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Eurozone Showdown Coming

The eurozone cannot survive without Italy. The serious problem at the moment is the Eurozone also cannot survive with Italy. Two of Italy’s three largest...
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Video: IMF-Eurozone Deal Hailed as a Breakthrough, But No Relief for Greeks (2/2)

Dimitri Lascaris, securities class actions lawyer, says the Troika is lending money with one hand and taking it back with the other, perpetuating the...

Economist Dimitris Kazakis: Greece Can and Must Leave the Eurozone and EU

(Photo: Anders Sandberg; Edited: LW / TO) As discussions continue to take place between the Greek government and the country's lenders, Greece's economic...
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Video: Greece, Europe hid Athens’ debt to keep it in Eurozone: corruption expert

The world is losing the battle against corruption despite a great amount of resources being directed at the problem. And while some countries have...
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Video: What Would Happen to the Eurozone if Greece Leaves?

Economist Gerard Dumenil argues the Eurozone will face minimal impact and its leaders are already preparing for a possible Grexit. Via Youtube
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Video: Greeks Protest Austerity, But Is Leaving the Eurozone Their Only Option?

University of Greenwich's Ozlem Onaran argues that the government should create its own currency and fall out of love with the eurozone. Via Youtube
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Video: A Fury Rising as Greek Parliament Votes to Accept Eurozone Agreement

Reporting from Athens, Dimitri Lascaras says there is deep anger against the humiliating deal forced on Greece by Eurozone leaders, but the whole deal...
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Video: Temporary Grexit from eurozone an option in case of no deal – EU...

Pressure is mounting on Europe to reach a deal on Greece's debt crisis. Among the options that potentially will be discussed by eurozone leaders...
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Video: ‘Leave Euro, retake democracy!’ Far-left & eurosceptic MEPs bash eurozone over Greece

The Greek Prime Minister has presented his latest case to the European Parliament. The MEPs spent around three hours debating the Greek debt crisis....
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Video: Greek timeline: From joining Eurozone to referendum

How did Greece find itself in such a predicament? Let's recall some key points on its rocky road within the eurozone. RT LIVE http://rt.com/on-air...

EuroZone Profiteers: How German and French Banks Helped Bankrupt Greece

(Common Dreams) - Alexis Tsipras, the prime minister of Greece, has called a national referendum this Sunday to call the bluff of the European Union...

‘Humanitarian crisis’ brought on by austerity must be eased, Greek PM Alexis Tsipras warns...

Greece’s new Prime Minister sent a defiant message to his country’s eurozone creditors tonight, ahead of a crucial week of meetings with the rest...

Bank of England governor attacks eurozone austerity

The Bank of England governor, Mark Carney, has launched a strong attack on austerity in the eurozone as he warned that he single-currency area...

Eurozone retail sales fell again in December

finfacts.ieDecember 30, 2013 The Eurozone retail PMI (purchasing managers' index) data for 2013 signalled an overall...

Fireworks but no joy as Latvia joins eurozone

Mike CollierAence France-PresseDecember 27, 2013 Fireworks will light up the skies above Riga when Latvia adopts...

Mandela’s Legacy, Eurozone Woes — Geneva Business Insider

David L. Smith of the Geneva Business Insider blog joins us once again for our monthly conversation on economics, finance and politics. This month we tackle the life and legacy of Nelson Mandela, the latest in the Eupocalypse with the latest abysmal st...

Eurozone youth unemployment reaches record high of 24.4%

Phillip InmanThe GuardianNovember 29, 2013 The crisis facing the younger generation across the Eurozone worsened last month as youth unemployment hit a new record high...

The EuroZone Profiteers: How European Bankers and Bureaucrats Brought the EuroZone to the Point...

A new CorpWatch report shines a light on the role of six major banks in Greece, Ireland and Spain in the EuroZone crisis. “The...

Youth joblessness could tear eurozone apart, WEF warns

Press TVNovember 15, 2013 The World Economic Forum (WEF) has warned that a lost generation of jobless youth in the eurozone could tear Europe apart...

France downgrade a reminder that eurozone not mended

Robert PestonBBC NewsNovember 8, 2013 It may be that the reasons for Standard & Poor's decision to cut France's credit rating will resonate more than...

Eurozone Debt Burden Rises Again in Q2

Pan Pylas and Juergen BaetzAssociated PressOctober 23, 2013 The eurozone's debt burden rose further in the...

As the IMF’s map shows, it’s so much warmer outside the eurozone

Jeremy WarnerThe TelegraphOctober 10, 2013 Here's a nice little map, drawn from the IMF's latest World...

Complete eurozone banking agency: IMF

People walk outside the International Monetary Fund headquarters in Washington, October 8, 2013. The International Monetary Fund (IMF) has called on eurozone countries...

Eurozone recovery ‘subdued and uneven’

Associated PressOctober 10, 2013 European Central Bank head Mario Draghi says the eurozone economy will stay...

Merkel pledges to keep eurozone policy

German Chancellor Angela Merkel has pledged to maintain the same German policy on the eurozone in the next four-year parliamentary term. Merkel™s remarks came...

‘Spain, eurozone economically imbalanced’

The International Monetary Fund (IMF) has added Spain and the eurozone to a list of countries with relatively large economic imbalances. Although Spain managed to...

ECB to supervise eurozone banks

The Euro logo outside the headquarters of the European Central Bank, Frankfurt, Germany (file photo)Members of the European Parliament have overwhelmingly passed a new...

Eurozone industrial output misses target

New official data show that the eurozone™s industrial output dropped much more than expected in July as the recession-hit continent continues to grapple with...

Democratic global Keynesianism as a way out of crisis? Critical reflections on Heikki Patomäki’s...

