Send a Tweet
Most Popular Choices
Poll Analyses
Share on Facebook 7 Share on Twitter 2 Printer Friendly Page More Sharing
OpEdNews Op Eds    H3'ed 10/4/16

The Poisoned Chalice: From Eurozone to Dead Zone

Author 36185
Message Dr. Michael Hudson
Become a Fan
  (7 fans)

Reprinted from Counterpunch


(Image by Amazon)   Details   DMCA

James Galbraith's articles and interviews collected in his book Welcome to the Poisoned Chalice trace his growing exasperation at the "troika" -- the European Central Bank (ECB), IMF and EU bureaucracy -- which refused to loosen their demand that Greece impoverish its economy to a degree worse than the Great Depression. The fight against Greece was, in a nutshell, a rejection of parliamentary democracy after the incoming Syriza coalition of left-wing parties won election in January 2015 on a platform of resisting austerity and privatization.

The world has seen the result: In contrast to the support given to countries with right-wing regimes, the ECB and IMF tightened their financial screws on Greece. The incoming finance minister, Yanis Varoufakis -- who had been Galbraith's faculty colleague at Austin, Texas -- asked Galbraith to join him in February to help develop an alternative to the austerity being demanded. They were optimistic that reason would prevail: an awareness that the creditors' program of "cutting wages and income without providing any relief from private debts (such as fixed mortgages) merely deepens debt burdens and forces people into bankruptcy and foreclosure."

This book reflects Galbraith's disappointment at how matters turned out so disastrously. In early June, a month before the July 5 referendum in which Greek voters rejected ECB-IMF demands by a heavy 61.5 percent, he thought that the government would fall if it capitulated. "So this option is not a high probability." But that is just what did happen. Tsipras surrendered, prompting Varoufakis to resign the next day, on July 6.

A week earlier Galbraith had spelled out what seemed to be the inherent logic of the situation: Tsipras "could not yield to the conditions being demanded. So then the onus will be back on the creditors, and if they choose to destroy a European country, the crime will be on their hands to all to see."

Tsipras did yield, and the Greece's economy was destroyed by the Eurozone getting its way and imposing insolvency within the euro, not by forcing it out of the euro and leaving it bankrupt resorting to anti-Cuba or anti-Iran-type sanctions. Galbraith's book presents the prosecutor's case for what ensued. By May 3, he wrote to Varoufakis that he found "no prospect for development inside the current economic structures of the Eurozone."

The essays in this book present Greece's experience as an object lesson for other countries seeking to free themselves from right-wing financial control. The IMF and ECB do not even consider their destruction of Greece's economy to be a failure. They continue to impose an austerity doctrine that was shown to be fallacious already in the 1920s.

The EU Constitution imposes debt deflation and austerity

Galbraith expressed his "epiphany" already in 2010 that a "market-based" solution was a euphemism for anti-labor austerity and a reversal of political democracy. "In a successful financial system, there must be a state larger than any market. That state must have monetary control -- as the Federal Reserve does, without question, in the Untied States." That was what many Europeans a generation ago expected -- for the EU to sponsor a mixed public/private economy in the progressive 20th-century tradition.

But instead of an emerging "European superstate" run by elected representatives empowered to promote economic recovery and growth by writing down debts in order to revive employment, the Eurozone is being run by the troika on behalf of bondholders and banks. ECB and EU technocrats are serving these creditor interests, not those of the increasingly indebted population, business and governments. The only real integration has been financial, empowering the ECB to override national sovereignty to dictate public spending and tax policy. And what they dictate is austerity and economic shrinkage.

In addition to a writeoff of bad debts, an expansionary fiscal policy is needed to save the eurozone from becoming a dead zone. But the EU has no unified tax policy, and money creation to finance deficit spending is blocked by lack of a central bank to monetize government deficits under control of elected officials. Europe's central bank does not finance deficit spending to revive employment and economic growth. "Europe has devoted enormous effort to create a 'single market' without enlarging any state, and while pretending that the Central Bank cannot provide new money to the system." Without monetizing deficits, budgets must be cut and the public domain sold off, with banks and bondholders in charge of resource allocation.

As long as "the market" means keeping the high debt overhead in place, the economy will be sacrificed to creditors. Their debt claims will dominate the market and, under EU and ECB rules, will also dominate the state instead of the state controlling the financial system or even tax policy.

Galbraith calls this financial warfare totalitarian, and writes that while its philosophical father is Frederick Hayek, the political forbear of this market Bolshevism is Stalin. The result is a crisis that "will continue, until Europe changes its mind. It will continue until the forces that built the welfare state in the first place rise up to defend it."

To prevent such a progressive policy revival, the troika promotes regime change in recalcitrant economies, such as it deemed Syriza to be for trying to resist creditor commitments to austerity. Crushing Greece's Syriza coalition was openly discussed throughout Europe as a dress rehearsal for blocking the Left from supporting its arguments. "Governments from the Left, no matter how free from corruption, no matter how pro-European," Galbraith concludes, "are not acceptable to the community of creditors and institutions that make up the European system."

Opposing austerity is called "contagion," as if prosperity and rising living standards are an economic disease, not national bankruptcy being enforced by the ECB and EU bureaucracy (and the IMF). To prevent Podemos in Spain and similar parties in Portugal and Italy from mounting a recovery from eurozone austerity, these financial institutions support right-wing governments while tightening the screws on Left governments. That is what happens when central banks are made "independent" of democratic electoral politics and parliamentary control.

Next Page  1  |  2  |  3

(Note: You can view every article as one long page if you sign up as an Advocate Member, or higher).

 

Valuable 4   Must Read 3   Well Said 2  
Rate It | View Ratings

Dr. Michael Hudson Social Media Pages: Facebook page url on login Profile not filled in       Twitter page url on login Profile not filled in       Linkedin page url on login Profile not filled in       Instagram page url on login Profile not filled in

Michael Hudson is President of The Institute for the Study of Long-Term Economic Trends (ISLET), a Wall Street Financial Analyst, Distinguished Research Professor of Economics at the University of Missouri, Kansas City and author of J is for Junk Economics(2017), Killing the Host (2015), The Bubble and Beyond(2012), Super-Imperialism: The Economic Strategy of American Empire (1968 & 2003), Trade, Development and Foreign Debt (1992 & 2009) and of The Myth of Aid (1971), amongst (more...)
 

Go To Commenting
The views expressed herein are the sole responsibility of the author and do not necessarily reflect those of this website or its editors.
Writers Guidelines
Contact AuthorContact Author Contact EditorContact Editor Author PageView Authors' Articles
Support OpEdNews

OpEdNews depends upon can't survive without your help.

If you value this article and the work of OpEdNews, please either Donate or Purchase a premium membership.

STAY IN THE KNOW
If you've enjoyed this, sign up for our daily or weekly newsletter to get lots of great progressive content.
Daily Weekly     OpEdNews Newsletter
Name
Email
   (Opens new browser window)
 

Most Popular Articles by this Author:     (View All Most Popular Articles by this Author)

De-Dollarization: Dismantling America's Financial-Military Empire The Yekaterinburg Turning Point

Peter "Socialist" Schiff _ Exposed by MMT's Michael Hudson

The IMF forgives Ukraine's debt to Russia

US Coronavirus 'Bailout' Scam is $6 Trillion Giveaway to Wall Street

The IMF Changes its Rules to Isolate China and Russia

America Escalates Its "Democratic" Oil War in the Near East

To View Comments or Join the Conversation: