In the EU, sacrifice for the unprivileged.
From William Pfaff’s latest column:
The great economic crisis has given birth to a smaller and tighter monetary union in Europe, under the influence of a Germany that is undergoing a certain estrangement from its European partners. This amounts to a possibly dangerous wager on what the European Union will ultimately become, which not everyone may like.
In Vienna last weekend, the World Policy Conference, founded by the French Institute of Foreign Relations (IFRI) as a vehicle of European communication and cooperation with the so-called BRIC nations and other states in the developing world, found its attention riveted on Brussels and the euro-zone states of the EU. A French official who was part of the nearly all-night discussion in Brussels flew to Vienna to brief the gathering there, where decidedly mixed feelings were expressed about this successful German imposition of its own economic norms on an EU in distress.
Read the rest right here.
I wish Pfaff would get half as much attention as the architects of political talking points. Europe is being handed over to economists (directly in Greeece and Italy) who are respected in the insular banking communities and unknown to the publics for whom they presume to act. Even elected officials act as as if they are owned by Goldman Sachs and the IMF. Writing about the run-up to World War II, George Lukacs listed the majority of the European countries that had abandoned democracy for some form of caesarship even before Hitler because of hard economic times. They are doing it again, but instead of bemedaled military strongmen they are handing over to moneychangers, leverage artists and speculators.
There is some more sound thinking on this point by Harold Myerson in today’s Washington Post.
I really find William Pfaff to be a stimulating read. I would note a couple of things in regard to this column, though:
* Conventional Keynesian policy, as interpreted in the West throughout the 20th Century, called for running deficits, even large deficits,*during times of economic downturn*. That policy has been largely successful for the 2nd half of the 20th century. But it would be a mistake to attribute policies of perpetual and incorrigible debt to Keynes. I believe he called for fiscal discipline and responsibility during times of economic growth – for many good reasons, one of which is that so that the nation has the financial/credit wherewithal to take on increased debt during the down times. This is where both the US and most of Europe have positioned themselves very poorly for the not-quite-recession that we’ve been in for several years.
* Whether the unprivileged should sacrifice in pursuit of Germany’s preferred remedies is something worth considering. But it may also be worth noting that, in Europe, it seems that the dire levels of national debt have come about because the unprivileged have *benefited* from the social/government policies that have contributed to those debts, from subsidized medical care to relatively cushy retirement benefits to vacation and family-leave policies that are the envy of Americans. When one considers, on top of that, the extent to which the US has been subsidizing Western Europe’s defense for many years (to our own fiscal detriment), it suggests that some large-scale changes in Europe are likely.
Jim, The underprivileged not only “benefited” from government social policies, but they benefited from them. And, except possibly in Greece, the social policies were not the cause of the governments’ current problems. Spain ran a surplus until the speculators got at it; Ireland got in trouble not for social policy benefiting the underprivileged but for the political decision to save the banks and let everyone else in Ireland pay for it. Portugal is in trouble because New York speculators can’t tell it from Spain.
The problem with Germany being the most powerful economic country in Europe is that the Germans have a compulsive fear of inflation bred into their bones over 80 years. Changing times won’t change those fears. It will take generations. I am so glad we won the Second World War so Germany couldn’t dominate.. never mind.
Tom – I think you believe I put the word “benefited” in quotation marks. I didn’t. I put it in asterisks (*benefited*) as a way of emphasizing the word.
Greece, Italy, Spain and Portugal are in crises of creditworthiness because their government expenditures, a large portion of which, yes, has gone to social entitlements, have outstripped the tax revenues generated by their sluggish economies for quite a long time. Their choices are to grow their way back to solvency or to spend less. You’re right that Spain experienced a real estate bubble that masked its economy’s poor performance for a time, but that bubble has now burst.
Ireland’s root cause is somewhat different – bailing out its banks is what tipped it so deeply into the red.
OK, I say they benefited as well as *benefited.*
I was sort of hoping you would bring in Italy, where they have an income tax but don’t pay it, which is a near approximation of the prevailing notion that it would be good not to have any taxes at all. I would then have responded that people can have a choice of no taxes or no benefits, and why don’t we put that to a vote?
Which would be democratic. But our betters have already decided they prefer no taxes (I read that in the local paper this morning — something about the Democrats caving, as predictable in the Senate). It looks like they convinced you that’s for the best. I still have doubts.
Here’s a Us headline just poppedup at msnbc -”Dismal: one in two Americans are on poverty, low income.”
But they’ll have to sacrifice, right?
It’s the same old “reponsible” FTP!
”Dismal: one in two Americans are on poverty, low income.”
Bob – that can’t be correct. What is the URL? I just looked around a very little bit on MS NBC but couldn’t find the story.
Jim: http://bit.ly/utWJID
All these underpriviliged have to do is:
(1) take a bath
(2) get a job
(3) praise Jaysus a whole lot
(4) kwitcher bitchin’
Jim P. and Tom B. –
Thanks for reminding the blog about taxes as one of the factors determining economic well=being or disaster. And Keynes has never been more relevant, except maybe in 1930. Once again I recommend the recent Skidelsky work on Keynes (the short one :-)
It seems to me that if we wants to figure out how to have a healthy economy that we have to quit looking at the failed ones, which fail for many different reasons, and start looking at the most successful ones . Check out Denmark’s economy at Wikipedia. It has few natural resources and few industries, yet it has remained a prosperous European nation with health care for all, unemployment benefits, and high retirement rates — all this with a tax rate of 50 percent!!! It has AAA bond ratings and ranks at the top of “happiness’ indexes which compare what people in all the countries of the world say about their own happiness.
I wonder what the tax rates of the, say, 40 most prosperous countries are.
When will we learn.