The crisis in Crimea could lead the World into a second Cold War

a13-iconDmitri Trenin writes: In Moscow, there is a growing fatigue with the west, with the EU and the United States. Their role in Ukraine is believed to be particularly obnoxious: imposing on Ukraine a choice between the EU and Russia that it could not afford; supporting the opposition against an elected government; turning a blind eye to right-wing radical descendants of wartime Nazi collaborators; siding with the opposition to pressure the government into submission; finally, condoning an unconstitutional regime change. The Kremlin is yet again convinced of the truth of the famous maxim of Alexander III, that Russia has only two friends in the world, its army and its navy. Both now defend its interests in Crimea.

The Crimea crisis will not pass soon. Kiev is unlikely to agree to Crimea’s secession, even if backed by clear popular will: this would be discounted because of the “foreign occupation” of the peninsula. The crisis is also expanding to include other players, notably the United States. So far, there has been no military confrontation between Russian and Ukrainian forces, but if they clash, this will not be a repeat of the five-day war in the South Caucasus, as in 2008. The conflict will be longer and bloodier, with security in Europe put at its highest risk in a quarter century.

Even if there is no war, the Crimea crisis is likely to alter fundamentally relations between Russia and the west and lead to changes in the global power balance, with Russia now in open competition with the United States and the European Union in the new eastern Europe. If this happens, a second round of the cold war may ensue as a punishment for leaving many issues unsolved – such as Ukraine’s internal cohesion, the special position of Crimea, or the situation of Russian ethnics in the newly independent states; but, above all, leaving unresolved Russia’s integration within the Euro-Atlantic community. Russia will no doubt pay a high price for its apparent decision to “defend its own” and “put things right”, but others will have to pay their share, too.

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Baltic states at risk if West doesn’t act says Estonian lawmaker

n13-iconThe Wall Street Journal reports: An Estonian member of European Parliament said on Sunday the three Baltic states may be vulnerable if the international community doesn’t put adequate pressure on Russian President Vladimir Putin to remove troops from the Crimean peninsula.

“This is a critical point in European history,” Tunne Kelam said during an interview on the sidelines of a peaceful protest against Russia here. “If [the West] submits to this situation and accepts the occupation of Crimea or East Ukraine, anything could happen. This is a definite danger also for the Baltic states.”

The three Baltic nations—Estonia, Lithuania and Latvia—were part of the former Soviet Union and have moved toward the European Community since gaining independence. All three are members of the European Union and Estonia and Latvia are participating in the bloc’s common currency.

Mr. Kelam said that in recent years Russia has been practicing tactical military maneuvers and the “intent of these has been to practice invading neighboring countries to protect fellow Russians.” [Continue reading...]

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Ukraine crisis: Why it matters to the world economy

a13-iconCNN reports: While the world watches the escalating crisis in Ukraine, investors and world leaders are considering how the instability could roil the global economy.

The political turmoil is rooted in the country’s strategic economic position. It is an important conduit between Russia and major European markets, as well as a significant exporter of grain.

But in the post-Soviet era, it’s a weakened economy. Now, the government is in need of an economic rescue — and torn between whether Russia or the Western economies (including the European Union) is the savior it needs.

Here are five reasons the world’s largest economies are watching what happens in Ukraine. [Continue reading...]

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Far right in Eastern Europe makes gains as Syrians arrive

The New York Times reports: After spreading turmoil and desperate refugees across the Middle East, Syria’s brutal civil war has now leaked misery into Europe’s eastern fringe — and put a spring in the step of Angel Bozhinov, a nationalist activist in this Bulgarian border town next to Turkey.

The local leader of Ataka, a pugnacious, far-right party, Mr. Bozhinov lost his seat in the town council at the last municipal elections in 2011 but now sees his fortunes rising thanks to public alarm over an influx of Syrian refugees across the nearby frontier.

Membership of the local branch of Ataka, he said, had surged in recent weeks as “people come up to me in the street and tell me that our party was right.” Ataka, which means attack, champions “Bulgaria for Bulgarians” and has denounced Syrian refugees as terrorists whom Bulgaria, the European Union’s poorest nation, must expel. An Ataka member of Parliament has reviled them as “terrible, despicable primates.”

