It’s unlikely that the destabilizing of the political calculus in Europe resulting from impressive showing of anti-austerity candidates in Italy will end prettily or nicely. However, Europe had already put itself in the position of having only bad choices. So the question is who suffers, and the public in periphery countries are starting to rebel against being broken on the rack while Eurocrats and pampered German and French bankers feel no pain.
Needless to say, the fact that 57% of Italians who went to the polls Monday have figured out that austerity is not working has been met with condemnation and consternation from Brussels and Germany. The astonishing part about their hectoring is it reflects a real inability to grasp some basic elements of the equation. First, of course, is that austerity is a failed experiment. Even the IMF, which has favored this formula for decades, has been forced to ‘fess up. But the other two thirds of the Troika are so politically and emotionally wedded to tightening the fiscal noose on the periphery countries that they’ve simply dismissed the IMF’s analysis as inconvenient. I suspect the IMF would have gotten a more sympathetic hearing if it blamed the failure of austerity on space aliens rather than fundamental shortcomings.
But the second is that the Eurozone really does not have much leverage over Italy. On the surface, that isn’t obvious, since Italy has €420 billion in financing scheduled for this year, so a rate spike would be painful and costly. But as Ambrose Evans-Pritchard pointed out in the Telegraph:
Yet Italy is big enough to bring down the eurozone if mishandled. It is also the one Club Med country with enough fundamental strengths to leave EMU and devalue, if it concludes that would be the least painful way to restore 35pc of lost competitiveness against Germany since the launch of the euro.
It has low private debt and €9 trillion of private wealth. Its total debt level is 265pc of GDP, lower than in France, Holland, the UK, the US or Japan.
Its budget is near primary balance, and so is its International Investment Position, in contrast to Spain and Portugal. It could in theory return to the lira without facing a funding crisis, and this may be the only way to avoid a crisis if the ECB withdraws support. Any attempt to force Italy to knuckle down risks backfiring disastrously for EMU creditors.
In other words, Italy could credibly exit. But right now, German and EU politicians are reacting badly to this wrenching change in their assumptions, that they held the cards and could impose their will on elected governments. They were confident that if the Bond Gods demanded sacrifices from the public, they’d be made, and pronto too.
Sadly, I don’t read German, but one of my buddies who does says the reactions in the German media were unhinged. From what I can infer from the spillover into the English language media, they seem to be doing a combo of the denial and anger phases of the Kubler-Ross give stages of loss model at once. They honestly seem to think that Berlusconi can be hectored into line. And Grillo is simply derided. Funny how no one acknowledges that he was onto the Parmalat fraud before even analysts picked it up. He’s untested, but he’s not the fool that the Eurocrats are telling themselves that he is. Underestimating your opposition increases the odds of failure of a countermeasure.
Some of the quotes are priceless. The Der Speigel headline sums it up: World From Berlin: Italy’s ‘Childlike Refusal to Acknowledge Reality. This is an extract from the leading conservative paper Die Welt:
Silvio Berlusconi ruined Italy — a founding member of the European Community — and brought it almost as close to bankruptcy as Greece. One had hoped that he wouldn’t get another chance after a lean but necessary year of reforms under Prime Minister Mario Monti. He probabably won’t get that chance — but he succeeded in at least getting close to the winning Democratic Party. It is worrying that voters didn’t punish this jester by ignoring him.”
In the campaign he promised the abolition of the IMU real estate tax and even the repayment of the taxes already paid under it. The failure to punish such nonsense casts a bad light on a country that requires a fundamental political renewal. If you count the results of the Five Star Movement of the rabid Beppe Grillo, who has been preaching wild hatred of the ‘freeloaders up there,’ then more than half of Italians voted for some form of populist. This amounts to an almost childlike refusal to acknowledge reality.
Funny, this is Berlusconi’s position, per the Telegraph:
“A deal with Monti is impossible,” said Mr Berlusconi on Tuesday. “His austerity policies have put the country into a dangerous recessionary spiral, with rising debt and unemployment, and the closure of a thousand firms a day.”
So who is more reality based here? But you’d never know that reading the German media. This is from Süddeutsche Zeitung:
Now populism, yelling and lies rule Italy once more. In the Greek election dramas of recent years it was the radicals who profited from the crisis. In Italy it has been the populists. They’re radical too in their ways: They deny reality, they pass blame for the misery to enemies outside the country, they witter on about the simple solution to all the problems. Italy won’t get a simple solution after this election. It will get a new election at most. And that wouldn’t be a blessing either.
The Guardian kept track of the official threats on Tuesday. This one ran in Reuters:
“It is important that Italy has a functioning government. Monti’s reform path must be continued,” Michael Grosse-Broemer, parliamentary floor leader of Merkel’s Christian Democrats (CDU), said, in the first German reaction to the election result.
This one as described in the Guardian:
German economy minister Philipp Rösler was putting a brace face on events, saying that he could imagine a better result for the pro-reform parties.
But in a statement, Rösler insisted there was no other way:
There is no alternative to the structural reforms that are already underway and which include consolidating the budget and boosting competitiveness.
Ah, but there are alternatives! As Ambrose-Pritchard noted, Italy could depart the eurozone, and my German-reading colleagues say that there was also discussion of Germany leaving the Eurozone. The German concern is that they are facing open ended rescues of those profligate Latins (which are in reality rescues of those profligate French and German bankers, somehow that part is never included in the equation). But the rescues were destined to continue until Germany addressed its chronic trade surpluses. Trade surpluses entail financing your trade partners. The alternative proposed by economists like Yanis Varoufakis is for Germany to invest heavily in the periphery countries, to increase the wealth of their population and enable them to make products that Germans would buy. It appears the German plan (if there was a plan, I think the Germans have been driven by their desire to avoid embarrassing questions about banks and their emotional attachment to manufacturing dominance and the virtues of saving) was to impose a German diktat on the periphery, which would make their governing apparatus irrelevant (that is pretty much the state of play in Greece) and enable them to acquire assets on the cheap. The problem is, if Greece is the model, is that you destroy so much of the economy that there is not much left worth salvaging. You not only destroy your cheap takeover opportunity, you also destroy your trade partner. Whoops!
The German foreign minister also banged the same empty drum. Again, from the Guardian:
Germany’s foreign minister, Guido Westerwelle, has now weighed in, becoming the third German politician to argue that Italy must stick with Monti’s reform plan.
Speaking in Berlin, Westerwelle said it was important that a stable Italian government is formed quickly – one that is committed to Monti’s policies.
The European Commission was on the surface more reasonable, saying it heard the message of Italian concerns. But it effectively insisted that the beating must continue until morale improves, that Italy needed to reduce its “unsustainable” level of debt and finger-wagged at the dangers of populism. Notice how democratic processes are dismissed as mere “populism”? As if the Italian public does not have a right to self-determination? And notice also the refusal of the technocrats to take any responsibility. There’s not an inkling of “Hey, the results in Italy are so bad, maybe we need to do a bit of course correction.” No, all you read is bullying, dismissal, or faux sympathy combined with thinly-veiled threats.
In fact, the Italian revolt has exposed a grave miscalculation by the Eurocrats, that they would do the bare minimum, only driven by crisis (and those crises were mainly foreseeable, like major bond refinancing dates for wobbly countries). The Greek referendum threat was abruptly shut down, with the help of the betrayal by finance minister Evangelos Venizelos. There’s been a widespread belief that the ECB’s OMT, which calmed the markets last fall, had pretty much solved the Eurozone crisis because periphery bond yields fell and have stayed tolerably low. In fact, this was an astonishing feat of three card Monti. The OMT in fact was a bluster, a mere clever restatement of existing powers and programs. But it has worked longer than Hank Paulson’s July 2008 bazooka did.
But the complacency of the seeming success of the OMT meant the Eurocrats simply failed to move forward with other needed elements of integration. And that in turn reflects fundamental German ambivalence. Germans would also lose critical elements of democratic and economic sovereignity if the European project moves forward, no matter how much they do to cut the pie in their favor.
Now of course, the nay sayers are narrowly correct. Italy will suffer if it bucks the will of its aspiring Eurocrat masters. But it faces pain, certain pain, if it stays with its present path. And there are intangible but important positives to the defiance of the policy elites: outcomes will be uncertain, which if nothing else is more exciting, and some people may come out better off short term. If Italy does ditch the euro, the prospect is for a good deal of short term dislocation, but it could wind up markedly better off longer term. And perhaps most important is self determination and altruistic punishment. People place considerable value on control; the most stressful jobs are ones where workers face both time pressure and little autonomy. And members of social species are willing to inflict punishment to fellows who break the rules, even when it comes at personal cost and appears to yield no personal benefit.
Italian voters have said “Basta” to self-serving politicians and technocrats. These feckless leaders are living examples of Upton Sinclair’s dictum: “It is difficult to get a man to understand something when his living depends on not understanding it.” So expect the two sides to keep talking past each other as this struggle over Italy’s and possibly the Eurozone’s future escalates.
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Vaffanculo!
Go Italy.
I second that, and great piece, Yves, explained well. I love coming here. I get smarter.
The Telegraph is reporting that Ireland’s seasonally adjusted unemployment rate has dropped “sharply” to 14.2%. Is that just mere propaganda?
Humans have an innate sense of justice. There is no way the status quo will last forever.
One country will refuse to carry all the weight on its shoulders and this will be the impetus for change as others will follow.
It’s not a question of if but when.
Moneta,I so hope you’re correct that one of the major EZ countries will exit. I’m hoping soon. The Euro project is hopelessly flawed and needs a do over. The neoliberal cabal who have hijacked the project really have had only one thing in mind – busting labor. Listening to the Finance Minister of Portugal this morning on BBC, he had nothing to say about the problems of Portugal other than blaming unions.
Yes, innate sense of justice, Piaget’s research with infants proved it, but he failed to explain why so many humans lose it.
The day of Banksters making money out of people wanting democracy would appear to be ending. We shall see, however, how clear the people of Europe are in perceiving this as opposed to the Americans and British.
February 27, 2013 at 8:07 am
The Telegraph is reporting that Ireland’s seasonally adjusted unemployment rate has dropped “sharply” to 14.2%. Is that just mere propaganda?
———–
If you want the truth, you should probably be looking at the participation rate and not the unemployment rate.
Excellent piece! Thank you.
Agreed.
This is Yves at her finest.
I agree. This is an amazing piece of work. Thank you so much.
Yves wrote: “Some of the quotes are priceless. The Der Speigel headline sums it up: World From Berlin: Italy’s ‘Childlike Refusal to Acknowledge Reality.”
Yup. I, too, saw that DER SPIEGEL headline and article, and thought the insular German mindset/self-delusion was hilarious. I’m glad you picked up on it, Yves.
And as you also write, Italy faces “certain pain, if it stays with its present path. (But) there are intangible but important positives to the defiance of the policy elites: outcomes will be uncertain, which if nothing else is more exciting, and some people may come out better off short term. If Italy does ditch the euro, the prospect is for a good deal of short term dislocation, but it could wind up markedly better off longer term.”
If anything, you understate the possible gains to the Italians if they don’t play along. In fact, the possible gains from that strategy are markedly greater from both a practical game/decision theory POV and the human one.
Escalation of commitment is a major problem in the politcs (and just about everything else).
Most political problems, one way or another, can be traced to it. Most solutions to critical problems also comes from figuring a way to reduce EoC (Cuban crisis being a prime example of someone willing to break the cycle). Unfortunately, the modern media make it much easier to do the “commitment” part, and at the same time massively increase the cost of loss of face for the breakage. A game of chicken played between two people, or a small group is suddenly aired to the whole world. Guess what it does to the outcome?
I suspect that if the Cuban crisis was covered by media and politicans had been allowed to waffle on national TV on it, we wouldn’t be here anymore.
