By Michael Hudson, a research professor of Economics at University of Missouri, Kansas City and a research associate at the Levy Economics Institute of Bard College. Cross posted from CounterPunch.
Soon after the Socialist Party won Greece’s national elections in autumn 2009, it became apparent that the government’s finances were in a shambles. In May 2010, French President Nicolas Sarkozy took the lead in rounding up €120bn ($180 billion) from European governments to subsidize Greece’s unprogressive tax system that had led its government into debt – which Wall Street banks had helped conceal with Enron-style accounting.
The tax system operated as a siphon collecting revenue to pay the German and French banks that were buying government bonds (at rising interest risk premiums). The bankers are now moving to make this role formal, an official condition for rolling over Greek bonds as they come due, and extend maturities on the short-term financial string that Greece is now operating under. Existing bondholders are to reap a windfall if this plan succeeds. Moody’s lowered Greece’s credit rating to junk status on June 1 (to Caa1, down from B1, which was already pretty low), estimating a 50/50 likelihood of default. The downgrade serves to tighten the screws yet further on the Greek government. Regardless of what European officials do, Moody’s noted, “The increased likelihood that Greece’s supporters (the IMF, ECB and the EU Commission, together known as the “Troika”) will, at some point in the future, require the participation of private creditors in a debt restructuring as a precondition for funding support.”
The conditionality for the new “reformed” loan package is that Greece must initiate a class war by raising its taxes, lowering its social spending – and even private-sector pensions – and sell off public land, tourist sites, islands, ports, water and sewer facilities. This will raise the cost of living and doing business, eroding the nation’s already limited export competitiveness. The bankers sanctimoniously depict this as a “rescue” of Greek finances.
What really were rescued a year ago, in May 2010, were the French banks that held €31 billion of Greek bonds, German banks with €23 billion, and other foreign investors. The problem was how to get the Greeks to go along. Newly elected Prime Minister George Papandreou’s Socialists seemed able to deliver their constituency along similar lines to what neoliberal Social Democrat and Labor parties throughout Europe had followed –privatizing basic infrastructure and pledging future revenue to pay the bankers.
The opportunity never had been better for pulling the financial string to grab property and tighten the fiscal screws. Bankers for their part were eager to make loans to finance buyouts of public gambling, telephones, ports and transport or similar monopoly opportunities. And for Greece’s own wealthier classes, the EU loan package would enable the country to remain within the Eurozone long enough to permit them to move their money out of the country before the point arrived at which Greece would be forced to replace the euro with the drachma and devalue it. Until such a switch to a sinking currency occurred, Greece was to follow Baltic and Irish policy of “internal devaluation,” that is, wage deflation and government spending cutbacks (except for payments to the financial sector) to lower employment and hence wage levels.
What actually is devalued in austerity programs or currency depreciation is the price of labor. That is the main domestic cost, inasmuch as there is a common world price for fuels and minerals, consumer goods, food and even credit. If wages cannot be reduced by “internal devaluation” (unemployment starting with the public sector, leading to falling wages), currency depreciation will do the trick in the end. This is how the Europe’s war of creditors against debtor countries turns into a class war. But to impose such neoliberal reform, foreign pressure is necessary to bypass domestic, democratically elected Parliaments. Not every country’s voters can be expected to be as passive in acting against their own interests as those of Latvia and Ireland.
Most of the Greek population recognizes just what has been happening as this scenario has unfolded over the past year. “Papandreou himself has admitted we had no say in the economic measures thrust upon us,” said Manolis Glezos on the left. “They were decided by the EU and IMF. We are now under foreign supervision and that raises questions about our economic, military and political independence.” On the right wing of the political spectrum, conservative leader Antonis Samaras said on May 27 as negotiations with the European troika escalated: “We don’t agree with a policy that kills the economy and destroys society. … There is only one way out for Greece, the renegotiation of the [EU/IMF] bailout deal.”
But the EU creditors upped the ante: To refuse the deal, they threatened, would result in a withdrawal of funds causing a bank collapse and economic anarchy.
The Greeks refused to surrender quietly. Strikes spread from the public-sector unions to become a nationwide “I won’t pay” movement as Greeks refused to pay road tolls or other public access charges. Police and other collectors did not try to enforce collections. The emerging populist consensus prompted Luxembourg’s Prime Minister Jean-Claude Juncker to make a similar threat to that which Britain’s Gordon Brown had made to Iceland: If Greece would not knuckle under to European finance ministers, they would block IMF release of its scheduled June tranche of its loan package. This would block the government from paying foreign bankers and the vulture funds that have been buying up Greek debt at a deepening discount.
To many Greeks, this is a threat by finance ministers to shoot themselves in the foot. If there is no money to pay, foreign bondholders will suffer – as long as Greece puts its own economy first. But that is a big “if.” Socialist Prime Minister Papandreou emulated Iceland’s Social Democratic Sigurdardottir in urging a “consensus” to obey EU finance ministers. “Opposition parties reject his latest austerity package on the grounds that the belt-tightening agreed in return for a €110bn ($155bn) bail-out is choking the life out of the economy.” (Ibid.)
