Published: Sunday 9 December 2012
Published: Thursday 15 November 2012
As the movement for that strong social safety net grows around the world, and locally here at home, the mandate is clear: Austerity is not the answer.

Amaia Engana didn’t wait to be evicted from her home. On Nov. 9, in the town of Barakaldo, a suburb of Bilbao in Spain’s Basque Country, officials from the local judiciary were on their way to serve her eviction papers. Amaia stood on a chair and threw herself out of her fifth-floor apartment window, dying instantly on impact on the sidewalk below. She was the second person in two weeks in Spain to commit suicide as a result of an impending foreclosure action. Her suicide has added gravity to this week’s general strike radiating from the streets of Madrid across all of Europe. As resistance to so-called austerity in Europe becomes increasingly transnational and coordinated, President Barack Obama and the House Republicans begin their debate to avert the “fiscal cliff.” The fight is over fair tax rates, budget priorities and whether we as a society will sustain the social safety net built during the past 80 years.

The general strike that swept across Europe Nov. 14 had its genesis in the deepening crisis in Spain, Portugal and Greece. As a result of the global economic collapse in 2008, Spain is in a deep financial crisis. Unemployment has surpassed 25 percent, and among young people is estimated at 50 percent. Large banks have enjoyed bailouts while they enforce mortgages that an increasing number of Spaniards are unable to meet, provoking increasing numbers of foreclosures and attempted evictions. “Attempted” because, in response to the epidemic of evictions in Spain, a direct-action movement has grown to prevent them. In city after city, individuals and groups have networked, creating rapid-response teams that flood the street outside a threatened apartment. When officials arrive to deliver the ...

Published: Tuesday 13 November 2012
“Austerity opponents say the strike isn’t intended to grind down Europe’s already weakened economy, but to send a clear message to governments and the Troika that austerity cuts aren’t working to solve the debt crisis, but instead are worsening the problem.”

Austerity has spawned general strikes in individual countries across the troubled European Union. But this week may see something to add to the union’s tensions: a coordinated, multi-national mega-strike. Organized labor plans a general strike against the E.U.’s austerity policies, borderless and spanning the south of the continent. With more than 25 million people out of work, Europe’s biggest unions have vowed to lead marches and demonstrations on Nov. 14 that unite opposition parties, activist movements like Spain’s M15 and a growing sea of unemployed to challenge their national governments, banking leaders, the IMF and EU policymakers to abandon austerity cuts ahead of a high-stakes budgetmeeting in Brussels later this month.

What makes Wednesday’s strike even more threatening to Europe’s managerial elite is the strong support it is receiving from traditional labor groups that rarely send their members into the streets—foremost, among them, the European Trade Union Confederation, representing 85 labor organizations from 36 countries, and totaling some 60 million members. “We have never seen an international strike with unions across borders fighting for the same thing—it’s not just Spain, not just Portugal, it’s many countries demanding that we change our structure,” says Alberto Garzón, a Spanish congressman with the United Left party which holds 7% of seats in the Spanish Congress. “It’s important to understand this is a new form of protest.”

The strike is expected to cause near or total shutdowns of the ...

Published: Monday 5 November 2012
“The medical community already suspects that economic downturns put an increased strain on mental health — recent studies in Greece, Spain and Italy have found a trend in rising suicide rates as those European countries face recessions fueled by misguided austerity policies — but this study is the first to focus on the Great Recession’s impact on Americans.”

 

A new analysis finds that the suicide rate among Americans increased four times faster between 2008 and 2010, after the housing bubble burst and the subsequent economic downturn began to take effect, than it did in the eight years before the Great Recession.

The medical community already suspects that economic downturns put an increased strain on mental health — recent studies in Greece, Spain and Italy have found a trend in rising suicide rates as those European countries face recessions fueled by misguided austerity policies — but this study is the first to focus on the Great Recession’s impact on Americans. After analyzing state-level unemployment and suicide rate data through 2010, researchers concluded that this economic crisis may have hurt Americans’ mental health more than any other economic event:

“The magnitude of these effects is slightly larger than for those previously estimated in the United States,” the authors wrote. That might mean that this economic downturn has been harder on mental health than previous ones, the authors concluded. [...]

