The False Model
Sooner or later "peak soil" will follow peak oil. This kind of mastery of the economic and financial crisis leads inevitably to a food crisis and even to a hunger crisis in many poor world regions. Isn't expanding public services commanded for ecological and social reasons instead of expanding material production? Aren't there many investment opportunities?
THE FALSE MODEL
Europe cannot survive as a monetary union without solidarity regulation
By Elmar Altvater
[This article published on 9/14/2012 is translated abridged from the German on the Internet, http://www.monde-diplomatique.de. Elmar Altvater is an emeritus professor of political economy at the Free University of Berlin who has written many books and articles on the myths of neoliberal capitalism and solidarity economics.]
... The dream of reason generates a monster. Neoliberal rationality produces economic, social and ultimately ecological disaster.
"The European house is in flames" and "firefighter Merkel puts out the fire with kerosene," Joschka Fischer scolded.  One can sympathize with his frustration because his party ardently supplies the kerosene. The majority of the Bundestag Greens approved the fiscal pact and the future bailout umbrella ESM (European Stability Mechanism). No wonder that many are reminded of the 1930s. First, there was the financial crisis and then the Bruning austerity policy as the ultimate economic rationality. That bumped off democracy at that time and paved the way for a barbaric dictatorship. Are we condemned to make the same mistake of saving-to-ruin on the European plane?
The explosive mixture of desired accelerated growth and the debt brake, the Euro bailout umbrella and the fiscal pact is responsible for the foreseeable knock-out of the euro and the breakdown of the European monetary union. As a stop gap, banks are stabilized with unimaginable amounts of money in their slide into bankruptcy. The crisis of the euro should be overcome after the stormy speculations by the actors on the global financial markets - from bonds and banks, rating agencies, advisors, think tanks and brokers. Nevertheless the cheerleaders of the euro-zone believe there is "no alternative" to the economic demands defined by neoliberal expert idiots  - no matter that the social cohesion is destroyed and the political consensus is undermined, no matter that states - along with state territory, state power and state people - are removed from the euro-zone.
The fiscal pact received an eternal guarantee at the Euro-summit in May 2012. Through the mouths of its high priests, the neoliberal religion commands "there is no alternative" (TINA). No parliament and no sovereign are sovereign enough to loosen the pact and enforce a minimum of political-economic transparency and flexibility. If one sees politics as the capacity for alternative organization of social futures, the euro-zone today is forced to an anti-political authoritarian path. The neoliberal expert idiots offer themselves as boy-scouts. The dream of reason becomes the nightmare of the rational...
People could have learned from history and theoretical reflections about an "optimal monetary zone" (Robert Mundell from the early 1960s) that a monetary integration cannot function in the long run without real economic adjustment and shared economic- and fiscal policy.  Economic, social and political stability in the EU is only possible when the productivity of countries like Finland and Portugal, Spain and Holland increases so the differences of competitiveness between branches and regions diminish and the economic tensions in the monetary union would be controllable.
An adjustment of the living conditions of people (with simultaneous acceptance of linguistic and cultural differences) is the presupposition that they - as economic citizens - can exercise the same citizen rights and duties in the common Europe. This must be actively and politically sought and is not a side-effect of market- and money integration. The same is true for the social rights in the world of work or for protection of the atmosphere.
The integration process takes a paradoxical course. For a long while, advances were realized as "negative integration" through liberalization of markets and deregulation of politics. However that is a discontinued model. The crisis brings this to light. There is only progress in solidarity. Redistribution of income and assets or a financial equalization between regions and nations may not be declared taboo.
Redistribution would be a political alternative to the anti-political authoritarian integration guided by the financial market from which the "monetarists"  promised real economic, social and political adjustment in Europe. It would also be a present-day alternative to the fiscal pact with its forced savings and permanent ESM, Euro-bailout umbrella and other bureaucratic monstrosities of neoliberal rationality.