With populist, anti-immigrant parties gathering momentum across much of Europe, Ataka stands out as a particularly shrill and, its critics say, sinister political force — an example of how easily opportunistic groups can stoke public fears while improving their own fortunes.

The influx of Syrian refugees has sown divisions across the European Union as the refugees add burdens on governments still struggling to emerge from years of recession. But Bulgaria is perhaps the most fragile of all the European Union’s 28 members. Modest as the numbers of refugees are here, the entry of nearly 6,500 Syrians this year has overwhelmed the deeply unpopular coalition government and added a volatile element to the nation’s already unstable politics.

The arrival of the refugees and public fury over the stabbing of a young Bulgarian woman by an Algerian asylum seeker “has opened the floodgates” for far-right nationalists, said Daniel Smilov of the Center for Liberal Strategies, a policy research group in Sofia, the capital. “They see this as their big chance.” [Continue reading...]

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Radicalisation in Syria poses growing threat to Europe, says Turkish president

The Guardian reports: The Syrian nation is dying as an indifferent world looks on, and the territory it occupies risks becoming “Afghanistan on the shores of the Mediterranean”, the Turkish president, Abdullah Gul, has said.

Radicalisation of ordinary people by Islamist jihadist groups was spreading across Syria and posed a growing risk to its neighbours and the countries of Europe, Gul said in an exclusive interview with the Guardian.

But the response of the international community – including Turkey’s American and British allies – to the security, humanitarian and moral challenges posed by the crisis had been “very disappointing”, he said. He reiterated his view that the UN security council’s performance was a “disgrace”.

In a forthright and sometimes angry critique of western policy on Syria, Gul said the deaths of more than 100,000 people, mostly civilians, in fighting over the past 32 months could have been avoided. Turkish mediation efforts early on in the war were not supported and were even undermined by western powers, he complained. [Continue reading...]

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The NSA has harmed transatlantic relations more than any al Qaeda operative could

Josef Joffe writes: “Every good spy story,” my friendly (former) CIA operative told me, “has a beginning, a middle and an end. And so, the snooping on the German chancellor and her European colleagues will surely stop.” He didn’t say: “It won’t resume.” Because it always does in a new guise, perhaps more elegantly and subtly.

For states need to know what other states are up to – friends or foes. Even so-called friends are commercial and diplomatic rivals. Some of our friends deal with our enemies, selling them dual-use technology good for insecticides, but also for nerve gas. Or metallurgical machinery that can churns out tools as well as plutonium spheres.

Let’s take an earlier story. Recall Echelon, the spy scandal that roiled Atlantic waters in the 90s. It was set up by the Five Eyes – the Anglo powers of the United States, Britain, Canada, Australia and New Zealand – to monitor signal traffic in the Warsaw Pact. After the cold war – spies always look for gainful employment – it was turned inward, on the Europeans, to scan satellite-transmitted communications, allegedly for industrial espionage, too.

Was it stopped? Yes, the US handed over its listening station in the town of Bad Aibling to the Germans, but the game never ends. [Continue reading...]

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First detailed genetic history of Europe reveals multiple waves of migration

A new study, published in the journal Nature Communications, provides the first detailed genetic history of Europe.

National Geographic reports: Rather than a single or a few migration events, Europe was occupied several times, in waves, by different groups, from different directions and at different times.

The first modern humans to reach Europe arrived from Africa 35,000 to 40,000 years ago. By about 30,000 years ago, they were widespread throughout the area while their close cousins, the Neanderthals, disappeared. Hardly any of these early hunter-gatherers carried the H haplogroup in their DNA.

About 7,500 years ago during the early Neolithic period, another wave of humans expanded into Europe, this time from the Middle East. They carried in their genes a variant of the H haplogroup, and in their minds knowledge of how to grow and raise crops.

Archeologists call these first Central European farmers the linear pottery culture (LBK) — so named because their pottery often had linear decorations.

The genetic evidence shows that the appearance of the LBK farmers and their unique H haplogroups coincided with a dramatic reduction of the U haplogroup—the dominant haplogroup among the hunter-gatherers living in Europe at that time.

The findings settle a longstanding debate among archaeologists, said Wells, who is also a National Geographic explorer-in-residence.

