We must begin by allowing that all nations of the world confronted the Panic of ’08 in unison, and that all have dealt with the consequent economic fallout in one way or another. To pretend that the crisis can be blamed on the actions of one’s own government at the time–whether that’s the Republican administration of George Bush, the Labour government of Gordon Brown, or the nominally Gaullist government of Nicolas Sarkozy–is asinine.
That said, different nations’ responses to the crisis have not been in any way uniform. Some nations have responded extraordinarily well and mitigated shortfalls in employment and private lending. Iceland nationalized its banks and let its currency’s exchange rate depreciate. It has done very well. Peru was running a budget surplus and was able to engage in large-scale infrastructure spending. It has done very well. China financed huge building programs. It has done fairly well. Israel let the shekel depreciate and engineered an export boom. It has done well. The Scandinavian countries also depreciated their currencies. They have done well. Switzerland set a targeted exchange rate for the Swiss franc. It has done well.
The US had a medium-sized infrastructure program in the first year of the crisis and has increased transfer payments such as unemployment insurance and disability, which are strangely immune to political controversy and which are set by the number of people eligible for them, not by budgets. It has also seen massive cuts in state and local budgets (mostly school budgets), and somewhere around 40 percent of its “stimulus” consisted of temporary tax cuts, which do not appear to be effective. It has an accommodating central bank that nonetheless has a credibility problem (and, I would argue, too much faith in the false Quantity Theory of Money). The country’s large size greatly limits the potential of any currency depreciation to boost exports, since foreign trade accounts for a small portion of our economic activity compared to small countries like Iceland and Israel. Overall, the US has done OK but not great.
The Eurozone and the UK present a starkly contrasting picture. Here, austerity–cuts to spending, increases in tax rates–has been the order of the day. In the case of the UK, this has been self-imposed by a government led by the Tory party. The paternalistic Tory party of old has metamorphosed into its opposite, the mean and stingy Liberal Party of the 1840s. (The policies associated with the Irish potato famine, satirized so effectively by Dickens in the person of Ebeneezer Scrooge, have always had a certain allure to the well heeled).
The peripheral countries of the Eurozone, however, simply had no other choice. Ireland, Greece, Spain, and Italy could not borrow money to shore up spending, because investors–fearful that these countries would default–were bidding up interest rates on their bonds. These countries cannot rely on central bank issues to solve this problem, either, because they have surrendered this power to the European Central Bank. While advocates of austerity have claimed it would bring growth and lower unemployment, this has persistently failed to happen. The countries with the most severe austerity have also the worst unemployment and growth numbers. The ECB is a German institution in all but name. Germany, it happens, spent the 2000s performing rituals of decreasing labor costs, increasing exports, and decreasing the budget (needlessly, in my opinion). Now they are quite sure that the dire circumstances in Ireland, Greece, Spain, and Italy are the result of vice–that the Greeks, Spaniards, and Italians, like the Irish of the 1840s, are suffering the just rewards of their gluttony and sloth. The consequent orders of punishment and humiliation follow naturally. As long as the other nations of Europe remain in the currency union of the Eurozone, they will have no choice but to submit to the sadistic fancies of their cruel master.
So I say to the people of all the nations of the Eurozone: Get the hell out! It’s a trap!
Currency union allows for such slight conveniences that it is impossible to understand the symbolic importance it has acquired. The Euro wears a mask of continent-wide solidarity; but in its operations, it reveals itself to be precisely the opposite, a harbinger of death for social democracy. So long as nations subject themselves to the stranglehold of this demonic currency, they will not breathe freely as they once did, and their bodies politic will atrophy. Equality of currency will mean gross inequality in wealth, on a scale previously reserved for the English-speaking world. In all Eurozone nations, the most pressing priority must be official repudiation of the Euro’s despotism, now and forever. Only then will the reinstatement of sound exchange-rate and finance policies be possible.
Down with the Euro!
Down with the European Central Bank!
Down with German domination of other nations’ budgets!