When the financial market crisis in 2007 and 2008 threatened the global economy, governments around the world stepped in and bailed out many financial institutions, which were on the brink of collapse. Large amounts of private debt were transformed into public debt. In the Eurozone, this resulted in the sovereign debt crisis. In his excellent book The Great Eurozone Disaster: From Crisis to Global New Deal (Zed Books, 2012), Heikki Patomäki not only provides an insightful analysis of the crisis, but he also makes clear recommendations for the best way out of crisis.

Patomäki’s argument is in many respects a classic Keynesian analysis. He correctly points out that ultimately the global financial crisis was only the trigger of the sovereign debt crisis. Insufficient demand unevenly distributed across the European Union (EU) and the neo-liberal institutional set-up of the Economic and Monetary Union (EMU) were the real problems. ‘The difficulties facing the European Monetary Union have been primarily caused by the asymmetries in the formation of overall demand in the European political economy as a whole, and also by the institutional arrangements and restrictions that were put in place by the Maastricht Treaty’ (P.79). A successful solution to the crisis, for Patomäki, consequently, needs to tackle the question of demand. ‘A sufficient level of effective aggregate demand is an essential requirement for adequate real investments and economic growth’ (P.49).

When reflecting on potential future scenarios, Patomäki identifies three different alternatives: ‘According to the first scenario, the neoliberal European project will continue and deepen; in the second scenario, the EU will develop into a social-democratic federation of states and a world power; but in the third scenario the EU will pursue transformations of global governance and promote democratic and social goals, understanding itself as part of a much wider dynamic whole’ (P.108). The current EU policies around the so-called Fiscal Compact and its focus on fiscal discipline, the first scenario, are considered disastrous. ‘When a sufficient number of EU states decide to cut public spending at the same time, it has a marked negative impact on the level of effective aggregate demand within the whole of the EU’ (P.83). The second scenario, the Euro-level, social-democratic federation, would be in a better position to address the problem of aggregate demand spread equally across the EU.

Image by EuroCrisisExplained.co.uk

The real solution for Patomäki, however, lies in the EU becoming part of a democratic global Keynesianism. This would include the re-regulation of financial markets within a setting of new global institutions, perhaps including even a global central bank, with the goal to manage trade deficits and surpluses. ‘Needed are the sorts of global governance mechanisms that can shape the supply of money in the system, balance surpluses and deficits on an equitable basis, and direct the formation, composition and distribution of economic growth’ (P.168). His vision includes a world parliament to ensure the democratic nature of the new system as well as respect for ecological issues. In sum,

‘global Keynesianism is an approach that frames questions of public economic policy and politics more generally on the world economic scale. Global Keynesianism aims to regulate global interdependencies in such a way as to produce stable and high levels of growth, employment and welfare for everyone and everywhere, simultaneously. Global Keynesianism is an ecologically responsible doctrine: governing interdependence could not otherwise by sustainable’ (P.175).


Nevertheless, as impressive as Patomäki’s analysis clearly is, and as nice as it would be to have a ‘global Finland’ characterized by equality, democracy and social justice, there are serious flaws in his historical understanding as well as recommendations for the future. Most importantly, it is his (mis-) understanding of the capitalist social relations of production, which causes a number of problems in his analysis. In line with his Keynesian focus on demand levels and related issues of distribution of wealth, he completely overlooks the way exploitation is rooted within the way of how production is organised around wage labour and the private ownership of the means of production as well as the related, fundamental class conflict between labour and capital. 

A different understanding of the capitalist social relations of production has implications for how we can explain the current crisis in the first place. Rather than pointing to the lack of regulation (P.37) and personal greed (P.39), from a historical materialist perspective the emphasis is on the structural crisis tendency of capitalism. The fact that so many US financial institutions engaged heavily in the risky subprime mortgage market was not the result of personal greed, but due to competitive pressures forcing one financial institution to obtain the same high profit margin as its competitor, which dealt in subprime mortgages (see also Corruption in the banking industry – the problem of a few ‘bad apples’?).

Moreover, a class analysis results in a completely different understanding of how the Keynesian compromise came about in industrialised countries after World War Two. In contrast to Patomäki’s rather technocratic vision, in which experts, understanding how the economy works, devised a system of demand management, a class analysis makes clear that the welfare state was the result of class struggle. Against the background of the Cold War and on the basis of strong labour organisations at the national level, forged in industrial conflicts at the beginning of the 20th century, labour was in a position to balance the social power of capital. The result was a compromise, in which capital retained the right to own the means of production in exchange for rising wages and an expansive welfare state for workers. In other words, a balance of power in society was absolutely essential. Keynesian ideas provided the economic formula of implementing the compromise in concrete policies.  

This has clear implications for the possibilities of global Keynesianism. Rather than establishing new institutions of global governance and a technocratic consensus on the best Keynesian way forward, it is a balance of class power, which is required. However, this is clearly not the case. Globalisation has precisely implied a dramatic increase in the structural power of capital, which has shifted the balance of power at the global as well as national level in favour of capital. After all, the dominance of capital has been behind the neo-liberal shift in European integration since the mid-1980s in the first place.

Photo by informatique
Nevertheless, even if there was a balance of class power in society at the global level, it is questionable whether global Keynesianism would be feasible within the general capitalist setting. Capitalism has always expanded outward along lines of uneven and combined development. Structurally, in order to continue the accumulation of surplus value, capitalism constantly has to look for new markets and cheap labour elsewhere. This does not, however, lead to equal development, but to highly uneven development and increasing inequality between countries as well as within countries. Ultimately, we can only understand the Keynesian class compromises in industrialised countries, if we see it as a part of the wider global setting. While a degree of equality had been achieved within Northern welfare states, this was also based on, and conditioned by, continuing exploitation of the Global South be it in the area of mineral extraction, be it through drawing on cheap labour of the periphery. Similar to Germany, Nordic countries including Denmark, Finland, Norway and Sweden have historically related on export-led growth, with which their welfare states were financed. It is in these trade relations, in which high value added goods are traded in exchange with labour intensive goods that surplus is transferred from developing to developed countries. In short, structurally, global Keynesianism is simply impossible within the capitalist social relations of production and global uneven and combined development.

