Reprinted from Dispatches From The Edge
Between now and next April, four members of the European Union (EU) will hold national elections that will go a long way toward determining whether the 28-member organization will continue to follow an economic model that has generated vast wealth for a few, widespread misery for many, and growing income inequality. The choice is between an almost religious focus on the "sin" of debt and the "redemption" of austerity, as opposed to a re-calibration toward economic stimulus and social welfare.
The backdrop for elections in Greece, Portugal, Spain and Ireland is one of deep economic crises originally ignited by the American financial collapse of 2007-08. That meltdown burst real estate bubbles all over Europe -- particularly in Spain and Ireland -- and economies from the Baltic to the Mediterranean went off the rails. Countries like Ireland, Greece, Spain and Portugal saw their GDPs plummet, their banks implode and their unemployment rates reach levels not seen since the Great Depression of the 1930s. Debt levels went through the ceiling.
The response of the EU to the crisis was a carbon copy of the so-called "Washington consensus" that the International Monetary Fund (IMF) applied to indebted Latin American countries during the 1990s: massive cutbacks in government spending, widespread layoffs and double digit tax raises on consumers.
Instead of lower debt levels and jumpstarting economies, however, the IMF strictures for Latin America did exactly the opposite. Cutbacks, layoffs, and high taxes impoverished the majority, which in turn tanked economies and raised debt levels. The formula was a catastrophe that Latin America is still digging itself out from.
But the strategy was very good for a narrow stratum, led by banks, speculators, and multinational corporations. U.S, British, German, Dutch and French banks helped inflate real estate bubbles by pouring low interest money into building binges. The banks certainly knew they were feeding a bubble -- land prices in Spain and Ireland jumped 500 percent.
However, as economist Joseph Stiglitz points out, the banks had a trick: their private debts would be paid for by the public. Taxpayers did pick up the tab, but only by borrowing money from the Troika -- the IMF, the European Central Bank, and the European Commission -- and accepting the same conditions that tanked Latin American in the 1990s. Needless to say, history was replicated on another continent.
The upcoming elections will pit the policies of the Troika against anti-austerity movements in Portugal, Greece, Spain and Ireland. If these movements are to succeed, they will first have to confront the mythology that the current economic crisis springs from avaricious pensioners, entitled trade unionists, and free spending bureaucracies, rather than irresponsible speculation by banks and financiers. And they will have to do so in a political arena in which their opponents control virtually all of the mass media.
Never have so few controlled so much that informs so many.