The Scandinavian states in Northern Europe are known for their speed skaters, but more so for their high taxes and generous welfare states. Cradle to the grave benefits for all and a great deal of state involvement in the economy are staples of the economic and political systems of Norway, Sweden, and Finland. Indeed, this much vaunted social model invokes world-wide envy: having achieved the seemingly impossible, reconciling a large interventionist state with economic growth. Predictably, the left has dominated the political scene in these countries. But that may be coming to an end.
After maintaining power for 65 of the last 74 years, Sweden’s Social Democrats—one of the world’s longest political dynasties—lost last fall’s election to Fredrik Reinfeldt’s center-right coalition. Similarly, Finland’s recent election in March of this year witnessed the worst results for the Social Democrats since 1962, as the center-right National Coalition Party gained ten additional seats and now share power with the Center Party. Norway still wields a leftist government—although the Norwegian right has had a better go of it compared to its regional counterparts—yet the next election may tip the scales in favor of the right and complete the political tri-fecta.
This electoral shift may just be a coincidence. It also could just be a sign of popular dissatisfaction and boredom with the same party dominating government for all these years. More likely, however, it is a pattern, representing a change in the political landscape.
To be sure, economic growth has accompanied high taxes and big welfare states in Scandinavia. But the system is not without inherent problems. Rigid labor markets, along with disincentives for working—accepting welfare checks is often more advantageous than finding a job—foster unemployment and an insider-outsider employment system.
It is tough for new graduates and outsiders to tap into the protected labor market. Lina Soderberg, a frustrated 24 year old Swedish graduate, declared shortly before the election, after having applied for over 100 jobs: “I am starting to get desperate about money...They say the system here in Sweden gives you help, but when you need it to, it doesn’t.”[1]
Yet Swedish unemployment figures do not fully bear this out. Government statistics often conceal rampant unemployment, as new Swedish Prime Minister Reinfeldt noted throughout the campaign. James Ashley, from Barclay’s Capital, argues: “The official unemployment rate looks better than European averages, but when you look at the true rate, taking into account government schemes for example, it is much higher, and there is a lot of dissatisfaction with that.” Official data shows unemployment at just under 6%, but McKinsey Global Institute observes the true rate as more than double the figure above, at roughly 15%, and the European polling agency, Eurostat, indicates youth unemployment is over 23%.[2]
Demographic troubles also underline the fragility of the Scandinavian social model. Problems endemic to many countries across Europe, and in the United States, such as plunging birth rates and the increasing rate of retirees, haunt those dedicated to the welfare state. Too few workers are, and increasingly will be in the future, contributing to retirees’ pensions and public services--social security in the U.S. faces similar difficulties.
Potential remedies include selling state-owned enterprises to engender further economic growth, increasing the retirement age, and slashing taxes and the welfare state—the markings of a center-right agenda. Unsurprisingly, the people across the region have voted the right into power to face down these obstacles.
It is too soon, however, for free-marketers to truly claim victory. The Scandinavians, much like the French, covet their welfare state, and will likely never truly relinquish its services. This rightward shift, which this piece lays out, is potentially misleading. The fact that the region has favored more right-wing parties is unmistakable, but one has to look at where the ideological dividing lines are drawn before making conclusions.
Just as the American political system is skewed to the right—some Democrats would be considered conservatives in Europe, and certainly in Scandinavia—the political spectrum in the Nordic countries veers left. Those parties identified as rightist in Scandinavia truly represent a centrist agenda: trimming the welfare state and lowering taxes, but largely at the margins. The right is still dedicated to the Scandinavian social model. Hence, although Scandinavia has shifted to the right, it is rather a lunge to the center.
[1] Qtd. From Ibison, David. “Voters’ disquiet leaves Swedish election neck-and-neck.” Financial Times. August 17, 2006.
[2] Ibison, David. “Swedish oust Persson as right wins poll.” Financial Times. September 17, 2006.
