Is George Osborne failing … or succeeding brilliantly?

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Posted on March 20, 2013 by syzygysue

Is George Osborne failing … or succeeding brilliantly?

Obviously the answer depends entirely on what are George Osborne’s actual intentions?

We are led to believe by government and commentators in the mainstream media that George is trying to ‘re-balance’ the economy, eliminate the deficit by 2017 (sorry 2018!) and create the conditions for the private sector to grow and export the UK out of recession/depression. He and David Cameron tell us that fiscal austerity or expansionary fiscal contraction, is showing signs of working and anyway, there is no alternative (TINA).

However Martin Wolf, the distinguished FT journalist, describes Cameron’s arguments for sticking to the government’s programme of fiscal austerity as ‘overwhelmingly wrong-headed’. (1)

Duncan Weldon quotes the FT leader ahead of the Budget and writes:

FT leader ahead of the Budget opens by stating:

More than halfway through the UK coalition’s term of office, the British economy is becalmed. Output is flat and confidence is perilously weak. The UK is experiencing its slowest recovery since the 19th century. Nearly half a decade has passed since the crisis erupted and the economy remains no bigger than it was in 2006 – more than 3 per cent below its 2008 peak. It is no longer fanciful to talk about a lost decade.

As we approach the Chancellor’s fourth Budget, we can already guess that much of the content will feel eerily familiar – growth revised down, borrowing revised up, an insistence that his policy is working and delivering low interest rates, some additional austerity measures to be announced for the future and some ‘more of the same’ policy in the short-term (corporation tax, the personal allowance and generic ‘deregulation’ being likely candidates). (2)

I could find dozens of quotes in the same vein. So in terms of mending the UK economy, George Osborne has signally failed!

Furthermore, it is not just that he has failed on economic indicators. His ‘austerity’ cuts have or will have severe consequences for the social fabric. For example, more than a million more families will be living in poverty by 2015. (3)

Research published by the TUC earlier today shows that the decisions being made by the government will cost middle-income households £1,200 a year. By the time of the next election, nine in ten households will be worse off, and half of all children in the UK will live in families below the breadline. (4)

However, this aspect of George Osborne’s strategy is, in his own terms, a success .. a real success.

Such impacts were implicit in the CSR (Comprehensive Spending Review October 2010) which if implemented in full would result in less spending on public services in the UK than that of the US by 2014/15 (5)

However, it has to be said that not everybody accepts George Osborne’s stated agenda as being his real purpose.

Ivan Horrocks, commenting on Tax Research UK as long ago as September 2011, wrote:

I do wonder if part of the issue you and many other commentators have with Osborne and co is that you/we are ascribing to them a primary economic policy aim which is in fact not their primary aim. We assume that Osborne and co’s primary concern (aim) is to get the economy growing again. And to be fair, this is the impression that Osborne and co promote.

But what if their primary aim is in fact to (try to) fundamentally restructure economic (and social) relations in this country (and beyond if they can) and that their belief is that to do that “austerity” is an essential tool. It can be argued that this is similar to the approach Thatcher employed between 1979-83. For example, under the cover of “austerity” we are witnessing a massive fire sale of public assets, planning laws are being relaxed, the NHS is being “restructured”, and so on and on, all to the considerable benefit not to the “big society” but to big business and big finance.

My conclusion would be that the “austerity” approach – and the narrative that’s been developed to support it – will not be dropped, regardless of any arguments put by the IMF, UN, you, Martin Wolf or anyone else – or the production of data that shows how dire the economic situation of this country is – until Osborne and his supporters are confident that their primary policy aim is sufficiently entrenched to withstand efforts to stop or undo it. Again, we see this approach reflected in the behaviour of Thatcher’s first government. And, furthermore, it resonates with the reported view of senior/influential Tory thinkers, that the first Blair government wasted their first two years in power. In summary then, we could argue that Osborne and co have simply been very good at learning from history. (6)

The passage of time has certainly vindicated Ivan Horrocks assessment. The ‘austerity’ approach and accompanying narrative (“its all Gordon Brown’s fault”) have not been dropped. And regardless of the economic data, the arguments of the IMF, UN, Richard Murphy and Martin Wolf, we continue to witness the fire sale of public assets, planning laws are being relaxed, the NHS is being “restructured” and so on… to the benefit of big business and big finance

Richard Murphy is also in firm agreement that George Osborne’s real agenda is a Tory revolution ‘aimed at creating a managed, corporately controlled, and deeply unequal ‘democracy’.(7) (Note the quotation marks around ‘democracy)

He quotes Ivan Horrocks who is unsurprisingly, not surprised at all:

… It’s the inevitable conclusion of a strategy and process that was undoubtedly conceived while the Tories were in opposition and in concert with many of those who stand to benefit.… Now the Tories are aware they’ll only be in power for one term completing the demolition of the state, the fire sale of public assests and services, and the engineering of the corporate control of as many regulatory and governmental institutions as is possible will gain pace drastically. As will the tempo and harshness of the attack on the poor and less fortunate in our society. (7)

(edited)

Michael Hoexter makes a similar argument in New Economics Perspectives:

After the initial panic surrounding the global financial crisis of 2007-2008 subsided, an opportunistic brand of neoliberalism emerged, that continued neoliberalism’s attack on government as a stabilizing, moderating force in society. This re-energized brand of neoliberalism advocates fiscal austerity and balanced government budgets, “worrying” that public bond issues floated during the economic stabilization process were “unsustainable” debts….

