In the lexicon of contemporary cant, modernisation signifies everything that is worth striving for. Who wants to be backward - worse still, reactionary? Being modern, we think, is good; not being modern is bad. And progressive thinkers take for granted that being modern means accepting liberal values. Yet many of the most repressive regimes in recent history have been uncompromisingly modern. Even the Nazis, who mobilised Europe's deeply rooted traditions of racism and anti-Semitism, did so in the service of a modern revolutionary project. It has become an article of faith that the growth of the global economy goes hand in hand with the spread of liberal values. Yet across Europe, parties that reject liberal values are entering deeply into the political mainstream. Conventional wisdom on the centre left explains this development by the failure of mainstream parties to defend multicultural ideals and the economic advantages of immigration. The truth is less reassuring. Today, as in much of the 20th century, it is the enemies of liberal societies who best understand their fragility.
Among the parties of the far right across the Channel, an ambitious new project of modernisation is under way. In Britain, modernisation means becoming a centrist party, the hugely successful strategy adopted by Labour on its way back to power. In Continental Europe, it is the strategy through which the far right is breaking the hold of the centre on power. Europe's far-right parties encompass a variety of tendencies. What they have in common is that they use the social dislocation produced by the global free market - now the chief icon of modernisation - as fuel for a new politics of identity. Far better than its fumbling centre parties, Europe's far right knows that globalisation has losers, even in the richest countries. By linking the fears of these people with high levels of immigration, the far right is mounting a powerful challenge to the centrist consensus that has ruled most of Continental Europe since the end of the cold war. At the same time, the advance of the far right confounds the faith - which underpins progressive thinking everywhere - that democracy and prosperity ensure a liberal, cosmopolitan future.
There are continuities between pre-war fascist and Nazi movements and the European far right today, but what we are seeing is not simply a replay of the events of the 1930s. Then, secular ideologies were at odds in much of the world, and mass political parties struggled for control of powerful states. Now, secular ideology is in retreat and there are no mass political parties. When large numbers of people are mobilised today, it is in fundamentalist movements or in single-issue groups such as Greenpeace, or in amorphous networks such as the anti-capitalist activists. Europe contains no totalitarian states of the kind that were common between the wars. Corrupt and semi-authoritarian as it may be in some of the post-communist countries, democratic governance is entrenched throughout Europe.
Nor is Europe - outside Russia and the Balkans, at any rate - scarred by economic crisis. Not only in Germany, but in much of Continental Europe, the far right came to power between the wars on the back of hyperinflation and mass unemployment. Today's far right has made some of its most striking gains in some of the most prosperous countries. By no stretch of the imagination can Austria be said to be on the brink of economic crisis: it has one of the lowest rates of unemployment in Europe, along with one of the most highly developed welfare states. Yet it was in Austria that Jorg Haider's Freedom Party overturned a 30-year centrist consensus and became a partner in the national government. Again, the rise of the Pim Fortuyn List cannot be explained by unemployment, which is even lower in the Netherlands than in Austria.
To think of the far right as merely atavistic is to underestimate it. Whereas between the wars Europe's far right gained strength from poverty and economic crisis, today it thrives on the insecurities of the affluent. Using democracy rather than seeking to overturn it, the far right is redrawing the map of European politics by exploiting the fears of voters in rich countries.
In its economic philosophy, it is the acme of modernity. Most of Europe's far-right parties have abandoned the protectionist programme of the inter-war years. Except in France, where Jean-Marie Le Pen continues the murky traditions of Vichy, the far right is libertarian in its economic outlook. In Austria, Switzerland and northern Italy, it promotes a high-tech economy linked with the world by free trade but insulated from the legions of the poor by a ban on immigration. This is the fascism of laptops, not jackboots. Like the fascist parties of the past, the far right accepts the economic orthodoxies of its time. Today, those are the orthodoxies of the free market.
Along with the centre parties, the far right has embraced globalisation. Unlike the centre parties, however, it understands that the global market has casualties. It may be true that global free trade sometimes benefits poor people in poor countries (though the evidence for this is not overwhelming), but, as its less doctrinaire enthusiasts are ready to admit, it does nothing for unskilled manual workers in rich countries. Equally - and this may prove to be more important politically - it has few benefits for office workers and middle managers whose functions can be downloaded to parts of the world where labour is cheaper. Even where they do not now suffer from high levels of unemployment, those manual workers and white-collar employees whose tasks can be automated tend to have incomes that fall behind the rest of society. For these groups, globalisation means inexorable decline.
