Thomas Fazi is an UnHerd columnist and translator. His latest book is The Covid Consensus, co-authored with Toby Green.

December 29, 2023

There’s a story European progressives like to tell themselves: that, after the horrors of the Second World War, their governments struck a quasi-utopian compromise between capitalism and socialism — only for it to be corrupted by the import of the cutthroat capitalism that defined Reagan’s neoliberal counterrevolution in the early Eighties.

It’s a comforting fable, designed to excuse their own failures. It is, however, completely untrue. Neoliberalism wasn’t exported to Europe from across the Atlantic (or from across the Channel, for that matter). It was a largely homegrown affair — one that was, in fact, spearheaded by European Socialists, and by one Socialist in particular: Jacques Delors, President of the European Commission from 1985 to 1995, who died this week.

To understand this tragedy, we need not return to 1945, but 1981. In May, the Socialist François Mitterrand was elected France’s president, after more than two decades of the Left being excluded from office. He went on to form a government that also included Communist ministers for the first time since 1947, prompting a widespread belief that France was headed for a radical break with capitalism.

At the time, such a notion was not inconceivable. Most European governments still firmly believed in the importance of economic dirigisme and the need for capital controls and regulated financial markets, which presupposed a high degree of economic sovereignty. Nowhere was this truer than in France: the French had always been particularly reluctant to agree to any supranational authority — a consistent position that had hampered progress towards an economic and monetary union. In general, there was still the belief that individual nations had the power to shape their own economic and political destinies — and even to challenge the capitalist system itself.

Nothing exemplifies this better than Mitterrand’s victory in the spring of 1981. The new president’s policy agenda embodied an ambitious reform programme of Keynesian economic reflation and redistribution. It also proposed extensive nationalisations of France’s industrial conglomerates. By implementing this platform, Mitterrand claimed, his government would precipitate a “rupture” with capitalism, and lay the foundations for a “French road to socialism”. It’s easy to see why this represented a moment of immense hope not just for the French Left, but for the entire European Left — of the kind not witnessed since.

Soon after the Mitterrand experiment began, however, it started to unravel. As a reaction to the Socialists’ ambitious plan for economic reform, capital started to flee France almost immediately. Despite the imposition of draconian capital controls, the government was unable to halt the flight.

This created a downward pressure on the franc (further exacerbated by the post-1979 global interest rate hikes), threatening France’s membership in the European Monetary System (EMS) — the system of semi-fixed exchange rates created in 1979. Under the EMS, the central banks of participating states had little choice but to shadow the Bundesbank’s restrictive monetary policy. Yet this was incompatible with Mitterrand’s reflationary programme — and Mitterrand found himself in a position where a decision had to be made about whether to leave the EMS or abandon his progressive agenda. Regrettably, he chose the latter path.

And so, in the spring of 1983, Mitterrand and the Socialists drastically reversed course, in what came to be known as the tournant de la rigueur (turn to austerity): rather than growth and employment, the emphasis would now be on price stability, fiscal restraint and business-friendly policies. A crucial aspect of this was the gradual rollback of virtually all capital controls and restrictions on financial transactions. And who was the main architect of this shift? Mitterrand’s finance minister, Jacques Delors.

The effects of this U-turn cannot be overestimated. Mitterrand’s victory in 1981 had inspired the widespread belief that a break with capitalism — at least in its extreme form — was still possible. Yet two years later, the French Socialists had succeeded in “proving” the exact opposite: that globalisation was an inescapable reality. Even though there were alternatives available to Mitterrand (such as leaving the EMS and floating the franc), the conclusion most people drew was that the “Keynesian road to socialism” had failed. Capital had won.

To make matters worse, the French Socialists, after having embraced neoliberalism at home, then proceeded to export their newfound views — on everything from capital movements to monetary integration — to the rest of Europe. Here, Delors was also central. “National sovereignty no longer means very much, or has much scope in the modern world economy,” he said. “A high degree of supranationality is essential.” This was a radical departure from France’s traditional souverainiste stance, which had already been seriously compromised by France’s decision to join the EMS, under which, as noted, the country was effectively forced to subjugate its own monetary-fiscal policy independence to the Bundesbank’s monetary policy.

For all of France’s historical concerns about supranational (that is, “European”) encroachment on its sovereignty on the one hand, and German hegemony on the other, few missed the irony of it being the Socialists who gave up that freedom — and to Germany of all nations. But by the late Seventies, French politicians on both sides of the political divide had come to accept that maintaining France’s status required them to remain firmly “in Europe” — that is, in the EMS — which in turn entailed adopting a low-inflation, stable-currency policy.