Finally, a historical materialist analysis has clear implications for what is required for a viable alternative way forward.  Rather than focusing on how the distribution of wealth could be re-arranged within global institutions, the emphasis has to be on changing the capitalist social relations of production, the ‘hidden abode’ within which exploitation takes place. It is the system of the private ownership of the means of production and wage labour, which needs to be changed. Only socializing the means of production can overcome exploitation and inequality. 


Prof. Andreas Bieler
Professor of Political Economy
University of Nottingham/UK

Personal website: http://andreasbieler.net

2 September 2013

Eurozone jobless rate remains at 12.1%

Official data shows eurozone unemployment rate remains at a record 12.1 percent in July 2013. (File photo)Official data shows eurozone unemployment rate has remained...

Eurozone crisis to Germany’s benefit

Europe plunged into financial crisis in early 2008. The crisis in the eurozone has brought Germany great benefit despite the fact that other members...

Eurozone crisis is just on hold for the summer

Mohamed el-Erian theguardian.com August 6, 2013 August is traditionally Europe’s holiday month, with many government officials taking several weeks off. In the process,...

‘Eurozone unemployment rate alarming’

The issue of the eurozone unemployment has reached an alarming point, the director of the London-based Bruges Group tells Press TV . Å“Unemployment is alarmingly...

Eurozone joblessness at record high

Eurozone jobless rate remains at a record high of 12.1 percent in June 2013.The Eurostat data agency has reported that the eurozoneâ„¢s overall unemployment...

Austerity and Resistance: The politics of labour in the Eurozone crisis.

Europe is haunted by austerity. Public sectors across the EU are cut back and working class gains from the post-war period seriously undermined (see also Reflections on the Eurozone crisis). In this blog post, I will assess the causes of the crisis, its implications for workers and discuss the politics of labour in response to the Eurozone crisis.


The underlying dynamics of the Eurozone crisis

Photo by Gwydion M. Williams
Current problems go right back to the global financial crisis starting in 2007 with the run on the Northern Rock bank in the UK and reaching a first high point with the bankruptcy of Lehman Brothers in 2008. Two major consequences of the crisis can be identified. First, states indebted themselves significantly as a result of bailing out failing banks and propping up the financial system. Second, against the background of high levels of uncertainty financial markets froze. Banks and financial institutions ceased lending to each other as well as industrial companies. Countries too found it increasingly difficult to re-finance their national debts. The Eurozone crisis, also called sovereign debt crisis, commenced.

Nevertheless, this analysis ultimately only scratches the surface of the causes of the crisis. The fundamental dynamics underlying the crisis have to be related to the uneven nature of the European political economy. On the one hand, Germany has experienced an export boom in recent years, with almost 60 per cent of its exports going to other European countries (Trading Economics, 10 May 2013). Germany’s trade surplus is even more heavily focused on Europe. 60 per cent are with other Euro countries and about 85 per cent are with all EU members together (de Nardis, 2 December 2010). However, such a growth strategy cannot be adopted by everybody. Some countries also have to absorb these exports, and this is what many of the peripheral countries now in trouble, such as Greece, Portugal, Spain and Ireland, have done. They, in turn, cannot compete in the free trade Internal Market of the EU due to lower productivity rates. Germany’s export boom results in super profits, which then require new opportunities for profitable investment. State bonds of peripheral countries as well as construction markets in Ireland and Spain seemed to provide safe investment opportunities. In turn, these investments led to yet more exports from Germany to these countries and yet further super profits in search for investment opportunities.

Photo by informatique


Who is being rescued?

It is often argued in the media that citizens of richer countries would now have to pay for citizens of indebted countries. Cultural arguments of apparently ‘lazy Greek’ workers as the cause of the crisis are put forward. Nevertheless, this is clearly not the case. Greek workers are amongst those, who work the most hours in Europe (BBC, 26 February 2012). In any case, it is not the Greek, Portuguese, Irish or Cypriot citizens and their health and education systems, which are being rescued. It is banks, who organised the lending of super profits to peripheral countries, which are exposed to private and national debt in these countries. For example, German and French banks are heavily exposed to Greek debt, British banks to Irish debt (The Guardian, 17 June 2011).


What is the purpose of the bailout programmes?

Is the purpose of the bailout programmes to ensure the maintenance of essential public services in Europe’s periphery? Clearly not. On the contrary, the Troika consisting of Commission, European Central Bank and IMF demands cuts in public finances precisely for services such as education and health care. Is the purpose to assist peripheral countries in re-gaining competitiveness? Again, this too is clearly not the objective. The bailout programmes do not include any industrial policy projects.

Photo by HatM


The true nature of the bailout programmes is visible in their conditionality, making support dependent on austerity policies including: (1) cuts in funding of essential public services; (2) cuts in public sector employment; (3) push towards privatisation of state assets; and (4) undermining of industrial relations and trade union rights through enforced cuts in minimum wages and a further liberalisation of labour markets. Hence, the real purpose of the bailout programmes is to restructure political economies and to open up the public sector as new investment opportunities for private finance. The balance of power is shifted further from labour to capital in this process. Employers, ultimately, use the crisis in order to strengthen their position vis-à-vis workers, facilitating exploitation.


Are German workers the winners due to the export boom?

