A political and economic case for voting to Remain

The case for Britain to Remain within the EU is to my mind, largely a political case. The political forces pressing for a rupture with the Union are not on the whole progressive, although there are many sincere Leave campaigners on the Left of the spectrum. ‘Brexiters’ are mostly insular, nationalistic and sometimes racist, especially in relation to immigrants and refugees.

With few exceptions the Brexit leaders are market fundamentalists, anxious to blame foreigners for the state of our economy; to attack European ordoliberalism rather than the – if anything more damaging – Anglo-Saxon Osbornomics. Their approach is particularly ironic, given that today’s European Union is today much more like Britain than it was before, as Jan-Werner Müller [1]  argues in the latest edition of the London Review of Books. European populist discontent owes much to the impact of Anglo-Saxon economic policies for the liberalisation of finance and the privatisation of public assets.

There are politically progressive arguments made by some on the Leave side against membership of a political Union which has hollowed out democratic institutions across Europe, and transferred power to unelected technocrats. One in which right-wing politicians actively use state intervention and the rhetoric of the Social Model to reshape Europe into what José Palma defines as “a major facilitator of the ever-increasing rent-seeking practices of oligopolistic capital.” [2]

These liberal finance principles have led to high levels of private debt, bankruptcies, unemployment and public humiliation in many European states. It is clear to many Europeans that the workings of the self-regulating market system threatens to destroy their societies. And so they are engaged in what Karl Polanyi defined as “the self-preserving actions of communities” to interfere with the system’s free functioning by turning for “social protection’ to the strong leaders of right-wing, and even fascist parties.

At this critical turning-point in Europe’s history I believe it would be wrong to walk away from the fight against authoritarianism, and to spurn European partnerships in managing the market system, and curtailing the rent-seeking practices of oligopolistic capital.  Above all, after a catastrophic world war still fresh in European memories: one in which at least sixty million people died worldwide, it would be wrong for Britons to exacerbate inter-European tensions and divergences with a Brexit. It would be wrong to shun the yearning for peace, stability and neighbourliness common to most European societies.

The economic case for remaining a European partner

There are two points to be made in support of the economic case for membership of the European Union.

The first has to do with the evolution of geopolitical forces. As American power wanes and in the process becomes more dangerous, it is paralleled by the rise of a powerful, autocratic Chinese state. Given these developments, I believe it important for Britain to be part of strengthening and upholding a third bloc: one built on long-established European struggles for protection of fundamental human and democratic rights of citizens, and for security and justice. A genuinely Social Europe whose struggles, values, culture, traditions and institutions are distinct from those of both the Americans and the Chinese.

The importance of strengthening such a unified third bloc is made clear as we face three great challenges that do not recognise national borders. The first is the grave threat of climate change, when infinite expansion hits the buffer of finite natural resources. Global warming knows no boundaries, so European-wide cooperation will be vital in adapting to it. Second, the wars, catastrophes and poverty of the Middle East have triggered mass migrations of refugees which can best be managed in a co-ordinated, co-operative and (hopefully) humanitarian Union.

Third, given the global interconnectedness of an out-of-control finance sector, we face another financial crisis. It is extraordinary that almost nine years after inter-bank lending froze on the 9th August, 2007, we as an international community have failed to re-structure or reform the current system, and are stumbling mindlessly towards the next grave global calamity.

Tackling the first of these two crises as a small island state will be nigh impossible. But alone, we have no chance of dealing with the aftermath of the next global financial crisis.

While there has been much tinkering with the complexity of global finance by the Basel Committee on Banking Supervision, little has been done to re-structure the international financial architecture and system to restore stability. On the contrary: unrestrained, finance capitalism has expanded further into shadow banking, aided and abetted by government guarantees, and the European Central Bank’s largesse. This has enabled the finance sector to engage in immensely lucrative debt-creation and other rent-seeking activities – without public oversight, and without the immediate fear of failure or losses. Business for this sector, backed as it is by European taxpayers, is better-than-usual, even as it becomes mired in tax evasion scandals, fraud and corruption.

There’s fear too in the eyes of global technocrats, conscious that they are driving blind, having lost control of the financial system. They lack up-to-date information and data about the activities of anarchic finance; and they have used up the monetary tools at their disposal during the last crisis. To compound their fears, social democratic politicians in Europe and the US remain fixated by neoliberal dogma, unable to pull the levers of government spending that would stimulate demand, lift their economies out from under mountains of debt, and halt stagnation and decline.

As this goes to press, the IMF, in a paper titled Neoliberalism. Oversold?  has released a belated mea culpa regarding the destructive effects of neoliberalism, and arrived at

“three disquieting conclusions:

•    The benefits (of neoliberalism) in terms of increased growth seem fairly difficult to establish when looking at a broad group of countries.

•    The costs in terms of increased inequality are prominent. Such costs epitomize the trade-off between the growth and equity effects of some aspects of the neoliberal agenda.

