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Ian Welsh wrote, and we’ve commented, because while Ian provides penetrating analysis, there is no suggestion of solutions, for example those on which  Marine Le Pen campaigns, which seem cogent: Restore the Franc, Restore Sovereignty, and Control  Multiculturalism.

2014 May 27
by Ian Welsh
The Result of Austerity and Neo-Liberalism includes, as expected, the rise of the neo-fascist right.  The UK Independence Party and France’s National Front won national elections to the European Parliament.

This doesn’t mean they would win national elections proper, the EU vote is often a protest vote, but the results are still impressive.

This the natural reaction to austerity.  When times get tough, and when the “mainstream” parties have no answers which work, people will vote for alternatives.  In Greece, to the Greek’s credit, this was SYRIZA, an actual left wing party (though the fascist Golden Dawn party did do reasonably well).

Yes we’d agree. The votes in Europe were protest votes by the people, for parties who do not embrace the “neo-liberal” consensus. In the current political climate, this may have often devolved into a vote for the neo-fascist parties, but it is not an indication that people are accepting fascism.  What they are doing is DEMANDING an alternative.  The mainstream parties need to learn the lesson quickly, because there will be an accounting if they don't.  Note that any country which does not control its currency is not sovereign.  It is depending on some other entity for its medium of exchange.  This is frequently unwise, and is always an indication of subjection and dependence.

In MMT a country Sovereign in its own currency sets the value of its currency by the Government’s taxation.  Acceptance of the currency by the government in settlement of taxes gives the currency legitimacy and value.

The problem facing the French is the creation of bonds in Euros, where it is not sovereign in its currency. This means it has little “good faith and credit” upon which to rely, because others define and control its “good faith and credit”, and these are the troika, the European Commission (the European executive), the European Central Bank (a master, not a servant of the French state), and the IMF (the 1%'s poodle). This creates a constitutional nightmare, which renders France a Vassal state of opaque (oligarchical) interests.

Vassal States Can Escape.

France is able to issue bonds, interest bearing accounts. These could be “New Franc” Bonds, which float against the Euro, and are held as an interest-bearing account at the French Central bank. This changes little.

In general, we need to break the stranglehold the Banking system has on the issuance of money. We need to remove the mechanism where the only way to inject money into the economy is through the central bank funding the banks. We need to end the “debt driven,” broken economies we have today, and the reason is highlighted by the student loan explosion in the US. The graduates do and will have large student loans to repay, which will cause a demand drag on the economy, in cars, housing, and all consumer products. The Student loans are an obscene use of loans, encumbering both the people and the economy, when the cost of higher education is better paid by Government as an investment in the commons.

When I was a child, living in the city of Vancouver, I told my father I didn’t see a lot of racism.  I’ve always remembered his response “wait till times get bad.  People will  hate those who are different.”
This is called Controlled Multiculturalism, or Immigration Reforms, or Abandon the Schengen Agreement. Basically it is France for the French, something for which the French fought others, especially the British, for 1,000 years.  People have a fundamental right to control their own borders, an example what not do with this ideology is being tested someway to the east of France.
My father was a child of the Great Depression.

The neo-liberal left of Europe and North America offer no solutions.  They cannot offer solutions, it is not possible under neo-liberalism to fix the problems neo-liberalism has created: they are a result of neo-liberalism’s genuine beliefs about how the world economy should be run.

You can not, under the neo-liberal model of globalization, tax the rich effectively: they can go somewhere else.  You cannot hold wages up, because jurisdictions can always be played against each other.  You cannot fix the environment and stop the mass wiping out of species and the probable death of a billion humans, because jurisdictions can be played against each other.  That countries no longer produce the majority goods they need themselves, nor in many cases even the food, means jurisdictions cannot unilaterally do the right thing, even if they wanted to (which they don’t.)

Because the oligarchs also control the means of ideological dissemination, you also can’t effectively communicate either the problems or good solutions.  Because the oligarchs control the means of political production (ie. the process of producing and nominating political candidates), you can’t get into power the people who would actually want to change the neo-liberal political order (and if by some miracle you could, expect them to be treated as Argentina or Venezuela have been treated or destroyed as Howard Dean was.)

This holds as true within the United States, where states are played against each other to serve the same masters.