At issue is whether Greece, Ireland, Spain, Portugal and the rest of Europe will roll back democratic reform and move toward financial oligarchy. The financial objective is to bypass parliament by demanding a “consensus” to put foreign creditors first, above the economy at large. Parliaments are being asked to relinquish their policy-making power. The very definition of a “free market” has now become centralized planning – in the hands of central bankers. This is the new road to serfdom that financialized “free markets” are leading to: markets free for privatizers to charge monopoly prices for basic services “free” of price regulation and anti-trust regulation, “free” of limits on credit to protect debtors, and above all free of interference from elected parliaments. Prying natural monopolies in transportation, communications, lotteries and the land itself away from the public domain is called the alternative to serfdom, not the road to debt peonage and a financialized neofeudalism that looms as the new future reality. Such is the upside-down economic philosophy of our age.
Concentration of financial power in non-democratic hands is inherent in the way that Europe centralized planning in financial hands was achieved in the first place. The European Central Bank has no elected government behind it that can levy taxes. The EU constitution prevents the ECB from bailing out governments. Indeed, the IMF Articles of Agreement also block it from giving domestic fiscal support for budget deficits. “A member state may obtain IMF credits only on the condition that it has ‘a need to make the purchase because of its balance of payments or its reserve position or developments in its reserves.’ Greece, Ireland, and Portugal are certainly not short of foreign exchange reserves … The IMF is lending because of budgetary problems, and that is not what it is supposed to do. The Deutsche Bundesbank made this point very clear in its monthly report of March 2010: ‘Any financial contribution by the IMF to solve problems that do not imply a need for foreign currency – such as the direct financing of budget deficits – would be incompatible with its monetary mandate.’ IMF head Dominique Strauss-Kahn and chief economist Olivier Blanchard are leading the IMF into forbidden territory, and there is no court which can stop them.”
The moral is that when it comes to bailing out bankers, rules are ignored – in order to serve the “higher justice” of saving banks and their high-finance counterparties from taking a loss. This is quite a contrast compared to IMF policy toward labor and “taxpayers.” The class war is back in business – with a vengeance, and bankers are the winners this time around.
The European Economic Community that preceded the European Union was created by a generation of leaders whose prime objective was to end the internecine warfare that tore Europe apart for a thousand years. The aim by many was to end the phenomenon of nation states themselves – on the premise that it is nations that go to war. The general expectation was that economic democracy would oppose the royalist and aristocratic mind-sets that sought glory in conquest. Domestically, economic reform was to purify European economies from the legacy of past feudal conquests of the land, of the public commons in general. The aim was to benefit the population at large. That was the reform program of classical political economy.
European integration started with trade as the path of least resistance – the Coal and Steel Community promoted by Robert Schuman in 1952, followed by the European Economic Community (EEC, the Common Market) in 1957. Customs union integration and the Common Agricultural Policy (CAP) were topped by financial integration. But without a real continental Parliament to write laws, set tax rates, protect labor’s working conditions and consumers, and control offshore banking centers, centralized planning passes by default into the hands of bankers and financial institutions. This is the effect of replacing nation states with planning by bankers. It is how democratic politics gets replaced with financial oligarchy.
Finance is a form of warfare. Like military conquest, its aim is to gain control of land, public infrastructure, and to impose tribute. This involves dictating laws to its subjects, and concentrating social as well as economic planning in centralized hands. This is what now is being done by financial means, without the cost to the aggressor of fielding an army. But the economies under attacked may be devastated as deeply by financial stringency as by military attack when it comes to demographic shrinkage, shortened life spans, emigration and capital flight.
This attack is being mounted not by nation states as such, but by a cosmopolitan financial class. Finance always has been cosmopolitan more than nationalistic – and always has sought to impose its priorities and lawmaking power over those of parliamentary democracies.
Like any monopoly or vested interest, the financial strategy seeks to block government power to regulate or tax it. From the financial vantage point, the ideal function of government is to enhance and protect finance capital and “the miracle of compound interest” that keeps fortunes multiplying exponentially, faster than the economy can grow, until they eat into the economic substance and do to the economy what predatory creditors and rentiers did to the Roman Empire.
This financial dynamic is what threatens to break up Europe today. But the financial class has gained sufficient power to turn the ideological tables and insist that what threatens European unity is national populations acting to resist the cosmopolitan claims of finance capital to impose austerity on labor. Debts that already have become unpayable are to be taken onto the public balance sheet – without a military struggle, needless to say. At least such bloodshed is now in the past. From the vantage point of the Irish and Greek populations (perhaps soon to be joined by those of Portugal and Spain), national parliamentary governments are to be mobilized to impose the terms of national surrender to financial planners. One almost can say that the ideal is to reduce parliaments to local puppet regimes serving the cosmopolitan financial class by using debt leverage to carve up what is left of the public domain that used to be called “the commons.” As such, we now are entering a post-medieval world of enclosures – an Enclosure Movement driven by financial law that overrides public and common law, against the common good.
Within Europe, financial power is concentrated in Germany, France and the Netherlands. It is their banks that held most of the bonds of the Greek government now being called on to impose austerity, and of the Irish banks that already have been bailed out by Irish taxpayers.
On Thursday, June 2, 2011, ECB President Jean-Claude Trichet spelled out the blueprint for how to establish financial oligarchy over all Europe. Appropriately, he announced his plan upon receiving the Charlemagne prize at Aachen, Germany – symbolically expressing how Europe was to be unified not on the grounds of economic peace as dreamed of by the architects of the Common Market in the 1950s, but on diametrically opposite oligarchic grounds.
