Neoliberalism and its unhappy results in Spain

Vicenç Navarro in El patético neoliberalismo de la Comisión Europea Público 16.05.2014 explains some of the major shortcomings of the austericide (austericidio) that German Chancellor Angela Merkel vis the EU Commission and the other two memeers of the Troika (ECB and IMF) have imposed on Spain and other eurozone countries.

The European Commission worships at the altar of Big Capital. Neoliberalism is its credo and dogma.

Finnish liberal politician Olli Rehn in currently Vice President of the European Commission, currently on electoral leave as he campaigns for a seat in the European Parliament. He has also served since 2010 as European Commissioner for Economic and Monetary Affairs and the Euro, to which his leave also applies. In that position, he has been one of the leading prophets of the neoliberal dogma.

The Pope of neoliberalism is, of course, Angela Merkel.

Navarro uses Rehn as a foil for his criticism of the neoliberal doctrine, its dogmatism, its proponents and its results. If he were Esquire blogger Charlie Pierce, he might be saying that Rehn is a "colossal dick," although Pierce himself reserves that particular epithet exclusively for former Republican Senator and sometime Presidential candidate Rick Santorum.

Olli Rehn, enforcer and prophet of austericide

Navarro uses somewhat politer terms for Rehn, like "pathetic" (patético), noting that "no hay otra manera de definirlo" ("there is not other way to define him").

In Spain, Troika neoliberal policies have meant a focus on falsely blaming public debt for the crisis. When actually the level of public debt is a function of the crisis, and in particular of public money used to bail out private banks. Helped, as such false notions and bad ideas are in the US, by a lazy and/or subservient press:

Y los periodistas que le entrevistan toman nota y publican esta explicación de la crisis sin nunca hacerle al señor OR la pregunta obvia: ¿puesto que España estaba en superávit y no en déficit cuando se inició la crisis, cómo puede usted señalar que la causa de la crisis es el déficit público cuando España estaba en superávit? El que los periodistas no le hicieran tan obvia pregunta es señal de que los periodistas de este país no parecen entender los indicadores económicos.

[And the journalists who interview him {Rehn} take notes and publish this explanation of the crisis without ever posing to Señor OR the obvious question: given that Spain had a surplus and not a deficit when the crisis began, how can you suggest that the cause of the crisis is the public debt, when Spain was in surplus? That the journalists don't put such an obvious question to him is a sign that the journalists of this country {Spain} don't seem to understand economic indicators.]

Among the options of lazy, ignorant or subservient to explain such conduct by the press, Navarro opts for "their enormous docility toward power" ("su enorme docilidad hacia el poder") as the better explanation.Sp

Even the appealing but terribly misleading notion that a country's deficits and debts are by analogy just like those of an individual household or company. In the real world, an economy is made up of many, many households and firms, and austerity that can indeed be financially redemptive for one of those units has proven to be enormously destructive when applied to the economy as a whole. The "family sitting around the kitchen table deciding how to tighten their belts" - to take the homey American version - may have common-sense appeal and Norman Rockwell imagery. But it misses the most elementary lessons and concepts of macroeconomics such as "aggregate demand."

But basic macroeconomics doesn't have to be esoteric, either. Navarro explains some basics in a very accessible way:

El enorme desempleo, creado, en parte, por las políticas de austeridad y recortes del gasto público, fue lo que creó una ralentización de la demanda y del crecimiento económico, causa de la dramática reducción de los ingresos del Estado (consecuencia de que la gran mayoría de los impuestos en España se basan en las rentas del trabajo y muy poco en las rentas del capital). Eso fue lo que disparó el déficit público. La combinación de recortes del gasto público junto con la reducción de los ingresos al Estado, resultado, entre otros factores, del desempleo (26% de la población activa), fue lo que causó que el déficit público se disparara. Los datos que apoyan esta interpretación están ahí para todo el que quiera verlo.

[The enormous unemployment, created in part by the policies of austerity and cutbacks in public services, was what created a deceleration of demand and of economic growth, the cause of the dramatic reduction of state income (due to the fact that a large majority of tax income in Spain is based on the earnings of work and very little on the earnings of capital). That is what shot up the public debt. The combination of cuts of public services together with the reductions of state revenues resulted in, along with other factors, unemployment (26% of the labor force) shooting upward. The data supporting this interpretation were there for all who wanted to see them.]

Navarro also points out that a government has tools that an individual family does not have, like, say, a central bank. "Los bancos centrales pueden comprar deuda pública y con ello forzar a que los intereses bajen. Las familias no tienen esta posibilidad." ("Central banks can buy public debt and by that force down interest rates. Families don't have this possibility.")

But, he complains, eurozone governments "no están protegidos por el Banco Central Europeo, que como he dicho muchas veces no es un banco central sino un lobby de la banca" ("are not protected by the European Central Bank, which, as is often said, is not a central bank but a bank lobbyist.")

He points out that ECB President Mario Draghi was able to alleviate the acute crisis in June of 2012 in which speculators were driving up interest rates for Spanish and Italian public debt to levels that would be immediately unsustainable by his reassurance that the ECB would use a backdoor method to buy up public debt to stop the speculation, a direct purchase for that goal not being part of the ECB charter.

"Si el BCE hubiera dicho y hecho esto, la recesión no habría ocurrido como ocurrió. Esto, de nuevo, es obvio. Pero los periodistas nunca le hicieron esta observación." ("If the ECB had said and done that {earlier}, the recession would not have occurred like it occurred. But the journalists have never been able to make that observation.")

Tags: angela merkel, austerity economics, eu, euro, european union, neoliberalism