Every rise of 1 percent in unemployment was accompanied by an increase in the suicide rate of roughly 1 percent, it found. A similar correlation has been found in some European countries since the recession.

Researchers estimated that the U.S. suicide rate was increasing by about 0.12 deaths per 100,000 people between 1999 and 2007 — but when the recession hit in 2008, the rate began increasing by an ...

Published: Tuesday 30 October 2012
The question is, once we understand and openly recognize this truth, what are we going to do about it?

 

What is austerity? A dictionary definition will provide you with the definition of a “strict economy.” It will also provide you with an antonym: leniency. Although the current austerity practices in Europe, the U.S. and elsewhere certainly match those definitions, the implications of enforcing these measures against the will of the majority population — and imposing them as a rational solution to the socioeconomic problems we face — are far graver, dangerous and outright scary.

Let’s examine the conditions of the loans aimed at getting countries (like Greece and Spain) out of debt: they want to raise the retirement age, increase the work day and have people work for lower wages, cut funding to education, maintenance and other important public sector areas, cut Social Security, cut pensions, and even privatize the municipal water and electric systems.

But at least the measures are democratic, right? Wrong. These austerity policies have been entered into and implemented despite resounding political opposition. Almost weekly protests all over Europe have been gathering outside centers of governmental power with signs like "No Nos Representan" (They Don’t Represent Us), or scissors with a slash through it, or the European Union flag peeled away to reveal the flag of Nazi Germany, or "No es la Crisis, es el ...

Published: Thursday 16 August 2012
“Awake we share the world; sleeping each turns to his private world.”

A couple of decades ago, upon returning to Atlanta, Georgia, after spending a year abroad, I would frequent an independent bookshop that contained a small coffee shop/cafe, where I would sip tea, read books and periodicals, and engage in the nearly extinct art of long form face-to-face verbal discourse with other habituates of the cafe. To this day, I have long standing friendships with a number of people I came to know during those years.

Yet even then, I noticed how the atomization inherent to the internalization of the corporate state (the manner that the domination of commercial and work space had all but eliminated the public commons) had diminished so many people's ability to converse on all but the most superficial level.

Any invocation to deepen conversation or an assertion that arrived outside of the realm of status quo consensus caused all too many to simply go haywire. People checked out, went blank, testiness ensued…Comfort zones were mobilized for a siege. The space between people became a no man's land, stippled with a minefield of sensitivities.

In short, approaching life and one's fellows from a mode of mind evincing aspects of the human condition that existed outside the realm of workplace expediency and consumer desire had been diminished to the point of being rendered all but absent. People seemed adrift -- bereft of the ability to cohabit public space. The will towards communal engagement had atrophied.

Essential qualities -- traits that are uniquely human -- had been lost. A wasteland of fragmented discourse and inarticulate rage howled between us.

And the situation has only degraded since that time. Unless communal space can be reclaimed and our innate humanity re-established, to paraphrase Kafka: There is infinite hope but not for us.

After decades of economic decline, the loss of public commons, the emotional blowback of the militarist brutality required to sustain empire and the ...

Published: Sunday 8 July 2012
Published: Tuesday 26 June 2012
“The euro is doing exactly what its progenitor – and the wealthy 1%-ers who adopted it – predicted and planned for it to do.”

 

The idea that the euro has "failed" is dangerously naive. The euro is doing exactly what its progenitor – and the wealthy 1%-ers who adopted it – predicted and planned for it to do.

That progenitor is former University of Chicago economist Robert Mundell. The architect of "supply-side economics" is now a professor at Columbia University, but I knew him through his connection to my Chicago professor, Milton Friedman, back before Mundell's research on currencies and exchange rates had produced the blueprint for European monetary union and a common European currency.

