For those of you unfamiliar with medieval implements of torture, the rack was believed to be quite effective in extracting information, but generally by having a potential victim watch it in use, with the obvious threat that he was next unless he cooperated. The rack was not only terribly painful, but like most old school methods of torture, often crippled those who survived. (Civilized people, which now clearly excludes our President and those in influential positions in the Pentagon, now recognize that torture is good only for producing phony confessions). It was also employed in particularly gory executions, such as drawing and quartering.
The Eurozone seems to be using similar medieval methods on its debt-laden periphery countries with far less clear understanding that serious damage to the subject is a likely outcome. However, we have the unusual spectacle of a smidge of disagreement between two regular critics of the Eurozone “kick the can down the road and call it a strategy” approach to its interwoven sovereign debt/banking crisis. The trigger event was an announcement over the weekend of yet another adjustment in the funding mechanisms for countries at risk of default: an enlargement in the size of the rescue facility, a 1% reduction in punitive interest rates, some loosening of restrictions on the uses of the €440 billion facility (limited purchase of periphery country debt permitted). But numerous conditions were imposed on the subject countries. Ireland refused to accept the new terms because it would have had to give up its low corporate tax rate.
One of the two skeptics, Wolfgang Munchau of the Financial Times, simply sounds resigned to an eventual train wreck. His reading is straightforward: there are only two mechanisms for resolving a debt crisis, namely a bailout or a default (or a combination). I actually disagree a tad, since the options are really “provide new funds” which might not be nuts if debt were written down enough, a voluntary restructuring, or a default. But his bottom line is right: the Europeans are engaged in what we call “extend and pretend” and for countries like Greece, the only possible endgame is default:
This game will continue until the debtor country’s economy collapses under its debt burden, at which point the inevitable default will be very messy. If you are lucky, you are no longer in office by then, and you can blame your successor for the mess.
So what to do instead? You could either accept the logic of a default, and arrange for it now, followed by a big programme for bank bail-outs, a recapitalisation of the European Central Bank, and credit support for the defaulting country. Or else, you accept the principle of a bail-out, not through cross-country transfers, but a single European bond that replaces all national debt. I personally would choose that option. A large and highly flexible rescue mechanism with pari passu status, the ability to underwrite debt or buy bonds in secondary markets, would have been a step in that direction.
Ms Merkel said at her press conference that her one concession – for the ESM to be able to buy bonds in primary markets – is not going to make much of a difference. She is right. The rescue mechanism as constructed now is an emergency facility only. On Saturday morning, the EU got itself an arrangement that lives in a purgatory between bail-out and default, as it muddles through a never-ending crisis.
Ambrose Evans-Pritchard, by contrast, is even more worked up than usual, which for him is saying quite a lot. He instead focused on the demands being made of the periphery countries and finds them to be untenable. Our Richard Smith reached a similar conclusion for Ireland, but pointed out they may have ways of extorting the Eurozone members:
Wonder if the Irish will default now. Or just publish, instead of stupid coverup stress test results, really horrific ones that show another EUR100Bn is needed; somewhat the technique of Calcutta beggars displaying running sores for extra horror and pity.
I think that would do more than engender a shudder in viewers; it would call unseemly attention to what a sham the bank stress tests are and could produce some unexpected reactions (if nothing else, from the officialdom, which believes everyone believes their BS, when the markets are up mainly on the expectation of continued central bank munificence).
One part I find particularly alarming, as I suspect subject states will, is the demand for infrastructure sales. Per Evans-Pritchard:
For Greece, the terms are a fire-sale of €50bn (£43.2bn) of national assets within four years, a tenfold increase from the original €5bn that premier George Papandreou thought he signed up to a year ago.
When the IMF first mooted this sum last month he told the inspectors not to “meddle in the internal matters of the country.“
State holdings in Hellenic Post, Hellenic Railways, Athens Public Gas, the Pireaus port authority, Athens airport, Thessaloniki water, and ATEbank, to name a few, will not fetch more €15bn. What next?…
Meanwhile, austerity is biting harder. The jobless number jumped almost a full point to 14.8pc in January. Youth unemployment hit 39pc.
For Portugal, the condition is more hairshirt retrenchment, a fiscal squeeze of 5.3pc in one year. Pensions, welfare, and health will be cut, following wage cuts already under way. “A descent into Hell,” said the Bloco de Ezquerda.
Almost 300,000 youth took to the streets of Lisbon and Oporto on Saturday in a day of wrath by the “Desperate Generation”, openly invoking the events of Egypt’s Tahrir Square…
The condition for Spain, Italy, Belgium et al, is intrusive surveillance of pensions, wage policies, productivity levels, as well as demands for a mandatory “debt-brake”, regardless of whether or not such a reactionary policy implies 1930s deflation.
Just as eurosceptics always feared, monetary union has led to a state of affairs where – in order to “save the euro” as Mrs Merkel puts it – Europe’s ancient states find themselves having to accept a quantum leap towards political union and a degree of subjugation that would not have been tolerated otherwise.
There is no democratic machinery to hold this central system to account since the European Parliament lacks a unifying language or demos, and remains a technical body in practical terms.
So we have an unelected body and a German iron maiden calling the shots. And as Evans-Pritchard’s mention of Tahir Square suggests, he believes the public will revolt. He notes that in the Great Depression it took three years for severe economic location to translate into protests. It’s likely to move faster, given the emboldening examples of revolts in the Middle East (although Egypt had years of organizing behind it) and the widespread recognition that citizens are being squeezed to preserve the balance sheets of German and French banks.
It’s important to note that the big culprit in Greece’s deficits has been its military spending, which historically was just below Israel’s, with arms purchased from the US, Germany, and France. The logic was to curry favor with influential patrons in its long-running dispute with Turkey. But purchased loyalty clearly does not run very deep.
