Commentary on Political Economy

Monday 8 August 2011

Crisi e Stato - La Questione Italiana

The European Union can be used as a microcosm of what is happening in the capitalist world economy, not just in terms of the dynamic interaction between States (collective capitalists) and "markets" (private capitalists, represented by "finance capital"), but also in terms of how events are "analysed" by professional economists and "official decision-makers", from central bankers to politicians. More specifically, Italy is the latest domino to fall into the maelstrom of the Europeam, and global, "sovereign-debt crisis" which, it must be remembered, was precipitated by the "speculative bubble" caused by the inability of Western financial corporations (banks and funds) to absorb recycled savings from the "emerging countries" by investing in "productive" areas for the simple reason that the resulting full employment of productive capacity would have resulted in higher inflation through wage-push and demand-pull factors.

In effect, because EU member states are tied together with a common currency but do not have an effective fiscal union, it is easy to see how the great financial crisis would concentrate the minds of finance capitalists on the possibility that, given the trade imbalances between German industry (for too long made unbeatable by its undervalued national currency now ties to the euro) and the rest of Europe (handicapped by the common currency), the inability of deficit member countries to repay their debts with Germany would inevitably lead to default, in the absence of a fiscal union!

So, effectively, finance capital (bondholders) is exploiting a unique opportunity afforded them by, first, the planned imbalance in the European project (common currency, trade deficits), and second the inability of "fiscal transfers" to cover for these "structural imbalances" exacerbated by the common currency - finance capital is exploiting this opportunity to sell down bonds and raise the interest to be paid on any future debt requirements.

We have therefore the paradoxical situation in which "private capitalists" who actually caused the great financial crisis that led European nation-states to become indebted by taking over the "private debt" that "private" finance capital had accumulated in the bubble years - we have the situation where now it is "finance capital" that turns around and "punishes" governments for failing to take "appropriate measures" to avoid this ensuing "sovereign-debt crisis" - which they created in the first place!

And these "appropriate measures" are all about forcing governments to ensure that the "debts" that they created and were subsequently "socialised" to avert the collapse of capitalist society - that now it be "taxpayers" (workers!) who should pay for the lot! And pay higher interest rates, without higher inflation and "financial repression"!

For those who read Italian, I have collated a series of articles from today's "Corriere della Sera" that illustrate the hypocrisy and bloody-mindedness of the bourgeoisie in describing, analysing, and prescribing solutions for the crisis that they have created!

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