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 8th 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)
(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
(7) http://www.guardian.co.uk/business/2012/may/23/debt-crisis-greece
(9) https://think-left.org/2012/06/08/italian-views-on-austerity/
(11) https://think-left.org/2011/12/21/gordon-brown-did-not-spend-all-the-money-the-banks-did/
(13) https://think-left.org/2012/03/20/gordon-brown-woke-up-too-late-to-save-the-world-from-the-torylds/
(14) http://www.foreignpolicy.com/articles/2011/10/11/americas_pacific_century?page=full
(17) http://www.guardian.co.uk/business/2012/jun/10/crisis-capitalism-osborne-recovery-plan
(20) https://think-left.org/2011/09/08/soylent-green-george-osborne-and-plutonomy/
Related Think Left posts:
Democracy in the Euro-zone is under threat
As Michael Hudson predicted – The Euro-Reality of Austerity.
Think Left 
‘… what would really be bizarre, would be if European capitalists did not see the crisis as a once-in-a-lifetime opportunity to get what their American cousins have. They’d be crazy — they’d be betraying their own interests — if, given the ECB’s suddenly increased power vis-a-vis national governments, they didn’t insist that it extract all the concessions it can.’
http://jacobinmag.com/blog/2012/06/what-are-the-bankers-up-to/
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The Euro crisis had started during the US financial crisis of 2008 – 2009, this has exposed the unsustainable fiscal policies of countries in Europe and around the globe
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No .. not around the globe. Those countries that use a foreign currency like the Euro are in difficulty because they have no control over their fiscal policy. Sovereign countries like the UK which issue their own currency can never be broke, unable to pay their debts or bullied by the Bond markets.
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