The abdication of the Left – redux – Part 1

Former Austrian Chancellor Bruno Kreisky was quoted as saying during the 1979 Austrian election campaign that: “I am less worried about the budget deficits than by the need for the state to create jobs where private industry fails”. That is the statement of a social democrat. That is a progressive Left view. In June 1982, with French unemployment at 7.2 per cent (having risen from 2.4 per cent in 1974 after a near decade of austerity under the right-wing Prime Minister Raymond Barre), the French Minister of Economy and Finance cut 30 billion francs from government spending so that the fiscal deficit would remain below 3 per cent. In March 1983, the same Minister pressured his colleagues including President François Mitterrand, into imposing a further bout of austerity, cutting another 24 billion francs and increasing taxes by 40 billion francs. These were very deep cuts. The austerity under the so-called ‘Barre Plan’ had failed to reduce inflation. When the turn to austerity was repeated under Mitterand’s so-called Socialist government, France was already in a deep recession. Under the Socialist austerity period unemployment rose sharply to further to 9.3 per cent by 1987. By then the architect of that austerity, one Jacques Delors, was European Commission President and starting work on his next exercise in neoliberal carnage – the Eurozone. None of his behaviour during that period remotely signals a position we could call progressive or Left. Like his austerity turn (“tournant de la rigeur”), Delors had turned into just another neoliberal obsessed with fiscal surpluses, free markets (he oversaw the 1987 Single European Act), and privatisation (which he claimed was necessary to attract foreign direct investment) (Source). This is Part 1 of a two-part series on the abdication of the Left, which some still choose to deny.

Sometimes one reads a piece of writing that stands out for its insightfulness, learnedness, and inspiration. In other cases, its denial, self-promotion and sheer stupidity that comes across.

I am writing today about an article in the second category and it is no surprise that it comes from a self-proclaimed Europhile ‘progressive’ who has a novel interpretation of history and of what constitutes ‘Left’ thinking.

I am referring to the recent article in Social Europe (July 11, 2018) by Stuart Holland Not An Abdication By The Left – which is really an attack on other ‘progressive’ thinkers who have advanced the conjecture that there has been an “intellectual abdication by the Left”.

Holland says “this is entirely wrong”.

The conjecture that is.


In particular, Holland holds out the track record of Jacques Delors as a demonstration of the continuity of progressive Left values in Europe.

In one case, he claims (the self-promotion part) that he apparently convinced Jacques Delors to insert a small section on Eurobonds in a 1993 document on mass unemployment as an example of how Delors was keen to have a federal fiscal capacity.

I will address that claim specifically later. The document he is referring to was as pure a neoliberal approach as one can find. And Holland is misleading when he introduces the Eurobonds example.

There are several examples in Holland’s article of a similar ilk.

Overall, there is denial in the article. There is historical revision. And, there is just plain stupidity. Sorry!

This is Part 1 of what will be a two-part series on this theme.

The reason I began the Introduction by comparing Bruno Kreisky with Jacques Delors, is that Stuart Holland seems to think they represent a consistent progressive Left tradition, with Delors taking over the mantle of Kreisky, Willy Brandt in Germany, and some other social democrat luminaries.

In my view, that is a plain violation of history and stretches what we mean by a progressive Left tradition to a point where it become a meaningless and vacuous concept.

Holland is upset that writers such as James Downes and Edward Chan “have written of the debacle of the social democratic Left in Europe”.

He is upset that this view has been repeated by “others such as Sheri Berman who has claimed that this is because it has run out of ideas (see here) while Dani Rodrik of Harvard, even more sweepingly, has claimed that, since the early 1980s, there has been an intellectual abdication by the Left”.

He clearly would not like the ideas in my latest book with Thomas Fazi – Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto Books, September 2017).

I have written about those themes for many years now. That book brings those themes together.

Thomas and I argued that the social democratic Left has abdicated and the people know it and that is why they have been rendered a political rump in a sequence of national elections.

In many cases, the former socialists have become the vehicles for austerity implementation and have overseen millions of people becoming jobless under the guise of reducing fiscal deficits. Think back to my opening sentence.

