Prison of Nations

Riots swept across Eastern Europe this winter. In Latvia, 100 were arrested when they attacked the Finance Ministry with cobblestones from the quaintly restored tourist area protesting unemployment, budget and wage cuts. In Lithuania, riot police fired rubber bullets and tear gas on a trade union march. A demonstration in the Bulgarian capital turned violent leading to the arrest of 150 protesters. These three states are all members of the Exchange Rate Mechanism (ERM2), the euro’s pre-detention cell. They must join.

The IMF calls for devaluation of the currencies of these “economies”, which are not really economies at all after their deindustrialization over the past two decades, but the euro-agreements prevent this. And even if they could do the IMF number, their huge mortgage debts contracted in euros and Swiss francs over the past decade would still be unrepayable.

Latvia’s government was trying to comply with IMF-imposed measures to qualify for an emergency loan, much like Argentina in 2001, when brutal cuts to education and social programs sparked a general strike and radicalized the entire nation (except, or course, those responsible for the crisis). The riots in Lativa brought the government down and its credit rating was just lowered to junk status.

It’s no better inside euroland. Q: What’s the difference between Ireland and Iceland ? A1: The letter “c”. A2: Six months.

We haven’t even mentioned Greece, which is already considered a failed state, virtually in a state of civil war since last September. And now the very pillars of the European Union are crumbling. In January, hundreds of thousands marched in French cities in the biggest protest in two decades. An ongoing month-long strike in France’s far-flung Guadeloupe is now full-scale urban warfare, with the dead including a trade union leader. The ruling white elite and tourists are at this very moment fleeing in panic. Martinique and Reunion have joined in.

In Britain demos are breaking out across the country protesting unemployment and the bank bailouts. The British National Party shocked the establishment by winning a council seat in Kent, “penetrating” the south of England, and are expecting major gains in the EU elections in June. Spain lost a million jobs in 2008 and the unemployment rate is expected to reach 25 percent this year. Spain’s (and Ireland’s) so-called wage inflation now requires wage deflation, workers are told. With Spain’s high debt levels, this is impossible. Even if it were possible, wage deflation is a recipe for revolution.

Marches protesting the economic plight of the people are expected to grow and lead to further violence throughout Europe, with Greece as the prequel. Suddenly, the specter of the end of the EU, certainly the end of the common currency, is being raised. Coined to convince the “free world” of the dangers of Communism, the domino effect is back with a vengeance.

The string pullers over the past two decades managed to transform the face of Europe, destroying the Soviet Union and expanding the EU and NATO rapidly eastward. But just as Napoleon and Hitler before them, the over-confident conquerors moved too far too fast, and now face the prospect of losing everything. The marvel of the euro zone is now derided as the Völker-Kerker (prison of nations) recalling the Austro-Hungarian Empire. Italian journalists have begun to talk of Europe’s “Tequila Crisis,” referring to the collapse of Mexico’s peso in 1993 when the elite took their money to the US. A similar capital flight from Club Med could set off an unstoppable process and even bring the euro down.

What is the euro, except a fixed exchange rate agreement among members? Skeptics have always dismissed it as a dangerous straightjacket, since Europe is far from uniform. It means national governments are highly restricted in their monetary and fiscal policies to deal with crises. It also means that ripples in Europe become tidal waves, as all the countries’ economic successes or failures happen together.

This is fine if governments are united in pursuing a common agenda to promote stability and prosperity for the common Europeans, but neoliberalism allows for no such political will. The common economic space has merely allowed large companies and banks to take control of the whole market, supposedly to be equal competitors to their big brothers in the US, China and elsewhere. But riding the wave of privatization and euro-expansion, they threw caution to the winds, with no strong national governments to clip their wings. The EU “government” is exposed as worse than useless, a rubber stamp for this Thatcherite mania, fooling Europeans into thinking there was someone controlling the private chaos.

As the euro begins to slide against the worthless dollar (that’s right), no one is seriously preparing for the possibility of its immanent collapse and what to do about it. Instead, incredibly, a Financial Times columnist calls on the EU to drop its euro-entry requirements for the “economies” of eastern Europe and quickly shepherd them into the “safe” euro-fold. Just as mad as this strategy may seem is the one presently being implemented: to pump endless cash into the banks that have recklessly moved into this economic wasteland.

It is vital to keep the edifice afloat, after all. Virtually all of Eastern Europe is in hock to Western banks and as they go bankrupt, or for the “lucky” ones, their exchange rates plummet with respect to the euro, they represent bargain-basement fire sales for the West. The Polish zloty plunged 50 percent in the past six months, making it impossible to repay the countless euro-Swiss loans contracted by unwitting Poles, lured by low interest rates.

