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Friday, May 28, 2010

Eurozone's problem is Germany


Interesting review by Prof. Vincenç Navarro
at his blog[es] on how the real problem of the Eurozone is not really the rather normal finances of peripheral countries but in the lack of demand of the central countries, notably Germany.

Germany, supposedly the economic engine of the EU, has been pretty low in the last decade, with small GDP growth figures and high unemployment. What is worse: the domestic demand of Germany has been lower than the peripheral countries now being punished for precisely sustaining the economy of the Eurozone (and specially of Germany itself) with their demand.

This is because Germany, still with a social-democrat government then, chose not to use the huge surplus that conversion to the euro generated to increase its domestic economy by rising salaries (and hence demand) but to speculate in the peripheral countries feeding the housing bubble and the deficit escalation.

Germany is in fact the wealthy but savy cousin who wants to sell commodities to their less well off relatives. And oddly enough, it has worked for a while, thanks to German (and French) credit. But logically this was untenable in the long run and now the Germans (and the French) want their money back by any means, what implies the destruction of the demand for German products.

As I said before, Mr. Volkswagen: how do you expect us to buy your cars if we work for misery salaries and pensions?

Navarro mentions that Oskar Lafontaine, then minister of economy and now co-leader of the growing communist Die Linke party, left Schröeder's government and the SDP for that reason. Lafontaine proposed instead a more balanced approach, increasing the income of German workers and hence the internal demand, what would have created a much more balanced EU and not this neocolonial engender designed for Mr. Volkswagen exporting until the demand runs dry (what is happening right now).

So what really needs to be fixed is that historical error that highly imbalanced the demand in the Eurozone. The demand by Germany and other Eurozone countries need to rise, what probably means increasing local salaries.

That does not mean that other barbarities like the Spanish housing bubble do not need to be addressed, they do. In fact Spaniards could work for less or demand more commodities if housing prices were not so extremely high, and that's a good reason to explode this bubble. But that would cause serious trouble to banks, who have invested heavily in this worthless excercise of financial engineering.

That's after all the real problem we have in EU: if we do what is logical (explode bubbles, restore a healthy demand by rising income), then banks would sink. Nobody cares about that except banks themselves, because they can always be replaced by other more serious banks, private or public. Of course some private investors would suffer but most people would be unscathed.

But the interest of the people does not matter to policy-makers, specially as EU is anything but a democracy, so Brussels and the Eurozone oligarchs have decided that it's best to make people pay for the errors of the banks and re-level the Eurozone demand to misery levels by lowering income and making sure that the banks are paid back.

This is extremely short-sighted: it's bread for today and hunger for tomorrow. Even for the bankers. If there is only a very low demand in the Eurozone, then Mr. Volksvagen (my imaginary archetype of European capitalists) won't be able to sell nearly anything and the economy will become stagnant for a very very long time.

The problem is clear: who dares to hang the bell from the cat's (banks') neck? It's much needed if we want to avoid Europe from sinking into misery and self-destruction.

Nobody? Then I think I know where the first socialist revolution of the 21st century will happen.

21 comments:

Kepler said...

Oskar just stepped down from the leadership of the Linke. He is ill, seriously ill, and will keep low profile, doing politics in his Heimat, Saarland.
When Oskar switched to the Linke years ago, one of the first things he did was to blast about the "Fremdarbeiter", which is a term used only during Hitler times to refer to foreign workers. Way to go for getting popularity!

That is the kind of Linke that is blossoming.
In the latest Bundesland elections, the Linke in Rheinland-Westfallen got 5.6%, which is more than 4 years earlier.


Of course, it has growth potential. The NSDAP (you know, the National Socialists) got about 2% something in 1928. They modified their rhetoric and looked at what they got in 1933!

I am often in Germany. Several of my best friends are Germans. I don't feel there will be a revolution anytime soon.

The German mentality is different. German salaries still allow Germans to have a higher purchasing power than to Iberians or Greek. The main difference is that Germans calculate how much they have and will need to spend for the year, whereas Latinos and Greeks just deem themselves rich until they find no coin in their pockets.
Sounds simplistic, but it is like that.

Maju said...

Please, Kepler, don't mix the Nazi Party, which rose to power with the support of Britain and all the German "constitutional bloc" (Christian-Democrats, Liberals and Social-Democrats), who also helped in destroying their only real rival, the KPD.

Die Linke is the heir of that KPD, which was the only party which opposed Hitler and the party against whom Hitler was launched.