Holland writes that the claim that Delors represents the “intellectual abdication by the Left”:

… traduces the record not only of Delors, but also of François Mitterrand, Andreas Papandreou, Willy Brandt, Bruno Kreisky, and Antonio Guterres. Moreover, in the 1990s, Delors’ proposals for a New Bretton Woods directly influenced Bill Clinton in calling for one at his first G7 in Naples.

First, I wouldn’t hold out Bill Clinton as being progressive or Left in any way. His fiscal surpluses led to recession. His attacks on income support beneficiaries were pure neoliberal policy.

Clinton along with his British counterpart Tony Blair clearly abandoned the traditional mission of the Left in the Anglo world and pitched government policy to the advantage of the global financial interests and oversaw a dramatic rise in income inequality.

Second, I would never bundle François Mitterrand, Andreas Papandreou, Willy Brandt, Bruno Kreisky, and Antonio Guterres into the same grouping.

They may have started out in a similar tradition but over time their views and actions diverged quite dramatically.

Mitterand sold out to the Left by allowing Delors to impose the harsh austerity U-turn and substantially increase unemployment while the so-called ‘socialist’ Guterres engaged in large-scale privatisation and massive public sector expenditure cuts. Guterres also introduced conditionality into income support – the neoliberal ploy to cut benefits.

On social policy, Guterres was anti-abortion and homophobic (Source). Hardly progressive.

By way of contrast, in Catholic Austria, Bruno Kreisky decriminalised both homosexuality and abortion.

Andreas Papandreou, Willy Brandt, and Bruno Kreisky are much more alike in their views and behaviour while in government.

Bruno Kreisky has been described (Source) as “the last socialist of the old school” who “look back admiringly at an era when the standard of living was noticeably rising, when the welfare state was in full swing and when, by means of a state-funded programme promoting equality of opportunity, working class children were encouraged to stay on at school and eventually receive higher education.”

Andreas Papandreou period in office was continually attacked by conservatives who considered his spending program, which reversed years of neglect of social policy and employment creation under the Right-wing governments, to be excessive. His one mistake was to keep Greece within the European Union when he had been a long-time critic of the bloc.

Willy Brandt, similarly, was a progressive German Chancellor (between 1969 and 1974). By way of interest, apart from being the Chancellor who began a true, short-lived Keynesian era for Germany, which set his government in conflict with the Bundesbank and the ordoliberal elites, Brandt also saw European integration in an entirely different way to Delors.

He told the Bundestag on November 6, 1970 that the Werner proposal was the “great common task of the 1970s” and that it represented a “new Magna Carta for the Community” (Source).

This was in reference to the so-called Werner Plan outlined in – Report to the Council and the Commission on the realisation by stages of Economic and Monetary Union in the Community – which was submitted to the European Commission on October 13, 1970.

The Report outlined a comprehensive timetable for the creation of a full economic and monetary union by the end of the decade. Its vision bears no correspondence with what transpired at Maastricht under the guidance of Jacques Delors.

I discussed the Report and its place in history in some detail in my 2015 book – Eurozone Dystopia: Groupthink and Denial on a Grand Scale (published May 2015).

The Werner Plan sought “to determine the elements that are indispensable to the existence of a complete economic and monetary union” (page 9) and which constituted the “minimum that must be done”.

Among other characteristics, the Werner Report indicated that successful federations must have a central fiscal capacity and that this capacity had to be transferred from the national authorities and the central ‘budget’ would dominate the Member State ‘budgets’ to ensure asymmetric transfers were possible between the Member States.

Further, the Werner Report made it clear that the “centre of decision of economic policy will be politically responsible to a European Parliament” (page 13), elected on the basis of universal suffrage thereby recognising that economic policy should be democratically determined and those responsible for the policy should be held accountable to the will of the people.

That is what Willy Brandt thought was appropriate.

There was no hint that this level of intervention would be the domain of technocratic officials centred in Brussels who would do deals with unaccountable bodies such as the IMF that would result in millions of Europeans being made unemployed, which is the norm in the Europe that Delors and Co. created.

The likes of Andreas Papandreou, Willy Brandt, and Bruno Kreisky were Left leaders who preceded the abdication of the Left to neoliberalism.

In my new latest book (with Thomas Fazi) – Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto Books, September 2017) – we examine the ‘turning points’ where the Left abdicated.