@ vlade
What happened? Are you backpeddling from your tactic of yesterday, equating Berlusconi and Grillo to Hitler and Mussolini? To wit:
Now you’re hyping the sophistries that Martin Luther King so brilliantly debunked in his Letter from Birmingham Jail. Here’s your version of blame the victim:
This comes right straight out of the oligarch’s playbook. After all, it is the business of the poor to stay poor, of blacks to stay deferent, of women to stay at home, of the handicapped to stay in the back room, and of homosexuals to stay in the closet. Why can’t all those Untermensch just shut up and accept what is “natural,” “historically determined” or “God’s will”?
Then you really go off the rails with this:
Yep. All the struggles of the überzähligen Essern, and the state violence necessary to keep them compliant in the face of starvation, should be hidden from public view. This of course is just the very opposite of what any revolutionary movement wishes to do, as Martin Luther King pointed out:
Fascinating. Pray tell, where in my current comment did you see Brillo, Berlusconi or even Italy mentioned?
Do you understand what escalation of commitment ACTUALLY MEANS?
You clearly have no clue, and neither about how this comment differs from yesterday’s, but very nicely manage to project your views. You’ve decided that I’m an evil capitalistic dog (or an equivalent thereof), who wants to grind the deserving under his expensive designer shoe heel. Whatever, it’s your view – I even find it amusing, and have little interest in trying to change it.
But for the future reference, I’d suggest you do some actually fact-finding and engaging of your brain before writing purely on Pavlov’s reflex. No amount of quotes that are irrelevant to the context will make your argument valid. That is, unless you’re trying to troll and hijack.
OK, I’ll bite. What does it mean in the Italian context?
Well, only Vlade can speak for himself. And should.
But the question of ‘escalation of commitment’ is a basic one in strategy and policy. The best illustrations of the problem probably come from the game theorists. For instance, the scenario of ‘the dollar auction’ —
http://en.wikipedia.org/wiki/Dollar_auction
— where in a non-zero sum sequential game actors with perfect information can, based completely on a sequence of perfectly rational choices, be forced to make an ultimately irrational, completely self-defeating choice.
That said, in the Italian context I disagree with Vlade. Threatening to ditch the Euro and, if necessary, actually ditching it, is in fact the Italians’ best strategy, from a game theory viewpoint.
(Also: Like Vlade, I note that ‘from Mexico’ frequently ascribes beliefs and statements to other posters that they’ve not in fact espoused, then arrogates to himself/herself the right to denounce them while sloganizing at length in a fashion that’s frankly irrelevant to whatever the discussion was previously about.)
@ Mark P.
I think from vlade’s comment its fairly clear what his meaning was. And if I got it wrong, why didn’t he simply explain what he meant?
I have little patience for the passive-aggressive antics of you or any of the other right-wing ideologues.
You come on these threads and post comments that are extreme, all the while trying to appear moderate and reasonable, and then when someone calls you out on them, you get all huffy and say: “Oh, that’s not what I meant,” and then launch into an orgy of victimhood, claiming you are misunderstood and unfairly judged.
But then, just like in the immediate case, vlade never explains what he did mean.
We’re still waiting vlade. What does it mean in the Italian context? What is the losing proposition that, regardless of how much effort is invested in it, cannot be won?
Well, the article is about some politician throwing hissy fit over Italian result w/o regards to reality (if “from Mexico” doesn’t trust me, me being unreliable imperialistic dog with an agenda, here it’s from Yves own keyboard, bolding mine:
1. This post was clearly labelled as being about the reaction in Germany and Brussels. This is a blog. I cannot and do not write theories of everything on every post I issue on a particular general topic. )
So I wrote about the reaction, and as to me it is a typical EoC behaviour (to be 100% clear, I’ll repeat – not Italians) – turning around and saying “sorry, we’ve been wrong” when you go banging around the “lazy Italians led by sex-mad Berlusconi” drum for ages is hard.
Thus, hissy fits over the result are to be expected at this point of time(which doesn’t change the fact that Berlusconi/Grillo can be disasters in making – even broken clock is right twice a day, and wave of popular dissatisfaction is the easiest one for scum to ride up).
A similar example would be Mr. Osborne in the UK, with “my solution was right, but not enough, we need more austerity” being the response to the loss of AAA rating.
In broader context, given how long and loudly the various “North” politicians trumpeted the austerity story contrasting it with free spending PIIGS etc. it’s near impossible for the same politicians to turn the boat at any reasonable speed (if you think anything different, then you’re falling into the rational-mankind fallacy I’d say). In fact, even if the politicians were rational, it would be pretty much suicidal for them (given the likely response of their electorate), and the only strategy remaining is to take it right to the brink and hope that either the other party blinks (as they did so far) or that they will be able to swerve in the last possible moment (unlikely, since that would means being able to identify the last possible moment)
I’d say from psy perspective (understanding that some people view game theory as imperialistic science not worth attention of a proper conscious worker), reading “Mistakes were made (but not by me)” is a good, easily accessible if somewhat repetitive reading explaining the psychology behind this.
@Mark P – I agree that IT & co threatening to leave EUR – and IT has the best case, with primary surplus etc. – is their best strategy. Truly, the only reason I can see why they never went back to the North with “your stick is nice, but where’s the carrot? If there’s no carrot, I will show you my stick, and believe me, it’s a bit more real than yours” is a deep corruption of the related elites. In Greece it’s quite obvious, in Ireland it’s less obvious to an external observer (at least until they go and try to figure workings of Ireland so-calle politics), but I had some hopes for Spain/Portugal, and even Italy.
I think the english term is “brinkmanship”…
Of course missing from all this polemic between the opposing sides is some Three Sector Accounting perspective that makes it clear that German hectoring substantially takes place because of the net financial contribution to their economy from exports. A contribution that can only stem from the willingness of their export target countries to run deficits. Can Germans do irony?
Never mind that said deficit related debt are more likely than not held by German banks.
Meaning that is said debt was defaulted on, the German fiance would crumble…
Yves, your faith in the good intentions and reasonableness of Berlusconi is entirelly misplaced. He’s posturing, but at the end of the day it’s all about his money, power, and access to teenage girls.
Otherwise, good article.
Oh, I don’t harbor an illusions about Berlusconi. But he does need Italy to be viable economically. The Eurocrats are so dedicated to their austerian beliefs that they’ll treat any failure as simply proof that they didn’t administer enough pain. And they are personally not affected by bad outcomes. They are testing to destruction in Greece, and are willing to go way too far down that path with anyone who lets them. Look, they actually think Latvia is a success! That is how nutty this bunch is.
So I am relying on Berlusconi’s incentives being better, not his character.
He has always had fascist leanings, and idolizes Il Duce. On that vein, wouldn’t it also be in his interest to destabilize Europe “back to the 30s” and seize a dictator for life status?
He may well be anti-neoliberal/austerity and pro-state-involvement, but not in the way we will appreciate.
Golden Dawn is also anti-austerity.
looselyhuman, there is no Europe. There are no European citizens.
Why do so many of you continue to cling to the belief that a US of Europe can be?
Why can’t you accept that Berlusconi, for all his faults, represents a better project for Italy than Monti and his radicals?
I’m beginning to believe that some of you would sacrifice democracy in southern European countries if it led to the creation of a US of Europe.
How sad.
Jim,
the problem with Mr. Berlusconi is that he has proved beyond any doubt he is totally uncapable of using power for the good of his country. He had almost 20 years to test himself, but he insists… time for a change I would say.
I don’t think I in any way voiced an opinion on the European Union. There is a continent called Europe, and Italy is one of the key nations in its political/economic dynamic… There is a continent called Europe and it has been the center of world war, twice.
In previous moments of crisis in the world economic order, we’ve been presented with a choice – i.e. 1930s we had Communism or Fascism (false choice – Roosevelt charted a better path…)
Now it seems we’re getting a new choice: Neoliberal Social Darwinism (the radicals you mentioned), or again, Fascism.
This time, sans viable left-of-center options. Where’s Roosevelt?
Roosevelt is where the Democrats put him: Tied up and buried alive in the coffin Obama crafted for him. The takeaway for the elites after The New Deal was “Never again!” and the Demcorats were only too happy to help them achieve their dream.
Roosevelt, and most other social welfarism, was only made possible by the capitalists’ fear of the communists.
Without a radical threat, the capitalists don’t have enough fear to make such compromises.
Capitalists work best when they’re good and scared. We ought to do everything we can to keep them good and scared.
Of course Golden Dawn is anti-austerity. That’s how Hitler got power, by pretending to listen to and work for the people when the other politicians wouldn’t listen. Golden Dawn is a symptom of austerity – austerity is the problem. If the mainstream politicians had tried to do something constructive, Golden Dawn would have been nothing more than a fringe. Berlusconi may be corrupt, but he is a populist. I’m not sure he wants to be like Mussolini, he managed to do what he wanted before without going that far. The problem are the idiots who think the people should pay for the corruption of Europe’s political classes and the banks over the last 20 odd years.
Sure Yves, the Eurocrats are economically insane, agreed.
But Berlusconis’ incentives lie in him politicing from the opposition, not in order to get Italy returning to the Lira, or in growing the economy, but rather to make a weak government collapse so he can sweep back to power.
Once he’s back in office, he’ll be the one deciding economic policy, and it’ll be based around whats right for him, not Italy.
What I, and presumably Yves, are betting on, is essentially that, while a complete and thorough self serving scumbag, that Berlusconi is at least rational enough to realize that while austerity in Italy may be in Germany’s best interest, it is not in Italy’s best interests, and therefore, his best interest. He isnt a raging neoliberal ideologue like the IMF or Merkel.
Self serving sons of bitches can in some ways be preferable to sadists and madmen. Give me a Mussolini over a Hitler any day.
And surely you dont think Bersani the Austerity Peddler is preferable to him? Berlusconi is the ‘lesser evil’, but unlike Obama, he may actually be useful. You know, to the general public instead of the financial oligarchies.
Would I prefer an anti-austerity Socialist of some kind who (unlike Syriza) wants to leave the Euro? of course I would. But the fact that Germany is getting into such a hissy fit over this shit is proof enough to me that Berlusconi is a far better choice than Bersani or god forbid, Super Mario 3-Card Monti.
If banks like it, its usually bad for everyone else, and vice versa.
Or, more to the point, give me a Huey Long over a Mussolini.
“Self serving sons of bitches can in some ways be preferable to sadists and madmen.”
Fair enough, good point, and well made.
But it looks like austerity will be ensured now for at least a year , before an elction can take place, thanks to Montis clever timing.
Which will be perfect for Europes sleaziest man, ready to take the reins again, and do absolutelly nothing except have sex with teenagers and count his money while preventing anyone else any meaningful, political power.
Look, you guys seem to have missed the following:
1. This post was clearly labelled as being about the reaction in Germany and Brussels. This is a blog. I cannot and do not write theories of everything on every post I issue on a particular general topic
2. Did you also miss that Grillo has a blocking position in the house and is firmly opposed to the existing corrupt structure? What does that mean? Berlusconi above all. So the only thing they agree on is being anti austerity. All this talk of Berlusconi, when (even if he could) the current president and Berlusconi are afraid of new elections as the solution to the current impasse because Grillo is expected to gain even more seats.
Get a grip. The amount of damage Berlusconi can do is limited, and he’s on the right side of the biggest issue Italy faces.
On the whole sex with teens thing, she would have been perfectly legal under Italian law if had not payed her…
https://en.wikipedia.org/wiki/Ages_of_consent_in_Europe#Italy
Yves Smith says:
I’ve always wondered exactly what the psychology is that drives the austerians, because it surely doesn’t seem to be entirely the rational maximization of individual utility.
Maybe this from Ralph Ellison offers a window onto their psychology:
It may not matter in the short-term, but I don’t think nutty is quite the right term. If they were trying to do the job that you and I and many readers of this blog would want them to do, then the way they are acting would be nutty. But they are not.
