An end-of-the world crisis, but what world?

The world that is coming to an end is both unsustainable and unfair. The world that prepares itself to take its place is an uncertain world. Europe is today the ground for that transition between a dysfunctional globalization and something else whose countenance we cannot yet discern. <img143|center>
Caricature “The Legislative Belly” by Honoré Daumier, Paris 1834

Athens and Rome were Europe’s birthplaces. Tomorrow they will be its burial grounds. The European Union and its single currency –the euro- are in serious danger of disintegration with an imminent Greek default and a probable Italian insolvency. Events occur with such speed that when this article is published, it is probable that an outcome, perhaps catastrophic, will be a consummated fact, or that it will be once again postponed. We should take a step back and make an analysis of the different dimensions of the crisis, as if we were peeling an onion, layer by layer, to get to the more profound causes of such disarray.

First, we know that the crisis was triggered by the insolvency of a small Balkan country on the margins of the European Union: Greece. Along with other southern European countries, Greece joined the Union rather late, and adopted the single currency. But its books were not in order, its political patronage system, its wide network of subsidies, and its lax tax collection did not qualify the country as a viable candidate for the Union. Successive Greek governments hid those flaws with an accounting fraud. For their part, the ‘serious’ members of the EU – especially France and Germany- turned a blind eye to the situation, and their banks were willing to extend substantial lines of credit to the Greek treasury, which in turn distributed the funds with abandon to diverse clienteles. Political parties went along by promising and dispensing pork to those who voted for them. This is how a network of interests held by debt was created. It increased without a correlative growth of the local economy. Greece simply could not compete with the main partners of that Union of disparate parts. We must remember that the European Union has always been a halfway union, that is, a monetary union but not a sovereign one, in short: a (dis)United States of Europe, without a central government with enough authority to transfer resources, to enforce common ground rules, and to discipline stragglers.

The 2008’s financial global crisis undermined the existing arrangements by putting a hold on international credit flows. In Europe the chain broke at its weakest link – Greece – and this damaged other fragile links – Ireland, Portugal, Spain and Italy. This chain reaction affected and still affects not only debtors but also creditors (the large banks) for the well-known reason that ‘if you owe a million dollars to the bank and you cannot return it, you have a serious problem; but if you owe a trillion, the serious problem is the bank’s’. In those circumstances, Greece faced a cruel truth: despite the fact that its (fraudulent) incorporation into the European Union gave the country a decade of sham prosperity, when the moment came to pay and it could not continue to roll-over its debts, Greece realized that the euro (a local version of the old Argentinean currency board that bound the peso to the dollar at parity) condemned it to a third-world status, and consequently, to the fate of an untidy cure for its disease through default, followed by a possible shift from the euro to the drachma, and a subsequent devaluation, with the traumatic social impact this option implies. Today, the ghost of Argentinean Finance Minister Domingo Cavallo’s ‘fence’ or corralito (the 2001 freeze of depositors’ funds in Argentina) haunts the Parthenon.

In order to avoid this ‘Argentinean style’ outcome, the ‘serious’ members of the Union – in particular the disciplined and disciplinary Germany – imposed arduous austerity measures upon Greece which are as painful as a default, but with one difference: in a default, both sinners and righteous pay; but in the conditional alternative given by the European Central Bank and the International Monetary Fund, big sinners – the lending banks – come out with flying colors, for two reasons: (1) the “haircut” on their loans is smaller, and (2) they gain some time to digest their losses. Athens is still in that painful waiting period. In economic terms, the old national bonds are worth very little and the new ones Athens could issue would be burdened with prohibitive interests. Only an all-out bailout by the European Central Bank (issuing guarantees and currency from its money printing press) would save Greece from default. But this Bank is not backed up by a single European government; instead it is pulled in different directions – something like a husband with 17 mothers-in-law. In social terms, protests increase in Greece: strikes, riots, demonstrations and street violence multiply. Added to the above is the emigration of the most capable and the most agile. In political terms, the governing class faces a citizenship that does not believe in it anymore and that cries out, as it was once shouted in Argentina and now in Spain, ‘Que se vayan todos’ (‘We want them all gone’). In those conditions, the government does not govern. It is caught in a vise grip, squeezed on one side by popular discontent and on the other, by the pressure of investors (today’s so called ‘markets’), creditor banks and their representatives in the strong countries of the Union.