The second Wilson government in Britain led the way. Then Mitterand with Delors carved the way for European socialists to abandon their mission under the guise of TINA in the face of the expanding neoliberal ideological infestation among policy makers.

The old school Left leaders like Andreas Papandreou, Willy Brandt, and Bruno Kreisky faded out and social democratic parties throughout the world and particularly in Europe, including Britain, became infested with this neoliberal thinking.

The talk shifted from full employment and inclusion to fiscal rules, fiscal surpluses, deregulation, fight inflation first, income support cuts and work tests, pension reforms (cuts), privatisation, outsourcing, single markets, free trade, user pays, and all the rest of it.

Jacques Delors was at the centre of all that despite Stuart Holland trying to wipe over the record.

It is interesting that Holland uses an example from the 1960s to advance what he claims to be Delors life long opposition to “technocracy”.

The Left abdication had not yet begun in 1968.

1968 is an important year though.

It was the year that Milton Friedman gave his presidential address to the American Economics Association and outlined his Monetarist mantra, including the natural rate of unemployment narrative.

Arguably, this was the start of the Monetarist era and it was not until the early 1970s that these views seeped out of the academy like slime from a sewer and started to penetrate central banking and, soon after, fiscal policy making departments.

The first embrace of the Monetarist ideas by policy makers was probably the introduction of the Competition and Credit Control (CCC) policy by the Bank of England in September 1971, which formalised the growing emphasis among the banking sector and economists that the central bank had to ‘control’ the money supply.

Classic Monetarism.

CCC ended in the Northern Autumn of 1973 – an abysmal failure, which demonstrated that the basic principles of Milton Friedman’s Monetarism were erroneous.

I discussed that failed experiment in this blog post – The Monetarism Trap snares the second Wilson Labour Government (March 9, 2016).

The UK Guardian article (January 21, 2011) – The modern left has much to learn from Austria’s golden age – provides some interesting and relevant historical analysis of Bruno Kreisky’s period of office in Austria.

The article carried the sub-heading:

The great socialist leader Bruno Kreisky would be dismayed by the European left’s meek acceptance of the rule of money power.

Which is exactly the point we make in – Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto Books, September 2017).

You can go through the UK Guardian article and tick the points which taken together delineate a progressive Left view.

1. “Austria not only became a more equal society, it also became more prosperous.”

2. “His leftwing economic policies showed that there certainly was an alternative to the monetarist economics that were soon to be imposed – at huge social and economic cost – in Britain.” (Delors imposed the same monetarist economics in France).

3. “Socially there were major advances too: the position of Austrian women was greatly improved, with maternity leave introduced, and homosexuality was decriminalised.”

4. “A Jewish anti-Zionist, Kreisky was a great champion of the rights of the Palestinian people and the strongest western European critic of Israel.”

5. “He was also one of the first European politicians to take an interest in developing countries”.

6. “If Kreisky were active in politics now, he’d be making the bankers and financial speculators pay for the mess they have caused and rejecting the new age of austerity. He’d be nationalising, not privatising, and putting the interests of the majority first.”

And by way of summary:

Kreisky’s career shows us what can be achieved if the main party of the left elects a leader who is committed, sincere and who refuses to apologise for his or her socialist beliefs.

Instead, for the past 20 years, the main parties of the European left have gone in another direction. They have elected leaders – like Tony Blair – who have moved their parties away not just from socialism, but from social democracy too, and who have tamely accepted the international rule of money power.

And along with Tony Blair, we would lump Jacques Delors, despite Stuart Holland’s poorly argued protestations.

The 1982-83 austerity turn!

I documented Delors role in the famous fiscal U-turn that occurred in France in late 1982 and 1983 in – Eurozone Dystopia: Groupthink and Denial on a Grand Scale (published May 2015) – in the context of the European integration debate.

I also discussed it in this blog post – Jacques Delors – a failed leader not a champion of a prosperous Europe (August 14, 2017).

And in – Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto Books, September 2017) – we put the period in historical context.

The French experience is particularly interesting and demonstrates how Jacques Delors abandoned his socialist credentials.