A colleague of mine spoke to a friend in Greece, and he says matters on the ground are worse than reported in the media. Unemployment among recent graduates is 70% as far as he can tell (!) and civil disobedience is widespread. The favorite target is tolls. One person lifts up the bar while the driver proceeds through the station. And the logic is impeccable: if everyone disobeys, the powers that be cannot enforce. Any effort to do so would be capricious and would clog up the courts.
But high levels of unemployment among the young is the perfect tinder for more widespread protests. And as Evans-Pritchard points out, the creditor states cannot lay legitimate claim to the moral high ground:
The tenor is cruelly one-sided, as if this were a morality tale of wise and foolish sovereign virgins. The debtor states are made to carry opprobrium for what is at root a pan-European banking crisis.
Ireland and Spain never breached the deficit ceiling of the Stability Pact, though Germany and France did. They did not break the rules. If anything, it was the European Central Bank that broke the rules by running negative real interest rates and gunning the money supply.
In the end, default by Greece and Ireland is inevitable, and austerity policies that produce deflation will push more countries into default or restructuring. But as Munchau has repeatedly pointed out, the current wishful thinking among the Eurozone officialdom is that a crisis deferred is a victory, when it instead guarantees a worse explosion when the bomb finally goes off.
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“…and the widespread recognition that citizens are being squeezed to preserve the balance sheets of German and French banks.”
This is why I can’t take what you write seriously on this subject, Yves. The country whose banks are most on the hook in Ireland is … the UK. The country whose banks are most on the hook in Portugal is … Spain. Somehow though you and every other Anglo-Saxon likes to talk about French and German banks. Go figure.
The country with the largest exposure (combined) to Spain/Portugal/Ireland/Greece is *drumroll* Germany (over 400bn. UK has slightly over 300bn followed closely by France with high 200bn figure). The country with the highest exposure to Greece is – France.
Also, UK banks have the advantage (sort of), that everyone more or less knows their exposure. Germans still didn’t come clear about their Landesbanken.
So the UK is in there second, but it’s always Germany and France. Do me a favor and ask yourself, Why?
“The country with the highest exposure to Greece is – France.”
And – no it isn’t. First, the source that most people quote (BIS), lists Swiss banks as tied. And secondly, the BIS figures are bogus, because, if French bank has an equity control of x euro in Greek bank with balance sheet of y euro, the BIS counts the French bank as having exposure of y euro, when in fact it is limited to x.
“The country whose banks are most on the hook in Ireland is … the UK.”
Very likely to be true: for instance, BIS numbers say EUR224Bn for UK vs EUR208Bn for Germany. But that and your other points don’t refute the claim that citizens are being squeezed to preserve the balance sheets of German and French banks.
“But that and your other points don’t refute the claim that citizens are being squeezed to preserve the balance sheets of German and French banks.”
I’m not refuting the claim. I’m questioning the seriousness of Yves, and most other Anglo-Saxon commentators, who mention French and German banks, but leave out e.g. the UK. Why? Because they read the Torygraph and other British papers, who would like nothing better than the French and Germans to pick up the tab to rescue their banks.
And, to be completely serious, the aim of both Sarkozy and Merkel is to protect the French and German *taxpayer*. This may have a secondary effect in terms of the French and German banks, but their primary desire is to protect their *citizens*. I have little doubt that Merkel, in particular, if she could, would stuff German banks, if that meant German taxpayers came out okay. It seems to me that the desire to protect your own citizens is right and proper, and indeed the entire point of your elected leadership. But Yves likes to express it in terms of the banks, because, first, good American that she is, she is transferring American values onto the continentals; and, two, she loves things with a conspiratorial sound to it, and protect French and German banks sounds a lot worse than protecting the French and German people.
“I’m not refuting the claim. I’m questioning the seriousness of Yves…” So Yves and other commenters may be right, but possibly not serious? What on earth does that mean?
“…and most other Anglo-Saxon commentators, who mention French and German banks, but leave out e.g. the UK.”
Then you are flat wrong. See for instance this on Ireland:
http://www.nakedcapitalism.com/2010/11/the-irish-mess-iv.html
“Why? Because they read the Torygraph and other British papers, who would like nothing better than the French and Germans to pick up the tab to rescue their banks.”
Unintelligible: does “their banks” refer to British banks, to banks owned by British newspapers or to French and German banks? whichever, this doesn’t make much sense.
“the aim of both Sarkozy and Merkel is to protect the French and German *taxpayer*”
– From what?
“But Yves likes to express it in terms of the banks, because, first, good American that she is, she is transferring American values onto the continentals; and, two, she loves things with a conspiratorial sound to it, and protect French and German banks sounds a lot worse than protecting the French and German people.”
Or it might be that there really is a banking crisis in the Eurozone. Unless you show that there *isn’t* a banking crisis, all this stuff about Yves is beside the point.
a said: “…the aim of both Sarkozy and Merkel is to protect the French and German *taxpayer*” and “their primary desire is to protect their *citizens*.”
Here’s my response to that.
Really, a, you need to get a life.
Here’s George Carlin’s response to those like you who live in their own little fantasy world, completely divorced from any this world reality.
“One part I find particularly alarming, as I suspect subject states will, is the demand for infrastructure sales.”
Pure “Shock Doctrine” “Disaster Capitalism” playbook operations … that has been the point all along … debt feudalism for the peripheral countries …
Bankster hegemony is the goal and they are well on their way there. Even Europe’s Socialists are part of their operation. Both in Spain and Greece the “Socialists” were in charge of the presidency yet both got out their country’s checkbooks for the banksters with no questions asked.
Absolutely. Greece and Ireland – and others after that will have their state and its infrastructures destroyed by the EU/IMF. Once the state is destroyed, the EU can take over to form a single state. I guess they will move the capital to Berlin at some point, but maybe that would probably make it too obvious what’s going on.
