A few weeks ago, I wrote about the possibility of a political breakupof the European Union. Just before Thanksgiving, I wrote— not ironically — about whether a crypto-breakup of Europe might already be underwayin the sovereign debt markets.
Today, a new idea that is at least as unsettling: Fragmentation in Europe, not just along national lines, but along class and economic lines as well.
Michael Pettis, a Professor of Finance at Peking University and a frequent writer on international economics wrote in a recent blog post, in reference to Europe's most economically troubled nations:
"Political radicalism in these countries will rise inexorably as a consequence of rising class conflict. As Keynes pointed out as far back as 1922, the process of adjusting the currency and debt will primarily be one of assigning the costs to different economic groups, and this is never an easy or conflict-free exercise."
This is indeed a frightening scenario. If, as Milton Friedman suggested in 1965 "We are all Keynesians now," perhaps it is time to think through some of the darker ramifications for Europe.
In the United States, we tend to underestimate the significant ideological grip socialism held in Europe for much of the 20th century. In the U.S., for example, the late 1960's brought a highly polarizing counterculture movement, whose excesses, nonetheless, rarely rose above the level of annoyance and disruption—despite much anxious hand-wringing by overwrought establishmentarians. In France, on the other hand, the events of May 1968 came perilously close to toppling the Fifth Republic. In Italy, The Italian Communist Party held representation in the parliament until 1989. Such ideological strains in Europe, over the last several decades, have occasionally risen beyond the barricades and the ballot box: In Germany in 1989, Alfred Herrhausen, the chairman of Deutsche Bank, was assassinated by a highly sophisticated roadside bomb—believed to have been detonated by The Red Army Faction, a violent revolutionary group advocating Marxist-Leninist positions.
While those examples might indeed be outliers, the policies of many European Union nations are influenced by the fundamental structure of their governments: parliamentary democracies. Unlike the political system in place in the United States, parliamentary democracies often result in coalition governments—like the government currently in power in The United Kingdom.
From an American perspective, there are surprising features of parliamentary democracies in general and, in particular, coalition governments, which often rise to power during times of political and economic strife.
The upside of the parliamentary system is the promise of an intellectual openness to a broader spectrum of political opinion. The downside is the possibility that small parties—and with them fringe movements—can accumulate a share of power disproportionate to their representation in the general population. (In an example from the opposite side of the political spectrum, the broad Swedish left is apoplectic over the rise of a political party alleged to have racist roots.)
In short, due to cultural, historical, and structural factors at play in Europe, it seems impossible to rule out the possibility of social fragmentation along class and economic lines. In certain European intellectual circles, that oft-quoted line from The Communist Manifesto —that "The history of all hitherto existing society is the history of class struggles"—is more than just an ancient relic. It's a political truism.
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