Euro Crisis, Modest Proposal, Social Democracy's Waterloo, and the threat of Fascism: Interview

An interview with Alessandro Bianchi, editor-in-chief of the Italian political news website, www.lantidiplomatico.it 

1. Together with Professors Galbraith and Holland, you have updated in July your “Modest Proposal,” in which you indicated four programs of economic policy of absolute wisdom that could help Europe to find a way out  from the current collapse. Programs, however, that European countries of the north, Germany in particular, have shown no intention to implement in any way. At the current state of things, don’t you believe that the best solution for southern European countries would be the exit from the single currency?

If we could turn the clock back, the best option would have been for the southern countries, plus Ireland, to have stayed out of the Eurozone. Undoubtedly, the behavior of the powers-that-be both in Northern and in Southern Europe has well and truly dispelled the fantasy, circa 2000, that the Eurozone would evolve into a federal entity, possibly after an existential crisis threatened its integrity. Put bluntly, our elites committed a cardinal sin by placing our Peripheral nations into a European version of the Gold Standard which, like the original Gold Standard, (1) occasioned massive capital inflows into the deficit regions that built up gigantic bubbles and (2) caused a permanent depression in the same deficit countries once the bubbles burst following our generation’s 1929 (2008, that is).

Having said all that, getting out of our hideous monetary union will not return us, even in the long run, to where we would have been had we stayed out of it in the first place. Once in, an escape may simply push our stuttering social economies off a tall cliff. Especially if it is does in an uncoordinated country-by-country basis. The reason why is dead simple: Unlike Argentina in 2002 or Britain in 1931, getting out of the Eurozone is not just a matter of severing a peg between our own currency and a foreign one. We just do not have a currency to unpeg. In other words, we would have to create a currency (a task that takes at least 8 to 10 months to complete) in order then to unpeg or devalue it. An 8 to 10 month of delay between announcing a devaluation and effecting it is sufficient to return our economies to the stone age.

Of course, none of this means that the European Periphery must suffer in silence the pains of an unsustainable, misanthropic Eurozone. Our governments can exercise their legal veto powers at the next European Union Summit or Eurogroup meeting. And demand that policies like the ones that we have proposed, in our Modest Proposal, are discussed seriously and given a chance to reconfigure the Eurozone in a manner that makes it sustainable.

2. This week The Wall Street Journal published the (till now) undisclosed reports of the statements of members of the board during the meeting of 10 May 2010, which opened to the bailout of Greece. Many had predicted its unsustainability, that would only have allowed banks and private creditors to take back their investments and worsened the socio-economic situation of the country, without improving, moreover, the trend in debt / GDP ratio. Every prediction, indeed, came true. In the light of these revelations what do you think of the behavior of the troika in your country after three years of work? 

It will go down in history as a notorious Unholy Alliance between Irrationality and Wickedness. Representatives of organisations which knew perfectly well that the policies they were imposing would fail by their own stated criteria carried out their ‘orders’ with no remorse, no rhyme or no reason and in a manner that brings to mind Hannah Arendt’s Banality of Evil. Their ulterior motive, hiding behind a rhetoric of ‘saving’ our countries, was none other than to shift losses from the accounting books of Deutsche Bank et al onto the shoulders of the weakest of Europe’s taxpayers (including those in Germany who are suffering a severe restraint in the real value of their wages).

3) As in several other European countries, even in Greece we witness the union of socialist and conservative parties in the defence of an economic model that led society to the collapse. How do you judge the action of the PASOK of Mr.Venizelos and how much responsibility you would attribute to them for the current crisis?

Social democratic parties made a pivotal choice in the mid-1990s: to throw their lot in with financialisation; to go into partnership with financial capital. At the time, it made sense to them. It had never been easy for social democrats to extract value from industrialists, from shop owners, from business people, from landowners for the purposes of funding the welfare state to which they were, indeed, committed. It was much easier instead to turn a blind eye to the bankers’ opaque shenanigans of the 1990s and 2000s (which, in any case, they never fully understood) and, in return, collect a small percentage of the mountains of financial rents the bankers made as a result – rents that they used to fund social programs (some of which were very worthy).

Tragically, in 2008 the banks went under and the mountains of financial surpluses turned into deep holes of losses. At that point, the bankers demanded that the state fills these gaping holes up with monies borrowed by the taxpayers. The social democrats were at a loss. They had long lost both the moral authority and the theoretical capacity to oppose the bankers and their arguments. Both as political organisations and as individual politicians they had sold their soul to a devil that was now injured and demanded in no uncertain terms that they, the social democrats, drop all other priorities and come to the aid of the hand that fed them and their cherished welfare state for a decade. So, they obliged the bankers. They bent to their will. Instead of demanding a default of public debt in Greece and a default on senior private debt in Ireland, the social democrats joined the conservatives to side with the bankers. To conspire in order to delay any defaults until most of the losses were transferred on the shoulders of the weakest of taxpayers.

In the process, the loyal members of the social democratic parties felt let down. They had joined up and struggled for years to effect a degree of income distribution from the have-nots to the haves. Suddenly they found that their own social democratic party was party to a terrible alliance that, in the name of ‘saving the country from bankruptcy’ effected the most brutal redistribution of income to benefit those whose preposterous acts had occasioned the crash. It did not take long for social democratic parties to be abandoned by the well-meaning, genuine social democrats and to be left in the filthy hands of the careerist, opportunists who turned these proud parties into their personal fiefdoms. Precisely the case of PASOK under Mr Venizelos.

4) The most credible opposition party that opposed to the administration under a commissioner of the troika in Greece today is Syriza. Do you think that it will ever come to the government? And what do you think of the ‘”European agenda” of Tsipras recently announced at the Kreisky Forum in Vienna?

My fear is that Syriza’s win may come too late. That it will come after the bankers, in cahoots with the current government, have built a New Cleptocracy which, by the time Mr Tsipras in Prime Minister, will have become a state within a state. As for his recently announced European Agenda, I think it is a beacon in the current darkness that is Europe’s political landscape.

5) The last point of your Modest Proposal 2.0 calls for the establishment of a program of social solidarity to ensure the existential minimum needs of all citizens and to prevent the current crisis to be pretext for the rise of totalitarianism. Do you believe it is possible the repetition of what happened in the 1930s? Do you think Greece’s situation is really that different from that of other southern European countries?

Yes, we repeated the mistakes of the 1930s and we should, thus, not be surprised if, in the process, we are conjuring up the same kind of demons. Portugal and Spain may not have seen the rise of a Nazi party yet (thankfully). But then again, Portugal and Spain have not seen a 30% loss of national income – at least not yet. If the rot goes that far, I have no doubt that extremist nationalism will rear its ugly head there too. Meanwhile, far right, Nazi-leaning parties are rising in Denmark, in Holland, in Austria, in Scandinavia, in Hungary. Europe is toying with some very nasty ghosts which it nourishes and reinforces with ever act of denial of the nature of this Crisis.