At the outset of his speech on “Building Europe, building institutions,” Mr. Trichet appropriately credited the European Council led by Mr. Van Rompuy for giving direction and momentum from the highest level, and the Eurogroup of finance ministers led by Mr. Juncker. Together, they formed what the popular press calls Europe’s creditor “troika.” Mr. Trichet’s speech refers to “the ‘trialogue’ between the Parliament, the Commission and the Council.”
Europe’s task, he explained, was to follow Erasmus in bringing Europe beyond its traditional “strict concept of nationhood.” The debt problem called for new “monetary policy measures – we call them ‘non standard’ decisions, strictly separated from the ‘standard’ decisions, and aimed at restoring a better transmission of our monetary policy in these abnormal market conditions.” The problem at hand is to make these conditions a new normalcy – that of paying debts, and re-defining solvency to reflect a nation’s ability to pay by selling off its public domain.
“Countries that have not lived up to the letter or the spirit of the rules have experienced difficulties,” Mr. Trichet noted. “Via contagion, these difficulties have affected other countries in EMU. Strengthening the rules to prevent unsound policies is therefore an urgent priority.” His use of the term “contagion” depicted democratic government and protection of debtors as a disease. Reminiscent of the Greek colonels’ speech that opened the famous 1969 film “Z”: to combat leftism as if it were an agricultural pest to be exterminated by proper ideological pesticide. Mr. Trichet adopted the colonels’ rhetoric. The task of the Greek Socialists evidently is to do what the colonels and their conservative successors could not do: deliver labor to irreversible economic reforms.
Arrangements are currently in place, involving financial assistance under strict conditions, fully in line with the IMF policy. I am aware that some observers have concerns about where this leads. The line between regional solidarity and individual responsibility could become blurred if the conditionality is not rigorously complied with.
In my view, it could be appropriate to foresee for the medium term two stages for countries in difficulty. This would naturally demand a change of the Treaty.
As a first stage, it is justified to provide financial assistance in the context of a strong adjustment programme. It is appropriate to give countries an opportunity to put the situation right themselves and to restore stability.
At the same time, such assistance is in the interests of the euro area as a whole, as it prevents crises spreading in a way that could cause harm to other countries.
It is of paramount importance that adjustment occurs; that countries – governments and opposition – unite behind the effort; and that contributing countries survey with great care the implementation of the programme.
But if a country is still not delivering, I think all would agree that the second stage has to be different. Would it go too far if we envisaged, at this second stage, giving euro area authorities a much deeper and authoritative say in the formation of the country’s economic policies if these go harmfully astray? A direct influence, well over and above the reinforced surveillance that is presently envisaged? … (my emphasis)
The ECB President then gave the key political premise of his reform program (if it is not a travesty to use the term “reform” for today’s counter-Enlightenment):
We can see before our eyes that membership of the EU, and even more so of EMU, introduces a new understanding in the way sovereignty is exerted. Interdependence means that countries de facto do not have complete internal authority. They can experience crises caused entirely by the unsound economic policies of others.
With a new concept of a second stage, we would change drastically the present governance based upon the dialectics of surveillance, recommendations and sanctions. In the present concept, all the decisions remain in the hands of the country concerned, even if the recommendations are not applied, and even if this attitude triggers major difficulties for other member countries. In the new concept, it would be not only possible, but in some cases compulsory, in a second stage for the European authorities – namely the Council on the basis of a proposal by the Commission, in liaison with the ECB – to take themselves decisions applicable in the economy concerned.
One way this could be imagined is for European authorities to have the right to veto some national economic policy decisions. The remit could include in particular major fiscal spending items and elements essential for the country’s competitiveness. …
By “unsound economic policies,” Mr. Trichet means not paying debts – by writing them down to the ability to pay without forfeiting land and monopolies in the public domain, and refusing to replace political and economic democracy with control by bankers. Twisting the knife into the long history of European idealism, he deceptively depicted his proposed financial coup d’état as if it were in the spirit of Jean Monnet, Robert Schuman and other liberals who promoted European integration in hope of creating a more peaceful world – one that would be more prosperous and productive, not one based on financial asset stripping.
Jean Monnet in his memoirs 35 years ago wrote: “Nobody can say today what will be the institutional framework of Europe tomorrow because the future changes, which will be fostered by today’s changes, are unpredictable.”
In this Union of tomorrow, or of the day after tomorrow, would it be too bold, in the economic field, with a single market, a single currency and a single central bank, to envisage a ministry of finance of the Union? Not necessarily a ministry of finance that administers a large federal budget. But a ministry of finance that would exert direct responsibilities in at least three domains: first, the surveillance of both fiscal policies and competitiveness policies, as well as the direct responsibilities mentioned earlier as regards countries in a “second stage” inside the euro area; second, all the typical responsibilities of the executive branches as regards the union’s integrated financial sector, so as to accompany the full integration of financial services; and third, the representation of the union confederation in international financial institutions.
Husserl concluded his lecture in a visionary way: “Europe’s existential crisis can end in only one of two ways: in its demise (…) lapsing into a hatred of the spirit and into barbarism ; or in its rebirth from the spirit of philosophy, through a heroism of reason (…)”.
