Austerity policies are the last thing Europe’s economy needs, and voters are making sure their leaders get the message.
Can democracy be raising its wonderful, if often lazy, head in Europe? Too often there is skepticism that democracy itself — the will of the people — can lead to wise economic decisions and that the American founding fathers were all fearful of the rule of the masses. I have long held the opposite view.
We all know examples of populist uprisings that have failed. The French Revolution was hardly an adulterated success. Populism in the U.S. in the 19th century led to many an ugly idea and many a bad economic solution.
But democracy creates demands for more equal wages, for social goods that reinstate confidence in a nation, and for the spread of opportunity. Democracy often also demands rights for minorities. It was democracy in America that fostered progressive income taxes, Social Security, Medicare, and government financing of education and roads. In my view, equal and strong wages are a source of growth, not a disadvantage that reduces profits as many orthodox economists see it. There is no growth without adequate demand. After 40 years of neglecting this basic idea, it is making a comeback.
Now the people of France may be saying they have had it with austerity. They may well vote out Sarkozy in favor of the Social Democrat Francois Hollande. Hollande beat Sarkozy in the first run-off and, according to the pundits, is likely to win the two-person run-off in two weeks. And Hollande is running an anti-austerity and anti-big finance campaign, if a mild one. Can this break the ice and reverse the trend toward austerity? One former European leader I spoke to thinks it could.
But there is more than just a reaction against austerity in France. The Netherlands is dealing with a backlash against its austerity programs, and the Dutch have been stalwart supporters of German single-mindedness on this issue. The prime minister felt obliged to resign. Even in Germany, the Social Democrats who are increasingly voicing concerns with Angela Merkel’s policies will gain more confidence. There are left-wing soundings in Spain as well.
All this is refreshing and highly welcome. Austerity policies are dead wrong for Europe right now. It is sliding into serious recession, and it may eventually upset the fragile U.S. recovery. The rebelling left is correct about economic policy, even if it is most motivated by economic justice. Could democracy and justice be policies for prosperity? Start believing again.