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9 February 2015

UNITED STATES OF EUROPE

Let’s hear it for Alan Greenspan, chairman of the US Federal Reserve (central bank) from 1987 to 2006!

Greenspan must be a happy man this afternoon. This is first time that the erstwhile overlord of the world’s most market-oriented financial system has received a plaudit from Antigone1984.

There are good reasons why we have hitherto refrained from showering Greenspan with acclaim.

In the first place, he has been an avid disciple of Ayn Rand (née Alissa Rozenbaum, 1905-1982), a Russian-born American writer and ideologue, whose ideas, ironically dubbed “objectivism”, embraced extreme self-centredness as the human ideal and supported unregulated laissez-faire capitalism. Her 1964 collection of essays, “The Virtue of Selfishness”, co-authored with Nathaniel Branden, validated egoism as a rational code of ethics, maintaining at the same time the destructiveness of altruism. Her novels, “The Fountainhead” (1943) and “Atlas Shrugged” (1957) embodied the same ideology.

With Rand as his guru, Greenspan was ideally suited, at least in theory, to spend nearly two decades as the capitalist world’s top banker.

However, that’s not exactly how it turned out.

The second reason why you might not expect Greenspan to feature favourably in these columns is what critics might describe as culpable complacency in his stewardship of the international monetary system.  The regulation-lite boom he allowed to flourish during his term of office paved the way for the Great Recession of 2008 to 2011.

BBC business correspondent Joe Lynam said yesterday 8 February 2015: “ Greenspan has been badly wrong before. He said markets (and banks in particular) would always act rationally and prevent self-destructive crashes. Then the financial crisis happened in 2008 – plunging the world into a massive recession. He did, though, admit his error.”

Now Greenspan has waded into the current eurozone crisis that is pitting the newly-elected left-leaning anti-austerity government of Greece against its triad of Scrooge-like creditors in Germany (the European Central Bank), Brussels (the European Commission) and Washington (the International Monetary Fund).

According to a report on the BBC yesterday 8 February, Greenspan has predicted the inevitability of a Greek exit from the 19-state eurozone single-currency bloc within the 28-nation European Union. He told the BBC he could not see who would be willing to put up more loans to bolster Greece’s struggling economy.

Greece wants to re-negotiate the austerity-linked bail-out provided so far by its creditors, but Mr Greenspan said:

“I don’t think it will be resolved without Greece leaving the eurozone. I believe it will eventually leave. I don’t think it helps them or the rest of the eurozone – it is just a matter of time before everyone recognises that parting is the best strategy.

“The problem is that there is no way that I can conceive of the euro of continuing unless and until all of the members of eurozone become politically integrated – actually even just fiscally integrating won’t do it.”

He warned that trying to hold the eurozone together “is putting strain on everybody”, adding that as well as Greece leaving the eurozone, there was a real risk of a “much bigger break-up” with other southern European being countries forced out.

Commenting, the BBC’s Joe Lynam pointed out that Greenspan has long been a critic of the European single currency (the euro).

“Now the 88-year-old former chairman of the US Federal Reserve has repeated a claim that nothing short of full political union – a United States of Europe – can save the euro from extinction. Given that few (if any) of the current 19 sovereign governments which make up the eurozone would choose to create such an entity at this time, that means – for Greenspan at least – the euro is doomed.”

In a defiant speech to the Greek parliament yesterday 8 February Greek prime minister Alexis Tsipras warned that he would stick to his anti-austerity campaign pledges, which include giving free food and electricity to the poor. He also promised to cut politicians’ benefits, such as ministerial cars and said he would fight against corruption and tax avoidance.

Tsipras wants Greece’s creditors to provide a bridging loan that will enable the country to get by over the next few months while it renegotiates the cuts in public spending that are attached to its bail-out terms. However, so far he has come up against a brick wall in his efforts to persuade other EU member states to okay a further loan while, at the same time, loosening the corset of austerity attached to the current bail-out. Unless it is extended, the €240 billion bail-out programme will come to an end on 28 February 2015, plunging Greece into a financial black hole and bringing much closer to fulfilment Greenspan’s forecast that the country will leave the eurozone.