For the French, this step is accomplished by having the French Government (The Treasury, not the Central Bank) pay all its bills and salaries in bonds, denominated in Francs, and have the French Government accept only Francs to settle tax debts.

Neo-liberalism is an effective ideology and set of policy prescriptions: not because it produces good outcomes for the majority of people (that’s not its purpose), but because it creates a constituency (oligarchs and their supporters/retainers) who are able to maintain it in power.

All ideologies eventually come to an end, however.  The oligarchs hate real left-wingism far more than they do fascism.  They have crushed the left.  Because no new coherent ideology can arise due to oligarchical control over the mechanisms of dissemination, all that remain are old ideologies.

In general, we need to break the stranglehold the Banking system has on the issue of money. We need to remove the mechanism where the only way to inject money into the economy is through the central bank funding the banks. We need to end the “debt driven,” broken economies we have today, and the reason is highlighted by the student loan explosion in the US. The graduates do and will have large student loans to repay, which will cause a demand drag on the economy, in cars, housing, and all consumer products.
Given no real and viable left-wing parties to vote for; given the failure of what they are told are left-wing policies (as with Obama being called a left-winger when his economic policy has been to give trillions to oligarchs); people will vote for the only other option: the hard right—the neo-fascists.

They are, at least, against the status quo.  The UK-IP wants to leave the EU.  They want less “free” trade.  And so on.  Given no other option for actual change, people opt for the parties actually offering it, even if those parties are noxious.

And so, the hard right rises because of the failure of the so-called center-left, which is not left wing at all, but is for more slightly less cruel neo-liberalism.

But neo-liberalism cannot be made kind. It is antithetical to one of the fundamental purposes of neo-liberalism, which is to drive down wage rises and inflation by playing jurisdictions against each other.

And so the hard right rises.

Remember, the economies in Germany and Italy under Hitler and Mussolini, for ordinary people, improved immensely.  (Unless you were a Jew, gay, a socialist, a gypsy, etc…  But that’s a price those who won’t pay it, are willing to pay.)

As in Germany after 1933, at this point there are two legal mechanisms to pay tax bills in France, Francs and Euros. While theoretically possible to manage such a transition, we would expect violent reaction for the Vassal state’s imperial power, up to and including military coup and assassination of the Vassal’s state's political leaders. Such actions would have to be carefully considered, and would begin the migration to a country Sovereign in its own currency.  

A further method to eliminate unemployment in France could be to create a program in which the government becomes the Employer of last Resort under a Job Guarantee program described by MMT, coupled with a reversion to state-owned enterprises.  (State-owned enterprises can sometimes be much more efficient than privately owned enterprises.) For example, the overhead of a national health system is 3-5% for a single government payer, versus at least 25-30% for a private enterprise because of the need for profit and executive demand for high salaries.

These jobs could be provided by the commons, by re-nationalizing the commons without compensation (transferring wealth from the 1%) the state-owned enterprises “sold” off under neo-liberalism.

In conclusion, we collectively could manage a transition, and include other great events which face us, ecocide, mass extinction and climate change/ Or we could travel down the repression, rebellion and war path, and arrive at a much worse destination; how the oligarchy consider they can survive this latter path is unknown.

Personally, I consider we are very close to having our oligarchs answer the questions of intelligent life in the Universe.

Originally posted to Synoia on Fri May 30, 2014 at 08:10 PM PDT.

Also republished by Money and Public Purpose.

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Comment Preferences

  •  EZ countries will nver arise from their Mediocrity (1+ / 0-)
    Recommended by:

    ..until they abandon the Euro.

    That is a fact.

    Abandon the Euro, or Commit to a United States of Europe.

    And can any of you, on the eve of the World Cup, imagine residents in Madrid cheering for a team from the US of Europe.

    Or residents of what is now Germany cheering for a team from the US of Europe.

    The Brits would have their team, but the Germans wouldn't!!!!!!!

    Learn about Centrist Economics, learn about Robert Rubin's Hamilton Project.

    by PatriciaVa on Fri May 30, 2014 at 09:01:39 PM PDT

    •  They wouldn't need all that much unification. (0+ / 0-)

      What they would need is a system in which the richer states subsidize poorer states, like in the US.
         The Greeks are arguably more productive than Mississippi but, although Mississippi is a very poor state, the central government keeps it from collapsing. Greece has no such backstop.