Die Linke and other coherent communist parties are and will keep growing and not because of the shit you're fanning out here but because the reality in Europe, all Europe and surely all the World is that Capitalism is suiciding but sending the citizens to die before it does, and robbing them (just like Hitler did btw).

The worst of the uncontrolled demolition of Capital by Capital, has not yet reached Germany, but when it does, it will be again the party of Rosa Luxemburg and that of the oligarchy. But this time, the Nazi option is not on the table because Germany already has all the colonies it want: Greece, Spain, Poland, etc., thanks to an ill-conceived EU.

EU is at a crossroads: either it becomes socialist, or at least a social-democracy, or it blows up. I (and so many others) may be in favor of European union but not to be the lackeys or subjects of anyone else, much less to pay someone else's debts. And it's going to be practically impossible to impose that IMF shit on us. Wait and see because Europe is gonna burn badly.

It was about time.

Kepler said...

Maju,
I know very very well what the KPD and the NSDAP were. That is why I am telling you.

What you seem to ignore is that 1) the KPD and the NSDAP colaborated a lot at the beginning. It actually happened more often than not that the ones who first were commies turned to Nazis (this phenomenon was similar in other countries). At the beginning of the Weimarer Republic commies and NSDAP thugs sometimes even coordinated marches and went together against social democrats or just against the state. It was mostly with Hitler's rise within the NSDAP that they started to distance themselves-in the way they talked, not their methods.

When the Nazis came to power they rushed to ban the commmunists and all the rest, but very meaningfully they sigened the big treaty with the Soviets(Molotov someone?). Yeah, I know, you will say the Soviets were no real commies.

Fact is: although thousands of commies ended up in the concentration camps, they were similar to the Nazis than the rest, specially the social democrats. Extremes meet.

Anyway, coming back to Lafontaine: It is not surprising that he used a Nazi word (Fremdarbeiter) in his very popular speech to rise within the Linke. Both movements thrive on resentment.


I followed this very closely, I saw the reactions in Germany. You can look for Lafontaine + Fremdarbeiter and do some Google machine translation. The translation will be very probably very bad, but it will give you some idea about the issue (perhaps there is something in English as well).

As for Rosa Luxembourg etc: read the signs on the wall. The Linke will pass away. They are simply living in the past. The past won't come back.
The world wants pluralism and those models you propose are more authoritarian than anything we have had in the last 50-60 years.
Those models cannot be implemented in any country alone and they won't be implemented in a "world system" either, afortunadamente.
Sorry, man, pero estás sonando como los testigos de Jehová y su llegada del reino a la tierra.
No tienes indicios de nada. You should know history well. We have passed through worse crisis before.

Maju said...

"I know very very well what the KPD and the NSDAP were".

You don't know shit and that's evident in your next statement: "the KPD and the NSDAP colaborated a lot at the beginning", which is absolutely false.

Worse: you don't even provide any evidence of such insulting accusations.

"Extremes meet".

At the battlefield it seems.

May I remind you that the Nazi party was set to destroy the KPD and that Hitler would have never reached power except for the fact that the "democrats" (bourgeoises) supported their plot to declare the KPD illegal.

May I remind you that right before the ascension of Hitler, the Reichstag was split between the Nazis and the Communists and that all the other parties favored the Nazis all the time since then, while attacking the revolutionary party.

May I remind you that all the fascist governments ever only had one clear declared goal: destroy Communism and that for that reason they enjoyed the support of the bourgeois parties, including the most treacherous and vile socialdemocrats and specially of the regional power of the time: the United Kingdom.

"... Fremdarbeiter and do some Google machine translation".

I don't need any translator, I know from context that fremdarbeiter must mean 'guest worker', because that's the term that the Nazis used for the Italian and French immigrants they brought sometimes by will and sometimes by coertion to work in Germany while they sent their youth to die in the Russian front.

"They are simply living in the past. The past won't come back".

I've been member of the CNT and I know what is looking into the past. When you are the only party that is systematically growing in the elections and in popular support, that is obviously not the case.

"The world wants pluralism and those models you propose are more authoritarian..."

I don't think you grasp at all what I "propose". Because what I'm saying all the time is:

1. radically improve democracy by increasing popular participation and decentralization and...

2. radically increase democracy by putting the economical resorts (industries, banks, money, media, infrastructures...) in the hands of the people and removing them from the hands of oligarchs.

