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Sunday, December 4, 2011

Here Comes the "European Fiscal Union"

Merkel and Sarkozy are apparently going to Brussels "with the goal of achieving treaty change," aiming for no less than transforming the EU into a "fiscal union". This implies a considerably greater degree of "sharing and pooling" when it comes to the sovereignties of the EU-member states. Member states will be asked to transfer more of their formal economic sovereignty to the Brussels centre than before. (Notice that, while the problem they are working on is the Euro-crisis, they are not reforming just the Eurozone but the EU as a whole. The EU-member non-Eurozone economies are already so highly dependent on the Euro that nobody bats an eyelid about this.) The measure is to be backed up by an additional €1 trillion "cash injection" (i.e., subsidy) from the European Central Bank (i.e., the taxpayer).

Given the economic realities of the EU, it is almost certain that this centralization of the Europan "sharing and pooling" of fiscal policy will result in Germany's (and by implication perhaps also France's) greater dominance over the economic policies of the European Union. In other words, "Rhenish," continental big capital is throwing in its weight in the Euro-crisis. Rhenish capital is using its trusted political lapdogs, the German and French states to do this. Viewed from the perspective of smaller-scale, less global capital anchored in the poorer EU-member states, this is but a formal inauguration of an already existing hierarchical relationship. (Notice: I'm not even talking about labour, social reproduction or "the concerns of the European citizen" here, this is just a thought about some geopolitical-economic features of the capital-capital relationship within Europe.)

Clearly, at the heart of the Euro-crisis has been what I have called the elasticity of weight--the EU's innovative game of playing two parallel strategies on the world stage (one: acting as a single power where that strategy maximizes result; the other: acting as a loosely coordinated mass of 27 quasi-independent, "Westphalian" states where that game promises better results). Unable / unwilling to abandon elasticity of weight, the EU is, with enormous agony, shifting a tiny bit of its weight in the single-power direction. But the game still remains the same.

Thursday, July 21, 2011

Cargo Cult of Rescue Packages

Today a second--this time EUR 109 billion--west European financial package was announced. The aim: saving the ailing Euro or, in Sarkozy's words, "prevention of contagion." There are many angles to this new arrangement. Let's focus, for a moment, on its size. Together with the last package that arrived in May 2010--which amounted to 440 bn Euros--the Euro is now propped up by a fund of 549 bn Eur. According to an online currency converter, this is equivalent to approximately 804 bn USD at today's rates. Using Angus Maddison's estimates of economic performance, a dataset of which I have made copious use in the writing of The European Union and Global Social Change, this comes to over 1.5% of the Gross World Product, more than 11% of the summary GDP of the Euro-zone, and almost half of the total GDP of Africa. Keep this in mind, when you hear west Europeans talk about the significance of fiscal discipline for indebted nations.

Monday, June 27, 2011

Subsidizing the Rich

As I am writing this, announcements are being made on account of Prime Minister Wen Jiabao's visit in Europe that the People's Republic of China will provide a series of financial instruments to help save the ailing Euro. In other words, the world's largest society (approximately 20% of the world's population) will subsidize a European economic entity whose per capita GDP is at least 4 times greater than that of China. (This of course after a more-than-a-decade-long record of subsidizing the US economy through bond purchases.)

Plus ca change.

Sunday, January 9, 2011

János Kornai on Hungary

More or less coinciding with the new year as well as Hungary assuming the rotating presidency of the European Union, institutional economist János Kornai published a wide-sweeping critique of the current right-wing Hungarian government in the daily Népszabadság. Today, a somewhat terse English translation of the piece has been published.

Much can, and I'm sure will, be said about the situation in Hungary and Kornai's current position. For now, one quick observation. A striking aspect of Kornai's piece is that it is free of any reference to the world economy or geopolitics. Even the section on 'growth' and 'development' is entirely internally focussed. Interesting, with respect to a place, like Hungary, an extremely open, and globally speaking quite tiny, economy.

More later, perhaps.

cover page of the book

cover page of the book
image used for the cover design by Anannya Dasgupta