Postwar

by Tony Judt

  Faced with an unprecedented raft of demands for job security and wage protection, European leaders initially resorted to proven past practice. Inflationary wage settlements were negotiated with powerful unions in Britain and France; in Italy a flat-rate indexing system linking wages to prices, the Scala Mobile, was inaugurated in 1975. Ailing industries—steel especially—were taken under the wing of the state, much as in the initial round of post-war nationalizations: in the UK the ‘Steel Plan’ of 1977 saved the industry from collapse by cartelizing its price structure and effectively abolishing local price competition; in France the bankrupt steel combines of Lorraine and the industrial center of the country were regrouped into state-regulated conglomerates underwritten from Paris. In West Germany the Federal government, following form, encouraged private consolidation rather than state control, but with similar cartelizing outcomes. By the mid-seventies one holding company, Ruhrkohle AG, was responsible for 95 percent of the mining output of the Ruhr district.

  What remained of the domestic textile industries of France and Britain was preserved, for the sake of the jobs it offered in depressed regions, by substantial direct job subsidies (paying employers to keep on workers they didn’t need) and protective measures against third-world imports. In the Federal Republic the Bonn government undertook to cover 80 percent of the wage costs of industrial employees put on part-time work. The Swedish government poured cash into its unprofitable but politically sensitive shipyards.

  There were national variations in these responses to economic downturn. The French authorities pursued a practice of micro-economic intervention, identifying ‘national champions’ by sector and favoring them with contracts, cash and guarantees; whereas the UK Treasury continued its venerable tradition of macro-economic manipulation through taxes, interest rates and blanket subsidies. But what is striking is how little variation there was along political lines. German and Swedish Social Democrats, Italian Christian Democrats, French Gaullists and British politicians of every stripe instinctively clung at first to the post-war consensus: seeking full employment if possible, compensating in its absence with wage increases for those in work, social transfers for those out of work and cash subsidies for ailing employers in private and public sector alike.

  But over the course of the seventies a growing number of politicians came to the conviction that inflation now posed greater risks than high levels of unemployment—especially since the human and political costs of joblessness were institutionally alleviated. Inflation could not be addressed without some sort of international arrangements for the regulation of currencies and exchange rates, to replace the Bretton Woods system precipitately overthrown by Washington. The six original member states of the European Economic Community had responded by agreeing in 1972 to establish the ‘snake in a tunnel’: an accord to maintain semi-fixed ratios between their currencies, allowing a margin of 2.25 percent movement either side of the approved rates. Initially joined by Britain, Ireland and the Scandinavian countries, this compromise lasted just two years: the British, Irish and Italian governments—unable or unwilling to withstand domestic pressures to devalue beyond the established bands—were all forced to withdraw from the arrangement and let their currencies fall. Even the French were twice forced out of the ‘snake’, in 1974 and again in 1976. Clearly, something more was needed.

  In 1978 the West German Chancellor Helmut Schmidt proposed recasting the snake into something altogether more rigorous: a European Monetary System (EMS). A grid of fixed bilateral exchange rates would be set up, linked by a purely notional unit of measure, the European Currency Unit (the écu 196), and underwritten by the stability and anti-inflationary priorities of the German economy and the Bundesbank. Participant countries would commit themselves to domestic economic rigour in order to sustain their place in the EMS. This was the first German initiative of its kind and it amounted in fact if not in name to the recommendation that, for Europe at least, the Deutschmark replace the dollar as the currency of reference.

  Some countries stayed out—notably the UK, where Labour Prime Minister James Callaghan correctly understood that the EMS would prevent Britain adopting reflationary policies to address the country’s unemployment problem. Others joined precisely for that reason. As a ‘solution de rigueur’, the EMS would function rather like the International Monetary Fund (or the European Commission and the euro in later years): it would oblige governments to take unpopular decisions which they could hope to blame on rules and treaties framed from abroad. Indeed, this was the true long-term significance of the new arrangements. It was not so much that they succeeded in time in driving out the demon of inflation (though they did), but that they did so by steadily depriving national governments of their initiative in domestic policy.

