The impact the financial crisis of 2007-8 has had on Europe has actually not been financial at heart. For what was a financial crisis triggered by bad debt in the United States has given birth to a re-emergence of island-state nationalism coupled with national egotism. In so doing the financial crisis is rapidly morphing into a crisis of the European idea. It is doing so because politicians have resolutely ignored the linkage and have allowed economic arguments to be hijacked and used to inculcate fear. A fear of what? A fear of further losses? That seems improbable? A fear of job losses? Well that has only happened in the Romance countries. So perhaps the key fear is that of having to alter a lifestyle…
The 2007 crisis actually cracked Europe wide-open along debt de-fault lines. And the debt in question was not the sovereign debt that the newspaper pundits and talk-show experts all started talking about avidly. The ‘sovereign debt crisis’ was window-dressing to disguise the real root of the problem. For the crisis placed its finger in a festering wound that few politicians wanted to look at, let alone admit was there: the wound of hyper-materialism. Europe’s 65 years of relative peace had a cost and it had been one gladly paid by the consumers, be they in work or pensioners: The power of purchasing kept the European economic locomotive running smoothly, with the German economy in particular stoking the engine. Suddenly it became apparent that much of the purchasing, particularly in Great Britain, Spain and Italy, had been done using credit and was not sustainable. The house of cards collapsed. And like the Great Depression of 1930, the crisis brought right-wing parties back into play with a vengeance.
What the politicians under-estimated was the fears triggered by taking away the credit cards. While it may sound simplistic, it has been this that has cracked the political landscape open and triggered a sudden surge in support for nationalist anti-EU parties, such as the Partij voor de Vrijheid in the Netherlands, UKIP in Great Britain, the Alternative für Deutschland in Germany and the Front National in France. All of them swiftly scored strongly in elections to something they opposed – the European Parliament – and all of them suddenly found themselves able to muster mass support. Was the European idea itself at fault, unable to adjust to allay the fears, fears nurtured by politicians not saying Europe had delivered peace and prosperity but saying Europe had “taken from us”. What exactly has been taken is left unclear, as ‘freedom’ or ‘sovereignty’ have in post-War years never been particularly water-tight definitions for something tangible that the man on the street had in his back pocket.
What do the four countries in question have in common that could explain why this phenomenon has happened in them? They have all enjoyed comparable affluence for the last 30 years, in fact possibly since the 1972 Oil Crisis and perhaps that is why each population could be readily persuaded that something was being taken away from it – that it had something to lose. Writing in that august strongly anti-materialist left-wing journal the Daily Telegraph, back in June of 2013, Alistair Heath stated: “We still aren’t remotely living within our means and – for all the genuine pain in some quarters – still haven’t made a decisive break with the irrational exuberance of the 2000s and the cultural delusions that accompanied it.” He went on say that “together, families and non-financial firms’ debt is still worth 208pc of GDP and is merely back to levels last seen in mid-2007, a time when leverage was already utterly unsustainable. Current debt levels remain much higher than they were a decade ago (170pc of GDP) and 15 years ago (128pc of GDP).”
Eurostat is slightly kinder with its figures, saying that the figures for the United Kingdom were 184 pc (2007) and 169 pc (2013) respectively. Maybe the UKIP argument underneath everything is that the UK should be granted independence to be privately financially incompetent – it will never be able to pay its bills. People have not learned from the disastrous Northern Rock / RBS setting. (In fact, were Britain to have been a member of the Eurozone, it would have been spat out the back of the European Monetary Union train and punished for financial incompetence.)
In the Netherlands, during the same period, private-sector debtor soared, albeit not nearly as fast as the upturn in the fortunes of the Party for Freedom, but still significantly, leaping from 222pc to 246pc of GDP. In France, private-sector debt has risen from 150 pc to 175 pc over the same period. People buy things they cannot pay for and possibly will never be able to pay for, and seemingly do so gladly. Rather than considering how many people lost their savings when the banks they had been persuaded to buy mortgages from that they would never be able to repay collapsed, the politicians looked to bad banks and insolvent nations. And were happy to let the people continue spending as if there were no tomorrow.
