Europe’s Struggling Political Parties Promise a Return to the Pre-Thatcherite Era

BERLIN—To win voters lost to an anti-globalization backlash, Europe’s mainstream parties are going back to the 1970s.

In Germany, the U.K, Denmark, France and Spain, these parties are aiming to reverse decades of pro-market policy and promising greater state control of business and the economy, more welfare benefits, bigger pensions and higher taxes for corporations and the wealthy. Some have discussed nationalizations and expropriations.

It could add up to the biggest shift in economic policy on the continent in decades.

In Germany, Europe’s biggest economy, the government has increased social spending in a bid to stop the exodus of voters to antiestablishment, populist and special-interest parties. Reacting to pressure on both ends of the political spectrum, it passed the largest-ever budget last year.

“The zeitgeist of globalization and liberalization is over,” said Ralf Stegner, vice chairman of the 130-year-old Social Democratic Party, the junior partner in Chancellor Angela Merkel’s government coalition. “The state needs to become much more involved in key areas such as work, pensions and health care.”

The policies mark the end of an era in Europe that started four decades ago, with the ascent of former British Prime Minister Margaret Thatcher and her U.S. ally, President Ronald Reagan.

Margaret Thatcher and Ronald Reagan in Paris, 1982. PHOTO: ASSOCIATED PRESS

After Thatcher abolished capital controls in 1979 and began selling off state companies in the 1980s, other European governments followed suit, embracing supply-side policies, deregulation, market liberalization and tax cuts. Revenues from privatization among European Union member states rose from $13 billion in 1990 to $87 billion in 2005, according to Privatization Barometer, a database run by consultancy KPMG Advisory S.p.A.

Today, concerns about growing inequality, stagnating wages, immigration, the debt crisis and China’s rising power have fueled the recent political shift. European businesses and governments also worry about potential changes in U.S. policy, amid looming threats of trade sanctions.

Smaller State Governments across Europe retreated from many economic sectors and sold state companies starting inthe 1980s.Privatization proceeds in EU countriesSource: Privatization Barometer reports
00.billion1980’85’90’952000’05’10’150102030405060708090$100

This erosion of the old technocratic consensus about how to run an economy, even in countries where populists aren’t getting any closer to power, could be one the most lasting consequences of the recent antiestablishment surge.

Even in countries where populist parties are already in government, such as Poland, those parties have shifted their focus from nationalist and anti-immigration rhetoric to championing generous welfare policies and state aid.

Bigger BenefitsGermany’s government has increased socialspending in a bid to win over voters. Germany’s government spendingSource: Germany’s Federal Ministry of FinanceNotes: Data through 2017 are actual; 2018 and 2019are targets. €1=$1.14
.billionSocial and welfare benefitsOther spending2012’13’14’15’16’17’18’19050100150200250300350€400

Germany’s SPD has embraced additional welfare spending, paid for by tax revenues, to combat a retreat of voters so rapid it threatens to turn the once-dominant force in German politics into a niche player. The party is now pushing for policies such as unconditional pension for people who have worked for a certain period but didn’t make sufficient contributions into the pension pot.

In the U.K., Jeremy Corbyn, leader of the opposition Labor Party, has proposed renationalizing railways, public utilities, the postal service and the Royal Bank of Scotland ,the country’s second-biggest lender. It’s effectively a reversal of the privatization spree initiated by Ms. Thatcher. The party is also toying with policies such as universal basic income for all and a four-day working week for public-sector employees.

Labor has been polling ahead of the ruling Conservatives in opinion surveys for most of the past two years.

The re-nationalization plan would cost around $210 billion, according to an estimate by New York-based consulting firm S&P Global. Labor has said it would issue treasury bonds to finance nationalizations. Thames Water, the U.K.’s largest water company, added a clause to its bond to make sure holders are repaid immediately should it be nationalized.