Mundell, then, was more concerned with his bathroom arrangements. Professor Mundell, who has both a Nobel Prize and an ancient villa in Tuscany, told me, incensed:

“They won't even let me have a toilet. They've got rules that tell me I can't have a toilet in this room! Can you imagine?”
As it happens, I can't. But I don't have an Italian villa, so I can't imagine the frustrations of bylaws governing commode placement.

But Mundell, a can-do Canadian-American, intended to do something about it: come up with a weapon that would blow away government rules and labor regulations. (He really hated the union plumbers who charged a bundle to move his throne.)
“It's very hard to fire workers in Europe,” he complained. His answer: the euro.

The euro would really do its work when crises hit, Mundell explained. Removing a government's control over currency would prevent nasty little ...

Published: Monday 25 June 2012
Even if a fatal calamity can be avoided, the division between creditor and debtor countries will be reinforced, and the “periphery” countries will have no chance to regain competitiveness, because the playing field is tilted against them.

 

At their meeting in Rome last Thursday, the leaders of the eurozone’s four largest economies agreed on steps towards a banking union and a modest stimulus package to complement the European Union’s new “fiscal compact.” Those steps are not enough. German Chancellor Angela Merkel resisted all proposals to provide relief to Spain and Italy from the excessive risk premiums that both countries are now confronting. As a result, the EU’s upcoming summit could turn into a fiasco, which may well prove lethal, because it would leave the rest of the eurozone without a strong enough financial firewall to protect it from the possibility of a Greek exit.

 

Even if a fatal calamity can be avoided, the division between creditor and debtor countries will be reinforced, and the “periphery” countries will have no chance to regain competitiveness, because the playing field is tilted against them. This may serve Germany’s narrow self-interest, but it will create a very different Europe from the open society that fired people’s imagination and propelled European integration for decades. It will make Germany the center of an empire and permanently subordinate the “periphery.” That is not what Merkel or the overwhelming majority of Germans stand for.

Follow Project Syndicate on Facebook or Twitter. For more from George Soros, click here.

Merkel argues that it is against the rules to use the European Central Bank to solve eurozone countries’ fiscal problems – and she is right. ECB President Mario Draghi has said much the same. Indeed, the upcoming ...

Published: Saturday 23 June 2012
Published: Wednesday 20 June 2012
Greece has no good options, but a serious contagion risk remains to be contained in order to prevent derailment of the fiscal and growth-oriented reforms in Italy and Spain.

I have just had the privilege of speaking at the main annual conference of Germany’s Economic Council, the economic and business arm of the Christian Democratic Union, the current governing party. Chancellor Angela Merkel and Finance Minister Wolfgang Schäuble were among the other speakers. It was an interesting event – and, more important, an encouraging one.

It seemed clear that Germany (or at least this rather large gathering of government, business, and labor leaders) remains committed to the euro and to deeper European integration, and recognizes that success will require Europe-wide burden-sharing to overcome the ongoing Eurozone crisis. The reforms in Italy and Spain are rightly reviewed as crucial, and there appears to be a deep understanding (based on Germany’s own experience in the decade and a half following reunification) that restoring competitiveness, employment, and growth takes time.

Greece has no good options, but a serious contagion risk remains to be contained in order to prevent derailment of the fiscal and growth-oriented reforms in Italy and Spain. In the face of high systemic risk, private capital is leaving banks and the sovereign-debt markets, causing governments’ borrowing costs to rise and bank capitalization to fall. This in turn threatens the functioning of the financial system and the effectiveness of the reform programs.

 

Follow Project Syndicate on Facebook or Twitter. For more from Michael Spence, click here.

Thus, the central European Union institutions, along with the International Monetary Fund, have an important role to play in stabilization and ...

Published: Tuesday 22 May 2012
“The German philosopher Jürgen Habermas speaks of a ‘transformational reality’ – a complex word for a simple reality: divided we fall, whereas united, in our own complex manner, we may strive for ‘greatness’ in the best sense.”

