Land of discontent

An interesting pattern has emerged from the October 15 protests. Here are the ten cities which had the largest rally turn-outs, with estimated attendance [source]:

Madrid: 500,000
Rome: 100,000 - 300,000
Barcelona: 60,000 - 400,000
Valencia: 100,000
Lisbon: 20,000 - 100,000
Santiago: 10,000 - 100,000
Zaragoza: 40,000
New York: 35,000 - 50,000
Porto: 10,000 - 20,000
Berlin: 5,000 - 10,000+

Only one of these cities is in the United States. Eight are in western Europe. Four, including three of the top five, are in Spain alone. If the high-end estimates for the four Spanish cities are correct, total turn-out was over one million in a nation of 46 million.

What's going on over there? For decades Europeans have been most notable for passivity in the face of their rulers' arrogant and destructive policies. Poll after poll showed that high immigration, the loss of national sovereignty to the European Union, and the imposition of the euro currency were deeply unpopular -- yet there were none of the mass protests and campaigns to influence politicians that characterize American political controversies. Early last year, when I sought to call fellow American liberals on the carpet for defeatism and passivity in the face of a political setback, it came quite naturally to say "You sound like a bunch of Europeans." I certainly couldn't say that now. What's changed?

Well, for one thing, there's obviously the recession. But the US is suffering from that too. The difference lies in the policies adopted in response, and in who is deciding them.

The 2009 stimulus program in the US was too small for the scope of the problem, but at least it was a stimulus program and it saved millions of jobs which would otherwise have been lost. In most European countries, austerity policies -- the exact opposite -- have been followed, with utterly predictable results: deepening stagnation, rising unemployment, and rising emigration as people despair of jobs in their own countries ever coming back. Spain's unemployment rate recently hit 21%, the highest rate in the developed world.

Why? The biggest European countries do have conservative (by European standards) governments, but that's only part of the problem. EU rules for membership in the euro currency, which most EU countries use, require that deficits and national debt be kept below certain figures. Since recession reduces tax revenues and increases claims on public benefits, it naturally increases the deficit, and so spending cuts must be imposed. Also, the common currency precludes the depreciation of a national currency which would normally make exports cheaper and thereby provide a stimulus without public money being spent. Trapped by these constraints, the hardest-hit countries must turn to the EU for bail-out loans -- which come with conditions attached in the form of further austerity policies.

It has been aptly said that obsessing over deficit reduction at a time of high unemployment is rather like obsessing over water conservation when your house has caught fire. The resulting problems have come to a head in Greece, where the public is rioting and striking against the policies the EU has forced the government to impose, but Spain and Portugal are in a similar position, and Italy may be heading there. In a normal situation, the public would simply vote for a party with different policies, but in those countries, that no longer works; electing a different set of leaders just means choosing a different set of people to implement the same orders from the EU. Economic failure has made Europeans aware of how democracy is being destroyed (eloquently explained here) -- is it any wonder that people are taking to the streets?

A successful economic stimulus also reduces the deficit; as jobs come back, more tax revenue comes in and claims on the benefits system decrease. Austerity under the same conditions leads to a kind of death spiral; spending cuts lead to more unemployment and falling demand, which slows down the economy even further, which reduces revenue and increases claims on benefits, which raises the deficit and spurs politicians to make even more cuts, etc. That's what's happening in Europe now.

(There are two major exceptions to the pattern. Britain has more independence of action because it doesn't use the euro currency. Its current conservative government is also imposing austerity policies, but not at the EU's behest; a wiser future government would be free to change course. Germany is by far the biggest and most prosperous European economy, but that means it has ended up committing the lion's share of the money for the bail-outs of other countries, and its people are as unhappy about this as the southern Europeans are about their situation.)

If European countries abandoned the euro currency and the EU, they would be free to let their currencies depreciate and apply stimulus policies to whatever extent their elected leaders decided was best. Until that happens, it's hard to see how their economies can recover. European peoples are just beginning to grasp this.

The next few years over there could get rather interesting.