  This was a momentous shift, of greater consequence than was sometimes appreciated at the time. In the past, if a government opted for a ‘hard money’ strategy by adhering to the gold standard or declining to lower interest rates, it had to answer to its local electorate. But in the circumstances of the later 1970s, a government in London—or Stockholm, or Rome—facing intractable unemployment, or failing industries, or inflationary wage demands, could point helplessly at the terms of an IMF loan, or the rigours of pre-negotiated intra-European exchange rates, and disclaim liability. The tactical benefits of such a move were obvious: but they would come at a price.

  If the European state could no longer square the circle of full employment, high real wages and economic growth, then it was bound to face the wrath of those constituents who felt betrayed. As we have noted, the instinctive reaction of politicians everywhere was to assuage the anxieties of the blue-collar male proletariat: partly because they were the worst affected, but mostly because precedent suggested that this was the social constituency most likely to mount effective protests. But as it transpired, the real opposition lay elsewhere. It was the heavily-taxed middle classes—white-collar public and private employees, small tradesmen and the self-employed—whose troubles translated most effectively into political opposition.

  The greatest beneficiaries of the modern welfare state, after all, were the middle classes. When the post-war system started to unravel in the 1970s it was those same middle classes who felt not so much threatened as cheated: by inflation, by tax-financed subsidies to failing industries and by the reduction or elimination of public services to meet budgetary and monetary constraints. As in the past, the redistributive impact of inflation, made worse by the endemic high taxation of the modern service state, was felt most severely by citizens of the middling sort.

  It was the middle classes, too, who were most disturbed by the issue of ‘ungovernability’. The fear, widely expressed in the course of the 1970s, that Europe’s democracies had lost control of their fate derived from a number of sources. In the first place there was a backlog of nervousness provoked by the iconoclastic rebellions of the 1960s; what had seemed curious and even exciting in the confident atmosphere of those days now looked more and more like a harbinger of uncertainty and anarchy. Then there was the more immediate anxiety born of job losses and inflation, about which governments seemed helpless to act.

  Indeed, the very fact that European leaders appeared to have lost control was itself a source of public angst—all the more so in that politicians, as we have seen, found some advantage in insisting upon their own inadequacy. Denis Healey, Chancellor of the Exchequer in the hapless Labour government of the mid-Seventies, bemoaned the billions of Eurodollars washing around the continent, the work of ‘the faceless men who managed the growing atomic clouds of footloose funds, which had accumulated in the Euro-markets to evade control by national governments’.197 Ironically, Healey’s own party had been elected in 1974 because of the Conservatives’ apparent inability to allay public discontent—only to find itself accused of comparable impotence, and worse, in the coming years.

  In Britain there was even passing talk of the inadequacy of democratic institutionsin the face of modern crises, and so
me speculation in the press about the benefits of government by disinterested outsiders, or ‘corporatist’ coalitions of ‘nonpolitical’ experts. Like De Gaulle (in May 1968), some senior British political figures in these years thought it prudent to meet with police and military leaders to reassure themselves of their support in the event of public disorder. Even in Scandinavia and the Low Countries, where the core legitimacy of representative institutions was never seriously called into question, the disarray of the world financial system, the apparent unraveling of the post-war economy and the disaffection of traditional electorates called into question the easy confidence of the post-war generation.

  Behind these nebulous stirrings of doubt and disillusion there was a very real and, as it seemed at the time, present threat. Since the end of the Second World War, Western Europe had been largely preserved from civil conflict, much less open violence. Armed force had been deployed to bloody effect all across Eastern Europe, in the European colonies, and throughout Asia, Africa and South America. The Cold War notwithstanding, heated and murderous struggles were a feature of the post-war decades, with millions of soldiers and civilians killed from Korea to the Congo. The United States itself had been the site of three political assassinations and more than one bloody riot. But Western Europe had been an island of civil peace.