In contrast to general assumptions, German workers have not benefitted from the current situation. German productivity increases have to a significant extent resulted from drastic downward pressure on wages and working related conditions. ‘Germany has been unrelenting in squeezing its own workers throughout this period. During the last two decades, the most powerful economy of the eurozone has produced the lowest increases in nominal labour costs, while its workers have systematically lost share of output. EMU has been an ordeal for German workers’ (Lapavitsas et al, 2012: 4). The Agenda 2010 and here especially the so-called Hartz IV reform, implemented in the early 2000s, constitutes the largest cut in, and restructuring of, the German welfare system since the end of World War II. In other words, Germany was more successful than other Eurozone countries in cutting back labour costs. ‘The euro is a “beggar-thy-neighbour” policy for Germany, on condition that it beggars its own workers first’ (Lapavitsas et al, 2012: 30).  
Hence, while the mainstream media regularly portray the crisis as a conflict between Germany and peripheral countries, the real conflict here is between capital and labour. And this conflict is taking place across the EU as the economic crisis is used across Europe to justify cuts. In the UK, although not in the position of countries such as Greece, Portugal or Ireland, people too are faced with constant further cuts and restructuring including privatisations in the health and education sectors as well as attacks on employment rights. In short, across the EU, employers abuse the crisis to cut back workers’ post-war gains. The crisis provides capital with the rationale to justify cuts, they would otherwise be unable to implement.  


What possibilities for labour to resist restructuring?

Considering that austerity is a European-wide phenomenon, pushed by Brussels but equally individual national governments, it will remain important that trade unions combine resistance to neo-liberal restructuring at the European level with resistance at the national level. To declare solidarity with Greek workers is a good initiative by German and British unions, for example. Nevertheless, the more concrete support is resisting restructuring at home. Any defeat of austerity in one of the EU member states will assist similar struggles elsewhere.

Photo by informatique
When thinking about alternative responses to the crisis, short-term measures can be distinguished from medium- and long-term measures. Immediately, it will be important that German trade unions push for higher salary increases at home so that the German domestic market absorbs more goods, which are currently being exported. Along similar lines is the proposal by the Confederation of German Trade Unions (DGB) for an economic stimulus, investment and development programme for Europe. This new Marshall plan is designed as an investment and development programme over a 10-year period and consists of a mix of institutional measures, direct public sector investment, investment grants for companies and incentives for consumer spending (DGB 2013). Neo-Keynesian measures of this type will ease the immediate pressure on European economies. However, they will not question the power structures, underlying the European political economy.

A victorious outcome in the struggle against austerity ultimately depends on a change in the balance of power in society. The establishment of welfare states and fairer societies were based on the capacity of labour to balance the class power of capital (Wahl 2011). Overcoming austerity will, therefore, require a strengthening of labour vis-à-vis capital. As Lapavitsas notes, ‘a radical left strategy should offer a resolution of the crisis that alters the balance of social forces in favour of labour and pushes Europe in a socialist direction’ (Lapavitsas 2011: 294). Hence, in the medium-term, it will be essential to intervene more directly in the financial sector. As part of bailouts, many private banks have been nationalised, as for example the Royal Bank of Scotland in the UK. However, they have been allowed to continue operating as if they were private banks. Little state direction has been imposed. It will be important to move beyond nationalisation towards the socialisation of banks to ensure that banks actually operate according to the needs of society. Such a step would contribute directly to changing the balance of power in society in favour of labour.

Photo by apasp


In the long run, however, even the change in power balance between capital and labour will not be enough. Capitalist exploitation is rooted in the way the social relations of production are set up around wage labour and the private ownership of the means of production. Exploitation, therefore, can only be overcome, if the way of how production is organised is being changed itself.


This post was first published in Norwegian on radikalportal.noand in English by the Global Labour Column as well as by the Social Europe Journal


Prof. Andreas Bieler
Professor of Political Economy
University of Nottingham/UK

Personal website: http://andreasbieler.net

29 July 2013

Eurozone collective debt hits new record

Official data show the collective debt in the eurozone has hit a new record high of 92.2 percent in first quarter of 2013, as...

Greece may have to leave eurozone

A European economist, Ben May, says the recession-hit Greece may be forced to leave the eurozone if the countryâ„¢s international creditors cannot reduce Athensâ„¢...

Eurozone joblessness to hit new record

Eurozone unemployment rate is projected to hit a new record at 12.3 percent by the end of 2014, with the youth hit the hardest,...

Fitch downgrades eurozone fund rating

The Fitch credit ratings agency downgrades the eurozone's bailout fund credit rating from AAA to AA+. (File photo)The global ratings agency Fitch has downgraded...

Has the break-up of the eurozone already started?

Andrew Higgins economictimes.indiatimes.comJuly 10, 2013 On a visit to Athens this year, Marios Loucaides, a Cypriot...

Eurozone joblessness exceeds OECD

Europe plunged into financial crisis in early 2008.The Eurozone jobless rate has edged up to its highest point in nearly 20 years, marking a...

Eurozone joblessness exceeds OECD

Europe plunged into financial crisis in early 2008.The Eurozone jobless rate has edged up to its highest point in nearly 20 years, marking a...

Eurozone grants Greece bailout funds

EU ministers grant Greece 6.8 billion euros in financial aid on July 8, 2013.Eurozone finance ministers have agreed to grant 6.8 billion euros ($8.7...

Austerity Blitz: Eurozone Notes From Beyond the Grave

The global financial crisis that erupted in the United States in 2007-08 has already gone down in history as the most destructive capitalist crisis...

Greece: Exit From the Eurozone

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Eurozone unemployment hits fresh high

Graeme Wearden and Katie Allenguardian.co.ukJuly 1, 2013 The unemployment rate across the eurozone hit a fresh...

Eurozone jobless rate 12.1% in May

A homeless sleeps at the entrance of a bank in Milan, Italy on June 27, 2013.Recent figures released by the Eurostat data agency show...

Eurozone output falls at slowest rate for 15 months

bbc.co.ukJune 21, 2013 The downturn in the eurozone’s services and manufacturing sectors eased in June as...

Do not abandon the state as a site of social struggle: Lessons from the...

In 1997, Asia experienced its own financial crisis. In this guest post, Mi Park analyzes the root causes of the Asian crisis and the current Eurozone crisis and compares the politics of the anti-austerity movements in Asia and Europe. She asks what lessons Europe can learn from the Asian experience.