•    Increased inequality in turn hurts the level and sustainability of growth. Even if growth is the sole or main purpose of the neoliberal agenda, advocates of that agenda still need to pay attention to the distributional effects.” [3]

This climb-down comes too late to reverse the economic and social destruction wreaked by neoliberalism over many decades. Nor will it alter the direction of events. A crisis is now unavoidable. When that day arrives, it will be necessary for progressive forces to combine across the continent.  First, to amend the Union’s treaties and their embedded orthodox economic policies.  Second, to fight to restore democracy, security and justice to European countries and institutions; to replace anarchy with stability and order; and to subordinate mobile global capital markets to the interests of democratic societies.

That will only be achieved by international co-ordination and co-operation of progressive forces across borders. It cannot be achieved in isolation.

Ann Pettifor is Director of Policy Research in Macroeconomics (PRIME)

Footnotes:

[1] Jan-Werner Muller, Europe’s Sullen Child, London Review of Books, 2 June, 2016.
[2] José Gabriel Palma:  The Revenge of the Market on the Rentiers: Why neo-liberal Reports of the end of history turned out to be premature. June, 2009. Cambridge Working Papers in Economics (CWPE) 0927
[3] Jonathan D. Ostry, Prakash Loungani, and Davide Furceri. Neoliberalism: Oversold? IMF Finance and Development, June, 2016

 

An open letter to the leaders of Europe: Abandon the Euro's 'gold fetters'

(Image source: Bloomberg Businessweek)

I am posting below my latest contribution to openDemocracy published on May 28.  In an open letter to the leaders of Europe, I argue that they need to abandon the fetters that chain them to the interests of private wealth, and threaten European disintegration:

“On May 15th, in what can only be described as an act of coercion, an impoverished and effectively insolvent Greece acceded to the handover of a bond payment – €436 million – to private financial ‘vulture funds’. The Greeks had little choice. However, in acquiescing to this handover – facilitated by its paymasters,‘the Troika’ – impoverished Greeks protected reckless private wealth from the consequences of their risks. Namely: losses and bankruptcy, and the discipline of market forces. Continue reading… ›

Reining in Public Debts or Challenging Democracies?

Last week I gave a talk in Brussels at a debate moderated by Pierre Defraigne, Executive Director of the Madariaga – College of Europe Foundation. It was A Citizen’s Controversy with Lars Feld, Professor of Economic Policy at the University of Freiburg and Member of the German Council of Economic Experts.

Below is my slideshow from the talk:

The architects of the Euro hung by their own petard

With acknowledgements to the Economist: front cover 26 November, 2011

Dear readers…posted this last night, but  failed to add links…so have updated this morning….And now at 12.54 on 28 Nov, following revelations from Bloomberg, am adding in a reference to the extent that Morgan Stanley was bailed out in 2008.

A petard, I am reliably informed by the Web,

“was a bell-shaped metal grenade typically filled with five or six pounds of gunpowder and set off by a fuse. Unfortunately, the devices were unreliable and often went off unexpectedly. Hence the expression, where hoist meant to be lifted up, an understated description of the result of being blown up by your own bomb.”

Correct or not, this is a helpful analogy for the crisis of the Euro. The grenade that is the Euro has a fizzing fuse that threatens to explode imminently, causing visible panic in markets, in parliaments and treasuries across the world. Mainstream economists are either dodging the bullets and like the cowards they are, pretending that ‘it’s nothing to do with me guv’.  Or else they’re panicking in ways that are crass and unhelpful, banging their heads against the brick wall that is the Bundesbank and ECB, and demanding that someone, somewhere defuses the bomb.

The Economist has a dramatic leader this week (“Is this really the end?”) warning of grave threats and offering Chancellor Merkel and other EU leaders ways of avoiding a comet-like crash. Like many others, leader writers on the Economist, somewhat belatedly, want the ECB to act as a central bank, and to  provide liquidity to sovereign members of the Eurozone.

Continue reading… ›

Greece - a symptom, not a cause

I appeared on Newsnight last night, to discuss the Eurozone crisis – and Greece in particular. (You can watch it with the BBC’s iPlayer..our slot is about 7 minutes into the show.)

The game is up: the age of liberal finance over. The Left's Plan B?

By Ann Pettifor. An edited version of this piece was published on Left Foot Forward, 14 September, 2011. This original, longer version posted 19 September, 2011. 

The game is up. The 2007-9 private banking crisis that started with the unpayable debts of the US sub-prime sector, was never over. The crisis has now moved on to include the unpayable debts of sovereigns owed to private European bankers. It is increasingly clear that there is declining political and institutional support for further private bank bailouts. The dramatic resignation on Friday 9th September of Jürgen Stark, architect of Europe’s equivalent of the Gold Standard – the Growth and Stability Pact – marks an important step in the resistance to bailouts by the ECB; in the inevitable collapse of the Maastricht Pact, and with it, the utopian vision of the neoliberal Euro.

And so the age of liberalised, de-regulated finance appears to be over – at least in Europe. That is the conclusion of investors in both Wall St and the City of London and explains the collapse of confidence in banks and the volatility of stock markets as investors rush for the exits, transferring speculative gains into the safety of government bonds.