The world wants democracy, social justice and dignity in life and work, and right now we have authoritarian governments that do not respond to the will of the people and all they seem able to do is to rob us to give to the rich, which is the very definition of EVIL and TYRANNY.

Where is the democratic control of the European Commission? Where is the democratic control of the European Bank? Where is democracy in the IMF? Nowhere. The oligarchs do and undo at will and that must change.

Kepler said...

"the KPD and the NSDAP colaborated a lot at the beginning", which is absolutely false.

Concretely: it was about the start. There is a book by Geert Maak, Europe, where that part is mentioned.
It was not that they had the same goals as the DAP (predecessor of NSDAP) was from early on anti-Semitic, but they did organize common actions at the start of the republic.
After that they were rather competition.

Remember that Hitler and Stalin also collaborated a lot until Hitler invaded the Soviet Union.

Remember also that Lenin would have never ever been able to get to power in Russia without the huge monetary support that the Germans in WWI gave to him.



"... Fremdarbeiter and do some Google machine translation".

I don't need any translator, I know from context that fremdarbeiter must mean 'guest worker', because that's the term that the Nazis used for the Italian and French immigrants

Wrong. Guest worker is Gastarbeiter now. Fremdarbeiter is the term used by the Nazis and then by Oskar Lafontaine to complain that Germany was getting full of Fremdarbeiter.

From Wikipedia:
"Am 14. Juni 2005 sagte Lafontaine auf einer Kundgebung in Chemnitz, der Staat sei „verpflichtet zu verhindern, dass Familienväter und -frauen arbeitslos werden, weil Fremdarbeiter zu niedrigen Löhnen ihnen die Arbeitsplätze wegnehmen.“[21] „Fremdarbeiter“ wurde vielfach als Ausdruck aus der Sprache des Nationalsozialismus kritisiert, den Lafontaine bewusst verwendet habe, um Fremdenfeindlichkeit zu nutzen und so potentielle NPD-Wähler für das neue Linksbündnis zu gewinnen. Auch viele PDS-Mitglieder gingen deshalb auf Distanz zu ihm, bis er auf ihrem Parteitag erklärte, er habe das Wort dem Ausdruck „Gastarbeiter“ vorgezogen und gerade nicht herabsetzend gemeint."
After that Oskar said he did not mean it like that, which was something no one believed.


"2. radically increase democracy by putting the economical resorts (industries, banks, money, media, infrastructures...) in the hands of the people and removing them from the hands of oligarchs."

The people? Who's the people? We need bosses and risk takers, man...otherwise efficiency goes down the drain. Sad, but that is reality.

"The world wants democracy, social justice and dignity in life and work,"

I agree with that, many capitalists agree with that.

I don't deny the control over the European Bank, World Bank, etc, sucks, but when you come to propose "give the power to the people" you have to explain what you mean by that. Until now everything some group has pretended to give "power to the people", it has been "to their people" and those are even more incompetent and unfair than the ones that came with capitalism.

Maju said...

So you are talking of the early 20s, when fascism, a new phenomenon just created by Mussolini out of the blue, was not even really understood?

WTF! You are talking shit just for the sake of discrediting.

"Remember that Hitler and Stalin also collaborated a lot until Hitler invaded the Soviet Union".

Actually they only collaborated between 1939 and 1941 and in regard to the dismantling of the buffer zone that the Entente had created to contain the USSR at the end of WWI. Stalin obviously hoped to use inter-imperialist struggle in favor of the USSR and who knows... But anyhow, Stalin is not the KPD!

I'm not at all sympathetic of Stalin but you are mixing apples and oranges just for the sake of manipulating the facts in favor of your reactionary discourse.

"Remember also that Lenin would have never ever been able to get to power in Russia without the huge monetary support that the Germans in WWI gave to him".

Who knows. But again it'd be about to use inter-imperialist confrontation in favor of the revolution and the much desired peace that the Russian people desired so vehemently. That's totally legit.

...

Don't add texts in German without translation because it's like only you understand that. Nobody speaks German, this side Strasbourg, really. :(

"The people? Who's the people?"

The community of individuals that by magic of belonging to a community stop being mere robotic individuals in a merely work-produce-consume dynamics and begin being people ("personas" in Spanish) with a meaning of existence.

The people is what legitimates or not any exercise of power, at least for all among us who are democratic. The people is "where the buck stops": with the people a government or whatever other endeavor is legitimate, without it and specially against it, it becomes tyranny.

"We need bosses and risk takers, man..."