As my friend Marshall Auerback quipped in response to this speech, its message is familiar enough as a description of what is happening in the United States: “This is the Republican answer in Michigan. Take over the cities in crisis run by disfavored minorities, remove their democratically elected governments from power, and use extraordinary powers to mandate austerity.” In other words, no room for any agency like that advocated by Elizabeth Warren is to exist in the EU. That is not the kind of idealistic integration toward which Mr. Trichet and the ECB aim. He is leading toward what the closing credits of the film “Z” put on the screen: The things banned by the junta include: “peace movements, strikes, labor unions, long hair on men, The Beatles, other modern and popular music (‘la musique populaire’), Sophocles, Leo Tolstoy, Aeschylus, writing that Socrates was homosexual, Eugène Ionesco, Jean-Paul Sartre, Anton Chekhov, Harold Pinter, Edward Albee, Mark Twain, Samuel Beckett, the bar association, sociology, international encyclopedias, free press, and new math. Also banned is the letter Z, which was used as a symbolic reminder that Grigoris Lambrakis and by extension the spirit of resistance lives (zi = ‘he (Lambrakis) lives’).”
As the Wall Street Journal accurately summarized the political thrust of Mr. Trichet’s speech, “if a bailed-out country isn’t delivering on its fiscal-adjustment program, then a ‘second stage’ could be required, which could possibly involve ‘giving euro-area authorities a much deeper and authoritative say in the formation of the county’s economic policies …’” Eurozone authorities – specifically, their financial institutions, not democratic institutions aimed at protecting labor and consumers, raising living standards and so forth – “could have ‘the right to veto some national economic-policy decisions’ under such a regime. In particular, a veto could apply for ‘major fiscal spending items and elements essential for the country’s competitiveness.’
Paraphrasing Mr. Trichet’s lugubrious query, “In this union of tomorrow … would it be too bold in the economic field … to envisage a ministry of finance for the union?” the article noted that “Such a ministry wouldn’t necessarily have a large federal budget but would be involved in surveillance and issuing vetoes, and would represent the currency bloc at international financial institutions.”
My own memory is that socialist idealism after World War II was world-weary in seeing nation states as the instruments for military warfare. This pacifist ideology came to overshadow the original socialist ideology of the late 19th century, which sought to reform governments to take law-making power, taxing power and property itself out of the hands of the classes who had possessed it ever since the Viking invasions of Europe had established feudal privilege, absentee landownership and financial control of trading monopolies and, increasingly, the banking privilege of money creation.
But somehow, as my UMKC colleague, Prof. Bill Black commented recently in the UMKC economics blog: “One of the great paradoxes is that the periphery’s generally left-wing governments adopted so enthusiastically the ECB’s ultra-right wing economic nostrums – austerity is an appropriate response to a great recession. … Why left-wing parties embrace the advice of the ultra-right wing economists whose anti-regulatory dogmas helped cause the crisis is one of the great mysteries of life. Their policies are self-destructive to the economy and suicidal politically.”
Greece and Ireland have become the litmus test for whether economies will be sacrificed in attempts to pay debts that cannot be paid. An interregnum is threatened during which the road to default and permanent austerity will carve out more and more land and public enterprises from the public domain, divert more and more consumer income to pay debt service and taxes for governments to pay bondholders, and more business income to pay the bankers.
If this is not war, what is?
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Politics by other means. The dis-establishment of former colonized people (Ireland and Greece), that were each dispossessed of their national identities and incorporated into no longer functioning empires are now being re-digested by what could be a new emerging global order. I hesitate to say international order, because that would assume we would retain the nation state system, as characterized by the zombie organization called the United Nations.
The crisis is so complete as not to be able to hide itself even if it wanted to. The weakest go first, as always. The dominant will of course do everything to remain dominant, even a wholesale transformation of the established political order, once it no longer functions to serve the carefully co-evolved mutual International State / capitalist world system. Of course, capitalism no longer works, so it will take down with it the interstate system we are so familiar with, and just assume that will always be here. Unless the political entities involved, dominant core states US, UK, Germany, Japan and emerging semi-periphery states India, China, Brazil Russia can invent a new economic platform from which to base their political sovereignty, then they too will torn by the force of the collapsing financialized capitalism. Torn to pieces or severely wounded, they are now and will continue to feel the human pain of world divided up into a dozen power centers all trying to contain the chaos. And that LACK of social order and political stability is not a profit inducing environment.
The Liberal Nation State which allowed for social and cultural progress, no matter how attenuated, provided for loyal and patriotic as well as educated, healthy and well fed and cared for citizens. Now, as riot police and swat teams crush popular protests from China, to Iran, across the Eurozone to Seattle and Wisconsin, the loyal and patriotic citizens are deemed the new internal security threats, not the consumers to be wooed, the citizens to be groomed as economic partners but the dangerous class to be contained by the increasingly isolated and diminishing numbers of affluent American, Brits, Irish, Greeks, Spaniards and on and on
Yep,and Thanks MH
Stellar analysis Paul. Growth heading in reverse is bad for everyone and lots of people of all classes die. Bankers make loans, they don’t like the details (read hard work) of fiscal policy. In name only is Congress responsible for fiscal policy. Power sharing will happen, the only question is the casualty rate…
…Greece’s *suborner’s* (the IMF, ECB and the EU Commission, together known as the “Troika”)…
FTFY.
A reader over at BillyBlog today provides some necessary enlightenment over the word “Troika”:
… Troikas were the three-person local committees, comprised by the local party commissar, the local police chief and the Cheka representative, that were established during the period officially named by the Communist Party as “Red Terror”, a response to the so-called White Terror, during Russia’s Civil War.