Archaeology alone can’t determine whether cultural movements — such as a new style of pottery or, in this case, farming—were accompanied by the movements of people, Wells said in an email.

“In this study we show that changes in the European archaeological record are accompanied by genetic changes, suggesting that cultural shifts were accompanied by the migration of people and their DNA.”

The LBK group and its descendants were very successful and spread quickly across Europe. “They became the first pan-European culture, if you like,” Cooper said.

Given their success, it would be natural to assume that members of the LBK culture were significant genetic ancestors of many modern Europeans.

But the team’s genetic analysis revealed a surprise: About 6,500 years ago in the mid-Neolithic, the LBK culture was itself displaced. Their haplogroup H types suddenly became very rare, and they were subsequently replaced by populations bearing a different set of haplogroup H variations. [Continue reading...]

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Europe’s south rises up against those who act as sadistic colonial masters

Costas Douzinas writes: The “new world order” announced at the end of the 1980s was the shortest in history. Protest, riots and uprisings erupted all over the world after the 2008 crisis, leading to the Arab spring, the Indignados and Occupy. A former director of operations at MI6, quoted by Paul Mason, called it “a revolutionary wave, like 1848“. Mason agreed: “There are strong parallels – above all with 1848, and with the wave of discontent that preceded 1914.”

Many on the left have been more circumspect. The philosopher Alain Badiou welcomed the Arab spring but did not think it would lead to a “rebirth of history”. For Slavoj Žižek, 2011 was the “year of dreaming dangerously”. A melancholy of the left descended as the protest wave started receding. But on this occasion the pessimism was premature. Resistance against austerity and injustice is again in the air. In Bulgaria and Slovenia, protesters unseated the government. In Italy, the overwhelming anti-austerity vote has shaken the parties committed to the Berlin orthodoxy. Large marches and rallies in Portugal and Spain have undermined governments and policies and a new push for anti-austerity unity is emerging in Britain. In Greece, the parties that brought the country to its knees and are now administering policies causing the well-documented humanitarian catastrophe and rise of fascism are on the brink of exit.

Finally, the Cypriot government agreed the unprecedented haircut of bank savings but was forced to renege after MPs of all parties under pressure from the public voted against it and ruling party MPs had to abstain. This was the first formal rebuff of austerity, something that the obedient governments of southern Europe had not dared. When the government finally accepted the European blackmail, it presented it as unavoidable and, under instruction from Germany’s foreign minister, Wolfgang Schäuble, refrained from putting it to parliament or the people. The words “democracy” and “referendum” create panic in the corridors of Brussels. But the symbolic value of a small nation rejecting the initial troika blackmail and protecting the savings of ordinary people is immense. The European debate has concentrated on the protection of savings. The protection of our democracy is perhaps more important. [Continue reading...]

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The root of Europe’s riots

Ha-Joon Chang writes: Throughout the 1980s and 90s, when many developing countries were in crisis and borrowing money from the International Monetary Fund, waves of protests in those countries became known as the “IMF riots”. They were so called because they were sparked by the fund’s structural adjustment programmes, which imposed austerity, privatisation and deregulation.

The IMF complained that calling these riots thus was unfair, as it had not caused the crises and was only prescribing a medicine, but this was largely self-serving. Many of the crises had actually been caused by the asset bubbles built up following IMF-recommended financial deregulation. Moreover, those rioters were not just expressing general discontent but reacting against the austerity measures that directly threatened their livelihoods, such as cuts in subsidies to basic commodities such as food and water, and cuts in already meagre welfare payments.

The IMF programme, in other words, met such resistance because its designers had forgotten that behind the numbers they were crunching were real people. These criticisms, as well as the ineffectiveness of its economic programme, became so damaging that the IMF has made a lot of changes in the past decade or so. It has become more cautious in pushing for financial deregulation and austerity programmes, renamed its structural adjustment programmes as poverty reduction programmes, and has even (marginally) increased the voting shares of the developing countries in its decision-making.