Judging by the above figures, the average consumers have evidently responded to the crisis by trying to buy their way out of it – on tick. Which is a bad choice, as a paper published by Alan Taylor two years ago at the US National Bureau for Economic Research shows. Taylor’s analysis of 138 years of performances by 14 advanced economies show that the more private ‘leveraging’ there was, the greater the proneness to crisis. Yet the response to the financial crisis has not been to get private debt on a more even keel. No, although the political leaders in all three countries should know the problem, they have elected to stick their heads in the sand and have not levelled with the electorate. That blind-eye on consumerism has blind-sided them on Europe and has undermined the European idea and the EU.
This is where we come to the odd-man out in the quadrumvirate: Germany. In Germany, private-sector debt over the same period fell from 118pc to 110pc, so there the argument does not apply. Germany is the special case, as it is the one country inside the Eurozone that has been depicted rightly or wrongly as the person picking up the tab for the moribund over-spenders in Spain and Italy. That has been the chink in the armor that the Alternative for Germany has exploited. The argument was different, but the underlying fear they have fed on has been the same: “We are having to pay for others – with our (budget) independence.”
However, this is not the only point on which Germany is the special case. After all, what do the first three countries have in common other than excessively high private debt ratios, meaning they live above their means, meaning they live at someone else’s cost? Sadly the answer is that they share in common a history of having always done so, although the habit has gone by different names. All three countries built empires on exploiting parts of what is now called either the Third World – or America. Put differently, all three empires rested on the same mindset as ‘shop till you drop’: someone else somewhere else was footing the bill. (Most recently that person is possibly a Chinese worker dying from being contaminated in an Apple factory.)
Each country in the trio has a long-standing tradition of regarding itself as a ‘master of the universe’ as a key element in its national identity. For two of them, the last nail in the coffin of nationalist fervor came when Germany overran them and occupied them in 1940. For Britain, an acceptance that the price-tag for victory over Germany in 1945 was the final loss of its Empire has been such a bitter pill, that many have not swallowed it. Could it be that the reason why Germany is the odd man out is therefore less a matter of its populace not opting for excessive debt? Perhaps the key factor is that the three countries where the new political parties insist they are the “patriots” and are championing ‘independence’ or ‘freedom’ are the three that have ‘lost’ empires and have not come to terms with the fact.
How has the population in the triad coped with this sudden ‘downgrading’ in the national rating? It has not embarked down the path taken by the Germans after 1945, with its mixture of mea culpa, never again, and let’s build something together. No, the Brits, Dutch and French have instead evidently chosen that classic means of alleviating pain: They have gone shopping. And when the ability to go shopping as the main value in life (OK, I’m simplifying here) comes under threat, because a younger generation is not getting into jobs that pay more than service-industry-piss-poor wages because the politicians abandoned manufacturing in the 1980s in favor of a financial industry (and are not prepared to own up to the fact that the latter is closely connected with the house of credit cards that just fell down) then social cohesion starts to melt and dissatisfaction spreads.
Marine Le Pen, Geert Wilders and Nicholas Farage are all given credit by the electorate – for projecting a vision of past glory into the future. This is apt and makes sense, as it is the political version of saying my past credit rating was good, I spent masses, so surely I can continue to do so in the future. It’s always someone else who pays. Remember Black Friday is the first big shop of the Christmas season and also the day when in 1929 Wall Street came unstuck. This year, Amazon UK, that great taxpayer, posted record sales – not of records, but of just about everything else. The BBC reported: “Black Friday was the busiest day on record for online retailer Amazon UK, with sales that ‘surpassed all expectations’, the company has said. Its website recorded orders for more than 5.5 million goods, with about 64 items sold per second. Amazon said the public’s appetite for Black Friday was ‘bigger than ever’.” It will take a staunch politician to tell his electorate that maybe such a spree is not so good an idea after all. As always, history runs along an ironic trajectory. For the irony here is that those parties who claim to champion Western Judeo-Christian values (remember: Islamic banks don’t give credit as easily) are the ones undermining our societies, as consumerist values are simply not sustainable. It is high time politicians started offering us non-consumerist visions. If they don’t, Europe will fall apart and we will enjoy be ‘independent’.