The euro, many now believe, will not survive a failed political class in Greece or escalating levels of unemployment in Spain: just wait another few months, they say, the European Union’s irresistible collapse has started.

Dark prophecies are often wrong, but they may also become self-fulfilling. Let’s be honest: playing Cassandra nowadays is not only tempting in a media world where “good news is no news”; it actually seems more justified than ever. For the EU, the situation has never appeared more serious.

 

It is precisely at this critical moment that it is essential to re-inject hope and, above all, common sense into the equation. So here are ten good reasons to believe in Europe – ten rational arguments to convince pessimistic analysts, and worried investors alike, that it is highly premature to bury the euro and the EU altogether.

 

The first reason for hope is that statesmanship is returning to Europe, even if in homeopathic doses. It is too early to predict the impact of François Hollande’s election as President of France. But, in Italy, one man, Mario Monti, is already making a difference.

Follow Project Syndicate on Twitter and FacebookClick here to see more from Dominique Moisi.

Of course, no one elected Monti, and his position is fragile and already ...

Published: Wednesday 18 April 2012
Published: Sunday 8 April 2012
“On average, 25 percent of European’s youth labor force is unemployed and yet another 25 percent only has a precarious, low paid job, even though most of unemployed young people possess high educational qualifications, including university diplomas.”

According to official figures, the unemployment rate affecting people under 25 years of age has reached 50 percent in Spain, 48 percent in Greece, 35 percent in Portugal, and 31 percent in Italy. Youth unemployment is also high in Ireland (30 percent), France (23 per cent), and Britain (22 percent). 



On average, 25 percent of European's youth labor force is unemployed and yet another 25 percent only has a precarious, low paid job, even though most of unemployed young people possess high educational qualifications, including university diplomas. 


In all these countries affected by high sovereign debt and economic recession, conservative governments have imposed drastic cuts in public spending, reduced social welfare programs and pensions and increased taxes, especially those paid by consumers, among other austerity measures. 


These programs have deepened economic slumps and fiscal difficulties across Europe. 


As the Organization for Economic Cooperation and Development (OECD) announced on Mar. 29 in its more recent economic assessment for the G7, the seven most industrialized countries of the world, "Our forecast for the first half of 2012 points to robust growth in the United States and Canada, but much weaker activity in Europe, where the outlook remains fragile." 


"We may have stepped back from the edge of the cliff," the OECD’s chief economist Pier Carlo Padoan cautioned, "but there’s still no room for complacency." 


Padoan also warned that the Eurozone’s three largest economies - Germany, France, and Italy – might have shrunk by an average of 0.4 percent during the first quarter of the year. 


The German economy already suffered a slowdown of 0.2 percent during the last quarter of 2011. Given the OECD ...

Published: Sunday 29 January 2012
“The most recent phase of the advanced economies’ frenzied search for growth took different forms.”

With the world’s industrial democracies in crisis, two competing narratives of its sources – and appropriate remedies – are emerging. The first, better-known diagnosis is that demand has collapsed because of high debt accumulated prior to the crisis. Households (and countries) that were most prone to spend cannot borrow any more. To revive growth, others must be encouraged to spend – governments that can still borrow should run larger deficits, and rock-bottom interest rates should discourage thrifty households from saving.

Under these circumstances, budgetary recklessness is a virtue, at least in the short term. In the medium term, once growth revives, debt can be paid down and the financial sector curbed so that it does not inflict another crisis on the world.

This narrative – the standard Keynesian line, modified for a debt crisis – is the one to which most government officials, central bankers, and Wall Street economists have subscribed, and needs little elaboration. Its ...

Published: Thursday 26 January 2012
“That supposed solution leaves half the eurozone relegated to the status of Third World countries that have become highly indebted in a foreign currency.”

