CAPITALISM IN CRISIS: Europe, Austerity and the Left, 2012 Proceedings of National Conference Sydney, 29-30 May 2010 Image for INDIGNADOS The logo of SYRIZA Publisher: Social Education And Research Concerning Humanity (SEARCH) Foundation 124 Chalmers St, Surry Hills NSW 2010, Australia Ph: +61 2 9319 2309; Fax: +61 2 9318 2523 Email: [email protected]; Website: http://www.search.org.au Reproduction of articles permitted as long as the source is acknowledged, except for the article by Slovoj Žižek for which permission must be sought from The Guardian. The SEARCH Foundation thanks all the authors and publishers, and the Creative Commons li- cence, for permission to reproduce this collection of articles. National Library of Australia Cataloguing-in-Publication entry Title: Capitalism in crisis, Europe, austerity and the left, 2012 / John Bellamy Foster ... [et al.] ISBN: 9781876300210 (pbk.) Subjects: Capitalism - Europe. Economics - Europe. Political development. Europe - Politics and government - 21st century. Other Authors/Contributors: Foster, John Bellamy. Dewey Number: 330.122094 Date of publication: July 2012 Format: PB; Size: 270x195; No. of pages: 112 Photos: Front cover from top - European Union and Greek Flags in Athens; Acropolis protest May 4, 2010. French strike and rally March 1, 2009. Inside cover: logos of SYRIZA (Greece), Indignados image, The Left (Germany), and the Left Front (France). Text preparation: Troy Henderson, Peter Murphy. Layout: Peter Murphy; Leila Barreto. Printer: Spotpress, 24-26 Lilian Fowler Place, Marrickville NSW 2204 Distribution: Print & Mail Pty Ltd, 23-25 Meeks Rd, Marrickville NSW 2204 Foreword Capitalism’s European Summer of Discontent The SEARCH Foundation has collected the views of participants and commentators on the crisis in Eu- rope to inform debate in the Australian Left. For most Australians at present the crisis is a reason for caution and insecurity. We know that but for some accidents of economics and history, particularly our link to a trading partner ironically governed by a communist party, that there but for the grace of the mining boom go we. The policies and structures of corporate globalisation we have been exhorted to embrace mean that now more than ever we are vulnerable to policies adopted beyond our shores. The views included here are likely to prove only an early chapter in a crisis with profound political conse- quences. For a generation, the proclamation of Fukuyama’s ‘end of history’ reflected the estrangement of the terms ‘capitalism’ and ‘crisis’. Now they are firmly locked together again in Europe where it all began. After the 20th century trauma visited on the continent by depression and war, conventional wisdom foresaw successful economic and ultimately political union. This would maintain a global counter- weight to the US colossus and an emerging Chinese giant in the 21st century. Modern economic man- agement, with astute hands on the levers, would avoid economic and social crisis; the political consen- sus would prevail providing a limited democratic choice between social democratic and conservative versions of neo-liberalism. No more. The first response to the Global Financial Crisis ushered in by the subprime collapse in the US was largely rhetoric to assuage the panic. There would be an ‘end to extreme capitalism’ by revisit- ing Keynes and regulation. But in practice corporate and political elites succeeded in harnessing pub- lic finances and policies to return to the pursuit of their own interests at the expense of the 99%. The public debt crisis became a new vehicle for attacks on living standards, the welfare state and the public sector. Democracy was sidelined by technocratic experts whose arrogance far exceeded their capacity to address the underlying causes of the crisis. Political responses to these policies are now dominating the discussion on the prospects for the world economy; witness the trigger which a small nation and economy like that in Greece now represents for international share markets. The suffering imposed on the Greek people by the Eurozone auster- ity program has turned to anger and ultimately created a political renaissance for the radical left. The transformation which SYRIZA wrought on Greek politics is far more significant and enduring than the narrow majority achieved by the old parties in the June 17 general election. In Spain, Italy, Ireland, France and Portugal this renaissance is being closely watched. A decisive element in how these move- ments evolve will be the alignments of labour movements and the opinions of workers broadly defined. This collection does not attempt to make a grand analysis or a narrative. The sections dealing with po- litical economy, political responses and the future for Europe are not chapters leading to a conclusion and can be sampled at random. However, together, the contents are momentous for the future of the Left in Europe as well as in Australia and deserve further debate of all kinds. The SEARCH Founda- tion website www.search.org.au provides a forum for feedback and discussion. Rob Durbridge President, SEARCH