Blog Post

Politics doesn’t have to remain in suspended animation

In all the troubled European countries, traditional political parties have been incapable of structuring a debate on how to respond to the crisis. In Greece, politics has been parked while vital financial negotiations take place with creditors and the Troika. In Italy, Mario Monti and his government of technocrats have replaced a voiceless Left as […]

By: Date: January 25, 2012 Topic: Macroeconomic policy

In all the troubled European countries, traditional political parties have been incapable of structuring a debate on how to respond to the crisis. In Greece, politics has been parked while vital financial negotiations take place with creditors and the Troika. In Italy, Mario Monti and his government of technocrats have replaced a voiceless Left as an alternative to Silvio Berlusconi. In Spain, the Right led by Mario Rajoy has scored a brilliant victory by carefully avoiding being specific about policy. In Portugal, Passos Coelho won by promising to implement the same measures as the Socialists of Socrates, only with more conviction. Everywhere party politics seems to be in suspended animation, as if the times were too tough for it.
This phenomenon is not universal. In the US and the UK, the traditional battle-lines are as relevant as ever, especially on the role of government. But in the Eurozone doubts are widespread: are both Right and Left still capable of offering a choice?     

Let us begin with the subjects which are not within government’s powers to decide and where, being unable to differentiate themselves, ruling parties are condemned to suffer buffeting from hostile forces: monetary policy, the rules governing public finances, trade policy, competition, financial regulation, to mention only the main ones. These are no trifles. In the knowledge that they are powerless to influence these factors, politicians are tempted by posturing – which only weakens their credibility. Rather, what is needed is a structured political debate at EU level. It is high time that politicians realise that maintaining European parties in an ectoplasmic state is not in their own interest. This argument applies particularly to the responses to the Eurozone crisis. Crucial choices lie ahead as regards the fiscal compact, the next EU budget and Eurobonds, which would deserve to be addressed in the open.           

Next comes the area of constrained choices, starting with national budgetary policy. Under the pressure of markets and with the tougher European rules, any incoming government must aim to eliminate the deficit over the next parliamentary term. This does not imply, however, that the policies to achieve this must be identical: there is a margin for differentiation on the speed and modalities of budgetary retrenchment, on the balance between increasing taxes and cutting spending, and on the choice of spending items to cut and taxes to rise. It is up to the politicians make sense of these choices and offer the voters a alternative between two versions of identically rigorous policies.    

This same largely applies to another traditional dividing-line, that between capital and labour. In all countries whose competitiveness has deteriorated the return on investment in the domestic traded-goods sector is currently too low to trigger a recovery in exports and manufacturing jobs.

Governments therefore need to take measures to make business profitable again. That, however, leaves the choice of tools – tax policy or wage policy, targeted or across-the-board measures, incentives to move up the quality ladder or to preserve low-skilled jobs. As long as politicians do not stick to outdated arguments, there is genuine room for debate here.    

Finally, there is still a ‘freestyle’ policy area. Against a backdrop of global widening of inequalities between the upper one percent and the other ninety-nine, the most prominent is certainly personal taxation. It is becoming an issue everywhere and should help taxation take centre-stage in the coming elections. There is however a whole range of other issues for differentiation, such as the labour market, education or energy, to name just a few.                 

The next country where candidates will have to test the attractiveness of their proposals is France. There is widespread perception in the country that François Hollande, on the Left, and Nicolas Sarkozy, on the Right, both represent variants of the same system, and a large fraction of the voters is tempted by anti-system candidates. But it is up to the two main candidates to offer voters a choice between two different analyses of the situation, and two sets of solutions. The real risk for democracy is not that the situation is narrowing the scope for political choice. It is that politicians are loath to speak out clearly for fear of stirring dissent in their own ranks. If tactics do cause ambiguity to prevail, then one will indeed be right to say that politics will have been in suspended animation during the elections. Democracy deserves better.   

This post is based on the column La politique en berne published also in Le Monde


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