The banksters need assets to launder their money printing operations into. By having these countries sell their public assets into private hands they will own every profitable piece of infrastructure these countries have to offer … What Michael Hudson calls a toll booth economy … where every move you make means profit for the plutocracy …
You got it!
It always frustrated him [the historian Carroll Quigley] that each nation, including our own, regards its own history as unique and the history of other nations as irrelevant to it.
▬Harry J. Hogan
A wise man learns from his experience; a wiser man learns from the experience of others.
▬Confucius
3.2 Privatizations of Public Enterprises
Another of the three pillars of neoliberalism, privatizations, or the selling off of public enterprises, played a significant role during the 1990s in Argentina.
Between 1991-1998, Argentina sold off a total of some us $31 billion worth of public enterprises (Rock, 2002: 68), though the majority of which was sold off between 1991-1995. Although this improved the fiscal balance for those years, this was partially offset due to the debt equity swaps agreed to by the Menem administration. However, this meant that after 1994 there was not only nothing left to sell, but also resources that could have been a steady source of revenue, such as the National Oil Company (ypf),16 would be providing no future income other than taxes.17 Besides ypf, the Argentinian government also sold off the national airline, the electric and gas utilities, water, the railroads and many other public enterprises.
P. Cooney – Argentina‘s Quarter Century Experiment with Neoliberalism… 19 Another major concern was the manner in which the privatization process took place, often lacking transparency and clearly favoring the transnational corporations and local conglomerates, as evidenced by the majority of the state enterprises being sold below their worth or involving debt equity swaps (Azpiazu and Schorr, 2004). Although the drive toward privatizations was coming from the Peronist party, the imf provided a significant
external push by strongly advocating these policies and supporting tncs in subsequent negotiations.18
It was during the military dictatorship of 1976-1983 that public enterprises were deliberately undermined, being disproportionately impacted by budget cuts. There had been a growing need for the renovation of physical capital that did not take place, “arguably” because of the level of the state’s indebtedness. Changes in management occurred on a regular basis because of political shifts, causing a lack of continuity in terms of management and leadership, and therefore their ability to serve the public declined and the
quality of service worsened. Such an impact is independent of being a public or private enterprise. Instead of privatizing public enterprises, the junta or the Menem government could have made their functioning a greater priority, and given them the infrastructure necessary to perform well, as with any private firm providing services.
Privatizations of state enterprises had a rather significant impact on unemployment in Argentina, especially in the provinces. A total of over 110,000 workers were laid off between 1990-1993 (Duarte, 2002: 76). This increase
in unemployment had the greatest impact in the poorer provinces.19 It should come as no surprise that, after the wave of privatizations, these provinces were having greater problems with their budgets. Additional impacts of neoliberal policies on workers are discussed below in section 5.
▬Paul Cooney, “Argentina’s Quarter Century Experiment with Neoliberalism: From Dictatorship to Depression”
DownSouth,
your comments are always enlightened.
Argentina has corruption levels way higher than Europe’s. Privatization, per se, is not necessarily a good policy; however, it is difficult to argue that opening some markets to fair competition does not increase efficiency.
I am not knowledgeable about Argentina, but I think they did privatize (in a corrupt way) state monopolies but they did *not* open the relevant markets to other players. If you are going to have a monopoly: 1) please don’t; 2) if you insist on having a monopoly, let it be state-owned.
You may also find this interesting:
http://www.jesusencinar.com/2011/02/el-sector-publico-crea-paro-cuando-se-mete-a-empresario.html
There seems to be great confusion on the part of the author of the article you linked. Is his conflation of democratic socialism with state state socialism (or state capitalism) due to ignorance on his part, or is his conflation of the two a deliberate attempt to mislead?
This documentary, Human Resources, explains the difference between democratic socialism and state socialism, state socialism being indistinguishable from state capitalism:
Michael Albert: …if you work in an environment that is so fragmented that so robs you of dignity and so robs you of the expression of your own capacities then they’ll be diminished, you’ll be deadened, you’ll be bored. You will be reduced in your potentials and you are not too likely to take issue in other domains either. This is why Taylorism is pursued. This is why fragmenting of work is pursued. It weakens the workers, not just on the job, but in their communities too, which is what you want to do so that they don’t take more of the income for themselves thus reducing profits for the elite. So it’s perfectly sensible policy, perfectly sensible approach, a devil’s approach, but a perfectly sensible approach from the point of view of those at the top who are trying to stay there and who are trying to advance. Moreover, if they don’t they just get wiped out, so it’s not even really an option. What you have to do is to create a new kind of economy in which these kinds of situations and these conditions don’t restrict our options.
The corporate person, the corporate entity, is it pathological? The answer is yes. Why? Because it drives toward profit regardless of the broader implications. It doesn’t matter if your drive toward profit induces pain and suffering, generates black lung disease in a mine or pollutes the environment or literally destroys the society. It doesn’t matter. You’re forced by the nature of the social relations inside and among corporations, the market system, to pursue, to accumulate, to pursue profits.
Moderator: If hierarchy is the defining characteristic of scientific management, it should not be surprising that it was met with great praise, not only by the capitalist world, but by fascists and authoritarian communists. Mussolini set up a propaganda arm of his government to promote Taylorism while Lenin wrote in Pravda in 1918 that “We must introduce in Russia the study and the teaching of the Taylor system, and its systematic trial and adaptation.” As in America, workers in Russia were unimpressed by scientific management. A major contributing factor to the Kronstadt Rebellion of 1921 was the introduction of Taylor’s techniques. Immediately after the rebellion was crushed, a government document on rationalization spoke of “the instinctive mistrust of all workers toward all kinds of experiments directed at extracting greater productivity from them.” Workers at Kronstadt had envisioned a decentralized system where they would actually own and control their own work and resources, but Lenin had something different in mind. “Socialism,” Lenin wrote, “is merely state-capitalist monopoly which is made to serve the interests of the whole people and has to that extent ceased to be capitalist monopoly, the new means of control having been created not by us, but by capitalism in its military-imperialist stage.”