Useless bosses like Obama and Barroso and risk takers on the money and well being of others, like BP or Goldman Sachs?

I'd put it that we need leadership (but maybe not individual leaders so much) and we need creative people who can think outside the box. But that's like normal: every other person can do that given the right circumstances.

I don't see how democracy and socialism is opposed to that. In fact you can have free market, even a better free market than now under oligopolistic capitalism, in socialism but not corporations, whose bosses are legally irresponsible.

Do you want to take risks? Fine but assume the full responsibility for them. Stockholders don't dare to hold any responsability: they just bet and if it goes well, they rip the benefits and if not, they only lose what they have invested without further responsibility.

Also huge companies have such important roles that cannot be only responsible to their owners: they must be responsible towards society as whole (and in particular their own workers, who are the ones creating all the wealth in any case).

That is exactly what is being fought: who decides what is produced and what for? Is it to make an abstract benefit of nominal "money", be it paper-money or mere numbers in an account? That's plainly ridiculous! Money, if it must exist at all, can only be a tool to guarantee that the needs of society and its members are met. Same for markets, companies and whatever other economic tool you may imagine.

The economy is a tool, not a goal. The goal is well being, justice, dignity, freedom... living worthy lives.

(continues)

Maju said...

"I agree with that, many capitalists agree with that".

Only in words. In actions there may be a handful (even Engels was one of such rare illustrated capitalists) but not most. Remember that capitalism is about greed and profit. As competing capitalist, one must make profit once and again, no matter what.

That is the very essence of capitalism and that is why it's so problematic.

"I don't deny the control over the European Bank, World Bank, etc, sucks, but when you come to propose "give the power to the people" you have to explain what you mean by that".

Cooperativize all companies, except maybe those that are too large, which should then be either divided or held by a relevant representative institution, with workers having a say, of course. If banks must exist at all, they should be held by the public: I have got all my life my little money in a local savings bank... and I don't need anything else, though I would like to have more say on how it offers its services (attention to public has degraded a lot, for example, sign of lack of democracy). I'd also would prefer a local supermarket with at least partial management by the neighborhood community, because they try to sell you a lot of stuff we don't need and instead don't offer a lot of stuff we might want (like organic food but not only).

In the end the companies are all social agents: they shape society at all levels, so society, organized in a democratic manner (soviets, for instance) should be able to manage them and direct them to the real public needs.

We are also wasting lots of work hours in producing stuff nobody really needs, from advertisements to weapons passing through luxury items, etc. A good democratic management should end with all that overwork and allow for a lot more leisure time, part of which could be voluntarily dedicated to social and economic grassroots management. Similarly all the unemployed could take partly with the extra hours (and even some of the regular hours) of workers, all winning with the deal.

We can live very very well... but we need a system that is oriented to the real needs of the people, not to the fetish of power and greed.

manju said...

I think Max Weber was right in ethical part. Ethical money maker/spender Germans are the ones helping unethical money maker/spender Greeks. The difference in religious orientation is very visible. The next in line Spain, Portugal, Italy and Ireland are all Catholic countries.

I think now many Europeans feel indebted to Germany. That explains Germany's success at Eurovision.

Maju said...

I wrote a long answer but had technical problems and got lost. Let's synthesize the main points:

1. France, Belgium, Austria are "ok" (add Luxemburg one of the wealthiest countries per capita) are traditionally Catholic. Germany is 50% traditionally Catholic. Britain is traditionally Protestant and is doing very bad (only its not belonging to the Eurozone saves it slightly). Same for Iceland.

Is not as simple, specially when today nearly everybody is effectively agnostic in all the continent (except Poland and maybe Ireland and Italy).

2. The economic center of Europe is the Rhine area since at least the High Middle Ages. This was long before the Protestant schism and has more to do with the development of Atlantic climate agriculture thanks to several seemingly Chinese inventions spread by the Mongols: heavy plough specially. The heavy plough could not be effectively used in Mediterranean areas because of the thinness of the productive soil, just as it can't be used effectively in Africa either. This changed the economic basis totally and displaced the economic center of Europe from the Mediterranean to the Rhine.

Additionally, already in Modern Age, the closure of the traditional Silk Route and the opening of oceanic routes, totally crippled Mediterranean economy and favored the Atlantic one.