The strategic coup of the far right has been to blame immigrants - themselves often victims of globalisation in poor parts of the world - for the casualties of globalisation in Europe. It is a success made possible by deep-seated European traditions of xenophobia and racism. Here there are some ominous echoes of the worst parts of Europe's history. Except in the Netherlands, anti-Semitism remains at the core of the far right. Le Pen's National Front stands firmly in a tradition that goes back to Charles Maurras's Action Francaise, a radical nationalist-monarchist organisation founded in 1899 and embodying the political anti-Semitism of the Third Republic, which culminated in the Dreyfus case. In recent years, the far right's anti-Semitism has become more open and brazen. A senior member of the Vlaams Blok in Belgium has cast doubt on the reality of the Holocaust and questioned the authenticity of the diaries of Anne Frank. By doing so, he revealed the underlying agenda of the far right across nearly all of Europe. Today, as in the past, the dark side of Europe's communitarian traditions and prized social cohesion is the exclusion of minorities and foreigners. The centre parties find it impossible to admit the strength and depth of Europe's fear and hatred of outsiders. The far right has no such inhibitions.
In its use of European racism, the far right today resembles its counterpart between the wars. But there are important differences. Hard-core radical fascists were often contemptuous of nationalism. In Arthur Koestler's wartime novel Arrival and Departure, he has a philosophising Nazi diplomat - a type which actually existed in Europe at that time - assert that Nazism is more internationalist than the French revolution or communism, a revolutionary project that will wipe out Europe's "anachronistic national sovereignties". In the Nazis' New Order, Jews will be exterminated, along with gypsies, and small nations relocated where they can be most useful to the pan-European economy:
"Close your eyes. Imagine Europe up to the Urals as an empty space on the map. There are only fields of energy. . . . Wipe out those ridiculous winding boundaries, the Chinese walls which cuts across our fields of energy; scrap or transfer industries that were heedlessly built in the wrong places; liquidate the surplus population in areas where they are not required; shift the population of certain districts, if necessary of entire nations, to the spaces where they are wanted, and to the type of production for which they are most racially fitted."
Although it lingered on in Oswald Mosley's postwar slogan "Europe: a nation", this anti-nationalist strand in far-right thinking largely died out after 1945. Today, all of Europe's far-right parties are markedly hostile to European institutions. But it is worth remembering the Nazi intelligentsia's contempt for nationalism because it is of a piece with their overall modernism. In Germany and Italy, the far right recruited supporters from avant-garde cultural movements such as expressionism and futurism. Again, the Nazis embraced modern science: Adolf Hitler was a passionate partisan of technology as an instrument of human power - including the power to commit genocide on an unprecedented scale. As Koestler's Nazi diplomat declares: "We have embarked on something gigantic beyond imagination. There are no more impossibilities for man now. For the first time we are attacking the biological structure of the species. We have started to breed a new species of Homo sapiens. We are weeding out its streaks of bad heredity. We have practically finished the task of exterminating or sterilising the gypsies in Europe; the liquidation of the Jews will be completed in a year or two. . . . We are the first to make use of the hypodermic syringe, the lancet and the sterilising apparatus in our revolution."
Attitudes of this kind were not confined to Nazis. George Bernard Shaw advocated mass extermination as a humane alternative to imprisonment, lauded Stalinist Russia at a time when millions were dying of starvation and viewed Hitler's Germany as a progressive regime. H G Wells flirted with similar views. For these thinkers of the left, as for the Nazis themselves, Nazism was the opposite of a reactionary movement. It was a perverse embodiment of one of the core beliefs of the modern period: the faith that progress demands the use of science and technology to transform the human condition, without regard to the moralities of the past. If the Second World War had ended differently and the Nazis had prevailed in Europe, who is to say that the New Order they would have imposed would not have been modern?