Noam Chomsky: The Lenonist system was one of the greatest blows that socialism suffered in the 20th century, maybe second only to fascism. As Lenin took power, one of his first acts along the Trotskians was to destroy the socialist institutions that had arisen in the pre-Bolshevik period—-soviets, factory councils, constituent assembly which was dominated by left social revolutionaries, largely peasant based. And of course they went to war against the anarchists, a major war to try to wipe them out.
The defenders of state capitalism always brand all socialism as state socialism. And to make their case they trot out poster children like the one in the article you linked. They never advocate rooting out the authoritarianism that is the hallmark of state socialism. Instead, it is taken as a given that the authoritarianism cannot be cured, and so socialism must die. Of course the fact that capitalism is even more susceptible to this disease than socialism is never talked about.
AFAIK, the author of the article is not critical of (democratic) socialism. He is critical of state-owned companies in sectors where private-owned companies can manage the job better.
If you want equality, raise taxes and re-distribute. Just don’t supress fair competition.
I feel one of the many problems in Spain’s economy over the last decade has been the huge number of pointless public investments, especially at the local and regional level. This includes investments done by politicians ruling the cajas.
High-speed railway to nowhere, airports in the middle of nowhere, and research grants for non-existent, trivial projects. For a decade now, it was easier to get rich in Spain via connections with politicians in pointless investments than with a brilliantly executed idea.
You could say about free markets in some countries (including Argentina) what it was argued a long time ago about Christianity: it was a great idea… just never implemented.
To Diego: I don’t know what do you call public companies but the ‘cajas’ (saving banks) are just (or used to be) the little guy’s bank where at least you can have an account without being ripped off via commissions all the time (and whose benefits go, in principle, to social redistributional activities like paying for ambulances and elderly people’s homes). Nowadays they are being more and more privatized anyhow, what is a shame and behaving more and more like the big predatory banks where people like me (and so many others) are not wanted even nearby.
But overall in Spain there is not anymore any remaining public sector worth that name. There are pampered monopolies (electric sector notably) but they are super-private. There is public investment but goes to pay private contractors, even if it is to provide a public service often, and even in monopolistic and corrupt circumstances often.
But there is too much private sector, not too little. And the private sector does not generate jobs but when things look good maybe. When things look bad as they do now, there is clear need for increased public investment, with the primary goal of generating decent jobs (which produce satisfaction and demand for the overall economy).
“High-speed railway to nowhere”…
Private – even if pampered by the state and the EU (because of the wrong elitist priorities).
“For a decade now, it was easier to get rich in Spain via connections with politicians in pointless investments than with a brilliantly executed idea”.
That happens everywhere, sadly enough. The vicious symbiosis between the economic and political oligarchs is all pervading. You complain of Spain (with some good reason) but it’s the same in the USA for what I can see. As soon as Capitalism trascends the utopic state of a pure market with infinite rational agents, and becomes more and more oligopolistic (or even monopolistic), it’s more like an industrial feudalism than the quite fictitious ideal of a free market, which only works where all agents are individuals or small personal companies and not large corporations in position to bend the rules more and more to their advantage.
Worse yet, “Downsouth” comments apply here:
http://www.dailytribune.com/articles/2011/03/10/news/doc4d78d0d4d764d009636769.txt?viewmode=fullstory
because this is how it gets “there”…
You got it!
It always frustrated him [the historian Carroll Quigley] that each nation, including our own, regards its own history as unique and the history of other nations as irrelevant to it.
▬Harry J. Hogan
A wise man learns from his experience; a wiser man learns from the experience of others.
▬Confucius
3.2 Privatizations of Public Enterprises
Another of the three pillars of neoliberalism, privatizations, or the selling off of public enterprises, played a significant role during the 1990s in Argentina.
Between 1991-1998, Argentina sold off a total of some us $31 billion worth of public enterprises (Rock, 2002: 68), though the majority of which was sold off between 1991-1995. Although this improved the fiscal balance for those years, this was partially offset due to the debt equity swaps agreed to by the Menem administration. However, this meant that after 1994 there was not only nothing left to sell, but also resources that could have been a steady source of revenue, such as the National Oil Company (ypf),16 would be providing no future income other than taxes.17 Besides ypf, the Argentinian government also sold off the national airline, the electric and gas utilities, water, the railroads and many other public enterprises.
P. Cooney – Argentina‘s Quarter Century Experiment with Neoliberalism… 19 Another major concern was the manner in which the privatization process took place, often lacking transparency and clearly favoring the transnational corporations and local conglomerates, as evidenced by the majority of the state enterprises being sold below their worth or involving debt equity swaps (Azpiazu and Schorr, 2004). Although the drive toward privatizations was coming from the Peronist party, the imf provided a significant
external push by strongly advocating these policies and supporting tncs in subsequent negotiations.18
It was during the military dictatorship of 1976-1983 that public enterprises were deliberately undermined, being disproportionately impacted by budget cuts. There had been a growing need for the renovation of physical capital that did not take place, “arguably” because of the level of the state’s indebtedness. Changes in management occurred on a regular basis because of political shifts, causing a lack of continuity in terms of management and leadership, and therefore their ability to serve the public declined and the
quality of service worsened. Such an impact is independent of being a public or private enterprise. Instead of privatizing public enterprises, the junta or the Menem government could have made their functioning a greater priority, and given them the infrastructure necessary to perform well, as with any private firm providing services.