Wednesday, May 30, 2007
Friday, May 25, 2007
Mini-HACL: Sarkozy's Voluntary "Grand Coalition"
Garnering over 53% of the vote in a presidential election, in a Western liberal democracy, while not a landslide, is a quite a feat. Nicolas Sarkozy did just that in the recent French election, attaining a generous mandate for his right-wing reforms. Yet the new president has shifted leftward since his victory, reaching out to the defeated Socialist Party and naming moderate figures from his own party and the centrist UDF party for cabinet positions.
He even achieved a political coup—convincing former health minister and Socialist Bernard Kouchner to cross party lines and take over the powerful foreign ministry. Socialist Party boss Francois Hollande predictably lamented Kouchner’s decision and asked for his resignation from the party. While this certainly does not amount to a full blown grand coalition government, which is the current situation in Germany, whereby the two main political parties join forces to govern, it is similar and more importantly, completely voluntary.
Given Sarkozy’s sizable triumph over Segolene Royal’s Socialists, it appears odd that he would reach out to socialists and centrists. It has indeed sparked criticism from both the left and the right. On the left, Royal has denounced the Sarkozy offer as a ploy to divide her ranks, stating: "I have always been subject to criticisms, if not betrayals,” and went on to declare, "We must have more discipline. On the right it exists without fail." And within Sarkozy’s own party, some do not see the point in diluting their message and reaching out to those who lost the battle of ideas. An unnamed official from Sarkozy’s UMP party recently suggested that the party should not pretend as if it did not win the election.
So why would Sarkozy voluntarily form a national unity government? The answer is simple: to pass the reforms the president has in mind, the opposition needs to be cajoled and subdued. Sarkozy must have watched in horror as violent street clashes and protests accompanied his electoral victory—and took notes. Knowing that his country desires modernization, but is petrified of it at the same time, Sarkozy realizes that he cannot pass reforms too quickly and needs some opposition support to do so. The intense backlash last spring over the tepid youth labor law supported by then-Prime Minister Dominique De Villepin, which would allow employers to more easily hire and fire workers under the age of 26, is a case in point.
Some might view Sarkozy’s inclusive actions as a sign that for all his talk of a “rupture” in the French social model, he has no intention of doing much more than Chirac to modernize the country. Wrong. Sarkozy is dead-set on implementing his vision, but is a shrewd political operator and a realist. He knows that he must converse with the social opposition and include them in the process if his reforms are to be accepted and not sidelined by street protests. Whether he achieves his goal or not is still up in the air, as the French love a good protest as much as their welfare state. But in forming a French-style grand coalition, Sarkozy is at least giving his modernization efforts a chance at succeeding.
He even achieved a political coup—convincing former health minister and Socialist Bernard Kouchner to cross party lines and take over the powerful foreign ministry. Socialist Party boss Francois Hollande predictably lamented Kouchner’s decision and asked for his resignation from the party. While this certainly does not amount to a full blown grand coalition government, which is the current situation in Germany, whereby the two main political parties join forces to govern, it is similar and more importantly, completely voluntary.
Given Sarkozy’s sizable triumph over Segolene Royal’s Socialists, it appears odd that he would reach out to socialists and centrists. It has indeed sparked criticism from both the left and the right. On the left, Royal has denounced the Sarkozy offer as a ploy to divide her ranks, stating: "I have always been subject to criticisms, if not betrayals,” and went on to declare, "We must have more discipline. On the right it exists without fail." And within Sarkozy’s own party, some do not see the point in diluting their message and reaching out to those who lost the battle of ideas. An unnamed official from Sarkozy’s UMP party recently suggested that the party should not pretend as if it did not win the election.
So why would Sarkozy voluntarily form a national unity government? The answer is simple: to pass the reforms the president has in mind, the opposition needs to be cajoled and subdued. Sarkozy must have watched in horror as violent street clashes and protests accompanied his electoral victory—and took notes. Knowing that his country desires modernization, but is petrified of it at the same time, Sarkozy realizes that he cannot pass reforms too quickly and needs some opposition support to do so. The intense backlash last spring over the tepid youth labor law supported by then-Prime Minister Dominique De Villepin, which would allow employers to more easily hire and fire workers under the age of 26, is a case in point.
