Commentary on Political Economy

Tuesday 27 September 2011

The European Crisis in a Global Context

Apologies for the delay in commentary on the most recent financial and economic developments coming fast and furious now that require constant upgrading - I was in transit in South East Asia and jet lag caught up with me.

Despite the volatile euphoria of certain bourses and money markets, the dreadful reality is that there is no light at the end of the tunnel for world capitalism - which is always a sign that "alternatives" are possible, but also histrorically a very dangerous time because inter-capitalist rivalries, especially those between nation-states, can give rise - as they are now - to growing international military tensions. The place where I am now, Taiwan, is right at the centre of this gathering storm, in the South China Sea, the most important waterway for global capital on earth.

As we said yesterday, the US are exiting Iraq and Afghanistan the better to concentrate on the Chinese dictatorship which poses by far the greatest threat to world peace at the moment. And the Administration has made it plain to the Europeans that they can no longer count on US co-operation regarding dollar and balance of payments adjustments. Germany in particular will have to expand domestic consumption and forgive debts to the EU periphery unless it wishes to see the eurozone implode, the German currency to soar, and the German economy to be consigned to the dustbin of history. The Americans feel that Europe can take care of itself and no longer poses a global threat as it did in the last century - but China's PLA is another thing!

Nor will the Administration long tolerate a strong dollar to benefit European exporters and Franco-German banks as well: the EU has until perhaps late October "to get its act together" before the American Fed launches a fresh round of QE3 that will send BRIC and European economies into an inflation-powered tailspin of declining "competitivity", capital flight (as happened last week) and deep recession that will pose the greatest danger for the Chinese dictatorship in particular - which is having to grapple with fresh crises and economic decline every passing day.

All these individual "facts" may be gathered easily by browsing through the world financial papers, from the WSJ to the FT to LesEchos to the NYT, so I will not discuss individual articles. My aim here is merely to join the dots together, as it were, so you can see the broader picture. The EU is in deep trouble because its several bourgeois elites have wasted the best part of the last twenty years preaching "competition" to justify and legitimise the consolodation of their power within the EU, in the hope that they would be able to discipline the peripheral working classes with the tight monetary policy of the ECB based on the Bundesbank policies with the Deutschemark. We know that this was not successful now. Curiously, it is easy to see through the ideology here because Germans are always preaching to peripheral states to be more disciplined in terms of consumption and austerity - and so are the peripheral bourgeois elites - so as to be able to compete with German industry. Yet the German and other capitalist elites never accept the opposite argument! That it would be equally well for German workers to consume more so as to balance BoP imbalances within the eurozone! Is that not peculiar?

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