Privatizations of state enterprises had a rather significant impact on unemployment in Argentina, especially in the provinces. A total of over 110,000 workers were laid off between 1990-1993 (Duarte, 2002: 76). This increase
in unemployment had the greatest impact in the poorer provinces.19 It should come as no surprise that, after the wave of privatizations, these provinces were having greater problems with their budgets. Additional impacts of neoliberal policies on workers are discussed below in section 5.
▬Paul Cooney, “Argentina’s Quarter Century Experiment with Neoliberalism: From Dictatorship to Depression”
Well, an excellent amalgamation of excellent analysis by the usual suspects. Plus, thank you Yves for your two cents. I know SOME people are listening to this narrative. Good grief even the Tea-party types are using things like this as their reason for all their demanded ‘preemptive’ cuts. But, can anyone see any governmental organization actually preparing for this? It’s not that I don’t agree with this, this is why I come to this site. Fresh air. But sometimes it just feels like people in the know, all talking to people who know full well what’s going on. How about we take it a step further:
Yves and company; How can we help decision-makers (I guess read politicians and business leaders) actually make good decisions preparing for this? I can contact my local politician-types and actually get some feedback. What do they really need to know and how can they prepare to deal with the issues that a second major credit blowup will cause? Any ideas?
Mr. CRO-mwell, you are a few centuries late and out of touch. The people in authority you love,already have their own agenda. Our input is not required. btw. you don’t need to post to hear our thinking.
As I said on this site about a year ago, “This will end with Nato troops on the streets of Athens.”
Probably not because it’d cause widespread disruption across NATO. The peoples of Europe (or the USA) are not willing to support or even tolerate such intervention: it will just expand the revolution to other states.
That is what the Brussels politicians want us to believe: that unless their draconian policies are implemented to the last drop of blood, we are heading for fascism and wars. But what we are headed for is for a revolution at continental (or even global) scale. Not yet maybe because conscience is just building up but soon.
By the way, did anyone notice the Portuguese demonstrations outside the traditional unions and left-wing parties. Maybe 200,000 people demonstrated on Saturday across Portugal on an Internet call in demand for a Human Right: art. 23 of the UDHR which establishes the right to a dignified work.
Europeans are not really concerned about budget, I believe. We know that we can always save in the military or politicians’ salaries (all of which is a waste) and unilaterally declare bnakruptcy overnight. We are worried about jobs, job conditions, salary levels and social security. If keeping these implies a transition to socialism and expropiation of the oligarchs, I believe most Europeans will gladly embrace it eventually.
There are doubts because people is still trapped in the illusion of a Capitalist system which used to work in spite of all, and they have yet to wake up to the reality of 21th century Capitalism as a total failure and vertical plunder. Also there’s some risk that in some states, xenophobia may be played in favor of fascism or fascist-like “solutions” (no solution, just scapegoating).
But from that to “NATO troops in the street of Athens” there’s a long road ahead. I do not think it is possible because, as we are witnessing these days, revolts, uprisings and fully fledged revolutions are too easy to happen and NATO invading yet another country, notably a member state with which we all feel very much solidarious and in brotherly mood, is basically triggering a pan-NATO revolution: asking the peoples of Europe and North America to get out to the streets to join the Greeks.
Maju said: “That is what the Brussels politicians want us to believe: that unless their draconian policies are implemented to the last drop of blood, we are heading for fascism and wars. But what we are headed for is for a revolution at continental (or even global) scale.”
Well said.
The entire argument of the plutocrats is based on the assumption that human beings never change, and they never learn.
But 1789 (the French Revolution) was not 1631 (when Count von Tilly and his Catholic League massacred twenty-five thousand of a total population of thirty thousand Protestants in Magdeburg, and then celebrated his slaughter of men and women and children in a mass at the Magdeburg cathedral). And 2011 is not 1917 (Bolshevik October revolution) nor is it 1933 (the Nazi revolution). 1789, 1917 and 1933 all occurred before the advent of people’s war and a demonstration of the awesome power unleashed by the methods of nonviolent resistance.
Modernism and its seed, capitalism, are in crisis. We’re now living in a post-modern world. The old liberalism of Wilson, Kennedy and Walter Lippmann just does doesn’t work any more. Here’s how Stephen Toulmin sums up our new post-modern world in Cosmopolis:
Before Kennedy’s time, politicians thought of their issues as resting on matters of technique. They took for granted the goals of national politics, and argued about the best means of fulfilling them… After 1965, this changed: aside from the Vietnam debates, the 1960s saw a move away from a politics of national goals—-which aimed at consensus—-toward a politics aimed at redressing traditional injustices, driven by a confrontation of sectional interests. In the 18th and 19th centuries, the upper (“respectable”) classes had assumed that the varied and numerous lower (“unfortunate”) classes “knew their places,” and could, if necessary, be kept in those places by social pressure of some kind.
Now, all these classes began to speak up for themselves, in distinct but concerted tones. In theory, the interests of NAACP, La Raza, the Grey Panthers, and the Gay and Lesbian Alliance, were anything but identical: in practice, they united in opposition to those structural rigidities that “respectable” people had viewed as inevitable preconditions for a stable social order. There followed a sequence of assaults on the inequalities entrenched in European society around 1700, and legitimated by the new cosmopolis. Institutionalized racism, a flagrant injustice left long unaddressed, was the first to become a target of the civil rights movement. This was followed by others. Throughout the 1970s, all the inequalities built into modern society came under attack in turn: women, the elderly, the handicapped, lesbians and gays, all spoke up, one group after the other. Those who never questioned the rights and wrongs of modern nationhood found it a terrible shock. Jesus said, “The poor ye have always with you”—-i.e., deserving objects of charity are always near at hand. Now, many believers in “traditional values” understood Him to mean, rather, that it is the business of the poor to stay poor, of blacks to stay deferent, of women to stay home, of the handicapped to stay in the back room, and of homosexuals to stay in the closet.