Some might view Sarkozy’s inclusive actions as a sign that for all his talk of a “rupture” in the French social model, he has no intention of doing much more than Chirac to modernize the country. Wrong. Sarkozy is dead-set on implementing his vision, but is a shrewd political operator and a realist. He knows that he must converse with the social opposition and include them in the process if his reforms are to be accepted and not sidelined by street protests. Whether he achieves his goal or not is still up in the air, as the French love a good protest as much as their welfare state. But in forming a French-style grand coalition, Sarkozy is at least giving his modernization efforts a chance at succeeding.
Tuesday, May 22, 2007
The Rise of the Euro-Realists
The European Union has evoked two different visions and ideologies since its inception. Euro-Federalists, such as Jean Monnet, the philosophical godfather of the European project, viewed the European Coal and Steel Community (ECSC), the precursor to the EU, as the first step in the break down of the traditional nation-state in favor of a European super-state.
A rival vision, espoused by what one could call Euro-Realists--the politically correct term in Brussels lingo is intergovernmentalists--still considers the nation-state as the main actor in Europe, tending to support a rather minimalist course of action for the EU. Recent events dictate that the Euro-Realists now have the upper hand, but there has been a history of back and forth between the two.
Charles De Gaulle, the arch intergovernmentalist, began a long period of Euro-Realist domination of the EU in the mid-1960s with his disappearing act from the European Commission, boycotting the body in what came to be known as the "empty chair crisis", which resulted in the Luxembourg Compromise: thereafter, states can veto any EU initiative if it deems it as detrimental to the national interest. But the federalists recently enjoyed a resurgence, having presided over massive integration projects; the creation of three treaties since the early 1990s--the Maastricht Treaty, Amsterdam Treaty, and Nice Treaty--and the recent European Constitution.
The European Constitution, among other things, included some underpinnings of a state: for one, the namesake, a constitution; secondly, references to a flag and anthem. But voters from France and the Netherlands definitely put a pause--although perhaps not an end--to the constitution via referendums in 2005.
Angela Merkel, chancellor of Germany, who currently holds the rotating presidency of the EU, seeks to breathe life into the treaty. She has her work cut out for her. Although eighteen member states have already signed and ratified the constitution as it was written, the Euro-skeptic, to put it mildly, Poles and British cannot accept the document as it is. This is not to mention the populaces that already refuted it, the French and the Dutch.
The crafty chancellor knows this. Consequently, Merkel has been touting the possibility of a slimmed down treaty--dismissing the more troublesome sections and just including mainly a smaller European Commission, an EU Foreign Minister, a 2 1/2 year term EU President, and new voting weights--in which cynical states could bypass their citizenry and ratify the document in parliament.
In truth, Merkel and the rest of Europe have been waiting for the French election results before doing much of anything. Sarkozy's recent victory, along with the announcement of the departure of British Prime Minister Tony Blair this summer, shakes up the European political scene. Powerful states, the UK and France, after July will be led by different personalities--after over a decade of Tony Blair and Jacques Chirac. In regards to the latter, good riddance. However, Blair may have been the most pro-European leader ever to grace 10 Downing Street.
The stage is now set for hopefully the conclusion of this strenuous process and the signing of a treaty, as the club rules certainly need to be updated to adjust to 27 members. And the election of Sarkozy and the ascendance of Gordon Brown, Blair's successor, tilts the European political scales in favor of the Euro-Realist vision, especially regarding the constitution.
A rival vision, espoused by what one could call Euro-Realists--the politically correct term in Brussels lingo is intergovernmentalists--still considers the nation-state as the main actor in Europe, tending to support a rather minimalist course of action for the EU. Recent events dictate that the Euro-Realists now have the upper hand, but there has been a history of back and forth between the two.