While Weberian Catholic/Protestant dichotomy can maybe used to explain to some extent the displacement from Iberia to the North Sea (though really Anglicanism is more Catholic than Protestant in nearly every aspect) of the center of Atlantic and Indian trade and colonialism, it's totally useless to explain Germany or France. And certainly is totally useless to explain Greece, which belongs to a different Christian tradition (Orthodoxy).

You need to look further into the material, as well as the ideological, drives of this displacement.

The Weberian hypothesis does not explain why Catholic North France overpowered Occitania of Protestant tradition since deep in the Middle Ages (Bogomils) and again in Modern Age. It has absolutely nothing to say about the opposition between developed Basque Country and Catalonia and most of the rest of Spain, or about the economic and sociological disparities between North and South Italy.

We have to look instead at other more important cues such as the existence of free farmers or instead feudalism, the proximity to the Rhine axis, and various local historical aspects. Protestant Prussia was always pretty much underdeveloped while largely Catholic Rhineland was instead much more advanced, for example.

(next, the semi-falsehood of Spanish debt problems)

Maju said...

The media-spread lie that Spain has budget problems is hard to understand except in the context of some sort of systemic plot. Spain has till now a very healthy budget that is much healthier than most of other Eurozone members. That's a fact, though maybe it changes in the upcoming years.

Spain has economic problems but all them belong to the private sector, which is obscurantist, oligarchic and unhealthy. Much of it belongs to the Real State Bubble, also affecting other countries, specially the Anglo-Saxon ones (UK, USA) where there's not significant public housing plans (in Spain neither). However in the case of Spain the apportion of the GDP held by the Real State is surely higher than in Britain or the USA, where the financial, military and productive sectors are more central.

So Spain, like the USA and the UK, has chosen to support the Housing Bubble and prevent it from collapsing as should have done long ago. This costs money, of course, but also costs in the sense of making salaries higher (the basic Spanish salary is at least 50% higher than in Greece or Portugal, though at least 50% lower than in NW Europe, and can hardly be lowered because of the high cost of life, specially housing).

So Spain has a relatively high internal demand, what favors France, Germany, the USA and even China... but produces little other than services (finance, tourism), housing and components for German/French products, which can easily be relocated to cheaper (poorer) countries like Morocco or Poland. (It's an oversimplification because there's more than that but good enough for our little discussion).

All the media discussion today on Spanish economy seem to dwell about a "bad labor market". However the reality is that Spanish workers have nearly no rights and that firing workers is very very cheap, both for the companies and the (to lesser extent) the state, which provides nearly no welfare.

It's a very Anglo-Saxon model in fact and has cheaper costs and greater productivity than Britain. But it doesn't have the strong financial and other basis of the major Anglosaxon countries (though the Spanish financial sector is not weak either, think Banco Santander and BBVA for example, as well as the strong semi-public savings bank system, La Caixa specially is important internationally).

The real problem is that housing costs are so extremely high that salaries cannot really fall much under current levels before the Housing Bubble is really left to explode and housing prices drop to where the law of offer and demand marks (about half of current prices). However letting housing prices dive to their market levels would cause a major collapse of the Spanish (and other) banks, so the government and oligarchy are doing all in their hands to prevent such collapse, at high cost for the real economy.

But is not a problem of government overspending in any case. It may be in fact a problem of government underspending, which is a structural problem of most Mediterranean countries
and typical of underdeveloped neo-colonies.

But tell that to the IMF... it just doesn't fit with their unequal standards. They are probably planning how to save in order to bail out the banks when the time comes (soon).

Maju said...

Finally it must be said that the "German" (not only them) bail out of Greece was much needed to prevent German and French (and US) banks from losing lost of otherwise un-payable money. So German (and other European) citizens are paying almost directly into the accounts of their own banks, via Athens.

Oddly enough very few consider taxing the rich, which is the only logical thing to do when the people has not more money and what they have is so desperately needed to keep the demand afloat.

In general, it's just a suicidal vampiric strategy from International Capital, making the poor pay, in Germany and abroad.

manju said...

The way I read, Weber's theories were in relation to industries, merchants and industrial workers. He has considered the examples of German regions with Catholic majority to show how Protestants dominate education and industry(of course, Jews were number one). I suppose agriculture prosperity has limited scope to human ethics and more to geography and climate. So, it's immaterial to discuss about Protestants and Catholics in relation to agriculture.

So, the way I read it Weber is about how industrial western Europe is the handiwork of Protestants where they merged asceticism with materialism. I think Orthodox Church is similar to Catholicism that views ethics have nothing to do with money making.

