On many issues, Paul Krugman is a breath of fresh air in the USA’s stodgy, hopelessly reactionary corporate media. Unfortunately, some of his recent output conforms to the abysmal standards set by his colleagues.
For example, his recent comments on Scotland’s upcoming referendum on independence amounted to crude fear mongering. Krugman warned Scotland that maintaining the pound as its currency, as the Independence movement intends, could possibly lead to the kinds of disasters endured in Spain and Greece after the collapse of housing bubbles in Europe a few years ago. Without their own currencies, and therefore without control over exchange rates, these countries could not devalue to help pull themselves out of the slump. Krugman neglects to say that the unaccountable bureaucrats in charge of EU monetary policy deliberately used the crisis to coerce these countries into making outrageous cuts in public spending that deepened their problems. With an unaccountable Central Bank, countries that have their own currencies are often led to disaster. Didn’t countries that have their own currencies develop massive housing bubbles? In fact, the world’s largest and most destructive housing bubble was developed in the USA under the watch of its “independent” Federal Reserve. Discard enough neoliberal garbage – like tolerating unaccountable Central Banks myopically focused on keeping inflation low – and not having your own currency, even though it is a problem, is far from being an insurmountable one.
The example of Ecuador is extremely relevant to Scotland as Krugman should know.
Ecuador is much poorer country than Scotland and does not have its own currency. In 2000, it adopted the US dollar during a massive financial meltdown brought about, in large part, by its formerly “independent” Central Bank. There were other neoliberal polices pushed by Ecuador’s financial elite and IMF bureaucrats as I described here. Since the election of Rafael Correa in 2007, Ecuador has maintained the US dollar as its currency even though Correa has always said, and still says, that adopting the dollar was a mistake. However, his government opted to work around the limitations imposed by it and to take advantage of a few benefits (like not having to tie up reserves to fight off speculative attacks on the currency). Despite Ecuador’s deep vulnerability to the global crisis of 2009, Correa’s policies have yielded major economic gains as I recently outlined. That happened because the Central Bank was placed firmly under government control, the financial sector was tightly regulated, tax avoidance clamped down on, public and social spending increased, and the elite stranglehold on public debate loosened (a “crackdown on free speech” is what the international corporate press prefers to call it). All of that was linked to a process of democratic renewal that involved the rewriting of Ecuador’s constitution. The public elected people to rewrite it and then approved what their representatives came up with in a referendum.
Many countries in Latin America have gone through a very similar process of democratic renewal linked to the rejection of neoliberalism and, unlike pro-independence Scots, are now pushing for deeper integration with their neighbors. Correa advocates a regional currency and a regional minimum wage to end ruinous “race to the bottom” competition. Regional integration makes sense provided it is clearly aimed at achieving worthy common goals. It basically amounts to the common sense idea of pooling resources with like-minded people, but what common goals do working class Scots have with war-addicted, austerity-pushing UK elites? What kind of democratic renewal is seriously being offered? None, as John Hilley ably informs us.
The UK’s incapacity to reform was also highlighted at the UN recently. The UK voted, alongside the USA and a handful of other countries, against a sovereign debt restructuring intuitive proposed by Argentina. Telesur reported “debate at the U.N. is a result of the worldwide alarm at the Argentine case, and the fear that the ruling by the U.S. Supreme Court in favor of the vulture funds could have a negative impact on other countries. “ Fortunately, the UK and others were easily out voted, but opposition to the most basic, and hardly radical, reform is quite stunning and revealing.
Serious reform generally takes place when elites fear revolution, or, if you prefer, Frederick Douglass’ beautifully expressed truism that “Power concedes nothing without a demand. It never did and it never will”.
An ossified political system helped generate this opportunity for Scotland (and indeed the world) as Hillary Wainwright credibly explained a few weeks ago:
“The question posed in next month’s referendum, yes or no to independence for Scotland, was intended by British Prime Minister David Cameron to make the alternative to the status quo look so radical that the forces of conservatism would win out – but it hasn’t gone according to plan.”
Too bad Krugman doesn’t get it, but hopefully enough Scots will to vote yes.
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