By Claus Offe, Social Europe, March 6, 2015
Europe has had a rocky start to 2015. The Eurozone crisis is back on the agenda, a war is developing at Europe’s border and people across the continent seem more and more discontent with their political systems leading to the rise of different forms of populism. How healthy do you think is European democracy?
Who wouldn’t agree these days that things are not going well in Europe? Yet do the challenges and disasters you mention have common roots? I think they do, if at a very abstract level. The common root of the war in Ukraine, the Eurozone crisis and the rise of populism can be seen in the absence of fair and effective institutional mechanisms of political interest intermediation, conflict resolution and crisis management. If those are in place and function well, such institutional mechanisms serve to inculcate in political actors, “elite” and “mass” alike, the ability to anticipate crisis, to search for modes of reconciling conflict and to be attentive to the major risks, uncertainties and dangers involved in current political, economic and military configurations of forces. If they are not in place or do not function well, we observe instead the spread of pious lies, self-righteous insistence on “non-negotiable” positions as well as all the political pathologies that come with the short-sighted and irresponsible pursuit of both interests and passions and the outright refusal to take notice of harsh and complex realities.
What used to be a utopian dream of Europhiles looking at the distant future has, under the impact of the financial, fiscal, economic and institutional crises, suddenly turned into an urgent move dictated by the necessities of an emergency.
Just to illustrate: Scores of academic and political observers have predicted that the introduction of the Euro into a highly heterogeneous currency area would turn out an intolerably risky adventure unless such monetary strategy were embedded into a political union with strong fiscal capacities. Yet the latter is still not in place. Similarly, the “color revolutions” that took place in the EU’s eastern neighborhood in the 2000s, the signals sent to the region by the evolving European Neighborhood Policy, the manifest economic, political, territorial and cultural divisions of Ukraine (as well as Moldova and the Caucasian republics) and the equally manifest and aggressive “grievance nationalism” (Georgia 2006) of a Russian regime relying on the archaic sacralization of territory (Crimea 2014, rather than the conventions of international law) would have called for the establishment of precautionary institutional mechanisms – the timely setting up of mutually acceptable bargaining tables, as it were.
As to the question of the “health” of democracy in Europe, an institutionally unbridged gap, the defining feature of “postdemocracy,” has opened between the sphere of politics (with its mobilizing passions and fragmented protests, its side shows for the entertainment of spectators, its moralizing and personalizing media accounts of events, but also with its legitimate demands) and the sphere of policy where national and European technocratic elite actors decide, within the parameters set for them by dictates of financial and other markets, on everything that involves the social and economic wellbeing of the citizens of the EU and its member states. The democratic bridge between those two poles, i.e., the institutions that allow for enlightened understanding and informed preference formation, organized participation and representation, the building of alliances and consistent/persistent oppositional forces, of an ongoing process of creation and contestation of policies, is largely ruined, and the more so the more deeply policies affect and often violate standards of social and economic justice.
In your new book, Europe Entrapped, you analysed some of the most pressing issues of European integration. What do you think are the biggest problems?
In a nutshell: The EU in general and the Eurozone in particular are alarmingly incapable of coping with the problems that integration has brought with it. At the same time, the way back, the return to a system of (putatively) autonomous and sovereign European nation states is not just a horror on normative grounds; it is, in my view, simply (and happily) not going to happen, all the rhetoric of “Grexit” and “Brexit” notwithstanding. Thus the EU finds itself suspended in a state of severely deficient policy capacity without, however, a “way forward” being charted nor political forces and alliances pushing for and defining that way having come forward. At the same time, and as the ongoing Euro and debt crisis demonstrates beyond any reasonable doubt, the current institutional condition of the EU with its severely deficient policy capacity is unsustainable. It is this configuration of (im)possibilities that my metaphorical “trap” refers to. One could even argue, in a more optimistic tone, that what used to be a utopian dream of Europhiles looking at the distant future (such as the building of some “European Republic”) has, under the impact of the financial, fiscal, economic and institutional crises, suddenly turned into an urgent move dictated by the necessities of an emergency.
In the EU of 2015, the divide that dominates all others is that between the winners and the losers of the common currency that disunites the “core” and the “periphery.” The core is perceived to dictate the terms under which the periphery is to be assisted, while growing political forces in the periphery see themselves as being forced to abide by rules and agreements the terms of which amount to a suicide pact. The two medicines of “austerity” and “structural reforms” that the core has administered have turned out to be poisonous. It now seems to dawn upon political elites on both sides, even those in Berlin and Brussels, that anything resembling a new equilibrium will come at the price of massive redistribution (between countries, social classes, and generations) the requisite size of which dwarfs the redistribution that has been accomplished already: that from tax payers to “systemic” banks.
It would help if we had a clearly articulated European party system (together with supranational election laws) capable of processing the distributional conflict, but that system is unlikely to make much progress in the shadow of exactly that conflict. Meanwhile, rightist populism is emerging in all of the core countries; it has established itself as an effective electoral veto power blocking overly “Europhile” concessions of national governments. Also, all sides agree that any escape from the trap presupposes a resurgence of economic growth. But in the absence of the demand that could stimulate private sector investment (and in the presence of fiscal constraints and “debt brakes” that hinder public sector investment in spite of the ECB adopting extreme versions of monetary policy), the actual performance of investment and labor markets lends growing credibility to the “secular stagnation” hypothesis: major growth rates of GDP per capita are to be observed in other places than Europe or, for that matter, the OECD world as a whole.