(T)hat the prime drivers of fiscal austerity were representatives of the financial industry, which had just been bailed out by government and had gotten themselves into trouble via high levels of private “leverage,” has, so far, escaped the notice of most sectors of the press in Europe and the United States and, therefore, the consciousness of the public. Furthermore, the potential future advantages to that same industry of austerity’s selective shackling of government’s ability to create and control the liquidity of the economy have also, so far, escaped the notice of a gullible press and, by extension, a good portion of the public. (8)

So is George Osborne failing or is he succeeding brilliantly? And does he know which agenda he is following? Does he actually believe in the failed neoclassical nostrums? Is he being ‘manipulated’ in some way by those vested interests who stand to benefit? Or was it always his intention to keep the crisis going to provide the ‘shock doctrine’ which justifies asset-stripping and re-structuring the economic/social relations of the UK ?

In writing about the imperative for a macroethics, Michael Hoexter makes the observation:

… fundamental moral confusion may be mere pretense in the sociopaths and Machiavellian political operatives who are, no doubt, crucial to the success of the austerity campaign. Yet, their (fallacious) ethical argumentation has swept along more gullible political leaders who have not paused long enough to consider the uniqueness of their role as leaders of governments. These leaders, with the exception of the Euro-Zone countries, can move their governments to issue currency to bail their nations out of any real or imagined financial bind (though finances do not necessarily solve real economic difficulties). Either, believing the fiscal reality of currency-issuing governments was identical to that of a business or a household or fearing their constituents would view them as immoral if they did not treat the national budget as that of a household, politicians have, so far, acted as if they do not recognize their distinct macroethical duties as regards the national budget. (8)

A similar point made by the Guardian’s Zoe Williams when she speculated about … the true division of the Conservative party – the ones who are mistaken versus those who are wrong deliberately… Some of them are simply out of their depth, do not understand the benefits system or a government’s realistic prospects of controlling the economy…Others take the Fox News approach: if you can just get enough misinformation out there, enough people who were only half-listening might half-believe you. Competing claims don’t need to relate to facts, their validity will be judged on the manner in which they’re delivered. You may have to retract later, but what does that matter? (9)

Michael Hoexter provides a disturbing rationale for neoliberal behaviour:

Conventional neoclassical economics has normalized sociopathy in economic life by assuming the “utility maximizing individual” at every turn, which aids sociopaths in gaining positions of power and influence in our contemporary society. In the political science derivative of neoclassical economics, James Buchanan’s “public choice theory,” politicians are assumed to be as fundamentally amoral as neoclassical economics’ model of the person, which has the effect of excusing or making invisible political corruption…. (8)

Disturbingly, I conclude with the (edited) view of Andrew Dickie, another regular commentator, on Tax research UK whose opinion is respected by Richard Murphy:

Ivan and I have been in agreement on this before – this will be a Neo-feudal state, in which we subjects in the oligarcho-democratic state we now enjoy are transformed into serfs,without rights, in a feudal state where the land-basis of mediaeval fedualism will be replaced by a “territorial” carve-up on the basis of income streams from taxation = Prince HMRC and Duke NHS and Marquess Tertiary Education, and Earl Secondary Education – somewhat reminiscent of Prohibition Chicago!…. These new “garagiste/card-sharping/rent-seeking” baronage know the price of everything and the value of nothing, and their only skills are those of rip-off and plunder, and are a universe away from the real economy and real wealth creation, which will be the task of the serfs – as it always was….. (10)

Andrew Dickie ends with the advice that “ Labour should be putting down a marker – a future Labour Government will bring all these illicitly disposed of mutually created assets back under democratic control, without compensation where possible, which, given that it is highly likely that their new “owners” will already have made more than they have paid for the assets, will be easy to justify.”

I’ll more than second that… but in the meantime, there’s another Osborne budget….

Capitalism – Neoliberalism, Plutonomy, and Neo-feudalism.

Soylent Green, George Osborne and Plutonomy.

Plutonomy – Invasion of the Political Body Snatchers.

What is George Osborne playing at?