U.K. Labor leader Jeremy Corbyn in May. PHOTO: BEN BIRCHALL/PA IMAGES/GETTY IMAGES

In France, President Emmanuel Macron reacted to weeks of violent street protests by abolishing plans to increase fuel prices and announcing measures to boost the incomes of low earners. The estimated cost of the spending is more than €10 billion ($11 billion). In a symbolic concession to the antiestablishment yellow-vest movement, Mr. Macron declared he would shut down the university École Nationale d’Administration, his own alma mater, because it instigated elitism.

Mr. Macron reversed a decision to eliminate 200,000 civil-service jobs and announced a tax increase for companies that overly rely on short-term contracts, which his government blames for creating an underclass of workers. In addition, monthly pensions of less than €2,000 have been pegged to the rate of inflation.

He also embraced the idea of holding referendums on certain policy issues, a key demand of populist leaders. The first major referendum will decide whether the sale of the state’s majority stake in the company that runs Paris’s airports should go ahead as planned.

French President Emmanuel Macron in May. PHOTO: PIROSCHKA VAN DE WOUW/REUTERS

Denmark’s Social Democrats, who had been out of government since 2015, won a general election on June 5 following a policy makeover that included going further left on economic policy, while sharply turning right on immigration. They pledged to increase public spending and taxes for companies and the wealthy, and to enable early retirement by rolling back some recent pension changes. Their far-right rivals the People’s Party suffered a major loss in the election.

The reaction from European economists is decidedly mixed.

Some have greeted the shift as a welcome correction to years of pro-business and free-trade policies they think have dug deep rifts in Western societies.

“The lesson from Germany is: Strong growth and a generous social welfare system alone are insufficient to satisfy voters. Globalization and technological change are putting pressure on many people,” said Marcel Fratzscher, head of the German Institute for Economic Research, a Berlin-based think tank. “Europe’s social welfare state needs a fundamental overhaul as it has to focus on empowering people and on stopping the market abuse of firms and lobby groups.”

Others are concerned Europe is deviating from proven economic recipes just as growth is wobbling, or that the policies are outdated.

“We are indeed seeing a kind of return to the pre-Thatcherite approach, but it is doubtful that policies from the era of closed markets and capital controls could work in a globalized world. A vision of the past can’t be implemented in the present,” said Branko Milanovic, a New York-based Serbian-American economist who studies income distribution and inequality.

In Germany, despite a decade of robust economic growth and near full employment, almost four million working people receive welfare benefits to supplement their income. Around one-quarter of all employees work in the low-wage sector, according to government statistics and research by Mr. Fratzscher’s group.

Low Wages Increased competition put downward pressure on wages, while shrinking unemployment benefits increased incentives for Germans to take lower paying jobs. Share of German workers who are low paid*Source: German Institute for Economic Research*Those who make less than two-thirds of the country’s median earnings
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Subsidies to Germany’s mandatory pay-as-you-go pension scheme almost reached the €100 billion mark for the first time in 2018. Earlier this year, Ms. Merkel’s government adopted a new industrial strategy that centers on protecting German companies from foreign competition, including by enabling the government to buy stakes in businesses to shield them from foreign acquisition.

Peter Altmaier, economics minister and author of the industry strategy, said it was designed in part to address the anxieties of Germans who have been drawn to far-left and far-right parties in recent years.

Germany’s SPD, the junior partner in Germany’s government coalition, is now debating whether large real-estate investors should be expropriated as a way to stabilize rents. In Berlin, where they preside over the local government, the SPD announced a freeze on rent prices. The head of its youth wing recently called for car maker BMW to be nationalized, earning grass-roots plaudits and some support from SPD ministers and mayors.

The SPD scored its worst result ever at last month’s European Union election. Polling around 12% to 14%, it is a shadow of its 1998 self, when it gathered 41% of the vote.

German Chancellor Angela Merkel on June 17. PHOTO: TOBIAS SCHWARZ/AGENCE FRANCE-PRESSE/GETTY IMAGES

The environment-focused, center-left Greens more than doubled their votes between the country’s last general election in September 2017 and the EU election. It is now polling at around 26%. At least two polls since early June showed the Greens had become Germany’s most popular party for the first time since its creation in the 1980s—ahead of Ms. Merkel’s Christian Democratic Union.