If all three members of a Troika were to sign on it, they could decide and implement the immediate execution of any local person for “anti-Soviet activity” without a trial. …
http://bilbo.economicoutlook.net/blog/?p=14739&cpage=1#comment-17787
A shocking choice of words by Moody’s. One can only hope it was chosen in ignorance of its original implementation.
Financial oligarchy makes it sound rather like plutocracy, but what we see in the world’s economies is more than this. It is systemic looting, that is kleptocracy. And the important point about kleptocracy is that it is inherently unstable and self-destructive. So yes, German and French banksters are seeking to institutionalize their rights to loot countries like Greece, but more importantly they are going to push their looting there and elsewhere until it all comes crashing down, again. Kleptocracy is driven by the logic of the Ponzi. There is only one direction, no offramps, no brakes, and only one certain conclusion.
“One of the great paradoxes is that the periphery’s generally left-wing governments adopted so enthusiastically the ECB’s ultra-right wing economic nostrums”
As I wrote in the Bill Black thread on this, there is no paradox here. Greek, Irish, American, British, French, German politicians either are or work for kleptocrats. Distinctions between left and right in kleptocracy are pure distractive pap for the rubes.
Black and Hudson are both still trapped in the left-right paradigm they grew up with (we all have a tendency to do this). There are so many obvious framing problems with this paradigm and so much it doesn’t explain or explains badly, and yet it is so comfortable amd familar and basic it is challenging to uproot.
For example: “ECB’s ultra-right wing economic nostrums”
My observation is that when I read articles in the MSM about the so-called European ultra-right wing they typically are referring to strong ethnic/tribal/nationalist groups (those who oppose the EU) as far right wing. Black, Hudson and other seeming liberals refer to the ECB (the oligarchy) as being ultra-right wing. Liberals who despise libertarians often refer to them as ultra right wing, but in another context refer to neo-cons as ultra right wing, and then the wealthy elites as right wing and also the skinhead groups and KKK as ultra right wing. Looks to me like the definition changes based on the biases of the speaker. The people on the so-called right do the exact same thing to the left and have many shifting definitions of left wing.
So who gets to define ultra right wing and ultra left wing, etc, etc? It’s all smoke and mirrors and propaganda. There is no more usefulness in this worn out L-R terminology.
I have a novel idea, why not just use descriptive terms like ‘kleptocracy’ or really any other real and reasonably well defined terminology, rather than the abstract shortcut words ‘left’ and ‘right.’
You should really consider reading David Harvey’s The Enigma of Capital if you haven’t yet. A nice review can be found here, for example.
I just read the review on the Enigma of Capital you suggested. It sent me off on this rant (I apologize in advance because I don’t know anything about money): How can money, capital, be both a commodity and the only medium of exchange for all other commodities? Money really shouldn’t be a commodity because it is completely meaningless on its own. Money is only a mutual agreement confirmed by an electronic switch or a chit of paper. But strangely if you have no money, you have no means. None of it has ever made any sense to me whatsoever. As long as commerce doesn’t get complex the superficial idea (of money) works if you do not question it. But when commerce falters, when growth stops, money stops. If money is a commodity, we need some new laws to prevent, say, bankers, from cornering the market on it. Bankers’ mandates to “make loans” are not working for anybody but bankers. And what exactly is so important about money that Greece should sell its islands for money to give to the ECB? Or any other of a thousand examples? Charlemagne had it easy. He just said either become a Christian or I will kill you. Pretty much everybody agreed to become a Christian.
Yes, I get pissed off with old people insisting on this right/left divide.
The state is too big. It licenses banks, which rip off the populace, who then have to pay extra in tax and price rises to bail out the banks creditors. But the same banks bankroll the state, which employs a privileged class who describe themselves as of the left and go out on strike to preserve their privileges.
The only answer I can see: stop paying taxes.
But the same banks bankroll the state, which employs a privileged class who describe themselves as of the left and go out on strike to preserve their privileges.
*Sigh* … if only …
The problem with the whole “let’s get past left and right” discourse is that it is espoused by, well, people firmly on the right. It’s these who glimpse, as through a mirror darkly, that finance capital has subverted and polluted the democratic-republican state, but who go from there to the proposition that stinky-meanies the unionists, civil servants, etc. are to blame.
As someone with somewhat more than a half a brain, I am amazed by people who think that Atlas Shrugged is something other than junk. Perhaps that’s how our world comes to an end: not with a bang, but with overweight, underemployed Ayn Rand geeks whimpering about public sector unions.
When the scale of the problems is competing empires is this big, history suggests you lose in this strategy. Reducing risk means following the path of the Boomers and tune in and check out, follow path of bhudda, time with neighbors and family. Reduces stress and accelerates reform timelines. As a plus, you don’t get jailed or killed.
“Mr. Trichet adopted the colonels’ rhetoric. The task of the Greek Socialists evidently is to do what the colonels and their conservative successors could not do: deliver labor to irreversible economic reforms.”
Within hours the headlines are:
“The leftist socialist leader negotiate austerity deal”
“The leftist socialist leader bend forwards
and accept further indebting his people to reward the banksters.”
“Hudson wants to shift taxes from labor to rents, which is a fine idea in theory, but the kleptocracy will never do it for as long as it exists.”
