Late degenerate capitalism and the eurozone crisis

The introduction of the European Central Bank then meant that there was a one size fits all monetary policy. In other words, there was one interest rate set for the whole eurozone instead of each of the individual central banks setting an interest rate that was more appropriate for any particular nation. ... So if you're suppressing the capacity of your domestic economy to spend, which is what the Germans were doing, by stopping their workers from getting real wages growth, and building up massive real income shifts in the profit sector, you've got low interest rates in the periphery countries and then there was a massive flow of German capital south to take account of profitable opportunities outside of Germany because there were no profitable opportunities in Germany because they had suppressed the capacity of the workforce to spend. The so-called period of stability was really setting up the eurozone for the crisis because it was obvious that there were going to be massive trade imbalances emerging between the nations of the eurozone. So when Germany puffs out its chest and describes itself as an export powerhouse, who do you think is buying German exports? All countries can't have exports and growth because you need some countries to buy exports...

Professor Mitchell makes the point that political scientists suggest that the whole thing was part of a push for political integration, to get over WWII - for the "ugly German" to become a citizen of Europe again. Germany succeeded spectacularly, particularly from the 1950s through to the 1980s, but with the unravelling financial system their political integration has been undermined and they are lapsing back into the "ugly German" and the "lazy Greek or Italian", which is unfortunate.

Professor Mitchell says the system as currently designed is unsustainable. He says those countries have either got to have their own currency sovereignty, or they've got to have a federated fiscal policy capacity. One or the other.

The option of retaining the euro requires that they have a federal fiscal capacity, and there's no way they'll do that: politically it won't happen. The other option is to break it up. The problem is that they won't do that, and so we'll see a disorderly breakdown.

There's confusion on the ground, too, which Professor Mitchell describes as an education gap: polling in Greece clearly shows that the people are against austerity, yet they want to remain as part of the eurozone. To demonstrate the viability of Greece exiting the euro and returning to the drachma, Professor Mitchell refers to Argentina's experience.

Although it's not regular table talk for IMF executives, in 2001 Argentina gave the middle-finger salute to the IMF, devalued its currency and defaulted on $100 billion of debt. It is now regarded as the model for economic recovery.

Professor Mitchell accurately observes that someone will always lend money to a country that has defaulted: it's the nature of capitalism, of those seeking profit. Ideology doesn't come into it.

But economic theories apart, it's important to understand what austerity really looks like when austerity economics is casting its spell over international governments (or perhaps more accurately, their advisors).

In December last year, Noëlle Burgi, of Le Monde diplomatique, described in graphic detail the dire situation in Greece. The picture she paints shows how grim an exercise life in Greece has become.

The Greeks are accused of living beyond their means, but one wonders what's gone awry when recent OECD data reveals that Greek workers work 2,017 hours per year, making them the third hardest-working nation on earth, after Chile and Korea.

Perhaps we should listen to the average Greek citizen's indignation about these slurs and look through the microscope to see exactly who is not paying their taxes.

Austerity means significant cuts in public sector salaries, pensions, spending on education, health care and so on. It involves raising taxes, high unemployment, particularly youth unemployment, and the slashing of spending. And it's spreading through Portugal, Ireland, Spain, France, Italy and Britain.