The measures introduced by the European Central Bank last December, especially the Long Term Refinancing Operation (LTRO), have relieved the liquidity problems of European banks, but have not cured the financing disadvantage of the highly indebted member states. Since high-risk premiums on government bonds endanger the capital adequacy of banks, half a solution is not enough.

Indeed, that supposed solution leaves half the eurozone relegated to the status of Third World countries that have become highly indebted in a foreign currency. Instead of the International Monetary Fund, it is Germany that is acting as the taskmaster imposing tough fiscal discipline on them. This will generate both economic and political tensions that could destroy the European Union.

I have proposed a plan that would allow Italy and Spain to refinance their debt by issuing treasury bills at around 1%. I named it in memory of my friend Tomasso Padoa-Schioppa, who, as Italy’s central banker in the 1990’s, helped to stabilize that country’s finances. The plan is rather complicated, but it is legally and technically sound. I describe it in detail in my new book Financial Turmoil in Europe and the United States.

"Follow Project Syndicate on Facebook or Twitter. For more from George Soros, click here."

European authorities rejected my plan in favor of the LTRO. The difference between the two schemes is that mine would provide instant relief to Italy and Spain. By contrast, the LTRO allows Italian and Spanish banks to engage in a very profitable and practically riskless arbitrage, but has kept government bonds hovering on the edge of a precipice – although the last few days brought some ...

Published: Sunday 15 January 2012
Short- and medium-term economic policies should aim at stimulating the economy, rather than throttling it with austerity measures.

Bolstered by Germany’s strong economy, Berlin has become the unofficial capital of the battered European monetary union.

However the German government’s proposals to solve the sovereign debt crisis, by imposing severe austerity programs to reduce state deficits and rejecting the distribution of Eurobonds, are coming up against increasing opposition across most of the 17 countries that comprise the Eurozone.

On Jan 9, French president Nicolas Sarkozy was in Berlin to meet German chancellor Angela Merkel and discuss fresh new solutions to the European sovereign debt crisis.

On Jan 11, Italian Prime Minister Mario Monti, in office since November, visited the German capital for the very same purpose but made no secret of his wish to modify the austerity program, which successive governments have hurled at the crisis with little to no success.

In an interview with the German daily newspaper Die Welt, Monti said that his government has imposed "severe burdens" upon the Italian citizenry by following Berlin’s austerity model, but so far "the European Union has made no concession towards Italy, by way of lower interest rates" for the country’s state bonds.

"If Italian citizens do not see (the immediate) fruits of their austerity efforts, there will be protests against the EU, against Germany, and against the European Central Bank," Monti warned. "There are already signs of these protests."

Although almost all 17 members of the Eurozone currently suffer from sovereign debt, financial markets sanction each of them differently by imposing different interest rates for new state debt bonds.

For instance, Germany, which has a sovereign debt of some 2.1 trillion Euros, pays extremely low interest rates for new debt bonds. Earlier in January, the interest rates for new German debt bonds were negative, meaning that investors were willing to pay Germany for taking out ...

Published: Sunday 15 January 2012
“Contrary to what one might think, democracy is more resilient than the alternatives in the long run.”

Is democratic time too slow to respond to crises, and too short to plan for the long term?

At a time of deepening economic and social crisis in many of the world’s rich democracies, that question is highly relevant. In Italy, for example, Prime Minister Mario Monti has the necessary and legitimate ambition to carry out comprehensive reform. He is both competent and honest, but faces a quasi-structural impediment: whereas leaders once had three years to convince voters of their policies’ benefits, they now have three hours to convince global financial markets to back their approach.

Caught between Italian legislators who, deep down, do not understand that change and markets in quest of near-immediate certainties, can Monti transcend his natural prudence and act with sufficient clarity and decisiveness?

READ FULL POST 10 COMMENTS

Published: Thursday 22 December 2011
“The negotiating teams at the troika surely must know that the path they are following can only lead to further crises.”

