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The Blair Project

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Tony Blair, the former British prime minister who turned a once-progressive party into Tory-lite, is now in line to be the first President of Europe. Given Blair's central role in creating the conditions that invited Britain's financial collapse, this idea makes about as much sense as putting protégés of Bob Rubin in charge cleaning up after the mess that Wall Street made (whoops, that happened, too).

The new constitution for the European Union, unlike its current set of basic laws, provides for a strong president. After much delay, the proposed constitution is now likely to take effect because the Irish recently reversed their "no" vote. (In the current crisis, aid from the EU is helping to keep their economy from going the way of Iceland.) The last holdout, Czech President Vaclav Klaus, who doesn't much like the treaty, said Saturday that he would not stand in its way.

Blair is in need of a high-profile job, and President of the EU suits his ambition. But there seems to be remarkable forgiveness for the fact that Blair helped launch the race to the bottom in financial regulation that helped produce the financial collapse. Under Blair, the British Labour Party decided that the best way to fight Thatcherism was to go it one better and cut a deal with the City of London, Britain's Wall Street. Britain would become the global capital of unregulated hedge funds, private equity, and casino products like credit default swaps. In the U.K., this was known as "light-touch regulation." The bankers, in turn, would give New Labour their financial support.

The unit of AIG that helped take down the world economy was based in London, where it could enjoy even more feeble supervision than in George Bush's United States. Early in the present decade, whenever Americans began warning that finance was becoming dangerously speculative, defenders of business as usual solemnly warned that if we began regulating the affair, the show would move offshore to London, finance's new wild west.

Blair's notion was that it didn't much matter if Britain was losing its manufacturing economy. The City of London, as the center of the world's deregulated money market, would carry Britain. Well, it carried Britain to collapse. The aftermath of Britain's bubble economy today is a bigger disaster even than its American counterpart.

Blair also helped wreck what was once a proud left-of-center party. Progressives have been systematically purged from New Labour. Under Blair's successor, the dour Gordon Brown, Labour's popularity is now at a postwar low, setting the stage for a Conservative comeback despite the fact that the Tories offer nothing more in the way of solutions than do the Republicans in the United States.

Much the same thing happened in Germany a few weeks ago, where a Social Democratic Party (SPD), which had abandoned social democracy a decade ago in favor of neo-liberalism, turned in its worst electoral performance in six decades. If you wonder why left parties are not making any gains from the worst crisis of capitalism since the Great Depression, you need only look to the British Labour Party and the German SPD. They have nothing to offer.

Why, then, is Blair likely to be the first President of Europe? Because he is just what Europe's ruling financial elite wants -- nominally a man of the center-left who can be trusted to continue business as usual.

There are alternatives to Blair, but they are long shots. One is Joschka Fishcher, the well-respected leader of Germany's Greens and Germany's former foreign minister in the late SPD-Green coalition government. Another is Poul Nyrup Rasmussen, the former Danish Social Democratic prime minister who is an actual social democrat as well as Europe's leading advocate of real financial reform.

Politically, however, the failure of nominally center-left parties that emulated the center right has undercut the appeal of genuine progressives. The more likely scenario that could spare us Blair is that leaders of several of Europe's smaller member nations are not quite sure that they want such a high-profile figure, and a compromise candidate could be a functionary or a less visible leader from a small country.

Despite the fact that modern Europe is generally friendlier to a managed form of capitalism than the US, the Blair project reminds us that real reform is not likely to originate in Europe any time soon. That puts even more pressure on Barack Obama to get financial reform right.

Robert Kuttner is co-editor of The American Prospect, a senior fellow at Demos, and author of Obama's Challenge.