The Causes of Financial Crises

Photo by infomatique
Contrary to the propaganda of austerity that a country’s debt crisis is caused by government profligacy, tax evasion, and people’s overconsumption, lax work ethics, and the pervasive sense of entitlement in the debtor country, the real causes of debt crises are often both structural (a country’s place in the global economy) and institutional (banking regulations). The Asian financial crisis of 1997 and the current Euro-zone crisis share structural and institutional elements conducive to a region-wide financial crisis. In both cases, financial liberalization enabled excessive credit circulation in countries with high growth rates. Secondly, at the sign of a declining rate of profit, foreign capital took flight from countries of high current account deficits. A contagion effect spread as more speculative capital withdrew from countries with a high rate of external short term debt. As countries with a debt payment crisis turn to international financial institutions (IFIs) for help, fiscal rescue packages were promised on the condition that austerity measures were implemented. Without addressing the root causes of the crises, IFIs insisted on the structural adjustment programs (SAPs) as a condition for loans and demanded that public services should be reduced to bare bones minimum so that a bigger portion of government budget can be dedicated to debt servicing. This is a very dangerous idea that was tried in Asia but utterly failed.


Austerity Politics Compared: Asia and Europe

A comparison of the Asian case with the European one reveals a number of salient similarities and differences. The impact of austerity on society in both cases is catastrophic with massive unemployment and social unrest. They differ, however, as to how the state and civil society have responded to IFIs’ austerity politics.

Photo by FuturePresent


At the peak of the Asian crisis, millions of people were thrown out of work and faced abject poverty in Thailand, Indonesia, and South Korea (called the Asian Three thereafter). Due to the IMF’s insistence on austerity measures, the Asian Three found their hands tied, unable to help mitigate social unrest resulting from massive unemployment and increased poverty. The situation developed into full blown social crises, resulting in major political upheavals in the Asian Three. In Thailand, tapping into the pervasive anti-IMF populist nationalism during the Asian crisis, Thaksin’s Thai Rak Thai Party seized power with strong support from the wider population. Although neoliberal restructuring continued under his administration, the Thaksin government moderated destabilizing impacts of neo-liberalism by extending social welfare measures. In Indonesia, a nationwide anti-austerity movement eventually forced the pro-IMF Suharto regime to resign. The new administration, now more responsive to popular demands, did not implement many austerity measures previously planned. In South Korea, anti-IMF sentiments contributed to the electoral victory of the opposition party leader, Kim Dae-Jung who was most critical of the International Monetary Fund program. As in the case of Thailand and Indonesia, the Kim administration did moderate the scope of neoliberal restructuring and introduced an extensive social welfare program.

Similar to the Asian Three, massive protests against austerity measures have taken place in Greece, Spain and Portugal (the European Three thereafter). Unlike the case of the Asian Three, a large segment of the anti-austerity movement in Europe eschewed electoral politics. As a result, the politically elusive anti-austerity movements failed to forge a government with a popular mandate that is able to challenge the IFIs. The Indignados (‘the Outraged’), also known as the 15 M movement in Spain and the anti-austerity protesters in the Greek Syntagma square are cases in point.

Photo by photoAtlas
In Spain, a significant number of anti-austerity protesters refused to engage in electoral politics and as a result, the pro-austerity, conservative Popular Party was elected into power. As in the case of Spain, Portugal also saw an electoral victory of right-wing parties that are happy to cut welfare programs. In Greece, too, many anti-austerity protesters, disenchanted with electoral politics, refused to utilize electoral venues for a social change. In the absence of an alternative political opposition party backed by anti-austerity movements, the far-right political forces take advantage of the situation by exploiting mass resentment. With the anti-Troika, ultra nationalist narrative that immigrants and foreigners siphon off national wealth, the far-right fringe parties such as the Golden Dawn Party in Greece gain increasing support from the disgruntled populace who resent the sharing of reduced public services and welfare benefits with immigrants.

Photo by furlin
Partly due to these different state-civil society dynamics in Asia and Europe, the outcomes of the two financial crises have so far turned out to be different. With anti-austerity administrations in power, the Asian Three reversed IMF austerity policy and expanded social welfare. As a result, they were able to spur further economic growth and significantly reduced their external debt within a relatively short time period. In sharp contrast, with the electoral victory of conservative parties in the European Three, austerity measures are likely to prolong economic downturns and social instability in Europe. More alarmingly, the rise of ethno-exclusionary political parties in Europe can further divide civil society as sections of the populace turn against the most marginalized and powerless in society.

We can draw a valuable lesson from the Asian financial crisis for the Eurozone. As shown in the case of Asia, the ideology of austerity can be defeated. To this end, anti-austerity movements in Europe should not abandon the state as a site for social change.


This blog post is based on the article “Lessons from the Asian Financial Crisis for the Euro-zone: A Comparative Analysis of the Perilous Politics of Austerity in Asia and Europe”, Asia Europe Journal, Vol.11/2 (2013).

Mi Park is a visiting professor at the University of British Columbia, Canada. She can be reached at [email protected]

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‘Greece needs additional cuts’

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‘Greece needs additional cuts’

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Coordinating collective wage bargaining: a way of transnational solidarity in Europe?

Roland Erne is currently a research fellow at the Centre for Advanced Study in Oslo, where he is part of the project on Globalization and the Possibility of Transnational Actors – The Case of Trade Unions. The purpose of his subprojectis to investigate different case studies of translational labour in order to move to a conceptual understanding of the circumstances under which transnational solidarity is possible. In this guest post, he reviews in this respect the book Le salaire, un enjeu pour l’euro-syndicalisme. Histoire de la coordination des négotiations collectives nationales (Presses Universitaires de Nancy, 2011) by Anne Dufresne.
  
In the late 1990s European unions started to coordinate their wage bargaining policies at EU level in order to prevent a ‘race to the bottom’ in wages and working conditions within the Eurozone. However, these attempts were largely unsuccessful. Anne Dufrense’s book outlines two reasons for this failure:

1. The heterogeneity of national (trade union) cultures.

2. The problematic nature of ‘German leadership’ within the European labour movement.

As national cultures do not change very quickly, the prospects of a European coordination of trade unions’ wage policies therefore seem to be very bleak.

