Saturday, October 1, 2016

Michael Hudson — Review of James Galbraith, Welcome to the Poisoned Chalice (2016)

Galbraith expressed his “epiphany” already in 2010 that a “market-based” solution was a euphemism for anti-labor austerity and a reversal of political democracy. “In a successful financial system, there must be a state larger than any market. That state must have monetary control – as the Federal Reserve does, without question, in the Untied States.” 
That was what many Europeans a generation ago expected – for the EU to sponsor a mixed public/private economy in the progressive 20th-century tradition. But instead of an emerging “European superstate” run by elected representatives empowered to promote economic recovery and growth by writing down debts in order to revive employment, the Eurozone is being run by the troika on behalf of bondholders and banks. ECB and EU technocrats are serving these creditor interests, not those of the increasingly indebted population, business and governments. The only real integration has been financial, empowering the ECB to override national sovereignty to dictate public spending and tax policy. And what they dictate is austerity and economic shrinkage.…
“Europe has devoted enormous effort to create a ‘single market’ without enlarging any state, and while pretending that the Central Bank cannot provide new money to the system.” Without monetizing deficits, budgets must be cut and the public domain sold off, with banks and bondholders in charge of resource allocation.

As long as “the market” means keeping the high debt overhead in place, the economy will be sacrificed to creditors. Their debt claims will dominate the market and, under EU and ECB rules, will also dominate the state instead of the state controlling the financial system or even tax policy.

Galbraith calls this financial warfare totalitarian, and writes that while its philosophical father is Frederick Hayek, the political forbear of this market Bolshevism is Stalin. The result is a crisis that “will continue, until Europe changes its mind. It will continue until the forces that built the welfare state in the first place rise up to defend it.”
To prevent such a progressive policy revival, the troika promotes regime change in recalcitrant economies, such as it deemed Syriza to be for trying to resist creditor commitments to austerity. Crushing Greece’s Syriza coalition was openly discussed throughout Europe as a dress rehearsal for blocking the Left from supporting its arguments. “Governments from the Left, no matter how free from corruption, no matter how pro-European,” Galbraith concludes, “are not acceptable to the community of creditors and institutions that make up the European system.” …
Galbraith’s month-by-month narrative describes how the IMF and ECB overrode Greek democracy on behalf of creditors and privatizers. They sought to undermine the Syriza government from the outset, making Greece an object lesson to deter thoughts by Podemos in Spain and similar parties in Portugal and Italy that they could resist the creditor grab to extract payment by a privatization grab and at the cost of pension funds and social spending. By contrast, conciliatory favoritism has been shown to right-wing European parties in order to keep them in power against the left.…
The arena of conflict and rivalry has shifted from the military to the financial battlefield. Along with the IMF and ECB, central banks across the world are notorious for opposing democratic authority to tax and regulate economies. The financial sector’s policy of leaving money and credit allocation to banks and bondholders calls for blocking public money creation. This leaves the financial sector as the economy’s central planner. 
The euro’s creation can best be viewed as a legalistic coup d’état to replace national parliaments with a coterie of financial managers acting on behalf of creditors, drawn largely from the ranks of investment bankers. Tax policy, regulatory and pension policies are assigned to these unelected central planners. Empowered to override sovereign self-determination and national referendums on economic and social policy, their policy prescription is to impose austerity and force privatization selloffs that are basically foreclosures on indebted economies. Galbraith rightly calls this financial colonialism.…
At first glance the repeated “failure” of austerity prescriptions to “help economies recover” seems to be insanity – defined as doing the same thing again and again, hoping that the result may be different. But what if the financial planners are not insane? What if they simply seek professional success by rationalizing politics favored by the vested interests that employ them, headed by the IMF, central bankers and the policy think tanks and business schools they sponsor? The effects of pro-creditor policies have become so constant over so many decades that it now must be seen as deliberate, not a mistake that can be fixed by pointing out a more realistic body of economics (which already was available in the 1920s).…
The EU cannot be “fixed” by marginal reforms. Greece’s treatment shows that it must be recast – or else, countries will start leaving in order to restore parliamentary democracy and retain what remains of their sovereignty. The financial sector’s ideal is for economies centrally planned by bankers, leaving no public infrastructure unappropriated. Privatized economies are to be financialized into opportunities to extract monopoly rent.

The gauntlet has been thrown down, posing a question today much like that of the 1930s: Will the alternative to austerity, debt deflation and the resulting economic breakdown be resolved by a pro-labor socialist alternative, or will it lead to a victory by anti-European right-wing parties?….
Not difficult to see where this is headed. The Left and it's chance and blew. Now it the Right's turn.

Michael Hudson
Review of James Galbraith, Welcome to the Poisoned Chalice (2016)

9 comments:

Matthew Franko said...

"Eurozone is being run by the troika on behalf of bondholders and banks. ECB and EU technocrats are serving these creditor interests, "

Deutschebank anyone?

Does Hudson ever look at what is going on out there?

Bob said...

Matt, you might be expecting too much from a book review.

Kaivey said...

'The left had it chance and blew it.'

I hope Micheal is wrong, a moderate, well integrated, multiracial society is best.

Andrew Anderson said...

The Left gave us government provided deposit insurance instead of expanding the Postal Savings Service.

With friends like those ...

Magpie said...

The result is a crisis that “will continue, until Europe changes its mind. It will continue until the forces that built the welfare state in the first place rise up to defend it.”

Very good.

I have a question, though.

"Otto Eduard Leopold, Prince of Bismarck, Duke of Lauenburg (1 April 1815 – 30 July 1898), known as Otto von Bismarck", a "conservative Prussian statesman", is credited with creating "the first welfare state in the modern world, with the goal of gaining working class support that might otherwise go to his Socialist enemies."
https://en.wikipedia.org/wiki/Otto_von_Bismarck

It may take a while until the Iron Chancellor and His Imperial Majesty, the Kaiser, rise up to defend the welfare state. How are the professors planning to resurrect them? You know, to save time.

Gary Hart said...

The destruction of Greece was not a failure. It is just what the IMF, EU and ECB intended on doing and is groundwork for the future of the entire European continent. That is what free trade is all about, control of the world. Galbraith was naive to think that the troika would relent and he is also naïve to not understand that asset stripping is exactly what the EU was set up for. Surely a professor can understand that the banksters that set all of that up understood exactly what they were doing. The banksters control Europe and their target is the world. By the way, the EU did put an end to military conflict; now Europe is conquered through finance. Does anyone here not understand this?

Matt Franko said...

Well Gary it doesnt look like that strategy is working out too well for the Nazi era spawn running DB now does it?

Gary Hart said...

I hope not.

Magpie said...

Well Gary it doesnt look like that strategy is working out too well for the Nazi era spawn running DB now does it?

IMHO "It's bad look to count the chicks before they hatch".

Let's wait and see what AM does with DB, if things go SNAFU, MF. :-)