Michael Fry: Looking at Europe's woes from another Angle

THE other big debate of the week took place between me and Professor Christopher Harvie MSP, not under the pitiless glare of spotlights but in the upper room of a pub in Edinburgh before an audience making up in discrimination what it perhaps lacked in size.

The purpose of this encounter, arranged by Sean Bradley of Thirsty Books, was to have a discussion of Prof Harvie's latest publication, Broonland. It might reasonably be described as a scathing indictment of the Prime Minister. Both Harvie and I knew him during his blissful dawn in the Edinburgh of 30 years ago as he embarked on that career which, always dogged by his own flaws, will come to an exhausted and dispirited end next week.

Few, I think, could more deeply disapprove than I do of Gordon Brown's authoritarian policies and his self- defeating faith in Big Brother, in intrusive and implacable control as the answer to every problem – yet with the big exception of the City of London, where all but total freedom was his preferred option.

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The first face of Brown is a mirror of the man who clawed his way into Number Ten, the driven control freak. Yet I do also recall a second face, the modest and charming Gordon of yesteryear. It may not be easy to match that to the calculating politician who indulged hedge fund managers for the sake of his borrowing requirement and of his succession to Tony Blair. In any event, no such ambiguity lightens Prof Harvie's account. The Brown of Broonland is not just a control freak but a criminal, or at least complicit in criminality. By his policies as Chancellor of the Exchequer – (though they only came home to roost once he was Prime Minister) he created casino capitalism and brought the country to its present pass, with crushing debts that threaten to stifle, or at least long delay, any recovery.

Yet the bankers still laugh, and on their way to their banks they chum along with the shady types today crowding the rich lists who, in 1997, were not even citizens of the United Kingdom. Some owe that status, too, to the corrupt favouritism of New Labour ministers.

The detailed evidence of this narrative is presented in relentless fashion by Prof Harvie's book. It is the kind of evidence that will be brandished by the Left after Labour's defeat on 6 May, as it declares war on the Blairites and its other enemies to launch a bout of savage internecine strife likely to last all through the new parliament if not beyond. The same evidence clearly again informs the prevailing view in Harvie's own SNP, and will colour the coming dissensions between the governments in Edinburgh and London.

Without wanting to let off any of the capitalist culprits, I do wonder if the case as presented is a sound one. The starting point for Harvie's indictment is Germany, where he has spent most of his career. With the experiences of the 20th century still etched in German memories, they always fear and avoid inflation before anything else. While they did rather envy Britain the long boom under Blair and Brown, they could never steel themselves to the sort of financial deregulation needed to follow suit.

So Germany bumbled along with less growth and higher unemployment, both also the result of hanging on to rustbelt industries. At the same time, the former East Germany was kept on life support and the eurozone propped up. As of now, Germans are deciding these achievements exacted of them sacrifices going somewhat beyond the call of duty.

Though the Americans were mostly to blame for the credit crunch, they seem to be getting out of it quicker than anybody else, with the Brits trailing more uncertainly behind. A second phase of the credit crunch is under way, but somewhere else. It is in Greece, and spreading or threatening to spread to Portugal, Spain and Italy. By implication that means it spreads to Germany too, since Germany is paymaster to the eurozone to which these Mediterranean countries belong.

And whether Greece bears most of the pain alone, or whether a bit more of the pain is to be shared, what it will all amount to is a ferocious squeeze on the European economy – because that is what Germany will demand, of itself and others. The Germans have never shrunk from such masochism before, and will not shrink now. So it may be the Germans and their neighbours that suffer the double-dip recession which the Brits and Americans first feared was coming their way. History has always been bad at distributing its prizes and penalties fairly.

It is worth noting that the Greek policies up to now of high public expenditure and, whenever deemed necessary, heavy public borrowing are precisely the policies advocated for an independent Scotland by the SNP in general and Prof Harvie in particular. If, as they intend, an independent Scotland were also a member of the eurozone, then the Germans would now be demanding of us the same anorexic slimming down of the state as they are going to exact from the Greeks. I do not think this is an argument against an independent Scotland, but it is certainly an argument against present SNP policies.

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While the Greeks stare into an abyss, and maybe other Europeans too, the Americans, and even the Brits, are keeping afloat. There is no reason for complacency. What happened in 2009 was a massive systemic failure of regulation, which Brown in particular was unwilling to guard against because it kept Britain's electorally favourable booms, in housing and the stock market, ticking over nicely.

The solution is not to abolish capitalism, as the Labour remnant left after next Thursday will go back to demanding, along with the rather too large lunatic fringe of the SNP and perhaps even Prof Harvie. Nor is it to join the eurozone, which may now stand at the start of a slow collapse. Nor is it to abandon the Anglo-Saxon model of capitalism for the German one. The Anglo-Saxon model is more unstable, but it is also more flexible and more capable of meeting novel conditions.

Those novel conditions can be summed up in the word globalism. In its first quarter-century, ending in 2009, we failed to regulate it effectively. But that does not mean that, having felt the pain of the failure, we will be unable to regulate it better next time.