  When European policemen did beat or shoot civilians, the latter were usually foreigners, often dark-skinned.198 Aside from occasional violent encounters with Communist demonstrators, the forces of order in Western Europe were rarely called upon by their governments to handle violent opposition and, when they were, the violence was often of their own perpetrating. By the standards of the interwar decades, Europe’s city streets were quite remarkably safe—a point that was frequently underscored by commentators contrasting Europe’s well-regulated society with the rampant and uncaring individualism of urban America. As for the student ‘riots’ of the Sixties, they served, if anything, to confirm this diagnosis: Europe’s youth might play at revolution but it was mostly show. The ‘street-fighting men’ ran little risk of actually getting hurt.

  In the 1970s, the prospect suddenly darkened. Just as eastern Europe, in the wake of the invasion of Prague, was stifled in the fraternal embrace of the Party patriarchs, western Europe appeared to be losing its grip on public order. The challenge did not come from the conventional Left. To be sure, Moscow was well pleased with the balance of international advantage in these years: Watergate and the fall of Saigon had decidedly reduced America’s standing while the USSR, as the world’s largest petroleum producer, did very well out of the Middle East crises. But the publication in English of Aleksandr Solzhenitsyn’s Gulag Archipelago and his subsequent expulsion from the Soviet Union in February 1974, followed within a few years by the massacres in Cambodia and the plight of the Vietnamese ‘boat people’, ensured that there would be no revival of illusions about Communism.

  Nor, except in a very few marginal instances, was there a credible revival of the far Right. Italy’s neo-Fascist Movimento Sociale Italiano (MSI) never received more than 6.8 percent of the vote in national elections and in any case took care to present itself as a legitimate political party. The nationalists in West Germany were less concerned with such niceties of appearance, but like comparable parties of the nationalist fringe in Belgium, France or Britain, they had negligible electoral significance. In short, Communism and Fascism, in their classic incarnations, had no future in Western Europe. The real threat to civic peace came from another direction altogether.

  In the course of the 1970s, Western European society faced two violent challenges. The first of these was pathological, in the sense that it was born of a longstanding malaise, albeit cast in a very modern form. In the Basque region of northern Spain, in the Catholic minority of Northern Ireland, in Corsica and elsewhere, old grievances flared into violent revolt. This was hardly a new experience for Europeans: Flemish nationalists in Belgian Flanders and German-speaking ‘Austrians’ in Italy’s Alto Adige (the former South Tyrol) had long resented their ‘subjection’, resorting variously to graffiti, demonstrations, assault, bombs and even the ballot box.

  But by 1970 the problem of the South Tyrol had been resolved by the creation of an autonomous bi-lingual region which appeased all but the most extreme critics; and although the Flemish nationalists of the Volksunie and Vlaams Blok parties never abandoned their ultimate goal of separation from French-speaking Wallonia, the new prosperity of Flanders, together with far-reaching legislation to federalize Belgium, had temporarily removed the sting from their demands: from a resentful pariah movement Flemish nationalism had been transformed into a revolt of Dutch-speaking taxpayers reluctant to subsidize unemployed Walloon steelworkers (see Chapter 22). The Basques and the Ulster Catholics, however, were another matter altogether.

  The Basque country of northern Spain had always been a particular target of Franco’s ire: partly because of its identification with the Republican cause in the Spanish Civil War, partly because the Basques’ longstanding demand to be recognized as different ran counter to the deepest centralizing instincts and self-ascribed, state-preserving role of the Spanish officer corps. Anything and everything distinctively Basque was aggressively repressed throughout the Franco years: language, customs, politics. Contradicting his own centripetal instincts, the Spanish dictator even favored Navarre (a region whose sense of self and separateness never remotely approached that of the Basques or Catalans) with rights, privileges and its own legislature, for no other reason than to rub in the fact that the neighboring Basques could expect no such favors.

