The European Union’s proposed recovery fund to counter the economic impact of the pandemic seems to leave the majority in each member country in a worse position. Finances will be protected again if bad, while workers will be forced to pay bills through new rounds of austerity.
The euro crisis that erupted ten years ago has long been portrayed as a clash between the lean north of Europe and the wasteful south. In fact, it was based on a brutal class war that left Europe, including its capitalists, significantly weakened compared with the United States and China. Worse, the European Union’s reaction to the pandemic, including the EU restoration fund under discussion, will inevitably exacerbate this class war and deliver another blow to Europe’s socio-economic model.
If we have learned something in recent decades, then it makes no sense to focus on the economy of any country in isolation. Once, when money moved between countries mainly to finance trade, and most of the costs of consumption benefited domestic producers, the strengths and weaknesses of the national economy could be assessed separately. No longer. Today, the weaknesses of, say, China and Germany are closely related to the weaknesses of countries such as the United States and Greece.
The destruction of finance in the early 1980s after the removal of capital controls left over from the Bretton Woods system made it possible to finance enormous trade imbalances through cash flows created privately through financial engineering. As the United States shifted from a trade deficit to a huge deficit, its hegemony grew. Its imports support global demand and are financed by the profits of foreigners who enter Wall Street.
This strange recycling process is driven by global de facto Central Bank, US Federal Reserve. And the maintenance of such an impressive creation – a constantly unbalanced global system – requires the constant intensification of class war, both in countries with deficits and in surpluses.
All countries with deficits are the same in one important sense: strong, like the US, or weak, like Greece, they are doomed to create debt bubbles, as their workers helplessly watch industrial areas turn into rusty belts. As soon as the bubbles burst, workers in the Midwest or the Peloponnese are faced with debt slavery and declining living standards.
Although surplus countries are also characterized by a class war against workers, they are significantly different from each other. Consider China and Germany. Both have a large trade surplus with the United States and the rest of Europe. Both suppress the income and wealth of their workers. The main difference between the two is that China maintains huge levels of investment through an internal credit bubble, while German corporations invest much less and rely on credit bubbles in the rest of the eurozone.
The euro crisis has never been a clash between Germans and Greeks (short for the legendary North-South clash). Instead, it was due to the exacerbation of the class war in Germany and Greece at the hands of an oligarchy without borders, living off of financial flows.
For example, when the Greek state went bankrupt in 2010, the austerity imposed on the majority of the Greek population did wonders to limit investment in Greece. But he did the same in Germany, indirectly suppressing German wages at a time when the European Central Bank’s money stamp sent stock prices (and bonuses to German directors) through the roof.
The class war is perhaps more brutal in China and the USA than in Europe. But the absence of a political union in Europe ensures that its class war will be meaningless, even from the point of view of the capitalists.
It is not difficult to find evidence that the German capitalists squandered wealth extracted from the working classes of the EU. Euro crisis caused massive 7% devaluation The surpluses that the German private sector has accumulated since 1999, because the owners of capital had no alternative but to lend these trillions to foreigners, whose subsequent disasters led to heavy losses.
This is not only a German problem. This condition also affects other EU surplus countries. German newspaper Handelsblatt recently revealed noticeable appealIf in 2007 EU corporations earned about 100 billion euros (113 billion dollars) more than their American counterparts, in 2019 the situation changed.
Moreover, this is an accelerating trend. In 2019, corporate revenue grew 50% faster in the US than in Europe. In addition, US corporations are expected to suffer less from the recession caused by the pandemic and decline by 20% in 2020 compared with 33% in Europe.
The essence of the riddle of Europe is that, although it is a redundant economy, its fragmentation ensures that the loss of income of German and Greek workers does not even become a sustainable profit for European capitalists. In short, the narrative of northern thrift hides the ghost of useless exploitation.
The reports that COVID-19 forced the EU to raise its game are greatly exaggerated. The silent death of European mutual debt ensures that a huge increase in the national budget deficit is followed by equally significant savings in every country. In other words, the class war, which has already undermined the incomes of most people, will intensify. “But what about the proposed recovery fund of 750 billion euros?” may I ask. “An agreement to issue a total debt is not a breakthrough?”
Yes and no. Common debt instruments are a necessary but not sufficient condition for weakening the intensified class war. To play a progressive role, total debt must finance weaker households and firms in the common economic zone: in Germany, as well as in Greece. And this must be done automatically, without relying on the kindness of local oligarchs. It should work as an automatic processing mechanism that transfers surplus to deficit in every city, region, and state. In the United States, for example, food stamps and social security benefits support the weak in California and Missouri, while moving net resources from California to Missouri – all without the involvement of state governors or local bureaucrats.
On the contrary, the fixed distribution of the EU Recovery Fund among the member states will turn against each other, as a fixed amount, say, say, Italy or Greece is depicted as a tax on the working class of Germany. Moreover, the idea is to transfer funds to national governments, in fact entrusting the local oligarchy with the task of distributing them.
Strengthening the solidarity of European oligarchs is not a good strategy for empowering a majority in Europe. On the contrary. Any “recovery” based on such a formula will lead to a short change in almost all Europeans and will push the majority into deeper despair.