I attented a talk by Roubini last Friday, and someone asked a question of whether Greece should sell assets. The answer was “makes no difference to net position”. And I’d add – short term. Long term it depends on whether your assets generate more than the liabilities, which I can’t comment on.
Someone should compile a simple graph which would be a stark visual metric of governmental/corporate organized crime. (I’m not a graphics guy or I’d do it myself.)
Two curves, plotted on two vertical axes vs. the chronological horizontal axis (time since the latter half of 2008).
One (rising) curve is a cumulative index of bailouts, reported corporate “profits”, and executive “bonuses” and other pay.
The other (descending) curve is a negative index of all calls for “austerity”, privatization, and so on. The quantification would be actual spending cuts or demands for them, as well as the best estimate of the value of amenities they want to gut or privatize.
You’ll find almost all the data you need between Kevin Phillips “Bad Money” and Barry Ritholtz’s “Bailout Nation.”
In many ways, executive pay is a distraction as it is the mechanism that major financial institutions use to ensure that execs manage firms yo demonstrate perpetual earnings growth, regardless of the human cost, which in turn causes the stock price to grow on speculation of future returns. Executive pay is just the executives’ reward for making Wall Street a lot of money. As institutional holders tend to own a majority of shares in the largest companies, i.e., the companies who pay their execs the best, it’s not as if the shareholders are victims.
Thanks for the suggestions, Tao.
Might be best to first read Kevin Phillips’, “American Dynasty” and “American Theocracy”..
“Even Europe’s Socialists are part of their operation. Both in Spain and Greece…”: “even” seems rather naive. Anyway, add to the list the fact that it was the socialist Gordon Brown who gave huge state funding to the British banksters.
It’s true, even the socialist are part of the corporate takeover, but only if you don’t realise that that which is currently presumed to be the Left in Europe, has nothing to do with Socialism. The left part of the political spectrum has steadily moved to the right, so that the current ‘socialists’ are savely on the bourgeois side of the spectrum.
Gordon Brown and Tony Blair are a good examples. New Labour is not and never was socialist.
Yes, a lot of good people mobilized for Barak Obama. But what did they demand of him? Working to elect a Democratic presidential candidate may seem like activism, but it isn’t. Activism doesn’t give up. Activism doesn’t fall silent. Activism doesn’t rely on the opiate of hope. Woody Allen once said: “I felt a lot better when I gave up hope.” I like that. Real activism has little time for identity politics, which like exceptionalism, can be fake. These are the distractions that confuse and sucker good people, and not only in the United States I can assure you. I write for the Italian socialist newspaper “Il Manifesto,” or rather I used to write for it. In February I sent the editor an article which raised questions about Obama as a progressive force. The article was rejected. “Why?” I asked. “For the moment,” wrote the editor, “we prefer to maintain a more positive approach to the novelty presented by Obama. We will take on specific issues, but we would not like to say that he will make no difference,” unquote. In other words, an American president drafted to promote the most rapacious system in history is ordained and depoliticized by important sections of the Left. It’s a remarkable situation, remarkable because those on the so-called radical Left have never been more aware, more conscious of the iniquities of power. The green movement, for example, has raised the consciousness of millions so that almost every child knows something about global warming. And yet, there seems to be a resistance within the green movement to the notion of power as a military force, a military project. And perhaps similar observations can also be made about sections of the feminist movement, and the gay movement, and certainly about the union movement.
One of my favorite quotations is from Milan Kundera. “The struggle of people against power is the struggle of memory against forgetting.” We should never forget that the primary goal of great power is to distract and limit our natural desire for social justice and equity and real democracy. Long ago Edward Bernays’ invisible government of propaganda elevated big business from its unpopular status as a kind of mafia to that of a patriotic driving force…. Today we are presented with an extraordinary opportunity thanks to the crash of Wall Street and the revelation for many ordinary people that the free market has nothing to do with freedom. The opportunity within our grasp is to recognize that something is stirring in America that is unfamiliar, perhaps, to many of us on the left, but is related to a great popular movement that is growing all over the world.
▬http://www.youtube.com/watch?v=gXL998q7skI
That really is the point isn’t it!
In every group of people, call them ‘vested interest unit’, the leadership is resistant to fundamental change. The group and therefore specially the leadership, only has validity in the context of the present situation. The leadership of each vested interest unit will promote change within the current structure. However, they are not motivated to promote any change which destroys that structure and thereby makes their position irrelevant.
Because of that humans have a problem. We cannot evolve when we are stuck in a loop, constantly reinventing the wheel, when we should be looking for something better.
A suggestion for posters; try to keep your arguments short and simple. Not only for my sake, but to make the blog easier to read. I’m not the only ‘low brow’ reading here.
Wall Street bankers including JPMorgan Chase & Co. (JPM)’s Jamie Dimon, Citigroup Inc. (C)’s Vikram Pandit and Goldman Sachs Group Inc. (GS)’s Lloyd Blankfein are advising the Kremlin on how to turn Moscow into a global financial center.
http://www.bloomberg.com/news/2011-03-10/dimon-pandit-blankfein-ackermann-join-kremlin-advisory-board.html
Russia moves to develop a Paris/Berlin/Moscow transcontinental federation. This new investment will mean the starvation of capital for Greece, Ireland and others, the periphery, as there is only so much capital to go around. I mean, you gotta get the money from someone, just like the provocation that triggered Shay’s rebellion in the US after the American Revolution. See how the French got paid back for lending to us back then. There is a dynastic sense of history missing from the American middle class that you just do not acquire sticking your head only into accounting and biz law courses.
