The 'Two Views' of Europe

There has been talk in the news recently of two contrasting views of the way Europe could emerge from the crisis: One strategy assumes it must take immediate steps toward debt mutualisation and needs either the European Central Bank (ECB) or an expanded European Stability Mechanism (ESM) to purchase distressed governments' bonds as soon as possible. Over time, this view has it, Europe would build the institutions needed to complement these policies: it would create a single bank supervisory body, build up the European commission's powers, and create a European Treasury, and strengthen the European parliament.

The other view being put forward is that to proceed with these new policies before the new institutions are in place would be reckless; it thinks that mutualising debts before European institutions have a veto over fiscal policies and going forward with capital injections before the single supervisory body is in place would only encourage more risk taking. Additionally, allowing the ECB to supervise the banks before the European parliament acquires the power to hold it accountable would worsen the EU's apparent lack of democracy.

The second view has not, however, placed democracy as its primary reason for the apparent reticence. It has mostly asserted that what is needed first is fiscal control over apparently unruly governments and state authorities, and that it wishes to build these institutions and powers first. Note that reckless government spending is put forward as the reason for this authority needing to be in place, even though it has been widely observed that private financial enterprises and banks have been the main source of needs for bail outs from public accounts. It is also not entirely evident that the European authorities such as they are prefer a political establishment or governments that are fiscally responsible in the terms that they seem to be suggesting. In fact they have supported New Democracy in Greece and the coalition including Pasok, which are the two parties that between them have the most responsibility for the lamentable condition of the state finances in Greece.

So is it a question of tardiness over fiscal authority due to possible risk, or merely unwillingness to move forward unless they have in place their preferred political parties? Or is it something else that is holding up proceedings? It does not appear to be a desire to have democracy in place first. In fact democracy would be a hindrance to the proposed fiscal authority, since it might not be wanted, and what we are seeing is a set of projections for the future put forward, already, by an authority. This authority decides to keep itself in the background, but from the talks on the need for fiscal authority it is clear that this desire must come from somewhere, from some already existing authority. This authority, therefore, is seeking greater powers, not mere existence, and it would be to reduce their powers to put their authority at the mercy of democratic oversight.

So in fact we have an already existing power deciding to delay because of the lack of power it perceives over its own authority. This power can see the reason for swift injections of capital to the European nations' central banks, but does not do so because, for some reason, it sees hurdles that must be overcome, such as to give it more power. So one of these reasons is presumably simply that it wants more power and can use monetary need as leverage, but is there other reasons? Capital injections from the ECB or ESM straight to banks would be a step on the road to mutualisation of Euro debt; the northern economies would be sharing the burden with the southern states that are in financial trouble, which would mean that their economies become more risky according to the markets. Perhaps this also could be a source of delay, a certain amount of protectionism of the northern economies. They are, after all, also capitalist competitors. As competitors, it stands to reason that some reward would be wanted for the sharing of risk, it is a point of strategic leverage, so this also implies more power is being sought, and that there is a lack of trust among competitors.

Is this central power guided by principles of European fraternity or is it guided by the principles of capitalism and neoliberal free market ideology? All factual evidence points to the latter. The logic of fiscal authority has been put forward under the banner of austerity and with the spin that it is profligate governments that are and have been to blame for the crisis, implicating democracy and the peoples' choices and sense of entitlement to welfare as a problem. There has been a particular focus on Greece where this story can be told in the most convincing fashion, because of its history and particular level of state corruption. Yet even in Greece the corruption of the state is due to private graft and the ability of the wealthy to escape from taxes, so that state money ends one way or another in private hands. Despite this, the 'troika' of lenders still wanted the old duopoly of state power to keep control, and threatened dire consequences if this was strayed from. And of course the state power persist with the austerity measures and the neoliberal ideology that it is peoples' entitlements that are the main cause of the crisis.

What does this ideology achieve? Three things: 1) it deflects from the real causes of the crisis; 2) in doing so deflects from the real solution to the crisis; 3) it pulls to the extreme right at a time when the left and socialism is resurgent. The extreme right is seen as political protection, a buffer, against the left, which have grown in stature (such as the rise of Syriza in Greece) simply as a result of the perceived failures of free market capitalism and neoliberal rightist policy. This left is not the standard left of duopoly politics but a new and more genuine kind, and is therefore not trusted by the traditional order.

Gary Tedman

Consider the Germans: Co-determination and Works Councils

By Thomas Geoghegan
Originally Harper’s Magazine

Come on: Is the West really in such decline? Yes, we can sit here on our island continent and gloom about the rise of China, as our elite now like to do. Or we can go out into the world and start competing like the Europeans. For here’s a strange fact: since 2003, it’s not China but Germany, that colossus of European socialism, that has either led the world in export sales or at least been tied for first. Even as we in the United States fall more deeply into the clutches of our foreign creditors—China foremost among them—Germany has somehow managed to create a high-wage, unionized economy without shipping all its jobs abroad or creating a massive trade deficit, or any trade deficit at all. Sure, China just pulled slightly ahead of Germany, but that’s mostly because the euro has soared, making German goods even more expensive, and world trade has slumped. Meanwhile, the dollar is dropping, and we still can’t compete with either nation. And even as the Germans outsell the United States, they manage to take six weeks of vacation every year. They’re beating us with one hand tied behind their back.

Why is Germany beating us? It’s tempting to say it’s because we beat them. After all, we helped put a major component of the German model in place, which is the role that German workers have in running their firms. After World War II, we had a problem: Who would keep watch over all the German businessmen who had supported Hitler? We couldn’t put them all in jail. Back in that New Deal era, we and our allies were quite willing to put workers on the boards to keep an eye on businessmen. Still, the idea of works councils was not invented by Americans. In fact, it had its origins in Weimar Germany. And now Germany is the country, out of all countries, including Communist China, in which workers have the greatest amount of control over (dare I say it) the means of production.

Okay, it’s not that much control. But it’s enough to make the German system a rival form of capitalism. And because German workers are at the table when the big decisions are made, and elect people who still watch and sometimes check the businessmen, they have been able to hang on to their manufacturing sector. They have kept a tool-making, engineering culture, which our own entrepreneurs, dreamily buried in their Ayn Rand novels, have gutted. And now, thanks in large part to these smart structural decisions, Germany is not only competitive, it’s rich. Although it’s unlikely that even the most liberal of American politicians would ever use a phrase like “worker control”—much less describe people who work as “workers”—it might still be worth at least considering what would be involved in emulating the German model.

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