Given these recent changes in the IMF, it is ironic to see the European governments inflicting an old-IMF-style programme on their own populations. It is one thing to tell the citizens of some faraway country to go to hell but it is another to do the same to your own citizens, who are supposedly your ultimate sovereigns. Indeed, the European governments are out-IMF-ing the IMF in its austerity drive so much that now the fund itself frequently issues the warning that Europe is going too far, too fast. [Continue reading...]

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The European atrocity you never heard about

R.M. Douglas writes: The screams that rang throughout the darkened cattle car crammed with deportees, as it jolted across the icy Polish countryside five nights before Christmas, were Dr. Loch’s only means of locating his patient. The doctor, formerly chief medical officer of a large urban hospital, now found himself clambering over piles of baggage, fellow passengers, and buckets used as toilets, only to find his path blocked by an old woman who ignored his request to move aside. On closer examination, he discovered that she had frozen to death.

Finally he located the source of the screams, a pregnant woman who had gone into premature labor and was hemorrhaging profusely. When he attempted to move her from where she lay into a more comfortable position, he found that “she was frozen to the floor with her own blood.” Other than temporarily stanching the bleeding, Loch was unable to do anything to help her, and he never learned whether she had lived or died. When the train made its first stop, after more than four days in transit, 16 frost-covered corpses were pulled from the wagons before the remaining deportees were put back on board to continue their journey. A further 42 passengers would later succumb to the effects of their ordeal, among them Loch’s wife.

During the Second World War, tragic scenes like those were commonplace, as Adolf Hitler and Joseph Stalin moved around entire populations like pieces on a chessboard, seeking to reshape the demographic profile of Europe according to their own preferences. What was different about the deportation of Loch and his fellow passengers, however, was that it took place by order of the United States and Britain as well as the Soviet Union, nearly two years after the declaration of peace.

Between 1945 and 1950, Europe witnessed the largest episode of forced migration, and perhaps the single greatest movement of population, in human history. Between 12 million and 14 million German-speaking civilians—the overwhelming majority of whom were women, old people, and children under 16—were forcibly ejected from their places of birth in Czechoslovakia, Hungary, Romania, Yugoslavia, and what are today the western districts of Poland. As The New York Times noted in December 1945, the number of people the Allies proposed to transfer in just a few months was about the same as the total number of all the immigrants admitted to the United States since the beginning of the 20th century. They were deposited among the ruins of Allied-occupied Germany to fend for themselves as best they could. The number who died as a result of starvation, disease, beatings, or outright execution is unknown, but conservative estimates suggest that at least 500,000 people lost their lives in the course of the operation.

Most disturbingly of all, tens of thousands perished as a result of ill treatment while being used as slave labor (or, in the Allies’ cynical formulation, “reparations in kind”) in a vast network of camps extending across central and southeastern Europe—many of which, like Auschwitz I and Theresienstadt, were former German concentration camps kept in operation for years after the war. As Sir John Colville, formerly Winston Churchill’s private secretary, told his colleagues in the British Foreign Office in 1946, it was clear that “concentration camps and all they stand for did not come to an end with the defeat of Germany.” Ironically, no more than 100 or so miles away from the camps being put to this new use, the surviving Nazi leaders were being tried by the Allies in the courtroom at Nuremberg on a bill of indictment that listed “deportation and other inhumane acts committed against any civilian population” under the heading of “crimes against humanity.”

By any measure, the postwar expulsions were a manmade disaster and one of the most significant examples of the mass violation of human rights in recent history. Yet although they occurred within living memory, in time of peace, and in the middle of the world’s most densely populated continent, they remain all but unknown outside Germany itself. On the rare occasions that they rate more than a footnote in European-history textbooks, they are commonly depicted as justified retribution for Nazi Germany’s wartime atrocities or a painful but necessary expedient to ensure the future peace of Europe. As the historian Richard J. Evans asserted in In Hitler’s Shadow (1989) the decision to purge the continent of its German-speaking minorities remains “defensible” in light of the Holocaust and has shown itself to be a successful experiment in “defusing ethnic antagonisms through the mass transfer of populations.”

Even at the time, not everyone agreed. George Orwell, an outspoken opponent of the expulsions, pointed out in his essay “Politics and the English Language” that the expression “transfer of population” was one of a number of euphemisms whose purpose was “largely the defense of the indefensible.” [Continue reading...]

