This post is a guest contribution by Paul Sandison *
The European sickness
Well, well. Last week was quite a historical week. So, Christian Noyer, member of the governing council of the European Central Bank (ECB), has apparently:
“criticized the so-called ‘Bad Bank’ plan, which would take troubled assets off the balance sheets of financial institutions, arguing that such a model is difficult to implement and not necessary in France.”
What will he soon say when French farmers cannot sell their apples, and French factories cannot sell their cars and trains and nuclear power? He may as well have said ‘If the people are hungry let them eat cake’. Noyer’s statement is the appalling result when central bankers, out of touch with business realities and the man in the street, jump into the political vacuum left by the abdicating actions of the incompetent European Heads of State.
Then in the same week on 5 March 2009, with European companies folding like nine pins due to an interest rate which should have been lowered six months ago, we have his colleague and Chairman of the same council of the ECB, Jean-Claude Trichet, locking the door after the horse has bolted, as heard in this video clip.
Being a Central Bank ill-prepared for the current crisis by its constitution that precludes focusing on little else than controlling inflation, the European Central Bank has structurally, constitutionally and historically no real innovative macro-economic ideas of its own. It has been behind the curve for over a decade through its narrow focus on inflation control, to the detriment of European employment levels. The latter have continued to drag on in double-digit figures, a continuation of the same situation for almost four decades.
The fault is not only on one side. Naturally, Europe’s marvellously fair-minded trade unions have also contributed to this malaise. Conveniently for themselves they have not lifted a finger to integrate Europe’s immigrant and refugee communities. With very few exceptions, through biting unofficial discrimination by the local population in country after country in Western Europe, the immigrants have been forced to eke out a sorrowful existence on the edges of society in their high-rise para-suburban ghettos, while the unions have preferred to ensure that the native population always has jobs over the foreigners; jobs that are also paid at a higher rate than the equilibrium wage would be if everyone was employed.
This situation is now changing. The economic crisis is sending unemployment levels into heights unseen since the 1970s, with the strong promise of reaching 1920 and 1930 levels already before the end of 2009. Unfortunately, the present younger generation of European politicians and administrators, being privileged and cocooned themselves, have not known serious unemployment, and have no idea what it means on a personal level or for the European union and its international relations.
The new situation in Europe means native workers are also being made redundant.The order books are down 20-40%. In some places some unions are accepting pay-cuts of 20% rather than redundancies and many municipalities are axing all new projects – even cutting health and education and important infrastructure maintenance. Social unrest is beginning to spread. The usual component of racism and right-wing extremism is beginning to get ever louder with ugly attacks on immigrants and refugees. Even various native population groups have begun attacking each other in an attempt to find a scapegoat to sacrifice for the crisis. Spontaneous uprisings and gang warfare are beginning to become common, as newly unemployed get in the way of drug dealing and become a target for criminal elements.
Few modern European politicians and economists have ever studied John Maynard Keynes’s General Theory of Money and Employment. Ever since Milton Friedman was awarded the Nobel Prize in Economics and particularly after President Reagan came to power in 1980 the European universities have selected textbooks in basic and intermediate Economics that do not include Keynesian Economics. Although Monetarism and Keynesianism are not completely incompatible, Keynes has been widely air-brushed out of the European universities.
The EU is thus ill-equipped for the coming wall of water. At least two generations of economists, who have not been schooled in demand-side management and don’t have any idea what to do in the present economic crisis, are now out there in positions of power and responsibility in banks, government authorities and municipalities. Any fiscal spending actually ordinated is likely to be useless work like digging holes and filling them in again. Europe’s heavy income tax systems, its cumbersome and highly inefficient public authorities, inefficient and elitist educational systems, the increasing wage gap between men and women and its strange socialist penchant for treating research and entrepreneurship as a burden on society are now all coming home to roost.
The European Union has great inner structural contradictions. These include an enormous democratic deficit with a heavily circumscribed Parliament largely out of the legislative loop and a Ministers Council system very like a country club – ‘we meet up for a day once a month, say and eat what we like and then go home’. When the masters have gone the servants stay behind at the club to try to bring some semblance of reason to the rules decided on, in between feathering their own nests with their own deals, information angling and status climbing. All this will now be tested to destruction in the coming storm.
Despite the dire straits in Eastern Europe – already one government has fallen, in Latvia, with others soon to follow – no co-ordinated assistance to Easten Europe has been put together by Western Europe because the leaders of the latter have arrogantly forgotten that they are elected to serve their peoples both individually and collectively, rather than serve their own careers. The comfortable status quo which they are wedded to has blinded them from understanding that integration, co-operation and mutual security is the essence of the 21st Century we are now in, and in fact the best that globalisation has to offer.
Functioning well, globalisation does not merely mean fair trade between continents. Charity will always have a role in human lives and charity begins at home as well as abroad. But the European Union is very hypocritical about both fair trade and charity. It penalises emerging economies with import tariffs and on top of that subsidises its own industries. It refers floundering Eastern European countries to the European Bank for Reconstruction and Development. Yet, although these are not normal times, the Western European countries will not directly assist their sister countries in Eastern Europe, for example with common infrastructure projects that would benefit both. It begs the question: what is the Union for if it is not for all the member countries to assist each other for the common good? The true selfish nature of the European Union is being revealed before our eyes.
Even Germany has forgotten what Marshall help meant to it after the Second World War, but then of course Angela Merkel was not even born then and grew up in East Germany anyway, which was a communist country at the time. Western Europe does not even realise that it would benefit itself by assisting Eastern Europe not to collapse. Europe is now facing a crucial crossroad in its own development. Either it fulfils the objective of a common destiny for its member states, or it reverts to a Free Trade system and an ‘I’m all right, Jack’ mentality. Bluntly, if Eastern Europe goes down with cancer, the European Union project is finished, and Western Europe could face a terminal decline.
