The “socialist” and the “democratic” sides of this utopian vision are heading for a collision

Recently came across Janet Daley, a political columnist in the Daily Telegraph, writing on the impasse in Europe.   Good stuff.  Will have to check out her writing on other topics.

Spain is in ‘total emergency’, the EU is in total denial (June 2)

This is the heart of the irreconcilable contradiction on which the euro is being broken. As everyone has been saying, in order to be viable in the face of market pressures, a genuine currency (as opposed to a pretend one) must have a “lender of last resort” – a true central bank like the US Federal Reserve System. But this is impossible within the EU because the constitutions of member states are not compatible with each other or with the principle of underwriting debt across national boundaries (as the states of the US are under their genuinely federal system). So, either the existing democratic institutions and historical principles of all EU countries must be forcibly reconciled in a Year Zero political reconstruction, or there can never be a monetary union (let alone fiscal union) that will be sustainable. This is where we are.

What would such a reconstructed political entity look like (assuming that someone in the delusional European political class should think of trying it)? Presumably it would involve wealth redistribution on an epic scale – since the most urgent problem to be remedied is the disparity between the poor, indebted states and the rich, thrifty ones. Fiscal transfers (meaning Germany pays for everybody) would be an accepted, perhaps automatic, mechanism, thus creating more or less permanent dependency of the less productive on the more productive. We have grown accustomed in Britain to this form of cross-subsidy, in which wealth produced in the South East is channelled to the North. Even within one country with a shared identity and linguistic culture, it breeds some resentment and resistance.

Applied across the boundaries of nations whose peoples have profoundly different historical experiences and social attitudes – and whose democratic institutions have been shaped by their collective memories – it would be incendiary. And it is worth saying that there is nothing invidious in this. For Germans to refuse to bend in the face of shrill demands to (as they see it) debauch the currency is a sign of conscience: an unwillingness to forget the shame and criminality into which such a process led them in the last century. It is ironic that Germany itself was one of the great drivers of economic union, and specifically of the democratic socialist model in which “the rich nations help the poor ones” as José Manuel Barroso (who seems less and less capable of remaining in touch with reality) likes to put it.

Now the “socialist” and the “democratic” sides of this utopian vision are heading for a collision: the EU can embrace wealth-redistribution wholeheartedly – with the full works of a central bank, fiscal uniformity and no nonsense about the will of the people – or it can accept the separate, and morally defensible, differences between its member states which will mean thinking seriously about other options than browbeating Germany. Generally, when given a choice, Europe ditches the democracy and keeps the socialism – so I wouldn’t get your hopes up.

Europe finally awakes from its utopian dream (May 19)

(T)his is not just a story of bureaucratic grandiosity, or of German insistence on domination. Certainly it is true that there is an irreconcilable cultural clash between the more puritanical North and the, shall we say, more indulgent South. It turns out that Marx was wrong about economic conditions determining political behaviour: a nation’s religion and geography are much more likely to affect its economic attitudes than the other way round. But it is not the dream of European co-operation that was doomed from the start: given the ancient hatreds and unforgivable sins of the past, that was difficult, but it was not impossible. What has made the project unworkable is the insistence that the EU be a vehicle for democratic socialism: the impossible dream was not European unity but universal “social solidarity” stretching across a continent, for which the single market was simply a milch cow to produce the funds.

Unfeasibly enormous social security and entitlement promises were made on the basis that the free market would always provide. Nobody bothered to ask what would happen when the market faltered or fluctuated (as genuinely free markets do) or when the sense of entitlement outgrew the wealth that could be created. The problem is not unique to Europe. They are facing the same question in the US, where benefits programmes – particularly social security (the US federal pensions system) and Medicare – have become as untouchable, and as financially unsustainable, as they are here.

How long will freedom survive in the face of mass rage at the loss of the economic security that has come to be seen as a basic human right? People were told that they could have lifelong protection from want without any restrictions on their liberty or their economic self-determination. So now the cake has been well and truly eaten and had. The EU is going to have to admit sooner or later that this fantasy has run its course.

This entry was posted in Foreign Affairs, Politics. Bookmark the permalink.

One Response to The “socialist” and the “democratic” sides of this utopian vision are heading for a collision

  1. Paul Marks says:

    The boom-bust events are nothing to do with a free market – they are the result of credit-money expansion. However, the governments of the West (not just most of Europe – but the United States also) were depending on the profits of the “finance economy” to finance their Welfare States with (partly by taxation, partly by low interest rate deficit finance). However, this “finance economy” is not solid – it must vanish like the smoke it is.

    Governments are then without sufficient funds to finance their Welfare States – but they can not just allow them to go (vast numbers of human beings have been made dependent upon them – over DECADES). So they desperately try and “save the financial system” with endless bailouts (again and again) financed by Central Banks (the Federal Reserve , the European Central Bank, the Bank of England) with money they create from NOTHING.

    However, the “financial system” or “finance economy” can not be saved – no matter how many bailouts it gets, But the elite will not (can not?) accept this – each time they demand a bailout, forgetting all the previous failed bailouts. The official “free market” types are no better than the official statists. For eample, N. Ferguson has his name in the (rabidly statist) “Financial Times” this week argueing for yet more bailouts (both of banks and of governments) “the Chancellor of Germany must act” – as if this lady had not already agreed to many bailouts and was agreeing to yet another one.

    Of course Ferguson is no economist (and even his historical work should have warned people – a real supporter of rolling back statism would hardly be a Frederick the Great fan, which Ferguson is, as Frederick was the arch statist of his age – and an inspriation for later statists such as Bismark, T. Roosevelt and Woodrow Wilson), but the official “free market” economists are no better – I am afraid that the Chicago School is (on monetary policy) rotten to the core, supportive of ever more bailouts and “demand” (read credit bubble creation).

    What is the solution?

    There is no solution.

    The “financial system / finance economy” CAN NOT be saved.

    But (I repeat) the elite will not (or can not) accept that – they will not accept that objective reality limits their will to power.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s