Also, the landowners strategy would be to simply increment the rents to pass the bill onto tenants wherever they can. Over time all of this “expense” for owners winds up being paid by the ordinary renter or priced into a renting business’ goods. That’s the de facto situation here in Japan which has a feudal renting system. I have to pay “gift money” (2 months every 2 years) and then occasionally the owner will come round with some local community tax bill and jab it under my nose asking for the cash. I’m not in much of a bargaining position to refuse. Any alternate landlord will do the same. All they have to do to get the same power in the EU/USA is weaken the laws protecting renters which is probably a future GOP strategic goal.
Dammit. This is in reply to the BELOW post, sorry.
The conditionality for the new “reformed” loan package is that Greece must initiate a class war by raising its taxes, lowering its social spending – and even private-sector pensions – and sell off public land, tourist sites, islands, ports, water and sewer facilities.
If people are to get nothing out of government (and increasingly, we will not), then why on earth should we submit to taxation?
That’s why I’ve completely given up on trying to make the tax code “more progressive” and moved on to the demand:
No Taxes on the Non-Rich.
period.
Hudson wants to shift taxes from labor to rents, which is a fine idea in theory, but the kleptocracy will never do it for as long as it exists. We have a better chance of abolishing rents completely than taxing them. That solution would also have an infinitely greater moral elegance.
Back in Teddy Roosevelt’s time, the only thing that was really taxed by the federal government was rentier income, which was taxed at 90% or so because there was a broadly shared consensus that money earned through renting out houses etc. was not earned through productive labor, and that it was therefore undesirable to reward such behavior.
Are you going to understand post-oil kleptocracy or not? Stop with the irrelevancies.
Although it would be near impossible to ascertain Foppe’s motive for writing, merely from the words written, would you guess that his motives were very similar to your own?
Was Michael Hudson outlining the use of Financial Oligarchy as a replacement part for Economic Democracy, whatever that is? Or was he drawing a parallel between recent Greek politics on the one hand and on the other hand recent domestic politics? Pointing out that Oppressive Greek Rulers were recently replaced with less oppressive Greek rulers? Similarly, Elephants siphoning taxes from Impoverished Americans into the hands of Rogue Bankers to the chagrin of Straight Bankers had set a siphon-off-precedent. DR, Donkey Replacements to RR, Rogue Republicans have decided to honour the precedent set by RR. Why this choice? Lack of imagination? Fear of not being re-elected by the TV industry that controls voter behaviour? Or just, “Hey! It worked for RR, it’s just so crazy perhaps it will work!”.
Naaah! DR have decided that if division of labour can bring sustained economic advancement then division of wealth could only work as well. They now posit, “We will increase disparity in wealth to a higher and higher paradigm for the building of the greatest American Empire in the West”. Bless their hearts, they are now about to use tax dollars to hire the most expensive consultants the World Over to counsel domestic; local, county, state, and federal rulers on just how to transfer payment from impoverished to super-excessively-wealthy-landlords of all creeds, colours, and nations of birth.
Equal opportunity triumphs forever
!
“a heroism of reason.” Somebody needs to read their Johnathan Swift, thoroughly.
What gets me about Greece is how amazingly wealthy it is in everything other than fake ‘money’. They have so much awesome veggies, meat and wine, beautiful land, all the necessary manufacturing industries, and a conscript army to keep the Turks at bay. They are a good model of how an economy should be: produce and consume as much as you can locally, and trade for those few luxuries you can`t produce yourself. Unfortunately, the new world order values stuff according to how far it`s shipped and how much it`s processed; according to how inefficient it is because they make their money off of that inefficiency. So, an efficient self-contained nation will naturally be targeted for takeover.
We are now reliant, believe it or not, on anarchists to save us from global domination. Not libertarian anarchists of course, but red-neck village anarchists and hippy-urban anarchists. What a combination.
Birch said: “ ‘[in its rebirth from the spirit of philosophy, through] a heroism of reason.’ Somebody needs to read their Johnathan Swift, thoroughly.”
Or their Cicero.
As Cicero, in his futile attempt to disavow Greek philosophy on this one point–its attitude to politics–succinctly pointed out, if only “all that is essential to our wants and comforts were supplied by some magic wand, as in the legends, then every man of first-rate ability could drop all other responsibility and devote himself exclusively to knowledge and science.” In brief, when the philosophers began to concern themselves with politics in a systematic way, politics at once became for them a necessary evil.
▬Hannah Arendt, Karl Marx and the tradition of Western political thought
Another brilliant essay by Michael Hudson …
Having no recourse in the third world at neoliberalism the banksters have turned on their own territories. The failure of the Doha round of trade talks spells the end of the bankster financial Ponzi Scheme. Third world countries now know well this game of neoliberal conquest.
The “elephant in the room” is peak oil and peak food production. Without these and other resources growing the end game is clear … private bank fractional reserve banking will inevitably implode. The banksters are well aware of their fate and will steal, loot and pillage as fast as they can ..
Unfortunately the only path ahead for the banksters is war. This is the only remedy to reshuffle the world economy and financial system to make them viable once more, until of course their Ponzi Scheme inevitable implodes again. The stakes couldn’t be higher …
The end of economic growth as we know it has eluded Hudson, at least from what I’ve read of his work. The Hirsch Report circa 2005 spells out in detail the problems associated with peak oil. It was vehemently ignored … and removed for a time from the USG website. Just recently Jeremy Grantham produced a report on peak resources …
The Hirsch Report
http://www.netl.doe.gov/publications/others/pdf/oil_peaking_netl.pdf
Time to wake up: “Days of abundant resources and falling prices are over forever” by Jeremy Grantham
http://www.energybulletin.net/stories/2011-04-29/time-wake-days-abundant-resources-and-falling-prices-are-over-forever
The “end game” is here my friends … an “end game” unlike any other in history …
End game, huh?
