Monday, April 30, 2012

The issues in the European financial and political crisis, and how Very Serious People see them

This is an informative 42-minute discussion about the current European economic crisis that is becoming more of a political crisis from Deutsche Welle English's Quadriga program, Europe's New Populism - Financial Crisis Reloaded? 04/26/2012. "Populism" in the European political vocabulary is pretty much a synonym for rightwing demagoguery.

It features Oene van der Wal, a standard-issue pretty-boy conservative clone who is just reciting dogma; Quentin Peel, a journalist for the Financial Times-Germany, who actually understands the problems; and, Ulrike Guérot of the European Council on Foreign Relations. Starting just after 22:40, Ulrike Guérot explains a couple of basic facts about the euro currency union: the Germany is currently benefiting from it more than any other country, and that the notion that Portugul and every other country in Europe could duplicate Germany's economic model which depends very heavily on German exports to other European countries is just nuts.

But all three still seem to think there's something sane about pursuing austerity economics in the middle of a depression. Which is a sad thing. "Respectable" discussion like this assumes as a matter of course that the EU and eurozone will survive. The smug airhead Oene van der Wal says near the end that there are no undemocratic countries in Europe and that whatever party gets elected is democratic and therefore there is no danger to democracy anywhere in Europe. Neither the moderator nor the other two guests brings up Hungary, or indicates that the Dutch airhead was talking jive.

This is a big deal, because until this depression hit in 2007-8, I had thought it was still some kind of common historical understanding in the US and Europe that depressions could present a real risk to democracy. See Germany, 1933. But at least among the US punditocracy and, as this video illustrates, among a lot of the Serious People in Europe, that risk isn't considered a problem. They've also generally ignored Macroeconomics 101 on the need for government economic stimulus during a depression. That's what happens when a democracy like the United States tries to function with a press corps that is more interested in getting invited to the White House Correspondents Dinner than in doing journalism or providing useful analysis.

The moderator does bring up Paul Krugman at the end on how Krugman thinks the whole euro project was a mistake. Guérot's response on that is pretty sensible, as well. But she's also being optimistic in thinking that the euro is likely to survive for the next 10 years. She talks about the currency union on having done half of what was needed to make it work over the last 10 years, and now it's time to do the other half. But the "other half" (creating a transfer union, eurobonds, the ECB as the buyer of last resort of sovereign debt, and end to Angie's fiscal suicide pact) is just what needs to happen urgently. And that is virtually unthinkable. Especially as long as Angela Merkel is Chancellor of Germany.

Krugman makes the very important point that austerity economics was a dogma of the One Percent, not an economic theory founded in some kind of reasonable interpretation of reality and experience (The Big Wrong 04/25/2012):

Recent election results in Europe seem to have raised consciousness in a way literally years of economic data couldn’t: the austerity doctrine that has ruled European policy is a big fat failure.

I could have told you that would happen, and sure enough, I did. Did I mention that after three years of dire warnings that the bond vigilantes are attacking, the interest rate on US 10-years remains below 2 percent?

It’s important to understand that what we’re seeing isn’t a failure of orthodox economics. Standard economics in this case — that is, economics based on what the profession has learned these past three generations, and for that matter on most textbooks — was the Keynesian position. The austerity thing was just invented out of thin air and a few dubious historical examples to serve the prejudices of the elite.

And now the results are in: Keynesians have been completely right, Austerians utterly wrong — at vast human cost.
But in the US as well as Europe, the governments and major political parties and the Very Serious People are still largely framing the discussion on economic policy in terms of assuming that controlling deficits by cutting civilian government spending is the most important priority.

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