Charles De Gaulle, the arch intergovernmentalist, began a long period of Euro-Realist domination of the EU in the mid-1960s with his disappearing act from the European Commission, boycotting the body in what came to be known as the "empty chair crisis", which resulted in the Luxembourg Compromise: thereafter, states can veto any EU initiative if it deems it as detrimental to the national interest. But the federalists recently enjoyed a resurgence, having presided over massive integration projects; the creation of three treaties since the early 1990s--the Maastricht Treaty, Amsterdam Treaty, and Nice Treaty--and the recent European Constitution.
The European Constitution, among other things, included some underpinnings of a state: for one, the namesake, a constitution; secondly, references to a flag and anthem. But voters from France and the Netherlands definitely put a pause--although perhaps not an end--to the constitution via referendums in 2005.
Angela Merkel, chancellor of Germany, who currently holds the rotating presidency of the EU, seeks to breathe life into the treaty. She has her work cut out for her. Although eighteen member states have already signed and ratified the constitution as it was written, the Euro-skeptic, to put it mildly, Poles and British cannot accept the document as it is. This is not to mention the populaces that already refuted it, the French and the Dutch.
The crafty chancellor knows this. Consequently, Merkel has been touting the possibility of a slimmed down treaty--dismissing the more troublesome sections and just including mainly a smaller European Commission, an EU Foreign Minister, a 2 1/2 year term EU President, and new voting weights--in which cynical states could bypass their citizenry and ratify the document in parliament.
In truth, Merkel and the rest of Europe have been waiting for the French election results before doing much of anything. Sarkozy's recent victory, along with the announcement of the departure of British Prime Minister Tony Blair this summer, shakes up the European political scene. Powerful states, the UK and France, after July will be led by different personalities--after over a decade of Tony Blair and Jacques Chirac. In regards to the latter, good riddance. However, Blair may have been the most pro-European leader ever to grace 10 Downing Street.
The stage is now set for hopefully the conclusion of this strenuous process and the signing of a treaty, as the club rules certainly need to be updated to adjust to 27 members. And the election of Sarkozy and the ascendance of Gordon Brown, Blair's successor, tilts the European political scales in favor of the Euro-Realist vision, especially regarding the constitution.
Sarkozy campaigned on the idea of a trimmer "mini treaty" and Brown, who has yet to declare his true European colors but is known as more euroskeptic because of his decision as Chancellor of the Exchequer to keep Britain out of the Euro, certainly wishes for an excuse to refrain from a constitutional referendum. Merkel will thus seek to enlist the support of these new-found leaders for a mini-treaty and hope to buy off the rest of the skeptics, notably Poland.
Opt-out clauses are an effective outlet for tepid states to sign up to the meat of a treaty while staying out of politically sensitive programs within the initiative. This is how Denmark was persuaded to sign the Maastricht Treaty in 1992, notably opting out of defense and monetary integration, and how the Irish similarly refrained from the further defense cooperation inherent in the 2000 Nice Treaty.
Unsurprisingly, it was recently reported that the UK is being tempted with opt-out clauses in the realm of justice and home affairs in order to ease the ratification process of a new treaty. Given these circumstances, the adoption of a new, smaller constitution is indeed a distinct possibility in the run up to an important EU Summit this June.
Euro-Realists will no doubt dictate the strategic near future of the EU, as Merkel, Sarkozy and Brown rule the most powerful states in the union. Their more free-market economic leanings and less ambitious plans for the EU also find a friend in Brussels--EU Commission President Jose Manuel Barroso.
Barroso, since taking office in 2004, has attempted to make the commission more efficient, cutting the numerous statutes constantly coming out of Brussels. This effort goes hand in hand with his liberal economic goals, as Barroso notes, "For business we need to roll out a red carpet, not create red tape." Hence, although tenuous, the rise of the Euro-Realists is likely to result in the end of the constitutional crisis, and a more economically liberal and efficient EU. Sighs of relief abound on both sides of the Atlantic.
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