At this point the sovereign debt crisis in Europe is almost getting boring. We’ve seen the same script played out over and over with country after country. The basic story is the markets begin a run on the debt of a country: Greece, Ireland, Italy, Spain etc.

The troika, the European Central Bank (ECB), the European Union (EU), and the International Monetary Fund (IMF) then demand a series of austerity measures. In addition, they sometimes demand measures unrelated to fiscal policy, such as a lower minimum wage in Ireland or weaker employment protection legislation in Italy, that are intended to weaken workers’ bargaining power. As a quid pro quo, the troika then arranges enough bond purchases or other supports to get through the immediate crisis.

Of course these measures don’t actually solve the underlying problem. If the troika took the steps needed to ensure that the indebted countries got past this crisis, it would lose the ability to demand further austerity and other steps that weaken welfare state supports for workers. The troika is not willing to give up its leverage at this point.

That is why the ECB repeatedly declares its refusal to guarantee support for sovereign debt any time it seems as though the financial markets believe that it is committed to supporting the debt of the troubled borrowers. This insistence by the ECB, coupled with the other policies it pushes to stifle growth, ensures that the crises will continue. The same countries will have to keep coming back for another dose of punishment and new countries will be added to the list as the contagion of slumping demand, deteriorating bank balance sheets, and dwindling confidence spreads.

The negotiating teams at the troika surely must know that the path they are following can only lead to further crises. Their medicine of austerity is irrelevant to the disease that is afflicting the debt-burdened countries.

Most immediately they are suffering ...

Published: Saturday 10 December 2011
The treaty would limit government budget deficits to 3 percent of a nation's gross domestic product — the broadest measure of the economy.

European leaders closed a pivotal week Friday with an agreement in principle to join a new treaty that would force all but one European Union nation into common budget discipline and would empower EU courts to enforce the new rules.

The 17 nations that use the euro as their currency agreed to support the new treaty, and nine of the 10 EU members that have their own currencies agreed. The treaty's rules would allow only small budget deficits, and they'd require EU nations to submit their budgets for review by the European Commission, a considerable erosion of their sovereignty. The commission could request that they revise their budgets; details on enforcement remain to be drawn. The EU leaders hope to have a draft treaty by March.

Great Britain was the lone holdout, concerned that Europe-wide rules could harm its vital financial-services sector. London is the financial center of Europe.

U.S. stocks flat-lined for much of the week awaiting the EU summit, and the trading week ended with modest gains on the news that Europe had moved forward, notwithstanding huge unanswered questions on implementation whose answers matter to Americans. The Dow finished up 186.56 points at 12,184.26, the S&P 500 rose 20.84 points to 1,255.19 and the NASDAQ gained 50.47 points to 2,646.85.

Here are some answers to questions about ...

Published: Monday 5 December 2011
“Letting the ECB off the hook in this manner would simply validate for Europe as a whole the same moral hazard feared by German and other leaders who oppose ECB intervention.”

A short-lived rumor recently suggested that the International Monetary Fund was putting together a €600 billion ($803 billion) package for Italy to buy its new government about 18 months to implement the necessary adjustment program. Except for the magnitude of the package, this sounds no different from a standard IMF adjustment program – the kind that we are accustomed to seeing (and criticizing) in the developing world. But there is one crucial difference: Italy is part of a select club that does not need outside rescue funds.

So far, programs for the eurozone periphery have been spearheaded and largely financed by European governments, with the IMF contributing financially, but mainly acting as an external consultant – the third party that tells the client the nasty bits while everyone else in the room stares at their shoes.

By contrast, the attempt to crowd multilateral resources into Europe was made explicit by eurozone finance ministers’ call in November for IMF resources to be boosted – preferably through ...

Published: Saturday 3 December 2011
“Crisis is often invoked as the midwife of revolutionary change, and here are Greece, Italy, Spain and even France at various levels of crisis, with political orthodoxy and the normal order of things increasingly discredited.”