Dufresne’s study ranges from the early 1980s to the late 2000s and covers developments at the European cross-sector level, the European sectoral level, and cross-border initiatives at the regional level. In particular, the book documents the rise and demise of European unions ‘inflation and productivity’ wage increase benchmarks that were adopted in 1999 and 2000 by European Metalworkers Federation (EMF) and the European Trade Union Confederation (ETUC) respectively in order to prevent the adoption of beggar-thy-neighbour wage bargaining policies by its national affiliates. Dufresne’ study of European unions’ policy documents, participant observations, and expert interviews provide a very detailed description of the development of ETUC and EMF policy in this field. However, the exclusive focus on EU-level experts and documents also has its limits. It is indeed very difficult to comprehend EU level developments without a good understanding of the internal dynamics that are at play within national labour movements.

German unions certainly played a leading role in the establishment of the ‘inflation plus productivity’ norm as a European wage coordination benchmark in the late 1990s. In turn, ‘les Allemands’ – or better German wage moderation – also contributed to the demise of the European wage coordination policy benchmark in the 2000s. But does that really mean that ‘le leadership allemand’ (page 156) is the major explanatory factor behind these contradictory events? As argued previously (Erne, 2008), the rise and demise of European unions’ wage bargaining coordination benchmarks in my view first and foremost reflects the contingent outcomes of the policy battles between ‘Euro-Keynesian’ and ‘competitive corporatist’ currents within the German labour movement rather than Teutonic trade union culture and leadership.

Dufresne is correct when she emphasizes that many French and Italian unions greeted the ‘German’ inflation and productivity wage bargaining benchmark with scepticism. On the other hand, one should also note that the traditionally least Germanophile sections of the French and Italian union movement – namely the left-wing of FIOM-CGIL and the French CGT – were the most resolute supporters of the EMF and ETUC wage bargaining coordination benchmarks. This observation, however, would not be so surprising if one associates the promotion of the European wage bargaining coordination benchmark not with the German union movement per se but rather with the DGB’s and the IG Metall’s left-wing. Conversely, the stagnation of German wages during the 2000s that led to the demise of the European wage bargaining coordination benchmark should not be seen as systemic outcome of the German system collective bargaining, but as the contingent result of the defeat of Oskar Lafontaine within the SPD and the left-wing within the IG Metall.

In turn, a more political reading of the recent history of European collective bargaining coordination would also allow a more positive conclusion regarding its future. The extensive wage moderation in Germany during the 2000s not only created huge economic imbalances within the euro area but also impoverished German workers, especially in the construction and service sectors. Hence, it may still be possible to construct new transnational alliances – for example between FIOM-CGIL and VERDI – to support European workers’ wage claims in the future, as political orientations can be changed more easily, by contrast to primordial national identities.

Roland Erne, University College Dublin


This blog post is a based on a longer book review that appeared in: Transfer, European Review of Labour and Research, Vol. 19, No. 3 (August 2013), pp. 433-435.


References

Erne, R. (2008) European Unions. Labor’s Quest for a Transnational Democracy. Ithaca: Cornell University Press.

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“The powers of financial capitalism had another far reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole.”  —Prof. Caroll Quigley, Georgetown University, Tragedy and Hope (1966)

Iraq and Libya have been taken out, and Iran has been heavily boycotted. Syria is now in the cross-hairs. Why? Here is one overlooked scenario. 

In an August 2013 article titled “Larry Summers and the Secret ‘End-game’ Memo,” Greg Palast posted evidence of a secret late-1990s plan devised by Wall Street and U.S. Treasury officials to open banking to the lucrative derivatives business. To pull this off required the relaxation of banking regulations not just in the US but globally. The vehicle to be used was the Financial Services Agreement of the World Trade Organization.

The “end-game” would require not just coercing support among WTO members but taking down those countries refusing to join. Some key countries remained holdouts from the WTO, including Iraq, Libya, Iran and Syria. In these Islamic countries, banks are largely state-owned; and “usury” – charging rent for the “use” of money – is viewed as a sin, if not a crime. That puts them at odds with the Western model of rent extraction by private middlemen. Publicly-owned banks are also a threat to the mushrooming derivatives business, since governments with their own banks don’t need interest rate swaps, credit default swaps, or investment-grade ratings by private rating agencies in order to finance their operations.

Bank deregulation proceeded according to plan, and the government-sanctioned and -nurtured derivatives business mushroomed into a $700-plus trillion pyramid scheme. Highly leveraged,  completely unregulated, and dangerously unsustainable, it collapsed in 2008 when investment bank Lehman Brothers went bankrupt, taking a large segment of the global economy with it. The countries that managed to escape were those sustained by public banking models outside the international banking net.

These countries were not all Islamic. Forty percent of banks globally are publicly-owned. They are largely in the BRIC countries—Brazil, Russia, India and China—which house forty percent of the global population. They also escaped the 2008 credit crisis, but they at least made a show of conforming to Western banking rules. This was not true of the “rogue” Islamic nations, where usury was forbidden by Islamic teaching. To make the world safe for usury, these rogue states had to be silenced by other means. Having failed to succumb to economic coercion, they wound up in the crosshairs of the powerful US military.

Here is some data in support of that thesis.

The End-game Memo

In his August 22nd article, Greg Palast posted a screenshot of a 1997 memo from Timothy Geithner, then Assistant Secretary of International Affairs under Robert Rubin, to Larry Summers, then Deputy Secretary of the Treasury. Geithner referred in the memo to the “end-game of WTO financial services negotiations” and urged Summers to touch base with the CEOs of Goldman Sachs, Merrill Lynch, Bank of America, Citibank, and Chase Manhattan Bank, for whom private phone numbers were provided.