The Hirsch report was a solid piece of work. As it happens, I make part of my money doing journalism, and in 2008 had to interview the not-particularly-impressive Austan Goolsbee and pushed a copy of Hirsch’s paper onto him. (I didn’t expect much, but wherever one mighthave a chance to make a difference one should try. You know?)
That said, Hirsch wrote his report in 2005. And peak oil as “the elephant in the room” is a little overated by all those wishful doomers who frequent sites like THE OIL DRUM. Human energy use is far more voraciously adaptive than the doomers fixation on oil allows them to see. For one example, back in 2005 Hirsch wrote on page 36 of his report that:
“North American natural gas production is declining or poised for decline.”
Also, Hirsch stressed: “Geology is ultimately the limiting factor, and geological realities are clearest after the fact.”
True that. Between 2006 and 2008 (after Hirsch wrote his report)heavily ramped-up hydraulic fracturing increased accessible natural gas reserves in the U.S. by 35 percent.
So Hirsch was significantly wrong on that score.
In general, we also have the decades-old historical examples of the two nation-state societies that were deprived of oil, Nazi Germany and South Africa. Neither state collapsed because of lack of oil because both of them switched over promptly to Fischer-Tropsch-based liquefaction of coal for their essential liquid-fuel needs.
This isn’t to say that peak oil — which probably already occurred in the 2005-2008 (period like Hirsch, I may be proved wrong by later developments)– isn’t a big, traumatic shift for the global system. To quote General Buck Turgidson, “I’m not saying we’re not going to get our mussed,” by peak oil.
Nevertheless, for one instance of what the future looks like, think of the enormous reserves of methane clathrates (and petroleum) under the melting Arctic ice and the fleet of floating atomic generators and nuclear-powered icebreakers the Russians are now building to drill for and capture it.
http://www.telegraph.co.uk/sponsored/russianow/6098600/Escalating-tensions-over-hunt-for-oil-and-gas-in-the-Arctic-Russia-Now.html
http://edition.cnn.com/2011/BUSINESS/04/13/arctic.ice.breaker.nuclear/index.html
http://www.physorg.com/news162812345.html
Energy is fungible. You and I won’t be around to see it — since just natural gas could carry the next hundred years at least — but I wouldn’t be surprised if humankind eventually burns through every fuel reserve on the planet and it becomes nothing but bare rock.
Peak oil is the death knell of fractional reserve banking. Without ever increasing amounts of energy the Ponzi Scheme of private bank fractional reserve banking will implode …
I suggest your read this carefully:
Time to wake up: “Days of abundant resources and falling prices are over forever” by Jeremy Grantham
http://www.energybulletin.net/stories/2011-04-29/time-wake-days-abundant-resources-and-falling-prices-are-over-forever
Debt is future promises … without ever increasing resources those promises will not, can not be met. The destruction of debt is the destruction of currency and credit under our current system.
As far as energy substitutes most are ill suited for transportation fuels and ALL have far lower EROEI capability.
Natural gas? Don’t be fooled …
REPORT: Will Natural Gas Fuel America in the 21st Century?
http://www.postcarbon.org/report/331901-will-natural-gas-fuel-america-in
Basically you have been suckered by the propaganda of the forever growth paradigm advanced by the powers that be …
I disagree about a bare rock Mark.
I disagree about a bare rock Mark. But the last line was funny.
@ JasonRines –
The bare rock was, obviously, an exaggeration. I fully expect, though, that we’ll suck up from under the Arctic all the milkshakes we can.
We arguably don’t have much choice, given the potential for methane release there. We will see.
@ mmckinl –
You wrote: ‘Peak oil is the death knell of fractional reserve banking. Without ever increasing amounts of energy the Ponzi Scheme of private bank fractional reserve banking will implode …’
You think that I think this is bad news? Hasten the day, I say.
Regarding the rest —
I’ve seen the Grantham newsletter. I’ve no serious arguments with that.
As for the Post Carbon Institute piece, it concludes: “Strategies for energy sustainability must focus on reducing energy demand and optimizing the use of the fuels that must be burnt. At the end of the day, hydrocarbons that aren’t burnt produce no emissions.” In other words, this is a tendentious piece of work, which starts with its conclusion and works backwards towards that by selecting its facts. Common sense will tell you that the big picture for natural gas — think only of the Arctic and of Siberia — is not as this piece suggests.
I support Germany in its renouncing nuclear and trying to go renewable, incidentally, because from the Germans we will learn more about what will work and what won’t.
For exactly the same reasons, I support China and India, and the third of humanity that those vast countries contain, as they continue with their large nuclear build-outs. And greater energy efficiency is also good.
But common sense — again — should also tell you that “powering-down” qua ideology is of little interest to most of humanity, if that ideology is what you’re selling.
Post: brilliant. And terrifying.
I agree with Hugh, however, that neofeudalist kleptocracy is ultimately self-destructive, based on the logic of the Ponzi.