For who they are and for what their objectives are, what they are doing is quite sensible and so far has worked. So far.
Can’t they just print money and point a gun at countries they want to rob like the US does?
Talking to regular people I know in Germany, it’s surprising how checked out they are about all this.
‘Can’t they just print money and point a gun at countries they want to rob like the US does?’
Nicely put. But, no, on the hegemonic scale they’re neither that good nor that big. Historically, you have to be on the level of the Romans, the British — maybe the Soviets for a brief while, maybe eventually China — to pull something like that off
I’m curious.
What do the common Germans think about what’s going on in Greece, Spain, Italy and these “peripheral” EU countries. What do they make of the claim that it’s the German banks and EU policy-makers that are causing all this suffering?
Are they ignoring the involvement of Germany in these catastrophes? Do they believe the periphery is getting what they have coming?
Do they think that it will eventually come out of their hide too?
Perhaps one should look at la Stampa or Corriere della Sera to get an understanding of Italian elections. Wannabe newspapers like Spiegelonline/Welt or outright morons like Ambrose-Pritchard who is clearly focused on serving English resentments don’t do the job.
Yves said:
I love it! Not only are the German neoliberals’ pants on fire, but their hair as well. It’s socailism for the 1%, and austerity for the 99%.
What can one expect when Germany is led by a Marxist-Communist? My German friend here in Mexico never tires of pointing out that Merkel, in her former life behind the iron curtain, was the leader of the Marxist-Communist youth organization. He calls her Germany’s “Iron Lady,” the German equivalent of the neoliberal gurus Margaret Thatcher and Ronald Reagan.
Which brings us full circle back to the great unresolved political problem of the 20th century, eloquently articulated by Lawrence Goodwyn in The Populist Moment:
You’re going off the deep end, man.
So, since the American neoconservatives had their origins in Trotskyism, should we also consider THEM to be Marxists?
http://en.metapedia.org/wiki/Neoconservatism
Should we consider your idol Reinhold Niebuhr to be a Marxist – which he was up until WWII – even though he ended up being the ideological godfather to such fascist luminaries as McCain, Albright, Obama etc and one of the main proponents of expelling the Palestinians from their home land to make way for the European Jews?
It’s on the tip of my tongue…where did Marx write about the use of Christianity as the underpinning for just wars?
Oh, that’s right, he didn’t.
“Niebuhr’s long-term contributions to political philosophy and political theology involve relating the Christian faith to “realism” in international relations and foreign affairs, away from idealism, and his contribution to modern just war thinking.”
http://en.wikipedia.org/wiki/Reinhold_Niebuhr
Y’see as a leftist, I can see how ridiculous it would be to include such fascists as the neoconservatives, Niebuhr, etc, as Marxists because at one point in their lives they had their heads in the right place but later spent their time working towards ends that were antithetical to helping the common human being.
Really, you’re better than that, fM.
Merkel is a Marxist?
So, I guess we should all giggle about Hollande, too?
What a fine example of a socialist, huh?
Pathetic.
@ jsmith
Is it possible for you to open your mouth without uttering your distoritons, half-truths and outright lies?
Oh, but I forget, you’re a Marxist. And as Martin Luther King so aptly pointed out, since for the Communist “there are no fixed, immutable principles; consequently almost anything — force, violence, murder, lying — is a justifiable means to the ‘millenial’ end.”
As to Neibuhr being a Marxist, nah. He was a socialist, yes, just like Martin Luther King, but neither of them were ever Marxists (except in the make-believe world of Marxists). skippy provided the relevant facts in regards to Niebuhr on this thread the other day:
http://www.nakedcapitalism.com/2013/02/big-bank-welfare-queens-unprofitable-without-government-subsidies-so-why-dont-we-regulate-them-like-utilities.html#comments
jsmith, the other day you provided Exhibit “A” of the sort of utopianism that Niebuhr attacked. From a link you furnished, following a prolonged and scurrilous assault on Hannah Arendt, it concludes as follows:
That was written in 1955, and of course we know now that the violence never went away, nor did any of the beautiful promises of the Marxists ever come true.
Maybe this explains why you hate him so much.
That hardly serves as the basis for your allegation that Niebuhr “was the philosophical godfather of the neoliberal movement.”
I notice how you carefully cherry-pick those who claim to have been influenced by Niebuhr — you allege “he ended up being the ideological godfather to such fascist luminaries as McCain, Albright, Obama etc.” — and very meticuously ommit those like Martin Luther King, Jr., Elliot Spitzer, and Andrew Bacevich that do not conform to your distortions and half-truths.
Again, maybe Niebuhr’s anti-communist stand helps to explain why you hate him so much. And the fact that Niebuhr opposed the Vietnam war hardly seems congruent with your lumping him together with the neoconservatives.
Again, this hardly seems to place him amongst the ranks of the neoconservatives.
Again, this places him solidly outside the Utopian visions of Marxism, Nazism, neoliberalism and neoconservatism, and their belief that violence is justified in order to bring about their fantasized worlds.
Again, this may help explain why you hate Niebuhr so much.
Again, this may help explain why you hate Niebuhr so much. He was a socialist, but despised Marxism.
The need for absolute goodies and absolute baddies runs deep in us, but it drags history into propaganda and denies the humanity of the dead: their sins, their virtues, their efforts, their failures. To preserve complexity, and not flatten it under the weight of anachronistic moralizing, is part of the historian’s task.
By the way, Ralph Ellison, who I quoted above, was another in a long tradition of prominent black thinkers and intellectuals who attempted to operate outside the hierarchical languages that grew out of the visions of Adam Smith and Karl Marx. As he wrote in “The World and the Jug”:
I don’t know; it seems like 30-40 years of democratic socialism in Europe and The New Deal in the US were pretty successful. The mix is the key. No central planned economy but harnessing the power of economic freedom (capitalism) to drive a robust safety net and some level of ongoing redistribution.
These institutions have been destroyed quite intentionally via the Washington Consensus and Shock Doctrine/Disaster Capitalism tactics.
looselyhuman said:
That they were. But why is that so? Can it not be argued that the places where socialism has worked best to achieve its stated goals are the places where it evolved more along the lines of Christian (moral-spiritual) socialism rather than Marx’s “scientific” (materialistic) socialism? Unlike the big lie propagated by Marxist-Communists, the origins of socialism are not Marxist. Christian socialism existed for almost 2000 years before Marx came along, and I think it can be argued that socialism is just part of the human condition. (For much more on this, there’s this: http://www.anth.ucsb.edu/faculty/gurven/papers/kaplangurven.pdf )
The myth that all socialism is predicated upon Marxist-Communist theory is nothing but Marxist-Communist propaganda, and is something one should not fall prey to. As Susan Neiman pointed out of Albert Einstein:
Firstly, Marx did indeed frame Scientific Socialism in moral principles at certain times, though I will admit it is fundamentally materialist even when framed in moralist terms.
Secondly, in Why Socialism by Albert Einstein, you will see certain terms coined by Marx, including among other things “reserve army of the unemployed”. I think thats evidence enough that Einstein was at least familiar with Marx. And Einstein, like myself, was a socialist but differentiated himself from the USSR, as did certain Marxist Socialists like George Orwell.
Please dont confuse proper Marxism with Leninism or Stalinism. Being a Marxist does NOT have to be synonymous with supporting Stalin or even Lenin.
I appreciate your attempting to illustrate that socialism goes a long ways back before Marx, because its true, as Marx himself referred to premodern man essentially being the first communists/socialists. Compared to collective living, Capitalism is by contrast very modern.
Capitalism existed before Adam Smith, but Adam Smith put it down on paper. The fact that he did not ‘invent’ capitalism does not take away Smith’s contributions to the understanding of capitalism and to capitalist theory. So while you have a point, at the same time, its still a bit unfair to discount Marx’s work entirely.
I feel like youre going too far out of your way to discredit Marx, and its a bit ridiculous to me. It almost seems like you have some sort of personal Animus towards Marx and Marxist theory.
If there’s one thing we folks on the left can all agree on, it’s that most of the other folks on the left are sadly-out-of-touch, deluded, undereducated, and misinformed. Consensus, at last!
Seriously though, can’t we all just get along?
My crazy, brilliant, Greek econ advisor was always very keen to distinguish between ‘Marxian’ and ‘Marxist.’ Marxian-ism refers to sharing Marx’s basic critiques of the Capitalist System presented in the majority of Das Kapital. Marxism, OTOH, means sharing Marx’s prescriptions for the post-capitalist phase, as well; i.e. dictatorship of the proletariat progressing to “beautiful anarchy” and “the withering away of the state.” Communists might be either Marxian, Marxist, both or neither. I rarely see these distinctions made anywhere else, but that’s what ol’ John told me.
At least, that’s how I remember it. I may have things a little confused, or accepted definitions may have changed. I get the feeling that most Marxists don’t actually advocate Soviet-style revolution or Bolshevism, but I could be wrong.
• Massinissa says:
I think Arendt pretty much hit it on the head when she wrote:
• Massinissa says:
Once more, I believe Arendt does an outstanding job of articulating the problem:
In other words, the Marxists believe that they and they alone are on the side of the angels, and furthermore they are justified in their use of “anger and clenched militancy” — the unleashing of barrages of outrageous falsehoods and vicous, unfounded character assasinations — to say the least.
All this goes full circle back to what Martin Luther King siad, that since for the Communist “there are no fixed, immutable principles; consequently almost anything — force, violence, murder, lying — is a justifiable means to the ‘millenial’ end.”
diptherio says:
That’s very much the way Martin Luther King framed it.
For anyone interested in King’s take on Marxism, he wrote in some detail about it:
@ diptherio
And no, we can’t “all just get along.”
As Lawrence Goodwyn put it: “individual righteousness and endless sectarian warfare over ideology came to characterize the politics of a creed rigidified in the prose of nineteenth-century prophets.”
@diptherio “Can’t we all just get along?”
If even one percent of you ever got along and agreed that the 0.01 percent is your enemy, then you would have us outnumbered by 100 to 1.
For this reason, we can never allow that to happen.
We are the Peter Pinguid Society, we are the 0.01 percent.
99 to 1, not 100 to 1, according to my finger-countint, or dactylonomy, for our learned friends.
Prime Beef Says in reply to Pluto Penguin: “99 to 1, not 100 to 1, according to my finger-counting, or dactylonomy, for our learned friends.”
Er, no, 1% is to 0.01% as 100 is to 1. PP isn’t drawing his sample 1% from The 1%, it’s any 1% from the hapless 99%. Hapless being the operative word here.
“I feel like youre going too far out of your way to discredit Marx, and its a bit ridiculous to me. It almost seems like you have some sort of personal Animus towards Marx and Marxist theory.”
As a very happily intellectually promiscuous person, I also find red baiting annoying. If someone actually has a point they want to make, then just make the point.
As for historically “Christian,” roughly egalitarian “communist” communities (is that redundant?) in feudal Europe, the only references to this form of dissent (and it is a form of dissent) that I’ve ever seen has been in “Marxist” historians, to include Engels. So, to suggest that they ignore it simply false information.
Meanwhile, it makes absolutely no sense to me to try to draw some penumbra of enlightenment around liberals and liberal thought when liberals can be just as violent but are much sneakier about it, as liberals are given to moralizing rationales and to sublimating violence into forms of naturalized exploitation that people learn to not even see.
Some might want to separate out a liberal tradition from neoliberalism and neoconservatism, etc, but I don’t think it’s so easy to do that, no matter how loud anyone yells LIBERTARDIAN!
“In other words, the Marxists believe that they and they alone are on the side of the angels, and furthermore they are justified in their use of “anger and clenched militancy” — the unleashing of barrages of outrageous falsehoods and vicous, unfounded character assasinations — to say the least.”
Yeah, them and everyone else.