After indulging in the early Monetarist experiments under Giscard d’Estaing and Barre, the political fallout associated with the sharply rising unemployment demonstrated the poverty of that policy framework and led to Mitterrand’s election in 1981.

His government immediately set about doing what a sovereign government should do: use fiscal and monetary policy to expand employment, reduce unemployment and expand the social wage.

But the French were still intent on remaining in the European Monetary System (EMS) – that is, to fix their exchange rate against other European currencies, despite the on-going difficulties associated with that.

In other words, they wanted everything: political popularity associated with the lower unemployment and improved living conditions, a straitjacket on perceived German pretensions to European power, and continued German subsidies to their farmers under the Common Agricultural Policy.

On the one hand, domestic policy sovereignty was crucial if it was to lower unemployment and this really militated against participating in the EMS.

On the other hand, the desire to undermine German influence and to find a way to subsidise their farmers under the CAP forced them to engage in the European dialogue. They were caught betwixt!

By the third currency realignment under the EMS (which began in 1979) in March 1983, the French were at the crossroads and the incompatibility of these competing ambitions was obvious.

At that point, France had a choice. It could retain its policy sovereignty and pursue its legitimate domestic objectives by floating the franc or remain within the EMS and subjugate its domestic policy freedom to the dictates of the Bundesbank.

Unfortunately, for the French and for Europe in general, they chose the neo-liberal path, however culturally alien this was to them.

Accordingly, the French government fell lock-step into the increasingly dominant Monetarist policy approach that involved using rising unemployment as a policy tool to discipline the inflation process.

That political reality was too stark for the public to accept and necessitated a smokescreen being erected to disassociate the rising unemployment from macroeconomic policy choices.

The rising unemployment was reconstructed by the political and bureaucratic spin-doctors as a ‘structural’ problem reflecting a failure of individuals to be self-reliant and assiduous in job search and skill development.

A bevy of securely employed and highly paid economists pumped out a massive number of ‘research’ papers, which served to give authority and legitimacy to this ideologically tainted and empirically bereft view.

Most of this ‘authority’ lacked credibility, but then mainstream economics has never really been concerned with its theoretical inconsistencies or lack of empirical traction.

The shift in policy in March 1983, the so-called ‘tournant de la rigueur’ (turn to austerity), took France back to the ‘fight inflation first’ policies of Giscard d’Estaing in the late 1970s and ended the few years of social advance in France.

The shift in language, from “d’austérité” (as coined by Raymond Barre) to the softer “la rigeur” was just window-dressing.

The socialists were abandoning their principals to become part of the neo-liberal political convergence that captured social democratic parties in most advanced nations during this period.

In 1983, Delors, as the Economics, Finance, and Budget Minister (1983 to 1984), strengthened the neo-liberal program that Barre had begun.

The reduction in domestic inflation that resulted from the ‘scorched earth’ approach was celebrated as the first serious sign towards a convergence reality, while the sharp rises in unemployment were brushed under the carpet and forgotten.

Various bureaucrats, supported by free market-orientated academics worked overtime to convince everyone that the unemployment was not a result of a lack of jobs created by excessively restrictive fiscal and monetary policy, but rather a sign that people were not searching for work hard enough and were lulled into a welfare-dependent lassitude.

The war on the victims of this folly in macroeconomic policy gathered pace through the 1980s and culminated in the 1994 release of the OECD Jobs Study, which became the bible for those intent on ignoring the fact that the unemployed cannot search for jobs that are not there.

France’s output gap (the difference between actual output and the maximum potential output) nearly trebled between 1982 and 1985 as economic growth, household consumption and private investment slumped and more than a half million workers joined the jobless queues over the three year period.

The official unemployment rate rose from 7.4 per cent in 1982 to 10.2 per cent in 1985 and continued to increase after that.

Not unsurprisingly, the saving ratio (household saving out of disposable income) fell from 16.4 per cent in 1982 to 13.5 per cent in 1985 as a result of the failing economic growth and rising unemployment undermining household incomes.

However, the bureaucrats judged the outcome to be a success and applauded the French for adopting the German solution.

Delors was in charge throughout this dismal period of French history.

Nothing he was doing at that time indicated a progressive Left stance.

