Tag Archives: World War II

In Dangerous Times

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.”

George Irvin

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.

This article was posted last month on professor Irvin’s blog at the EUobserver.com:

Politics and the EU financial crisis

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.

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Filed under International Econnomic Politics, Laws and Regulations, National Economic Politics, Philosophy

Who The Fuck Is This Keynes-Guy?

For most people, with no relation to the financial sector and ordinary knowledge of economics, the name John Maynard Keynes means next to nothing. So, it’s a pleasure to share this article written by William Alpert and Sol Sanders; an excellent presentation of the famous economist that shaped our economy after World War II, but now has come back to haunt us with the possibility of making some huge mistakes.

“Keynes wouldn’t have been a Tea Party-er. But there is little doubt that his mind and heart would not have been with the Dodd-Frank-Geithner spend-until-we- recover crowd who have taken his name in vain. “

William T. Alpert and Sol W. Sanders


“Few would dispute the claim that John Maynard Milord Keynes was a genius. He was one of a long line of British writers on the political economy, who revolutionized the sport. He was brilliant if sometimes torturous in seeking to explain the riddle of human economic life,” the two authors states.

Like his British (mainly Scots) forbears, and like their offspring on the Continent who continued the tradition after it had died in Britain, he was a savant of political, repeat, political economy. For they understood as successive generations of practitioners of “the dismal science” often have not, that it is not a science.

They also knew that those who use statistics and, may the Lord help us, the new digital revolution, to build their “constructs”, not only to examine but to predict human behavior, will usually fail.

Keynes, certainly, understood the “political” part of political economy well before James Buchanan received his Nobel Prize in public choice theory for its “discovery.”

Torturous? Well, at least more than a bit Machiavellian.

He rather quickly left his Cambridge colleagues behind, including a homosexual lifestyle, when he ventured into the world.

He had minimum truck with the leaders of the chattering classes of his time, the inbred Bloomsbury Set, and even less with the Fabian Society.

The latter, of course, thought they had found the ultimate formula for a several hundred years search in utopian, Christian, anarchy, syndicalist, Marxian and other European socialism.

But unhappily, they were completely derailed by the Soviet heresy. For example, H.G. Wells would write a pamphlet not only endorsing but calling Stalin “beloved” on the eve of the Moscow Trials.

Torturous, too, if you are a layman and have tried to struggle through his General Theory of Employment, Interest and Money, generally acknowledged as his magnum opus or through an incredible array of writing – some of it surprisingly good.

See for example his The Economic Consequences of the Peace, in which he predicts the disastrous outcome of the Treaty of Versailles.

Keynes not only put his stamp on the academic world and excelled in the vicious infighting of government bureaucracy but he made a fortune gambling in commodities.

Machiavellian? Keynes not only put his stamp on the academic world and excelled in the vicious infighting of government bureaucracy but he made a fortune gambling in commodities.


A fund he set up for his Cambridge alma mater despite taking a massive hit during the Stock Market Crash of 1929, produced an average increase of 13.2% compared with the general market in the United Kingdom declining by an average 0.5% per annum until 1945.

His contempt for many if not most of his bureaucratic contemporaries was monumental.

After the Bretton Woods agreements were signed, the attempt to reset the world’s economies after World War II over which he presided, he snidely told one of his gophers:

“The clerks have got it wrong again. The Bank [International Bank for Reconstruction and Development, latterly to be called The World Bank] should have been called ‘fund’, and the Fund [International Monetary Fund] should have been called ‘bank’.”

In his own way, Keynes could be called the father of Europe’s post-World War II miraculous reconstruction.

This time his proposal that modest reparations should be sought, that all the powers should unite in rebuilding and with American credits under the Marshall Plan was accepted.

They had been rejected when as a young rising star in the British Treasury he had proposed them as early as 1915 and at the Versailles Conference. But Keynes, alas, was not by any means always right!

“The day is not far off”, he wrote, “when the economic problem will take the back seat where it belongs, and the arena of the heart and the head will be occupied or reoccupied, by our real problems/the problems of life and of human relations, of creation and behavior and religion.”

In 2011 we are still waiting.

His reputation, however, has become omnipresent – – spreading even to his self-acknowledged opponents. In 1999, US President Richard Nixon, having thrown his own primitive economic prejudices to the winds and instituted disastrous wage and price controls, said, “We are all Keynesians now”.

But however politically wily domestically or brilliant at international strategy, it’s unlikely that Nixon knew much about what Keynes had in fact argued.

Things haven’t changed.

A Greek chorus of the kind of economists who believe econometric models can predict social and political events is once again invoking the Old Boy’s name to bless profligacy.