Indeed, I would think even Protestantism would not help people in regions without much agricultural output. When this factor is nullified the successful industrial development can be ascribed to Protestants.

Regarding Spain, thank you for your information.

Maju said...

Agriculture is important because it's a material (Marx) and not ideal (Hegel) reason.

Also I have disclosed above how Catholic countries in the central area fare as well as Protestant ones. The ones which fared poorly are those in the Med affected by thin soil and the fact that the heavy plough is mostly useless. The same logic can be applied to Africa.

That's an objective reason.

"I think Orthodox Church is similar to Catholicism that views ethics have nothing to do with money making".

IDK, Romans though of manual labor as the worst of things, they had a very aristocratic vision of reality, next bad was trade and usury but Roman equites actually rose thanks to that activity before they were largely displaced by Greek, Syrian and Jewish traders. With imposition of Christianity Greeks and Syrians were absorbed, while Jews were not and gradually took monopoly of the sector, specially usury. But that's a Latin thing, so I don't know how Greek Orthodox and Syrian Christian churches address it in fact. They should be more like Jewish, much like Protestants.

Anyhow it reminds me of the Chinese ethics of the past, where traders were considered very lowly.

In any case I can understand well how money-making can be seen as a bad thing, a form of parasitism. It's an unproductive activity, at least on first sight.

But Spain's lenders were Italian, Bavarian, Austrian. The Counter-Reform allowed normal banking activities... I think it has more to do with the authoritarian nature of Catholicism, which is very fascist and hierarchical, not allowing for too much freedom in general. Castile was also a militarist type of power, not a trader one, like Aragon, Portugal, the Basque autonomous republics, the Italian city-states, etc. This trader attitude however did not impede the decay of Portugal or Venice and the autocratic attitude of the French state did not impede its relative success either.

It's complex and it's in the end mostly related to the creation of the economic European center at what we can call "greater Rhineland", of whichever religion, replacing the old one centered at Italy. Of course the rise of Protestantism (several variants) is weaved in all that evolution but I can't accept it's the only nor the main element. Otherwise we should expect Belgium, France, Austria, large parts of Germany... to be underdeveloped and they are not.

manju said...

Agriculture may be a pre-requisite for the later commercial life. Here we deal with only commercial life. According to Max Weber for Protestants it deals with ethical money making. Money making(worldly life) is their calling for god's work. What in Marx' word 'alienation' or in Weber's word 'disenchantment' was overcome when Protestants found meaning in their labour not because it gave them holistic life but complete life in god's eyes. They thirst for truth was quenched by productive affair in money making. Thus when religion gave way to secular truth seeking the ethicalness or nobleness of money making remained unchanged.

Weber also deals with France. He finds the commercial life was a given a boost by the Protestants there. The Huguenots were a case in the point.

The success of a country did not need a Protestant majority. Even minority Protestant with their active participation in commercial life was all that needed.

You are solely associating money making with banking. However, Weber's money makers were industrial workers and entrepreneurs. May be you are showing your Catholic upbringing.

Indeed Catholicism, Orthodox Church, Buddhism, Chinese philosophies, The caste system put money making or worldly life as a low life not worthy for the intellectuals. Therefore, money making in these regions was associated with unethical practices and which was accepted as a way of life. Even though Europe has moved to more ethical practices (though sometimes regressing back to old habits like that of Greece) thanks mainly to Protestants amongst them, India and China have still strong unethical practices when it comes to money making.

manju said...
This comment has been removed by the author.
Maju said...

Agriculture was and still probably is the basis of all other economy, involving 80-95% of all people. Most trade was similarly about agricultural products or its immediate derivatives.

Furthermore trade is for a reason called tertiary sector and is generally considered to be nonproductive but merely speculative. The basis of any economy is necessarily the primary and secondary sectors (roughly agriculture and manufacture), with trade only being necessary in the same way a bureaucracy or an army are necessary: to organize the production beyond the basic scale.

"ethical money making"

There is no such thing, IMO. And if there is it is immediately overwhelmed by those who are less ethical and therefore make more money. Ethical capitalism is not workable: mafiosos take over as soon as profits become interesting.

But anyhow that's exactly the ethics of Basques and for the most part they have never been Protestant. But they had a non-feudal agrarian economic basis with a very strong middle class based on the agrarian sector (but extending into the mining, manufacturing and trading sectors).

But the very basis of this middle class is a balanced distribution of land in efficient units: not too large that the owner becomes detached and not too small that the owner becomes poor.

