In a recent article in the Washington Post, Robert Samuelson contemplates the looming possibility of a new sovereign debt crisis in Europe. The Great Recession of 2008, he recalls, brought the weaker European economies, including Spain’s, to the brink of default, and the countries themselves to the brink of expulsion from the EU and economic devastation. The COVID-produced economic crisis, Samuelson contends, is having the same effect. Once again the deeply indebted countries of southern Europe will not be able to save themselves either through frugality or through spending: they will have to be “rescued” by the EU or some sort of international consortium. And for a rescue to occur, the indebted nations will have to accept the same sort of terms as those imposed during the Great Recession: “Over-borrowed countries got debt relief from the ECB [European Central Bank], which then effectively guaranteed their bonds. In return, borrowing nations trimmed deficits [i.e. cut social spending and defunded whole sectors of the welfare system] so they would depend less on the ECB for credit.”

Samuelson’s article seems designed to deflate hopes that the surplus spending endorsed by the banks and even orthodox neoliberal economists at the beginning of the COVID crisis will continue as the health crisis itself passes. On the contrary, what must come, Samuelson insists, is the end of surplus spending and the reassertion of fiscal responsibility, neoliberal style. There will be no rebuilding of the human and labor rights eroded under neoliberalism; no refunding and improvement of public education, health, and senior care; and no establishment of a universal wage or minimum income.

This grim message was delivered to Spain’s Socialist government on May 18th, a week before Samuelson’s article was published, by the governor of the Bank of Spain, Pablo Hernández de Cos, speaking in Congress. The shutdowns and surplus spending provoked by the pandemic, Hernández de Cos declared, had massively compromised Spain’s ability to finance itself or attract aid and investment from outside. To rebuild its reputation, “a forceful economic policy response with the aim of ensuring financial stability will be necessary.” Hernández de Cos treads even more carefully than Samuelson around what this will mean for the Spanish people, but when he speaks about “ensuring financial stability” and guaranteeing the “sustainability” of the welfare state, he is clearly imagining substantial cuts rather than dramatic amplifications. Recovery will require, in the words of one sympathetic account of the presentation, “sacrificios económicos brutales y generalizados durante al menos una década [for at least a decade].” “No habrá escudo social, sino hachazo social”; that is, freely translated, “forget any social shield, they’ll be taking an axe to all social programs.”

To construct and implement this painful new strategy, Hernández de Cos added, will require “a political agreement that is up to the scale of the challenge we face and that will foreseeably run for several legislatures.” The strategy will need to be formulated and affirmed by the current center-left government in concert with Spain’s other major parties, none of which share its social democratic dreams. The end of the pandemic, then, will also mark the end of the Coalition’s efforts to reinvigorate Spanish social democracy.

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If the conservative government of the Partido Popular were still in power today, as it was for almost a decade before 2019, Hernández de Cos’s prescription would be embraced without question. And it might well be accepted with certain reservations if the Socialist Party of the last thirty years were in power. For that party, like many others in Europe, had abandoned the Keynesian economics of mid-twentieth century social democracy and embraced the austerity logic of neoliberalism. This embrace had been rendered somewhat more palatable in Spain by a certain consensus, shared by both the Socialists and the conservative Partido Popular, that Spain’s extensive labor laws and its public education, health, and retirement services (designed in part under Franco to insure national stability) should be sustained, no matter which party was in power.

This consensus collapsed under the pressure of the Great Recession. The conservatives under Mariano Rajoy launched a fierce attack on Spain’s social institutions and laws. And the Socialist Party, facing the fury of its increasingly impoverished constituency, was eventually taken over by Pedro Sanchez, who launched a sort of revolution within the party and drew it leftwards, towards more ambitious social spending and a defense of social rights. At the same moment a new party of the left, Podemos, born of the Indignados Movement and led by Pablo Iglesias, was pressing for a profound transformation of the relations of production, a dramatic redistribution of wealth, and a much more robust role for the state in guaranteeing human flourishing. These two parties, in spite of their different histories and internal divisions, their years of skirmishes and bitter quarrels, managed to form a Coalition in late 2019, thereby making news around the world, and took power in January of this year. And so it is to this government that the demands of Samuelson and Hernández de Cos are addressed. So far the government seems determined to resist them.

