A crisis of capitalism, a threat to democracy

The following piece is taken from the Socialist Democracy website:

The leaders of Europe spent much time and ingenuity in designing the Financial Stability Pact so that it would not require a vote. The fact that Britain and the Czech Republic did not sign meant that it could not be formally part of European structures. The major powers went ahead anyway. The Irish government signed without a murmur. This ad-hoc arrangement was to become law over European citizens behind their backs, outside the formal (and already undemocratic) European structures, with a recommendation that it be written into individual constitutions. The Fine Gael coalition, having explored every legal avenue to try to amend the constitution without a vote, now tell us that there is no alternative to voting yes to the Pact.

The arguments of the European leadership, of the troika and of Irish capitalism rarely refer to the contents of the pact. This is hardly surprising, as the ideology on which it is based is the debased neoliberal ideology that was used to justify the credit boom in the first place. It is roughly the fifth in a series of increasingly desperate attempts to resolve the credit crunch, which became the sovereign debt crisis and then the Euro crisis. Stability is to be achieved by imposing increasingly harsh austerity and savagely cutting wages, pensions and public services.  As none of these were in any way responsible for a crisis based on the financialisation of capital and a frenzied bubble of reckless lending by the banks, it is hardly surprising that repeated doses of the same medicine don’t resolve the issue, especially when the banks and the bondholders continue to absorb a greater and greater share of the world’s wealth.

Protesters often cry that austerity isn’t working. At a number of levels this misses the point.  It causes terrible privation to the working class – but this is the scheme working – this is what it is supposed to do.  It has certainly worked for the bondholders, banks and stock markets, restoring share values in the stock market to pre-crash levels. Where it hasn’t worked is in restoring stability and this is where the emphasis has shifted from the workers picking up the tab to a process of restructuring – wage rates and social benefits must be driven down to a point where competiveness is assured by pushing wage rates to the bottom and keeping them there. The stability pact is aimed at outlawing opposition and moving the levers of the economy outside any form of democratic control, so that  the workers feel powerless and so that any kind of reform seems impossible.

The demands of the fiscal pact are:

  • General government budgets shall be balanced or in surplus. The annual structural deficit must not exceed 0.5% of nominal GDP.
  • Budgets will be submitted to the commission in advance – so Ireland’s budget is discussed in Germany, not in the Dail.
  • The balanced budget rule will be introduced in Member States’ national legal systems at constitutional level. It will be out of the reach of any new government that opposes austerity.
  • Member States whose government debt exceeds 60% of GDP will sharply cut public spending.  In Ireland’s case this would mean a 5% cut year on year.
  • The governments in this situation shall submit a structural reform plan to the European commission and council and they will oversee the economy – a permanent troika arrangement.
  • The plan will be a partnership arrangement – social partnership in Ireland has delivered so well for capitalism that it is to be exported across Europe. 
  • Countries that don’t meet their targets can be fined by the European court.

The central idea is that countries must balance their books. The sheer gall of this demand is breathtaking. The US economy floats on trillions of debt. The British print billions of extra pounds to manage their economy. The banks don’t balance their books, the bondholders don’t balance their books, the speculators don’t balance their books but Sean and Sinead Public – they must practice the most severe forms of financial stringency!

It is difficult to see just how extreme an idea this is when we are bombarded with propaganda that claims that the crisis is one of unbridled public spending and that assures us that national economies are just like private households.

All of the above is nonsense. Public spending had nothing to do with the credit crunch and Irish public spending  – and the level of public services – are at the bottom end of European tables.

In any case a national economy is nothing like a household. What it needs to function is liquid capital – the ability to move quickly between surplus and deficit as the occasion demands. The imposition of the pact would confirm the dependent nature of the Irish economy.

But much of capitalism no longer operates by the old rules. Despite all the blather about risk-taking entrepreneurs the new rule is that senior bondholders must never suffer a loss.

Under this rule the debt built up by banks and bondholders in the credit crunch became public debt. The public debt became sovereign debt. The accumulated sovereign debt became a crisis of the Eurozone. The Financial Stability Pact aims to stabilize the Eurozone by assuring bondholders that there is no limit to the amount that will be extracted from the working class to guarantee the euro.

There are two further elements to the pact worthy of notice. One is its permanent nature. It is not meant to overcome a temporary difficulty of one or two years. Rather it is meant to forever change the balance of forces between capital and labour and leave the majority of the working class in abject poverty. The other element is that, under the regime of late capitalism, democracy is becoming increasingly obsolete. In Greece and Italy capitalism has stepped in with an imposed regime. In Ireland the troika supervises the government. Now the FSP will enshrine  austerity in law and in the constitution and votes will have no power to alter economic policy.

The Irish establishment argue that the barbarism of the stability pact represents safety, stability and the road to prosperity. With these sorts of arguments they should be on a hiding to nothing – yet at the time of writing they have a majority of those expressing an opinion.

Beyond the formal argument there is an unstated argument, expressed in arguments that Europe will simply ignore a no vote or, alternatively, that we are so deeply committed to austerity that a new pact will make no difference. The basic argument is that Ireland is incapable of having any autonomy or level of self-determination. We should simply do as we are told and the imperialist powers will recover, dragging dependent countries like Ireland in their wake.

If we are to fight for a no vote we must both expose the dishonesty and brutality of our capitalist overlords and make the case for an alternative society able to meet human needs and that allows us to control our own destiny. 

Posted on May 31, 2012, in 21st century republicanism and socialism, Democratic rights - general, Economy and workers' resistance, EU, Irish politics today, Political education and theory, Public events - Ireland, Social conditions, twenty-six counties. Bookmark the permalink. 1 Comment.

  1. There are countries that don’t respect their capitalism, plus also don’t respect their own Constitution, for themselves to enter into revolution, those countries should not blame at other countries, because after all, its their very own revolution, their very own mistakes, those public of many countries, they do not studying the articles of their own political Constitution, foe those to make it able, to can steal good plus money, plus committing crimes, those poor countries public, they asked constantly for financial international aid, but those nasty poor persons they are, already with plan to steal and murder that help, those are their way to survival for those poor countries, they must study their own Constitution, plus they should know, not to ask constantly for international aid, because that one is not their solution, the solution for poor countries, it is the grow the agriculture power, the poor countries they always have the same rate, they ask for international help, those violate its own Constitution, to join the revolution, later over, with the theft money, they become rich, and those spent the stolen money, latter again, those poor ask for international help again, then again they violate its own Constitution, for on porpoise fall into revolution, those poor countries, are dangerous countries, many countries must do not negotiate, with those because these countries violate the economic system that integrated capitalism, some greatest example, of that it is a country under name México, many saying that a country in north America, they are falling into revolution some states of that country some say that the state of California the state of Texas, those states they are violating, on porpoise their own constitution. to felt into revolution for making able to stolid good and money to business people, the police must to stop they duties are.

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