The death of the European dream While the EU's foreign admirers are on the defensive, international Eurosceptics are in the ascendancy. Charles Grant, head of the Centre for European Reform, a pro-EU think-tank, says he has been struck on his recent travels by the growing disdain for Europe in Delhi, Beijing and Washington. "We're seen as locked into permanent economic and demographic decline, and our pretensions to hard power are treated with contempt," he laments. A few years ago Jeremy Rifkin, an American author, published a book called The European Dream, which made a great splash in Brussels. Mr Rifkin, who perhaps not coincidentally also wrote a book called The End of Work, argued that Europe was a model for the future. "While the American spirit is languishing, a new European dream is being born," he wrote. "It is a dream far better suited to the next stage in the human journey - one that promises to bring humanity to a global consciousness befitting an increasingly interconnected society." Reading those words today, I don't know whether to laugh or cry.
While the EU's foreign admirers are on the defensive, international Eurosceptics are in the ascendancy. Charles Grant, head of the Centre for European Reform, a pro-EU think-tank, says he has been struck on his recent travels by the growing disdain for Europe in Delhi, Beijing and Washington. "We're seen as locked into permanent economic and demographic decline, and our pretensions to hard power are treated with contempt," he laments.
A few years ago Jeremy Rifkin, an American author, published a book called The European Dream, which made a great splash in Brussels. Mr Rifkin, who perhaps not coincidentally also wrote a book called The End of Work, argued that Europe was a model for the future. "While the American spirit is languishing, a new European dream is being born," he wrote. "It is a dream far better suited to the next stage in the human journey - one that promises to bring humanity to a global consciousness befitting an increasingly interconnected society."
Reading those words today, I don't know whether to laugh or cry.
All of this because the euro reduced its overvaluation by nicely losing 15% against the yuan? Wind power
The Counter-Enlightenment, its Economic Program - and the Classical Alternative By Michael Hudson (February 5, 2010)
The last few years have seen demoralized Social Democratic and Labour parties fall into disarray throughout the world. Retreating from the economic program that powered their takeoff a century ago, they have lost their traditional constituencies. Their golden age was an outgrowth of classical political economy from Adam Smith via John Stuart Mill to Progressive Era reformers advocating progressive taxation of land and other wealth, public infrastructure investment at subsidized prices, price regulation of monopolies, and public banking reforms to socialize the financial system. Today, the parties of the left and even the centre have reversed the reform agenda advocated a century ago in the Progressive Era. They have endorsed a tax shift off property and finance onto labor and consumers; privatization of public infrastructure and enterprises; and deregulation of monopolies, above all that of banking and high finance. The result is an almost universal anti-government (and indeed, pro-rentier) model that leaves resource allocation and planning centralized in the hands of a financial sector that is being deregulated rather than steered along the social lines anticipated a century ago. ... ... We are having a meeting of European Social Democratic parties next May to draft a common program. We plan to reintroduce the classical economic reform of the tax system. I have seen no discussion of this in the press, except for my own write-ups in the Financial Times. There is a case of cognitive dissidence when it comes to structural financial and fiscal reform. Most people are not aware that there really is a workable alternative, and indeed one that was viewed for a century as being the free market alternative - a market free of unearned income and "empty" pricing. The problem is that students no longer are taught that economic thinkers have spent the last seven centuries discussing better modes of taxation, banking and pricing. They came to a similar conclusion, based on the ability to distinguish between economically necessary costs and income, and unnecessary costs. The aim was to complete what was viewed as the economic program of industrial capitalism: to throw off the remaining legacy of feudalism, above all the landlord class that used to be called the idle rich, but also predatory bankers. These two classes now have joined forces to become a new aggressive power - financial speculators unnecessary for the industrial economy to operate but actually are slowing it down. The most important plank of our entire program concerns the tax system. ... This is going to be the plank of our reform program - reforming the reformers - against which banks and the EU will fight most viciously. But fiscal reform must be a key element in financial reform, because the two forms of reform are symbiotic. By taxing the land, we are preventing its rental value from being capitalized into bank loans. Our aim is to lead bank credit to focus on actually creating new means of production, not simply bolstering the privatized market price of unproductive, extractive privileges and property claims.
Today, the parties of the left and even the centre have reversed the reform agenda advocated a century ago in the Progressive Era. They have endorsed a tax shift off property and finance onto labor and consumers; privatization of public infrastructure and enterprises; and deregulation of monopolies, above all that of banking and high finance. The result is an almost universal anti-government (and indeed, pro-rentier) model that leaves resource allocation and planning centralized in the hands of a financial sector that is being deregulated rather than steered along the social lines anticipated a century ago.
...
... We are having a meeting of European Social Democratic parties next May to draft a common program. We plan to reintroduce the classical economic reform of the tax system.
I have seen no discussion of this in the press, except for my own write-ups in the Financial Times. There is a case of cognitive dissidence when it comes to structural financial and fiscal reform. Most people are not aware that there really is a workable alternative, and indeed one that was viewed for a century as being the free market alternative - a market free of unearned income and "empty" pricing. The problem is that students no longer are taught that economic thinkers have spent the last seven centuries discussing better modes of taxation, banking and pricing. They came to a similar conclusion, based on the ability to distinguish between economically necessary costs and income, and unnecessary costs. The aim was to complete what was viewed as the economic program of industrial capitalism: to throw off the remaining legacy of feudalism, above all the landlord class that used to be called the idle rich, but also predatory bankers. These two classes now have joined forces to become a new aggressive power - financial speculators unnecessary for the industrial economy to operate but actually are slowing it down.
The most important plank of our entire program concerns the tax system. ...
