President Sarkozy has called European leaders to Paris tomorrow to discuss what everyone is fatalistically calling the global financial crisis. But it is not a world financial crisis, is it? It would be more accurate to describe it as a crisis of what the French used to call, with a contemptuous Gallic shrug, the "Anglo-Saxon model".
This is the high-salary, low-tax, easy-credit model that has now been exposed for the con it always was. The Continental Europeans – and they could be forgiven for pointing this out at the very top of their communiqué – ran their economies according to a very different, social market, model. It is a model that has now been triumphantly vindicated.
In the Anglo-Saxon world, of course – that is, in the US and Britain, but not many other places – you will hear it argued that globalisation lands us all in this together. But this confuses cause and effect and blurs responsibility. The Continental European economies are affected only in so far as they have been contaminated by US and British excesses. The German, Dutch and Icelandic banks that have needed rescuing were in trouble because they fell for the seductive patter of our transatlantic friends. In Europe, the crisis is more one of fear than insolvency.
The vast majority of European financial institutions – and that includes the Spanish bank, Santander, which is buying up ailing chunks of our own financial sector – are not in difficulty. They have stuck to a more old-fashioned form of banking: more local, more personal and more responsible.
Until very recently, the differences between banking in the UK and France were glaring. Our British bank seemed to be a stream of lost letters, call centres, confused lines of responsibility, deceptive savings rates and offers of "financial products". Banking in France meant a direct phone number to the branch manager, emails if needed, and a stern letter and interest charges if the account went a centime overdrawn.
Alas, "financial products" and call centres have been gaining ground there, too, along with many other aspects of the Anglo-Saxon model, such as casualisation of the work force. And regrettably, the British bear much of the blame. Citing our – as it now turns out, inflated – growth, we were enthusiastic advocates of the so-called Lisbon agenda, designed to make the European Union more "competitive" – competitive being defined by the particular economic indices that showed Britain and the US to best advantage. The growth rate was king; and the sure way to growth, as we argued it, was deregulation of pretty much everything that remained in the public sector.
Why this diktat of the growth rate – rather than, for instance, sanitary housing, clean air or low crime – deserves to be debated at more leisure. But the French and Germans spent the best part of the next eight years figuring out how to meet the Lisbon targets without sacrificing too many positive elements of their way of life. The political and institutional contortions this entailed were little short of heroic. Angela Merkel's centre-right alliance barely won a German election fought on this very issue.
Looking back, the hectoring that the French and Germans suffered from Tony Blair and Gordon Brown about their supposedly stagnating economies, high unemployment and short working hours deserved some smart ripostes about the less desirable by-products of the Anglo-Saxon model, such as unstable house prices, violent crime, hospital infection rates and low educational attainment. Our high employment and low tax rates should have been exposed for what they were: very similar, or inferior, to those of our Continental neighbours, only disguised by stealth accounting.
If only, it is tempting to wish, the Continental Europeans had not been swayed by our boasts and burnished statistics, there would now be an alternative economic template out there. It would be a social market model that preserved a balance between private and public, services and manufacturing, domestic and global, and kept the issuing of credit within bounds. Unfortunately, that model has been so adulterated that it will be hard to reconstruct.
The tragedy of the present crisis for Europe – a tragedy that must take its place alongside the individual tragedies of repossessions, failed businesses and lost pensions – is that France and Germany allowed themselves to be dragged reluctantly towards the "Anglo-Saxon" way of doing things, just as that model started to come unstuck. Not only are they now stranded between two conflicting models of growth, but they can no longer preach back to the Americans and the British as unequivocally as they would once have been qualified to do.Reuse content