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The Coalition certainly showed its commitment to progressive reform during the first months of the COVID crisis. By mid-March, Iván Gil, a trenchant and scrupulous chronicler of the Spanish left, could write that “the sector of the Government that is committed to an extraordinary increment of public spending , prioritizing the creation of a “social shield” over the containment of a budget deficit, keeps winning ground over the ministers that promulgate a more orthodox economic strategy.” And this reformist sector, led by Podemos, has the intermittent but strong support of Pedro Sanchez himself and several Socialist ministers.

The Coalition is not likely, then, to capitulate easily in this second stage of the crisis, when getting the Spanish economy going again is so urgent. In an article in the Guardian on May 25th, Podemos spokesperson Pablo Echenique reviews the Coalition’s response to the pandemic, acknowledges its costs, and then defiantly reaffirms its commitment to going forward with its ambitious plans. He begins by proudly enumerating the measures taken to protect Spain’s people from the worst physical and economic blows of the virus-induced shutdown: “after a very strict lockdown, the virus has been subdued and the unbearable stress on hospitals has been eased. . . . [W]e have banned evictions and electricity and water-supply cuts; we have protected workers from being fired by helping companies to hibernate; we have passed an extraordinary insurance policy for self-employed people; and we are about to put in place a minimum income for hundreds of thousands. We have built a social shield [escudo social] against the crisis.”

Now, Echenique continues, the Coalition must “put in place ambitious public investment plans to modernize Spain’s means of production, create high-quality jobs and thus exit this crisis on a completely different trajectory from last time.” All this, he asserts, “is necessary and it requires an important increase in public spending, which in turn requires additional public revenue.” This increase can be funded in part by borrowing–“issuing new debt”–and in part by forthcoming EU recovery plans and packages. But it will also require imposing a new wealth tax on the richest Spaniards. “Inevitably,” Echenique concludes, “this will lead to aggressive attacks on us from the right and from many wealthy and powerful people. So be it.”

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As we have seen, these attacks from without are already well underway. But strains are also beginning to appear within the Coalition. Nadia Calviño, the Socialist minister for the Economy, leads the opposition. As Eoghan Martin reported in Jacobin back in March, Calviño, “formerly the European Commission’s director-general for budgetary affairs, . . . has been described as “the Troika’s own representative in [the Spanish] cabinet” (the term Troika refers to the EU Commission, the EU General Bank, and the International Monetary Fund):

She and Iglesias . . . have already clashed repeatedly since the coalition reached office. First, Calviño was opposed to the inclusion of rent controls in the program for government and then she disputed a moratorium on housing evictions for those in social distress. Iglesias came out on top on this question. . . . A fresh dispute opened up . . . as the scale of the coronavirus outbreak became apparent. After the number of confirmed cases in Madrid doubled on Monday March 9, numerous ministers from both parties, including Iglesias, pushed for a swift declaration of a state of emergency — highlighting the seriousness of the crisis and the need to respond. But this was opposed by Calviño on economic grounds, fearing that it would spook the markets.

Calviño’s power has been shaken by Sanchez’s readiness to vote with Podemos on several crucial issues, but she now has the bank of Spain’s backing and she continues to push the Troika’s agenda.

The Coalition’s capacity to govern is also being challenged by insurrections within its “bloque de investidura,” the collection of informal allies made up of small parties that are at once leftist and nationalistic — meaning, in the Spanish context, supporters of regional autonomy. These parties helped the Coalition legislate until recently, then withdrew their support, claiming that the Coalition has used the threat of the coronavirus to expand the national government’s power in Spain. This abdication led or perhaps forced Sanchez to form a temporary pact with the center-right party Ciudadanos. And this turn infuriated Podemos, which responded by trying to push through some of its more radical proposals. So great was the tumult in the case of one such piece of legislation that Sanchez was obliged, within hours, to rescind an agreement he had just approved. It’s still too soon to know what damage this episode has done to the Coalition partnership or to its capacity to negotiate productively with the banks, the corporations, and the conservatives.

