Where Is Europe's FDR?

One would not want FDR's foreign policies, only too similar to Merkel's and Sarkozy's. But over in The First Post/The Week, Neil Clark writes:

While most of the attention in Britain has been focused on the domestic political implications of the Cameron-Clegg split over Europe, the bigger, more important story is what the EU leaders actually signed up to last week. s respected economic commentators such as Ambrose Evans-Pritchard in The Daily Telegraph and Larry Elliot in The Guardian have highlighted, 'Hooverism' - in other words, the politics of austerity - will now be enshrined in EU treaty law. It will no longer be possible for EU members to engage in deficit spending to try to stimulate the economy in times of recession: any government which breaks the harsh spending and borrowing rules faces automatic sanctions.

We shouldn't be surprised that it has come to this. Back in the early 1990s, as European monetary union was being discussed in the British Parliament, Peter Shore, the veteran eurosceptic, warned that closer economic integration in Europe would lead to a new age of austerity. Joining monetary union, Shore predicted, would amount to "national economic suicide". How right he was. Last week's Brussels agreement, while hailed by the EU elite, is actually terrible news for ordinary Europeans. If Sarkozy and Merkel get their way, all we can look forward to is years of austerity, high unemployment and falling living standards. Far from there being any light at the end of the tunnel, Gerard Lyons, the chief economist at Standard Chartered, has predicted that the eurozone will contract by 1.5 per cent next year. Merry Christmas everyone.

It doesn't have to be this bleak. What is urgently required is a totally different approach - a break with Hooverism and the return of imaginative Keynesian solutions. That means letting the Euro collapse - we can't get expansion and keep monetary union - and allowing eurozone countries to go back to their old currencies. To get to this point we will need radical, new leadership in Europe. And the model for the new leadership should be Franklin Delano Roosevelt - America's greatest ever president. FDR was a man brave enough to break with economic orthodoxy and set America on a different path. When he succeeded Herbert Hoover as president in 1933, he took over a demoralised, impoverished nation. By the time he died in 1945, the US was the world's strongest economy.

Declaring in his inauguration speech that "the only thing we have to fear is fear itself", Roosevelt embarked on a 'New Deal' of public works and other government measures to get the economy moving. Unemployment, which stood close to 25 per cent in 1933, had dropped to just over 14 per cent four years later. For millions of ordinary Americans, the man from New York state with the cheery smile and the cigarette holder, was a hero. Where is Europe's FDR today? The most depressing thing in European politics is to see parties of the left and centre-left, who should be rejecting totally the politics of austerity, siding with the Hooverites. One can imagine what the great Bruno Kreisky - Austria's Socialist chancellor of the 1970s and 80s - would say of their timidity.

At the time of the 1979 Austrian general election, Kreisky - an unapologetic Keynesian - declared: "Hundreds of thousands unemployed matter more than a few billion schillings of debt." The result was an overwhelming victory for the Socialist party. Instead of following Merkel and Sarkozy over the precipice, European progressives should be putting forward ambitious 'New Deal' plans, to get the EU's 23m jobless back to work. That means increasing - and not decreasing - government deficits in the short-term. As people return to the labour market, so the deficit will naturally fall, boosted by increased tax revenues and falling welfare bills. Instead of being caught in a vicious deflationary spiral, as at present, Europe would enjoy a virtuous circle of growth.

The Hooverites will, of course, tell us that this is all wholly impractical. But we've been here before. In the years following the Wall Street Crash, we were told there was no other way out of the morass than for governments to dutifully "balance their books" and for the populace to endure further hardship. But there was another way - and the European politicians who see that, and who are brave enough to shatter the pro-austerity consensus, are likely to end up being revered by ordinary people in years to come in the same way as FDR was in the Thirties.