The conservative free-market revolution, which reached its high point during the Reagan-Thatcher era and lingered on into the mid-1990s, shows increasing signs of being politically vanquished as the industrial world moves towards the millennium. Although many of the substrates of the Reagan-Thatcher revolution live on in the shape of the belief in liberalised open markets and laissez faire capitalism, there are clear signs that the pendulum is swinging back in the opposite direction.
The powerful forces of individualism have started to give way to a greater sense of community and corporatism, and the sense that markets are best left unfettered is being overwhelmed by the belief that even the most capitalist systems require better oversight, more moral guidance, and, at the extreme, a degree of social authoritarianism.
This era was ushered in with the 1992 election of US President Bill Clinton, who became the first Democrat to be elected to two full terms in office since Franklin D Roosevelt, the original architect of interventionist economics. During his first term, Clinton and his advisers - most notably political consultant Richard Morris - repositioned him at the centre of the political spectrum, forcing the Republicans out of the mainstream. This triangulation, as it became known, was to prove the inspiration for British MP Peter Mandelson, who used much the same technique in the 1997 election to force the Conservatives to the extremities, allowing the new Labour candidate, Tony Blair, to claim the middle ground. The result was a historic victory which is helping to reshape the political map in Europe.
When President Chirac of France decided to call early parliamentary elections to ensure that his strong centre-right majority was preserved through the start of the single European currency, he reckoned without the Blair factor. The astonishing and unexpected victory by the socialist leader Lionel Jospin in the National Assembly has turned on its head the 40 years which successive French governments have spent seeking to build a new Europe, with the single currency as the essential glue. The socialists' Communist allies are determined that the Maastricht treaty be renegotiated before monetary union - thought a certainty for France just a few weeks ago - goes ahead.
The potential unravelling of a January 1999 start to EMU is not confined to France. In Germany Chancellor Helmut Kohl, who wants to go down in history as the leader who both reunified Germany and brought Europe together under a common monetary regime, also finds himself in trouble. The trigger for Kohl's problems was the decision by the finance minister in his centre-right government, Theo Waigel, to revalue Germany's gold reserves so as to pay down debt and ease the passage to the single currency.
The move brought a vitriolic response from the Bundesbank, Germany's most trusted institution. It saw the effort to revalue the gold reserves kept in its vaults as undermining the independence in monetary policy making it has enjoyed for the last 50 years. Just as important, it saw the gold revaluation as 'creative accounting' which, if pursued, would provide an excuse for other EU countries to come up with similar devices to ensure that they meet the Maastricht debt and deficit criteria. The result would be a euro far softer than the Deutschemark, undermining decades of battling against inflation and the effort Bundesbank president Hans Tietmeyer has made to create a strong European Central Bank in the Bundesbank's image.
The political fallout is just as critical. Many in Germany see the Kohl administration's bid to buy its way into monetary union with the gold reserves as a fundamental error, which could gnaw away at its popularity. Indeed, there are signs of erosion inside Kohl's conservative coalition. With a majority of just 10 seats, the possibility of defeat for Kohl by the socialist SDP in September 1998 - just four months before the single currency is to begin - looks likely. Like the socialists in France, the German left has doubts about the Maastricht criteria and might also seek some form of renegotiation before it goes ahead.
The real significance of all this goes far beyond EMU. For the first time in two decades there is the possibility that the leading industrial countries will be dominated by the new socialism. Italy already has a left-centre government; in the US the Democrats are entrenched in the White House; barring disaster, Blair's UK majority should last two parliaments; France has voted socialist; and Germany is heading in that direction. As a result, the right-wing consensus on the global economy will be under challenge.
A great deal of what has been put in place in the years of right/centre-right rule across the main industrial countries remains part of the new agenda. In Italy, the UK, France and Germany, privatisation remains a key plank of policy and the new socialist parties, like the Democrats in the US, recognise the need to listen to business in formulating policy. One of the most interesting aspects of the Blair government in Britain has been the decision to deploy businessmen in key trade, economic and tax roles, reflecting how the economic debate has shifted to the centre.
The difference, however, lies in the willingness of the new socialist parties to intervene to prevent market power overwhelming the economy. They believe in competition, but understand that the interests of stakeholders other than commerce - including consumers and the workforce - need to be protected, as does the environment.
This does not mean the end of deregulation for the airline industry. However, carriers will need to be more aware that the new political environment will not be satisfied by ever higher revenues and profits, but will demand competition with a more human face. n
Source: Airline Business
