Perils of European optimism: The inability to imagine failure is reminiscent of 1914

Two years into the financial crisis I was talking to a British investor who allocates tens of billions of pounds, and whose idea of bedtime reading is medieval monetary history. Wouldn't the emerging markets be the winners in this crisis, I asked. She looked me in the eye and said: 'We're not called the First World for nothing'.

The West, she said, and more specifically the Anglo-Saxon West, had a 400-year history of dumping the social costs of economic crisis on to somebody else. Cue the second wave of quantitative easing in America, which exported inflation to the rising economic powers such as Brazil, India and China; cue America's $14 trillion debt pile, and a continued fiscal stimulus, which has brought growth back to America while piling extra risk on to those who have lent America the $14 trillion.

But one Western elite has spectacularly failed to perform in a First World manner: the Europeans. Though the bankruptcy of Lehman Brothers in 2008 signalled the crisis of an elite ideology in the USA - neoliberalism - the Americans were able to adapt and survive. Even politically, they have so far headed off fragmentation: the Occupy movement will vote for Barack Obama; the Tea Party, which began as a revolt against Wall Street, is now beholden to Wall Street to fund its politicians.

In Europe, meanwhile, the elite is paralysed, suffering an advanced crisis of legitimacy, and might yet crash its own project. This is seen not just in the rush to vote for non-centrist parties. It is apparent in the sudden repatriation of capital that is beginning to happen as the Euro-crisis veers towards a Greek exit from the eurozone.

The Greek crisis - though an extreme case - provides a textbook in which the Euro-elites can read their future. We are not there yet, but if events in the euro-zone continue their downward spiral this is how it will be.

We now have to imagine a Europe in which France is run by Marine Le Pen, the National Front leader, or by a socialist president under heavy leftist influence; in which Spain is bankrupt; in which UKIP, the Dutch Freedom Party and the True Finns call the shots in coalitions where traditional centre-rightists have been pushed towards the nationalist fringe.

Just to imagine it prompts the question: why has the European centrist elite proved incapable of swerving away from danger?

Ultimately it is trapped in a structure of its own creation. If we measure just debt, America is in a worse state. Debt equals 100 per cent of gross national product, and rising, with political paralysis. Euroland, taken as an aggregate, is solvent and on paper fiscally sustainable. But the aggregate is no longer backed by political will.

To maintain the rules of the single currency, one after another the countries of the periphery are being forced into a death-spiral of austerity. First Greece, then Spain.

Throughout the crisis, the Euro elite has suffered from the same inability to imagine failure that led to August 1914. Even days before the outbreak of war, it was thought impossible because the consequences would end the system, and everybody would be the loser. As the Austrian writer Stefan Zweig commented: our common optimism betrayed us.

And once the system fails, the European elite has a historic mind-set it can relapse into: on the day of the Nazi election victory in Germany, the Anschluss, and the French surrender in 1940, Europe's political class echoed the immortal words of the French socialists in 1914: 'Events have overwhelmed us'.

As I write this I can feel hackles rising - even my own: it is distasteful for the European centre to discuss the catastrophes that created it. But this 'social silence' lies at the heart of the problem: it is what allows the same politician to pop up on TV arguing that Greek exit from the euro is 'impossible' because of the consequences to the eurozone, then a year later propose it as 'inevitable' because of the consequences of avoiding it.

That said, we are not yet at the position where the majority of voters in stricken countries have deserted the centre. Even in Greece, the sudden rise of Syriza and the Democratic Left - two orphan parties of Euro-communism - merely reflects the move of social-democratic voters away from a party, Pasok, which gave up social democracy in favour of the Euro-rules.

But the cracks in the political system through which the European peoples have bestowed legitimacy on centrist politics are dangerous. The Greek fascist party, Golden Dawn, proclaimed its election credentials by bussing six coachloads of supporters to attack a migrant camp in Patras in front of the TV cameras.

I know that camp well. When I interviewed migrants from Sudan, Afghanistan and Morocco stranded there earlier this year, one said to me: 'This is not Europe. I've been to Europe: and this is not Europe'. The sad thing is, it is Europe - but the Europe we thought we had left behind.

(Paul Mason is Economics Editor of BBC Newsnight and author of Why It's Kicking Off Everywhere.)

 

 

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