South of the Ebro or East of the Elbe, feudalism hindered the development of this potentially entrepreneuring agrarian middle class.

(continues)

Maju said...

(cont.)

This system is bourgeois but is not really capitalist because there is not too much chance of accumulating huge disproportionate wealth, just of doing well, better or worse but hardly too well. To develop capitalism as such, the English invented something new: they recycled their not too strong feudalism into private property of the landlords, allowing an unprecedented accumulation of agrarian wealth in very few hands, and the formation of the first proletariat: a huge mass of ripped-off former farmers that could then be exploited by nearly nothing. This set the stage for the aristocratic-burgeois hybrid that characterizes British capitalism and by extension modern global capitalism. In a sense Latin European countries were doing that very same thing but unlike the English hybrid lord-burgeoises in most of Iberia the prejudice against real work and secondary sector (manufacture) production by aristocracy persisted hindering development. The huge early empires did not much either to favor entrepreneurship, as about all the riches of the world were already in the hands of the state and its aristocratic protégées. The highly developed bureaucracy, the intolerance towards most innovative ideas (this is indeed a Catholic trait) and institutional moral concerns (in the case of Castile but not Portugal) against the slave trade (one of the main sources of early capital accumulation by means of trade) did not help either.

But the fundamentals and the core of the economy, specially in the early stages, we have to look for in the agrarian sector in any case, as it was the basis of all further accumulation, what allowed greater or lower population densities and also what determined the social structure of each autonomous legal unit.

That way areas like Flanders, the Basque Country or Catalonia (all Catholic areas), as well as Switzerland, the Netherlands and some districts of Britain, were clearly bourgeois, even before Capitalism, while areas like Andalusia, Hungary or Brandenburg-Prussia (this one strongly Protestant) were clearly aristocratic instead, what restricted their development.

The attitude of the governments was also decisive: while Britain soon implemented an effective meritocracy, Spain got stuck in a hereditary and favoritist mentality, what is clearly evident even in such an early episode as the defeat of the Spanish Armada, commanded by an aristocratic silverspoon who knew nothing about the sea (instead of being under the command of one of the many excellent naval commanders that existed in Spain and its dependencies but who were normally not aristocrats).

We could go on for many pages but it is a more materialist, social and political matter than a mere matter of religion. I don't fully reject some influence of this last aspect but it's clearly not central, as Flanders or France or the Basque Country (for example) evidence.

manju said...
This comment has been removed by the author.
manju said...

But anyhow that's exactly the ethics of Basques and for the most part they have never been Protestant. But they had a non-feudal agrarian economic basis with a very strong middle class based on the agrarian sector (but extending into the mining, manufacturing and trading sectors).

This part is interesting. According to Weber, Jesuit movement in France 18th century onwards brought Protestant ethical concepts to the country. Considering the fact that Ignatius Loyola was a Basque, which according to you was already a quasi capitalist on account of being non-feudal society, did indeed give some credence to the Jesuit movement being a marriage of asceticism of capitalism.

Then I need to change my view of ethical money making associated with common capitalists. I suppose when the rulers adopted the idea of money making with ethics, they probably came up with laws to keep it ethical. I think when the ruling class and bureaucracy adopted Protestant worldly life, then money making got ethical laws.

The contrast with previous feudal economy could be that ruling class was also unethical about money making. Or didn't find it necessary to regulate unethical practices.

Maju said...

I would not link Jesuits with Basque culture. Eneko of Loiola, later renamed Ignatius because he found his Basque name not sufficiently Christian, was first and foremost a military man at the service of Castile who was injured when commanding the occupation forces at Pamplona in one of several revolts against the invasion of 1512.

For what I know, then he recycled himself into a religious-political leader as he was forced then to stay in bed for a very long time, what caused him to meditate. He therefore created what used to be in all Modern Age (till a few decades ago) the spearhead of Counter-Reformation, an order conceived as a military-like structure whose ultimate commander was the Pope.

It's pretty much a proto-fascist creation, much as the whole Roman Church but modernized. Jesuits indeed have certain reputation of intellectuals and rationalists, and even sometimes of humanists, and we can well say that it was precisely that modernization but emphasizing the hierarchical proto-fascist trend of traditional Catholicism (highly embedded of imperial-militaristic Roman values) into a modern orientation that is convergent with Absolutism (proto-fascism again).

There's nothing of the proto-democratic concepts of Reformation or Sunni Islam, which, at least in theory, allow everybody to interpret holy scripture according to their best judgment, in Counter-Reform or the Jesuits. That may be a key difference.

