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Europe’s Left and the
Unemployment Crisis
R O B E R T TAY LO R
Europe is suffering from its highest level of
unemployment in more than a generation,
and European social democrats have been
unable to formulate an effective political
response.
One in ten of Europe’s workers are without
paid work. The number amounts to more than
twenty-four million people, and looks set to rise
across the continent even if the European
economy as a whole starts to grow again next
year. The jobs outlook is particularly bleak for
the young, those aged eighteen to twenty-five.
Recent school leavers and university graduates
face a particularly tough time. It is estimated
that one in five of them are destined in the
immediate future for a life without paid work.
In Eastern Europe the jobs crisis is even more
acute, with the resulting threat of widespread
social and political unrest. Only a handful of
smaller West European countries—notably the
Netherlands and Denmark—may be able to
avoid the worst, but even there unemployment
in 2010 will probably reach levels not seen since
the Great Depression.
The jobs crisis in Europe may be here for a
long time. Those optimists who see mass unem-
ployment as a temporary stage on the road back
to a buoyant labor market will be disappointed.
Job forecasts from authoritative bodies such as
the International Labor Organization, the Paris-
based Organization for Economic Cooperation
and Development, and the European
Commission make for grim reading. Whatever
happens over the next few years to Europe’s
financial markets and its banking system, we
are likely to see high levels of joblessness in the
“real” economy of goods and services, for a long
time to come..
POLITICS ABROAD
What does massive unemployment mean for
democratic politics on the continent? There are
dangers of rhetorical hyperbole in likening
Europe’s current unemployment crisis to that of
the inter-war years. The European Assembly
elections last June did not suggest that fascism
is on the march after half a century of lying
dormant. Only a handful of far right candidates
were returned to Strasbourg, and these were
confined to a few countries—Hungary, Belgium,
and (dismally) the United Kingdom. Efforts to
exploit the deepening jobs crisis with appeals to
racism and xenophobia proved less successful
than might have been expected. Although there
is no reason for complacency about the social
and economic distress we can expect, current
political signs suggest that right-wing populism
will remain on the fringes.
Despite this, the European election results
were a disaster for mainstream social
democracy. The lengthening jobless queues
failed to provide any genuine boost for the Left.
In most countries, the social democratic parties
suffered substantial losses. Only Greece,
Denmark, and Sweden defied the trend. Social
democratic parties sought to make the
continent’s unemployment crisis their main
public policy priority, but they failed to reap any
obvious electoral dividend. Much of the
European electorate remained unconvinced
that the Left can provide credible answers to the
crisis.
At the same time, political parties that advo-
cated neoliberal solutions of unfettered markets,
low taxes, deregulation, and a minimalist state
made few advances either. The German Free
Democrats, who performed reasonably well,
were the only exception. Perhaps unsurpris-
ingly, the U.S. model of capitalism remains as
unattractive across most of the continent now
as it did before the economic crisis.
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POLITICS ABROAD
The real winners of the elections turned out
to be the parties of the mainstream center-right.
In Germany, Chancellor Angela Merkel, and in
France, President Nicolas Sarkozy were the big
beneficiaries. The center-right made impressive
gains as well in Spain, the UK, Italy, and
Poland. But what has mostly been overlooked is
the primary reason why the center-right proved
to be such a resilient force. It was not because it
was identified with any narrow conservatism or
nationalism. Rather, it reflected the values and
policies of the continent’s famed social model of
which the center-right was always a crucial co-
founder. “The Left in Europe lacks a coherent
narrative,” argues John Monks, general
secretary of the Brussels-based European Trade
Union Confederation. “It is the center-right
[politicians] who are sitting in the driver’s seat
because they accept and are carrying out what
are basically Keynesian economic policies of
public expenditure and fiscal stimulation to deal
with the crisis.” Monks regards both Merkel and
Sarkozy as social democrats in all but name and
believes most European governments have
gone as far as they can in implementing
measures to bail out the banks and stabilize the
financial system.
Even more significantly, most West European
states have responded to the jobs crisis in a
positive way by adapting the flexible social
market approach and offering protections and
incentives for companies and workers in key
areas of the economy. Europe’s center-right
governments have become the sturdy defenders
and promoters of social democracy in their
responses to the unemployment crisis.
The German experience is especially
revealing. The Christian Democratic/Social
Democratic government in Berlin—in close
alliance with the country’s employer associa-
tions and trade unions—has sought to mitigate
the consequences of decline in Germany’s
manufacturing export sectors with measures
designed to assist companies through the crisis.