(1) http://www.ft.com/cms/s/0/1670a3d2-880f-11e2-8e3c-00144feabdc0.html#axzz2NQUQ6WUO

(2) http://touchstoneblog.org.uk/2013/03/through-the-looking-glass-economics/

(3) http://touchstoneblog.org.uk/2013/03/a-million-more-families-below-the-breadline-by-2015/

(4) http://touchstoneblog.org.uk/2013/03/next-wednesday-george-osborne-should-admit-hes-got-it-wrong/

(5) http:// onlinelibrary.wiley.com/doi/10.1111/j.1467-923X.2011.02169.x/ful l

(6) http://www.taxresearch.org.uk/Blog/2011/09/06/maybe-osbornes-quite-happy-a-double-dip-that-provides-cover-for-all-he-wants-to-do/#comments

(7) http://www.taxresearch.org.uk/Blog/2013/03/14/the-tory-revolution-is-aimed-at-creating-a-managed-corporately-controlled-and-deeply-unequal-democracy/

(8) http://neweconomicperspectives.org/2013/03/without-an-effective-macroethics-our-civilization-is-doomed.html#more-5010

(9) http://www.guardian.co.uk/commentisfree/2013/jan/02/iain-duncan-smith-polemic-politics-cynical

(10) http://www.taxresearch.org.uk/Blog/2013/03/14/that-tory-revolution-and-the-rise-of-neofeudalism/

A Neofeudalist Fantasy inspired by Bilderberg 2012

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Posted on September 7, 2012 by syzygysue

The Bilderberg phenomenon is often dismissed as a ‘conspiracy fantasist’s dream. However, there is no doubt that there is an annual three-day conference attended by members of the global aristocracy, global leaders of industry and politicians (including US presidential candidates) from around the world. This year’s shadowy elite leaders’ conference was on May 31st 2012, so what was on the agenda? No real information is forthcoming, not even from the usually outspoken attendee Ken Clarke MP, nor from the queen of the Netherlands, the chairman of Barclays, and the chairman, vice-chairman and CEO of Shell Oil who also participated.

Charlie Skelton reported that ’The Occupy movement seems … to have realised that the problem isn’t the 1%, it’s the 0.001%…..”We refuse to pay for the banks’ crisis” was the cry from OccupyLSX back in the autumn. They demanded an end to “our democracy representing corporations instead of the people.” What Bilderberg represents is the fact that our democracy IS our corporations. And politics is just the wake behind a shark fin.”

This is a possible history to fill the void.

Imagine a land, long ago, when people lived in small groups, gathering what they needed from the environment as they migrated from place to place ‘following’ their food. Collecting wild hazelnuts and berries from the autumn woods; shellfish and seaweed from the shore, new green shoots in spring, grubs, roots and occasionally catching a fish or hunting for meat.

Over time, population growth, and rising sea levels, created food scarcity in the shrinking forests and grasslands. Some groups settled down and became farmers .. a much harder life in many ways but it ensured a more or less regular food supply for the greater number of mouths.

Now, as any parasitologist would tell you, a new farming ecosystem meant new opportunities for ‘parasitism’ to get established. And sure enough, there were soon groups of hunter-gatherers who adopted a land-based ‘pirate’ life-style of ‘raping and pillaging’ the farming communities.

Pretty quickly, it was realised that this was disadvantageous to both the farmers and the pirates because it meant farmers dying from raping, pillaging or starvation, and the pirates having to find another farmer.

A new strategy evolved; ‘land grab’ and enslavement of the farmers who now found themselves working as serfs to feed both themselves and the pirates. Furthermore, the pirates left the farmers with barely enough to survive and to still keep on farming. On the plus side, the pirates were willing to protect their assets, which may have meant that the farmers led a quieter life, free from other marauding pirates.

Psychologically, there was a terrible cost to the pirate aristocracy. They had to shut down any sort of empathy for the suffering of the serfs… they had to make them ‘the other’, ‘less than’ and different. The pirates grew to see themselves as ‘very special’ entitled people who deserved more than their fellow human beings. To preserve this, there was a fierce sanction against marrying outside their pirate class. Inevitably, this sort of narcissism impacted on their relationships with their partners and children.

Furthermore, the narcissistic pirates became too special to do their own chores or look after their own children… or even to allow their ‘wives’ to do so. And there was never enough being produced to satisfy the narcissistic pirates… these very special people saw no reason why they should not have it all. And their increasing wealth came to substitute for the emptiness of their relationships. The rules applied to other people but not to themselves.

Ultimately, there were limits as to how many of these bandits, any farming community could sustain. At first, the expanding population of pirates could be accommodated by extending their range; by colonizing and taking over other groups of farmers. But pretty soon, there were turf wars between rival gangs of pirates and many young male serfs were taken away from farming to fight on behalf of the pirates. Of course, to have serf soldiers doing the dying instead of the pirate aristocracy was pretty irresistible to the pirates.

So it was, that successful pirates acquired vast empires of land with a multitude of serfs. However, this presented a whole set of new problems … how to administer and keep control of a huge underclass?

From the start, organised religion, with different brands of hell-fire and damnation, was a major means of maintaining the pirates in their privileged position, and this control lasted for many centuries. But, eventually, the pirates found that they could safely promote certain serf individuals to positions of authority and power without losing their overall sanction … and with that came the understanding that ‘divide and rule’ was a much more subtle and effective control mechanism than threats. It became the strategy of choice from that time on.

