Commentary on Political Economy

Monday 11 July 2011

Themes of the European Sovereign Debt Crisis

There are a few themes that ought to be made consonant in the analysis of the European "crisis" and that go way beyond the "technical" financial solutions that may be available "to resolve", if only temporarily. They are themes that Leontaridis raised below and on which I should like to expand a little because they are crucial to a proper understanding of the aetiology and diagnosis of this "crisis" (remembering that this is a medical term that refers to that point in a patient's condition where he or she may either survive or die).
The first point is that what lies at the origin of this "crisis" is the attempt by social capital (in its "institutional guise" as Finanzkapital) to elide and avoid its confrontation with producers at the point of valourisation (the production process) and of realisation (the consumption process) by seeking to realise profits out of "speculative" investments that can be classified (along with Hyman Minsky) as "Ponzi finance". In other words, a low-interest environment achieved through the avoidance of class conflict through "emerging-country" investments (mainly in China and India) is channeled speculatively in the overpricing of existing assets in Western core capitalist economies, giving rise to the Great Moderation, and the creation of fictitious capital whose value is destroyed catastrophically once the "contracted returns" fail to materialise (the mortgage-debt debacle in the US, bad loans to PIIGS in Europe).
The "crisis" thus originated has been "exacerbated" by the in-decision and inability of European bourgeoisies to agree on a method of "sharing the burden of adjustment" both internally (given the common currency and impossibility to adjust exchange rates) and externally (given the decisive resolve of the American authorities not to bear this burden by accommodating Germany with domestic fiscal austerity and thereby exporting inflation to the German-led eurozone).
Amidst this "in-decision" it has been possible for "financial markets" to speculate against EU peripheral country sovereign debt. It is essential to realise that this in no way shows that "private investors" rule the roost: what it means is that Finanzkapital, which is "privately owned", will exploit any indecision and paralysis in the political determination of collective capitalists (the nation-states) to intervene decisively to bridge the gap between existing institutional arrangements and the necessary "adjustments" to those arrangements that will block Finanzkapital from exploiting speculative opportunitites - which in turn aggrravate the "crisis".
And here comes what is perhaps the most important point: the "systematic riskiness" or the "systematicity of the risk" posed by this very political in-decision and power-lessness. Because what this "crisis" reveals above all is how national bourgeoisies, which live or die by the "ideology of competition" whose only aim is "to destroy the competition", then find it impossible to justify to themselves and to their populations the necessity of "solidarity" needed to resolve the "crisis"! In other words, there is a literal "contra-diction" between the rationale of capitalist enterprise and the reality of capitalist social relations of production that increasingly require the "socialisation" of the use of social resources!!
(Participants who read Gavyn Davies's latest Blog will see our discussion of these matters there - and Davies's final concession of this "socialisation" process. Further analyses in this direction are being posted by us at Cheers to all.)

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