Most of you (not too busy watching “Dance Your Ass Off” every night) has probably picked up on the notion among more and more experts that the financial crisis, currently residential of Europe, may result in something far more serious than a long-time recession. At the moment some of us are sitting back while we are watching the scenarios we have predicted for a long time unfolding before our eyes like a day-time soap opera. And we wonder…
“If we know anything from history, it is that long periods of economic crisis tend to lead not to more progressive politics but rather to its opposite; the right-wing politics of xenophobia.”
The most obvious parallel is the Great Depression of the 30’s and the run-up to World War II. Logical thinking tells us, however, that this is a so well-known story that our political leaders will simply not allow something similar to happen again. But does logic even matter in times like this? Well, that’s not the only fundamental question that arise from this insecure situation. Professor George Irvin points points out a few more.
Like: Is the financial market about to kill democracy? Or is it the other way around?
Honorary professor George Irvin at the Univerity of London argues that – for time being – it is the politicians who have failed, not the financial system. And he fear they will make even more and bigger mistakes.
The other day, I was asked in an interview whether finance was killing democracy. Judged over the post-war period, the answer must be a qualified “no”. But things at present are not looking good.
Finance has not killed politics – if anything, the ongoing financial crisis is lading to a reawakening of politics on a scale we have not seen in many years, particularly a re-awakening amongst young people. If the young are out on the streets demonstrating, it is for quite understandable reasons.
Most obviously, the crisis has illuminated the weaknesses of neo-liberal capitalism in a way many though inconceivable a decade ago.
Not only is neo-liberal ideology deeply misleading – the idea that ‘free markets are infallible and don’t require regulation—but the economics it has produced is disastrous.
Inequality is growing everywhere, particularly in the main Anglo-Saxon countries where it is higher today than in the 1930’s.Youth unemployment in the most of Europe ranges between 20- 40%, and we are at risk of producing an entire generation which is locked out of decent work and income.
European “austerity” is destroying the cornerstone of the post-war social settlement; ie, our welfare state.
As for democracy, we have recently witnessed the toppling of two governments by the bond markets, and doubtless there will be more. This is largely the fault of a political elite dominated by bankers which designed a Eurozone where each member- state’s borrowing was vulnerable to attack.
This “fragility” of the Euro zone – the lack of a common fiscal policy and a genuine Central Bank able to act as lender of the last resort – is leading to growing national antagonisms, the most obvious being between Greeks and Germans (a proxy for north v south Europe).
What is truly dangerous is that the financial markets’ notion of ‘common governance’ is all about “greater fiscal discipline,” by which is meant stringent enforcement of the 3% budget deficit limit, the 60% indebtedness rule and, most recently, the notion that all Eurozone countries should follow Germany in adopting a constitutionally binding ‘balanced budget’ (debt brake) provision.
Such views are based on the simple-minded premise that a national economy can be run like a corner shop, the ‘handbag economics’ preached by Maggie Thatcher and more recently by the Schwabian housewife, Angela Merkel.
Not only are such views wrong (they ignore basic national accounting definitions), but they can lead Europe into even deeper economic gloom.
As credit dries up, Europe is on the verge of a new financial crisis which will almost certainly lead to renewed economic depression.
Moreover, the costs of all this is being borne once more by ordinary workers, and increasingly by the middle class. Like markets in the general, the financial market can be a good servant… but it is proving to be a very poor master.
If we know anything from history, it is that long periods of economic crisis tend to lead not to more progressive politics but rather to its opposite; the right-wing politics of xenophobia.
Witness the German depression of 1932 under Chancellor Brüning which saw the extreme right rise from virtually nothing in 1929 to assume power in 1933. I am hardly the first to say it, but we are living in dangerous times.
By George Irvin
George Irvin is a retired professor of economics and for many years was at ISS in The Hague. He is now (honorary) Professorial Research Fellow in Development Studies at the University of London, SOAS.
- What really caused the eurozone crisis? (bbc.co.uk)
- European financial crisis: Is Europe a mess because Germans work hard and Greeks are lazy? – Slate Magazine (wpvins.wordpress.com)
- Inside the Crisis. With the Society of Jesus (chiesa.espresso.repubblica.it)
- The Far Right in Europe and the Eurozone Crisis (thehumantsunami.wordpress.com)
- What Lies Ahead For The Economy? (outsidethebeltway.com)
- ADB urges Asia to help rescue eurozone (cnn.com)
- Europe blunders into a blind, and dangerous, alley (guardian.co.uk)