The game then in play was the deregulation of banks so that they could gamble in the lucrative new field of derivatives. To pull this off required, first, the repeal of Glass-Steagall, the 1933 Act that imposed a firewall between investment banking and depository banking in order to protect depositors’ funds from bank gambling. But the plan required more than just deregulating US banks. Banking controls had to be eliminated globally so that money would not flee to nations with safer banking laws. The “endgame” was to achieve this global deregulation through an obscure addendum to the international trade agreements policed by the World Trade Organization, called the Financial Services Agreement. Palast wrote:

Until the bankers began their play, the WTO agreements dealt simply with trade in goods–that is, my cars for your bananas.  The new rules ginned-up by Summers and the banks would force all nations to accept trade in “bads” – toxic assets like financial derivatives.

Until the bankers’ re-draft of the FSA, each nation controlled and chartered the banks within their own borders.  The new rules of the game would force every nation to open their markets to Citibank, JP Morgan and their derivatives “products.”

And all 156 nations in the WTO would have to smash down their own Glass-Steagall divisions between commercial savings banks and the investment banks that gamble with derivatives.

The job of turning the FSA into the bankers’ battering ram was given to Geithner, who was named Ambassador to the World Trade Organization.

WTO members were induced to sign the agreement by threatening their access to global markets if they refused; and they all did sign, except Brazil. Brazil was then threatened with an embargo; but its resistance paid off, since it alone among Western nations survived and thrived during the 2007-2009 crisis. As for the others:

The new FSA pulled the lid off the Pandora’s box of worldwide derivatives trade.  Among the notorious transactions legalized: Goldman Sachs (where Treasury Secretary Rubin had been Co-Chairman) worked a secret euro-derivatives swap with Greece which, ultimately, destroyed that nation.  Ecuador, its own banking sector de-regulated and demolished, exploded into riots.  Argentina had to sell off its oil companies (to the Spanish) and water systems (to Enron) while its teachers hunted for food in garbage cans.  Then, Bankers Gone Wild in the Eurozone dove head-first into derivatives pools without knowing how to swim–and the continent is now being sold off in tiny, cheap pieces to Germany.

The Holdouts

That was the fate of countries in the WTO, but Palast did not discuss those that were not in that organization at all, including Iraq, Syria, Lebanon, Libya, Somalia, Sudan, and Iran. These seven countries were named by U.S. General Wesley Clark (Ret.) in a 2007 “Democracy Now” interview as the new “rogue states” being targeted for take down after September 11, 2001. He said that about 10 days after 9-11, he was told by a general that the decision had been made to go to war with Iraq. Later, the same general said they planned to take out seven countries in five years: Iraq, Syria, Lebanon, Libya, Somalia, Sudan, and Iran.

What did these countries have in common? Besides being Islamic, they were not members either of the WTO or of the Bank for International Settlements (BIS). That left them outside the long regulatory arm of the central bankers’ central bank in Switzerland. Other countries later identified as “rogue states” that were also not members of the BIS included North Korea, Cuba, and Afghanistan.

The body regulating banks today is called the Financial Stability Board (FSB), and it is housed in the BIS in Switzerland. In 2009, the heads of the G20 nations agreed to be bound by rules imposed by the FSB, ostensibly to prevent another global banking crisis. Its regulations are not merely advisory but are binding, and they can make or break not just banks but whole nations. This was first demonstrated in 1989, when the Basel I Accord raised capital requirements a mere 2%, from 6% to 8%. The result was to force a drastic reduction in lending by major Japanese banks, which were then the world’s largest and most powerful creditors. They were undercapitalized, however, relative to other banks. The Japanese economy sank along with its banks and has yet to fully recover.

Among other game-changing regulations in play under the FSB are Basel III and the new bail-in rules. Basel III is slated to impose crippling capital requirements on public, cooperative and community banks, coercing their sale to large multinational banks.

The “bail-in” template was first tested in Cyprus and follows regulations imposed by the FSB in 2011. Too-big-to-fail banks are required to draft “living wills” setting forth how they will avoid insolvency in the absence of government bailouts. The FSB solution is to “bail in” creditors – including depositors – turning deposits into bank stock, effectively confiscating them.

The Public Bank Alternative

Countries laboring under the yoke of an extractive private banking system are being forced into “structural adjustment” and austerity by their unrepayable debt. But some countries have managed to escape. In the Middle East, these are the targeted “rogue nations.” Their state-owned banks can issue the credit of the state on behalf of the state, leveraging public funds for public use without paying a massive tribute to private middlemen. Generous state funding allows them to provide generously for their people.

Like Libya and Iraq before they were embroiled in war, Syria provides free education at all levels and free medical care. It also provides subsidized housing for everyone (although some of this has been compromised by adoption of an IMF structural adjustment program in 2006 and the presence of about 2 million Iraqi and Palestinian refugees). Iran too provides nearly free higher education and primary health care.

Like Libya and Iraq before takedown, Syria and Iran have state-owned central banks that issue the national currency and are under government control. Whether these countries will succeed in maintaining their financial sovereignty in the face of enormous economic, political and military pressure remains to be seen.

As for Larry Summers, he went on to become president of Harvard, where he approved a derivative bet on interest rate swaps that lost over $1 billion for the university.  He resigned in 2006 to manage a hedge fund among other business activities, and went on to become State Senator Barack Obama’s key campaign benefactor.

Summers played a key role in the banking deregulation that brought on the current crisis, causing millions of US citizens to lose their jobs and their homes. Yet he is President Obama’s first choice to replace Ben Bernanke as Federal Reserve Chairman. Why? He has proven he can manipulate the system to make the world safe for Wall Street; and in an upside-down world in which bankers rule, that seems to be the name of the game.

________________________

Ellen Brown is an attorney, president of the Public Banking Institute, and author of twelve books including the best-selling Web of Debt. In The Public Bank Solution, her latest book, she explores successful public banking models historically and globally. Her websites are http://WebofDebt.com, http://PublicBankSolution.com, and http://PublicBankingInstitute.org.

