Another impressive analysis of the real motives behind the eurocrisis from economist Michael Hudson. First published in Germany’s Frankfurter Allgemeine Zeitung as “Der Krieg der Banken gegen das Volk” (“War of the Banks against the people”). 

Hudson starts off by stating that the solutions being proposed to resolve Europe’s financial crisis are “a banker’s dream, a grab bag of giveaways that few voters would be likely to approve in a democratic referendum.”

He accuses the ECB, EU and IMF “troika” of “imposing a regressive tax” on citizens by having them pay for the criminal mistakes of the wealthy. Whoever believes this characterisation of what really caused the 2008 financial collapse and its economic consequences is too harsh or too ideological should urgently look at the movie “Insight Job” by Charles Ferguson.

“A democratic tax policy”, says Hudson, “ would reinstate progressive taxation on income and property, and would enforce its collection – with penalties for evasion. Ever since the 19th century, democratic reformers have sought to free economies from waste, corruption and “unearned income.” But the ECB “troika” is imposing a regressive tax – one that can be imposed only by turning government policy-making over to a set of unelected “technocrats.”

Hudson is also spot on with his description of the new “technocrats”:

“To call the administrators of so anti-democratic a policy “technocrats” seems to be a cynical scientific-sounding euphemism for financial lobbyists or bureaucrats deemed suitably tunnel-visioned to act as useful idiots on behalf of their sponsors. Their ideology is the same austerity philosophy that the IMF imposed on Third World debtors from the 1960s through the 1980s. Claiming to stabilize the balance of payments while introducing free markets, these officials sold off export sectors and basic infrastructure to creditor-nation buyers. The effect was to drive austerity-ridden economies even deeper into debt – to foreign bankers and their own domestic oligarchies.”

Hudson claims rightly that what is happening is a real threat to Europe’s social democracy:

This is the treadmill on which Eurozone social democracies are now being placed. Under the political umbrella of financial emergency, wages and living standards are to be scaled back and political power shifted from elected government to technocrats governing on behalf of large banks and financial institutions. Public-sector labor is to be privatized – and de-unionized, while Social Security, pension plans and health insurance are scaled back….

“From the financial sector’s vantage point, the “solution” to the Eurozone crisis is to reverse the aims of the Progressive Era a century ago – what John Maynard Keynes gently termed “euthanasia of the rentier” in 1936. The idea was to subordinate the banking system to serve the economy rather than the other way around. Instead, finance has become the new mode of warfare – less ostensibly bloody, but with the same objectives as the Viking invasions over a thousand years ago, and Europe’s subsequent colonial conquests: appropriation of land and natural resources, infrastructure and whatever other assets can provide a revenue stream”. …

There is no technological or economic need for Europe’s financial managers to impose depression on much of its population. ……

The kind of warfare now engulfing Europe is thus more than just economic in scope. It threatens to become a historic dividing line between the past half-century’s epoch of hope and technological potential to a new era of polarization as a financial oligarchy replaces democratic governments and reduces populations to debt peonage.

The ECB is a central bank that is blocked from acting like one and printing money, Hudson explains in detail and he warns:

“If the euro breaks up, it is because of the obligation of governments to pay bankers in money that must be borrowed rather than created through their own central bank. Unlike the United States and Britain which can create central bank credit on their own computer keyboards to keep their economy from shrinking or becoming insolvent, the German constitution and the Lisbon Treaty prevent the central bank from doing this.

The effect is to oblige governments to borrow from commercial banks at interest. This gives bankers the ability to create a crisis – threatening to drive economies out of the Eurozone if they do not submit to “conditionalities” being imposed in what quickly is becoming a new class war of finance against labor.”

“In this new financialized warfare”, Hudson says, “governments are being directed to act as enforcement agents on behalf of the financial conquerors against their own domestic populations.”

In the last paragraphs of his brilliant article, Hudson looks at the long-term economic consequences of this bankers’ warfare:

Economies as a whole will shrink – and change their shape, polarizing between creditors and debtors. Economic democracy will give way to financial oligarchy, reversing the trend of the past few centuries.

“Something has to give” says Hudson in his final conclusion.

“Will it be the past few centuries of liberal free-market economic philosophy, relinquishing planning the economic surplus to bankers? Or will society re-assert classical economic philosophy and Progressive Era principles, and re-assert social shaping of financial markets to promote long-term growth with minimum costs of living and doing business?

At least in the most badly indebted countries, European voters are waking up to an oligarchic coup in which taxation and government budgetary planning and control is passing into the hands of executives nominated by the international bankers’ cartel. This result is the opposite of what the past few centuries of free market economics has been all about.”

Or: How the capitalists are killing off capitalism!

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