The German state is providing subsidies of
between 60 percent and 67 percent of net
wages to workers in firms in the auto,
chemical, and metal industries to meet the
extra cost incurred in shortening the length of
the working week for a limited period of time,
without loss of pay. The resulting agreements
have been reached through the existing system
20 D I SS E N T F A L L 2 0 0 9
of collective bargaining. Companies such as
Bosch, BMW, and Opel are using such schemes
to retain their skilled employees through the
crisis. Public resources are also being channeled
into enhanced skills training. Generous
severance schemes are assisting in the rede-
ployment of workers. The relatively generous
benefits of the welfare state in Germany are
being upheld and even improved to make sure
that workers who lose their jobs do not suffer
any dramatic fall in their living standards. Plans
to make labor more flexible in response to
what is happening are also being encouraged as
Germany’s well-established social market
continues to reflect a broad political consensus
in response to mass unemployment. State
subsidies for part-time work and shorter
working hours in the private manufacturing
sector seems to have had some positive impact
even if they upset liberal economists and
breach European Union legislation. A similar
approach on employment subsidies can be
found in France, Denmark, and the
Netherlands. In fact, it has found wide support
across much of the continent. Only New
Labour in Britain continues to oppose the use
of state financial support to underpin part-time
work.
A recent study by the Brussels-based
European Trade Union Institute has demon-
strated the widespread use of collective
bargaining agreements at plant and company
level to ease the employment consequences of
the crisis. There is much more flexibility in
Europe’s labor markets than its critics recognize.
As the ETUI paper argues, “The existence of an
inclusive multi-level system of collective
bargaining is an important condition for the
adoption of cooperative company plant level
agreements on flexible working time.”
Governments and employers across the
continent are seeking common ground with
trade unions to develop coordinated approaches
that can ease the dangers of social tension and
slow down or avert plant closures and layoffs.
The traditional institutions of Europe’s indus-
trial relations systems are proving adaptable
enough to meet the jobs crisis in a structured
way through social dialogue at all levels. In
practice in the past, capital and labor were
always more pragmatic and consensual than
their often militant class war rhetoric might
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suggest. Despite the obvious strains, this
remains true in these harsher times.
It would be wrong, however, to see these
developments as part of any grand design for
the future of Europe’s world of work. They
remain essentially ad hoc and limited, and they
are based on the assumption that the current
troubles in the labor market are only temporary.
The return of mass unemployment on the
continent is thought to result from cyclical
factors like lack of demand and stagnant export
markets—as well as from structural change in
the occupational composition of Europe’s labor
force. This is why almost all the European
countries have launched public spending
programs to improve infrastructure such as
roads and railways, encourage the creation of
environmentally green products, and
strengthen information technologies.
There is also wide agreement that urgent
action must be taken to improve the position of
young workers, particularly those with few or
no educational qualifications or recognized
skills. Greater resources for skills training and
vocational education are in evidence across
Europe. Employers are being encouraged
through the provision of tax cuts and incentives
to hire school leavers and university graduates.
Trade unions are cooperating with companies in
agreed programs to ease entry into full-time
employment for the young. In some countries,
notably Britain, action to help the under
twenty-five-year-olds into paid work is coupled
with tough welfare-to-work policies designed to
encourage those in the most vulnerable parts of
the labor market to take up paid employment.
But all these publicly funded measures to tackle
joblessness are bound to be limited. Next year
and beyond, governments will need to exercise
restraint in their spending programs and
introduce cutbacks to ease their country’s
burgeoning debt burdens.
For the time being, the combination of fiscal
stimulation and flexible employment strategies
may ease social and political tensions, especially
when these measures are combined with a
determination to uphold the generous benefits
paid by European welfare states to the unem-
ployed—most of whom receive up to 60 per
cent of their previous weekly net earnings.
But severe limits remain on whether any of
these measures can become permanent. They
POLITICS ABROAD
offer temporary palliatives, not lasting solutions.
The social democratic Left argues that it will
require a radical shift in economic and financial
strategies to create the conditions for a return of
real employment growth and “good” jobs, but
in the immediate future, as I have suggested,
the pressure is in the other direction—for cuts
in public expenditure, reductions in national
debt, and a degree of fiscal restraint that
together threaten to overwhelm the tentative
signs of economic recovery. It seems that fear of
inflation remains stronger in Europe than fear
of unemployment.