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The crisis in Europe mirrors the fall of the Roman Empire

Focusing on Britain, the historian Michael Wood writes: Rome in the 4th Century had been a great power defended by a huge army. A century later the power and the army had gone.

Instead the West was ruled by new barbarian elites, Angles and Saxons, Visigoths and Franks. And nowhere were these changes more dramatic than on the very fringe of the Roman world in Britain.

Edward Gibbon, in his great book Decline and Fall, famously blamed the collapse not only on the barbarians, but on Christianity. He thought it had undermined society with its focus on another, better world.

Modern historians, though, see it differently, and some of their ideas seem startlingly relevant to us now.

First was the widening gulf between the social classes, rich and poor. When rich and poor start to live completely different lives this leads (then as now) to the poor opting out of the state. All studies today show that society is happier when the gap between rich and poor is reduced.

Widen it and you affect the group ethos of society, and also the ability to get things done through tax.

In the Roman West real wealth lay more in land and property than in finance (though there were banks) – but in the 300s the big land-owning aristocrats who often had fantastic wealth, contributed much less money than they had in the past to defence and government.

That in turn led as it has today to a “credibility gap” between ordinary people and the bureaucrats and rich people at the top.

Not surprisingly then, many people – especially religious groups – tried to opt out altogether.

Other strands in the collapse of the Roman West are more difficult to quantify, but they centre on “group feeling”, the glue that keeps society working together towards common goals. Lose that and you get a kind of nervous breakdown in the social order, which leads to what archaeologists call “systems collapse”.

The British historian Gildas (c 500-570) in his diatribe against contemporary rulers in the early 500s, looking back over the story of the Fall of Roman Britain, lists the military failures, but behind them he speaks bitterly of a loss of nerve and direction, a failure of “group feeling”.

Gildas talks about right-wing politicians advocating glibly attractive solutions that appealed to the populace while “any leader who seemed more soft, or who was more inclined to actually tell things as they are, was painted as ruinous to the country and everyone directed their contempt towards him”.

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Apocalypse fairly soon

Paul Krugman writes: Suddenly, it has become easy to see how the euro — that grand, flawed experiment in monetary union without political union — could come apart at the seams. We’re not talking about a distant prospect, either. Things could fall apart with stunning speed, in a matter of months, not years. And the costs — both economic and, arguably even more important, political — could be huge.

This doesn’t have to happen; the euro (or at least most of it) could still be saved. But this will require that European leaders, especially in Germany and at the European Central Bank, start acting very differently from the way they’ve acted these past few years. They need to stop moralizing and deal with reality; they need to stop temporizing and, for once, get ahead of the curve.

I wish I could say that I was optimistic.

The story so far: When the euro came into existence, there was a great wave of optimism in Europe — and that, it turned out, was the worst thing that could have happened. Money poured into Spain and other nations, which were now seen as safe investments; this flood of capital fueled huge housing bubbles and huge trade deficits. Then, with the financial crisis of 2008, the flood dried up, causing severe slumps in the very nations that had boomed before.

At that point, Europe’s lack of political union became a severe liability. Florida and Spain both had housing bubbles, but when Florida’s bubble burst, retirees could still count on getting their Social Security and Medicare checks from Washington. Spain receives no comparable support. So the burst bubble turned into a fiscal crisis, too.

Europe’s answer has been austerity: savage spending cuts in an attempt to reassure bond markets. Yet as any sensible economist could have told you (and we did, we did), these cuts deepened the depression in Europe’s troubled economies, which both further undermined investor confidence and led to growing political instability.

And now comes the moment of truth.

Greece is, for the moment, the focal point. Voters who are understandably angry at policies that have produced 22 percent unemployment — more than 50 percent among the young — turned on the parties enforcing those policies. And because the entire Greek political establishment was, in effect, bullied into endorsing a doomed economic orthodoxy, the result of voter revulsion has been rising power for extremists. Even if the polls are wrong and the governing coalition somehow ekes out a majority in the next round of voting, this game is basically up: Greece won’t, can’t pursue the policies that Germany and the European Central Bank are demanding.

Nouriel Roubini writes: The Greek euro tragedy is reaching its final act: it is clear that either this year or next, Greece is highly likely to default on its debt and exit the eurozone.

