Economist Michael Hudson has a new article at Counterpunch (Spanish language version at Sin Permiso) analyzing what he bluntly describes as financial coup.
Some key paragraphs:
A balanced budget in an economic downturn means shrinkage for the private sector. Coming as the Western economies move into a debt deflation, the policy means shrinking markets for goods and services – all to support banking claims on the “real” economy.
(...) The idea is to create an artificial financial crisis, to come in and “save” it by imposing on Europe and North America a “Greek-style” cutbacks in social security and pensions.
(...) It is diametrically opposed to the original liberalism of Adam Smith and his successors. The idea of a free market in the 19th century was one free from predatory rentier financial and property claims. Today, an Ayn-Rand-style “free market” is a market free for predators. The world is being treated to a travesty of liberalism and free markets.
(...) Latvia is the prime example. Despite a plunge of over 20 per cent in its GDP, its central bankers are running a budget surplus, in the hope of lowering wage rates.
(...) Beyond merely shrinking the economy, the neoliberal aim is to change the shape of the trajectory along which Western civilization has been moving for the past two centuries. It is nothing less than to roll back Social Security and pensions for labor, health care, education and other public spending, to dismantle the social welfare state, the Progressive Era and even classical liberalism.
(...) The problem is that there is not enough economic surplus available to pay the financial sector on its bad loans while also paying pensions and social security. Something has to give.
What really is causing the financial and fiscal squeeze, of course, is the fact that that government funding is now needed to compensate the financial sector for what promises to be year after year of losses as loans go bad in economies that are all loaned up and sinking into negative equity.
This is not the familiar old 19th-century class war of industrial employers against labor, although that is part of what is happening. It is above all a war of the financial sector against the “real” economy: industry as well as labor.
Latvia has been held out as the poster child for what the EU is recommending for Greece and the other southern EU countries in trouble: Slashing public spending on education and health has reduced public-sector wages by 30 per cent, and they are still falling. Property prices have fallen by 70 percent – and homeowners and their extended family of co-signers are liable for the negative equity, plunging them into a life of debt peonage if they do not take the hint and emigrate.
The explanation, of course, is that today’s economic planning is not being done by elected representatives. Planning authority has been relinquished to the hands of “independent” central banks, which in turn act as the lobbyists for commercial banks selling their product – debt. From the central bank’s vantage point, the “economic problem” is how to keep commercial banks and other financial institutions solvent in a post-bubble economy. How can they get paid for debts that are beyond the ability of many people to pay, in an environment of rising defaults?
This is why I say that Europe is dying. If its trajectory is not changed, the EU must succumb to a financial coup d’êtat rolling back the past three centuries of Enlightenment social philosophy. The question is whether a break-up is now the only way to recover its social democratic ideals from the banks that have taken over its central planning organs.
I could add many things but would be mere extensions on this analysis. Sadly enough, Hudson is right and, unless the People of Europe reacts very strongly, the continent will be plunged in a matter of years into the most dystopic scenario with the vast majority of citizens dumped into misery conditions, industries fleeing or dying out and mafias running the only remnants of the economy.
The corruption of the parliamentary representation system, with nearly all politicians being nothing but puppets of their financial patrons and with nearly no free media surviving, plus the destruction of effective state sovereignty is leaving Europe (and the World) on the hands of the big bankers, who have only one goal: to keep their profits high for as long as possible, concentrating all the wealth in their hands, without any real plan for the future other than that.
Capitalism has taken off its mask. It still tries to sell workers' austerity as something "good" but in fact they have no project whatsoever anymore. The Cold War illusion of welfare under capitalist conditions is all but dead now: class war has become very real.
But by the moment at least, the bad news is that the oligarchs are winning the war. For how long?