It looks as though the eurozone may be in a decisive meltdown, which is just fine in my book. The sooner we get back to francs, lire, punts, drachmas and the rest of the old sovereign currencies, the better.

It used to be as much a part of going to France to change money and be handed a bundle of notes featuring the devious Cardinal Richelieu as choking on Gauloise smoke. Instead, those francs are now replaced by the characterless but somehow always expensive euros.

The argument against the eurozone is that hard-faced Euro-bankers — their killer instincts honed at Goldman Sachs, Wall Street's School of the Americas — have the power to act as the bully-boys of international capital and impose austerity regimes from Dublin to Athens, scalping the poor to bail out the rich.

Now the end of the eurozone does not mean the end of the European Union. They're different. There are 17 nations in the former, 27 in the latter. Britain, for example, has never been in the eurozone, which is why the currency exchange in London will, in return for your worthless dollars, hand you bank notes with the Queen's portrait on them.

At the moment, the European Union has virtually no tax collecting powers. Its annual haul is about 1 percent of the EUs gross domestic product. By comparison, the U.S. government collects about 20 to 24 percent of GDP.

Throughout the entire Eurocrisis, there has been a basso profundo chorus from the Eurocrats that what's needed is a lot more centralizing. In the words of Wolfgang Munchau at the Financial Times on Nov. 28, the EU needs "a fiscal union": "This would involve a partial loss of national sovereignty, and the creation of a credible institutional framework to deal with fiscal policy, and hopefully wider economic policy issues as well."

I've read many editorial paragraphs with this same bullying timbre — that what the whole European enterprise needs is an ...

Published: Sunday 27 November 2011
“Reforming social-welfare benefits is the only permanent solution to Europe’s crisis”

The resignations of Greek Prime Minister George Papandreou and Italian Prime Minister Silvio Berlusconi have highlighted how Greece, Italy, and many other countries obscured for too long their bloated public sectors’ long-standing problems with unsustainable social-welfare benefits. Indeed, for many of these countries, meaningful reform has now become unavoidable.

The social-insurance systems in Europe, as in the United States, Japan, and elsewhere, were designed under vastly different economic and demographic circumstances – more rapid economic growth, rising populations, and lower life expectancy – from those prevailing today. Governments (the focus is on Greece and Italy at the moment, but they are not alone) have promised too much, to too many, for too long. My 1986 book Too Many Promises pointed to the same problem with America’s social-welfare system.

This fundamental problem has now manifested itself in these countries’ unsustainable debt dynamics. Euro membership, which temporarily enabled massive borrowing at low ...

Published: Thursday 24 November 2011
“Depressions, recessions, contractions – call them what you will – occur because the private-sector spends less than it did previously.”

Politicians are masters at “passing the buck.” Everything good that happens reflects their exceptional talents and efforts; everything bad is caused by someone or something else.

The economy is a classic field for this strategy. Three years after the global economy’s near-collapse, the feeble recovery has already petered out in most developed countries, whose economic inertia will drag down the rest. Pundits decry a “double-dip” recession, but in some countries the first dip never ended: Greek GDP has been dipping for three years.

When we ask politicians to explain these deplorable results, they reply in unison: “It’s not our fault.” Recovery, goes the refrain, has been “derailed” by the eurozone crisis. But this is to turn the matter on its head. The eurozone crisis did not derail recovery; it is the result of a lack of recovery. It is the natural, predictable, and (by many) predicted result of the main European countries’ deliberate policy of repressing aggregate demand.

“Fol­low Pro­ject Syn­di­cate on Face­book or Twit­ter. For more from Robert Skidel­sky, click here.”

That policy was destined to produce a financial crisis, because it was bound to leave governments and banks with depleted assets and larger debts. Despite austerity, the forecast of this year’s UK structural deficit has increased from 6.5% to 8% – requiring an extra £22 billion ($34.6 billion) in cuts a year. Prime Minister David Cameron and Chancellor George Osborne blame the eurozone crisis; in fact, their own economic illiteracy is to blame.