  The emergence of modern Basque terrorism was a direct response to Franco’s policies, though its spokesmen and defenders always claimed deeper roots in their region’s frustrated dreams of independence. ETA—Euskadi Ta Askatasuna (Basquia and Freedom)—was formed in December 1958 to lead the armed struggle for Basque independence. From its earliest days as an underground organization it established working links—later given somewhat specious ideological justification—with similar groups abroad, who helped it secure money, weapons, training, safe havens and publicity: the Baader-Meinhof Group in Germany, the Irish Republican Army, the Palestine Liberation Organisation, as well as the OAS in France.

  The strategy of ETA—and its political supporters in Herri Batasuna, the Basque separatist party formed in 1978—was a straightforward one of instrumental violence: to raise the price of keeping Basques in Spain to a politically intolerable level. But like the IRA and other comparable organizations, ETA also had ambitions to function as a society within the state. Catholic, stern and moralistic—in a manner ironically redolent of Franco himself—ETA activists targeted not just Spanish policemen (their first victim was killed in June 1968) and moderate Basque politicians and notables, but also symbols of ‘Spanish’ decadence in the region: cinemas, bars, discothèques, drug pushers and the like.

  In the waning years of the Franco era, ETA’s activities were restricted by the very repression that had led to its emergence: by the end of the dictatorship, in the early 1970s, one quarter of Spain’s armed police were stationed in the Basque country alone. This did not prevent ETA from assassinating Franco’s Prime Minister (Admiral Luis Carrero Blanco) in Madrid on December 20th 1973, or killing twelve civilians in a bomb attack in the capital nine months later. Nor did the execution of five ETA gunmen in September 1975, shortly before Franco’s death, have any moderating impact upon the group’s activities. The coming of democracy, on the other hand, offered new opportunities.

  ETA and its supporters wanted full independence. What the Basque region got, under Spain’s post-Franco constitution (see Chapter 16), was a Statute of Autonomy, approved by referendum in 1979. Infuriated—not least at the prospect of losing the support of moderate sympathizers satisfied by self-government and the right to linguistic and cultural self-expression—ETA stepped up its campaigns of bombing and assassination. In 1979-80 the organization killed 181 people; in the course of the next decade its mu
rder rate averaged 34 a year. But in spite of this, and the fragility of Spain’s infant democracy, ETA and its political allies failed to turn their terrorist campaign to political advantage: their one success, in provoking a small group of right-wing army officers to hold up the Cortes in February 1981 in the name of law, order and the integrity of the state, turned to fiasco.

  One reason for ETA’s limited impact, despite the horrific scale and wide public impact of its killing sprees, was that most Basques identified neither with its means nor with its ends. Indeed, many Basques were not really even Basques. The economic transformations of Spain in the 1960s, and the large-scale migrations within the country and abroad, had wrought changes that the old nationalists and their fanatical young followers simply did not grasp. By the mid-eighties, less than half the population of the Basque region had Basque parents, much less Basque grandparents. Such people rightly saw ETA and Herri Batasuna as a threat to their well-being (and implicitly to their very presence in the region).

  As its political project lost touch with social reality ETA became ever more extreme—having forgotten its aim it redoubled its efforts, to cite George Santayana’s definition of fanaticism. Financed by crime and extortion, its operatives increasingly constrained to function from across the border in the Basque départements of south-west France, ETA survived and it survives still, murdering the occasional politician or village policeman. But it has failed either to mobilize Basque sentiment in support of political independence, or to bludgeon the Spanish state into conceding its case. ETA’s greatest ‘success’ came early in the 1980s, when its actions prompted the Socialist Prime Minister Felipe González to allow counter-terrorist hit men (the Grupos Antiterroristas de Liberación) to base themselves illegally on French soil and pick off ETA operatives, twenty-six of whom were killed between 1983 and 1987. González’s decision, only revealed many years later (see Chapter 22), has cast a retrospective shadow across the early post-Franco years of constitutional democracy in Spain; but in the circumstances it was arguably a remarkably moderate response.