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This brought about a distinct shift in attitudes among the Socialists towards Europe — a mood that Delors summed up in October 1983: “Our only choice is between a united Europe and decline.” As Rawi E. Abdelal, professor of business administration at Harvard Business School, noted: ‘To the extent that the French Left continued to hope for socialist transformation, its members could see Europe as the only arena in which socialist goals could be achieved.” The problem was that, by 1983, they had little to offer in terms of a Europe-wide progressive alternative, since they had accepted the notion that social-political objectives should be subjugated to “price stability”.

And so, two years later, France strongly supported Delors’s nomination to the post of President of the European Commission — a position he would go on to hold for a decade, serving for three terms, longer than any other holder of the office. It is no exaggeration to say the Delors presidency was groundbreaking, giving the European integration process a momentum that had been lacking in the preceding decade. It is also the period in which the foundations of monetary union, and more generally of neoliberal Europe, were laid down — a development in which Delors, and the French Socialists in general, played a key role.

Their logic was the following: given that, within the EMS, the Bundesbank effectively set the interest rates for all participating states, and that leaving the EMS wasn’t considered an option, the French became increasingly convinced that there was only one way to preserve a low-inflation fixed exchange rate system while also wrestling control of monetary policy away from Germany: to push for a full European monetary union. For Delors, creating a single European currency became an utmost priority, and he set out to persuade his reluctant fellow European policymakers to embrace the idea. The first step was the signing of the Single European Act, in 1986, which set the objective of establishing a single market by 1992. Delors also proceeded to export France’s new views on capital movements to the rest of Europe, by pushing for the full liberalisation of capital flows across the continent — paving the way for a monetary union.

This brings the historical importance of the French Left’s neoliberal turn into stark relief: if the French hadn’t embraced financial liberalisation at the domestic level, they never would have offered their support for an integrated European financial market — and a monetary union would likely never have seen the light of day.

The Commission’s proposals were initially met with fierce resistance from a number of governments. But by the late Eighties, Delors had succeeded in radically changing Europe’s approach to capital controls — and in getting EU member countries to introduce full capital mobility by 1992, effectively making the free movement of capital a central tenet of the emerging European single market. This was a binding obligation not only among EU members but also between members and third countries.

In effect, Delors had succeeded in pushing Europe to fully embrace the “Paris consensus”, the European equivalent of the Washington consensus. The consequence of this was a European financial system that was, in principle, the most liberal the world had ever known. In this sense, the Europeans, far from being passive recipients of the free-market policies being concocted in Washington, actually preceded the Americans in embracing neoliberal globalisation, and promoting the spread of global capital.

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This also profoundly influenced the construction of the monetary union. In short, Delors succeeded in convincing European governments that, by joining the EMS and liberalising capital flows, they had effectively already lost much of their economic sovereignty; they therefore had little choice but to embrace monetary integration as a way to regain some sovereignty at the supranational level, by “having a say” in Europe’s collective monetary policy. It was a shrewd argument, but a fallacious one: as history would show, by ceding their monetary policy to a supranational central bank, European governments simply ended up losing what little sovereignty they had left.

However, Delors was aided by the fact that, by the early Nineties, even the German establishment had come round to the idea of a monetary union — and indeed, national elites in most European countries had come round to the notion of a supranational central bank, fully immune to democratic pressures, as a useful way to insulate economic policy from popular contestation. By 1989, the Delors Committee had published its hugely influential Delors Report, which essentially acted as a blueprint for the construction of monetary union in the coming years.

The final act of this democratic tragedy came three years later with the Maastricht Treaty. This didn’t only establish a timeline for the establishment of monetary union (in line with the Delors Report), but also created a de facto economic constitution that embedded neoliberalism into the very fabric of the European Union. By the time the Delors Commission came to an end, in 1995, much of the groundwork for the techno-authoritarian and anti-democratic juggernaut that the EU would later become was laid — and, to a large degree, we have Delors, a French Socialist, to thank for that.

Ironically, this didn’t just lead to the demolishing of the Left’s cherished European social model, to the benefit of financial-corporate interests (and, of course, Germany), but it also paved the way to the demise of the European socialist Left — and to the rise of the populist Right. More than anyone else, it is the latter who, today, should pay tribute to Delors.