We need Eurobonds and a new charter for Europe. The Euro crisis is clear evidence that we need to break out of the economic straight-jacket imposed by the Lisbon Treaty, the European Central Bank and the over-powerful financial sector.
-------------------------
-------------------------
You [Susan George ] became well-known for your work on the debt crisis in the 1980s and 1990s. Then it was a crisis for developing countries; now it seems to be mainly afflicting developed countries? How do you explain this?
The causes of the debt crisis in third world countries were not the same as now. In the 1970s, much borrowed money went into armaments, middle and upper class luxury spending on imports, rising oil prices, and white elephant development projects—in other words unproductive spending. Also the US suddenly increased interest rates unilaterally in 1981 by a huge percentage.
John Perkins in Confessions of an Economic Hit Man argues there was a deliberate policy to indebt and control developing economies. His personal testimony needs further corroboration, but we know for sure that the richest nations used debts to do exactly that - to enforce terms imposed by the US and other creditor countries which required developing countries to enter the world economy on very unfavourable terms.
The big reason for the current European debt crisis is that the governments have taken on private bank debts that exploded with the financial crisis. The clearest case is Ireland which took responsibility for all that its banks owed, but it is true for all countries that are now in trouble.
Even so most countries in Europe have modest debts. Earlier this year, Spain only owed 55 % of GDP. Even the stringent Maastricht Treaty says 60% of GDP is OK. Italy and Belgium for instance are well above 100% but many countries where austerity is preached, like France, have no problem.
People tend to believe—and are told to believe by their media--that the debt of a household is the same as the debt of a country. This isn’t so. A family can’t live for long beyond its means but countries, especially in modern time have always done so. The US has not been free of debt since the 19th century. The idea of zero national debt is a total fantasy.
Obviously, you’re better off borrowing in order to invest productively. And if you have too much debt you end up paying far too much in interest to bondholders; but “sovereign debt” as it’s called needn’t be a problem.
What do you think the consequences of these policies will be?
European policies so far are disastrous! They are the same so-called “remedies” that were forced on developing countries in the 1980s, now better known as the “lost decade for development”. The austerity programmes being imposed on Greece, Ireland or Portugal come straight from the neoliberal handbook of Structural Adjustment Programmes (SAPs), from A to Z.
The result is savage contraction of those economies to an unheard-of degree. When radical privatisation, salary cuts, social spending wipe-outs and so on were imposed in really poor countries like Niger, they actually led to famine and mass deaths. In Europe, we have more leeway, some cushions, but Greece's economy has already shrunk by more than 5% this year, unemployment has soared with no compensation, small businesses are failing in droves and everything in sight is being privatised.
It’s a criminal policy designed to push workers back into 19th century, to get rid of the social benefits people fought for over many generations. As usual, the rich will escape and international capital will have a heyday with the privatisation possibilities. Ordinary people are paying twice for the financial crisis—first to bail out the banks and now to sacrifice and bring about the ruin of their own countries and livelihoods.[...]
No comments:
Post a Comment