The banks have lent Eastern Europe about $1.7 trillion, since “independence” and this must be saved from disappearing at all costs. The currently proposed $31 billion to be pumped into the banks is peanuts — as long as national governments (that is, the people) pay it, of course.

If the steely-nerved bankers can stay the course, the pay-off is potentially immense. Lured into euro-clutches, these orphan nations can now be squeezed. Integration with a vengeance, on a par with their WWII and post-WWII occupations. At least under post-WWII socialism (which many Eastern Europeans remember fondly), the common people were provided for and the ruling party’s privileges circumscribed. But if today’s unsupervised elites keep sending their money abroad, the pit becomes bottomless. Riots turn into revolutions.

France will no doubt lead the way. Students occupied the Sorbonne recently in a long-running battle against President Nicolas Sarkozy’s education reforms, supported by 70 percent of the population. French radical politicians Jose Bove and the popular New Anti-Capitalist Party leader Olivier Besancenot have already traveled to Guadeloupe in solidarity with the strikers. “Their fight is our fight — against capitalism, exploitation, the big supermarkets,” exhorted a newly radicalized Bastille district activist.

Sarkozy’s popularity is at its lowest at 36 percent, with a similar number of French saying they would welcome strikes “on a huge scale.” The pollster Dabi said, “There is a sense of incoherence and a sense that Sarkozy does not really know where he is taking France. But that’s largely because there is an incoherence and Sarkozy doesn’t know here he is taking France.”

The same can surely be said of all Western leaders these days. United States President Barack Obama has it easy. He at least has a clear agenda to tear up — the Reagan-Bush one. But the only common policy of Western leaders so far is one dictated by the banking elite: “Bail us out, but leave us alone.” If anything, they are demanding coordinated bailing out and calling for a new international banking institution, which of course they will control, and which, we are supposed to believe, will avert any further unpleasantness. Such an institution may well act to avert capitalism’s collapse, but there will be lots of “unpleasantness”, evenly distributed among the common people.

The sunny euro-vistas of yesterday are no longer. Eastern Europe risks being eaten alive by Western banks. Western Europe risks mere stagnation and endless political unrest. All indications are that this is a dead-end; that the only way forward is to break the hold that the economic system has on both East and West. The upheavals have begun and the real domino effect will spread throughout Europe this summer. That the European parliament elections in June will take place in a hostile atmosphere is an understatement.

Using a crisis to push through unpopular measures doesn’t work anymore, as Greek and Latvian politicians have discovered. The streets are already ringing with the cry: “We won’t pay for your crisis!”

Eric Walberg is a journalist who worked in Uzbekistan and is now writing for Al-Ahram Weekly in Cairo. He is the author of From Postmodernism to Postsecularism and Postmodern Imperialism. His most recent book is Islamic Resistance to Imperialism. Read other articles by Eric, or visit Eric's website.

4 comments on this article so far ...

Comments RSS feed

  1. Michael Kenny said on March 4th, 2009 at 1:36pm #

    Oh dear! The EU is blowing up again! About time too! It hasn’t happened for nearly a week! The comforting thing about this rant is that it almost entirely fiction!
    Riots have not swept across Eastern Europe this winter, nobody but Mr Walberg considers Greece a failed state, Ireland is not in anything like Iceland’s position and the pillars of the European Union are not crumbling. The French march in the street every other week and what happens in overseas territories is more likely to make them seek independence that to affect the EU. The British press has made no mention of all this wave of demonstrations, but then who would trust a journalist nowadays? Nobody, except the US hegemonists and their supporters (dream on, baby!) are raising the specter of the end of the EU or the Euro. Nobody is talking about “Völkerwhatevers” or “Tequila Sunsets”. To be fair to Mr Walberg, I’m not aware of any preparations to save the Euro from immanent collapse, but that may well be because there is no sign of it being in danger of immanent collapse! As for East Europeans fondly remembering communism (they would have given anything for it to have been socialism!), that may be true of some old people, but if you mention communism to the young in those countries, they laugh into your face essentially because the common people had to endure miserable pay, miserable working conditions, miserable health care, miserable housing, miserable public transport and miserable everything else while, and so that, the party fat cats could live high on the hog and never answer to anyone. Which may well be why Mr Walberg has no plans to live in a communist state himself! (And yes, yes, it does sound like the US, doesn’t it!). Communism is not going to revive in Eastern Europe quite simply because the people who control the future, the young, will not accept it. Incidentally, banks have not just been bailed out in Europe, they have been effectively nationalised and I doubt if, in practice, they will ever go back to the bad old ways. Mr Walberg didn’t mention that, but it would have defeated the purpose of his article, wouldn’t it?
    So we have gone from straight-faced citation of far-right newspapers, to pseudo-interviews with emerging market gurus and ex-communists who don’t say what they were supposed to and now this hysterical rant. In the next exciting episode, a herd of rampaging elephants will bear down on the EU and trample it into dust. Stay tuned, folks!