St. Hannah Herself traces this dynamic back to the French Revolution. I’m sure we can find a multiplicity of precedents and successors, (albeit some sneakier than others).
Agreed generally, but I don’t see why it’s necessary to prefix with “Christian” (as toxic as Marx in some ways) when you can find similar thinking in secular humanism, enlightenment philosophy (yes with Christian roots but I question causality), etc.
I would also add that this is also capitalist/neoliberal/libertarian propaganda – at least from a cui bono perspective. Paint all things socialist with a Marxist (and by extension Stalinist, Maoist) brush and the masses reject it.
The Zionists and anti-Semites play the same game.
The Zionists, like David Brooks for instance, blast anyone who argues against Zionism as being an anti-Semite. The tactic, of course, is to paint anyone who challenges Zionism with the face of evil.
Likewise, the anti-Semites assert that anyone who argues against Zionism is an anti-Semite. The tactic, of course, is to bolster their own ranks, making it appear they are more numerous than what they really are.
I suppose I should finish that thought. In the world of David Brooks, all Jews are Zionists. So if you attack a Zionist, you are attacking all of Jewry. This also bolsters the ranks of the Zionists beyond what they really are.
Likewise, the anti-semites brand all Jews as Zionists, because they’re interested in tarring all of Jewry with the brush of being Zionists.
May I humbly submit that “what works” also has a lot to do with Thermodynamics?
Neither socialist “paradises” nor capitalist “prosperity” are possible without energy surpluses.
What “worked” politically, in the 1930s, in the 1940s, in the 1950s, in the 1960s, the 1970s and even the 1980s IS NOT GOING TO WORK NOW, because of some very hard energy, resource, and—most sadly of all—environmental limits, none of which are subject to modern political blandishments nor capable of being reversed via even the most extreme of political ideologies on offer.
I used to be a Libertarian…
But now Im a socialist.
Does that mean its fair to say Im a Libertarian, because I was one years ago? Lolno.
Merkel may have been a communist before, but she sure as shit isnt one now. Times change, people change.
The conflation of Marxism-communism with socialism is a big part of the problem.
see my comment above. do we even know what the terms of this ‘debate’ are?
Same mischaracterization re Bersani. Ex-communist becomes ideological neoliberal austerian, but somehow putative leftist bona fides inexplicably linger.
Did it every occur to you that there is no fundamental difference between the two? This was the conclusion that Eric Hoffer came to in True Believer:
Nice try peddling that association fallacy:
“Since both Communists and Fascists compete for disaffected citizens, they are the same.”
“Since some Communists have later become Fascists, they are the same.”
I used to be disgusted. Now I try to be amused.
There is a mixture of good (and bad) analysis and plain antigerman animus in this piece. The general characteristic of Italy´s situation is about right. And also that austerity can´t go on like that. Berlsuconi though gets off way to lightly. He is the Italian equivalent of Wall Street Banksters. The only difference being that Wall Street buys Washington whereas Berlusconi does the politics himself and very much in his own interest. (And the interest of his cronies)
He is a thoroughly unscrupulous politician who proves that TV reigns supreme. He is – much more than Bersani of the left or even Monti – the epitomy of what Grillo rails against. To not see in Berlusconis success a real danger to democracy is to be blind. It seems to be case of the enemy of the enemy is my friend.
Now to the Antigerman animus of the piece. What is exactly meant by “the Germans have been driven by their desire to avoid embarrassing questions about banks and their emotional attachment to manufacturing dominance and the virtues of saving?” The part about the banks one can agree to. By the way there was an explosion of anger in Germany in the last weeks directed against the leadership of Deutsche Bank. The average German isn´t far away from the position of occupy. But what about the “embarassing attachment” to “manufacturing dominance and the virtues of saving?” Does the author believe that Germany is a planned economy? That somehow all this “manufacturing dominance” has been planned by Berlin? And that Berlin could suddenly decree all these companies to be less competitive? Or at least decree wage rises? How so? Even if it wanted Berlin doesn´t have the constitutional power to set wage levels.
German manufacturing prowess rests primarily on thousands of small and medium sized companies mostly in the South and none of them ever received a penny from the government. Nor will they stop doing their best. By the way the economic structure of Northern Italy is very similar and Northern Italy by itself is even more industrialised than Germany as a whole. But nobody has as yet claimed that Rome has had anything to do with it.
What can be done? Maybe first stop the moralising. On both sides.
“That somehow all this “manufacturing dominance” has been planned by Berlin? And that Berlin could suddenly decree all these companies to be less competitive? Or at least decree wage rises?”
Well, the manufactoring dominance is very much a German national policy, along with huge trade surpluses. And they did, basically, insist on an internal devaluation in the early part of the last decade, where under Srhoder everyone’d wages got squeezed, the unions agreeing to it.
Actually, yes.
The Germans benefitted from the Euro being structured in such a manner that their finance industry exported inflation to the periphery, resulting in increased exports from Germany to those nations.
I would argue consciously structured the Euro to facilitate this.
See this. (My blog, where I riff on a Krugman post)
The graph Pr0n shows it all.
Manfuacturing dominance is what most nations would like if that means more jobs and growth.
If you have a legions-backed imperial currency, you don’t need to manufacture dominance. You have it already. Romans knew that.
The internal German devaluation was done out in the open. Italy, Spain, France….all these countries watched as it happened. And it was a pretty methodical process. These countries could have decided that they needed to take at least some steps in that direction so that Germany’s competitive situation did not get too far ahead. Granted they did not have a big event like reunification going on to justify some degree of unpleasantness the process has associated with it. I can sort of understand Spain not reacting. They had a huge housing construction bubble and things probably felt super-duper for many years. But France and Italy are a bit more mysterious as they do have a lot of competing industries with Germany.
Just hold on a moment. Are you seriously trying to blame others for not wanting to join the germans in the race to the bottom? Nice work there, propagandist. Your blame the victim routine is almost complete.
Now all you’re missing is the Absolute Truth about prolifigate south and people feeling “entitled” and you’re done.
Just to remind you: Germany has still a better social security system, it doesn’t know a 99-er problem; Germany has still a Gini-Coefficent comparable to the Scandinavian countries. What fucking race to the bottom are you talking about?
Most of the countries in problems have either a flawed political landscape or they are just unwilling to tax accordingly to their expenditures. So one has two possibilies: Either tax more or cut expenditures! It’s as easy as this!
Two lies right there:
1) Scandinavian countries have taken part in the race to the bottom with great abandon, thus comparison of Germany with them to prove that there is no such thing is inane.
2) You cannot expect to have a balanced budget in the eurozone nations, there HAS to be deficit spending. Since the private sector all around is reducing its debt, this means that without government spending the monetary base shrinks. And when the monetary base shrinks, you destroy the average person on the street while the rentier scum who benefit from “strong” money make off rich.
So yeah, thank you for your lies today.
Yeah, Yeah, everybody who doesn’t share your opinion is a lier…
Let’s get some facts:
http://www.missoc.org/MISSOC/INFORMATIONBASE/COMPARATIVETABLES/MISSOCDATABASE/comparativeTablesSearchResult_EU.jsp
Clearly a race to the bottom. If anybody suggested such a system in the US he would be denounced as communist.
Yes, I most seriously am doing exactly that. You got it.
Linky link:
http://www.missoc.org/MISSOC/comparativeTables
There was not an internal German devaluation.
They set up their banking system to inflate their customers/competitors in the Euro zone.
China’s currency manipulation writ small.
One can argue that the governments were too obedient to banks and rescued them without adequate haircuts of the creditors. I agree with that. But Italy has no big problems with its banks, unlike Spain, Portugal, Ireland. For these countries your argument might apply though I would insist that nobody forced these countries to get into debt. It was their choice and now they have to handle the consequences. If they aplly larger share-burdening of the losses is up to them, but there is a risk that it might go too far and their banks are shut out of credit markets.
Italy has a real problem with its rigged politiciians, Tangentopoli didn’t lead to a purification but to a cynical approach in which Berlusconi could enrich himself, mock the judiciary and corrupt the whole states body.
I quite sympathise with Grillo’s movement though I’m not sure if he is really honest, one will see…
Where and when should Germany actually have devalued its currency? This is really absurd.
It concentrated very much on setting the right framework for manufacturing and engineering. It was mocked by the FT that it had become an industrial museum and that it had lost touch with modern financial services. Now it seems that concentration on FIRE-industry is an artifact of yesterday and even Obama cites in his state of the union speech the dual education-system of Germany as an example.
There are good times and bad ones.
What are you talking about??? Google Hartz reforms or read this.
The labor “reforms” were tantamount to an internal devaluation:
http://www.nakedcapitalism.com/2012/07/josh-rosner-eurozone-crisis-no-more-safe-havens.html
Grillo actually demands Hartz IV since it would be improvement to the Italian system. The reforms of Schroeder were harsh for the Germans but the benefits are still way, way above the level of other countries.
http://www.missoc.org/MISSOC/comparativeTables
Check it out. Chapter X in the second field.
What sources does one read to get the views of ordinary Germans? An English expat blog would be nice for people like me who can’t read German….
I do read German, and the editorial of the main stream press went overboard yesterday – and collectively showed an unbelievably Berlin centric perspective – it was embarrassing. Noticeable was the absence of any serious official comment. The press together with the political elite are confined into a very narrow and dangerous reality distortion field. However, the delusion is not only driven by misjudgement of economic reality, but by (mainly) two further interlinked issues – the still lingering WW2 guilt which is mainly affecting the Berlin/Paris relationship.
I have to digress a little to make my point…
Till re-unification, Paris lead and Berlin paid (oversimplified) – and both countries treated each other as equal, both anxious to upset the fragile balance. As admitted by sources close to Mitterrand, Paris blackmailed Kohl to agree to the Euro (to get rid of the strong German currency, embarrassing Paris; and to ensure “control” over Berlin) to allow re-unification. To disguise the purpose and further shift power to Paris, a long list of candidates were included to join the new currency union. Blatantly ignoring all economic advice – the Euro was a political project, without economic foundation, but never mind.
So Berlin is caught between a rock and a hard place. From her point of view, the continued “return from pariah state” hinges – to a certain extent? – on the ongoing existence of the Euro – and the elites appear to be willing to sacrifice Germany in its entirety – “to be part of the family”. Because they are uncomfortable with taking the lead (in a polite manner, without being arrogant seems to be beyond the social skills of most acting politicians in Berlin – the two clowns gaffe only the latest), and act like stunned, thus not even defending obvious German self-interest. (Yes, they will want as much of their capital exports back, badly invested or not – who wouldn’t?) Imposing the wrong medicine – austerity – as a placebo to the real thing – revaluation against the German economy – will not help.
Everybody, I guess even Paris, has by now understood how bad an idea this forsaken currency union was, but how to end it without loss of face and considerably economic turmoil? Due to the above, the door to the most sensible solution – Germany leaves first, plus some other real core (ex France) countries with it – is most certainly closed. Because sorting out the economic troubles requires a sensible solution to the much bigger issue – the political relationship between the bigger European nations, including Britain. As long as no progress is made on the latter, the world will be stuck with the Euro crisis.
Afterthought – Italy can do Europe and the world a big favour of leaving first – thus forcing the issue.
Brilliant observation. Right on the spot. Still I believe further integration is the only way forward. Everything else will end in a catastrophy. Especially for Germany. So better for Germany to pay now than pay much more later. Reintroductin of the Mark and reawakaning of German nationalism? A total nightmare. Everything but that.
Perhaps we can go further in breaking things up.
Maybe one day, Scotland, Barcelona, Prussia, Bavaria, etc will all be totally independent again. Then we don’t have to worry about a big, bad Germany, Spain or GB.
Beg to differ. The mess is now too big to be sorted out without finishing the Euro off. Never forget, 90% of Italians voted against EU, Euro and Brussels only a couple of days ago. What would happen in Spain if given a chance? And in Germany?