Postponing the exit after the June election with a new government committed to a variant of the same failed policies (recessionary austerity and structural reforms) will not restore growth and competitiveness. Greece is stuck in a vicious cycle of insolvency, lost competitiveness, external deficits, and ever-deepening depression. The only way to stop it is to begin an orderly default and exit, coordinated and financed by the European Central Bank, the European Commission, and the International Monetary Fund (the “Troika”), that minimizes collateral damage to Greece and the rest of the eurozone.

Greece’s recent financing package, overseen by the Troika, gave the country much less debt relief than it needed. But, even with significantly more public-debt relief, Greece could not return to growth without rapidly restoring competitiveness. And, without a return to growth, its debt burden will remain unsustainable. But all of the options that might restore competitiveness require real currency depreciation.

The first option, a sharp weakening of the euro, is unlikely, as Germany is strong and the ECB is not aggressively easing monetary policy. A rapid reduction in unit labor costs, through structural reforms that increased productivity growth in excess of wages, is just as unlikely. It took Germany ten years to restore its competitiveness this way; Greece cannot remain in a depression for a decade. Likewise, a rapid deflation in prices and wages, known as an “internal devaluation,” would lead to five years of ever-deepening depression.

If none of those three options is feasible, the only path left is to leave the eurozone. A return to a national currency and a sharp depreciation would quickly restore competitiveness and growth.

Of course, the process would be traumatic – and not just for Greece. The most significant problem would be capital losses for core eurozone financial institutions. Overnight, the foreign euro liabilities of Greece’s government, banks, and companies would surge. Yet these problems can be overcome. Argentina did so in 2001, when it “pesofied” its dollar debts. The United States did something similar in 1933, when it depreciated the dollar by 69% and abandoned the gold standard. A similar “drachmatization” of euro debts would be necessary and unavoidable.

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Depression and democracy

Paul Krugman writes: It’s time to start calling the current situation what it is: a depression. True, it’s not a full replay of the Great Depression, but that’s cold comfort. Unemployment in both America and Europe remains disastrously high. Leaders and institutions are increasingly discredited. And democratic values are under siege.

On that last point, I am not being alarmist. On the political as on the economic front it’s important not to fall into the “not as bad as” trap. High unemployment isn’t O.K. just because it hasn’t hit 1933 levels; ominous political trends shouldn’t be dismissed just because there’s no Hitler in sight.

Let’s talk, in particular, about what’s happening in Europe — not because all is well with America, but because the gravity of European political developments isn’t widely understood.

First of all, the crisis of the euro is killing the European dream. The shared currency, which was supposed to bind nations together, has instead created an atmosphere of bitter acrimony.

Specifically, demands for ever-harsher austerity, with no offsetting effort to foster growth, have done double damage. They have failed as economic policy, worsening unemployment without restoring confidence; a Europe-wide recession now looks likely even if the immediate threat of financial crisis is contained. And they have created immense anger, with many Europeans furious at what is perceived, fairly or unfairly (or actually a bit of both), as a heavy-handed exercise of German power.

Nobody familiar with Europe’s history can look at this resurgence of hostility without feeling a shiver. Yet there may be worse things happening.

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The Serpent’s Egg hatchlings in Greece’s postmodern Great Depression

The Greek economist, Yanis Varoufakis, writes: It will prove George Papandreou’s ugliest legacy: that his last-minute childish maneuvering to maximise his waning hold on power (while negotiating his eviction from the PM’s job), has brought into the new ‘national unity’ government four self-declared racists (some of whom are neo-Fascists and one a neo-Nazi of some renown). It is also wildly ironic: for Mr Papandreou’s best quality has traditionally been his ardent cosmopolitanism, his demonstrated anti-nationalism, a genuine commitment to minorities and a deep seated intolerance of racism. Alas, such is the lure of power, it seems, that the entry into the new government of one minister and three junior ministers representing LAOS (a small ultra-right wing party) was cynically judged as a smaller price to pay than handing more control of the new regime to Mr Papandreou’s political opponents in the two major parties – his own PASOK and New Democracy, the conservative opposition.