Dear Reader;
The problem here is what you define as ‘success’ for the kleptocrats. Remember good old Boss Tweed, he of “honest graft” fame? If I remember correctly, he “retired” with his looted millions to Naples and died a happy man. Don’t underestimate the power of selfishness on the individual level. The form of kleptocracy may implode, but the individual actors will happily scarper with the loot and sit back with a drink in hand and watch the towers burn from the deck of the yacht.
The Greek trade and current account deficit doesn’t indicate an efficient self-contained nation.
The trade imbalances is the main cause of the problem, northern banks bait and switch the southern less industrialized countries to borrow and buy northern gods so Germany and so on can be export champions while the southern is looked in to the EU/Euro system where the currency cant depreciate and free movement of capital and goods is constitutionalized. This while Germany does internal devaluation with Hartz reforms.
Then they are racist lampooned by the Germans as lazy spendthrifts how borrow German money and buy German goods. Anyone how wanted to see could have seen the idiocy of this scheme.
If now they didn’t have had the Euro there had been an real currency risk in doing these sort of business, long before it had escalated to the point where it now is the southern currency’s had depreciated and Germany have found it much harder to be the European export champion. But Germany and the other export champions don’t want free floating currencies where the market balance each of them to an appropriate value.
The mighty countries in Europe have ever since the end of Breton Woods been obsessed by fixed currencies in Europe, all of the different schemes have failed miserably and so will also this do. They seem to never learn, at least those who usually stand with the short end of the stick when it collapse.
I meant to say that a relatively efficient self containted nation is what Greece very easily could be, but it has been lured otherwise by what you mention.
I had thought of Greece, particularly Crete as its ancestor of sorts, as an ancient society that had seen it all, and been conquered by all sorts of invading entities. Then a Cretan native explained to me that for the past 6000 years Cretan farmers and shepherds had led very similar lives regardless of whether the ruling elites were Doric, Roman, Venetian, Byzantine, or Turkish.
This new wave of takeover is totally different than anything they ever encountered before.
“Anyone [who] wanted to see could have seen the idiocy of this scheme.” /L
Well, yes, but only if you knew where and how to look. How can you be expected to understand the implications of international trade imbalances when your cultural history is built on local exchanges? The ruse was enabled by the Greek elites, who made a killing off the affair. The rest of the population, just like the rest of the world, was fed the television lie of a better way of life through dependency on foreign trinkets.
I like your description of the motivation behind fixed exchanges. They got what they wanted, now it’s their turn to suck it up and accept their losses.
What I get from all this discussion is that Greece needs to abandon the Euro, get out now. Then they can devalue their currency, or something, default on the bond-debt(I don’t quite understand finance.) At least they should make a credible threat to and see how the ECB (is that what I mean?) responds. Basically they need to DEMAND debt forgiveness. I see what the author was saying how the foolish European nations have accepted a form of monetary governance without corresponding political representation.
“Interdependence means that countries de facto do not have complete internal authority. They can experience crises caused entirely by the unsound economic policies of others.”
What stuns me is that there is no analysis (that I can find, anyway) of why this is considered a good thing, or even what awesome benefit we’re getting in exchange for this suicide pact. Like the TBTF banks, it seems to me that the solution would be setup the system in such a way that countries *cannot* experience crises caused entirely by others.
But then, I already know the answer to my own question. Like the never-ending war on terror, it’s far better to have a never-ending series of crises to justify a continual stream of “emergency measures” that siphon money away from the populace and into the pockets of the banksters.
This problem cannot happen – it is inconceivable.
MERS immunized these banks against assignments.
It must be true, I read it on the MERS website.
Hudson does not like Trichet’s speech (which I have read).
The EU has painted itself into a corner with the euro. Too many states were admitted into the euro zone from the start and there are so many gaps in the regulatory framework that a truck can be driven straight through. Very poor political leadership over the past couple of years have made things worse, not better.
I agree with the thrust in Trichet’s speech; that is that federal EU fiscal mechanism has be be created, with a ministry of finance. Without that, the euro will not survive. Many (also here at NC) believe that the death of the euro would be a good thing, in which case they will not agree with the proposition. The reality, however, is that the euro exists (with its many flaws) and that, at some point, it will have to be decided to scrap the project (which will implode anyway if we continue down the current path) or to move ahead towards a closer monetary, fiscal, political union under the rule of law. Just stating that the state of affairs is poor is just stating the obvious.
To Trichet’s proposals I would also like to add that the EU Treaty should be amended so that it allows states to leave the euro. At least three euro states will probably have left the euro a few years from now (they could not remain even if they wanted to). Provisions for their sorties will have to be made now or it will become even more chaotic.
If they amend the treaty so it allows states to leave the euro they by logic have to scrap the part that makes the Euro mandatory for EU members. The EU elite are all for strict adherence to the regulations like S&G pact. Should countries move in and out of the Euro if they fulfill the S&G pact or not?
The federal EU fiscal mechanism envisioned in Trichet’s speech doesn’t seems to be of the kind that nations usually implement it, i.e. roughly even out the living standard in the nation, rather the opposite.
To eradicate the mandatory Euro is to remove one of the fundamental pillars of the EU edifice. A giant structure that have feet of clay and is built on sand
Jean Claude “Pangloss” Trichet live in a world of his own in the skyscraper in Frankfurt. Those who resides in that ivory tower doesn’t see the world as we do.
Economic sports…see:
http://www.youtube.com/watch?v=xmnLRVWgnXU