  2. Marcos Stacks said on March 4th, 2009 at 3:03pm #

    Coming soon…

    As for Westerners fondly remembering Capitalism (they would have given anything for it to have been libertarianism!), that may be true of some old people, but if you mention Capitalism to the young in these countries they laugh in your face. Essentially because the common people had to endure miserable pay, miserable working conditions, miserable health care, miserable housing, miserable public transport and miserable everything else while the corporate fat cats could live high on the hog and never answer to anyone. Capitalism is not going to revive in Western Europe quite simply because the people who control the future, the young, will not accept it. Incidentally, banks have not just been bailed out in Europe, they have been effectively nationalized and I doubt if, in practice, they will ever go back to the bad old ways. Mr Kenney didn’t mention that, but it would have defeated the purpose of his comment, wouldn’t it?

  3. Mulga Mumblebrain said on March 4th, 2009 at 7:01pm #

    The crisis of market capitalism is terminal, for many reasons. The psychopathic greed of the kleptocrats has bankrupted entire countries, where the political elites, employed by the rich elites, see their duty not to the populace, the ‘losers’ in our Brave New World Depression, but to the financial interests who pay their campaign bills. After decades of elite graft and rent-seeking, the trillions of proceeds from which are securely stashed in off-shore tax-havens, during which time global inequality soared as high-paying manufacturing jobs were ‘off-shored’ to low-wage sweat-shop states, we reached a paroxysm of elite malfeasance. The last few years of parasite class financial cupidity, driven by literally insatiable greed, set the scene for the current implosion. Although scores of academic economists, economic historians and disinterested laymen had warned of the instability of ever escalating debt and financial manipulations, and even Warren Buffet expressed the view that derivatives were a time-bomb, the Right is now feigning surprise at developments. Naturally their remedy is more of the same, more debt, more money poured into the financial black-hole, to pop up later in tax-havens, awaiting opportunities to buy up insolvent rivals, other concerns in the economy at large and entire countries. The trillions used to pay-off the ‘too big to fail’ bankster gangs will be used to consolidate financial power. Moreover the stratospheric public debts will require a mass privatisation of state assets, to be bought up by..guess who? Public money used to bail-out crooks who then use it to buy up the privatised state. That is ‘nationalisation’ only in Orwellian terms. As could have been confidently predicted this crisis is being used, in pure ‘disaster capitalism’ style, to facilitate the neo-feudal market capitalist project, to consolidate elite rule and dominance, and public impotence. The Rightwing regimes in power virtually everywhere are complicit-they know who the real masters are. The perils of climate change, Peak Oil, the disappearance of potable water in many regions, neo-colonial wars in Palestine, Iraq, Afghanistan and the Congo, and ongoing US subversion of every regime not a completely subservient stooge, are all unaddressed. Any return to ‘normal’ conditions implies yet more asset bubbles, yet deeper indebtedness for the proles and oil prices above the $147 a barrel that helped trigger this meltdown. Yet the parasitic elites are so obsessed, so fanatically single-minded, and so psychopathologically unable to acknowledge these disasters, and the suffering they will, and do already, inflict on billions, they seem completely unconcerned. If one makes the not unremarkable leap in thinking to see this indifference as not brainless, but deliberate, a truly sinister scenario comes readily to mind. A global elite that are concentrating most of the planet’s wealth in as few hands as possible, and possessing technological means of great power to sustain production, really do not require vast populations of immiserated poor, who do not ‘pull their weight’ in consumption. And their numbers and poverty induced suffering remain a constant threat to the peace of mind of the self-satisfied overlords. Their permanent removal by pestilence, famine, war and climate change induced disaster would suit the global elite marvellously. So revolt from beneath becomes a matter of life and death, the only means to avert a global crime, or series of crimes, of truly cosmic proportions.

  4. Ron Horn said on March 5th, 2009 at 11:33am #

    Mulga…you have a very insightful mumblebrain! I’m sorry to add to your pessimism, but we must face reality–I really think that homo sapiens will go the way of the dinosaurs. They were a marvelous experiment in nature. To have a creature that was a sentient being that was aware of its own existence and with a marvelous brain to shape their environments in such creative ways was unprecedented. Unfortunately the experiment is not working out well. This creature has a self-centeredness that is proving to be its downfall. It destroys its fellow creatures and its very habitat to satisfy motives of greed and selfishness. It’s a shame it didn’t work out. They had such promise, such dreams, aspirations, and ideals.