To non-Greeks watching breathlessly the swearing into government of the serpent’s egg latest hatchlings, these news from Greece will surely resonate terribly. As they should! For yet again a Great Depression has given fascism another twirl. And while Greece is small and ought to be irrelevant, its past has spawned great perils for the world at large. Lest we forget, the Cold War did not begin in the streets of Berlin but in the alleys of Athens back in December 1944. Greece was also one of the first countries to have established a fully fledged fascist regime after the Crash of 1929: the Metaxas dictatorship in 1936. More recently, a CIA-backed coup brought Greek fascists in power six years before General Pinochet rolled his tanks against the Presidential palace in Santiago, quite obviously inspired by the ‘success’ of his Greek brethren. Nowadays, with Greece leading the chorus of Europe’s headlong dive into a new recession, and a renewed disintegration complete with racial overtones (Germans loathing the Greeks and vice versa), it is time for the world to take note. Feeling the irony of Papandreou’s tragic end will simply not do. Progressives around the world must remain vigilant. [Continue reading...]

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Debate on austerity and the eurozone

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Chas Freeman considers the global outlook for 2012

From a speech by Chas Freeman given in Macau, China, yesterday: Europe used to be boringly predictable, which was good for business. Now bits of it have reverted to being excitingly unreliable, which is bad. Repeated crises have addicted European leaders to summits, where they agree on partial solutions to problems and create new ones, then go home to think up still more ways to unnerve each other and investors. The year ahead seems certain to feature more summits and more Eurotorture of the world’s financial nervous system. The fiscal sobriety and punctiliousness of northern Europeans will not soon prevail over the bouzoukinomics and bunga bunga politics of Europe’s exuberantly irrational and overly indebted south.

More fundamentally, however, as a club of clubs, Europe has just shown itself to be much less than the sum of its far too many movable parts. In some of the clubs that make up Europe, members are seriously tired of each other as well as of the way responsibility is apportioned. The mismatch between the eurozone’s membership and that of the European Union, in particular, makes German creditworthiness, not the EU, central to the credibility of the euro. And there is an obvious contradiction between a bureaucratically administered supranational currency and the democratically exercised sovereign authority of Europe’s many nation-states.

As Greece has just demonstrated, the European project is seriously incomplete and vulnerable to disruption by reckless acts of political brinkmanship. In the absence of Europe-wide democracy, national democracy and multinational community-building no longer seem compatible. Decisions based on local interests, no matter how legitimately they are arrived at, can threaten both pan-European and global interests in market stability and economic revival. Sadly, in many ways, Europe remains more colloquium than commonwealth — more a confederation of small minds and big egos than a federal union of peoples. The incongruities and incompetencies of a still far-from-united Europe have become a problem not just for Europeans but for the world.

The destabilizing effects of financial uncertainty may now be Europe’s most notable export. But the United States seems determined to one-up the perversity of European indecisiveness. Europe has the will to act, but not the political machinery to act coherently. America has the mechanisms and the resources needed to make decisions and implement them. It lacks the wit, the will, and the spirit of political accommodation to do so. In effect, the United States now suffers from fiscal anorexia — economic self-starvation born of an obsession with curing the imagined obesity of government. But America’s civilian public sector is already too lean to sustain the nation’s socio-economic health and competitiveness. The United States is disinvesting in its human and physical infrastructure — consuming its sinews — at the very moment when it most needs to rebuild its strength. India may be the world’s largest functioning democracy but America is now seen everywhere as its largest dysfunctional one.

Ideological delusion, self-indulgence, arrogance, and unbridled greed got America — and the world economy — into their current mess. Devotion to fanciful concepts, despite their catastrophic results when actually applied, has undermined the credibility of the “full faith and credit” of the United States. Many Americans remain wedded to the bizarre notions that the redistributive functions of government are a net drag on the economy, that reducing government investment and outlays will somehow generate jobs, that financial engineering adds real value to the economy, and that unequal income distribution stimulates economic growth. In a less narcissistic political environment, people would laugh at the idea that cutting public spending — and thereby contracting the economy — could possibly create jobs and stimulate growth or that a “SuperCommittee” of the finest politicians that vested interests can keep in office could magically balance a budget that is 40 percent in the red solely by cutting non-defense expenditures, without raising revenues.

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