Now, there was a means to divert any blame or resentment away from themselves and onto the apparent authors of the oppression, the administrators … the proto-politicians. By keeping their lives and their wealth hidden from the masses, the pirates could not only exert ultimate control over the administrators, but with judicious paternalistic interventions, the aristocracy could induce respect, loyalty and even admiration from the unsuspecting serfs.

With colonization of foreign lands, came trade between different pirate overlords, and with trade came the need for an IOU system or money, banks, accountants and lawyers…. And the way in which the pirates stopped those professions running off with all the money was to make it ‘worth their while’ .. ‘to cut them in on the deal’. In some aspects of banking, they found that it was particularly advantageous to employ those serfs who lacked empathy, and had all the ingenuity of the intelligent thief… the ‘anti-socials’.

So life continued over still more centuries. There were blips of serf rebellion, but the pirates and their henchmen were always able to find a compromise which appeared to favour the serfs but in reality, incommoded the ruling elite very little. The rentier pirates lived well – they had a monopoly on overhead charges for access to land, minerals or other natural resources, bank credit and other basic needs. They had no need to earn a living by producing anything because they received so much wealth from their inheritance and unearned income.

Then a disaster fell. A huge war, a financial disaster brought about by the crooked bankers (that were installed by the pirates themselves), followed by another huge war. The income of the top 1% fell from 24% of total pre-tax income to a mere 10% in the space of 20 years. Worse was to follow. The troops, returning from 5 years of war, were in no mood to put up with the privations of the life that they had had before the war. A new type of government was elected which put in place a National Health Service, free dentistry, free schooling and a welfare safety net. These were only of benefit to the serfs because the pirates had always had the income to pay for their own schools and medical provision. On top of this, energy production, transport, utilities and communications were nationalized, and run by the government to further the national good.

The pirates were aghast .. not only were they being taxed to pay their share of services that they certainly didn’t need or use … not only did they lose the interests that would have been forthcoming prior to nationalization… but the sheer impertinence of the ‘little people’!

Who on earth did they think they were … breaking up the natural order? It was the politics of envy!!

The fight-back had to begin. Fortunately, the pirates had allies abroad who certainly did not want to see such socialist ideas infecting their own countries. The imperative to fight the welfare state and the mixed economy, overcame any difficulties that the narcissistic pirates had in co-operating … and doubtless each thought they might just find ways to outdo the other ‘pirates’.

One of the biggest problems, for the pirates and their fellow travelers, was that the welfare state was immensely popular with the serfs. It was clear that any moves to re-privatise state services would need stealth. A slow but a steady worsening, much media-undermining, and then the incremental introduction of private provision back into public services, would serve their ends. The plan was that by the time they had finished, the serfs would go along with anything because they would think that they had so little to lose!

The pirates salivated at the idea of all those services that were going to be privatised. There would never be a lack of demand for those assets, and payment was guaranteed by unavoidable taxation of the serfs by the government, that the serfs had themselves elected (Hee hee!).

Fortunately, the serfs had already been groomed to believe in the freedom of the press and the impartiality of the BBC. How the absurdity of this belief made the pirates laugh! It was almost incredible to them that the ownership of the papers by pirates, and the pirate leadership at the BBC was ignored.

The lower orders were to be deliberately distracted, and given opinion not facts. They would be fed a diet of celebrity and sport; a constant drip-drip that politics was boring; that all politicians are the same; that all politicians are looking after number one; and that all politicians are like children needing the working people to bail them out yet again. Active misinformation, propaganda and spin would be directed to cultivate the ‘correct’ attitudes amongst the managerial and educated middle classes. All that the pirate owned media had to do, was to label any inconvenient challenge to the pirate frame of reference, as ‘extremist’, ‘ideological’ or ‘a conspiracy theory’… and the ideas wouldn’t be taken seriously. TINA was to be repeated at every available opportunity… there is no alternative. But underlying all of this, was the imperative that there was to be as little information as possible about the fabulous wealth and life-style of the pirates, or indeed their ownership of the assets.

There would be little difficulty in implementing most of their blueprint, given the pirate entourage of willing politicians, CEOs of corporations, the bankers and the financial sector, and these were to be the public faces of the scam. This political-corporate-financial nexus would be acting in their own self-interest so would not hesitate to keep the overall scheme as hidden as possible.

However, there was one major hurdle. How to prevent another radical ‘out-of-control’ government coming into power and renationalizing everything? Unfortunately, the pirates and confederates had previously miscalculated when they had allowed the serfs to have voting rights. This was spun, at the time, as being ‘democracy’ but now it had been shown to be capable of back-firing on the pirates. What was needed was a way of negating democracy and elected sovereign governments… the most obvious solution was another layer of government which took precedence. They needed global governance!