Unfortunately for all of us, the explanation bears repeating nowadays. Depressions, ...

Published: Wednesday 16 November 2011
“The euro is at risk of collapse, and some European politicians are waxing apocalyptic.”

Europe has always been a rather tenuous concept. A rump continent, Europe represented the barbarous hinterlands for the Greeks and Romans. The first use of the term "European" occurred in a chronicle describing the forces of Charles the Hammer that turned back the northward advance of Islam at the battle of Tours in 732. Long celebrated in Europe as a victory of civilization over barbarism, the Battle of Tours was, as historian David Levering Lewis reminds us in God's Crucible, actually the opposite: "the victory of Charles the Hammer must be seen as greatly contributing to the creation of an economically retarded, balkanized, fratricidal Europe that, in defining itself in opposition to Islam made virtues out of religious persecution, cultural particularism, and hereditary aristocracy."

For most of its existence, Europe has been just that: a continent divided against itself. From the conquests of Charlemagne to the unprecedented bloodletting of two world wars in the 20th century, Europe saw only brief stretches of unity, and that only by virtue of imperial force.

Europe as a unified, democratic, relatively peaceful, and economically prosperous order has so far only enjoyed a brief lifespan. This conception of Europe dates to the early days of the Cold War and the perceived need to create a bulwark against the Soviet Union to the east. Centuries of Franco-German enmity vanished after World War II, as these two key European countries united against a common enemy at the urging of a common friend (the United States). The resulting economic alliance would expand and deepen over the decades into the current European Union of 27 countries. The EU now boasts a parliament, a council of ministers, a common currency (for 17 of the 27), the largest economy in the world, and even, somewhat ominously, a military force that has intervened overseas a dozen times or so.

Thanks to a difficult-to-contain economic ...

Published: Saturday 5 November 2011
“Here, as elsewhere, people are outraged at what feels like a rigged game – an economy that won’t respond, a democracy that won’t listen, and a financial sector that holds all the cards.”

The biggest question in America these days is how to revive the economy.

The biggest question among activists now occupying Wall Street and dozens of other cities is how to strike back against the nation’s almost unprecedented concentration of income, wealth, and political power in the top 1 percent.

The two questions are related. With so much income and wealth concentrated at the top, the vast middle class no longer has the purchasing power to buy what the economy is capable of producing. (People could pretend otherwise as long as they could treat their homes as ATMs, but those days are now gone.) The result is prolonged stagnation and high unemployment as far as the eye can see.

Until we reverse the trend toward inequality, the economy can’t be revived.

But the biggest question in our nation’s capital right now has nothing to do with any of this. It’s whether Congress’s so-called “Supercommittee” – six Democrats and six Republicans charged with coming up with $1.2 trillion in budget savings — will reach agreement in time for the Congressional Budget Office to score its proposal, which must then be approved by Congress before Christmas recess in order to avoid an automatic $1.5 trillion in budget savings requiring major across-the-board cuts starting in 2013.

Have your eyes already glazed over?

Diffident Democrats on the Supercommittee have already signaled a willingness to cut Medicare, Social Security, and much else that Americans depend on. The deal is being held up by Regressive Republicans who won’t raise taxes on the rich – not even a tiny bit.

President Obama, meanwhile, is out on the stump trying to sell his “jobs bill” – which would, by the White House’s own estimate, create fewer than 2 million jobs. Yet 14 million people are out of work, and another 10 million are working part-time who’d rather have full-time ...

Syndicate content
Make your voice heard.
Write for NationofChange
Small and medium businesses aren't the only ones at risk for massive financial miscalculations....
Autism and autism spectrum disorders have created unique challenges for parents for years. These...
Let’s face it, the world used to seem like a huge place. A place in which there were areas, towns,...
Recently, when I trying to define what the term “global energy markets” really meant, I stumbled...
Ukraine and neo-Nazis Ever since serious protest broke out in Ukraine in February the Western...