The Delors Committee revision

Stuart Holland also harks back to 1989 to justify his claim that Jacques Delors was a champion of the Left and an counterfoil to the neoliberal technocracy that is destroying Europe.

He writes:

Rodrik also errs in his claim that Delors opted for ‘Europe-wide and global rules’. When President of the European Commission, and chairing the committee for a single currency in 1989, including the governors of central banks, the Bundesbank wanted this to be founded on rules-based Ordoliberalismus. By contrast Delors gained the condition that “the process of achieving monetary union is only conceivable if a high degree of economic convergence is attained” as well as recognition that “monetary union without a sufficient degree of convergence of economic policies is unlikely to be durable and could be damaging to the Community”.

When I read that paragraph I nearly fell off my chair.

History tells us that Delors deliberately stacked his ‘Committee for the Study of Economic and Monetary Union’ to ensure that the Member States would have little voice as he bulldozed Europe towards a common currency with tight fiscal rules.

The Delors Committee deliberately excluded the Economics and Finance ministers at the suggestion of Delors himself.

He wanted the Committee to “consist of the governors of the central banks, who were more independent than the governments”

In one of his own submissions to the Committee – Regional implications of economic and monetary integration (January 1989) – Delors wrote (page 63):

The creeping paralysis of the Community was the result of the Member States calling into question the Community method for the progressive and limited transfer of national powers to common institutions possessing a real power make decisions.

Delors knew that the Bundesbank would not budge at all on the independence of a new European central bank and that it would have been difficult to get agreement if the Ecofin Ministers were involved.

Delors thus constituted his Committee to minimise any (legitimate) discussions of Member State sovereignty and to push through a homogenised Monetarist vision for the new united Europe.

By excluding the diversity of opinion, Europe was setting itself up for monumental failure, which manifested in 2008.

In 1999, political scientist Amy Verdun published an article – The Role of the Delors Committee in the Creation of EMU: An Epistemic Community? – in the Journal of European Public Policy.

She asked how the:

… consensus on the creation of EMU in the Community could have been reached so easily.

Delors effectively created what constituted an ‘epistemic community’, which in 1992, American political scientist Peter Haas called a “network of professionals with recognized expertise and competence in a particular domain and an authoritative claim to policy-relevant knowledge within that domain or issue-area” (Source).

According to Haas, this network also shares normative and causal beliefs and is engaged in a “common policy enterprise” (page 3), which means they agree on “common practices associated with a set of problems” (page 3).

The central bankers that formed the bulk of the Delors Committee met regularly and held a similar worldview about the primacy of monetary policy and the need for fiscal policy to be a passive support to the deflationary strategy defined by the Bundesbank.

The neo-liberal Groupthink was consolidating and Delors was active in the process.

In simple terms, the exclusion of the Ecofin Ministers meant that the Monetarist-orientated central bankers would come up with a consensus fairly quickly.

The addition of a conservative mainstream economics professor (Niels Thygesen from Copenhagen), and some other bankers (Alexandre Lamfalussy, BIS; and Miguel Boyer, President Banco Exterior de España) also reinforced the lack of diversity.

All members of the Committee were firmly wedded to the new era of neo-liberalism and the abandonment of Keynesian macroeconomic policies in favour of the hard-line pursuit of price stability.

Delors knew exactly what he was doing. A group of Yes men will only say Yes!

Stuart Holland refers his readers to two sentences in the 1989 Delors Report, which apparently shows Delors, himself was not a technocrat.

Yet a reading of the Report he oversaw and took charge of gives an absolutely opposite impression. Words and concepts do not lie.

The Delors Report (1989), which informed the Maastricht conference, disregarded the conclusions of the Werner and MacDougall Reports about the need for a strong federal fiscal function because they represented ‘old-fashioned’ Keynesian thinking, which was no longer tolerable within the Monetarist Groupthink that had taken over European debate.

The new breed of financial elites, who stood to gain massively from the deregulation that they demanded, promoted the re-emergence of the free market ideology that had been discredited during the Great Depression.

The shift from a Keynesian collective vision of full employment and equity to this new individualistic mob rule was driven by ideological bullying and narrow sectional interests rather than insights arising from a superior appeal to evidential authority and a concern for societal prosperity.