But at this point, some bright young ‘anti-social’ serfs objected:

“The serfs won’t buy global government. They are attached to their own lands and have little enough faith in their own politicians, let alone foreign ones. Apart from anything else, they’ll want to vote for a global government and we don’t want to go down that road again! Anyway, we don’t need a global government. We have the tools already.”

The young anti-socials laid out their cunning plan:

“Our original inspiration was that of ‘The Emperor’s New Clothes’ story. The swindlers’ aim was to make a fool of the Emperor and take his money. Your aim is to make the democratic process a joke, and take the money. Our vision taken from the Emperor’s clothes’ story is that we require a shift in the prevailing conceptual framework … just as the people and the Emperor, in the story, were persuaded to believe that others could see the clothes.

In our case, this can best be provided by the assertion that ‘the markets know best’; and therefore ‘governments interfere with the markets operating properly’ and ‘we need to deregulate – we need to set the markets free’. Then if, or rather when, the markets fail, we can say that there’s still too much red tape hindering the markets; that we must make it easier to ‘fire and hire’; that companies/individuals are not investing because of too much taxation; that public provision must be privatised because its ‘crowding out’ the private sector; and planning laws are holding back the economy by inhibiting very large conservatories from being built!

This is the perfect, plausible even, vehicle to achieve your goal. Implicitly, the market knowing best means that the electorate and politicians do not … ergo ‘democracy’ becomes redundant. In the same manner, it is implicit that government will shrink with the privatization of public services. The role of the state will be confined to being collector of taxes to pay for the privatized services, and to oversee law enforcement agencies required to protect the corporations, banks and pirates.

The first step must be to cause economic havoc in the country.. which should not be a problem for our financial friends. This will justify our tame politicians to take the draconian action necessary to privatise the nationalized industries. Eventually they will be able to fully dismantle the NHS and the rest of the welfare state.

The next step will be to set up some global agencies .. a WTO (World Trade Organisation), an IMF (International Monetary Fund) and a World Bank … who would have responsibility to maintain market freedom. We need to set in place a General Agreement on Trade and Tariffs (GATT) which will be mandated to supercede sovereign government legislation. This has the advantage that governments can sign up to a treaty without having too much discussion in Parliament. Furthermore, the negotiations can be completed in secret citing commercial sensitivity. Any new government wanting to reverse privatisation will find themselves hamstrung by the terms of the GATT and subject to WTO decisions.

The universal strategy will be a pincer movement. The financial sector will create an economic crisis which will justify draconian cuts in the welfare system, mass privatization of public services and a fire-sale of national assets. The corporations will then step in to take-over services and buy up the assets cheaply. The politicians will take on the banks’ debts and recapitalise the banks. This way we will be able to create a low-waged, high unemployment society with high levels of personal serf indebtedness. Then we will be properly back in the driving seat with our back-to-the-future neofeudalism.

Oh, but before we forget, it is really, really important to be able to get ‘our money’ out of the system before it crashes! We will need to get rid of exchange controls on the movement of money, and we need to sort out and ramp up ease of access to tax havens. The serfs can have their redistribution of income .. we’ll redistribute it upwards and offshore!

Postscript:

Who would willingly have allowed the scurrilous ‘pirates’ to turn the clock back? But just look at the graph (1)… and they’re not finished yet.

“If you’re sitting in banks driver’s seat and if you are controlling the quantity of national money, than de facto you control the political situation as well. Because if government needs loans and you are not willing to lend, than you are in absolute control of that government, and that’s the situation we’re in today.” Bill Still (3)

As Sherrill said, without regulation, capitalism is thievery. We stopped regulating the financial system, so thieves took over. (2)

Michael Hudson http://real-economics.blogspot.co.uk/2012/08/meta-thinking-on-political-economy.html

http://www.michaelmeacher.info/weblog/2012/09/tories-ramp-up-the-class-warfare/

http://think-left.org/2011/07/21/red-labour-must-address-the-elephant-in-the-room/

http://think-left.org/2012/08/20/has-george-osborne-been-taking-trans-atlantic-lessons-from-the-jude-wanniski-and-the-republicans/

http://www.guardian.co.uk/world/2012/may/30/bilderberg-2012-technocrats-are-rising

(1) http://think-left.org/2011/10/14/capitalism-neoliberalism-plutonomy-and-neo-feudalism/

(2) http://www.economonitor.com/lrwray/2012/07/23/why-were-screwed/#idc-cover

(3) http://www.positivemoney.org.uk/2011/09/bill-max-keiser-show/

Where the US goes, we are sure to follow.

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Posted on July 22, 2012 by syzygysue

Robert Reich calls ‘them’ Regressives, we call them neofeudalists, plutonomists or neoliberals .. His points, about the significance of the US presidential election, are made more overt by Will Hutton in the Observer:

The American election is really a battle for the future of capitalism -
‘Mitt Romney embodies a system dominated by financial engineering that uses companies as casino chips.’

