If ever in our lifetimes there was going to be a time for Europeans to question the efficacy of democratic capitalism, this was surely it. If ever there was a time for them to raise the red banner of socialism, prime-the-pump Keynesianism, and nationalization of the means of exchange, it is today. Behold the worst economic crisis since the Great Depression. Yet what has the European Union done, right across the continent? Exactly the opposite of what the left said it would.

Across Europe, left-leaning governments, as much as those of the right, have been cutting budgets and imposing austerity measures. Far from being the much-heralded "crisis of capitalism" that the left has so long and salivatingly augured, this recession has in fact seen capitalism’s ultimate triumph. Greek rioters, Spanish trade unionists, German regional governments, French pension protesters, Britain’s Labour Party, general strikes: Capitalism—in the shape of its Archangel Gabriel, the IMF—has outmaneuvered them all.

If socialism can’t triumph under these circumstances—anywhere—shouldn’t its adherents consider winding the whole idea up at last?

The reason is that competition—the fons et origo of capitalism, as Adam Smith teaches us—works between states just as successfully as it does between corporations and individuals. The country that tried to step outside the immutable laws of what Smith called capitalism’s "invisible hand" would have been condemned to bankruptcy by the rest of the world, as Greece so nearly discovered. Of the twin engines of capitalism—fear and greed—it was the former that worked superbly in this regard.

Smith said that because everywhere in the world a product becomes cheaper when plentiful, and conversely dearer when in short supply, the laws of capitalism therefore stem from the laws of nature—rather like Newton’s laws of physics—and thus the law of God. European leaders have certainly been acting that way in recent months, even at significant cost to their own political standing.

Consider the punishment that all European leaders have taken in their approval ratings since they embraced austerity packages, but also the fortitude with which they are (for the present at least) seeing them through. Greece’s Papandreou is down 10 percent since January, Berlusconi 7 percent, Zapatero 4 percent, Sarkozy 2 percent, and Merkel 1 percent. Jose Socrates of Portugal has dropped a massive 19 percent since October 2009. Brian Cowen of Ireland won the 2007 general election with 41 percent of the vote; currently he’s at 23 percent.

Yet such is the iron fist into which capitalism’s invisible hand can on occasion fashion itself that every single leader has had to embrace the center-right strategy over budget deficits, debt-to-GDP ratios, and subprime sovereign debt. The only European leader with an election in this period, Gordon Brown, was also the only one who hoped to put off the cuts until 2011, and he is presently looking for another job.

Between 1929 and 1931, in the last depression of this magnitude, capitalism was also bruited as being in its death throes by the left, but budgetary restraint and parliamentary compromises tended to see the democracies through, at least until everything was wrecked by the one major European country that foreswore internationalist democratic center-right capitalism for a toxic combination of nationalism and socialism. Today, nationalist autarchy is out of the question under globalization and EU rules, and socialism hasn’t been chosen by anyone.

The British response of 1929 to 1931, whereby Labour Prime Minister Ramsay MacDonald was expelled by the socialists of his own his party but patriotically carried on to run the country in a budget-cutting National Government coalition until 1935, is the template for what is happening today in Europe, rather than any end-of-capitalism utopianism. The question ought therefore to be asked: If socialism can’t even make any ground today in a massive economic crisis covering over half the world, when on earth can it? If it can’t triumph under these circumstances—anywhere—shouldn’t its adherents consider winding the whole idea up at last? There’s a moment in The Simpsons when Bart suggests to Homer that they should “all just disband and join other families.” Socialists must be feeling like that today.

The rumors coming out of Brussels suggest that during the last few months of his ministry, Gordon Brown did all he could to alter the European Union joint communiqués to minimize the glaring fact that every government except his wanted to embrace immediate cuts, while Brown wanted to postpone the pain until after the May general election. He paid the price against a credible centrer-right opposition. The £6.24 billion ($9 billion) in cuts that the Tory-Liberal coalition has so far announced to the £157 billion Public Spending Borrowing Requirement are completely negligible, of course, but at least they are timely and point in the right direction.

Meanwhile, in Spain, the Zapatero government has passed its €15 billion ($18.4 billion) in cuts, including a reduction of 5 percent for civil servants’ pay, albeit by a single vote; Sarkozy is ending France’s legal retirement age of 60, steamrolling trade union protests; Berlusconi has announced €25 billion of cuts, and is under attack from the right for not going far enough. In Holland and Sweden, parties offering center-right budget cuts are even proving popular with the voters, at least in contrast with their left-wing alternatives.

If this turns out to be double-dip recession, then all bets must be off. But at present, Europe is seeing precisely the opposite of what the left always predicted would take place during its much-heralded "forthcoming crisis of capitalism." Instead of embracing socialism, we are all Thatcherites now.

Historian Andrew Roberts' latest book, Masters and Commanders, was published in the U.K. in September. His previous books include Napoleon and Wellington, Hitler and Churchill, and A History of the English-Speaking Peoples Since 1900. Roberts is a fellow of the Royal Society of Literature and the Royal Society of Arts.