It is true that Keynes was an interventionist, that he believed government had a role and should employ it, to curb and limit the business cycles which have dominated modern economic life since The Industrial Revolution began with the advent of capitalism — and perhaps before.

Keynes set strict limits on how governments might borrow and toss capital into the machinery to get it up and going again.

But Keynes set strict limits on how governments might borrow and toss capital into the machinery to get it up and going again.

Keynes did believe in something he called “socialized investment”, that is public funds/borrowing that had to be made for the general good beyond the normal functioning of the capitalist system. And, if not lick the business cycle, to at least ameliorate it.

He wanted to set up separate budgets – for current accounts and for longer term capital projects which might require government assistance if not sponsorship.

He neither believed in general funding of an amorphous public debt through public borrowing and spending, nor of using the tax tables to work out solutions to social problems.

That’s something, by the way, that most corporations do today but which the Congress, which so far hasn’t produced this year’s budget. has never undertaken for one of the largest commercial enterprises in the world, the US government.

But he neither believed in general funding of an amorphous public debt through public borrowing and spending, nor of using the tax tables to work out solutions to social problems.

For a man who could twist the English language until it screamed for mercy, he actually made this point very clearly:

The more socialized we become, the more important it is to associate as closely as possible the cost of particular services with the sources out of which they are provided even when a grant-in-aid is also required from general taxes.

This is the only way by which to preserve sound accounting, to measure efficiency, to maintain economy and to keep the public properly aware of what things cost.

As early as 1931 (although it was hardly early for the British who already had endured a painful decade of restoration of the pound to its pre-war status), Keynes, in a radio address, said:

“[At] the present time, all Governments have large deficits. For government, borrowing of one kind or another is nature’s remedy… for preventing business loses from being, in so severe a slump as the present one, so great as to bring production altogether to a standstill. It is much better in every way that the borrowing should be for the purpose of financing capital works, if these works are of any use at all than for the purpose of paying doles [or veterans’ bonuses]. But, so long as the slump lasts on the present scale, this is the only effective choice for the one purpose or the other [or a diminished Sinking Fund, which has the same effect] is practically inevitable For this is the case, fortunately perhaps, where the weakness of human nature will, we can be sure, come to the rescue of human wrong-headedness.”

“… My own policy for the Budget, so long as the slump lasts, would be to suspend the Sinking Fund, to continue to borrow for the Unemployment-Fund, and to impose a Revenue Tariff. [Author’s note: Few recognize that his The General Theory was written with the assumption of an economy closed to foreign trade – – unlike our own today, but that is the subject for another time.] To get us out of the slump we must look to quite other expedients. When the slump is over, when the demands of private enterprise for new capital have recovered to normal and employment is good and the yield of taxation is increasing, then is the time to restore the Sinking fund and to look critically at the less productive state enterprises.” 

Perhaps even more to the point:

“I should aim at having a surplus on the ordinary Budget, . . . thus gradually replacing dead-weight debt by productive or semi-productive debt. . . . I should not aim at attempting to compensate cyclical fluctuations by means of the ordinary Budget.”

His ghost must be screaming about the downs at Tilton in Sussex where his ashes were scattered in 1946.

Maybe Keynes wouldn’t have been a Tea Party-er. But there is little doubt that his mind and heart would not have been with the Dodd-Frank-Geithner spend-until-we- recover crowd who have taken his name in vain.

President Barack Obama’s stalwarts may think they know what they are doing, throwing “stimulus” about – mostly in the form of supporting and expanding government through national and regional public sector employment.

But their claim that it is all following the philosophy of one of the last of the great political economists (rather than today’s econometricians pretending they are) is false.


His ghost must be screaming about the downs at Tilton in Sussex where his ashes were scattered in 1946.

By William T. Alpert and Sol W. Sanders

Source: International Risk Analysts

Video Bonus

John Maynard Keynes and his sharpest theoretical opponent F. A. Hayek, two of the great economists of the 20th century, come back to life to attend an economics conference on the economic crisis.

Before the conference begins, and at the insistence of Lord Keynes, they go out for a night on the town and sing about why there’s a “boom and bust” cycle in modern economies and good reason to fear it.


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EU Minster Compare France With Nazi Germany; Receive Standing Ovations

The French government are under heavy pressure because of its decision to expel over 1000 Romans from the country. But now the French have had it; EU justice commissioner Viviane Reding indirectly compared the French actions with Nazi Germany‘s deportation of Jews during World War II, saying that “this is a situation I had thought Europe would not have to witness again after the Second World War.”

“This is not how you speak to a major power like France, which is the mother of human rights.”