It used to be the case that European integration profited from its crises: Whenever developments lead into a dead end, an institutional breakthrough was adopted by European elites which opened up new policy choices. That logic may have become a thing of the past.
Looking forward, what do you think should change in European politics? Can there be such change and what would it take to bring it about?
I guess you are not asking me for my personal wish list but for promising possibilities inherent in the current situation. I am afraid there are not many, given the weakness of political agency at the EU and Eurozone levels. The notion that the monetary union must be complemented by a political one is widely paid lip service to. But the adoption of new Treaties in which such political union would be enshrined is known to be a time consuming affair, highly uncertain as to its outcome.
The core element of a “political” union would be an entity that is endowed with the power to tax, spend and (re)distribute. In order for such a power to come into being, it would have to be democratically accountable, because of “no taxation without representation.” There are countless design proposals concerning what a democratized EU might look like in institutional terms. One family of such proposals is focused on the European Parliament which is to be upgraded to a “normal” legislative body, complete with rights of legislative initiative and control over an elected “government.” But before that can come into being, the thorny question of “degressive proportionality” must be resolved – the issue of how much deviation from the “one person one vote” is consensually thought to be permissible and practicable. And so on.
It used to be the case that European integration profited from its crises: Whenever developments lead into a dead end, an institutional breakthrough was adopted by European elites which opened up new policy choices.
That logic may have become a thing of the past. Instead, we may face a situation where breakthroughs and innovations are triggered not by an orderly process of negotiated solutions, but by institutionally unscripted forms of politicization, mobilization and confrontation necessitating gamechanging responses.
These responses are likely to be disorderly, improvised, unilateral, last minute surprise moves with demarcation lines of competences being blurred, contested and challenged. At any rate, it seems far too early to write off European integration as being an unequivocal machinery of neo-liberal market integration. Instead, it remains an ambivalent process the possibilities of which are not yet exhausted.
Our Comment
One size does not fit all. The European crisis demonstrates our urgent need to move to a higher level of thinking – one that values and respects diversity for one thing – one that would wake us up to the need to rethink the “New World Order.” Only then can we escape from the one-size, neoliberal body bag into which nation states are being zipped, through debt and “free trade.”
Michael Hudson’s, Finance Capitalism and its Discontents, includes the edited transcript of a phone interview for Athens News, September, 2012.
It’s to be hoped that the following excerpts from that will drive the reader to rush right out and get a copy of this wonderfully clear and comprehensive overview of “how finance capitalism is pushing the world, starting with Europe, into austerity and neo-feudalism.”
- The problem is that neither Greece nor other Eurozone countries have a central bank to monetize their budget deficits. So they need to borrow from bankers and bondholders, at interest rates that rise as the dysfunctional system grows more untenable.
- …Families and companies can not pay their debts when government imposes such extreme austerity. Bank loans go bad and the government’s tax revenue declines, widening the deficit. This is well illustrated decade after decade, case after case for the International Monetary Fund’s austerity programs imposed on Latin America in the 1970s and ’80s.
- Unfortunately, the history of economic thought no longer is taught as part of the neoliberalized economics curriculum, at least here in the United States. So people are not aware of either of how destructive financialized management and planning ever since the fall of Rome, or of the alternative developed by Enlightenment, classical political economics and Progressive Era reforms.
- Greece joined Europe because it wanted to increase its prosperity, not let the financial sector end up with all the benefits. To promote fair growth whose benefits are widely distributed, it needs a real central bank – and taxation of unearned income, windfall gains and “unexplained enrichment,” that is, all forms of economic rent. Either this is created within the Eurozone, or else Greece or the European periphery should start afresh with the kind of Clean State that fueled Germany’s Economic Miracle. Europe needs a debt cancellation to bring debts back within the ability to pay.
- The financial sector cannot and should not continue as it is. The existing debt claims (“savings”) held by the 1% on the 99% should be wiped out along with the debt overhead.
- Q: How can Greece counter the terror propaganda warning about the horrors and calamities that threatens to befall the nation if it defies its troika conquerors and tries to go it alone? A: The real terror is what would happen if Greece surrenders to these financial aggressors. Throughout most of history, populations and governments have fought back against creditors. Either they win and resume their economic growth, or the creditors will win and impose austerity, turning economics toxic and driving many citizens to emigrate.
- But the reality in this financial war is that Greece can do whatever it wants with which debts get paid or which will be written down or written off altogether. Greece has a wide array of options. It can re-denominate debts in its own currency and than devalue. Or it can simply repudiate the debt as being unpayably high.
- Greece wouldn’t need to act alone in defending its economy. Its diplomats can pursue agreements with other countries that are in the same sinking debt boat. They may reject the Eurozone model of austerity and debt deflation.
- At issue is how society will resolve the buildup of debts that can’t be paid. If governments let the financial sector foreclose, they will end up being forced to privatize the public domain under duress conditions at distress prices. They also will have to dismantle public administration and welfare services.
- The alternative is write down debts to what can be paid, within the framework of a mixed public/private economy whose tax policies and monetary system aim to distribute wealth and income more equitably. The history of how societies have dealt politically with their debt overhead throughout history needs to be highlighted in the public consciousness and placed at the heart of the academic curriculum and media discussion.
Michael Hudson: Distinguished Professor of Economics at the University of Missouri (Kansas City), and President of the Institute For The Study of Long-term Economic Trends (ISLET).
The EU example is “writing on the wall” that we need to read and really think about, before our own body bag – already zipped to the chin – is snapped shut and locked!
International cooperation? Fair trade? Of course!
But one-world fascist, feudal rule???
Time to sort out the difference!!!
Élan