    •  have you ever heard of Scotland? (0+ / 0-)

      You do realize that Scotland has a national soccer team that actually does compete in the world cup, albeit it has been a while (1998) since they made it to the world cup but they still compete for it, right? There goes your theory on a "United States of Europe" and soccer. Yes, in a "United States of Europe" you could have a Germany team and a Portugal team, etc., just as you have England and Scotland and they are both part of Great Britain.

      Now as for your unfounded "fact", more like dogma, that the euro leads to mediocrity, you will have to explain that one. Is your theory that a single currency can't possibly work in a multiethnic society? Or what is it, I am curious.

      I will agree with you nevertheless that the current arrangement in Europe of the individual states being on the hook for their own debt without control of their own currency is problematic under the current structure. Still though, this is not any different than the individual States in the USA selling their own bonds while the currency is controlled by the federal government. Obviously there are differences on how the US does it and how Europe is doing it, but there is nothing fundamental that can impede Europe from doing the necessary changes, other than dogma, to fix this. If you can't provide some proof of some fundamental force of nature, physics, mathematics, etc., then you have to agree that the problem is purely ideological and dogmatic. And yes, under the current neo-liberal stranglehold there are tons of dogmatic impediments to fix this and many other problems. Why is this happening you might ask? Simply because the current system is working quite nicely for the people on top, until it doesn't. One of the main questions is, where is the inflection point?

      Was the last vote in the EU a fad or the beginning of a new trend? France and the U.K. went for the right. Portugal, Spain and Greece for the left. We shall see, but on at least one thing we agree, the current arrangement is not working well at the moment for a lot of people.

      "The great enemy of the truth is very often not the lie -- deliberate, contrived and dishonest, but the myth, persistent, persuasive, and unrealistic. Belief in myths allows the comfort of opinion without the discomfort of thought." -John F. Kennedy

      by basquebob on Sat May 31, 2014 at 09:18:07 AM PDT

      [ Parent ]

  •  Spain has recapitalized some zombie banks (0+ / 0-)

    by converting their massive piles of toxic 'assets' into tax credits for those who owe taxes in Spain. This seems to be a de facto Spanish currency, MMT style.

  •  Good point. (2+ / 0-)
    Recommended by:
    PatriciaVa, dallasdunlap

    It's not just the crisis and "austerity". Parties like Front National have existed and thrived well before the current financial crisis started, although the crisis has certainly increased support for the far-right.

    Since the time of the Maastricht Treaty, the anti-EU right has been rising in many countries, with growing anger over the increased concentration of power in Brussels, often without the consent of citizens. The case point here could be the euro - adopted for political, not economic reasons. Countries like Greece should have never adopted the euro, and in any case they should have been taken off it as soon as possible when the recession started. For political reasons, however, the European elite insisted on keeping the euro. Therefore, depressed nations like Greece are stuck at 25% unemployment for the foreseeable future, and the euro is holding down recovery just like the gold standard was in the 1930s.

    •  It is virtually impossible for a debtor nation to (1+ / 0-)
      Recommended by:

      leave a currency. Only the surplus countries can do it. This is because of contracts, banking, etc.

      There are two kinds of people in this world. The kind who divide the world into two kinds of people, and the kind who don't.

      by upstate NY on Sun Jun 01, 2014 at 06:12:27 AM PDT

      [ Parent ]

      •  Of course it's easy (0+ / 0-)

        Leaving a currency is very much like allowing a currency that had been pegged to the dollar float freely in international trade and defaulting on one's debt payable in dollars. Argentina did that in the early 2000s. We know what happened there. They had a period of hardship and then started to recover in part by using a limited and rather half-hearted JG program. They then renegotiated their debts and re-acquired respectability in the international system. They were much better off after default than before. All without running a surplus.

        •  Pegging your currency is very different (0+ / 0-)

          than having that currency.

          It's easy for a surplus country to leave a currency because the new currency will appreciate after the former's dissolution, and everyone will be happy because they'll be paying more.

          The problem for the deficit countries is that all the contracts are for euros. They don't envision another currency.

          You're basically inviting an endless proliferation of litigation between all contracts in that country.

          There are two kinds of people in this world. The kind who divide the world into two kinds of people, and the kind who don't.

          by upstate NY on Fri Jun 06, 2014 at 06:06:13 AM PDT

          [ Parent ]

  •  Love this post (0+ / 0-)

    Thanks, synoia.

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