So if austerity is only half working at best to restore capitalism in the Eurozone, what is the alternative? Well, there is another that is gaining prominence, especially within the distressed Euro states like Portugal, Greece and Italy. It is the Keynesian alternative of leaving the euro and restoring a devalued national currency. For example, in Portugal, economist Joao Ferreira do Amaral has published a book urging Portugal to exit the euro. This has become a best seller and is backed not just by the Communist Party but also endorsed by the Supreme Court President! The book argues that austerity won’t work and the divergence between rich Germany and poor Portugal will only get wider if the current government’s policy is maintained. The only answer is to exit the Eurozone and for Portugal to restore its escudo as in the 1990s.
The claim of these ‘exit’ supporters is that the cost of exiting the euro to the economy will be much less than the continuing cost of austerity imposed by the Euro leaders on the likes of Portugal or Greece. These arguments are presented more theoretically by a new paper from Heiner Flassbeck and Costas Lapavitsas (Systemic_Crisis). Flassbeck is a former Vice Minister of Finance under left Social Democrat Oskar Lafontaine and seems to have formed an alliance with ostensible Marxist economist Lapavitsas to argue the case for exiting the euro as the only solution. In doing so, they seem to have arguments very similar to those of many neoliberals like Dr Werner Sinn, now a leader of the new ‘exit party’ in Germany that calls for a return to the mark. Lafontaine has also moved to this viewpoint. So there is an alliance between some nationalist neoliberals and Keynesians for an exit policy. The problem that I have with this exit policy is that it is a bit like the position of the Irish Republican Army (IRA) on the issue of Irish unity. The IRA argued that first we must end ‘the border’ that divided north and south Ireland and then we can adopt socialist policies. Yet Ireland is still divided and still capitalist and the former leaders of the IRA now work within the existing two regimes for social change – a reversal of their old position. The euro exit is also a ‘two-stage’ theory: first, we must exit the euro as the top priority and then we can talk about socialist policies to end the crisis. I am sure that Lapavitsas and Amaral want to adopt policies for public ownership of the banks and major industrial sectors, public investment and a plan for Europe, but I think they obscure the battle against austerity by emphasising euro exit and devaluation as the major cure. Surely, this is a diversion. Why? Well,as I said in a previous post (https://thenextrecession.wordpress.com/2013/03/16/workers-punks-and-the-euro-crisis/), it is because the euro crisis is a crisis of capitalism and not a crisis of the euro. In other words, even if the euro were to collapse and EMU states returned to running their own monetary and currency policies, the crisis would not go away and may even get worse. That’s because the euro crisis is the product of the failure of the capitalist mode of production globally. It has had the worst impact on the weaker capitalist economists like Greece, Portugal or Slovenia, but it has hit all economies. The crisis is only partly a result of the policies of austerity being pursued, not only by the EU institutions, but also by states outside the Eurozone like the UK. If that is right, then alternative Keynesian policies of fiscal stimulus and/or devaluation where possible, will do little to end the slump and will still make households suffer income losses. Austerity means a loss of jobs and services and thus income. Keynesian policies also mean a loss of real income through higher prices, a falling currency and eventually rising interest rates. Take Iceland, a country outside the EU, let alone the Eurozone. Devaluation, or Keynesian-style ‘beggar-thy-neighbour policies, have still meant a 40% decline in average real incomes in dollar terms and nearly 20% in krona terms since 2007 (see my post, https://thenextrecession.wordpress.com/2013/03/27/profitability-the-euro-crisis-and-icelandic-myths/). If not Iceland, then Argentina in 2001 is dug up as a successful ‘exit’ strategy. Argentina ended the peso’s peg with the dollar and devalued, apparently escaping its depression. But for Greece it is not just a question of breaking a peg with the euro. It will have to introduce a new drachma. Would this new currency issued by an effectively bankrupt state have any exchange value whatsoever? Will the Russians accept a Cypriot pound in exchange for oil, and the Americans drachma in exchange for medicines? Greece, which, unlike Argentina, is not a net exporter of raw materials with rising prices and so has little to support any new currency. Greeks can print as much as they like of it, but will they be able to buy electrical appliances, cars or even foods produced abroad with it? And anyway, Argentina did not escape its crisis by breaking the peg with dollar. Guglielmo Carchedi and I are just about to publish a paper (The long roots of the present crisis: Keynesians, Austerians and Marx’s law) that will show that it was not competitive devaluation that restored Argentina’s growth after the 2001 crisis, but default on state debt caused by the previous destruction of productive capital. Argentina’s recovery was fuelled neither by devaluation nor by redistribution policies, but by the re-creation of previously destroyed private capital in the private sector with a low organic composition; a rising rate of exploitation; and improved efficiency. This is the cause—rather than Keynesian policies—of Argentina’s economic revival. full: https://thenextrecession.wordpress.com/2013/05/30/the-euro-recofvery-half-full-or-half-empty/ _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
