Coming to America…soon!

December 11, 2011

Depression and Democracy

By PAUL KRUGMAN

It’s time to start calling the current situation what it is: a depression. True, it’s not a full replay of the Great Depression, but that’s cold comfort. Unemployment in both America and Europe remains disastrously high. Leaders and institutions are increasingly discredited. And democratic values are under siege.

On that last point, I am not being alarmist. On the political as on the economic front it’s important not to fall into the “not as bad as” trap. High unemployment isn’t O.K. just because it hasn’t hit 1933 levels; ominous political trends shouldn’t be dismissed just because there’s no Hitler in sight.

Let’s talk, in particular, about what’s happening in Europe — not because all is well with America, but because the gravity of European political developments isn’t widely understood.

First of all, the crisis of the euro is killing the European dream. The shared currency, which was supposed to bind nations together, has instead created an atmosphere of bitter acrimony.

Specifically, demands for ever-harsher austerity, with no offsetting effort to foster growth, have done double damage. They have failed as economic policy, worsening unemployment without restoring confidence; a Europe-wide recession now looks likely even if the immediate threat of financial crisis is contained. And they have created immense anger, with many Europeans furious at what is perceived, fairly or unfairly (or actually a bit of both), as a heavy-handed exercise of German power.

Nobody familiar with Europe’s history can look at this resurgence of hostility without feeling a shiver. Yet there may be worse things happening.

Right-wing populists are on the rise from Austria, where the Freedom Party (whose leader used to have neo-Nazi connections) runs neck-and-neck in the polls with established parties, to Finland, where the anti-immigrant True Finns party had a strong electoral showing last April. And these are rich countries whose economies have held up fairly well. Matters look even more ominous in the poorer nations of Central and Eastern Europe.

Last month the European Bank for Reconstruction and Development documented a sharp drop in public support for democracy in the “new E.U.” countries, the nations that joined the European Union after the fall of the Berlin Wall. Not surprisingly, the loss of faith in democracy has been greatest in the countries that suffered the deepest economic slumps.

And in at least one nation, Hungary, democratic institutions are being undermined as we speak.

One of Hungary’s major parties, Jobbik, is a nightmare out of the 1930s: it’s anti-Roma (Gypsy), it’s anti-Semitic, and it even had a paramilitary arm. But the immediate threat comes from Fidesz, the governing center-right party.

Fidesz won an overwhelming Parliamentary majority last year, at least partly for economic reasons; Hungary isn’t on the euro, but it suffered severely because of large-scale borrowing in foreign currencies and also, to be frank, thanks to mismanagement and corruption on the part of the then-governing left-liberal parties. Now Fidesz, which rammed through a new Constitution last spring on a party-line vote, seems bent on establishing a permanent hold on power.

The details are complex. Kim Lane Scheppele, who is the director of Princeton’s Law and Public Affairs program — and has been following the Hungarian situation closely — tells me that Fidesz is relying on overlapping measures to suppress opposition. A proposed election law creates gerrymandered districts designed to make it almost impossible for other parties to form a government; judicial independence has been compromised, and the courts packed with party loyalists; state-run media have been converted into party organs, and there’s a crackdown on independent media; and a proposed constitutional addendum would effectively criminalize the leading leftist party.

Taken together, all this amounts to the re-establishment of authoritarian rule, under a paper-thin veneer of democracy, in the heart of Europe. And it’s a sample of what may happen much more widely if this depression continues.

It’s not clear what can be done about Hungary’s authoritarian slide. The U.S. State Department, to its credit, has been very much on the case, but this is essentially a European matter. The European Union missed the chance to head off the power grab at the start — in part because the new Constitution was rammed through while Hungary held the Union’s rotating presidency. It will be much harder to reverse the slide now. Yet Europe’s leaders had better try, or risk losing everything they stand for.

And they also need to rethink their failing economic policies. If they don’t, there will be more backsliding on democracy — and the breakup of the euro may be the least of their worries.