Friday, June 29, 2012

Greg Palast: The Euro As An Instrument Of Class Warfare

The indomitable Greg Palast, an American with a seemingly steady job at The Guardian, explains how economist Robert Mundell, formerly of the University of Chicago and now of Columbia University, inventor of the concept of supply-side economics, pushed the creation of the euro as a way of obstructing nations inclined to use Keynesian methods to combat recession. Palast quotes Mundell:

"It's very hard to fire workers in Europe," he complained. His answer: the euro.

The euro would really do its work when crises hit, Mundell explained. Removing a government's control over currency would prevent nasty little elected officials from using Keynesian monetary and fiscal juice to pull a nation out of recession.

"It puts monetary policy out of the reach of politicians," he said. "[And] without fiscal policy, the only way nations can keep jobs is by the competitive reduction of rules on business.

He cited labor laws, environmental regulations and, of course, taxes. All would be flushed away by the euro. Democracy would not be allowed to interfere with the marketplace – or the plumbing.

(You can safely ignore the remark about the plumbing, or read Palast to find out why plumbing is an issue to union-hating Mundell.) More on the euro and Mundell:

Mundell explained to me that, in fact, the euro is of a piece with Reaganomics:

"Monetary discipline forces fiscal discipline on the politicians as well."

And when crises arise, economically disarmed nations have little to do but wipe away government regulations wholesale, privatize state industries en masse, slash taxes and send the European welfare state down the drain.
In other words, power is centralized in Europe's wealthiest nations, and the rest (Greece, Spain, Ireland, etc.) can do little within the confines of the euro to avoid austerity programs, ineffective though they may be, forced upon them by the banksters of the euro. A nation without its own currency can find its back to the wall and no effective response. And this, according to Palast, is exactly what Robert Mundell intended the euro to accomplish. How about that... a real live conspiracy that may be more than just a theory!

Of course, Palast predicted that the 2008 US presidential election would be stolen by the GOP, so his record is not perfect... or is it? Did Republicans allow Obama to win as a kind of scapegoat, after whom the nation would elect an effectively permanent Republican majority? But that's another conspiracy theory (although one which IMHO deserves serious consideration), and we will have to deal with that possibility later.

(H/T Michael Moore , with the usual reservations about linking to his front page.)

ADDED: Thanks to L'Enfant de la Haute Mer, in comments on this post, for pointing us to David Dayen's post on FDL about two weeks ago. Dayen writes about Iceland's experience, how it dealt with mortgage debt, how the fact that it has its own currency (the krona, not the euro) made all the difference in its ability to cope. Dayen:

But there’s another major reason that Iceland has fared better than its neighbors, one I didn’t get to talk about on the show. Iceland wasn’t in the euro. As a result, they had the ability to manage their own currency. And they predictably and smartly dropped the currency in value. Right now, the krona sits 20% below the euro, even as the euro has plummeted lately. And that makes Icelandic exports competitive, which includes tourism. They have not had to live with another country’s monetary policy.

His point, which is much like Palast's, is summarized in his post's title: "Iceland’s Lesson for the World: Control Your Own Currency and Help Your People".


  1. Steve,

    You have certainly read this; my comment is mainly intended for your readers..

    Iceland’s Lesson for the World: Control Your Own Currency and Help Your People

  2. Enfant... how could I have forgotten David Dayen's article, which is exactly to the point! Thanks for the reminder; I have amended this post accordingly.

  3. European Crisis Bolsters Illegal Sales of Body Parts:

    ".. With Europe roiled by financial upheaval, experts say that the black market for human organs — traditionally based in China, India, Brazil and the Philippines — is expanding to crisis-hit Western countries like Greece, Spain, Italy, and poor Balkan nations like Serbia. Vulnerable, desperately poor people are seeking to sell their kidneys, lungs, bone marrow or corneas, abetted by the Internet, unscrupulous organ traffickers and a global shortage of organs for transplantation.
    In heavily indebted Greece, a 46-year-old businessman from Piraeus recently said that the only way to save his family from ending up on the streets was to sell a kidney for €100,000, or $123,000. He told the Greek media that he had even hired a private investigator to help him find a buyer. ."

  4. Hmm, I wonder if Dick Cheney's recent transplant was from the black market.

    When the gossip mongers said "Watch out for Dick Cheney; he'll steal your heart," perhaps they weren't referring to his prowess at seduction!

  5. The Los Angeles-class attack submarine USS Annapolis (SSN 760) gets underway from Souda harbour (Crete, Greece)following a port visit. (U.S. Navy photo by Paul Farley/Released)

  6. The United States informed Greece that they will probably make use of aeronautical facilities base in Souda (Crete, Greece) during the next few weeks, regarding the "humanitarian crisis in Syria." The briefing took place at a service level while the official request to Athens will be submitted later, in a clear indication that military operations in the Eastern Mediterranean might be launched.



  8. Enfant - great; just great... another US presidential election, another war. The "tradition" goes back at least to Richard Nixon, who delayed the possible end of the Vietnam War until after his re-election so he could use it as leverage in the election. Americans rally around their president in wartime, however much a stupid fool that president may be.

    I have to note the irony of calling a military mission in Syria at the moment as a "humanitarian" effort... well, I suppose it's humans who are being killed and humans yet to be killed...

  9. We say(perhaps, you too): If elections could change things, they’d be illegal..

    Despite this we move to vote!

  10. Enfant, that's a good one; yes, I've heard it here as well!

    We also say (especially after Citizens United) we have the best politicians money can buy!

  11. Steve,

    "... It costs cheaper to buy politician than a mule.."
    Sam Zemurray

    (see my post on Banana Republic):

  12. Enfant - very informative post; thanks!



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