Foundation Capitalism in Crisis: Europe, Austerity and the Left, 2012 1 Introduction Europe has become the focal point of the latest The third article by German economist Heribert phase of the capitalist crisis that first exploded Dieter provides a detailed account of European with the US subprime meltdown of 2007, before elites’ crisis management strategies, as well as becoming a Global Financial Crisis and a Great some insights into the structure of European capi- Recession in 2008. The European crisis clearly il- talism. Joseph Halevi’s short piece makes the key lustrates that, after short-lived calls to ‘reregulate point regarding the problems created by having finance’, ‘end extreme capitalism’ and implement a monetary union based on neoliberal principles ‘Keynesian policies’, economic and political elites without the government budgets also having ‘un- have returned to the same ideologies and poli- ion’ to deal with different levels of development cies that have enriched the 1% while promoting among Eurozone countries and the trade imbal- economic instability and attacking the interests of ances that result. the other 99%. High profile economist Nouriel Roubini and So the crisis has deepened into a political and Citibank economist Willem Buiter outline the social crisis, with sustained use of state force to costs and benefits of Greece leaving the Eurozone. contain and repress protest, and serious possibili- Articles by Varoufakis, Roubini and Greene, and ties of fascist-inspired civil conflict if there is not Pettis focus on the current predicament of - and a change in direction. future options for - Spain, the Eurozone’s fourth With strong financial and trade links between largest economy, where unemployment is around Australia and Europe, apart from the ideological 25% and 50% of young people don’t have jobs. loyalties in play, there is no way that this massive Edward Harrison argues that unless the Europe- crisis in Europe will not impact on Australian an Central Bank acts to prevent an Italian default, society. German banks will face huge losses and the Euro- This booklet is divided into four sections focusing zone will enter a depression. on the political economy of the crisis, the politi- The next two pieces by Halevi outline the failed cal response of the Left, the future of Europe, economic policies of Berlusconi and Monti and and the challenge of transformation posed by the highlight the key issue of internal European trade deeply interconnected capitalist and ecological imbalances created by Germany’s strategy of crises. generating large export surpluses through holding The political economy section seeks to situate Eu- down German wages below the rate of productiv- rope’s current economic woes within the broader ity increases. context of capitalist dynamics and the shifting Marxist economist Michael Roberts paints a bleak regional and sectoral characteristics of the crisis picture for the future of the Eurozone unless there that began in 2007. This broader analysis leads is a move towards public ownership of finance into a discussion of the current public debt and and productive sectors of the economy, state-led balance of payments problems of several Euro- investment and government budget union. UK zone countries and the likely implications for Keynesian economist Ann Pettifor makes the the Euro, before focusing on the savage austerity case against the Troika’s - EU, ECB, IMF – cur- measures implemented that have resulted in deep rent policies that serve the interests of finance. recessions, mass unemployment and widespread She argues in favour of European convergence, suffering in many European countries. prosperity, unity and peace. It starts with an excerpt from John Bellamy Fos- The next selection of articles focuses on the im- ter and Robert McChesney’s Monthly Review ar- pacts of the austerity measures being implement- ticle on the ‘Endless Crisis’. They situate the GFC ed across Europe. Christiane Marty highlights the and Great Recession within a deeper analysis effects of government cutbacks on women and of the long-run tendency of global capitalism to pensioners. Keynesian economist Paul Krugman monopoly and stagnation and the use of financial and market analyst Marshall Auerback make the bubbles as a counter to these trends. case against the austerity, arguing that cutting The next piece is a short talk by Martijn Konings government spending during a recession will only that draws out the links between the US subprime make the situation far worse by reducing demand, crisis, the GFC and Europe’s current debt crisis. investment, employment and incomes. Austerity 2 Capitalism in Crisis: Europe, Austerity and the Left, 2012 will also reduce government revenues and make but the articles on France’s Left Front and its debt and deficit reduction more difficult, if not leader Jean-Luc Melenchon, and the dynamics impossible in some countries. The last article in inside Germany’s ‘The Left’ describe important this section looks at the specific impact of auster- components of a Europe-wide solidarity of work- ity in Portugal.