As the Romans do…

Text kindly translated by Anne-Marie de Grazia

The symposium “ l’Euro contro l’Europa ?” which took place on Saturday, December 7th in Rome, organized by the Nuova Italia and A/Simmetrie foundations, gathered an audience over 300 strong at the old Rome stock market. The speakers included Prof. Alberto Bagnai (University of Pescara), Diego Fusaro, a Marxist philosopher and research professor at the University of Milan, Brigitte Granville (Queen Mary University –London) and your servant for the scientific part of the symposium. The mayor of Rome, Gianni Alemanno (former minister of Agriculture) and Stefano Fassina, in charge of economic research for the Democratic Party (the center-left party, holding the majority in Parliament) intervened in the political debate.

The Euro, an economic system or a political system?

Diego Fusaro developed two important ideas. The first being the idea of the advent of an “absolute capitalism” which was in a sense “prepared” by the libertarian dimensions of the 1968 movement and which strives to see itself liberated for all times from all obstacles to the establishment of a “market society.” In such a form of capitalism, there must exist neither obstacles nor rules besides those termed by K. Marx and F. Engels in The Communist Manifesto as “cold cash payments.” In others words, the model for this capitalism is a market having swallowed up all human values. As a matter of fact, resistance to this process of establishment of a world devoid of rules and institutions have made up the matter of social struggle for nearly a century and a half. There is for sure a lot to be said on this point. But one cannot deny the fact that the evolution of capitalism, qualified as “neo-liberal,” is indeed tending in this direction.

The second important idea was that of the loss by Italy of all sovereignty, thus preventing the existence of a democracy, conceived of not as a formal practice but as the living process through which opinions confront each other within the compass of the people, and from which emerge majorities empowered to make decisions. On this point, we are in total agreement with Diego Fusaro, were it only because I happen to have developed relatively similar ideas in a book published in 2002[1]. In reality, if one examines the status of this process of de-politicization of economic decisions, we see that it takes on different meanings depending on the schools considered. The status is ontological among the neo-classicists, it is instrumental among the Austrians such as von Mises and Hayek[2]. But the result is the same, namely an anti-democratic « hold-up »[3]. Thus sovereignty becomes a key concept in the struggle for democracy, not because it is sufficient, but because it is unquestionably necessary[4]. (This process of de-politization) tends to substitute for politics an organization of society dominated from all appearances by “technicity.” But the “technicity” in question is anything but neutral, as it is serving a class domination the effects of which are the more redoubtable for advancing undercover, and not giving themselves away for what they are. So that, for Diego Fusaro, the Euro is not first of all a currency, but a form of anti-democratic governance concealing its appearance under a monetary aspect. This seems to be profoundly true and helps to explain the quasi-visceral attachment of certain spheres and writers to the Euro. For the Euro enables them to put democracy between parentheses. We are rediscovering here a new formulation of the principle of an economic « Constitution. » At which point, we are brought to reflect on the convergence between Marx and Hayek in this will to put an end to politics. It reveals an instinctive distrust towards the state and towards political mediations, compelling these two great writers, so strongly opposed on so many points, to attempt one same theoretical coup de force in order to bring coherence to their systems: namely to state that the solution to a complex problem can all in the same time be a society which is simple and straightforward from the point of view of the representations which it produces. The future then becomes manifest in the reuse of the most archaic past, be it that of primitive communism as the model of communism in Marx, or the idea of a simplicity of forms and values taken over from past societies in Hayek. If one refuses this theoretical coup de force, the practical consequences of which would lead anyone taking at face value the anti-state conceptions of Marx and of Hayek down the dead-end of re-figuring the social solutions of the past, then the coherence of a heterogeneous society must become the product of a conscious political move of its members, even if the form taken by this coherence may be considerably distant from its initial intentions. The question of the state, and by way of consequence of politics, then regains its full importance, and democracy reveals itself not as the best, but as the sole practicable solution to the problems of the impossibility of perfect knowledge, and of heterogeneity.

Political economics of the Euro.

Alberto Bagnai insisted for his part on the incoherence surrounding the constitution and exercise of the Eurozone. Which was created, according to its conceivers, in order to protect the European Union from global economic disorders. However, when confronted to disorder (the economic crisis and its most immediate manifestation, the sovereign debt crisis) the Eurozone knows no more pressing matter than to destroy the great market it purported to create. For it is indeed a dismantling of this market which we are witnessing, through the use of the politics of so-called “internal devaluation,” the immediate effect of which is to render the countries which are implementing it even more dependent on the markets exterior to the Eurozone. In fact, one may consider that the Eurozone, and the European Union more generally, have been the prime vector of globalization in Europe. It’s in the name of the Eurozone that the various obstacles to the unification of the global currency market have been lifted. It is thanks to the Eurozone that the European banks could disseminate within the European Union the “toxic” American assets. One can measure the extend of this lie when one considers that the share of the Euro as a reserve currency on the international scale has, at best, only slightly bettered the share once taken up by the old currencies of the countries making up the Eurozone. Another proof can be advanced from the fact that the Euro has retrograded to third place (behind the Dollar and now the Yuan) as a currency for financial transactions. Gianni Alemanno insisted, basing himself on his ministerial experience, on the fact that the European Union is by no means a factor of resistance in regard to other countries (United States, China) in international trade negotiations.