Twenty years ago, the German Greens co-wrote with the SPD the country’s last big tax cuts and a deeply unpopular overhaul of labor-market legislation. Today, the party is toying with an unconditional universal income and seizing real estate from commercial landlords as a way to stop rent increases.

The far-right Alternative for Germany, known as AfD, lost ground in last month’s EU election, and is now polling around 13%.

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The AfD has campaigned on immigration in recent elections. Party leaders recently consulted with Steven K. Bannon, President Trump’s former chief strategist and now an adviser to nationalist and populist parties in Europe. In a meeting in Berlin on May 13, he advised the leaders to tone down their anti-Islam fervor, purge radical members, and refocus their message from identity politics to economics.

“The real message is the economy,” Mr. Bannon said in an interview. “Populists need to talk to the workers.”

Jörg Meuthen, the AfD co-chair who met Mr. Bannon, said he agreed, but questioned the timing of the message. He said Germany’s economy—with record low unemployment and slowing but still positive growth—remained too healthy for an immediate policy shift.

When the recession kicks in and people start worrying about their jobs, then we can roll out economic campaigns and show our competence. Populists must look at what is affecting people emotionally, and at the moment that is migration and the climate,” Mr. Meuthen said.

Globalization BacklashProtest parties focused on denouncing the economic, cultural and security impact of globalization have drawn more attention across Europe.Populist party poll performance in selected countries Source: NomuraNote: Weighted averages of national polls.
%GermanyFranceSpainU.K.2015’16’17’18’19051015202530

In Spain, Pedro Sanchez, acting premier and leader of the Socialist Party, won the national and the EU elections this year after sharply raising the minimum wage and announcing a boost in social benefits and corporate taxes.

Mr. Sanchez’s bet on wooing working-class voters lost to protest parties paid off, said Daniel Diaz Fuentes, professor of economics at the Spanish university of Cantabria. Mr. Fuentes said that the rise of populism could trigger a re-nationalization wave.

“I think that the state will become a much more active entrepreneurial actor via venture capital and involvement in investment via the banking system,” Mr. Fuentes said.

Two TrajectoriesThe income of low earners has decreased since 1980, while that of top earners has grown.Income shares of the top 10% in European regions*
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Income shares of the bottom 50% in European regions*Source: Thomas Blanchet, Lucas Chancel and Amory Gethin, World Inequality Database*Population-weighted country averages
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Wolfgang Schmidt, deputy German finance minister and one of the strategists behind the SPD’s new approach, said the success of socialists in Spain, Britain and Denmark, in elections and opinion polls, shows that voters have turned against economic orthodoxy.

“As a society, we need to stop looking down on people. Anxiety about the future of work is driving voters to populists. People read about automation and self-driving cars and they ask themselves what will happen to their jobs in the near future,” he said.

Many European politicians and economists say the swing away from markets and back to the state misses the point of many voters’ anxiety, which is rooted in politics or culture. An annual poll about the fears of Germans conducted by the R+V Versicherung AG insurance group found that nine of respondents’ top 10 fears focused on politics, security and health. Economic concerns dominated between 2004 and 2015.

Paul Ziemiak, the second most senior official in Ms. Merkel’s conservative party, opposes what he says is an SPD-driven spending spree. “These policies have never made any country successful. Countries that have [tried them] have ultimately failed—politically, but also economically,” he said.

Protectionism would destroy a German economy built on exports and cross-border supply chains, said Clemens Fuest, an economist and adviser to the German government. Ambitious redistribution programs such as pension increases, early retirement or a universal income would collapse as soon as tax revenues fall in the slowdown. Companies were privatized 30 years ago because the state is generally bad at managing businesses, he said.

“Established parties are taking over the populists’ agenda to show voters that they have heard their message,” Mr. Fuest said. “But they are making big promises that cannot be kept.”

Pronto Means Ready

Because for all the talk of going straight to level 4, we think it’s much more exciting and promising to first develop and scale a truly great level 2 system. Better to do several things — braking, steering, and throttle — super well on a wide variety of real roads and conditions rather than attempting to do everything else that driving entails in a very artificial manner.