“The financial situation leading to the rebellion included the problem that European war investors (among others) demanded payment in gold and silver; there was not enough specie in the states, including Massachusetts, to pay the debts; and through the state, wealthy urban businessmen were trying to squeeze whatever assets they could get out of rural smallholders. Since the smallholders did not have the gold that the creditors demanded, everything they had was confiscated, including their houses.
At a meeting convened by aggrieved commoners, a farmer, Plough Jogger, encapsulated the situation:
“I have been greatly abused, have been obliged to do more than my part in the war, been loaded with class rates, town rates, province rates, Continental rates and all rates…been pulled and hauled by sheriffs, constables and collectors, and had my cattle sold for less than they were worth…The great men are going to get all we have and I think it is time for us to rise and put a stop to it, and have no more courts, nor sheriffs, nor collectors nor lawyers.”
It was decided that the legislature (General Court) in Boston would be petitioned.[6]
Veterans of the Continental Army, like General Charles Logan Harding aggrieved because they had been conscripted, had to fight with no payment to help them pay for their living, and because they were treated poorly upon discharge, including being locked up in debtors’ prison, began to organize their neighbors, the besieged farmers, into squads and companies in order to halt the confiscations.[7] Veteran Luke Day of West Springfield, Massachusetts asked the judges holding the confiscatory hearings to adjourn until the Massachusetts legislature met. Throughout Massachusetts, newly organized farmers and veterans faced militia at courthouse thresholds. But sometimes the farmers and veterans were the militia, and often the majority of the militias sided with the veterans and farmers.[8]”
http://en.wikipedia.org/wiki/Shays'_Rebellion
Those farmers are a perfect example of people who had a largely self-contained society and economy, and who never needed the existence of money, “commerce”, and parasitic “elites”. They would have been far better off if such things had ceased to exist, or if they would have had the strength to eradicate such things.
And today we’re in the same pit, shackled with the same change. (Although today, far more than then, people are brainwashed into thinking they are better off with such things.)
Increase the pressure on the stone – There must be a pint of blood in it somewhere. :-).
1000 people is said to emigrate from Ireland every week, ill guess it’s not the elderly and pensioners that are leaving. Guess its young families with sufficient skills to get a chance in another country, e.g. Australia. Around Europe youth unemployment is record high. In e.g. Latvia the situation is dire, if the trend continue there is a good chance they become a country without a people, with a languishing aging population of pensioners. Neoliberal madness has run amok so people don’t want children to grow up there then and they cant afford it.
EUrope is a becoming more a more a mad house, for decades they have produced poor growth and high unemployment. On top of it as money master they have put an irremovable Ricardian equivalence panglossian psycophat like Trichet.
The eurocrats seems to be hell-bent to outdo the economic madness of the 1930s in Europe.
This at same time as the shifting demographics is said to be a big problem with more elderly and fewer in productive age. The pundits and politicians are concerned about how to “finance” this and want to raise pension age. Never are they concerned over (in this context) the fact that those who is supposed to produce what the future pensioners need is unemployed and get the worst start of their time as productive citizens.
They have now institutionalized the madness with the euro and the S&G pact and intend to make it even worse than it already is. It has effectively emptied democracy of its content and made practically illegal the economic policies of the post war that had created, by the end of the seventies, a relatively peaceful, well educated and tolerant Europe.
A monetary union is a luxury product that has to be paid for.
West Germany learned and applied this lesson well since 1990. It led a process of monetary union with the former East Germany that worked relatively well until now. The price? €70bn in annual transfers from the federal budget to the eastern part of unified Germany, for a grand total of about €1.4 trillion in the last two decades.
Unfortunately, the EU tried to do the same thing on the cheap – a monetary union with no transfer of funds to the weaker regions. So the inescapable transfers were eventually made via massive loans provided to the weaker economy countries by German, French and British banks.
Now that the debt has piled up to impossible-to-pay-back amounts the whole system is crumbling down. And either a bailout or a default on debt won’t be enough to solve the problem, since the weaker countries will still have to deal with structural (in a UEM environment) annual current account deficits that will again build up to a renewed stock of foreign debt after a few years.
The only real solution will have to be a combination of bailout, foreign public and private debt default and at least temporary exit of the weaker countries from the euro.
Unless, of course, the EU leaders eventually decide to foot the bill – via a federal budget or the European Central Bank – and provide for the permanent, annual transfer of massive amounts to the weaker countries of the Union, following the example that sort of “worked” for eastern Germany.
These summits with their decisions on EFSFs, ESMs, unworkable austerity plans etc. are simply a proof that the EU leadership is still living in cloud cuckoo land (as Satyagit Das recently put it), trying to postpone the hard choices that will have to be made to solve the crisis.
You explain all that in a quite convincing manner, Jose, but I do not think that it is correct – or at least not fully correct. I know best the case of Spain and there was no need for transfers and there was nearly no public debt until the global economic crisis went off.
There was need to keep real inflation controlled and instead prices went wild (not officially but this is just another case of falsified statistics: of “ojos que no ven: corazón que no siente”), effectively lowering the standard of life (what should be good for competitiveness but is bad for the real state bubble, as it destroys the market).
There was also a need to keep the construction bubble cooler and to invest in research and development instead. Nothing of that was done: short-term speculative thinking dominated lead by Rodrigo Rato first and others of his ilk later, when he was appointed as boss of the IMF in payment for Spain supporting the USA in Iraq.
The real problem is short-term speculative thinking, corruption (but not just in Spain, at the whole European and Atlantic “imperial” levels). In the end the Spanish bubble was not but a facet of the Imperial Atlantic bubble. And today’s problems in Spain are not but a facet of those that exist in the USA, the UK and other countries of NATO-plus.