Still, the biggest source of factional fighting is likely to be disagreements over whether and how far to push the government’s spending plans in the context of severe economic debility. Both Echenique and Iglesias agree that funds must come from two sources: the proposed tax on the rich and EU aid. But neither source is assured. The proposed tax will be fiercely opposed in Congress and the media and will not, even if passed, raise sufficient revenues to fund the Coalition’s programs. The proposed European Recovery Plan, announced by the EU Commission on May 27th, does include, for the first time, the prospect of billions of euros of direct gifts to indebted countries like Spain. But it is clearly not a game-changer. (Spain stands to receive 140 billion Euros under this plan, €77 billion in outright grants with no repayment required and €63 billion in loans. But according to Samuelson, simply rescuing Italy would cost “trillions of dollars.”)

For one thing, the plan’s approval will require the agreement of all 27 member states, and this will be hard to achieve. Moreover, much of the proposed assistance will come with conditions (likely to include the usual demands for deregulation and frugality). Finally, the EU plan, like the plans laid out by Samuelson and Hernández de Cos, makes no mention of increasing taxes on the rich and the corporations, establishing expensive new social services, or adopting Keynesian spending policies. Its goal has been repeatedly described as that of getting the indebted countries “back on their feet again” and nothing more. If Spain’s socialists are to pursue more ambitious (and to the EU, suspicious) goals, it looks as though they will have to do so on their own. Even Echenique and Iglesias acknowledge that that this is virtually impossible for a nation as economically depleted as Spain.

Friedrich Engels famously declared, in the mid-nineteenth century, that there could be no successful socialist revolution in one country: “No. By creating the world market, big industry has already brought all the peoples of the Earth, and especially the civilized peoples, into such close relation with one another that none is independent of what happens to the others.” In other words, the power of international capitalism was already in Engels’ time such that no single nation could substantially transform its relations of production in the face of its neighbors’ concerted opposition. Russia, of course, chose to defy Marx’s dictum, but at a terrible cost both economically—invasion, civil war, slaughter and famine–and politically–decades of brutal dictatorship. Now, with communism eradicated and social democracy in tatters, neoliberal capitalism seems determined to prove that there can be “no social democracy in one country” either, at least not if that country is as weak, economically, as Greece or Spain. The Socialists’ chances of proving this adage wrong seem rather slim in the short term. But it’s just possible that if they persist and if European elites continue making small but significant concessions, social democracy could be rebuilt in the twenty-seven nations of the EU. Indeed, Pablo Iglesias spoke to that hope today, June 6th, in a party gathering. He declared, Iván Gil reports, that “the response to this crisis will be played out, in good measure, in the arena of the EU”: where “‘today all of us who are democrats are neokeynesians.’” There is a consensus, Iglesias continued, “that we should confront the crisis with the same logic that was applied after the crisis of ‘29 [during the Great Depression] and the Second World War.” In the meantime, one can hope that the Coalition holds together and manages to continue winning small but real victories such as the approval this week of an “ingreso minimo vital,” a minimum living/essential income, that will provide some 850,000 Spaniards left destitute by the pandemic with basic life support.

Lest this post should end on a note of even subdued optimism, let me return to Robert Samuelson’s article for a moment. For Samuelson questions not only the dream of a robustly social democratic Spain (social democracy in one country) but also the larger dream that has animated progressive thought for centuries. What if, he asks, the global “economic foundations that enable most people to live decent lives most of the time” no longer exist? It’s hard to say which specific foundations Samuelson is referring to here. But let’s go to one of the most basic foundations of all, the earth with its living communities and its vital resources. What if the impediments to an equitable distribution of global wealth in the name of universal flourishing are no longer “simply” barriers of ideology and self-interest, but profound ecological barriers as well? What if the vast increase in the human population, the exhaustion of many essential resources and the depletion of the material necessities of agriculture—water, zones of relatively stable weather, arable land—may soon make it physically impossible to offer everyone on the planet the basic goods required to ensure “a decent life”? What then for the dream of a social democratic world?

John McClure, June 6, 2020