Commentary on Political Economy

Tuesday 25 October 2011

Martin Wolf on Draghi and the ECB

Martin Wolf is “formally” right, but “substantially” incorrect. We certainly did not need Professor De Grauwe (with all the respect due to him) to tell us that the eurozone crisis is due “formally” to the inability or unwillingness of the Bundesbank-dominated European Central Bank to act as lender of last resort!

What Wolf ought to address, and doesn’t in this Column, are the reasons “why” the ECB does not and perhaps cannot “intervene” and take measures appropriate to keep the Finanzkapital wolves (no allusion intended!) at bay! These “reasons”, as we have argued in a series of studies at, have to do with inter-capitalist rivalries between and within European industrial, financial, as well as political elites.

Nor can it be said, as Wolfgang Munchau did in his last Column, that these difficulties are “political”: because, as Philip Stephens rightly points out in a video interview dialogue with Mr. Wolf himself, here the “political” is clearly and inextricably intertwined with the “economic”! And nowhere do politics and economics “intermingle” more intriguingly and decisively (I chose these adverbs carefully) than in the world of Finanzkapital – meaning that the “decisions” are made not in the common “inter-est” but (literally!) in the “interest” of Finanzkapital!
As we have often explained, it is not the trade and capital account "imbalances" within the EU that are the real problem: rather, it is the fact that there is no political government of the EU to decide on and enforce eurozone fiscal policy and no ECB with a mandate to conduct monetary policy for Europe as a whole (!) rather than just for the Franco-German core!

It is this "gap" in the European construction that "private financial markets" are exploiting and milking for all it is worth - which is what they are expected to do in a capitalist economy. But the inertia and paralysis of European "leaders" is due to the fact that having trumpeted and espoused the principles of "competitivity" and "self-interest" (call it "entrepreneurship"!) to their own electorates, they now find it impossible to incite them to a show of "European solidarity" in the interests of European political and economic, if not "territorial" (!), integrity!

Essentially, Wolf is asking Mr. Draghi - an unelected technical official - to take precisely those "political" decisions that EU political leaders with electoral mandates are unwilling to take! However desirable this might seem or be (and we do not deny that the "outcome" would be most desirable), such action would amount to a usurpation of political decision-making power. And that is assuming, of course, that ECB members agreed with such action and, above all, with its "expansionary" implications in terms of the "monetisation" of government debt to which central bankers are, by training and indoctrination (the two are the same), steadfastly opposed! Here is the Martin Wolf Column:

We are preparing a closer analysis of central-bank policy and conduct to be posted in the very near future.

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