Nationalism is the last refuge of the bankers

It is trivial to say that the European Union is going through an existential crisis. But which crisis? Whose crisis?

The conference 'Europe in crises, Europe as the crisis' is held at the University of Oslo 14–15 March. (Illustration: Rob Ryan, Achilles and the euro,

A questioning of capitalism

The spectacular collapse of Lehman Brothers led to short-lived questioning of capitalism. We were told that we were suffering a crisis of capitalism, a crisis of which capitalists were to blame. Grand speeches were given calling for overcoming financial capitalism.  Interestingly, the small letter of public policy consisted in rescuing the banks, because it was argued that the collapse of financial capitalism will submerge us all. So this was a crisis of capitalism, but capitalists were to be sent to the comfy chair because otherwise we will all suffer. Enlightened public interest was the first refuge of the bankers.

When Papandreou Jr. won the Greek elections and discovered that there was no more money in the Greek exchequer, the debate shifted dramatically. The Greek state was forced into intensive financial care and a draconian cure of austerity, justified in the name of the profligacy of the state and child psychology of Greek citizens. We were told (and above all they were told) that Greeks had been living beyond their means (affording universal health care, for example). They should swallow the castor oil of austerity and become competitive through a deflationary purge. This “policy” had been rehearsed in the “bailouts” to Hungary, Latvia and Romania, and was later perfected in the “assistance” packages to Ireland, Portugal, Spain (soon of Cyprus and Slovenia). Even states (Italy) that have not been formally rescued have been subject to the same policy. What all these instances have in common is a reinterpretation of the crisis as a crisis triggered by a deviant, wasting state, which has to be slimmed down.

Pure ideology

In the last months it has become increasingly clear that austerity is not sound economics, but sheer ideology. A very cunning way of imposing a massive redistribution of resources from workers to capital holders (something which is automatic in an internal deflation, the key plank of the policy receipt applied by the European Union and the IMF). The recent “mea culpa” of the chief economist of the IMF concerning the wrong assessment of the impact of austerity over growth has merely confirmed what was plain to see from the beginning. If you impose cuts in a free falling economy, you are only going to make things much worse. Do we really need Keynes for that?

But what does still escape attention is the fact that the austerity narrative has had a massive toxic effect. The framing of the European crisis as a crisis caused by profligate peripheral states responding to the “childish” wishes of Southern citizens has reopened the Pandora box of nationalism. Nationalism has indeed become the last refuge of the banker. Perhaps austerity does not work, but surely we Swabian housewives should NOT show solidarity with profligate Greeks?

It's about class, stupid

It is urgent to realize that the national framing of the crisis is as false as the claim that the crisis is a fiscal crisis caused by profligate welfare states. Nationalism obscures the real nature of the key relationships at the core of the crisis and of the bailouts. It is about class, not nation, stupid!

The claim that core Eurozone nationals (say Germans) have rescued peripherical Eurozone nationals (say Greeks) is patently false. While it is true that Greek taxpayers have assumed the obligation to repay the loans, most of the “loans” have just flown back to “core” Eurozone banks (interestingly via tax havens in some cases). Had Greece (or any other Southern state) gone bust, the bankruptcy would have hit its lenders very painfully. And who were the lenders? Mainly banks established in the core of the Eurozone. And if the banks would have gone bust, who would have suffered? Capital holders. The states where the banks are established would have had to rescue banks which had made a very bad job at risk assessment. Fostering a political backlash against banker and capital holders at the Eurozone core. So So whose crisis is this? That of the Southern states or that of bankers, who had forgotten how to do their business properly?

It is equally false that core Eurozone nationals (say “Germans”) have been solidaristic with peripherical Eurozone nationals (say “Greeks”). The fact of the matter is that the German state has (for the time being) assumed contingent liabilities only. Liabilities which while may become very real if one Southern state leaves the Euro, for the time being are purely virtual. At the same time, the German state enjoys abnormally low real interest rates (occasionally negative in the short term), while the Bundesbank (and other Eurozone core banks) have pocketed enormous profits (a total of 20 billion euro, according to the Financial Times) buying peripheral debt on secondary markets. So far from solidarity of the North towards the South, what we have is unjust enrichment of the North from the South.

A national vision?

Am I reverting into a national vision? Far from it. Firstly, the unjust enrichment of the core Eurozone states has not benefitted ordinary Germans (who will be called to pay the contingent liabilities with their taxes if they become real liabilities), but again capital holders. German debt went through the roof in the aftermath of the crisis to cover the adjustment costs to German companies (avoiding harmful losses of employment came at a very heavy cost to the exchequer). Secondly, the German well-off never have never had it so good, but at the cost of 7,500,000 mini-jobs very poorly paid. A recent documentary on the working conditions on the German subsidiary of Amazon revealed Dickensian squalor as the true face of the second German economic miracle. Thirdly, the suffering of ordinary Germans is being made worse by the crisis. Housing prices in cities as Berlin have gone through the roof as the result of the real estate pressure exerted by rich (and many times tax dodging) Southerners seeking for a safe investment.

So let us drop national paradigms and clichés. Let us go back to proper words to deal with the realities of the crisis. Who said class was an old-fashioned concept?

By Agustín José Menéndez, professor ARENA Centre for European Studies, University of Oslo and University of León, Spain.
Published Nov. 6, 2013 10:29 PM