A few brief comments on Brexit and the postmortem of the European Union

Another end of the world is possible

There will be a lot of postmortems for the European Union (EU) after Brexit. Many will suggest that this was a victory against the neoliberal policies of the European Union. See, for example, the first three paragraphs of Paul Mason's column here. And it is true, large contingents of working class people, that have suffered with 'free-market' economics, voted for leaving the union. The union, rightly or wrongly, has been seen as undemocratic and responsible for the economics woes of Europe.

The problem is that while it is true that the EU leaders have been part of the problem and have pursued the neoliberal policies within the framework of the union, sometimes with treaties like the Fiscal Compact, it is far from clear that Brexit and the possible demise of the union, if the fever spreads to France, Germany and other countries with their populations demanding their own referenda, will lead to the abandonment of neoliberal policies. Austerity will most likely continue. On this matter, note that the United Kingdom did not ratify the Fiscal Compact, and austerity is a completely home made policy, consolidated by the current Conservative government, but also by the previous Blairite New Labor. And Socialist governments in France (you can say the same of Syriza in Greece) have also accepted austerity as the only alternative.

Most of the austerity policies imposed on the peripheral countries are actually the result of the euro, and are to a great extent independent of the existence of a broader political union. Of course the mechanisms for imposing austerity pass through the institutions of the union, but it is clear that progressive policies can be pursued within the union.

In order to understand the limitations of the European project it is important to remember that the original project, associated to the Treaty of Rome built on the European Coal and Steel community, was a policy that aimed at resolving the perennial Franco-German conflict, with the cooperation of the US, in the context of the Cold War. The project went hand in hand with Keynesian policies at home, and the development of the modern Welfare State, possible in part as a result of the Marshall Plan. On the other hand, the modern union is often confused and seen as being inextricably associated with the euro, which was designed after the Conservative resurgence in the 1980s, and consolidated in the 1990s after the collapse of the Soviet block. That is, the euro was created in the neoliberal Thatcherite world in which supposedly 'there is no alternative.' The context has not changed much, even if there is a revolt against neoliberal policies.

And that is why separating the euro project (the case of Grexit would be based on that) from Brexit is important. This is hardly the demise of neoliberal policies. Even the end of the European Union would not guarantee that pro-worker coalitions would win elections, or that if elected they would purse Keynesian expansionary policies (btw, it is also unclear that Grexit would solve all the problems in Greece, and that a default would be successful, although I do think the case is stronger there).

Globally, in fact, there is no evidence that neoliberalism is retreating. In Latin America, the opposite seems to be the case. In the US the same working class anger with neoliberal policies, austerity and stagnation has led to both Bernie Sanders and Donald Trump's insurgent campaigns, but we may end up with the same old neoliberal policies as always (yeah, I mean Hillary Clinton; and no Bernie and Donald are not the same, but that's another issue, and I would vote for Hillary). Even worse, some elements of the revolt of the masses in the US have led to a wave of anti-immigrant sentiment and outright xenophobia, not unlike the UK. And that is something that Nigel Farage and Boris Johnson have exploited in the UK. And remember that Jeremy Corbyn was for Remain, and that he may also suffer with Brexit, and with that the insurgence against neoliberal Blairism within Labor.

Personally, I cannot see that the disintegration of Europe would lead to a positive outcome. Sure the EU has a significant democratic deficit, and a bureaucracy that is seen as wasteful and inefficient (that is always, btw, part of the right wing propaganda for smaller government; you know, because private corporations are always so efficient and democratic, aren't they?). The same is true of American democracy. Ask the Bernie supporters re-counting votes in California (or Al Gore for that matter). So maybe secession should be the solution (yeah, in the US it's the right wing crazy lunatic fringe in Texas that thinks that this is a good idea). And yes, the right wingers in Europe are rejoicing (Trump too).

At a minimum the European Union provided an environment in which people could move freely, in which petty nationalism gave way to acceptance of foreigners and immigrants, something particularly relevant with the refugee crisis in the neighboring region. Some may suggest that this was very little to show for. And the alternative, does it have something to show for? If the European Union really collapses, there will be very little for progressives to be happy about.

Bill Lucarelli on The Euro: A currency in search of a state

 

New paper concerning Euro by Bill Lucarelli

From the abstract:

To understand the structural dynamics of the current eurozone crisis, it is necessary to examine the longstanding internal contradictions that the system has inherited from its inception under the Maastricht Treaty and the neoliberal strategy which has governed its evolution from the first experiments in economic and monetary union in the 1970s. A brief narrative of the evolution of the European Monetary Union yields some insights into its peculiar institutional design. More specifically, the article examines the dangerously self-reinforcing logic between speculative bond markets and cascading, deflationary policies of austerity imposed on those countries encountering severe debt crises. This examination reveals the fragile foundations upon which the eurozone was constructed [...] The stark contrast between US monetary and exchange rate policies and the straightjacket imposed in the eurozone by the ECB during the financial crisis that began in 2008 could not be more revealing. As David Fields and Matias Vernengo (2012) [see here] contend,

By buying great quantities of Treasuries, the Fed not only keeps stable bond prices and low interest rates, but also provides assurances that Treasury bonds remain a secure asset. That allows the US Treasury to maintain high fiscal deficits on a sustainable basis. That is the exact opposite of what the ECB has done for the countries in the periphery of Europe. Countries in the currency union lose control of monetary policy and cannot depreciate the exchange rate. But a common currency setting also brings to an end the possibility for a single nation to run fiscal deficits since the sources of funding are either removed or subjected to supra-national control.

Read rest here (subscription required).

Neoliberal Authoritarian Greece: A Nation for Sale & Death of Democracy

According to Henry A. Giroux (2005/6), 'neoliberal authoritarianism' is the process by which upper capitalist class interests reinvent the past, present, & future in the image of a crude exercise of power that unleashes unimaginable human suffering, in order to maximize wealth and influence in social, political & economic affairs at whatever social costs. From Truthout:

When the European Union (EU) and the International Monetary Fund (IMF) came to Greece's rescue in May 2010 with a 110 billion euro bailout loan in order to avoid the default of a euro-zone member state (a second bailout loan worth 130 billion euros was activated in March 2012), the intentions of the rescue plan were mult-ifold. First, the EU-IMF duo (with the IMF in the role of junior partner) wanted to protect the interests of the foreign banks and the financial institutions that had loaned Greece billions of euros. Greece's gross foreign debt amounted to over 410 billion euros by the end of 2009, so a default would have led to substantial losses for foreign banks and bondholders, but also to the collapse of the Greek banking system itself as the European Central Bank (ECB) would be obliged in such an event to refuse to fund Greek banks.

Read rest here.

Giroux, Henry A. 2005. “The Terror of Neoliberalism: Rethinking the Significance of Cultural Politics.” College Literature 32(1):1-19.

Giroux, Henry A., and Susan Searls Giroux. 2006. “Challenging Neoliberalism’s New World Order: The Promise of Critical Pedagogy.” Cultural Studies ↔ Critical Methodologies 6(1):21–32.