This battle is pertinent for the UK, because we already have many of the worst aspects of the US system… and the plans of the coalition lead inevitably towards further americanisation.

THE REAL BATTLE IN 2012 AND BEYOND Professor Robert Reich WEDNESDAY, JULY 11, 2012

It’s not merely Republicans versus Democrats, or conservatives versus liberals. The larger battle is between regressives and progressives.

Regressives want to take this nation backward — to before Social Security, unemployment insurance, and Medicare; before civil rights and voting rights; before regulations designed to protect the environment, workers, consumers, and investors. They want to sabotage much of what this nation has achieved over the last century. And they’re out to do it by making the rich far richer, turning Americans against one another in competition for a smaller and smaller slice of the pie, substituting private morality for public morality, and opening the floodgates to big money in politics.

Progressives are determined to take this nation forward — toward equal opportunity, tolerance and openness, adequate protection against corporate and Wall Street abuses, and an economy and democracy that are working for all of us.

The upcoming election is critical but it’s not the end of this contest. It will go on for years. It will require that you understand what’s at stake. And that you energize, mobilize, and organize others.

‘Brinkmanship’ and the Euro Crisis.

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Posted on June 15, 2012 by syzygysue

Making sense of what is happening in the Euro crisis from simply listening to the BBC and the headline media reporting is scarcely possible. Contradictions are hardly called into question; statements are confidently asserted as definitive; dubious assumptions are left unchallenged; and every new development is described incoherently. Economic journalists even openly admit to being confused. It seems, however, that it is the over-riding intent of the global power elites to utilize whatever drama, real or devised, to ruthlessly maintain, advance and lock-in the Washington consensus in perpetuity. To paraphrase Bertoldt Brecht after WW2 – is this where all the ‘fascists’ went?

In recent days, we have what Charles Moore describes as ‘the strange spectacle of British ministers saying almost opposite things, sometimes on the very same day’.

They say (D Cameron, Thursday) that the idea of European political union is “nonsense”, yet they urge Germany (also D Cameron, also Thursday) to lead the eurozone into a fiscal union and a banking union, which would be a political union in all but name. Our leaders demand that others do what they proudly boast we would not dream of doing. (1)

Furthermore, even within their own terms, none of the solutions which have come out of the many Euro crisis talks, address the immediate and specific national problems of the banking crisis or tackle the Bond market hikes in interest rates. So the banks and Bond markets carry on ‘business as usual’ secure in the knowledge that their losses will be socialized, and that repayment of debts will be prioritized, regardless of whatever is the suffering of EU citizens.

However, the contradictions are not restricted to just the utterances of the Tory high command or the EU troika.

As John C Dyer indicates (2), that ‘through its involvement in the IMF’, the US has been promoting fiscal austerity in the Eurozone whilst having taken a more Keynesian approach itself (such as that adopted and advocated by Gordon Brown 2008-10). This contradiction was ratcheted up on the 8^th June, when Barack Obama cautioned that Europe faces a “downwards spiral” unless it acts now to recapitalise its banks and stimulate growth.

The US president warned too much fiscal austerity would mean a stark future for Europe, and urged governments not to rein in spending on long term projects and infrastructure…. (3)

Only two weeks earlier, the head of the IMF, Christine Lagarde, said that she shivered when she looked back at the UK’s deficit in May 2010 and imagined there being no plan to reduce it. Lagarde not only backed George Osborne’s “policy mix” of austerity measures, but also said that the choice between deficit reduction and growth was a false one. She called on Europe to boost growth by structural reforms, not by spending more. (4)

The irreconciliablity of Obama’s domestic policy and apparent EU position, with the neo-liberal free trade agenda of the IMF, is all the more stark because the IMF was effectively created to impose US global interests. Since the US has a veto over key decisions, it is within the power of the US to demand a growth agenda as a condition of IMF ‘bail-outs’ in the EU. As John C Dyer writes:

What are we doing, President Obama?

We have aligned our nation with those who replace democratically elected leaders with functionary “colonial governors.” These functionaries enforce (for a Eurozone and IMF led by social conservatives) odious loan terms of draconian austerity, despite that austerity’s failure to achieve its stated purpose and despite the US public position Europe should turn its attention to growth. (5)

Furthermore, John Dyer suggests that ‘The last thing the US needs is for Europe and the UK to one day conclude that the US sandbagged their economies in order to preserve its own.’ (2)

So, we have Angela Merkel, the Eurocrats and the IMF insisting on unjust, harsh cut backs in government spending which cannot possibly succeed in solving the banking crisis; promoting long-term solutions which would take at least 5-10y to implement; and which do not address the very immediate problems of Greece and Spain, and risk worsening, or even risk a catastrophic meltdown, of the euro crisis.

We have an ‘austerity’ government which has Cameron and George Osborne calling for the eurozone to move towards fiscal union, including eurobonds, and for the ECB to effectively start the printing presses. As the Telegraph says ‘Eurobonds and cheap money create huge incentives for more spending, which is exactly what the Coalition is arguing against at home, and feel awfully like solving a debt crisis with more debt.’ (6)

Meanwhile, Obama urges EU governments not to rein in spending on long term projects and infrastructure whilst allowing its proxy, the IMF, to impose the opposite conditions.