Cadillac Makes Great Cars. Too Bad Americans Want S.U.V.s.

But now Cadillac finds itself overrun by German and Asian S.U.V.s and G.M.’s leaders have parted ways with the man once seen as the brand’s future. And America’s premier luxury car brand must reckon with an uncomfortable truth.

“Cadillac is just not selling what people want to buy today, especially in America,”

.. Mr. Lutz said Mr. de Nysschen had done critical dirty work by breaking Cadillac’s habit of dumping production into rental fleets to plump sales numbers, a practice that marred the brand’s image, retail prices and resale values.

.. Cadillac’s semiautonomous Super Cruise technology — which allows full hands-free driving on most major highways — is being hailed by some critics as superior to Tesla’s vaunted Autopilot, particularly for its emphasis on safe operation.

.. Mr. Lutz suspected that de Nysschen’s physical separation from Detroit made it harder to win allies and arguments alike.

.. Mr. Brauer, the Kelley Blue Book publisher, panned Cadillac’s move to New York as window-dressing. It might have made sense, he said, if the brand had set up design studios or engineering in New York, but those linchpins of auto creativity remained in Detroit.

.. Some observers fault Mr. de Nysschen for spending too much effort chasing the Germans, including by challenging them on their literal home turf: the famed Nürburgring circuit. Cadillac’s 640-horsepower, nearly 200-m.p.h. CTS-V

 

 

Uber Feared It Fell Behind in Driverless-Car Technology, Kalanick Testifies

Ex-CEO is highlight of second day of trial in which Google’s parent alleges Uber stole trade secrets

.. Mr. Levandowski previously has indicated he will invoke his Fifth Amendment right against self-incrimination. Mr. Kalanick has denied any theft in depositions.

.. Waymo attorney Charles Verhoeven showed December 2015 meeting notes from former Uber executive John Bares, then the head of the self-driving program, in which Mr. Kalanick appeared to be singularly focused on lidar, as well as intellectual property.

.. Mr. Bares said the company was burning through about $20 million a month trying to develop reliable autonomous vehicles. Relying on Mr. Levandowski’s assistance would help pare the costs by speeding up development

.. Kalanick’s goal of getting 100,000 driverless cars on the road by 2020

.. Autonomous vehicles are essential to Uber’s business, Mr. Bares said, given human drivers account for 70% to 80% of the cost of operating a vehicle in ride-hailing.

.. Still, he acknowledged Google was and remains the leader in self-driving vehicle technology. “That’s the general perception right now,” he said.

Judge Tells Uber Lawyer: ‘It Looks Like You Covered This Up’

The last-minute evidence quickly mounted. A letter and an email full of damning claims. Apps that sent self-destructing messages. A payment of $4.5 million to an employee who threatened to be a whistle-blower — and an additional $3 million to his lawyer.

.. On Wednesday, Judge Alsup continued to upbraid Uber’s lawyers for not being more forthcoming with evidence. “I have never seen a case where there were so many bad things done like Uber has done in this case,” he said.

.. The letter that caused the trial to be delayed was written by a lawyer for Richard Jacobs, a former employee in Uber’s security team, to Angela Padilla, the company’s deputy general counsel. Thirty-seven pages long, it detailed a list of questionable behavior at Uber, including spying on competitors and using special laptop computers and self-destructing messaging apps that would hide communications.

.. On Wednesday, Ms. Padilla testified that the letter, which has not been made public in its entirety, was “clearly extortionist” and filled with “fantastical” information.

.. Mr. Jacobs responded, Ms. Padilla said, by sending an email to Travis Kalanick, the company’s chief executive at the time, and others complaining of criminal and unethical behavior inside Uber.

That email to Mr. Kalanick also didn’t surface in the long evidence discovery process between Waymo and Uber lawyers, and was presented in court for the first time on Wednesday.

.. Judge Alsup said to Ms. Padilla that “on the surface, it looks like you covered this up” and tried to keep the letter out of the hands of Waymo’s lawyers.