We see Delors own contribution to this shift in his 1993 report on mass unemployment which I will consider in Part 2.

The Monetarist (neo-liberal) disdain for government intervention meant that the EMU would suppress the capacity of fiscal policy and no amount of argument or evidence, which indicated that such a choice would lead to crisis, would distract Delors and his team from that aim.

Delors knew that he could appease the French political need to avoid handing over policy discretion to Brussels by shrouding that aim in the retention of national responsibility for economic policy making.

He also knew that the harsh fiscal rules he proposed that restricted the latitude of the national governments would satisfy the Germans.

Monetarism had bridged the two camps.

On the same page of the Delors Report (pages 20-21) that Stuart Holland quotes on sentence, we read:

… binding rules are required that would … impose upper limits on budget deficits of individual member countries of the Community … exclude access to direct central bank credit and other forms of monetary financing … limit recourse to external borrowing in non-Community currencies … [which] should enable the Community to conduct a coherent mix of fiscal and monetary policies.

That is technocracy.

The ‘Delors Plan’ constructed counter-stabilisation policy purely in terms of central banks adjusting interest rates to maintain price stability irrespective of the impact on economic growth and unemployment.

The old progressive social democrats such as Bruno Kreisky knew that counter-stabilisation policy described the way governments offset the fluctuations in private spending, which in the absence of such intervention, would create boom and bust cycles.

The aim was to maintain satisfactory economic growth and full employment without inflation.

It was recognised that government deficits would at times have to rise significantly to counter major declines in private spending.

The Delors Plan was in contradistinction to that Keynesian orthodoxy and the social democratic tradition.

Tellingly, the word ‘unemployment’ does not appear at all in the Delors Report despite it being persistently high across Europe at the time and the single largest cause of poverty.

While there is some reference to the need to promote economic growth, the Report repeats the Monetarist mantra that the attainment of price stability will ensure stable, long-term growth.

The Delors Committee eschewed any notion of a central fiscal authority on ideological grounds. One of the Committee members (BIS representative Alexandre Lamfalussy) wrote in 1989 that the idea:

… is out of the question for a prospective European EMU

Without a federal fiscal function, it was very likely the Member State fiscal deficits would exceed 3 per cent of GDP during major recessions.

Yet the Delors Committee proposed tight fiscal rules, which were formalised later in the SGP and put the EMU into an unworkable straitjacket from day one.

Further, there is normally a close correspondence between the fiscal authority in a federation (the ‘treasury’) and the nation’s central bank, which is usually given the role of currency issuance.

In the absence of a federal fiscal capacity, the Member States would have to enjoy central bank support to ensure that fiscal policy was not constrained by the lack of currency-issuing capacity.

The Delors Plan deliberately dislocated these two essential arms of macroeconomic policy and banned any central bank support.

It was no accident. It was by design.

On the road to Maastricht

I describe the events between the publication of the Delors Report in April 1989 and the European Council meeting in Maastricht on December 9-10, 1991, which drafted the treaty that would be signed on February 7, 1992, in some detail in my 2015 boook – Eurozone Dystopia: Groupthink and Denial on a Grand Scale (published May 2015).

I only summarise what happened here but it is important in understanding how Jacques Delors was intent on suppressing debate to push through his ‘neoliberal’ agenda for the common currency.

The Economic Council of the European Union held a meeting in Madrid on June 16 and 17, 1989 and accepted the Delors Plan.

The Council resolved to begin the first stage on July 1, 1990, but it was not until the meeting in Dublin on June 25 and 26, 1990, that the Council agreed that the ‘Intergovernmental Conference’ (IGC), which would consider the changes to the Treaty of Rome necessary to implement stages two and three, would meet on December 14, 1990.

In between the meetings in Madrid and Dublin, an Ecofin Committee working party considered how the Delors Report could be rendered acceptable to the Member States, bearing in mind that the Delors Committee had deliberately excluded the ‘politicians’ from the process to that point.

The vehement opposition from the British brought home the need to render something that would be politically acceptable.

French politician Élisabeth Guigou was charged with leading this ‘high-level’ EMU working group.