There is more: by prolonging this situation without a clear exit – cathartic or not- there is a ‘contagion’ of other weak countries, in this case Italy. ‘Markets’ – guided by fear- cease to buy bonds from those countries; either they ask for exorbitant interest rates, or they take shelter in other investments (emerging countries’ titles, gold and properties). In a perfect self-fulfilling prophecy, they produce a run on the banks, pulling funds out of some of the most influential countries (Italy is the third European economy and the eighth worldwide). The result is illiquidity first and insolvency second. That is how the process moves from a local crisis to a regional crisis to a global crisis. At the moment, Europe repeatedly approaches the edge of the abyss only to take a little step back afterwards. The European leaders have tried a “definitive solution” five times, and five times they failed.

I hope to have peeled the onion’s first layer. Let us take on the second one then. Here the problem is not debt or deficits, but the lack of solid institutions and the absence of legitimate democratic procedures. This layer reveals a deep crisis of sovereignty. Back-handed deals, tricks and subterfuge can continue as long as there is a semblance of prosperity, but in a crunch they come down like a house of cards. In the political theory that was developed in Europe from the 17th to the 21st centuries, both on the political right and on the political left, from Hobbes and Bodin, going through Donoso Cortés and Karl Marx, to Carl Schmitt and Giorgio Agamben, the ‘sovereign moment’ is the state of exception, when a profound crisis, that is to say an existential threat, demands that the actors suspend their normal political activities and take extraordinary measures. In practice this means suspending representative institutions (political bodies, parliaments, parties, and even the Constitution itself) in favor of an ‘external’ decision-making entity capable of taking non-arguable measures, that is an authoritarian deus ex machina. It is time for a temporary dictatorship or one sine die, peaceful or violent, through reason or sheer strength, with or without popular backing.

In light of these considerations, today’s Europe presents two special characteristics. In the first place, it is a federation of sovereign states with restricted sovereignty – similar to the North American Articles of Confederation before the United States Constitution was sanctioned (that is between 1776 and 1787). From the perspective of sovereignty, Europe is a semi-state interwoven by treaties, in permanent flux –a transitional half-state, which is an oxymoron. In the second place, such a half-way arrangement does not foresee its dissolution nor emergency solutions to avoid such dissolution. In fact, the treaties and the network of deals which form this half-state were set up by political and technocratic elites around, above, and behind the popular will, without public discussion and without true democratic mechanisms. For instance, when the Irish people voted no to an initiative, they Eurocrats had them vote again until they passed what they wanted. The treaties and agreements were imposed ex post facto upon some of the member countries’ citizens through referenda won in a number of cases by slim margins, with lots of manipulation, and approved by the different citizenships (not all by the way) only reluctantly.

The current Europe was built only half-way and this was done behind the people’s back. It has no accountability, that very common word in the USA that has no direct translation in French or in Italian, or in German, or in Spanish. An approximate translation would be ‘responsibility’, or ‘obligation to answer for’[[In Spain the “accounting for one’s faults” was a practice established at the time of the Inquisition.]] . It is about nothing less than the responsibility of those who manage public affairs to be honest with the citizens of a country or region, with the users of a service, or with the consumers of a product. Very revealing on the matter was the reaction of the European heads of government to the attempt by then Greek Prime Minister Papandreu to ask his people in a referendum whether to accept or not the severe conditions imposed by the lenders of his insolvent country. The German and French heads of state felt they were offended, betrayed and indignant before the attempt to practice democracy in such an emergency. From the heights of elite power, the people are at best a nuisance. The main European leaders forced the Greek premier to take back what he had said and then to resign, in order to be replaced in a non-democratic manner by a banker. Something very similar happened next in Italy, where the financial crisis caused that country’s political class, pressured by ‘the markets’, to make the powerful but highly questioned Consiglio’s president Silvio Berlusconi quit in favor of a technical government in the hands of an economics professor and administrator. To sum up: facing a severe emergency, Europe puts the politicians’ domain on hold and turns to a series of technical administrators. It puts itself in receivership. It is seemingly a time for technocracy, which follows the party-based democracy in the countries at risk of bankruptcy.