.. The company did share the letter from Mr. Jacobs’s lawyer with three different United States attorney offices, because Mr. Jacobs had threatened to take his claims to federal prosecutors and Uber wanted to “take the air out of his extortionist balloon,” Ms. Padilla testified.

.. Mr. Jacobs received $2 million up front and was to receive $1 million spread over 12 months and $1.5 million in stock, also spread out over 12 months. The deal included a so-called clawback measure that would require him to return the money if he discussed his claims with outsiders
.. Judge Alsup questioned why Uber would pay so much to an employee making bogus claims. “To someone like me, an ordinary mortal, and to ordinary mortals out there in the audience — people don’t pay that kind of money for B.S.,” the judge said.
.. A Waymo spokesman, Johnny Luu, said in a statement: “Today’s revelations fit Uber’s pattern of destroying and withholding reams of evidence relevant to our trade secrets case, and that those at the very top of Uber were aware of these inexcusable practices. We look forward to the additional discovery granted by the court and to presenting our case in front of a jury at trial.”

Benedict Evans

Winner-takes all effects in autonomous cars

Rather, the place to look is not within the cars directly but still further up the stack – in the autonomous software that enables a car to move down a road without hitting anything, in the city-wide optimisation and routing that mean we might automate all cars as a system, not just each individual car, and in the on-demand fleets of ‘robo-taxis’ that will ride on all of this. The network effects in on-demand are self-evident, but will will get much more complex with autonomy (which will cut the cost of an on-demand ride by three quarters or more). On-demand robo-taxi fleets will dynamically pre-position their cars, and both these and quite possibly all other cars will co-ordinate their routes in real time for maximum efficiency, perhaps across fleets, to avoid, for example, all cars picking the same route at the same time. This in turn could be combined not just with surge pricing but with all sorts of differential road pricing – you might pay more to get to your destination faster in busy times, or pick an arrival time by price.

.. From a technological point of view, these three layers (driving, routing & optimisation, and on-demand) are largely independent – you could install the Lyft app in a GM autonomous car and let the pre-installed Waymo autonomy module drive people around, hypothetically. Clearly, some people hope there will be leverage across layers, or perhaps bundling – Tesla says that it plans to forbid people from using its autonomous cars with any on-demand service other than its own. This doesn’t work the other way – Uber won’t insist you use only its own autonomous systems. But though Microsoft cross-leveraged Office and Windows, both of these won in their own markets with their own network effects: a small OEM insisting you use its small robo-taxi service would be like Apple insisting you buy AppleWorks instead of Microsoft Office in 1995.

..  If you have sold 500,000 AVs and someone else has only sold 10,000, your maps will be updated more often and be more accurate, and so your cars will have less chance of encountering something totally new and unexpected and getting confused. The more cars you sell the better all of your cars are – the definition of a network effect.

.. It could be argued that Tesla has a lead in both maps and driving data: since late 2016, those of its new vehicles whose buyers bought the ‘Autopilot’ add-on have eight cameras giving a near-360 degree field of view, supplemented by a forward-facing radar

.. So, the network effects – the winner-takes-all effects – are in data: in driving data and in maps. This prompts two questions: who gets that data, and how much do you need?

 

How Self-Driving Cars Could End Uber

Mega-startup’s greatest threat: the disappearance of car-owning drivers caused by the rise of autonomous vehicles

 All of this is part of what auto makers and ride-hailing companies anticipate will be a larger transition to “transportation-as-a-service”—potentially the end of widespread vehicle ownership in developed countries. Subscribing to such a service for all of a person’s transportation needs within a typical American city could cost anywhere from 10% to 25% what an average consumer now spends on owning, maintaining and insuring a vehicle, says Tony Seba, co-founder of technology think tank RethinkX. Cost savings on that order could lead to rapid adoption akin to the touchscreen smartphone revolution, he argues.
.. Auto manufacturers have a great deal of experience working with the complex web of dealers, financing companies and fleet managers—even car-rental agencies—that could potentially be repurposed to manage millions of self-driving vehicles.Owing to all these factors, Uber, Lyft and their imitators will eventually cease to exist as stand-alone companies, either going out of business or being acquired by car makers