IN HIS LATEST BOOK, And the Poor Suffer As They Must?, Yanis Varoufakis, former finance minister of Greece, argues that the poor should not, need not – indeed – had better not suffer. He traces the history of the European Union from its inception to the present, laying bare the inherent flaws responsible for its current crisis.
The EU, he explains, was structured around the Bretton Woods system, so called because that’s where the model was agreed upon at the end of WWII.
There were two global systems proposed at Bretton Woods. The eminent British economist, John Maynard Keynes, “advocated a global system that could stabilize capitalism for a fabulously long time.” The American negotiator, Harry Dexter White, promoted “a system consistent with the United States’ new found strength but that was viable only as long as America remained the surplus nation extraordinaire.” The American proposal prevailed.
The new system was tied to gold, a feature Keynes held to be “a dangerous throwback to a dismal past.” Varoufakis explains how this blew up in 1971, when the US ceased to be surplus nation, and could no longer sustain the gold standard. Richard Nixon took the US off the gold standard. “Thus Europe was jettisoned in 1971 from the dollar zone by a US intent on preserving its hegemony and unwilling to turn to austerity to save Bretton Woods.”
He goes on to explain how the knee-jerk reactions of Europe’s leaders to that “led them from one error to the next, culminating, forty years later, in Europe’s current circumstances.” These errors included their “ill-conceived euro.” In fact, he cites that as the specific cause of the Eurozone crisis. “European peoples who had hitherto been uniting so splendidly, ended up increasingly divided by a common currency” – a paradox that is the central theme of his book. “European nations tried to huddle together” but the badly designed euro “turned into toxic bailouts with devastating effects.”
Another chief flaw was the “great difference between Britain and countries like Greece. Gordon Brown could rely on the Bank of England to pump out the cash needed to save the city; Eurozone governments had a central bank whose charter did not allow it to do the same. Instead, the burden of saving the inane bankers fell on the weakest of citizens. Bailout loans were given under conditions of income-sapping austerity that further weakened the weak taxpayers on whom the whole edifice was leaning.”
Though certainly no fan of Margaret Thatcher’s, Varoufakis credits her with “[hitting] the nail on the head regarding the nature of Europe’s monetary union.” He writes of “her last stand in a now famous cabinet meeting at 10 Downing Street, in 1990,” when she squared off against “a pack of…cabinet ministers hell-bent on toppling her.” At issue was Europe’s monetary union. “She wanted none of it. They were keen to hook Britain’s Sterling to the European monetary system. Thatcher proclaimed that if she had her way, “there would be no European Central Bank accountable to no one, least of all to national parliaments because under that kind of central bank there would be no democracy, and the central bank would be taking powers away from every single parliament and would be able to have a single currency and a monetary policy and an interest rate policy that takes away from us all political power.”
Varoufakis comments that “the notion that money can be administered apolitically, by technical means alone, is dangerous folly of the greatest magnitude.”
“Thatcher’s precious point,” he says, “was that controlling interest rates and the supply of money is a quintessentially political activity which, if taken out of the purview of a democratically elected parliament, would occasion a steady descent into authoritarianism.”
The European Union was the dream of nations much chastened by the latest in a long history of international violence, longing for a peaceful coexistence built on “common values and human principles.”
Alas, the model could not withstand the pressures emanating from the ‘Nixon shock’ and 2008, and “before long the working class in one nation turned against the working classes of all nations, looking to protectionism for success.”
These new divisions remind us, Varoufakis points out, that “it would be foolhardy to forget how Europe has managed, twice in the past century, to become so unhinged as to inflict stupendous damage upon itself and the world.”
“With every toxic bailout, with each triumph of the Eurogroup over a democratically elected government,” Varoufakis warns, “Europe is pushed further into a dark and arid future.”
Against this context, much of the commentary on Brexit seems superficial and singularly pessimistic. However, in their “Modest Proposal For Resolving the Eurozone Crisis” Yanis Varoufakis, Stuart Holland, and James Kenneth Galbraith, reflect hope that “serious dialogue and the readiness to return to the drawing board” can resuscitate the “dream” (page 255).
“I think we can pull it off,” writes Varoufakis, “but not without a break from Europe’s past and a large democratic stimulus that the fathers of our European union might have disapproved of.”
It would seem that the member states of the EU have only two options: Brexit or Fixit.
Élan
About Our Commenter
Élan is a pseudonym representing two of the original members of COMER, one of whom is now deceased. The surviving member could never do the work she is now engaged in were it not for their work together over many years. This signature is a way of acknowledging that indebtedness.
