Portugal has been held out by the Europhile Left as a demonstration of how progressive policies can manifest in the European Union, even with the Fiscal Compact and the Stability and Growth Pact (SGP). In 2015, after the new Socialist government took over with supply guarantees from the Left Bloc (Bloco de Esquerda) and the Portuguese Communist Party (PCP) and The Greens (Partido Ecologista “Os Verdes”), it set about challenging the austerity mindset that has blanketed the European continent in stagnation. Things improved in 2016 with increased government spending. But by 2017, the European Commission had reasserted its austerity mindset and the supposed flexibility that the Left were hoping and which Portugal had briefly embraced in 2016 was gone. And we learned that the neoliberal bias of the Eurozone and its fiscal rules dominates any progressive ambitions that a nation state might entertain. Another blow for the Europhile Left. The lesson: start looking at and supporting exit if you are truly serious about restoring a progressive policy agenda in Europe.
In a blog post last week – Financial services agreements – the EU as a neoliberal, corporatist project (November 13, 2018) – I wrote about the way the EU compromised the capacity of elected Member State governments to advance the well-being of their nations by the way they negotiate trade arrangements in services, particularly with respect to the financial services sector. For all those Europhiles that regularly deny the core agenda of the EU is to compromise democratic outcomes in favour of capital, that analysis, alone, should be sufficient to discourage those thoughts. Of course, that isn’t the only manifestation of this neoliberal, corporatist bias in the way the EU has developed over the last decades. I mostly conduct my analysis at the macroeconomic level but I am also interested (as my publication record demonstrates) in urban and regional analysis. At the level of the European city, the EU is behaving in the exactly the same way – to curb that ability of city authorities to render their cities favourable environments for the residents who live there.
I am travelling most of today to distant climes. And it is Wednesday, my alleged shorter blog day. Apart from some scintillating music suggestions today, I foreshadowed in Monday’s blog post, which analysed the British national accounts, that I would make some statements about the EU forecasts released in their latest – European Economic Forecast. Autumn 2018 – (published November 8, 2018). The forecasts posited that the UK would be among the two worst performers for 2019 in terms of Real GDP growth, accompanied by the waning Italy. And within seconds of the forecasts being published, social media was a light with those opposed to Brexit, using the forecasts to claim that Brexit would be a disaster – again! Brexit may still turn out to be a disaster. But these forecasts should be treated with a grain of salt – they are ideological in nature and the forecasting performance of the EU has not been good.
I have been reading the new book by Costas Lapavitsas – ‘The Left Case Against the EU’ – which has been recently published. It is solid and clearly explains why the EU is not an institution or structure than anyone on the progressive Left should support or think is capable of reform any time soon. It has become a neoliberal, corporatist state and hierarchical in operation, with Germany at the apex bullying the weaker states into submission. Divergence in outcomes across the geographic spread is the norm. It is also the anathema of our concepts of democracy both in concept and operation. It is more like a cabal of elites who are unelected and, largely unaccountable. By giving their support to this monstrosity, the traditional Left political parties (social democrats, socialists etc) have been increasingly wiped out such is the anger of voters to what has become a massive coup by capital against labour. These are the themes that Thomas Fazi and I also explored in our recent book – Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto Books, 2017). I also just finished reading an interesting report – Financial Regulation challenged by European Trade Policy – published by the Veblen Institute and Finance Watch (October 2, 2018), which examines “the impact of European trade policy on financial regulation”. It is essential reading for those progressives who still think that Britain should remain in the EU. If they understand the research findings they would change their minds.
The widely read German news site, Spiegel Online, published an amazing article last week (November 1, 2018) – Italy Doubles Down on Threat to Euro Stability – which confirms to me that very little progress has been within the Eurozone by way of cultural understandings since the GFC. That, in turn, tells me that the monetary union will not be able to get out of austerity gear and is now more exposed than ever to breakup when the next crisis comes. The current Italian situation is the European Commission’s worst nightmare. It could combine with the ECB and the IMF to bully Greece partly because of the size of the Greek economy but also because they had the measure of Tsipras and Syriza. They knew the polity would buckle and become agents for their neoliberal plans. But the politicians in Italy may turn out to be a different proposition – one hopes so. And Italy is a large economy and one of the original accessions to the Community. So the stakes are higher. But what the Commission is demanding of Italy in the present situation of zero economic growth and massive primary fiscal surpluses is totally irresponsible. It will not even achieve the stated Commission aims of reducing the public debt ratio. The likelihood is that the Commission’s strategy, if they succeed in bullying the Italian government into submission, will push the ratio up further. And meanwhile, Italy wallows in a sort of neoliberal dystopia. Italy should lead the other Member States out of this neoliberal disaster.