The far right was a radical modernist movement in the 1930s, and so it is today. Now, as in the past, it appeals to voters for more traditional right-wing parties, but its widening support includes the much larger ranks of those politically disaffected. Nowhere is this clearer than in the Netherlands, where Pim Fortuyn showed the strategy of the far right at its most subtle. An ex-Marxist and former academic, Fortuyn was neo-Thatcherite on the economy and the environment, harping on the evils of regulation and the burdens of taxation. Yet, unlike Thatcherites in Britain, he favoured a strongly liberal regime on sex, euthanasia and drug use. Again, he took a firm pro-Israel line on conflict in the Middle East and does not seem to have been anti-Semitic. But he undoubtedly played the race card, particularly against Muslims, and he did so, at least by his own account, because he believed that further Muslim immigration would threaten Dutch freedoms of lifestyle: he challenged the belief that liberal societies should assimilate immigrants whose values are anti-liberal. In effect, he advocated a policy of liberal cultural protectionism. He failed to explain how such a policy could be implemented in places where - as in the Netherlands and throughout Europe - multiculturalism is an irreversible reality. Partly for this reason, it seems unlikely that his party will be effective in government. Even so, Fortuyn's legacy is the destruction of the Dutch centrist consensus.
Across Europe, the centre is losing its hold. Far-right parties are already in national government in Austria, Italy, Denmark and the Netherlands. Yet Europe's political elites remain stubbornly resistant to the message this sends. In part, no doubt, it is simply the complacency of power - even if that power is fading fast. But it is also an intellectual default. Since the end of the cold war, all mainstream parties have accepted the same ideology, according to which economic modernisation and liberal values advance in tandem. Leave aside the belief that the free market is the only path to economic modernity. Even if this were not a historical myth, the notion that a modernised economy is bound somehow to engender a liberal society would still be a fantasy. Market reform has advanced in China and, more recently, in Russia without making any concessions to liberal ideas about human rights. There is no reason why the same should not happen in other parts of the world. The link between liberal values and economic growth is a historical accident, not a universal law.
To be sure, bien-pensants economists will tell you that, over time, prosperity must lead to a demand for personal freedom; but there is little evidence for this comfortable belief. In much of Continental Europe, where the far right makes headway against a background of low unemployment and general prosperity, it is plainly mistaken. That does not mean it will be abandoned. The belief that free markets and liberal values go together is not a result of empirical inquiry. It is a confession of faith - the Enlightenment faith that, with the growth of knowledge and wealth, human beings will shed their various, divisive identities to become members of a universal civilisation. Once the prerogative of Marxists, this fanciful rationalistic creed is now the intellectual basis of market reform throughout the world.
It lies behind the argument - now as commonplace as the clamour for privatisation a decade or so ago - that demographic factors make further immigration an economic necessity. It may be true that an ageing Europe could benefit from a steady flow of immigrants - even though so long as some European countries have more than 10 per cent of their workforces unemployed, the argument is hardly conclusive. But even if its economic benefits are great, large-scale immigration carries high political risks. In the late 19th century, few borders mattered, and labour had virtually as much freedom of movement as capital. This is a phase of globalisation that many economists, and not a few on the left, view with something approaching nostalgia; but it was also a period in which democracy was limited, trade unions weak and the welfare state non-existent. By contrast, in Europe today, where welfare states and trade unions are strong, persuading voters to accept open borders must be a forbiddingly difficult task.
It is true that a democratic consensus in favour of liberal immigration policies exists in the United States. But America's openness to immigrants testifies to its success in forging a national identity that transcends ethnic origins - an achievement that cannot be replicated across Europe. European institutions cannot replace national identities, but they are widely perceived as eroding them. Weakened national cultures do not cope well with the difficulties of assimilating newcomers; they are breeding grounds for a vicious populist politics that seeks to buttress identity through ethnic exclusion. Riddled with ancient bigotries, uncertain of its future and its place in the world, Europe has contrived to weaken national identities at a time when the legitimacy of its institutions has never been more widely questioned. It is a dangerous place to launch an experiment in liberal utopianism.
The far right understands the frailty of liberal societies; the centre parties do not. Sustained by a combination of hubris, fashionable doctrine and a comforting ignorance of history, Europe's political elites seem determined to deny the mounting risks. As a result, in not much more than a few years, they are likely to find themselves partners in power with the far right across much of the continent. Once again, Europe looks set to give birth to a version of modernity that encompasses its darkest traditions.
John Gray is professor of European Thought at the London School of Economics