The current level of integration is accompanied by a lot of undemocratic measures and institutions – and many Europeans hate them. Integration was imposed, not voted for. Scary as it will be, a couple of steps back will be necessary, otherwise any more undemocratic “integration” will implode the EU in acrimony.
the dirty secret – Germany cannot pay to maintain her living standard all over the EU (only 3 federal states out of 16 are paying for the internal transfer system) – all over the euro zone, neither for a short period of time nor forever. Thus the euro is the first thing which needs to go to stop the Europeans from going to war, seriously.
As for nationalism is Germany – the culture is very consensus driven, looking for compromise. The populace is by now angry, as they were promised a “stable” euro and no obligation to pay for the proliferate others – see what they’ve got. The (silent) majority is fed up with paying for the EU (reparations without end in sight), fed up with paying for bail-outs. The more pressure you put on Germany to pay (more), the more you conjure up the devil you fear. Its time for the (mainly) French bullying to stop – and the way Berlin behaves is the biggest obstacle to achieve it. As said above, Europe needs a new balance, reflecting the changed German role without leading to hegemony. Some progress was made on the last summit, but it is a long and hazardous road to travel. Abolishing the euro quickly will help.
Give some folks an inch and they take a mile. Instead of being grateful for not receiving the same fate they had planned for others (utter extermination down to the last man, woman and child) the German’s are upset that they have to share their wealth with the rest of the EU. (Including nations they destroyed during the war. Why exactly should they ever be allowed off the hook for that?)
Would you call that moxie or chutzpah?
Because at some point in time you’re not dealing with individuals guilty of those war crimes. You’re dealing with their children. Right now, you’re mostly dealing with their grandchildren.
Are you a thumper? Do you believe they should pay until the seventh generation?
Well, it would sure be nice not to have any more wars between the European powers. So shouldn’t the first priority be the EU, and the second, and the third? For the elites too….
I am German and I am as interested in the German mood as you are. To gauge it I look at the commemnts section of major German newspapers and look at which comments are most recommended. The mood is ugly.
First against the banks. The reasoning is very much like here at nakedcapitalism. Then there´s a revolt brewing against Europe and bail-outs. The smarter people understand that it is disastrous to let the banks be saved by Governments instead of bringing the banksters to account. Wit the shenanigans of Deutsche Bank in Germany.
But that is the smart people.
The majority goes for easy and none to pleasant explanations of German virtue vs. latin profligancy. No use telling them that these same Southeners keep Germans in work.
Finally a thought on the creation of the Euro. It is wrong to believe that it was German guilt that allowed it. Kohl was not that kind of man. Kohl and his generation (and also Mitterand who was a POW in Germany) were stamped by the war. Kohl rightly understood that Germany is to big to be dominated in Europe but to small to dominate. The only solution was (and I still believe is) Europe. That is how they consoled themselves when they gave up the D-Mark very much against their wishes. Their hope was for Europe to grow together. And for a while it worked out. Germany ran the first trade deficits in her history when Eastern Germany sucked in all those imports and everybody was happy. But since then the post war situation has reasserted itself. Only that now the neighbours can´t periodically devalue anymore. Now everybody´s stuck and nobody knows what to do. Internal devalution doesn´t work so there must be some other solution. But which?
“Finally a thought on the creation of the Euro. It is wrong to believe that it was German guilt that allowed it. Kohl was not that kind of man. Kohl and his generation (and also Mitterand who was a POW in Germany) were stamped by the war. Kohl rightly understood that Germany is to big to be dominated in Europe but to small to dominate. The only solution was (and I still believe is) Europe. That is how they consoled themselves when they gave up the D-Mark very much against their wishes. Their hope was for Europe to grow together. And for a while it worked out. Germany ran the first trade deficits in her history when Eastern Germany sucked in all those imports and everybody was happy. But since then the post war situation has reasserted itself. Only that now the neighbours can´t periodically devalue anymore. Now everybody´s stuck and nobody knows what to do. Internal devalution doesn´t work so there must be some other solution. But which?”
The post-war situation wasn’t any more economically stable then the present. No matter what the state of the German or French economy; the bond markets would bid up interest rates on French bonds, while German bonds would always go lower. Germany could be in recession yet this dynamic would still play itself out. Ironically the Euro was preceived to limit this effect. Instead it blew up in everybody’s faces. Well before further economic and political integration could take place to cope with it.
You’re absolutely right. They’re stuck and nobody knows what to do. The answer that has presented itself is to point fingers and kick the can. That’s one of the reasons why I’m having a harder time attributing malicious motives to the Eurocrats, the Germans, or even the Club Med countries.
All I know is that the longer this goes on the uglier it’s going to get.
@ Tom
Yep, all the vitriol is welling up in the comments of the main newspapers, and – for me – one reason why it is still so calm. And I personally discovered brown tendencies where I would have least suspected… and there is much more then I thought possible as well. Scary, simply scary. However, for the time being, the economy is relatively well off, thus most people are just not interested.
We agree, “more” Europe is the solution, however not the undemocratic, intransparent mess currently simmering in Brussels.
@Observer:
Ummm … the euro, like off-shoring manufacturing jobs, the ‘Washington Consensus’ and the succession of asset-price bubbles in the US and elsewhere, is an energy-price hedge.
All of these expedients emerged post- rise of OPEC and the ’73 oil embargo. The euro particularly emerged out of the quasi-currencies used to normalize exchange within various goods-markets in Europe such as European Unit of Account and ECU:
http://en.wikipedia.org/wiki/European_Unit_of_Account
The euro was intended to allow members a hard currency alternative to purchasing dollars or sterling on forex markets prior to buying Middle East fuel. Add Europe’s historical Jew-hatred, even countries such as Belgium and Italy could gain a discount or guarantees of supply in line ahead of the Zionist Yanks.
This is why the fiscal side of the euro-endeavor was shelved as soon as the euro began circulating … the currency itself was the means to the petroleum end not part of a larger politico-economic trans-European whole.
All of the energy price hedges were- and are undone by fuel constraints, the consumption of all cheap fuels and higher real fuel prices. This is why economic bubble-making cannot gain traction, why the euro is dissolving, why offshoring is convulsing, the neo-liberal ‘Plan’ has diminished credibility, etc.
Old futures’ market proverb: “The cure for $10 corn is $10 corn”: the cure for high priced gas is high priced gas … and conservation!
You won’t like the cure..
You are all falling into the trap set up by the US and Britain who are determined to destroy the Euro as a rival to the dollar as the world’s reserve currency. The Euro crisis was engineered by Britain and US. Note Goldman Sachs involvement both in Greece Italy etc. Its fingerprints are all over the Euro crisis beginning with the dumping of toxic mortgage securities on unsuspecting European banks. The bond vigilantis brought Berlusconi down because he was getting too cozy with Vladimir Putin, the real target of all this strife in the Eurozone. It’s an elaborate game of divide and conquer and everybody including Ives Smith are falling for it. Beppe Grillo is truly a clown, the European equivalent of the American tea party, claiming to be anti austerity but then totally anti development and anti immigrant. It is past time for European integration to counter the American and British threat. It is time for Europe to truly unite and look east. There will then be apopoplexy in London and Washington.
FWIW, M5S supporters are less anti-immigrant than average.
Likewise Berlusconi was getting cozy with Libya’s Gaddafi and see what happened to him. I think everyone is underestimating Mr. Berlusconi and falling for Anglo Saxon propaganda portraying him as a clown. Obviously Berlusconi was a major threat to Anglo US agenda. When Bill Clinton has sex with an intern, boys will be boys, but when Berlusconi’s bunga bunga is a sign of depravity. Grow up! The Euro zone crisis has been engineered by the US UK axis of evil who’s real target is Vladimir Putin. Next target Putin’s ally on the Mediterranean, Syria. The dominoes are falling one by one.
Finally, austerity is not a mistaken strategy, it is a deliberate strategy to destroy the Euro and the morons in in Brussels, Berlin and Paris are falling for it or deliberately selling out the rest of Europe to Anglo US hegemony.
Grillo anti-immigrant? Sorry, no. Anti-development? No, not anything like the austerians Monti and Bersani. What could be more anti-development than austerity? Anti-TAV isn’t the same as anti-development.
So Goldman-Sachs was advancing the Hegemony Strategy of Downing Street and Pennsylvania Avenue in selling mad cow securities to European buyers? Not just jamming its blood funnel into some more money?
This makes me think Germany will eventually launch a military attack on Italy and maybe Greece. The attack will have no clear objective and will bog down almost immediately in a total confusion and chaos that will minimize casualities and property destruction.
And that made me think: What if Italy won?
Can you imagine Italy ruling Europe? Mandatory 2 hour lunches. Mandatory 6 weeks of vacations. Mandatory scantily clad women on TV dancing up and down. German youth growing up drinking wine and not beer. Dissolution of the Bundesbank and its replacemet by an unmanned money printing machine supervised by a council of 100 ex-Communists from someplace sunny and warm. Holy Smokes. This seems not only plausible but probable. It’s a strange world if you think about it. And the more you do the stranger it gets.
Craazyman, you almost make sense here!
Thank you for this. I needed that laugh. Excellent what-if.
Please, don’t say these things. They are utterly insane. Which means they have a decent chance of becoming reality. I’d hate to see the day when you can say “Hey, I called it!”.
craazyman, have you ever read the book “Your Money or Your Life”? It’s kinda like that!
The more we “do”, the more time and energy we waste doing it. I would posit that 90% of “jobs” in the US are completely pointless and unnecessary: better NOT done from a thermodynamic/survival aspect. It’s only the artificial debt-leveraged money system along with a sick culture that steers and/or forces people do what—logically speaking—are perfectly pointless and solely wasteful things.
Talked last year with my RWNJ sister in CT, who complains about all the leaves in her yard that she has to either rake or pay someone to leaf-blow and cart away. I bought her a shredder, so she could return the leaves to the soil more easily and in a “tight-ass-neighbor-friendly” fashion. NAY!
She rejected composting the leaves on site, because paying people and using lots of diesel fuel to cart leaves away, and then paying people to come and put compost and petroleum-based fertilizers on your land is (and I quote) “civ-i-li-ZAY-shun”!! That’s “civilization” and you better like it! What are you, some kind of commie!?
I miss Italy tremendously, but there are too many folks there still aspiring to the “civilization” bandwagon. Many of the older generation are still in the 1950s-60s upwards aspirational transition out of share-cropping: from cracked wood tables to Formica, from the donkey to the SUV. The younger generation look upon their grandparents’ hardship stories as fairy tales from long ago. Folks of all ages look to The State for solutions even as they justly deride the never-ending corruption. Whatever “can-do” spirit they’ve had, if any, has long been beaten out of them, and the general life emphasis is how to set oneself and one’s children up in an untouchable State job, no matter how absurd and mind-deadening. Despite the superficial modernization of many systems, it remains an entirely feudal culture, as I saw it over the ten years I lived there.
“perfectly pointless and solely wasteful things”
and I’m lookin’ at YOU, European Parliament!
Excellent analysis. You drive a stake through the heart of the beast, credit based economies driving churning the economic waters all in an attempt skim profits from the chaos.
Italy is going to be exciting to watch. Doesn’t surprise me there would be copious amounts of spin coming from Berlin on what just happened. Those damn ingrates have the audacity to actually vote for democracy…How dare they!
Let the games begin!
Evans-Pritchard says “It could in theory return to the lira without facing a funding crisis…”
huh?
He said they have a budget in “near primary balance”. That means the deficit is all interest on the debt. So taxes would cover spending if they defaulted.
What he didn’t mention was Italian banks have been buying a lot of guv bonds, now that the ECB has been backstopping them. So if they cut from the E-Zone, they kill their own banks.
Also they have a sizable trade deficit and lots of energy imports, and also raw materials for mfg industries.