This is going to be the plank of our reform program - reforming the reformers - against which banks and the EU will fight most viciously. But fiscal reform must be a key element in financial reform, because the two forms of reform are symbiotic. By taxing the land, we are preventing its rental value from being capitalized into bank loans. Our aim is to lead bank credit to focus on actually creating new means of production, not simply bolstering the privatized market price of unproductive, extractive privileges and property claims.
I have seen no discussion of this in the press, except for my own write-ups in the Financial Times.
Greece is just the first in a series of European debt bombs about to go off. Mortgage debts in the post-communist economies and Iceland are more explosive. Although most of these countries are not in the eurozone, their debts are largely denominated in euros. Some 87 per cent of Latvia's debts are in euros or other foreign currencies, and are owed mainly to Swedish banks, while Hungary and Romania owe euro-debts mainly to Austrian banks. These governments have been borrowing [from the European Union and the International Monetary Fund] not to finance a budget deficit, as in Greece, but to support their exchange rates and thereby prevent a private-sector default to foreign banks.
Bankers in Sweden and Austria, Germany and Britain are about to discover that extending credit to nations that cannot (or will not) pay may be their problem, not that of their debtors. No one wants to accept the fact that debts that cannot be paid, will not be. Someone must bear the cost as debts go into default or are written down, to be paid in sharply depreciated currencies, and many legal experts find debt agreements calling for repayment in euros unenforceable. Every sovereign nation has the right to legislate its own debt terms, and the coming currency re-alignments and debt write-downs will be much more than mere "haircuts". ... Another by-product of the Great Depression in the US and Canada was to free mortgage debtors from personal liability, making it possible to recover from bankruptcy. Foreclosing banks can take possession of collateral property, but do not have any further claim on the mortgagees. This practice - grounded in common law - shows how North America has freed itself from the legacy of feudal-style creditor power and the debtors' prisons that made earlier European debt laws so harsh.
Another by-product of the Great Depression in the US and Canada was to free mortgage debtors from personal liability, making it possible to recover from bankruptcy. Foreclosing banks can take possession of collateral property, but do not have any further claim on the mortgagees. This practice - grounded in common law - shows how North America has freed itself from the legacy of feudal-style creditor power and the debtors' prisons that made earlier European debt laws so harsh.
These governments have been borrowing [from the European Union and the International Monetary Fund] not to finance a budget deficit, as in Greece, but to support their exchange rates and thereby prevent a private-sector default to foreign banks. What!?
These governments have been borrowing [from the European Union and the International Monetary Fund] not to finance a budget deficit, as in Greece, but to support their exchange rates and thereby prevent a private-sector default to foreign banks.
Why do I fail to be surprised?
- Jake If you only spend 20 minutes of the rest of your life on economics, go spend them here.
Another by-product of the Great Depression in the US and Canada was to free mortgage debtors from personal liability, making it possible to recover from bankruptcy.
"It is typically Scandinavian to swear with numbers." citation needed You can't be me, I'm taken
And can we maybe say there is a difference between worrying about deficits after 2 years of public deficit at >10% of GDP and worrying about deficits before doing such spending?
Since we all agree that the problem is not budgetary policies, but the lack of financial regulation, and targetted taxes on the right kind of people and incomes, why are we accepting the debate on spending cuts (ie and making the link between spending cuts and "doom in Europe" legitimate)?
There is a simple answer: increased taxes. Wind power
Trichet cannot at the same time call this the biggest crisis since WWI and call governments weak.
There's only one thing it makes sense to raise taxes on right now: land values.
Taxing labour would be asinine with unemployment at twice the usual rate. Taxing capital will just lead to capital flight in the free market we have engineered for ourselves. So you have to tax immovable assets. By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
There is a simple answer: increased taxes.
When you're in a liquidity trap, fiddling with the tax code does you very little good: The problem is that one part of the private sector - the businessmen - are neutering another part of the private sector - the engineers.
The solution to that is for the state to take a more active and explicit role in maintaining industrial production. That happens on the sovereign expenditure side of the equation, not on the tax income side.
You won't get me to say that tax hikes on the wealthy are a bad idea, but right now it's distinctly secondary to the need for the public sector to start explicitly underwriting industrial production.
the need for the public sector to start explicitly underwriting industrial production.
yes, but _ exclusively green_ industry, otherwise we remain in the same old paradigm of more polluting car sales making for good numbers, (and no regard for'externalities', like peoples' health, at all). ~"When an inner situation is not made conscious, it appears outside as fate." Karl Jung~
(why six? what's wrong with a "five year plan"?) It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II
As the current crisis is showing, markets are showing at least some unwillingness to finance public spending (in some places). That door being closed, you can either go the political route by printing money, or the political route by raising taxes.
Raising taxes is compatible with German neuroses. Wind power
Here, the stabilization fund has similarly come at a time when it was the supposed alternative to some kind of collapse, but it's been sold as a sign of duty (to the European ideal) rather than a vital interest, and the (much more certain) profitability of the loans has been underplayed.
And note that in the two cases, the interests of the financial world are radically opposite - in the case of the bank bailout, the markets had no interest to continue to cause unrest; here there is the obvious benefit of cost cutting across the board, lower wages, pensions etc, and the added bonus of bringing down to size the European social model.
Collapsing GDP in one country is unlikely to touch the citizens of another that much, unfortunately. Wind power
Poorly, stupidly and corruptly done, any government action will be a disaster.
The reason many of the classical liberals of the Enlightenment opposed government intervention to the extent that they did was that poor, corrupt and stupid governments were the historical norm.
Honesty, integrity and competence in your legislature: Accept no substitute.
