian carpet than a minister being allowed to say or do anything without his private secretary being present.

It is impossible to list the inaccuracies in this scene setting section of le Carré’s novel. Of course most spy thrillers are fantasy. But le Carré is meant to be revealing the real truths about how the British state works. He is not read as a David Baldacci or Daniel Silva. He is read because we have been told he really does know what is going on. On the evidence of this book from eight years reasonably intimate connection with the FCO he simply doesn’t.

That is not to say the book fails as a yarn though there are pages of longeurs about life in a Cornish village that might boost the Cornish tourist industry but could have been cut. The pace quickens towards the end with the wicked state bumping off awkward people. Perhaps this happens but I doubt it though it is true that recently William Hague shamefully denied to a British coroner the evidence that would have allowed details of Russian involvement in the killing of a British citizen, Alexander Litvinenko, to come to light and a true verdict to be delivered. But the present FCO has all but given up on human rights as Hague has turned this great office of state into the international department of the British Chambers of Commerce, elevating mercantilism at the expense of democracy and British values.

For le Carré fans and like James Bond films we have all enjoyed his output over the past half century, this book provides plenty of cynicism from officials and details of club-land which always matter to Old Etonians. But might he write a final book that exposed the real nature of the British state with its cautions and cowardices and complexes which cannot be reduced to stock villains and callous wickedness. In the end he writes fiction not fact. He is a fully paid-up member of the elite he purports to expose. Le Carré is part of what’s wrong with Britain and its ruling and its contrarian elites.


Denis MacShane is the UK’s former Minister for Europe.