In the terms of the 1980s and 1990s, when the monetary union was conceived and forged, it was a natural thing to do, as the market union was already there (and there were transferences too: basically all EU budget goes to transferences to the poorer states and regions – and to subsidies to farmers, specially the anti-ecological and anti-social type of hyper-industrialized farming, which should need no subsidies and deserves them not).
The problem is that then a greater political union also looked natural (except for the UK) and was never implemented in the sense of a more democratic and a more social(-ist) EU. This caused the popular rejection of the EU constitution fiasco even in France. And anyhow what EU-makers understand for greater political union is greater power for Merkel and Sarkozy (or whoever takes their role) and not for the European People(s).
So we have a state-like Central Bank with state-like money and a UN-like decision-making system, which emphasizes the profit of the corporations over the well being of the citizens.
It sucks, specially when things go awry, as has been the case since 2007. But it is this crisis of pretty unusual dimensions (IMO nothing like this has happened since the 18th century) which has cornered the monetary union – and still it’s not doing so bad considering the circumstances.
Now however there is a need for state (EU, ECB) intervention but the Merkel doctrine is “no concessions”, which is absurd even from the viewpoint of the German banks, which will have to face massive loses soon if the ECB does not turn on the printing machine and begins lending to the states.
In the end, we will see how this policy of “no concessions” is reversed when Germany or France need to get loans for their own needs. The same happened with the policy of no concessions to inflation early on: Germany and France were the first ones to have greater inflation that was deemed acceptable but the huge fines were dropped.
So it’s essentially a neocolonial system where the EU periphery is there to subsidize the center, and if it fails to do so, is punished, as happened last year and will keep happening while the peoples do not overthrow their governments.
This is very different from what you ask of subsidies from the center to the periphery (which like humanitarian aid may only be crumbs intended as bonus for political and business managers in the colonies) but it is the real mechanism of this EU fraud: to subsidize the center from the periphery.
Per EU statistics (Eurostat) from 2006, here in the Southern Basque Country we had one of the largest GDPs of Europe by regions, yet our salaries were pretty much mediocre. The same case happen in Catalonia or North Italy (or Budapest or Athens), and to a lesser extent in other regions of Southern Europe (most of Spain for example, Central Italy, etc.)
I have yet to work out the stats for whole states, which may be more actualized but, what existed before the 2007 crisis per regions, is that parts of Southern Europe subsidized parts of NW Europe, notably Belgium (Walloonia specially but Flanders too), Denmark, Ireland and regions of Germany and the UK. In the south there were a couple of subsidized areas (South Italy and one Greek region) but the results are far from the mischievous idea of Northern Europe subsidizing the South. The opposite is closer to the truth indeed.
And these days draconian programs only intend to keep the colonialist relationship that way.
Yves
I think it best not to put all the PIIGS into one sty
Greece has hardly been a team player or a beacon of democracy.
Its recent maneuvering to get Cyprus into the EU shows a clear policy back to the failed coup in 1974 by terrorist organization EOKA-B. And then back through the idea of reacquiring Constantinople.
I imagine that this has in large measure been the reason for such a large military. Greece benefited from entry into the EU and NATO for cold-war reasons.
The question could well be asked why Greece was in the Eurozone at all. I suspect that what we are seeing is
payback to Greece for its behavior within its EU tenure
They will be allow to twist and sway in the wind,eventually perhaps,Greece will demand to be let out
The question is why was Greece allowed into the Eurozone in the first place
The other problem I always hear about Greece is they are notorious for non-compliance with tax laws and collections and have a large underground economy. Then they basically export olives to pay for guns, tanks and government employee Mercedes. That’s a hell of a lot of olives.
I’m just an amateur foreign sovereign bond investor (I happily leave the nitty gritty of evaluating sovereign credit risk to bond fund managers I trust), but I do know that a few key fundamentals of investing in this space is to pick a country with reasonable rule of law and the ability of government to tax.
So one thing I’m missing here is any discussion of how Greece squares that circle with the presumed new investors it needs in order to to roll over existing debt, and of course fund non-auserity so as not to damage the oh so important GDP number.
Since I like the assumption that the “money” has to come from somewhere, the options are a whole lot of private investors around the world (tho I’ll bet Jacki Onassis and relatives are all in gold at this point and won’t budge from that position) have to buy Greek government bonds. Or International banks do it (or restructure debt, which possibly craters them, since they sound insolvent now anyway). Or the EU somehow does it with taxation of it’s citizens and/or guarantees the debt. Or the ECB monetizes it and takes it out of everyone’s butt via inflation.
This makes me think that the scenario where Germany, and perhaps France, kick themselves out of the EU and reactivate the Mark and Franc printing presses has better than zero odds. The obvious backlash here is the remaining EU will default on all debt to German and French banks. Or the euro goes to zero vs the NeoMark or NeoFranc, which is the same as default.
But figuring out how a country or entire continent melts down is so much more complicated than a simple nuclear reactor meltdown. So I wouldn’t presume to predict how this all really goes.
Interesting to see how crises are proliferating or how the cards in the house of cards that is the world economy keep falling. We have a succession of revolutions in the Middle East followed by a series of counter-revolutions like those in Libya and Yemen, suppression of demonstrations in Saudi Arabia and Saudi help in crushing dissent in Bahrain. We then had a spike in oil prices fed mainly by speculators. Then Japan got smashed by a triple whammy of a huge earthquake and tsunami followed by what seems like an endless series of “near” nuclear meltdowns which could mess up their environment and power grid for years. Then boom we’re back with the Europeans and the dying euro and the betting is not on if but when it is all going to blow up. The engine of kleptocracy is tearing itself apart at the same time it is being hit by large external shocks. I have no sympathy for the kleptocratic elites but I have a lot of trepidation concerning the ordinary people who are likely to suffer when this all goes splat.
Dito…its the start me thinks.
Skippy…hope all have a good place to chill.