As the banking crisis in Spain deepens, there is a renewed sense that measures are needed to prevent a European financial meltdown with great repercussions on the global economy. Reflecting a growing sense that the single-minded pursuit of austerity favored by Germany has not addressed the European debt crisis but produced a deepening recession in large parts of the continent and a social crisis as unemployment escalates, there is much discussion about the need to supplement budget tightening with institutional interventions that could bolster confidence on European countries in trouble.
In a recent editorial The New York Times rightly points out the potential benefits of such measures as the adoption of eurobonds, which would reduce borrowing costs for weaker economies by having at least part of their debt guaranteed by stronger countries, like Germany, as well as ‘Europewide deposit insurance,’ which could prevent future bank runs, such as the ones that may have already begun in countries, such as Greece and Spain. At the same time, however, the editorial seems to imply that the reason effective measures against the deepening European crisis have not been adopted thus far are politicians lacking “the courage to tell their voters the basic hard truths – of how this crisis happened and what it will take to dig out.”[i]
In its indictment the editorial blames Greek politicians for failing to persuade their constituents that, in view of their ‘profligate’ borrowing, “austerity and painful reforms cannot be avoided, no matter what” and that a return to the drachma would inflict even greater pain. Similarly, German politicians have to abandon the demonization of Greeks and explain to their citizens that German banks were willing participants in the overlending and overborrowing that landed countries like Greece in trouble and that the rescue packages of countries in the European periphery are as much aimed at protecting German banks and the German economy as they are in helping out irresponsible and undisciplined southerners.
While seemingly fair-minded and reasonable, this attempt to assign blame for the current mess to southern and northern European politicians alike in effect also blames a crisis of capitalism on a presumed dysfunction of democratic politics. The problem, we are led to believe, is not the undemocratic nature of an economic system that uses its own crises as an opportunity to launch a savage attack on the living conditions of workers, ordinary citizens and vulnerable populations. The problem is citizens who are presumably too resistant to the facts and politicians who are too cowardly to tell their voters the truths that the latter don’t want to hear. If only politicians were to speak the truth, shaking their voters out of their prejudice and complacency, everything would be OK again, making it possible for the optimal mix of austerity and institutional intervention to be adopted.
On the same day this editorial was published Paul Krugman, in his regular column in The New York Times, provided a more accurate assessment of the objective function of the austerity policies adopted across Europe.[ii] This function is to reduce not deficits but the size and function of the state. However, Krugman’s attribution of these austerity policies on the dishonesty and ideological blinders of conservative politicians barely scratches the surface of a broader process, namely the role that the European project has over the last few decades played in restructuring European societies along neoliberal lines. Krugman himself is one of the many academics in the United States who view Europe as a model of capitalism that is more gentle and humane than that of the United States, just as they view the Keynesian capitalist model in the immediate post-war era as a more desirable and egalitarian model than the one that has prevailed in the last thirty years.
If, however, there is a lesson to be drawn from the last thirty years and from the current crisis, this is the futility of aspiring for a more humane model of capitalism that either exists elsewhere or has existed in our own past. The advance of neoliberalism even in Europe, where people used to take pride in the difference between their social model and that of the United States, reminds us that all progressive gains within capitalism are precarious and will be reversed the moment the balance of forces changes in favor of capital. The power that capitalist elites derive from their control of the economy and the surplus produced, in combination with the end of the cold war, has made it possible for them to restructure the global economy and domestic social systems alike in ways that aggravate economic inequality and weaken political democracy.
Thus, even Germany, the economically most powerful country in Europe and the model that everyone else is supposed to emulate, has seen its numbers of the working poor increase exponentially in recent years. Meanwhile, European capitalist elites are doing their utmost to discourage Greeks from exerting their democratic right to oust the pro-austerity socialist and conservative parties that, over their decades of corrupt and incompetent rule, created a growing debt and then used this debt as a pretext for a brutal restructuring of the Greek society that has led to escalating unemployment, poverty, hunger and despair.
Despite their great differences, Greece, Germany and the rest of the continent bear witness to the injustices and problems created by Europe’s turn to neoliberalism, a turn made possible by the undemocratic power that the capitalist class enjoys over our economic and political systems. The European crisis is a crisis of democracy, but this crisis does not stem from cowardly politicians unwilling to tell their spoiled citizens the hard truths the latter need to hear. This crisis of democracy is the predictable result of an economic system that allows small capitalist elites to make decisions that determine our collective future as well as the future of our culture and of the planet on which our survival depends.
Costas Panayotakis is Associate Professor of Sociology at the New York City College of Technology of the City University of New York and the author of Remaking Scarcity: From Capitalist Inefficiency to Economic Democracy.
[i] See ‘Blame Game, European-Style,’ The New York Times, May 31, 2012,http://www.nytimes.com/2012/06/01/opinion/blame-game-european-style.html
[ii] See Paul Krugman, ‘The Austerity Agenda,’ The New York Times, May 31, 2012,http://www.nytimes.com/2012/06/01/opinion/krugman-the-austerity-agenda.html