Sure, they would have the Lira and a modern high speed printing press, and they would be running it full speed to save Italian banks.
And the Lira will certainly drop against the euro, and then wonderful things are supposed to happen to exports – if they can keep selling price ahead of rising import input costs, and local demand doesn’t suffer because everyone spends all their income on spaghetti and gasoline.
Let the games begin!
Also, if they defaulted and went off the Euro, it is unlikely they would be allowed to remain in the EU – which means they don’t get preferential tariff treatment, so they get a brand new “competitiveness” hurdle to jump. Lower Lira again!
I don’t think, that would be a big problem. BUT, if the Euro collapses, the existence of the EU itself would be in jeopardy. There would be many disappointments and a total shake up of trust in Europe. That would be the hour of men like Orban (Hungary); not a very nice outlook.
Well, if they exit — Itexit? — they’re sovereign in their own currency. And the MMTers did go over their, and fill a large auditorium for an economics lecture, of all things….
Germany is getting their revenge for their second ignominious; defeat – ignoring that it’s only possible because of the Marshall Plan, of course… They seem to now have as much power over Europe as Herr Hitler ever did.
By printing lire the Italians take their own fate away from the Germans and the troika. A risk yes, but the act of bringing back the lire may be a galvanizing force within the Italian society an unifying force, a sense of pride whose benefits are hard to measure.
Mind Wave Deconstruction
but who is the “they”.
we may see Italians as “they” but do they see themselves as “we”. this seems to me to be the foundation of the issue.
If they see themselves more as a “we” than as Europeans, or Tuscans and Sicilians and Romans, then “they” could exit the euro.
but that seems like a big step to take pyschologically speaking. It seems to me a stalemate pending some strengthening of the group consciousness structure, which right now constellates around the vague triad of “European” “Italian” and “Region”. It may be German and Euro elite condescension can trigger a reconstellation around “Italian” — the energy is dormant and scattered but not without potential. It will need more of a catalyst than seen so far. Maybe another year of grinding recession would do it. Or maybe an insulting gesture by a German public figure, some little piece of theater to galvanize the energy.
Modeling this seems to me more like wave-form analysis where you can add two waves and get some weird discontinuous jump than any sort of Cartesian linear system where curves intersect in discrete solution sets. But I’m not a mathematician so maybe this only makes sense to me alone and real mathematicians would scoff at it. So what. :)
Dittmer can figure this out. But he ran away and now he’s long gone. Maybe he was a fake, just like Code Name Cain. Maybe he was just fooling everybody and he can’t add two and two without a calculator. haha
I think Italians have shown themselves, historically, to be fairly opportunistic in a fairly rational way.
“We” is defined purely by context, IOW. “We Italians” would certainly prefer to be led by an identifiable Italian than by a German, but within Italy, the North and South chafe. The Bourbon-connected still chafe againt the Piemontesi interlopers. Each region chafes against its neighbors, each province against its fellow provinces.
When I moved one town away, the postal clerk, when I submitted my change of address, spontaneously regaled me with his quite negative (but entirely vague) opinion of the neighboring town! This is commonly referred to as “campanilismo”: protagonism of the “campanile”, which is the town hall or church bell-tower.
So it just depends on what the level the external threat is, to determine what the organic level of response will be. Italy is not anywhere near the intellectual concept that the American state is; it’s much more of a physical organism which responds with various anti-bodies and means of protection which I would call ecological in nature.
The memory of this particular body is long. Modern-day professionals still identify strongly with familial connections of the 1300s. It’s a race of Machiavellis as much as mere survivors. They’ve gone without money before and will go without it again. They understand its political origin as well as its transitory value for the less-well-connected. The State reached into everyone’s bank account and took out a flat 7% or something like that, across the board, overnight, in the 1990s. (I’ve no doubt insiders were tipped-off to that.) It’s openly understood that Prodi (Goldman Sachs alum) completely cooked the books to enter into the Euro, seeing it as advantageous at the time. Before that, however, it was quite common for people to use alternate forms of currency: not just IOUs (“cambiali”–there’s a funny 1960s film called “Il Cambiale” that traces its percorso from a doctor to a grocer to a prostitute, and so forth…).
The main newspaper of a well-off financial center, Bologna, is called “Il Resto del Carlino”, which means “The Change from your 10-cent-piece”, essentially, once given away instead of monetary change after the purchase of something else.
Living in Italy involves “l’arte di arrangiarsi” more than anything else; the “art of making-do” would imbue Protestant-Work-Ethic overtones not in the original… more like “the art of setting yourself up (in a favorable situation or climate)”.
I hope Italy wins.
Maybe if high profile EuroNordiCore spokesfolk were to retire the term PIIGS and role out the term GIPSIs for the national targets of their scorn, that might provide the psychological nucleating agent around which “Italy” could crystallise.
But there is the risk that Italy could delaminate and that a breakaway Northern Leaguestan could seek to join the EuroNordiCore.
@Yves sez:
Sorry, austerity is baked into the cake regardless of what Italian- or other ‘voters’ want. Don’t believe me, just sit back and watch. The revolution may not be televised but the ongoing collapse is on Twitter.
Analysts refuse to look at unpleasant evidence, preferring to dream instead. The model for Italy and the rest of Europe is Greece (except Norway and Denmark with their own, rapidly depleting fuel supply), the model for Greece is Detroit, the endpoint for all of the above is Yemen or Somalia. Austerity is not a choice, it is something to be managed, a fact on the ground, a component of the human race’s future. We conserve or else … conservation is imposed on us by the force of immediate events.
Conservation is a moral imperative, humans do not have the right to destroy the only world us and our plant- and animal charges have so that ‘GDP indicators can rise’.
Monti-technocracy was a failure before last weekend’s election, this means is there is/was too little to be gained for the establishment by stealing. Netted out and factoring energy into the equation, Italy is a sunny version of Detroit with better wine/no NFL franchise.
No government anywhere can change physical facts … as in ‘physics, laws of thermodynamics, entropy’ … nor can one create energy in the ground. None of the Italian political parties are promoting stringent conservation, as such they are all failures before they begin.
@Yves:
If Italy exits the euro and depreciates their new currency to ‘become competitive’ presumably in the field of car manufacture, the country’s fuel bill will become unaffordable. Italy imports 95% of its petroleum, its waste-based economy will unravel at the same rate the lira ‘declines’. See Japan which is being fed through the same wringer by their own anti-austerity government.
Outside of the feel-good political story there is no way to make the dinosaur debt-industrial economic process work any more. Industry isn’t productive, it never was, it is impossible for it to be so and never will be. If industrial processes could pay for themselve they would have … there would be no debt or crisis, any deficits would be met by deploying more machines! Instead, more machines = more debt, it is finance that is irreplaceable and indispensable. This is why the establishment sacrifices all to defend it!
Keynes’ greatest blunder/oversight was to never question whether industrialization was a going concern, he assumed it.
!
Maybe it’s time to consider ‘shared austerity’ for mankind and live-long-and-prosper (or go-out-and-multiply) for plants and animals.
“Keynes’ greatest blunder/oversight was to never question whether industrialization was a going concern, he assumed it.”
I never thought of it like that. you may be right.
Fuel taxes in Italy are the highest in Europe, 54% of retail prices.
http://www.bloomberg.com/news/2012-03-29/italians-get-sticker-shock-at-the-pump.html
They have plenty of room to cut fuel taxes and print lira instead.
Please do some homework before spouting off.
Uh oh, hit a nerve!
Please think through what would happen if the euro dissolves and there are ‘replacement currencies’. A euro dissolution would reflect Europe’s bankruptcy not euro bankruptcy. The euro is a thing, the European economy is a process: regardless of currency, Europe will still be bankrupt … only in smaller pieces.
Which of the oil producers will take a lira if the euro fails or if Italy jettisons it? (None) Who will accept lira if the Italians ‘print’? (Nobody) Who will accept a depreciated lira? Which forex market will accept lira without a severe haircut? (Nobody) Why do you think the Europeans are sweating blood to remain w/ the euro? Even the separatists in Catalunya and elsewhere want the euro.
A: The euro = gasoline.
I don’t want to be sniffy b/c I think highly of your finance industry analysis but you clearly don’t know beans about the subject of peak oil and its ramification. Sorry.
The Euro = gasoline.
Europe’s salvation = Vladimir Putin and Russia = lots of gasoline
Hence the full on assault on the Euro by the Anglo/US axis.
The real target is Vladimir Putin, Europe is his natural market. Europe as always is falling for divide and conquer and Britain as usual is exploiting European parochialism. Witness this thread with all the racist banter about those lazy corrupt Italians and those uptight sadistic Germans.
By the way let’s count how many Russian Oligarchs now live in London. Would the US and Britain bring down Europe to get at Vladimir Putin. You’d better believe it.
“No one will accept the lira?” Oh come on! Italy has a primary budget surplus. It would not need to “print” much. Currencies are depreciated all the time. If you don’t understand that, I can’t help you.
People accept the currencies of all sorts of countries with less economic heft. Start with the Thai bhat and the Indonesian rupiah. Please.
Living in Germany,
reading the german and financial press,
the only 2 official statements from Westerwelle and Rösler are just the usual blather, you do, if you do not even know who has won, and much less, what he is actually doing.
And what all the German press had to say, summed up at the Spiegel was less, and much more moderate, what the Financial Times alone had to say.
“Hissy Fit” sounds to me a lot more like Yves and many folks here acting out there usual stereotypes about Germany.
Sorry
Genau (I thin that’s what one would say ‘exactly’ west of the Rhine) – too many of us don’t speak at lease one of the languages over there.
Maybe they are saying in Italy ‘La dolce vita is bologna’
One should probably see this article as easy entertainment piece, targeted at many readers that observe the situation from great distance. While I don’t disagree with the general direction (“downhill”) Yves has has shown poor timing with her predictions as she does not understand European politics. I mean, betting on Berlusconi’s incentives? I mean, the same guy who called Italy a “shitty country” that he wanted to leave! Whose incentives are aligned here? Can we please translate this to the US and (say) the Koch brothers? I just don’t think that they ever were as corrosive as Berlusconi, so I know my analogy is bad.
IF, good point.
I dont like the Koch brothers, but they seem to me to care a lot more about the US than Berlusconi about Italy.
If you think the Kochs care one iota about the US, you are smoking something extremely strong. They are ideologues of the first order.
And my reason for enthusiasm about the Italian vote is it throws a big wrench in the Troika’s austerity campaign.
Berlusconi, however absurd I consider him to be, is still not unpopular among Italians, even reasonably intelligent ones like my husband’s family, for example. My husband grudgingly admits that Grillo is correct in all he says, but holds a grudge against him due to the crime which prevents him from holding office (not “a traffic accident” as Nicole Foss put it, but a drunk-driving incident in which he killed a couple of women, IIRC). Italians drink as a matter of course, but frown heavily on drunkenness. My sister-in-law picks up on Grillo’s strident tone and call him “a new Mussolini”. Crimes of excess, like hiring prostitutes, or crimes of fiscal corruption even to the tune of billions of euros are simply not on the same moral level as a crime that immediately takes a life, in their reckoning, which may be mere rationalization, but there it is.
Middle-class Italians who aren’t politically-connected have sided with Berlusca against the left and center-left. They are incredibly suspicious of Grillo, even many “youngsters” of thirty and forty, because they are unused to Free Discussion on the Internet. They don’t get democracy and they don’t get the Internet; someone must always be “behind” it, sponsoring it. The idea of having an independent voice is so unusual as to be shunned.
Political discussion is officially restricted to the (party-run) newspapers which are publically financed. [Berlusconi himself was an upstart challenging this system when he started out years ago buying up the first small private TV channels and expanding them into his media empire.] The remaining publically-managed airwaves are neatly divided up with each significant left/center-left party essentially running one of the channels.
