What led governments (although by no means all voters) to accept a supra-national pan-European authority was the trauma of World War II. It seemed that nation-states were prone to making war, but a United States of Europe would not fight -- at least, not internally. But the authority that has been put in place is financial, pro-creditor and anti-labor, empowered to impose austerity and turn the public domain to into privatized monopolies.
The EU cannot be "fixed" by marginal reforms. Greece's treatment shows that it must be recast -- or else, countries will start leaving in order to restore parliamentary democracy and retain what remains of their sovereignty. The financial sector's ideal is for economies centrally planned by bankers, leaving no public infrastructure unappropriated. Privatized economies are to be financialized into opportunities to extract monopoly rent.
The gauntlet has been thrown down, posing a question today much like that of the 1930s: Will the alternative to austerity, debt deflation and the resulting economic breakdown be resolved by a pro-labor socialist alternative, or will it lead to a victory by anti-European right-wing parties?
What makes the situation different today is the remarkable extent to which today's European parties calling themselves Socialist, Social Democratic or Labour have accepted privatization and opposition to budget deficits. This shift reverses what they urged at their origins more than a century ago. So the problem is not only to resist the right wing of the political spectrum; it is to reconstruct a real European left.
Galbraith's book has important implications for the policies needed to save the eurozone from being turned into a dead zone along the lines of Latvia's disastrous oligarchic "success" story. (Drastic emigration and declining after-tax wages are the "Baltic Miracle" in a nutshell.)
If European Left does not succeed in creating an alternative to eurozone austerity, right-wing nationalists will lead a withdrawal campaign. Golden Dawn in Greece, France's National Front, along with Hungarian, Austrian and Polish nationalist parties and Britain's UKIP are moving to fill the vacuum left by the absence of a socialist alternative to financialization under ECB and IMF dirigisme.
Notes.
[1] My book Trade, Development and Foreign Debt (2002) reviews the German reparations debate over "capital transfers" with regard to how austerity actually reduces the ability to pay.
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