According to Olivier Blanchard, chief economist of the International Monetary Fund, the Eurozone – and the world economy – are in a very dangerous place. In April Blanchard warned that if Greece pulls out of the euro “it is possible that other Euro area economies would come under severe pressure as well, with a full-blown panic in financial markets. Under these circumstances, a break-up of the euro area could not be ruled out. This could cause major political shock that could aggravate economic stress to levels well above those after the Lehman collapse.” Such a shock, indeed, could “produce a major slump reminiscent of the 1930s”.
This is why, as predicted in a number of ‘expert’ circles, the EU has been obliged to approve a new bail out package and to initiate moves towards a greater centralisation of the Union. “EU leaders have agreed to use the eurozone’s planned bailout fund to directly support struggling banks, without adding to government debt.
After 13 hours of talks, they also agreed to set up a joint banking supervisory body for the eurozone.
Spain and Italy put pressure on Germany to allow the bailout fund to buy government debt in the markets - a measure to contain borrowing costs”.
Although Germany has had to make policy concessions to struggling countries like Italy and Spain, it is at the forefront of a move towards greater EU centralisation. Thus Merkel told the German parliament that if countries want their debts guaranteed by centrally issued eurobonds, this would have to go with greater central control: “Joint liability can only happen when sufficient controls are in place.” This move towards centralisation was already part of the new deal with the decision to set up a joint banking supervisory body, but more ambitious plans are under review:
“European authorities have also unveiled proposals such as the creation of a European treasury, which would have powers over national budgets. The 10-year plan is designed to strengthen the eurozone and prevent future crises, but critics say it will not address current debt problems”.
Merkel has also proposed that in future the president of the EU council should be centrally elected.
In sum, if Germany is to act as the lender of last resort for the whole eurozone, the countries of the zone would have to accept a growing role for German imperialism.
No way out for the EU or capital
Here we can see the fragility of the whole euro and EU projects. Faced with the economic crisis, there is a growing tendency for each country to try to look after its own interests, hastening the break up of the Union. Germany then steps in to try to control the immediate impact of the crisis, but its demands for greater hegemony sharpen national rivalries, again threatening the stability of the Union. Given the history of Europe over the last hundred years, the other main European powers, notably France and Britain, are not going to accept a German-dominated Europe.
But at the economic level as well, the measures being adopted by the bourgeoisie can do no more than slow down the slide towards disaster. As we argue in the article here, the global crisis of overproduction has pushed the ruling class into an irresolvable dilemma: going for growth means piling up more debt, and this in turn only pumps up the pressures towards inflation and bankruptcy. Policies of rigour and austerity (and/or protectionism) aggravate the crisis by restricting purchasing power and thus makes the market contract even further.
The bourgeoisie is beginning to understand the gravity of the situation. It’s no longer worried about a ‘double dip recession’. It’s talking more and more openly about a 1930s-type depression. You can read how “Italy or Spain going bust could plunge Europe into an unprecedented economic catastrophe”, and how they fear intervention is being delayed as “only at one minute to midnight, with Europe staring into a horrific economic abyss, will political leaders be forced to act”.
In fact, the depression has already arrived, and the situation is already worse than it was in the 1930s. In the 30s, there was a way out of the crisis: the adoption of state capitalist measures - whether in the shape of fascism, Stalinism or the New Deal - which brought some control over the economy. Today the crisis is precisely a crisis of state capitalism: all the attempts of the ruling class to manipulate the system through the state (especially the state policy of resort to debt) are exploding in its face.
Above all, in the 30s, the road to world war was open, because the working class was in a position of defeat following the failure of its revolutionary attempts after 1917. The push to war made it possible to absorb unemployment by creating a war economy; and the war itself made it possible to reorganise the world economy and launch the boom that lasted until the 1970s.
This option isn’t on the table today; following the collapse of the old bloc system, the imperialist world order has become increasingly multipolar. American leadership has become weaker and weaker. Opposition to German control of Europe is evidence that Europe will never be able to unite itself into a military bloc. Other rising or recovering powers like China and Russia also lack the ability to form a stable international alliance around themselves In short the alliances needed to fight a world war are not in place. And if they were, the destruction unleashed by a third world war would make another ‘post war boom’ impossible.
Above all, the working class of the main capitalist countries is not in the same position of defeat as it was in the 1930s. For all its weaknesses and hesitations, it is showing an increasing willingness to reject the arguments of the rich and powerful, telling it to sacrifice its living standards ‘for the good of all’. In the last few years we have seen mass strikes in Bangladesh and Egypt, social revolts across the Middle East, Europe and the USA, protests against proposed cuts in pensions in France and the UK, student rebellions against increased costs of education in Britain, Italy, Canada...
But these struggles are still well below what is required by the objective situation confronting the exploited class. In Greece, we can see how workers’ living standards are being reduced in the most brutal manner: massive job cuts, wages, pensions and other benefits directly slashed, with the result that countless families who once could expect a modest living standard are dependent on food handouts when they are not actually living on the streets. In Greece, the shadows of the bread queue and the dole queue, which sum up the 1930s for many, is a painful reality, and one that is spreading to Spain, Portugal and all the other countries who are the fist to be hit by the collapse of capitalism’s house of cards.
Faced with such attacks, workers can often hesitate, cowed by fear. They also have a whole barrage of ideology thrown at them – maybe we need to vote left and nationalise the banks, maybe we should vote right and blame it all on the immigrants. There are the unions, actively sterilising their response, as we have seen with the succession of one day general strikes in Greece, Spain and Portugal, the endless public sector ‘days of action’ in the UK.
All these ideologies try to keep alive the hope that something can be preserved inside the present system. The crisis of the system, now shaking all the structures set up to manage it, will argue very persuasively that it cannot. WR 30/6/12