You cannot even publish a local shopper or a parish newsletter without an officially-LICENSED “journalist” as political control/cover. It’s illegal to do so. When I asked a leftist why anyone just couldn’t print up a newsletter, he responded—aghast—”but then there’d be no CONTROL!”.
Grillo, in his use of the free Internet as a medium and his rejection of public funds has poked entrenched interests, both ‘right’ and ‘left’, in the eye, and many dislike this lack of decorum purely on an aesthetic level, I am sad to say. He’s the one saying the emperor has no clothes (which everyone says in private) only he’s doing it in public, and with no clear patronage structure.
My guess is that certain Italians’ irrational distaste for Grillo comes from their inability to read into his movement where they would fit in. He wants to do away with the old, rancid systems, but the old, rancid systems are what keep people afloat even to the minimum extent that they are, currently.
I started out the above rant with the intent of saying that B. is nothing like the Koch brothers—politically. He is charismatic and devil-may-care where they are miserly and punitive. He makes money off of dreams, while they make money off of physical extraction. He wants the limelight; the Kochs prefer the shadows. They are all wealthy megalomaniacs who don’t know the meaning of “enough”, surely.
Two Germans earlier in the thread disagreed with you and said the reaction in the German press was embarrassing. This was also the reading of my American colleagues who have studied and lived in Germany. This is not stereotyping, this is the output your own official outlets. Maybe you need to own up to what your media is up to. Since the German media relentlessly does tons of stereotyping about Latins, this is people in glass houses throwing stones, on multiple fronts.
I have to disagree with the perennial nationalistic discussion of the Eurozone economic crisis which only contributes to hide the underlying class conflicts.
It doesn’t look like a bad idea to me if we try to stabilize public and overall debt-to-GDP in a society at some level.
Debt creates long-lasting dependencies, and contributes to debt servitude and a strong rentier class living from unearned income. Also, debt enables all kinds of fantasy financial products when it is sliced and diced, transformed into other currencies, and hedged against all kinds of risks, as our dear host Yves knows perfectly well.
Last time I looked, Italy’s household financial wealth was about 50% of GDP higher than the Eurozone average. Together with a budget near primary balance and an adequate Internatioal Investment Position we should not at all put Italy in the same basket as Greece, Spain and Portugal.
The European Union and Eurozone experiments are based on the Stability and Growth Pact which obliges member states to strive for a 60% debt-to-GDP ratio, among other criteria.
Italy would be in a perfect position to slowly decrease its public debt AND create growth with a policy based on a correct self-assessment. It should address its high household financial wealth and the existing income inequalities by taxation, and use the money to create more income and chances for the unemployed and lower middle class.
Combine this with much higher tax collection from EU or Eurozone multinational corporations (which pay ludicrously low income taxes), and reduction of public debt combined with higher aggregate demand and growth should be possible.
Supporting Gerold,
I want to say, there is actually a lot of agreement with
Bebbe Grillos positions here in Germany:
http://www.beppegrillo.it/en/
“our stars: water in public hands, schools in public hands, public health service”
perfectly conservative German values
He further doesnt like gold based money, nor endless debt financing.
Good!
We either dont like Berlusconi, nor Socialists caught cheating : – )
We are open to some fundamental overhaul of the Brussels mess.
And we also have some clear proposals how to fix the Italian situation: – )
http://blogs.ft.com/the-world/2013/02/mario-monti-paul-krugman-and-italian-austerity#comment-3884092
which for me do not seem to be incompatible with Grillo : – )
Genauer,
interesting that opinions of conservatives like you and critics of current capitalism like me are converging when we both look at the Eurozone financial and economic crisis.
I like that you care for those at the bottom, and also view Grillo’s movement positively. And I also liked Schäuble’s strong push against tax evasion and avoidance of multinational corporations.
And MMT gives us both some good background to not only look at stocks (e.g. Italian household wealth) as well as flows.
I think it is unfortunate that naked capitalism seems to recognizes only one anti-neoclassical macroeconomic approach so solve the problems which stems from its close affiliation with the too pro-debt MMT guys.
sorry for the small mistakes & typos – I submitted too fast.
gerold,
a year ago, I looked around at a lot of economic theories and blogs. I am aware, that there are several flavors of MMT.
I looked at lars christensen and cullen roche.
The first tried to basically redefine every word like inflation in ways, nobody understands, not how much I pay for some basket of goods, but subtracting taxes, imported goods, with arguments that this would somehow fit some weird theories.
The second run a post with MMT knows everything better, because they know how to apply the gas pedal and the brake, literally. When I asked, whether they could define this a little bit more specific, I got no answer beyond repeatition.
speaking of typos : – )
Folks who speak German, may enjoy : http://www.youtube.com/watch?v=nXiyN9qnyyM
genauer,
a very good MMT introduction is Randy Wray’s MMT Primer.
The basics of Macro Accounting (an essential method used by MMT to understand the current financial and economic crisis) is presented in the second posting of the series.
How I use Macro Accounting to understand our European troubles (I am living in Austria): for German speakers, for English speakers an automatic translation by Google.
For a deeper look into MMT, I recommend to have a look at all the excellent authors at New Economic Perspectives, and at Bill Mitchels great ‘billy blog’.
Obviously I am a bit sceptical when it comes to MMT policy prescriptions which sometimes imply that additional public debt is nearly never a problem (if your central bank is prepared to create additional credit money when needed). I think this is not a politically feasible position for the EU or Eurozone, independent of its theoretical correctness.
What I like is that they speak up for a full employment policy. But they don’t seem to care much about the fundamental economic forces which are responsible for the shrinking labor share. So I miss something in their understanding of modern capitalism.
On the primary surplus discussion you and most analyst miss one important point.
If you not pay interest the creditor doesnot receive that part of his income. For Italy guesstimates 2/3X125%X3-4%. Portion held locally X Debt X average interest rate.
So roughly 2-3% of GDP that is not received as income effectively working as a destimulus.
Another point is that primary surplus is only relevant when you want to go bust. Also the legal issue needs a bit more study. Probably catch on with some stuff published early last year and end year before.
Valentina Romei has an interesting piece on the FT website. Bersani and Monti did significantly better among Italians living outside Italy and Grillo much worse. Not sure what conclusions to draw.
My first guess would be that people (oversea Italians here) tend to think the grass is greener on the other side( of the border).
Can’t quite understand why the other European powers are so upset about election results. With the formation of over 60 governments since 1946, this seems to be a return to normal Italian politics. The domination of Berlusconi for 17 years (1994-2011) and it’s implied political stability was a historical aberration.
Early on in the Warsaw Pact’s senescence, divisions opened up between hard-liners and ameliorators in Europe. For hard-liners, any concession to human rights was a threat to their own regimes but as COMECON weakened, the ameliorators were left alone.
Now here goes NATO. There’s a different set of rights at issue but the dynamic is the same. The planned economy of the western banking oligarchs, our COMECON, is collapsing, pulling NATO apart. If Eurocrats exact retribution on countries exiting the EU, NATO has the most to lose. But the alternative is a cascade of EU exits and concomitant disruption that cuts off the death merchants’ gravy train for several crucial years.
The propaganda apparat will never ever mention this obvious implication of Europe popping rivets but it is a very good sign. Hegemonic blocs crumble from the outside in. Our evil empire’s fraying at the edges.
We all measure the success of austerity in the form of GDP or GDP to debt ratios, unemployment, and similar econometrics. By such measures, austerity is an abject failure. Are those the measures the so-called troika leaders use? I suspect that the ECB is primarily concerned with the value of the Greek bonds it holds. How are Greek bonds doing? Why, they’ve done quite well over the past year. Hence, for the ECB, austerity is working just fine. What about the European Commission? I suspect that its primary objective is to continue to exist – to not have the PIIGS leave the union. So far, that looks like a win, too. Frankly, I have only a weak idea of what the IMF’s objectives are – again, likely related to European bond values, and those seem to be doing fine. Hence, the assertion that austerity does not work may not be the view of the elite. Whether or not it is working is a matter of where you sit. For the hapless citizenry of peripheral nations, its horrible. For those fat cats pontificating from luxurious chambers, austerity is working great.
Screaming at the fat cats to stop wolfing their food isn’t going to work. Arousing the citizens, as Grillo has done, just might.
Yes. I’ve never really understood why the peripheral nations put up with this. In Spain a quarter of the people are unemployed. How awful does it have to get before politicians acknowledge that the interests of their constituents are not being met? (I guess it depends on the definition of “their constituents.”) And I’m mildly surprised that neither of the main parties (both have had their turn at the wheel) has decided to leave the euro. It’s a gamble, but if it succeeds, they could potentially be heroes and cement their standing for years to come. Have they really drunk the Koolaid to such an extent that they really do believe “there is no alternative”?
Count de Monet: “It is said that the people are revolting.”
King Louis XVI: “You said it! They stink on ice!”
Yves,
first,a couple of small corrections:
it was 75%, not 57%
Parmalat (from the italian city of Parma) and not Pharmalat
Second, a comment regarding M5S (Mr. Grillo’s “party”:
they are all nice well intentioned and young guys (average age 33) but they lack organization, the 5 Stars Movement is a loose thing and could very possibly fall apart once they are faced with the reality of politics in the parliament. Mr. Grillo himself is not exactly the “head” of the movement, rather a “charismatic inspirer”, and he wasn’t even a candidate. Frankly, I think he is even a little out of his mind, but fortunately this does not apply to the elected members of M5S, so let’s hope for the best.
Third: comments by german newspapers and politicians can be full of typical teutonic sarcasm, but unpleasant as they are, they are not so much off the mark: many italians DO have a childlike refusal to accept reality… at least those that still buy into Mr. Berlusconi’s snake oil.
Actually, if you read my post yesterday, you’ll see that you’re wrong on M5S demographics and wrong on M5S organization. If you’re reasoning from your own premises, you’ll also be wrong about how M5S does when faced with the realities of Parliament. Further, Grillo is the head of the movement, and never claimed to be a candidate in the first place. I’d also be very interested in the evidence you have that he’s out of his mind. And if it takes being out of his mind to expose, for example, Parmalat, or the corruption of the Socialist Party, then a little more insanity would seem to be a good thing for the Italian body politic. Try harder.
Dear Lambert,
in spite of what you seem to have understood, I’m not an enemy of M5S or Mr. Grillo. On the contrary I do really sympathize, but stick to my skepticism.
Concerning age, you are right, it should be 33 in the lower chamber but 47 in the senate, anyway I wasn’t complaining for that, on the contrary I do think it is a good thing to have younger people as representatives.
Concerning the definition of “head”: Grillo is the best approximation to a “head” that M5S has, he has created it, owns the rights on the symbol and has acted as its leader up to now. Still, this movement is somewhat in its infancy and is going to face the choice between structuring itself in a way that allows for having an operative role in the parliament, or choose the path of a worthless opposition and eventually dissolve. In this process, Mr. Grillo will have to let go. Time will tell if I’m right.
And yes, I think he is a bit out of his mind, which doesn’t mean he isn’t right about many things, I could quote several including the infamous Telecom Italia affair (a major leveraged buyout which almost sinked one of the most profitable italian companies). Proof? Sorry, just listening to him, I do not presume to persuade you with this.
Anybody who doesn’t get facts straight is an enemy.
PDC,
I will correct Parmalat.
But I don’t know where you get your 75% from. Per the Telegraph:
Almost 57pc of the Italian vote went to parties that have vowed to tear up the EU austerity script. Together they control a majority of senate seats.
http://www.telegraph.co.uk/finance/financialcrisis/9896222/ECB-bond-plan-in-jeopardy-as-Italys-voters-reject-conditions.html
So you do play fast and loose with facts on a lot of fronts. And you are upset because you think Grillo has? This looks like projection.