Yanis Varoufakis, the Greek finance minister, will have a last-minute confrontation with his fellow eurozone finance ministers this Wednesday 11 February.

The next day it will be High Noon in the Belgian capital when the the sheriff of Athens, Alexis Tsipras, the Gary Cooper of Greek politics, cold-shouldered by his fellow prime ministers, will ride solo into town for a shoot-out at a crunch 28-nation summit with the bad guys of the European Union.

Antigone1984:

We have focused on these remarks by Greenspan because they accord with our own long-standing views.

The eurozone as currently constituted is an economic nonsense. All members of the zone use the single currency known as the euro. But that is where it stops.

The individual member states raise their own revenue and decide their own spending. There is no automatic mechanism for distributing public resources from stronger to weaker areas within the currency zone, as there is in federal states with a single currency, such as Germany or the USA.

Moreover, deprived of common budgetary support in times of economic difficulty, neither can struggling members of the zone devalue their currency in order to export their way back into health. This is because the value of the euro in relation to other currencies is fixed by the market – with occasional help from the European Central Bank – at the same rate for all the countries that belong to the currency union regardless of the economic health of individual bloc members.

A eurozone with a central budget capable of evening out national economic disparities in the zone would solve this problem. However, a fiscal union of this kind, as Greenspan surmises (rightly in our view), would be unthinkable without the complete suppression of individual national sovereignty and its replacement by a central political body – a supranational government – to oversee it . Hence, the need for a United States of Europe – encapsulated in the goal of “ever closer union” laid down in the founding treaties of the European Union and zealously promoted by international big business (in search of an ever wider and more homogeneous market unencumbered by the vagaries of national boundaries) and its acolytes among the European political elite and their lickspittle mouthpieces in our europhiliac media (e.g. the London Guardian, France’s Le Monde or Italy’s la Repubblica).

That is why, paradoxically, we agree with the reasoning behind the remarks of the former chairman of the US Federal Reserve.

However, readers of this blog will, of course, be aware that Antigone1984 is very much opposed to the realization of a scenario that would lead to the creation of a United States of Europe. Quite the contrary. We have consistently argued in favour of the disintegration of the European Union as well as of the eurozone within it and for the reversion to a group of fully sovereign European nation states free to trade with one another as the whim takes them but with the power to direct their own economies as they see fit and to take their own political decisions in the interest of their own citizens without fear of interference from a power-crazed empire-building Eurocratic elite holed up out of touch in its Belgian ivory tower.

It is for this reason that  (Hélas Hellas!) we regard Syriza, the political party which now dominates the new coalition government in Greece, as simply a progressive social democratic party and not, despite its partly Marxist origins and its naive cheerleaders among leftwing groups elsewhere in Europe, a radical leftwing anti-capitalist anti-market party. Instead of “negotiating” to remain organically within the supposed comfort zone of the European Union and the euro currency bloc, both fundamentally capitalist constructions, a radical leftwing party could not have failed to seize this historic opportunity to break free and reclaim full national sovereignty in an economy based on cooperation, deprivatization, the egalitarian distribution of wealth and income, patriotic industrial protectionism and participative democratic decision-making. 

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 You might perhaps care to view some of our earlier posts.  For instance:

1. Why? or How? That is the question (3 Jan 2012)
2. Partitocracy v. Democracy (20 July 2012)
3. The shoddiest possible goods at the highest possible prices (2 Feb 2012)
4. Capitalism in practice (4 July 2012) 
5. Ladder  (21 June 2012)
6. A tale of two cities (1) (6 June 2012)
7. A tale of two cities (2) (7 June 2012)
8. Where’s the beef? Ontology and tinned meat (31 Jan 2012)

Every so often we shall change this sample of previously published posts.

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