The Populist Explosion: How the Great Recession Transformed American and European Politics by John B. Judis

Author:John B. Judis [Judis, John B.]
Language: eng
Format: epub, mobi
ISBN: 9780997126457
Publisher: Columbia Global Reports
Published: 2016-09-12T05:00:00+00:00

The Limits of Leftwing Populism: Syriza and Podemos

From 2003 through 2007, Europe seemed to be in passable shape. Growth in Europe averaged a low, but not disastrous 2.75 percent a year. The unemployment rate fell from 9.2 percent to 7.2 percent. The populist wave receded. But the financial crash that spread to Europe in late 2008 and the growth in refugees and Islamist terrorism that seemed to be tied to Western interventions and civil wars in the Middle East, South Asia, and North Africa sparked a populist revolt.

This populist reaction was different from the 1990s in one important respect. In the northern tier, where the Great Recession did not strike as forcefully, and where many of the asylum-seekers clustered, rightwing populism predominated. But in Southern Europe, where unemployment reached Great Depression levels, a new leftwing populism emerged in Spain, Greece, and Italy. When the major center-left and center-right parties, hobbled by their country’s membership in the Eurozone, failed to revive their nation’s economies, voters began looking to the new populist parties in these countries for answers.

The Eurocrisis

The financial crash, which surfaced in the United States in September 2008 with the collapse of Lehman Brothers, spread by the year’s end to European banks, which had heavily invested in American derivatives. Credit dried up, borrowers defaulted, investment lagged, and unemployment rose. By 2009, the EU’s average unemployment rate was 9.6 percent; in 2012, it would be 11.4 percent. And it would be far worse in Southern Europe—18 percent in Spain in 2009 and 25.1 percent in 2012. By 2012, the United States would begin pulling out of the Great Recession, but in Southern Europe it would endure, and would call into question the viability of the EU and the Euro.

In the United States, the immediate cause of the crash was financial deregulation and fraud. In Western Europe, the cause of the deepening recession was perverse financial regulation. The Eurozone, which went into effect in 1999, included 19 nations at varying degrees of economic development and with very different kinds of economies. Germany and the Netherlands, for instance, were export-driven high-tech economies. Under Gerhard Schröeder, German unions had agreed to restrain their wage demands. As a result, German wages actually ran behind productivity in the 2000s, making German products extremely competitive within the EU and internationally, and resulting in soaring trade surpluses.

Spain and Greece, by contrast, had lower-tech economies that relied on construction, tourism, financial services, and agriculture. Until they joined the Eurozone, these economies had managed to keep their current accounts balanced at moments of crisis by devaluing their currency. (Spain had devalued its currency four times between 1992 and 1995.) But when they joined the Eurozone, they no longer had control of their exchange rates. What they lost in flexibility, however, they seemed initially to gain in attractiveness for foreign investors. In the past, foreign investors might have worried that they would lose money if one of these countries got in trouble and devalued its currency. But with the Euro, regulated by the ECB, that wouldn’t happen in Spain any more than it would happen in Germany.

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