The euro crisis that began ten years ago has long been portrayed as the result of a conflict between the thrifty north and the wasteful south. The cause of that crisis was actually a class war that significantly weakened Europe, including its capitalists, compared to the United States and China. Worse, the European Union's response to the pandemic, including the European recovery fund under consideration, will further deepen this class conflict and deal another severe blow to the European socio-economic model.
If we've learned anything useful in the past decades, it's that focusing on the economy of any single country is pointless. Once upon a time, when money traveled from one country to another primarily to finance trade, and consumption was mostly directed to the benefit of domestic producers, the strengths and weaknesses of national economies could be assessed individually. But it's not like that anymore. Today, for example, the weaknesses of the economies of China or Germany are directly related to the state of the economies of the USA and Greece.
Relaxation in the financial sector in the early 80s, after the abolition of capital controls established in Bretton Woods, enabled the financing of huge trade deficits with rivers of privately produced money and the use of instruments of financial engineering. By turning the trade surplus into a gigantic deficit, the United States actually consolidated its hegemonic status. Imports to the United States, which today are the main generator of global demand, are financed by the inflow of foreign countries' profits, which they direct to Wall Street.
That unusual money recycling process is de facto managed by the central bank - the US Fed. Maintaining that impressive creation - a permanently unbalanced global system - requires a constant intensification of class war, both in deficit countries and in surplus countries.
All deficit countries resemble each other in one important way: whether they are as strong as the United States or as weak as Greece, they are forced to continue producing new debt bubbles while their workers watch helplessly as former industrial plants turn into scrap metal. When debt bubbles burst, workers from the Midwest or the Peloponnese are forced to accept an even deeper descent into debt slavery and a further decline in living standards.
In the surplus countries there is also a class war against the workers, but these countries can differ significantly. Let's compare China and Germany. Both countries record large trade surpluses compared to the United States or the rest of Europe. And both limit the growth of workers' income and assets. The difference is that China manages to maintain a high level of investment thanks to the internal debt bubble, while German corporations invest significantly less and rely primarily on borrowing from the rest of the Eurozone.
The euro crisis was not the result of a conflict between Germany and Greece (or North and South). The crisis is, in fact, the result of the intensification of the class war within Germany and Greece by the action of an oligarchy-without-borders that lives on international money flows.
For example, when the Greek state went bankrupt in 2010, austerity measures imposed on most of the population limited investment in Greece. The same thing happened in Germany due to an indirect restriction on wage growth, while the European Central Bank was printing money during that time and thus driving share prices into the stratosphere (along with bonuses for managers).
The class war in China and the US is probably more brutal than in Europe. But the absence of a political union in Europe makes the class war practically meaningless, even from the position of the capitalists.
It is not difficult to find evidence that German capitalists have already squandered the wealth they extracted from the working class of the European Union. The euro crisis caused a major drop in the value of surpluses accumulated by the German private sector by a full 1999 percent since 7, as owners of capital had nothing to do with their trillions except lend them to foreigners whose subsequent economic problems produced losses.
It's not just a German problem. The same disease affects other EU countries with surpluses. The German daily Handelsblatt recently pointed out an interesting twist. While in 2007 European corporations earned about 100 billion euros more than corporations in America, in 2019 that relationship reversed.
Moreover, this trend is accelerating. During 2019, the earnings of companies in the USA grew 50 percent faster than in Europe. It is also expected that in 2020, the revenues of companies in America will suffer a smaller decline due to the consequences of the pandemic recession, about 20 percent in America and about 33 percent in Europe.
The crux of Europe's problem is that even though it is an economy in surplus, its fragmentation makes it impossible to turn the loss of income of German and Greek workers into a sustainable profit for European capitalists. In short, behind the story of northern thrift are the specters of the trickle-down inflows from exploitation. Claims that Covid-19 has forced the EU to put its house in order are completely unfounded. The silent death of the idea of sharing the European debt guarantees that a large jump in national budget deficits will be followed by a corresponding strengthening of austerity measures in all member countries. In other words, the class war that has already destroyed the incomes of many people will only intensify. "But what about the proposed 750 million euro recovery fund?" someone will ask. "Isn't the agreement on joint issuance of debt a significant development?"
And yes and no. Common debt instruments are a necessary but not sufficient condition for easing the raging class war. To have truly progressive effects, joint borrowing would have to be used to finance weaker households and businesses in the single economic zone: both in Germany and in Greece. It would have to happen automatically, without relying on the kindness of local oligarchs. An automated recycling system is needed that directs the surplus to those in deficit, in any city, region or country. In the US, for example, food stamps and welfare are used to help the needy in California and Missouri alike, although the net transfer is from California to Missouri - without the involvement of governors or local bureaucrats.
On the other hand, fixed allocations in the EU's recovery fund push states into conflict as fixed amounts paid to Italy or Greece are shown as taxes paid by the German working class. Also, the idea is to pay the funds to national governments, effectively leaving distribution to local oligarchs.
Strengthening the solidarity of European oligarchs is not a good strategy for strengthening the majority in Europe. On the contrary. With an eventual "recovery" based on such a formula, almost all Europeans will remain deprived and the majority will end up in even greater despair.
(Project Syndicate; Peščanik.net; translation: Đ. Tomić)
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