The European Union’s proposed recovery fund to counter the pandemic’s economic fallout seems destined to leave the majority in every member state worse off. Finance will again be protected, if badly, while workers are left to foot the bill through new rounds of austerity.
- Yanis Varoufakis
ATHENS – The euro crisis that erupted a decade ago has long been portrayed as a clash between Europe’s frugal North and profligate South. In fact, at its heart was a fierce class war that left Europe, including its capitalists, much weakened relative to the United States and China. Worse still, the European Union’s response to the pandemic, including the EU recovery fund currently under deliberation, is bound to intensify this class war, and deal another blow to Europe’s socioeconomic model.
If we have learned anything in recent decades, it is the pointlessness of focusing on any country’s economy in isolation. Once upon a time, when money moved between countries mostly to finance trade, and most consumption spending benefited domestic producers, the strengths and weaknesses of a national economy could be separately assessed. Not anymore. Today, the weaknesses of, say, China and Germany are intertwined with those of countries like the US and Greece.The unshackling of finance in the early 1980s, following the elimination of capital controls left over from the Bretton Woods system, enabled enormous trade imbalances to be funded by rivers of money created privately via financial engineering. As the US shifted from a trade surplus to a massive deficit, its hegemony grew. Its imports maintain global demand and are financed by the inflows of foreigners’ profits that pour into Wall Street.This strange recycling process is managed by the world’s de facto central bank, the US Federal Reserve.
And maintaining such an impressive creation – a permanently imbalanced global system – necessitates the constant intensification of class war in deficit and surplus countries alike. Deficit countries are all alike in one important sense: whether powerful like the US, or weak like Greece, they are condemned to generate debt bubbles as their workers helplessly watch industrial areas morph into rustbelts. Once the bubbles burst, workers in the Midwest or the Peloponnese face debt bondage and plummeting living standards.Although surplus countries, too, are characterized by class warfare against workers, they differ significantly from one another. Consider China and Germany. Both feature large trade surpluses with the US and the rest of Europe. Both repress their workers’ income and wealth. The main difference between them is that China maintains huge levels of investment through a domestic credit bubble, while Germany’s corporations invest much less and rely on credit bubbles in the rest of the eurozone.
The euro crisis was never a clash between the Germans and the Greeks (shorthand for the fabled North-South clash). Instead, it stemmed from an intensification of class war within Germany and within Greece at the hands of an oligarchy-without-frontiers living off financial flows. …