By Zoltan Zigedy

Via: http://zzs-blg.blogspot.com/

When the so-called “dismal science” – economics — resorts to hollow metaphors like “contagion,” “belt-tightening,” “toxic,” or “tsunami” to describe economic facts and events, one might reasonably wonder if it represents dismay more than science. For sure, practitioners in this field eschew metaphors for technical jargon in their narrow academic studies that have earned many prizes and peer acclaim. But these studies have proven singularly unhelpful in explaining or resolving the four years of chaos that has befallen the global economy.

Thus, it comes as a surprise that those who are paid handsomely to think for us are hailing the appointment of two professional economists to run Greece and Italy. Reflecting these changes, stock markets and other market indicators also reacted happily. Aside from the fact that — over the course of a weekend — the democratic content of two bourgeois democracies were exposed as shams, aside from the fact that the appointments were largely dictated by forces outside of the two countries, it is incomprehensible that two economists—one a former vice-president of the European Central Bank and the other a former European Union Commissioner – will do anything other than continue subservience to the neo-liberal agenda. In effect, Greece and Italy have been put into receivership by the European Union.

That receivership promises no new approach, no retreat from austerity for the masses, no lessening of the slavish commitment to capital, and no defiance of financial markets.

“Centrifugal Forces”

There are properties of economic actors that exert pressure, propelling them away from each other, confounding collaboration and sowing antagonism. Marx identified these properties as intrinsic to capitalism. The properties of individual self-interest, competition and exploitation are inseparable from the social relations that define capitalism in all of its forms. From the small business owner to the CEO of a mega-corporation, from the Chamber of Commerce to the union of nation-states, the opportunity for gaining an advantage always stands in the way of any real, lasting unity between agents big and small. Within the confines of the capitalist mode of production, pressures are always latent to fracture or dissolve combinations or collectives.

Yet economic actors are wise enough to recognize the advantages that may arise from combination and cooperation; a larger capitalist enterprise enjoys an advantage over a smaller one: a big fish eats the little one. On the level of nation-states, a larger nation, or a federation of states, better competes against its rivals. Thus, they strive to advance their interests by striking some measure of unity with some against still other competitors.

Frederick Engels, in the seminal work of Marxist political economy, explained this dialectic well:
Each smaller group of competitors cannot but desire the monopoly for itself against all others. Competition is based on self-interest, and self-interest in turn breeds monopoly. In short, competition passes over into monopoly. On the other hand, monopoly cannot stem the tide of competition—indeed, it itself breeds competition… F. Engels, A Critique of Political Economy

It is this dialectical dance between immediate individual self-interest and self-interest promoted through opportune unity that explains the unstable existence of the European Union. Established as a bloc to compete more favorably against the economic might of the US and Japan, a senior partner in the Cold War rather than a compliant underling, the European community was a last-ditch effort to restore prestige and power to the old, formerly dominating European empires. Devastated by war and in the shadow of the new, post-war great powers, Euro-leaders hoped to forge a unity that would create a formidable entity capable of holding its own, or even overwhelm in the competition between imperialist blocs. Later, the bloc was the European answer to the post-Soviet international landscape that saw other economic powers like Brazil, Russia, India and China join the global competition for markets, resources, and ultimately profits.

In the better part of the twentieth century, imperialist competition led invariably to war; new economic, geographic and political arrangements were settled militarily. By contrast, the European Union was perhaps the most ambitious attempt at a voluntary and peaceful unification of capitalist states to secure economic advantage in global markets. But because each of its constituent states was in widely different circumstances and at uneven levels of development when accepting membership, they had widely divergent goals. The more economically successful states saw preferred markets for their products and downward pressure on their labor force from low-wage members. The poorer countries foresaw better financial terms, investments, and consumer spending from the newly adopted, successful Euro-siblings. In short, all the members – rich and poor – acquiesced to the Union for their own self-interest.

Today, these divergent interests are in immediate danger of destroying the EU. The only solution possible is outside of the logic of self-interest and individual advantage, that is, outside of the logic of capitalism. As Ian Bremmer and Nouriel Roubini put it, in an otherwise confused, cynical op-ed piece in The Wall Street Journal (Whose Economy Has It Worst? 11-12/13-11), “[the solution] implies a gradual transfer of wealth from the core economies to the periphery, a ‘transfer union’ from rich to poorer states.” Put plainly, the future of the EU rests on a program of affirmative action that will equalize the disparity in wealth and economic development between the European haves and the have-nots.

Instead, policy makers have resolved to punish the poorer states for being poor. The devastating austerity programs imposed by the EU, The European Central Bank and the IMF drive Greece, Ireland, Portugal, Spain, and soon Italy, into even greater depths of poverty. The inequalities in the EU generated greater inequalities and now the richer states propose to solve the financial crisis of the Union by proposing even greater inequalities. There is no affirmative action in this scheme.

Contrast this with the other twentieth-century experiments in unification: the union of republics constituting the USSR and the post-war CMEA project uniting Eastern European countries (and later, Cuba). For most of the twentieth century the USSR followed a Leninist policy of affirmative action regarding the poorer constituent republics of the USSR and likewise for post-war reconstruction of Eastern Europe (excepting the GDR which paid a heavy price in war reparations). Growth rates in the poorer republics and Eastern Europe’s former backwaters usually exceeded the rates of the Russian Republic. Most of these countries achieved levels of development on a par with or exceeding that of top European powers, measured by telling socioeconomic indicators: education, life expectancy, access to health care, culture, social securities, leisure, etc. And these achievements arrived in a short time.

Tellingly, the breakdown of Leninist policies during the Gorbachev era, the move to basing trade and aid policies on international market forces led to disintegration and the dissolving of this hard-won unity, another example of the centrifugal forces spawned by markets and the emergence of unequal, individualistic policies. Few will recall the disastrous effects of this policy shift, especially upon Cuba, and well before the demise of the Soviet Union. Indeed, these changes contributed powerfully to that demise.

With justification, one might conclude that unification – mutually beneficial combinations of national entities—is extremely unlikely to be successful with capitalist social and economic relations intact. Conversely, socialist social and economic relations, linked with an internationalist perspective hold the only real, lasting opportunity for unity among diverse states.

These same centrifugal forces gnaw at the twenty-first century effort to achieve economic integration among several progressive, anti-imperialist countries in Latin America. Clearly the European Union model cannot guide this effort. Its success can only come with a concerted effort to overcome the stubborn stance of self-interest and exploitative competitiveness of capitalist social relations.

From this perspective, I wrote in November of 2008:
As with the Great Depression, the economic crisis strikes different economies in different ways. Despite efforts to integrate the world economies, the international division of labor and the differing levels of development foreclose a unified solution to economic distress. The weak efforts at joint action, the conferences, the summits, etc. cannot succeed simply because every nation has different interests and problems, a condition that will become more acute as the crisis mounts… It is highly unlikely that the [European] Union will come up with common solutions. Indeed, the unraveling of the EU is a possibility.

Five months later, and well before Greece became the focus of EU crisis, I wrote:
The EU old guard, led by France and Germany, has adamantly refused to expand financial support for the Eastern European members. The limited aid to the newer members has been mainly exhausted by assistance to Latvia and Hungary. Germany, along with France, the dominant members of the EU, oppose additional EU-wide stimulus. It’s not only Eastern Europe, newly capitalist states that thrived on international loans, but many of the original EU states that are left to their own devices. Spain suffers from the implosion of the construction industry, with delinquent loans and unemployment provoking a banking crisis. A 19% unemployment rate is projected for next year, the highest in the EU. Italy suffers continued stagnation, huge debt, and a broken, corrupted political system – a system that seems incapable of even generating a modest response to the crisis,

Germany has been only too anxious to accept the role as the “big dog” in the EU, dictating most of the terms of Union-wide economic policy. Much as the US assumes that role in the global economy, Germany uses its economic might and relative health to impose its will upon the EU.

Three years later, these assessments and projections have been borne out.

Zoltan Zigedy

zoltanzigedy@gmail.com