More fundamental problems face any social
democratic approach to the continent’s
employment crisis. “We have failed to
examine what is wrong with our current
world of work,” argues David Coats, assistant
director of the London-based Work
Foundation. So far, labor market measures
are protecting those in full-time jobs, mainly
in private manufacturing. Workers in that
sector tend to belong to trade unions and
have recognized and badly needed skills;
they are covered by strong legal regulations
and collective bargaining agreements. But
they represent a shrinking elite. They are the
insiders in what is becoming an increasingly
fragmented and diffuse work force. The insti-
tutions of the European social market model
were designed for them and for a relatively
stable employment system.
Today there are millions more who do not
belong to a trade union, who are not covered by
collective bargaining, and who do not have
strong, legally enforceable rights. In Germany,
companies are using the state-provided short-
time working subsidy to hang on to the skilled
workers they hope to employ effectively in the
future. But at the same time, they are
dismissing agency workers employed on short-
term contracts and those who are temporary
and unskilled. The massive growth in the
private services sector and the expansion of
small firms makes it much more difficult to
pursue public policies based on the social
model. At the European as well as nation-state
level, the informal sector remains unorganized
and unrecognized. There is an obvious danger
that social democrats will focus too much of
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POLITICS ABROAD
their attention on the well-being of the core
labor force and not enough on the “outsiders.”
For migrant workers, many employed in
private services and small firms, for contract
workers, for women, the disabled, unskilled
youth, and many other victims of the job crisis,
the mainstream parties of the center-left have
had little to offer. What is missing from too
much social democratic thought is any credible
strategy of engagement with the new world of
work. Unless these parties and their trade union
allies respond in more creative ways, the
“outsiders” are going to look elsewhere for
political help.
In important ways, the European labor market
is regressing to the structures of the nineteenth
century—to the world of insiders and outsiders,
of the skilled and the unskilled, the organized
and unorganized. The breakthrough of the labor
movement came when it was able to reach out
to the uneducated and the vulnerable, to all
those whose working lives were characterized
by insecurity and exploitation. In the early part
of the last century, socialism or social
democracy became the all-embracing political
ideology that provided the inspiration and hope
for millions of workers across national frontiers
and brought a strong coherence to center-left
politics. Of course, there can be no return to
such a world. But unless we can develop a new
social democracy that reflects the needs and
demands of today’s fragmented and incoherent
workforce, the center-left will face a long period
of decline and stagnation.
Can anything be done at the European
Union level to combat the crisis? Before the
arrival of mass unemployment, the social model
was under threat in Brussels. Calls for policies
that uphold social solidarity and cohesion went
unheard. Efforts to modernize or expand the
EU’s social dimension, to rebalance the rights of
capital with those of labor, were often frus-
trated. The return of mass unemployment has
tested the existing social model and for the most
part has underscored its importance in ensuring
stability.
A new center-left European agenda for
employment is urgently needed. Measures that
establish minimum standards to deal with
gender, ethnic, and other forms of inequality
22 D I SS E N T F A L L 2 0 0 9
and discrimination in the workplace must be
implemented. Stronger social rights are required
to reassure workers that they can agree to
change without fear of exclusion. These are
obvious steps, but much more is necessary.
The social settlement first constructed in
Western Europe after 1945 proved highly
successful in creating prosperous democratic
societies based on steady economic growth, a
commitment to redistribution and equality, and
a radical improvement in the well-being and
status of workers. Today’s unemployment crisis
challenges European leftists to establish a new
social market model that reflects the realities of
a very different world of work. This will not be
easy. In recent years the European Union—a
distinctively social democratic project—was
unable to generate business innovation, strong
labor productivity, and better skills training and
education. Now the downfall of neo-liberal
capitalism and a revived sense of the impor-
tance of an activist state open the way for the
continent’s center-left to seize the initiative.
Critics of Europe’s social model in the past often
argued that its principles and practices were
formidable obstacles to the establishment of a
prosperous and competitive European economy.
In fact, the opposite is true. A strong social
model is the precondition for the future success
of the EU’s project, and the return of mass
unemployment gives an added urgency to what
social democrats need to do.
But in 2010 Europe’s mainstream left will
face a formidable problem. This year, govern-
ments of all shades have sought to rescue the
banks and the European financial system
through massive injections of borrowed capital.
This has resulted in soaring public debts that
cannot be sustainable for long and need to be
serviced and paid back. As a result we are going
to experience savage cuts in public spending
and rising taxes in Europe that endanger any
economic recovery and condemn millions more
workers to a life without work. The nightmare
of a resurgent right-wing populism may then
return with a vengeance.
Robert Taylor is an associate member of Nuffield College,
Oxford. He is writing a history of parliamentary socialism in
Britain.