While Queen Jeanne (Jeanne d'Albret) and probably to some extent her son the popular Henry III of France (and II of Navarre) represent a more genuine embodiment of Basque and Occitan proto-democratic tendencies, Loiola rather embodies Castilian values of militarism and hierarchy, forged in the Reconquista and the conquest of America but with likely deeper roots in Celtic, Roman and Visigothic aristocratic values.

However it is possible that some of the Basque values may have remained within the Jesuit organization. But I rather think that are imported ones, those that eventually lead to our "Taliban" period of Carlism in the 19th century, when self-rule and Catholic-conservatism became mixed in a complex but quite self-destructive cocktail.

Whatever the case, the historical reality is that Catholicism, lead by the Habsburgs, who were then the greatest global power, found itself in dire need of reformation... which was the Counter-Reformation, accepting science and rationalism, as well as some variants of humanism (Thomas Moore specially), an tackling as much as possible the excesses of the scandals and corruption that had damaged so much the image of the Church. By then many states had found in Reformation (several variants) a more appropriate alternative, specially to challenge the imperial aspirations of the Habsburgs.

I would think anyhow that much more harmful than Catholicism was for example the expulsion/forced assimilation of the Jews, who were a caste that had a lot of bourgeois potential. But there are other factors such as the fact of being suddenly brought to such a huge global-scale power with incredible wealth coming continuously from the American mines, which created an illusion of glory and immortal power, but that was wasted in military adventures against nearly everybody else (Turks, Germans, English, Dutch, French), causing inflation and not consolidation.

(cont.)

Maju said...

(continuation)

Probably oversized militarism and imperialism were the worst burden of Spain in that time. Much like today's USA, that is wasting its power and fortune in useless costly wars, Habsburg Spain was defeated by its own unmeasured ambition and self-delusion of God-blessed power, which lead to stagnation instead than to development.

As for Italy, it was then mostly a Spanish protectorate and, anyhow, once the Atlantic routes were opened, their source of wealth in the spice trade was completely broken. The demise of Italy, specially Venice, was decided in the Arabian Sea, when the Portuguese defeated the odd Turco-venetian coalition near Gujarat.

Meanwhile three Atlantic countries began competing with the Iberians: two were Protestant but the third was Catholic. These were, of course, the Netherlands, England and France. Gradually they took over in a process that was generally more measured and cautious than the attitude displayed by Spain.

While the Netherlands was indeed a bourgeois (republican, more or less democratic) state since its inception, England and France were quite aristocratic and hence suffered eventually major revolutions as their bourgeois class became more and more powerful. These were mixed with the religious conflicts in England but in France, where Catholics eventually won, the revolutionary forces became secularists, which is another, probably better and certainly more innovative, way of neutralizing the power of tradition.

"Then I need to change my view of ethical money making associated with laymen capitalists".

This is more an attitude of the petty bourgeois than the true capitalist. And I'd dare say that besides the worker-bourgeois class struggle, there is another less apparent one going on between the petty bourgeoisie, whose chances of success depend on law and genuine free market (ethics) and the capitalist oligarchy, whose success largely relies on corruption, power-mongering and monopolistic tendencies (lack of ethics).

"The contrast with previous feudal economy could be that ruling class was also unethical about money making. Or didn't find it necessary to regulate unethical practices".

Complex. I'd say that the basics is that there was not much of market economy in the Middle Ages, there was not even money in many cases. Wealth was then measured mostly in land, which was only owned in large amounts by aristocrats, whose right derived from conquest and/or royal grant. However there was a small bourgeois (trader/artisan) class also but these were mostly organized in locally oligopolistic guilds, which regulated production and markets. In fact early capitalists had often to take the production out of the towns in order to avoid these regulations and make greater profit on unqualified rural work force.

In the late Middle Ages, North Italy was for sure much wealthier than NW Europe, more advanced, more illustrated and even more bourgeois. But gradually the economic center shifted to the Rhine area as Northern Europe became more and more important economically and politically, and more developed too. The coup de grace was the shift of global trade routes from the Mediterranean to the Atlantic. That harmed Italy very much but the demise of Italy is also related to its lack of political unity because it was, as center of Catholicism and as important economic center, a very valuable prize for conquerors from elsewhere (Byzantines, Germans, French, Spaniards).

Well, I'm ranting a lot. I hope it satisfies your curiosity.