welfare state it incarnated was too costly to maintain—did not apply in Spain, or Portugal or Greece. There was no welfare state to dismantle.
Nevertheless, even in the absence of European-level social services and protections, the public sector— saddled with the abandoned and unprofitable refuse from Spanish capitalism’s accelerated and cosseted adolescence—was hopelessly overburdened. Already in 1976
In post-revolutionary Portugal, Article 85 of the Constitution and a subsequent 1977 law explicitly forbade private enterprise in banking, insurance, transport, posts and telecommunications, electricity production and distribution, petroleum refining and the arms industry. The Socialist administration of Mario Soares sought in 1983 to introduce some flexibility by allowing the private sector to compete with the state in banking and insurance, and authorizing joint-stock companies to form in the steel, petroleum, chemical and arms industries. But it would be some time before the remaining protected sectors were opened even to limited competition.
Mediterranean Europe—like post-Communist Central Europe a few years later—would probably have been even slower to relinquish state controls but for the impact of the European Community/Union. The fixed currency parities of the European Monetary System (EMS) after 1979 were an early constraint—one reason why the Mitterrand governments started selling public assets was to reassure currency markets and thus maintain the franc at its agreed level in EMS. But Brussels’ chief means of leverage were the rules being drawn up for the operation of a single European market. The latter obliged all businesses—public and private alike—to conform to norms of open competition within and eventually between countries. There was to be no favoring of national ‘champions’, or hidden subsidies or other advantage for publicly-owned or controlled enterprises competing for contracts or custom.
However much these regulations were circumvented in practice, their mere existence obliged state-owned firms to comport themselves in the marketplace no differently from private ones—at which point there was little reason to maintain the state’s involvement in their affairs. The Italian response was typical of that of many other member states of the Community: in 1990 Italy adopted new regulations that echoed the relevant clauses of the Single European Act, requiring all state-owned firms to apply the principle of open and equal competition in all their dealings—except in the case of firms and undertakings where a state monopoly was ‘vital to its tasks’, a clause whose flexibility and vagueness allowed governments to adapt to European norms while staying sensitive to local pressures.
Despite the excited talk in Brussels (and London) of increased openness and ‘competitiveness’ the European privatization fever of these years probably wrought less change than its supporters promised or expected. Critics had warned that the result would not be more competition but simply a transfer of concentrated economic power from the public to the private sphere and this is what happened. Thanks to complicated cross-shareholding arrangements, many large private firms in France, for example, mimicked the behaviour of the old public companies. They monopolized whole sectors and were no more responsive to their small ‘stakeholders’ than they had been to taxpayers or consumers when administered under public management.
Ironically, privatization and increased competition also had little immediate impact upon the size of the state sector itself. We have already seen that in Thatcher’s Britain the scope of the state actually
Economic liberalization did not signal the fall of the welfare state, nor even its terminal decline, notwithstanding the hopes of its theorists. It did, though, illustrate a seismic shift in the allocation of resources and initiative from public to private sectors. This change went far beyond the technical question of who owned which factories, or how much regulation there was to be in any given industry. For nearly half a century Europeans had watched the state, and public authorities, play a steadily more prominent part in their affairs. This process had become so commonplace that the premise behind it—that the activist state was a necessary condition of economic growth and social amelioration—was largely taken for granted. Without the cumulative unraveling of this assumption in the course of the waning decades of the century, neither Thatcherism nor the Mitterrand
XVIII. The Power of the Powerless
‘Marxism is not a philosophy of history, it is the philosophy of history, and to renounce it is to dig the grave of Reason in history’.
‘I talk about rights because they alone will enable us to leave this magic lantern show’.
‘Totalitarian society is the distorted mirror of the whole of modern civilization’.
‘The pressure of the state machine is nothing compared with the pressure of a convincing argument’.
Behind the long ‘Social-Democratic moment’ in Western Europe there had lain not just pragmatic faith in the public sector, or allegiance to Keynesian economic principles, but a sense of the shape of the age that influenced and for many decades stifled even its would-be critics. This widely-shared understanding of Europe’s recent past blended the memory of Depression, the struggle between Democracy and Fascism, the moral legitimacy of the welfare state, and—for many on both sides of the Iron Curtain—the expectation of social progress. It was the Master Narrative of the twentieth century; and when its core assumptions began to erode and crumble, they took with them not just a handful of public-sector companies but a whole political culture and much else besides.
If one were seeking a symbolic moment when this transformation was accomplished, a hinge on which post-war Europe’s self-understanding turned, it came in Paris on December 28th 1973 with the first Western publication of Aleksandr Solzhenitsyn’s
Solzhenitsyn himself had written about the subject before, and so had numberless victims, survivors, observers and scholars.