Clearly, there are some deeper agendas being played out, and the truth of Naomi Klein’s Shock Doctrine/disaster capitalism seems once again to be extremely relevant and powerful.

‘In the pursuit of enormous profits, those running the global economy intentionally exploit terrible catastrophes, or even create them, to take things for themselves that only shocked and traumatized populations would give up. This ambulance-chasing strategy of those in power is defined as the “shock doctrine,” and “disaster capitalism”, alternatively known as “neoliberalism” is the dominant social paradigm it has created.’

The most obvious explanation for Mrs Merkel’s position is an extremely risky ‘brinkmanship’. Larry Elliott writes:

The world’s biggest ever game of chicken. That’s one way of looking at the noises coming out of Brussels and Frankfurt on Wednesday, suggesting that each eurozone country is drawing up contingency plans for a Greek exit from the single currency, that such an eventuality would actually be no big deal, and that Athens might be offered a €50bn (£40bn) sweetener if it decides to call it a day and bring back the drachma. (7)

But upping the stakes, Mrs Merkel ‘now clearly intends to use her position to persuade Member States to cede further powers to the EU and she believes the European Commission ought to function more as a European government, with the Council of Ministers acting as a ‘second chamber’ alongside a strengthened European Parliament.’ (8)

Merkel’s push is consistent with the choice, set out by Marco d’Eramo, as being between the dismantling of the Euro and the democratic rights of the ordinary people of the Eurozone who will be ‘at the mercy of an imposed but highly unbalanced and divided Franco-German duumvirate’ (9)

The double-bind for the Tories is clear to the Telegraph:

‘While the collapse of the euro would drag us down with it, the federalism and fiscal union that Cameron and Osborne want would also spell doom for Britain.’ (10)

However, John Rentoul speculates on the reasoning of Osborne and Cameron:

I can see that it would not be polite for Cameron to lecture the eurozone on why it needs to dismantle its currency. But it does seem remarkable that he and Osborne pretend to be so enthusiastic about creating a core European superstate on our doorstep.

The only way to make sense of this, I think, is that Cameron and Osborne expect the Germans to realise that the euro must break up, and to organise it, so that floating exchange rates will restore prosperity again. But they fear that Germany will insist on trying to make it work, pouring money into Spain, Greece and then Italy and others, and acting as a brake on growth for the indefinite future.

It does seem strange, though, that they should be encouraging Angela Merkel to do the wrong thing in the hope that she will decide by herself that it is not going to work.

When it comes to accounting for Obama’s apparent ‘sandbagging’ of Europe, there are historical, geographical and election-year perspectives to consider.

A major difference between the US and the UK/Europe is in the provision of public services. As has been discussed many times on Think Left, the Tory/LD government has redefined the banking crisis to be the result of ‘the Labour government’s overspending’ (11). The mantra of ‘debt reduction’ has been utilized to justify, under the guise of fiscal austerity, implementing their ideological long-term plans to ‘shrink the state’ and sell off public services. Ann Pettifor compiles the evidence against this hugely significant lie on her blog . (12) The IMF as part of the Troika is making just such demands as part of any bail-out package in Ireland, Greece and now Spain.

In 2008, Gordon Brown announced the end of the Washington Consensus but he significantly underestimated the determination of the transnational corporations, international finance and the super-rich (13). It seems that, like Margaret Thatcher in the 80s, wrecking the economy of the UK and creating mass unemployment is a price worth paying in order to dismantle the post-war consensus once and for all.

However, no such consideration pertains in the US because privatization and marketisation of their ‘public services’ is fully implemented. In fact, it was the complaint of US private health providers that because of UK and European ‘public services’, there was no level ‘playing field’ for them, when the World Trade Organisation was created in 1995 to guarantee global free trade with a common set of binding international rules. In other words, the priority for Wall Street and the transnational corporations has been to strengthen the US economy; whereas in the UK, the priority has been to open up public services to privatisation.

In any event, the focus of the US is no longer on Europe, as Hilary Clinton made clear in her speech last October on America’s Pacific Century:

President Obama has led a multifaceted and persistent effort to embrace fully our irreplaceable role in the Pacific, spanning the entire U.S. government…. We are also making progress on the Trans-Pacific Partnership (TPP), which will bring together economies from across the Pacific — developed and developing alike — into a single trading community. Our goal is to create not just more growth, but better growth. We believe trade agreements need to include strong protections for workers, the environment, intellectual property, and innovation. They should also promote the free flow of information technology and the spread of green technology, as well as the coherence of our regulatory system and the efficiency of supply chains. (14)

David Harvey has emphasized the significance of the US’s geographical position in its global hegemony because it can face both east towards the EU trading block and west across the Pacific to the other trading block of Australasia. It seems possible, therefore, that another reason for the inconsistency of position between the US economic strategy and the IMF, is that having the power of the EU trading block somewhat diminished is not entirely a disadvantage… in other words ‘sandbagged’.

