Lecture 13.2

The Rise of Nationlism and Socialism

Emmanuel Teitelbaum

Populism in Europe

Trade \(\rightarrow\) growth \(\rightarrow\) social safety net, wage gains & social peace
Low unemployment, low inflation
Came to an end in 1970s for same reasons in the U.S.
- Overcapacity
- Regulations
- Aggressive unions (in some countries, but not all)
- Higher oil prices (energy crisis)

Deficit spending that stimulated demand in golden years made things worse in the crisis
- Increased inflation
- Undermined investment
- Increased demand for imports, worsening BOP
To cope with the crisis, leaders turned away from Keynesian policies and toward neoliberal policies
- Tried to limit wage increases
- Raised taxes to tamp down consumer demand
- Raised interest rates
- Squashed or coopted unions
- Removed regulations on industry
- Lowered taxes on businesses and the wealthy
- Etc.

During the boom years, labor was in short supply, immigrants came for work
In the 1980s, however, new immigrants were asylum seekers
Most recent wave of refugees is from refugees trying to escape the violence in the Middle East
cool map

Precursors to the EU (1950s)
- European Coal and Steel Community
- European Economic Community
- France, West Germany, Netherlands, Luxembourg, Belgium and Italy
Formation of EU in 1993
- Allowed goods and people to move freely
- Original six plus Greece, Spain, Portugal, the UK, Ireland and Denmark
- All except UK and Denmark also signed onto the Euro in 1999

Stability and Growth Pact (1997)
- Members’ deficits had to stay below 3% of GDP and debt below 60% of GDP
- Severely constrained government spending
- Devaluations impossible and tariffs forbidden
- Cemented in place neoliberal policy, no room for Keynesian response to downturns
Freedom of movement
- Unions opposed because companies could move to places with cheaper labor
- Right opposed because of influx of immigrants from poorer EU countries