This week’s theme seems to be the about how the so-called progressive side of the economic and political debate keeps kicking ‘own goals’ (given a lot of this is happening in Britain where they play soccer) or finding creative ways to ‘face plant’ (moving to Europe where there is more snow). Over the other side of the Atlantic, as America approaches its mid-term elections, so-called progressive forces who give solace to the New Democrats, aka Neoliberal Democrats are railing against fiscal deficits and demanding that the left-liberals in the Democratic Party be pushed out and that the voters be urged to elect candidates who will impose austerity by cutting welfare and health expenditure and more. And then we have progressive think tanks pumping out stuff about banking that you would only find in a mainstream macroeconomic textbook. This is the state of play on the progressive side of politics. The demise of social democratic political movements is continuing and it is because they have become corrupted from within by neoliberals. And then we had a little demonstration in London yesterday of the way in which the British Labour Fiscal Rule will bring the Party grief. The Tories are just warming up on that one.
The weekend before last I was in Germany (and Bavaria) at the same time as the – Bavarian state election. The results for the SPD (Social Democratic Party) were disastrous losing 20 seats (down from 42) and gaining only 9.7 per cent of the vote (down from 20.6 per cent). The Greens came second, winning 20 extra seats (to 38) and 17.5 per cent of the vote (8.6 per cent last election), while the neo-fascist AfD party, which did not contest the last election, came in fourth, gaining 22 seats (10.2 per cent of the vote). There is a growing fear that the AfD and its counterparts across Europe will grow further and push Europe back into its dark fascist days. One would not conclude that from the Bavarian voting patterns. Further, to construct what is going on in Europe as a right-wing counter to a ‘social democratised’ Europe, which is a common narrative among the Europhile Left is seriously missing the point. The social democratisation of Europe has been in retreat for decades under the onslaught of a very sophisticated campaign from the elites on the Right and often it has been the traditional Left political parties that have pushed the neoliberal agenda more vigorously than the conservatives. The AfD is a sideshow in this deeper take over of our democracies by capital. Root and branch change is needed not a few ‘reforms’ around the edges to make the Eurozone less of a disaster for workers than it currently is.
I don’t have much time today as I am travelling from Lisbon back to London for a series of meetings. My next public speaking engagement is on Saturday in Germany (see below). But I read an interesting report yesterday, which confirms the belief that Germany is a long way from ever permitting any wholesale reform of the Eurozone, along the lines necessary to make it functional. The research paper – Attitudes towards Euro Area Reforms: Evidence from a Randomized Survey Experiment – was published by the European Network for Economic and Fiscal Policy Research (econPOL) in June 2018. Even a weak sort of ‘federal’ move – to implement a European-wide unemployment benefit scheme – is rejected by a strong majority of German citizens. The same respondents firmly believe a Member State that finds itself in financial trouble should not be bailed out by the other Member States but should be allowed to go broke (exit the Eurozone). These sort of results are consistent across time. They were present when the Eurozone was initially designed, which is why the foundations were rotten from the start. And they condition all the talk since of reform once it is generally agreed that the system is dysfunctional. Which is why we see deeply flawed changes such as the bank union and the like. It is the differences in cultures and economic structures that preclude genuine reform. And so it will always be. The Europhile Left, who hang on to the eternal hope of eventual reform, should drop the Europhile bit and start acting like the Left.
Herman Van Rompuy, the former European Union president told us all we needed to know about democracy in the EU when he spoke to a a gathering in Louvain (Belgium) in 2010. In his speech (September 8, 2012) – A Test of Solidarity – Von Rompuy said that the Eurozone meant a “loss of sovereignty for all”. He went on to wax lyrical about the need for solidarity – “Solidarity is a duty, not only a right”. Unfortunately, his behaviour when in power, and the policies pursued by other EU bosses was not consistent with their narratives. Their constant claims that solidarity and convergence marked the aspirations of the EU was never borne out in reality. In the case of Greece, the Troika inflicted such harsh policies that, not only has the material prosperity of the nation been trashed, but now, evidence is emerging that the underlying physical and mental health of the people has been significantly damaged. One step short of genocide. The slow-burn destruction of Greece and its people continues.
Only a short blog post today as I am travelling for a fair part of the day on my way from New York City to Dublin for my next speaking engagement. Tomorrow’s blog post will cover some reflections on the 3-day Modern Monetary Theory (MMT) conference that finished yesterday in New York. There are several things I thought about the event, some of which I will share in public, the others, in private, with the organisers. But, today’s post, is a brief reflection on the latest crisis that is about to engulf the Eurozone. I am referring to the announcement by the Italian government that it will target a fiscal deficit of 2.4 per cent of GDP. The elites are up in arms. I hope that Italy holds its nerve.