Opinion Sur
Every national solvency crisis rapidly becomes a currency crisis. Under late capitalism, all big crises are interrelated. The central economies all face significant emergencies but each in its own manner and with a different rhythm. In order to avoid a new Great Depression, governments have socialized and monetarized debt. Thus, the second phase of the crisis is a sovereign phase. Today the euro is losing value relative to the dollar, but the latter will also fall sooner or later. Think of the Titanic, with the euro as the bow and the dollar as the stern. The dollar goes up as the euro goes down, but they are two parts of the same sinking ship. In the lifeboats, the great Asian societies standby and seek to rescue what they can. The United States may overcome the emergency thanks to its relative youth, flexible society, and inventive dynamism. Europe, on the other hand, has long gotten used to the comforts of retirement.<img139|center>
“You will see things, dear Sancho, that will make stones speak,” said Don Quixote. In the world of late capitalism, a time of reckoning has come. In Europe the accounts on the books are in the red. Nor are they in any better shape in the United States. The latter, however, are different from Europe in terms of their enormous military strength, their flexible society, a better demographic profile (though not as good as a few decades ago), and a capacity for technological innovation that remains unsurpassed. These fundamentals are lacking in Europe. True, Europe comprises half a billion people and is hence the largest market in the affluent world. Human capital is remarkable, the infrastructure is excellent, and the standard of living is in many aspects higher than that of the United States –especially when we factor health care, safety networks, unemployment benefits, and a larger number of other perks). But there is the rub: European social expenditures are not supported by an equivalent creation of wealth.
In order to plug the whole that a very high but unsustainable standard of living creates, many European countries went deeply into debt. The European Union is in fact a brittle union of disparate parts or something even worse: an amalgam of prickly sovereignties. They are bundled together by treatises (often unheeded), by common policies in some areas (by no means all), and above all by a common currency –an orphan that lacks the backing of a super ordinate state. A common currency without a central state is like stove with sixteen furnaces and a single dial. The greatest distance is between North and South, center and periphery within Europe itself. Marginal Europe is overwhelmingly Mediterranean to which are added some Atlantic and Baltic states. It is composed of countries that are still developing, very different from their richer industrial brethren. In sum, Europe is a contraption half way between a coalition and a super state. The somewhat artificial prosperity of the last two decades made the late capitalist world gloss over national differences and structural weaknesses. But since 2008, the world financial crisis has exposed them all. A chain breaks in its weakest link. Today the breaking point is Greece; tomorrow other links may snap as well. The set is named by an acronym with a swinish ring: PIIGS (Portugal, Italy, Ireland, Greece, and Spain).
At a different age of independent nations, a crisis of similar magnitude to the one in Greece would lead more rapidly to a sovereign default, that is, to the orderly or disorderly restructuring (if not reneging) of debt, to a hefty devaluation of the currency, and to the asymmetrical distribution of misery (with the poor bearing the brunt), to a precipitous fall of economic activity, to the cessation of credit, and to a whole series of related mishaps –including the emigration of the skilled and unskilled alike. Nine years ago this happened in Argentina. However, in order to arrive at this “final solution,” a member country of the European Union would have to leave the Union itself. For Greece, the abandonment of the euro would be tantamount to the Argentine abandonment of its currency board (the fixed one-to-one exchange rate with the dollar). Such moves can be likened to wiggling oneself out of a straightjacket. But in the European case, such exit would risk the unraveling of the entire union. In short, a Balkan nation like Greece could trigger the Balkanization of Europe itself. Should that happen, the event would confirm Winston Churchill’s lapidary statement about the Balkans: “they produce more history than they can consume.”
The EU decided to support the PIIGS with a massive injection of funds and guarantees. The rescue package comes close to 1 trillion dollars, and is accompanied by the purchase of bad bonds by the European Central Bank. This maneuver is similar to the measures taken in 2008 by the American authorities. The strategy of throwing money at the problem is in fact a strategy of helping ailing banks at the expense of the rest of the population. There is a great deal of social injustice in such policy, and its only justification is the avoidance of worse chaos should it not take place. The specter of another Great Depression guides policy makers. The fear of disorder trumps considerations of fairness. The measures are meant to bid for time. Since hope is not a plan, “the markets” do not have faith in them. It is however, a form of forced, if not perverse, solidarity in an emergency. “Save the system, and then we’ll see.” In Europe, as opposed to the US, the rescue came late. The recovery will be, as a result, even more sputtering than across the Atlantic. Solidarity under conditions of unfair austerity is not easy to sustain: a bitter pill to avoid a worse collapse. We cannot predict where all this will lead. However, we may put forth the following assessments.
First, for a long time now, the project of a united Europe has failed to elicit the enthusiasm of the various populations. National interests and passions linger and often trump the common good. Under such circumstances, will Europe close ranks in an emergency? Will the single currency survive and keep its value after only 12 years of life? There are no clear answers to these questions. One thing seems certain however the hopes for the euro to become a strong reserve currency are fading fast.
Second, with the end of the cold war, and given its pacifist proclivities, Europe is no longer the foremost ally of the United States. For decades, Europe thrived under the American defense umbrella, and hence could direct its public expenditures to build a sort of “lifestyle superpower.” It prospered and got cozy under the security blanket of the United States. That is n o longer. Faced with its own considerable challenges, the United States will turn its attention away from Europe and towards new ventures. The protection of Europe is no longer paramount.
Europe is faced with a geopolitical dilemma. The US is the military superpower. China is the industrial powerhouse. Emerging nations are now thriving. Can Europe continue to be a lifestyle superpower? The idea is nice, but its props are gone. It is not a youthful ideal. At most, the European lifestyle, pleasant as it is, is a utopia apt for retirees. Youthful hopes are elsewhere –away from pleasant hotels, lovely landscapes, and exquisite meals. Retrospection and belated wisdom are the hobbies of old age. Demography seems to point to such fate.
In order to balance the demographic deficit, Europe needs new blood. It will get it from neighboring regions that are undergoing a population surge: sub-Saharan nations, North Africa, and the Middle East. Hence, the “clash of civilizations” could happen inside Europe itself. In short, in a world in which the BRICs are rising, the Americans keep their guns, and the global South finds both its stride and its voice, Europe’s place is increasingly uncertain. Europe has the human resources and the cultural background to face up to the challenge, but it may lack the energy to invent a new role for itself. It is up to the dwindling youth of Europe to move forward and engage.