However, in all of political history, there are no cases of successful emergency governments staffed by technicians in the absence of a strong political leadership, of a dictatorial nature in the name of saving the status quo, or of a revolutionary nature, in the name of radically changing the system. Let us think of this: the new Greek prime minister Papademos has a 100-day timeline to impose the drastic austerity measures the creditors demand, but that neither the Greek political class nor the Greek people on the streets accept or desire. Therefore, Papademos’ 100 days will not be Franklin Delano Roosevelt’s 100 days, when the American patrician rescued the United States from the economic disaster of the thirties. Roosevelt was a politician with a strong personality backed by most of his people and chosen democratically to the highest office in the land. Let us compare the declarations of each leader at the time they came to power. F.D.Roosevelt: The only thing we have to fear is fear itself. Papademos: I am confident that the country’s participation in the eurozone is a guarantee of monetary stability. In the first case we hear a leader’s stentorian voice; in the second, a technician’s flat phrase. But if it is true that one cannot compare Roosevelt with Papademos, neither are the current European leaders flattered in the comparison of Silvio Berlusconi or even his successor Mario Monti with Alcide De Gasperi (or even Giulio Andreotti), of Angela Merkel with Konrad Adenauer or Helmuth Kohl, of Nicolas Sarkozy with Charles De Gaulle or Francois Mitterand, of José Luis Zapatero and Mariano Rajoy with Adolfo Suarez or Felipe González, or of David Cameron with Winston Churchill or Margaret Thatcher. Facing danger, the old Europe turned to strong leaders (even dictators). The current Europe turns to technicians and bean counters. For wealthy and complacent countries such as the European ones in question, this represents barely a paltry progress. In short, from the overall political and social perspective, in Europe we are in the presence of a tottering ancien régime – a socially costly, politically dysfunctional, and economically unsustainable system.

The onion’s third layer is closest to the core of the current crisis: global inequality and strategic imbalance. The current version of globalization gathered speed when, with the collapse of socialist systems, high capitalism found in the Asian masses (once kept in thralls by totalitarian systems) a source of cheap labor which became the true reserve army of direct producers. Material production was relocated to that region of the planet, whose population amounts to more than two billion people. When this population turned to material production, the possibilities of social mobility increased for hundreds of millions. At the same time, the prospects of a better life for large segments of the Western middle and lower classes – in the full-blown decadence of the inappropriately named ‘service economy’- diminished correlatively in the First World. For a limited period of time (a decade and a half, give or take) those populations were able to maintain their lifestyles thanks to inexpensive credit and subsidies that came from the emerging producing nations. Once inexpensive credit was exhausted, consumption (a crucial component in the deficient measurement of GDP) dropped, and the system cracked. The most respected economists rightfully describe the situation as a crisis of demand.

In order to maintain the system, the main countries’ authorities did everything they could to protect private profits and to nationalize the losses. The consequence of such policies has been the creation of a world upside down where the rich increase their privileges and the rest suffer the consequences. These imbalances indicate that the system of global capitalism has entered a phase of terminal crisis in which the relations of production block and distort the productive potential of the economy and the productive incorporation of the majority of the population. To exit such a quagmire, what is needed is a strong downward redistribution of wealth both in advanced countries and in the emerging ones, the socialization of substantial services and infrastructure sectors, and a strong and firm leadership, with popular backing and accountability vis-a-vis the majority of the population. In this perspective, the “reforms” posted nowadays are short-term palliatives destined to postpone the inevitable and final outcome.

Here we arrive to the crux of the matter.

There is a Spaniard who wants
To live and to live has started
Between a moribund Spain
And another Spain that yawns.

Little Spaniard who comes
To this world: may God help you.
One of the two Spains
Will leave your heart cold.
Antonio Machado

Like the little Spaniard sung by Antonio Machado [[http://www.youtube.com/watch?v=nxgnbExoz30]], the European infant that is born in these times has a disturbing future ahead, ‘between a Europe that dies and another one that yawns.’ The system that politicians, bankers and technocrats want to save at all costs but don’t know how does not offer good perspectives for young people. The current global system, unequal and unfair, is not capable of giving them hope or offering them a bright future. In their little island of technical solutions, leaders and other elites do not realize that a social tsunami is building from one extreme of the globe to the other. A wave of rising expectations is growing in the emerging powers. Another wave of anger due to unfulfilled promises and frustrated hopes rises in the decadent powers. When the two waves come together they will form a very big, unstoppable one that will sweep the existing structures. Those who today expropriate power, privileges, the good life and the hope for a better one will be expropriated in turn. But, as the occupiers of Wall Street say, in the end they only represent the top one percent.

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