A preliminary agenda-setting meeting between European Council members and Ms Guigou was held in Paris on September 15, 1989 and – Minutes of the meeting with the ad hoc EMU group, DG II – show that the Commission should “be ready to explain and advocate the need for binding rules in the budgetary field (in October’s meetings for the Group)”.

The Minutes also said that fiscal coordination within the EMU should “reduce fiscal deficits that exceed a certain threshold” and “exclude access to credit from the central bank and other forms of monetary financing” (translating from the French).

The European Council meeting in Strasbourg on December 8-9, 1989 considered the Group’s report and determined that the IGC would occur in Rome.

There were a series of informal EMU workshops sponsored by the European Commission in late 1989 to debate the central issue of fiscal policy – whether to establish a European-wide fiscal function or leave the responsibilities at the Member State level with tight fiscal rules (the Delors preference).

Several papers argued that effective federations provided a federal fiscal capacity to provide relief when states within the federation were in recession. This principle was well understood by earlier integration studies (Werner, 1969; MacDougall, 1977) but not favoured in the Delors Report.

The Danish government produced a paper in this period (November 27, 1989) which rehearsed their lack of confidence in the Delors Report proposals concerning binding rules on fiscal deficits

Throughout 1990, various workshops were organised by the European Council, which handpicked economists to present papers. The grip of Monetarism on the academy was evident and there was little disagreement on the question of fiscal rules etc.

However, even though the process was tightly controlled by the Council, there was still some dissent with one paper recognising that the Delors Pan would render fiscal policy ‘pro-cyclical’, which means that it would reinforce the direction of the private spending cycle. Other disssenting voices cast doubt on the Delors approach to restricting fiscal deficits.

However, the prescient analysis of these experts was clearly ignored.

On May 22, 1990, the Economic Policy Committee of the Council published the principles, which they claimed should govern fiscal policy under an EMU. Pure neoliberal principles were enunciated in line with the Delors plan.

A statistical annexe was provided presenting the “Relevant macroeconomic variables” to guide discussion. The unemployment rate or employment growth rates were not considered to be relevant.

In fact, there was no mention of the persistently high unemployment rates in the Member States at the time the paper was presented.

This paper exemplified the way in which the Monetarist doctrines had excised the responsibilities of government to maintain high employment rates from any discussion of fiscal policy parameters.

The discussion of fiscal policy had become a stand-alone exercise with an internal logic defined by the ad hoc fiscal rules.

The discussions at the time rarely focussed on the ‘functions’ of government deficits.

Instead, there was an obsession about whether deficits were ‘reasonable’, ‘excessive’ or otherwise, with little definition on how we might demarcate those assessments.

All this under the guiding hand of one Jacques Delors.

In the 1999 Springer publication – The Presidency of the European Commission under Jacques Delors: The Politics of Shared Leadership – author Ken Endō wrote:

A Mitterand’s diplomatic counsellor at the Élysée palace, remarked that: Clearly M. Delors went beyond the governments’ wishes.

Indeed, Delors repeated the tactics that he used to ram through the Single European Act (SEA) in the 1985 IGC, which was held in Luxembourg on December 2-3.


In Part 2, we will discuss the 1993 Delors Paper on mass unemployment which Stuart Holland claims is further proof of the socialist Left credentials of Delors.

Black becomes white if that was so.

That is enough for today!

(c) Copyright 2018 William Mitchell. All Rights Reserved.

This Post Has 10 Comments

  1. It is rather telling that Social Europe stopped accepting user comments, our eurosceptic responses were ruining the propaganda. I was hoping you would comment on the article, actually, as the historical details are not known to me yet (I know, I know, I should just read Reclaiming the Nation-State).
    It’s also frightening how the mangerine is now the pretense for euroland unity and rearmament, while the great oligarch is the excuse for the need for censorship. I’m sure there’s no chance of the chauvinist Prussians going on another jingoistic binge again. Surely.

  2. “A bevy of securely employed and highly paid economists pumped out a massive number of ‘research’ papers, which served to give authority and legitimacy to this ideologically tainted and empirically bereft view”.

    Thanks Bill. That marvellously-succinct and devastatingly apt critique really does say all that deserves to be said of the mainstream economics “profession” we are cursed-with. It made my day – if not my year!