Continue reading… ›

Argentina/Greece: De-fault lines?

So, five of the world’s biggest central banks have decided on co-ordinated action to bail out – once again – the European private banking sector. In other words, central bankers are hoping to shore up private bankers, help their defer their losses, and prevent them being disciplined by market forces for their reckless lending to EU sovereigns.

Shareholders and investors in these banks must be delighted. Once again, reckless speculation and lending has paid off. Once again the world’s taxpayers have ridden to the rescue.

Continue reading… ›

From Adelaide, Australia

I am staying with my hostess in an old homestead like this one in North Adelaide….

31st August, 2011. G’day from sunny Adelaide. I am here on a short lecture tour organised by the Search Foundation, and supported by the Don Dunstan Foundation,  Catalyst , the think-tank in Sydney, as well as trades unions in Melbourne, Brisbane, Canberra and Sidney.

It’s an interesting time in Australian politics, not only at national level with the controversy around the new carbon tax, and yet another political sex scandal….but also  here in Adelaide, the home state of Don Dunstan, progressive Labour Premier from 1967-79. Dissatisfaction with the current Labour leadership has forced the resignation of Mike Rann, the premier. And today, the Australian Supreme Court has ruled illegal the government policy of deporting refugees to Malaysia…..So interesting times…

But arriving at Adelaide airport, and standing in the slow and long passort queue, more than a little dazed after the long flight from London, I was confronted directly with the crisis back in Europe. There was only one customs official clearing our long queue, and so it moved very slowly….Next to me were a couple with two restless kids, so I handed over my phone and offered to teach them how to play my favourite game: “Angry Birds”. (Although to be honest the reason I really love it is for the sound effects and those had to be turned down in the queue….)  We soon got chatting, and it turned out that they were a family from Ireland. Mum and Dad, they told me with shock written all over their faces, had both lost their jobs in the past few months. Four years ago, they raised a mortgage and built their own home. Now they have abandoned both their home and their families to start a new life in this strange city. The father had found a job, and they had rented a home somewhere in Adelaide – they had no idea where and hoped that the Satnav on the hired car would get them there. They know no-one in this city, and the pain of leaving behind her family was etched in the face of the mother…The teenage daughter looked sulky, and the younger boy grumpy….There was clear anxiety in the father’s face. And incredulity as they discussed the way that private Irish bankers are being bailed out, while they are obliged to pay the cost of the crisis….I wished them well, and hoped that Australians would welcome them….

It’s a bad old world….but great to be among Australians determined to do something about transforming it.

Bankers: draining funds from taxpayers courtesy of finance ministers

Irish Finance Minister Noonan and Luxembourg Treasury Minister Frieden attend an EU finance ministers meeting in Brussels. Image source: www.reuters.com

I find it hard to write about the crisis in Greece….because the tragedy unfolding there is so reminiscent of the tragedies that unfolded in Africa, Latin America and South East Asia in the 80s and 90s – and I was very close to those. Seeing the same economic mismanagement replicated in well-armed Europe is scary. Watching as tensions rise between the peoples of Europe…given our bloody history….is frightening.  So I have been silenced by rage.

But my outrage boiled over today, because of what the FT wrongly calls a ‘subtle’ change unveiled by EU finance ministers to the terms of the massive Eurozone bailout fund – a fund backed by European taxpayers. This is how the FT explains it:

Any bonds issued in future by the eurozone’s new €500bn rescue fund on behalf of Ireland, Greece or Portugal will not enjoy “preferred creditor status” – an alteration to the fund intended to help those nations return more swiftly to private capital markets.

For those who do not dabble much in sovereign debt, let me explain. Common to the whole of the international financial architecture/system for sovereign lending, there is one principle that overrides all others. That the IMF/World Bank are ‘preferred creditors’. Just as when a company goes bankrupt, the supplier that sold it widgets, is ranked lower than the bank that provided the overdraft – so in international ‘law’ – taxpayer-backed lending from the IMF and World Bank is ‘preferred’ when it comes to repayment – over all private commercial lending. And it is preferred because it is public money.

Continue reading… ›

Does Greece have a Tea Party?

26th April, 2010

Dear readers….this is my latest Huffington Post.

“The humiliating surrender of Greece’s economic autonomy came just last Friday, 23 April, 2010. The democratically elected Prime Minister, George Papandreou transferred to unelected officials in Brussels and Washington the power to determine Greece’s fiscal policy. In other words, decisions about taxation, and how tax revenues should be spent.

In a 26 April interview with the Financial Times on the island of Rhodes, the Prime Minister, George Papandreou admitted his country had accepted “a partial surrender of sovereignty”.
“Our struggle” he went on to say, “will be to recover our autonomy and liberate Greece from the surveillance imposed by the forces of conservatism”.

Back in 1765 Bostonians such as James Otis and Samuel Adams regarded “taxation without representation as a form of tyranny”.

Today, a nation that served as the cradle of western democracy will effectively be governed by remote, invisible and unaccountable officials. Continue reading… ›