As for childlike denial of reality, because the Germans are sternfaced, they are more realistic? Huh? The Germans are insisting that austerity works and is necessary, when neither is true, and they want to have their trade surpluses but not finance their trade partners’ deficits, which is contradictory. So the Italians are much more realistic, despite their affect.
And as for political smoke-blowing, Obama has anyone in Europe beaten hands down.
Yves
I did misinterpret the text, I thought that you were referring to the total percentage of Italians that went to the polls (75%) and not to the fraction that apparently rejected austerity (57%), so I (wrongly) assumed a mistyping – my fault – being italian I’m prone to make linguistic mistakes.
Concerning Mr. Grillo and M5S, I will restrain from further comments.
Following up on Grillo’s positions:
1. “Citizen’s income, let’s start by being alongside the most vulnerable: nobody must get left behind.”
A link to a recent discussion at WCI, with hard, quantitative references to what those at the very bottom get in Germany and there:
http://worthwhile.typepad.com/worthwhile_canadian_initi/2013/02/why-is-inflation-finally-falling.html?cid=6a00d83451688169e2017ee88804f6970d#comment-6a00d83451688169e2017ee88804f6970d
What struck me there, that even conservative Germans (like me) care a lot more about those at the bottom, and not just the “middle class”. And we know that it does cost us in a larger Europe.
Canada is at just 43% of the German social minimum (carefully referenced).
Grillo:
2. “Italy’s problem is this set of people. And as long as the salaries and the pensions of these people are not at risk it’s fine to immobilise the country. But this won’t last long. This situation won’t last long at all.”
As a conservative German, I couldn’t say it better.
Summarizing all this, I see lots of agreements of Grillo with the German REALITY and core democratic 90% consensus (conservative, liberal, social democrat, green).
We can do business with this guy !
That brings me to the question: could anybody here point me to some difficult obstacles at all?
I think the question is if the cinque stelle are able and willing to adopt compromises and if they are ready to accept some of the PD’s positions. It can’t be a one way approach.
Furthermore some deputies have shown sympathies with an imperative mandate. Tricky, but not impossible to find issue-related solutions.
your “imperative mandate” gave me actually a cozy feeling, to when I was young. I pledged and kept the promise in many elected positions over many years. I never had to compromise on what I see right, with that.
This is very important. Every country in the world should have a social safety net comparable to that of Germany. But it seems that the social safety nets of Europe’s periphery countries are now being destroyed instead of being reinforced. When there is massive unemployment, it is essential that everyone receive sufficient basic income to feed themselves, have a roof over their heads, access to education and health care and live in dignity. Genauer, do you know of any article comparing countries on this issue that could be shared?
http://www.missoc.org/MISSOC/comparativeTables
“But it seems that the social safety nets of Europe’s periphery countries are now being destroyed instead of being reinforced.”
I think it is somehow more complex. Many Mediterranean states have an quite informal relationship with their citizens. They didn’t bother them too much but on the other side didn’t care so much. You can see this in the shadow economy: Most of the guesses put the shadow economy between one fifth and one third of the official economy in the southern states of Europe.
If you want to establish an official security net, you have to get this shadow economy also in the official sector to fund it.
This transition is a hard job.
Raymond,
it is because I do not longer trust oeganizations like World bank, oecd, imf, to give an adequate picture of what is really going on, that I did ask below folks here to report their grass roots experience of their countries here.
Nobody answered. They dont answer, because they dont know, because they dont care, because they live in gated communities, and spend their day in an ivory tower? Or how should interpret this ?
Armchair and and catheder socialists?
For Yves (on economists being completely asinine):
http://opinionator.blogs.nytimes.com/2013/02/24/less-innovation-more-inequality/?src=rechp
I quote: But this thesis that the government can adequately make the decisions once made by a well-functioning private sector raises serious doubts…. It is unimaginable that the government can do it well. Besides, there is a moral hazard.
My thoughts: Wow…. Edmund S. Phelps, Nobel Laureate from Columbia obviously forgot, starting from the present: Robotics (Armed Forces), Internet (DAARPA), Space Age/Satellites/GPS (Kennedy), Highways (Eisenhower), Nuclear (Manhattan Project), Commercial Aviation (B51 Bombers adaptation, US Air Force), Electricity (FDR), Post Office (WWI + WWII)
Just to name a few. Government FORGES progress.
Shall we present some of the sins of private enterprise of public domain?
1. Banking
2. Deregulation of utilities
3. Deregulation of Telecom
4. Charter Schools
What does it take to win a Nobel in Economics nowadays?
An econo mist can cloud one’s vision…unless you are a Luddite.
I would like to invite all folks here,
to report quantitatively and referenced, what their society does for those at the very bottom, “the least of these brothers and sisters of mine”.
This didnt take me more than 1 hour for Germany and Canada, each. Soo, I dont think this is some unreasonable demand.
I think this is the main difference between the American Dream, and the European Dream. Is it only for those in the sun, the Bloombergs, Berlusconis, Papandreous, or “for all of Gods children”, speaking as an infidel : – )
Yves
I am in total agreement with your assessment of the situation. Grillo was written off before the election & still is. Must admit to being worried if he would do the usual & accept Bersani’s offer in the usual politician careerist mode of power at any price, but hopefully that fear was & will remain unfounded.
I hope he hangs on for another election as I would imagine there might be lots of potential supporters who thought they might have casta wasted vote, or were just apathetic & also because of the 57% turnout, people seeing ( hopefully ) that he unlike the usual cretins is sticking by his word, might also wade in, especially the young who are being hit badly through unemployment. The likes of his FB page appear to be surging, now up to 1.2 million, if that is anything to go by.
I always thought that something unexpected might happen to upset the stinking apple cart, but what excites me about this is the fact that it is an online creation, & it’s a totally new political phenomenon. God knows, the old version is as rancid as hell & even if this ends in tears hopefully it might provide an example of the fact that there is a possible alternative to the normal bunch of careerist sell outs to the elites.
I also have a tentative hope that this phenomenon might spread across borders as the normal avenues of dissent are being efficiently suppressed by the elites & if these are frustrated would probably end up in extremism & bloodshed. I hope this for the Italians especially as according to a friend in Rome, from his direct experience, the Roman mob still exists, is potentially lethal, and needs bread as well as the provided circuses.
Berlusconi I think has served a useful purpose as otherwise his votes might have gone elsewhere resulting in a Bersani Troika kiss ass coalition. I hope that Grillo can take votes away from at least his euro sceptic support & hopefully leave him in the dustbin of history where he deservedly belongs.
All of this of course is me hoping that for once in this whole shameful time of predation that the EU (which I once supported) can be destroyed. I do not believe that it is worth conserving due to the behaviour of those who run it. Their neoliberal regime will only lead to a situation in which the very justification for it’s creation – Peace – Will result in the opposite. It is already at war, although the weapons that are killing people are financial.
As you well describe, the hubris the EU powers that be display, will play a part in their destruction & I think you are right that the Italians would be prepared to give it a go themselves. I also think that they are are well used to extortion & are not keen on it being applied to them by foreigners, especially Germans. If Grillo is neutralised I fear that like Vesuvio, Italy would eventually erupt.
We shall see, interesting times if nothing else.
Maybe this isn’t remarkable at all, but I’ll say it anyhow by way of compliment: Part of my job involves intensive reading of the American and British financial press. So I’ve been reading quite a lot about the Italian elections in these sources over the past few days. But I now have learned more from any two paragraphs of this article than I’ve learned from the generous spew of repetitive, biased and largely uninformative garbage I’ve been reading elsewhere. So thank you, Naked Capitalism.
Just heard an interesting analysis from Webster Tarpley. Besides being a philanderer Burlusconi’s big crime was his relationship with Vladimir Putin and investment in Russian pipeline projects; that the Eurozone problems are a concerted attempt by the US and Britain to destroy the Euro as a rival currancy to the dollar’s status as the world’s reserve currency. He states that the breakup of the Eurozone would result in Goldman Sach’s driving down the currencies of the Eurozone periphery and driving Germany’s currency up reducing its competitiveness. It all seems very plausible to me. It’s the old Roman strategy of divide and conquer. Remember Goldman Sach’s involvement in the Greek economy. Remember it was a bond vigilanti coupe that brought Berlusconi down. It might be a good idea to stop all this blame the victim crap and look at the big picture. Webster Tarpley also points out that the US ambassador to Italy was/is John Kerry’s brother in law. There is a much larger game a foot here, one that has Vladimir Putin in its sights.
Yves, I read in either the Guardian, Reuters, or the BBC websites that Beppe Grillo earned a degree in economics from a reputable Italian University before he became a comic, then a furious blogger and leader of the “ungovernable” free-spirited Italians.
This is a sad, but common, example of an average person’s desires, taken from Grillo’s blog post of yesterday:
Please embrace the responsibility the Italian people gave you, and try to direct your energy into a constructive project. Maybe this is a good time to switch gear, for you and for the Democratic Party. We had enough of this continuous confrontation, try to look at us as children in front their fighting parents. I hope you agree that strength and firmness are not expressed through abusive language.
I trust you and Bersani as a leaders more than the others, please lead us.
http://www.beppegrillo.it/en/2013/02/bersani_dead_man_talking.html#comments
In America one would think a comment like this to be a joke or a hoax, but this is a common cultural attitude I came across there: we need a Big Daddy to lead us—God, the Pope, etc.
“47: Morto che Parla” is a play on the title of a film, starring comedian Totò, about a terrible miser. The number comes from a traditional lottery/cabala/tombola (“Bingo”) system which assigns images to numbers.
“‘try to look at us as children in front their fighting parents… please lead us.’
In America one would think a comment like this to be a joke or a hoax, but this is a common cultural attitude I came across there: we need a Big Daddy to lead us—God, the Pope, etc.”
Oh no, I don’t think so. Not in those exact words maybe, but the paternalistic conception of government is what post-New Deal liberalism is all about. And that’s what liberals expected of Obama because that’s what FDR was.
The problem is that when government (which is really the whole government-corporate structure) gets so big and so bureaucratic and distant that it structures in near totalitarian fashion the entire social context in which you live, you’re almost automatically reduced to the role of–if not “a child,” then a supplicant– within that governing structure.
It’s only if you can organize to challenge that structure itself that you stand the chance of becoming something else within it. That’s what we’re trying to figure out how to do, to an extent, when we look at cases like this.
But I also think we still think that some cast of experts somewhere is going to “look out for the public,” and if they were just beholden to the correct economic theory, that’s what they would do.
Given the social positions of our policy experts, the privileges that flow therefrom, and the bullsh*t that comes out of their mouths (hazard of the profession), it’s perhaps not unreasonable to expect that. I’m just not too optimistic about that happening.
re the guardian: they often parrot the neo-con line, for instance this:
“The result indicated that fresh elections were a strong possibility and, at best, foreshadowed a weak government unable to pass the tough reforms Italy needs to enhance its grim economic prospects.”
from here: http://www.guardian.co.uk/world/2013/feb/25/italy-election-result-euro-fears
BTW, it’s always interesting to see who the proponents of strong government are, usually people who want to shaft the majority of the population, eg Tony Blair.
“No, all you read is bullying, dismissal, or faux sympathy combined with thinly-veiled threats.”
Exactly what you’d expect when a Ponzi scheme is on the verge of collapse.
“The OMT in fact was a bluster, a mere clever restatement of existing powers and programs. But it has worked longer than Hank Paulson’s July 2008 bazooka did.”
It worked longer because we’re a lot closer to the OTC derivatives Ponzi scheme’s disintegration. Seems Italian election results suddenly find London and New York (and their Frankfurt and Paris satraps) bracing to swallow a whole lotta crow if consensus on the continent decides the euro is here to stay. If so, something has to give, such as a banking system stuffed to the gills with “assets” marked to a dream counting on no one waking up. Well, at least Henry Kissinger’s favorite Communist still is Italian president, so we might look forward to tanks in the streets in 3, 2, 1…
(Great article.)