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The three key findings of the wage map are summarized by the ETUI as follows:

  • ‘The majority of countries (15 out of 27) record falling real wages. The most dramatic decline of real wages since the onset of the crisis took place in those countries that were subject to financial bailout programmes.

  •  A decline in real hourly minimum wages affecting the most vulnerable part of the workforce. Once again, the highest decline can be found in those countries which were dependent on financial aid programmes.

  •  A drop in the wage share in the majority of EU countries indicating a redistribution of income from labour to capital.’

Poster by PropagandaTimes
It should not be surprising that these policies have done little to overcome economic crisis. If everybody cuts wages and hopes that products are bought by people in other countries, an overall aggregate decline in demand across the EU is the result. Not everybody can pursue a strategy of export-led growth. Some also have to import products. In short, what the excellent wage map by the ETUI reveals well is that austerity policies have not worked in terms of getting Europe out of recession.


Nevertheless, perhaps the real purpose of austerity has never been to overcome recession? Perhaps the real purpose has been to change the balance of social class forces in society? As the ETUI notes itself, austerity policies have gone hand in hand with moves towards dismantling collective bargaining. Equally, austerity has gone hand in hand with attacks on the public sector and attempts across the EU to open up public sectors to private investment. This is directly enforced by the EU as part of bailout packages for countries such as Greece, but other countries too such as the UK are currently pursuing a policy of partial privatization with the excuse that this was necessary in order to pay off public debts.

Cartoon by barbourians

Ultimately, austerity is a strategy of class warfare by capital against working people and trade unions as their representatives. Arguments about having to deal with public debt are used to justify a drastic transformation of European political economies.

Resistance then has to focus first on increasing again the wage share. But this cannot be enough in itself. In the end, the control of the means of production by capital needs to be challenged to change fundamentally the balance of power in favour of labour. 



Prof. Andreas Bieler
Professor of Political Economy
University of Nottingham/UK

Personal website: http://andreasbieler.net

28 August 2013

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The Confidential Memo at the Heart of the Global Financial Crisis

Greg Palast Vice August 22, 2013 When a little birdie dropped the End Game memo through my window, its content was so explosive, so sick and plain...

Larry Summers and the Secret “End-Game” Memo

By Greg Palast for Vice Magazine When a little birdie dropped the End Game memo through my window, its content was so explosive, so sick and plain evil, I just couldn't believe it. The Memo confirmed every conspiracy freak's fantasy:  that in the late 1990s, the top US Treasury officials secretly conspired with a small [...]

A weaker euro for a weaker Europe

Franz NauschniggEuropean VoiceAugust 21, 2013 What can be done to help the ‘crisis economies’ of southern...

‘Greece needs third bailout package’

German Finance Minister Wolfgang Schaeuble says recession-hit Greece will need more rescue loans from its international creditors after the current one expires at the...

Germany election campaigning heats up

This file photo shows Peer Steinbrueck, the frontrunner of Germany's largest opposition group - Social Democrats.Electoral campaigning has gained momentum in Germany which is...

Greek opp. raps govt. over pupil death

People stand around flowers at the site where 19-year-old Greek student Thanassis Kanaoutis died after an argument with a bus ticket inspector in the...

Greece: Depression or Recession? Are the Troika Bailing Out or Forcing Under?

Six years of recession, an impressive drop in GDP from €231 billion in 2009 to €193 billion in 2012, unemployment at 26.9% in April...

Dutch economy shrinks 0.2% in Q2

Dutch economy shrank by 0.2 percent in the second quarter of 2013.The Dutch economy has shrunk by 0.2 percent in the second quarter of...

Prince Bandar and the Destruction of Syria

Talk about The Comeback Spy. Prince Bandar bin Sultan, aka Bandar Bush (for Dubya he was like family), spectacularly resurfaced after one year in...

Greece to need more bailout loans by start of 2014: Germany’s central bank

Press TVAugust 13, 2013 A report has revealed a document showing Germany’s central bank...

German inflation rate hits yearly high

Experts attributed the inflation hike to higher food costs brought on by a cold winter.

Italy’s public debt hits record high

The Bank of Italy says the countryâ„¢s public debt has risen, setting a new record, as the eurozone struggles to overcome a deepening financial...

‘Greece to need more bailout loans’

A report has revealed a document showing Germany's central bank predicts that the recession-hit Greece will need more rescue loans from its international creditors...

The Rise of New Political Parties

Surprised at the disgust of politics in Australia and elsewhere? This would itself be a surprise. Disliking Australian politics has not only been a...

The Rise of New Political Parties

Surprised at the disgust of politics in Australia and elsewhere? This would itself be a surprise. Disliking Australian politics has not only been a...

The Euro Crisis: German Economists Rehearse a Rebellion

The fear of losing one’s social and economic status and the distrust of EU institutions and international financial markets, which have greatly increased since...

‘France growth forecast lowered’

French Finance Minister Pierre Moscovici says the European country has cut its economic growth forecast for 2013. Å“This year, growth will be weak and spread...

Poor Greek families face food crisis

A child makes his way after receiving food from the Orthodox Church of Greece in Athens (file photo).A report says economic downturn in Greece...

Italy approves anti-crisis measures

A package of measures proposed by the Italian government aimed at improving its struggling economy has received final approval by the countryâ„¢s parliament. The package,...

‘Japan debt surpasses 1 quadrillion yen’

File photo shows a bank teller counting 10,000 yen bank notes in Tokyo. Fresh data released by Japan's Finance Ministry show that the country's...

Industrial output drops in France

File photo shows a French demonstrator holding a sign during a protest against labor agreements in Paris.Official figures show that Franceâ„¢s industrial output fell...

Greece jobless rate hits new record

Fresh data show that the unemployment rate in debt-ridden Greece hit a record high in May, with youth accounting for the largest jobless number....

German Politicians Take Aim at the Euro

German voters are heading to the ballot box on September 22. The re-election of incumbent cha