Brigitte Granville spoke on the political dynamics within the Eurozone. Starting from a game-theory reasoning, in which one will recognize the notion of « coercive deficiency » elaborated in the early sixties by Thomas Schelling[5], she developed the idea that in the duopole between Germany and France, it’s the latter country which should logically find itself in the better negotiating position. This bears some explaining. In fact, France is potentially (and already in fact) a debtor in regard to Germany. Now, in a “debtor-creditor » relationship, it’s for all purposes the creditor who has the upper-hand, provided that he is big enough to threaten to take the creditor down with him. Now, this condition is indeed fulfilled, even more so if one adds to France the full weight of Spain and Italy.

I have for my part arrived at identical conditions (conclusions ???) by a somewhat different way. But one cannot help but notice that the French government has never made use of the potential advantage deriving from its situation. Think of the proposition I made prior to the elections and upon which I made my support dependent for the run-off, that candidate Hollande call-up a referendum on the Treaty of Stability, Coordination and Governance (TSCG). We know that nothing happened. One pretended to “negotiate” and, as in Munich in 1938, “… One pound was demanded at the pistol’s point. When it was given, two pounds were demanded at the pistol’s point. Finally the Dictator consented to take 1 pound, 17 shillings and sixpence and the rest in promises of good will for the future.” These devastating words are Churchill’s. We also remember what he said about this shameful backing-out : “We had the choice between shame and war. We chose shame, and we shall have war.”

The Euro, or how to get out of it.

It is clear nevertheless that the key to the decision to dissolve the Eurozone is not to be found in Berlin, but in Paris and in Rome. Let France or Italy announce that either of them has decided to unilaterally get out of the Euro and the Euro is dead on the spot. Taking into account the closeness of these economies as well as the links existing between these countries, one cannot imagine one second that Italy and Spain (which implies Portugal and Greece as well) can stay in the Euro if France leaves. Reciprocally, let Italy announce its decision to leave the Euro, and France and Spain will be in fact compelled to do the same, taking along Portugal and Greece. Moreover, if confronted with the exit of the 2nd, 3rd and 4th economies of the Eurozone, Germany will think twice before maintaining the Euro in the “Northern” part of the zone. Besides the fact that an exit of the so-called “Southern” countries would automatically entail the one of Austria, Slovenia and Croatia (be it only to align themselves on the exchange rates of the exiting countries) Germany finds itself confronted with the problem of whether it can minimize the economic shock. If it persists in refusing any negotiation, it runs the risk of extremely important devaluations in some countries. This is what we called Scenario 3 in the study we made together with Philippe Murer and Cédric Durand [6].

Graph 1

 Parité-Hyp-MOD

It is, in fact, in Germany’s well understood interest to negotiate for reasonable devaluations with the South of Europe, and to offer in exchange a support which could take the form of a complete and orderly dissolution. We called this scenario 2 in this same study.

Such a coordinated dissolution of the Eurozone would limit its political impact. However, all the speakers, including the one in charge at the Democratic Party, the counterpart of the French Socialist Party (who holds a position in favor of the Euro), described a political situation where the Euro is undermining the very foundations of Europe. Granted, one cannot well imagine Prime Minister Jean-Marc Ayrault hitting on the table with his fist. The poor guy might hurt himself… For, we often talk about “negotiating” with Germany. But the only thing that’s negotiable, the only point on which there exists a favorable balance of power in regard to Berlin is precisely the very question of the existence of the Euro. This was stated, and quite well stated, by Alemanno as well as by Prof. Bagnai.

In these circumstance, a new French Prime Minister, appointed in the wake of the European elections and convinced of the inanity of the present efforts to “save” the Euro, convinced in fact that these same efforts will only aggravate the crisis in the countries of Southern Europe, could very well take such a decision, if the President agreed to sit back for a period of some 18 months. And, as a matter of fact, he will probably find himself forced to this by the European elections, which will show the breadth of the anti-Euro movement and of the radical challenge to the European Union. Even in Italy, one feels that the debate has been rapidly progressing during these past few months. The fact that this reunion was made possible, with participants representative both of the left and of the right, that the “pro-Euro” positions found themselves relatively isolated, are signs which leave no room for doubt. The rise of the protests against the Euro is not a French phenomenon, but an international one, a fact which is confirmed by the growing number of economists joining the movement.


[1] Sapir J., Les Économistes Contre la Démocratie, Paris, Albin-Michel, 2002.

[2] F.A. Hayek, Law, Legislation and Liberty – Vol. III, The Political Order of a Free People, Routledge, Londres, 1979

[3] R. Bellamy, “Dethroning Politics: Liberalism, Constitutionalism and Democracy in the Thought of F.A. Hayek”, in British Journal of Political science, vol. 24, part. 4, October 1994, pp. 419-441

[4] R. Carré de Malberg, Contribution à la Théorie Générale de l’État, Éditions du CNRS, Paris, 1962 (first edition, Paris, 1920-1922), 2 volumes.

[5] T.C.Schelling, The Strategy of Conflict, Harvard University Press, Cambridge, Mass., 1960.

[6] Sapir J., P. Murer et C. Durand, Les Scénarii de Dissolution de l’Euro, Paris, Fondation Res-Publica, septembre 2003.

 


Jacques Sapir

Ses travaux de chercheur se sont orientés dans trois dimensions, l’étude de l’économie russe et de la transition, l’analyse des crises financières et des recherches théoriques sur les institutions économiques et les interactions entre les comportements individuels. Il a poursuivi ses recherches à partir de 2000 sur les interactions entre les régimes de change, la structuration des systèmes financiers et les instabilités macroéconomiques. Depuis 2007 il s’est impliqué dans l’analyse de la crise financière actuelle, et en particulier dans la crise de la zone Euro.

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