  3. Willem says:- “This should be standard economic history in every school”.

    Of course it should. But it won’t be, unless and until the iron grip of the plutocrats on our educational systems is prised off and the mainstream economics establishment (their hirelings) dethroned.

    And when will that happen, short of revolution? (Not in my lifetime, alas).

  4. For those who might not know, the Werner of the Werner Report is Pierre Werner, PM and Finance Minister of Luxembourg at the time of the report. It is not Richard Werner. I mention this as I have been asked whether the author of this report was economist Richard Werner. It clearly was not.

    I think Nicholas Kaldor could get a mention here, as he criticized from the Lords virtually every economic policy Thatcher put forward in her first term. He hated monetarism. His two relevant books here are The Economic Consequences of Mrs Thatcher and The Scourge of Monetarism. It is probably obvious that his critique did not bring about any deviation from policy. While these works do not provide the broad historical background that Bill does, I still think they are worth perusing.

    Upon reading Bill’s succinct account of Delors’s machinations, I began to wonder whether he was an ideological fanatic. Some of his followers were acting in self interest, but could he be said to be doing so? It doesn’t look like it. He doesn’t look much different than some Tories in the UK government. (Perhaps I should mention that I am possibly violating the Goldwater Rule in writing this about Delor. (But I am not a psychiatrist.) For the Goldwater Rule, chick out The New Yorker article by Jeannie Gerson entitled “Will Trump Be the Death of the Goldwater Rule?” from August 2017.)

  5. No better in Oz. Labor’s shadow Treasurer Chris Bowen is a determined proponent of fiscal surpluses and austerity recently pulling his leader Bill Shorten into line over his suggestion to overturn some business tax cuts while shadow Foreign Minister Penny Wong believes free trade agreements with everyone is good for Australian workers while the rest of the Labor opposition more or less follow this line.

    Australia still effectively offers a choice between Blairism and Thatcherism with many looking to inept far right wing bigots like Hansen, Bernardi, Abbott, Christensen, Canavan, Abetz and so on for answers?

  6. ‘The first embrace of the Monetarist ideas by policy makers was probably the introduction of the Competition and Credit Control (CCC) policy by the Bank of England in September 1971, which formalised the growing emphasis among the banking sector and economists that the central bank had to ‘control’ the money supply.,

    Interstingly 1971 was when the first of the UK housing bubbles started as banks cottoned on to the notion that they could make money hand over fist by exploiting the land/housing market. Five major cycles of bubbling later with supine Governments we now have a major crisis of unaffordable housing and massive wealth transference-quelle surprise!

  7. Nixon issued the directive that withdrew the US convertibility of dollars into gold on 15 August 1971. This event did not pass anyone by who was awake at the time, and that includes the BoE. This was a shock to many economies who had had almost no time to adjust. Nixon didn’t warn anyone really. While he didn’t formally suspend Bretton Woods, it was a dead duck after his announcement. Shortly afterwards came the oil shock, another event for which most economies were not prepared. These events were preceded for a number of years by what could only be said to be guerilla insurgencies by the monetarists who had been fanning out from Chicago for quite a long time, infiltrating every economics department and government economics agency they could. We can see the results all around us today.

    A central reason that governments seem to have run out of ideas about what to do with the instability in the sixties was that what had become known as the Keynesian era was not truly Keynesian; it was a mish-mash. Joan Robinson referred to it as bastard Keynesianism. This is not to say that sticking rigorously to Keynes’ demand management ideas would have been a panacea for the economic ills of the time, but it might have alleviated some of the issues and possibly prevented or mitigated the backlash that took place soon afterwards. It would not have been the solution though. The real problem was Bretton Woods, whether informed by Keynesian ideas rigorously adhered to or not. Bretton Woods was not Keynes’ idea. His were better.

    What is irritating is that no one seems to have learned anything from the twenties and thirties. There was debate in the twenties about the gold standard but the Bank and the City pushed Churchill to reintroduce the gold standard against the advice of Keynes and, to a certain extent, his own proclivities, though Keynes castigates him for doing it in “The Economic Consequences of Mr Churchill”.

  8. I did something similar, with hard data from Maddison’s World Economic Data

Leave a Reply

Your email address will not be published. Required fields are marked *

Back To Top