Bernard Valero

Over 440 Roma camps have been dismantled in the past month and more than 1,000 Romanian and Bulgarian citizens sent back to their home countries as part of the massive crackdown on illegal immigration, ordered by President Nicolas Sarkozy at the end of July. The expulsion of gypsies from France have been met with with storm of protest from both EU politicians and human rights organizations.

“A plane ticket to one’s country of origin in the European Union is not a death train, and is not the gas chamber.”

This remark by EU justice commissioner Viviane Reding in a radio interview, yesterday, have really got the French out of their chairs and up on the barricades.

Viviane Reding

Viviane Reding

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Ms. Reding said she was “appalled” at the French policy. She called the developments a “disgrace” and said the commission will take legal action against Paris at the EU court in Luxembourg.

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All the political groups in the European Parliament have welcomed Viviane Reding’s intervention, except for the center-right European People’s Party, to which, awkwardly, both President Sarkozy and Ms. Reding are affiliated.

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The Mother Of Human Rights

Focusing in on the commissioner’s remark, Tuesday, the French politicians today says that Ms Reding’s “unseemly” remarks in effect compare France to the Nazi regime.

Bernard Valero

According to the EUobserver, spokesman for the French foreign ministry Bernard Valero says that Paris is “astonished” by Ms Reding’s statement.

“We don’t think that this kind of declaration will help improve the predicament of the Roma, who are at the heart of our concerns,” Valero says.

“This is not how you speak to a major power like France, which is the mother of human rights.”

Head of Mr. Sarkozy’s UMP party in the National Assembly, Jean-Francois Cope, also dismiss Ms Reding’s comments as “baseless accusations” and suggested the EU commission had “ulterior motives.”

Voluntary Deportations

French authorities deported over 200 Roma to Romania the same day that Ms. Reding spoke out on the commission podium. Some 230 explees, including children, landed in Bucharest on Tuesday in what France is calling “voluntary deportations” in defiance of human rights groups.

Over 440 Roma camps have been dismantled in the past month and more than 1.000 Romanian and Bulgarian citizens sent back to their home countries as part of the massive crackdown on “illegal immigration” ordered by President Nicolas Sarkozy at the end of July.

Most of the Roma interviewed by journalists upon arrival in Romania said they would return to France, because the economic situation is better, even if they get deported again.

Romanian local authorities are speed-tracking procedures for social assistance, but the fresh aid is unlikely to keep them in the country.

Xenophobic, Discriminatory And Nationalistic

Spokeswoman for the President of the European Parliament, Jerzy Buzek, says to the EUobserver that “the commission is the guardian of the EU treaties. If it finds that France broke the law, it should proceed accordingly.”

The head of the Liberal group, Guy Verhofstadt, says in a statement: “Europe is finally proving its worth by not ignoring xenophobic, discriminatory, and nationalist policies perpetrated by member states. We welcome commissioner Reding’s action to bring fast-track infringement proceedings against France.”

Socialist leader Martin Schulz also welcomed the Reding speech, but says the reaction came “too late for hundreds of Roman people,” already deported by the French government.

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Human Rights Groups Flabbergasted

Human rights groups have rallied behind the commission.

Amnesty International, which has behind the scenes been trying to push the commission to take action, was flabbergasted by the force of the response.

“This has never happened before. I mean, there were 10,000 Roma deported by various member states last year and the commission didn’t say anything,” Nele Meyer, the group’s Roman expert says.

“We are absolutely surprised and delighted that Reding took such a strong line.”

“Ms. Reding’s forceful statement comes not a moment too soon,” Benjamin Ward from Human Rights Watch says in a statement. “The French government needs to heed the calls from Brussels and halt this abusive policy.”

The European Network Against Racism urged the commission to take legal action not only against France “but also against all other member states putting in place similar policies infringing minority rights.”

The French parliament also on Tuesday pressed ahead with another controversial policy – the total ban of burqas and other full-body robes worn by Muslim women in public, even by visitors who pass through France.

Offenders face a maximum fine of €150 and could be asked to attend courses on what the government calls “republican values.”

Individuals who encourage others to ignore the ban would face tougher penalties: up to one year in prison and a maximum fine of €30,000.

On Econotwist’s account:

Thank you, Ms. Reding! This kind of courage is rarely seen in any political environment today, and is exactly what the world needs at the moment. Wishing you the best of luck.

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Sarkozy Takes Austerity To New Hights

EU’s Administrative Costs Set To Rise 4,4% In 2011

People’s Confidence In The EU Drops To Record Low

The Political Impact Of The Great Recession

A European Revolution by December?

EU Member States Disagree On Debt Figures

EU Officials Fears Second Depression And War

Is World War III Approaching?

A Report To Make You Go “Hmmm…”

The Failure Of A Culture

A Lament for Europe

Global Economy On Fast Track To Disaster

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