However, the US would certainly not want the EU to implode. Not only is it an important trading partner but they are terrified that the calling in of insurance policies on the loans to EU governments would trigger another devastating credit crunch. Mrs Merkel’s ‘brinkmanship’ is now clearly frightening the US and UK governments alike.

Benedict Brogan characterizes the ‘the mood among ministers and officials confronted with the euro crisis and our teetering economy is to imitate Munch’s The Scream: hands to head, mouth opened in a howl of despair. Certainly behind the scenes the feeling of worry, bordering on fear, is palpable. The prospect of an economic cataclysm terrifies the upper reaches of the Government.’ (15)

Furthermore, such fears lie behind the flying visit to the EU finance ministers meeting this Friday from a worried US Treasury Secretary. (16)

So to sum up.

As Larry Elliott puts the situation, ‘One tentative conclusion that can be drawn from the events of the past half-decade is that in the West we have been experiencing a genuine crisis of capitalism of the sort that Marx talked about.’ (17)

Michael Wayne writing in Tribune goes further:

Marx understood how the apparent freedom of contractual exchange in the market masked unequal power relations and violence. Much of Das Kapital was devoted to deconstructing the appearance of consent, and showing that there was nothing free and equal when one side owns the means of production (including financial resources) and those on the other side have only their labour power to sell. The “proletarianisation” and immiseration of an entire country by outside forces, in the case of Greece, has rarely been this rapid or brutal. If this is rational, then it is rationality devoid of reason.

The political crisis now gripping Europe predates 2008. The hollowing out of democracy took the form of the elimination of ideological choices at the ballot box, the massive increase in perception management (spin), the haemorrhaging of trust in politicians, rising levels of abstention from the political process, and a gradual blurring of the boundaries between the political and economic elites.

The economic crisis now gripping Europe also predates 2008. I recall a common discussion on the left in the late 1980s. After Thatcher had deregulated the City in the “Big Bang”, we pondered how long finance capital, now uncoupled from the real economy, could keep going without crashing and burning. Twenty years might seem like a long time in the answering, and indeed many on the left during that time abandoned the conversation altogether and resigned themselves to the “new paradigm”. (18)

The reality is that the Euro crisis is only a crisis if there is a determination to maintain the present political-financial-corporate paradigm. In fact, the most serious problems that actually face the world are climate warming, resource depletion and environmental degradation .. all the products of unrestrained neoliberal/neofeudal capitalism.

All the measures needed to address these real threats would necessitate creating jobs, and as John Maynard Keynes said, “look after unemployment and the budget will look after itself.”

Richard Murphy has written a very neat piece about how the Euro area might get out of the mess it is in… but as he says:

It’s a choice then: nationalised banks and a viable central bank for Europe or a failure of our democracies and all they represent….It’s not really a choice…. But there are those who refuse to embrace it. (19)

Unfortunately, those who refuse to embrace it seem to be holding the ‘levers of power’ and we, the ordinary people, will continue to be exploited unless we wake-up to what is happening. If we do not then the dystopia of Soylent Green might well represent our future. (20)

(1) http://www.telegraph.co.uk/news/worldnews/europe/eu/9319548/As-the-eurozone-breaks-apart-Britain-must-go-its-separate-way.html

(2) http://whirledview.typepad.com/whirledview/2012/03/as-the-earth-beneath-their-feet-begins-to-crumble.html

(3) http://www.guardian.co.uk/business/2012/jun/08/eurozone-crisis-germany-suffers-imports

(4) http://www.bbc.co.uk/news/uk-politics-18158470

(5) http://whirledview.typepad.com/whirledview/2012/06/president-obama-do-you-know-where-your-imf-boss-is-tonight-by-john-charles-dyer-uk-correspondent-25-may-2012-imf-bo.html

(6) http://www.telegraph.co.uk/news/worldnews/europe/eu/9317549/Britain-should-put-its-weight-behind-Berlin-not-Paris-in-the-euro-crisis.html

(7) http://www.guardian.co.uk/business/2012/may/23/debt-crisis-greece

(8) http://www.newstatesman.com/politics/politics/2012/06/labour-must-align-british-people-europe-it’s-too-late

(9) http://think-left.org/2012/06/08/italian-views-on-austerity/

(10) http://www.telegraph.co.uk/news/politics/9324402/For-one-day-only-at-the-Leveson-Inquiry-the-Iron-and-Rubber-Chancellor-double-act.html

(11) http://think-left.org/2011/12/21/gordon-brown-did-not-spend-all-the-money-the-banks-did/

(12) http://www.debtonation.org/2012/06/ann-pettifor-speech-notes-for-presentation-to-the-winning-labour-conference-doncaster-19th-may-2012/#more-5904