A monetary union requires more than a monetary convergence measured by the Maastricht criteria.  It necessitates a political union. Nevertheless many actors do everything to block political integration. The monetary union is not developing by itself into a political union as the "monetarists" believe. 
However there are no alternatives to be negotiated and decided in the neoliberal integration arena. There are only severe practical constraints that could turn out less harsh under special circumstances. In Germany, a great coalition of nearly all parties (with the exception of DIE LINKE, The Left Party) resolved a very rigorous nation-state debt brake. The annual new indebtedness of the state is limited to a maximum of 0.35 percent of the gross domestic product (GDP). Many EU partners had to accept an indebtedness limit of 0.5 percent - anchor this in their constitution according to the German example - and sign a binding international agreement. In his 1944 book "The Road to Serfdom," the "pope" of modern neoliberalism F.A. von Hayek recommended codifying liberal reforms contractually and constitutionally to prevent any state incursion in the market.
After the outbreak of the 2007 financial crisis, the crew at the helm of the Euro ship hardly acted consistently. They stepped on the debt brake as the Maastricht treaty ordered... Braking and accelerating at the same time does not bear up the most stable ship.
The policy of budget cuts brings about the opposite of what was intended and promised. No stability mechanism can keep from skidding into recession. Disillusionment in the population soars. Because "the markets get nervous," the risk charges increase for all state loans... Spain had to take new debts whatever the cost. In 2012 more than 60 billion euros in old state loans were due and 51.5 billion in 2013. Bankruptcy is foreseeable with more than 7 percent interest and dwindling growth without help from the outside. Politics has generated a self-fulfilling prophecy.
Thus inequality in the EU grows between Central Europe and the periphery in the South and East, not only between poor and rich, paid labor and capital or between the genders. On account of the bank bailouts, nation-states are also threatened by bankruptcy. Somewhere they must get money for the interests that increase state indebtedness with every euro and every devaluation of credit-worthiness by the rating agencies. The debt brake prohibits the reception of new debts. Taxes as the only other source of state revenue constantly fall owing to the tax competition that favors the mobile production capital factor.
The European Central Bank and the ESFS and ESM bailout umbrella are the sponsors of the "last authority" - since the Euro summit at the end of June 2012 - providing financial institutes with cheap trillions, feeding them with much money at a free fare so they do not collapse. On the other hand, the EU commission functions as an administrator of the economy and "debtor of last resort," the strapped governments say. Their debts are really system-relevant. What would the banks do with the cheap money from the European Central Bank, the ESFS and the ESM if no one is forced to become indebted and pay high interests for that?
The method that guarantees debt service to the financial institutes has a name: austerity. That can be translated as austerity course or rigor and privation. Social spending will be cancelled and mass income lowered. Public goods come under the hammer and are privatized. The states subjected to austerity abandon elementary democratic rights and hand over the population to a new form of financial dictatorship. The national governments are obliged to serve the debts of mostly external creditors, often big banks - which they must justify to their voters, often grudgingly and muttering under their breath.
Zapetero, Papandreou, the Dutch government and Berlusconi learned that this justification does not always succeed. Eight governments broke down since the outbreak of the crisis. In some cases they gave way to technocrats - "experts" - like Monti in Italy and Papademos in Greece. The Athens government is told what's what in prescriptions from the Troika of the EU commission, the European Central Bank and the International Monetary Fund.
According to the German European central banker Jorg Asmussen, the IMF brings that expertise gained with the World Bank during the debt crisis of the third world in the 1980s into the poker around the euro-crisis. The impoverishment of broad sectors of the population and a "lost decade" in Latin America, Africa and parts of Asia were the terrible results. Thirty years later this prescription has become the blueprint of politics in the European debt crisis. Nothing demonstrates more clearly that the financial crisis long ago changed into a serious political legitimation- and regulation crisis.
PRACTICAL CONSTRAINTS ARE NOT ALWAYS CONVINCING
Not surprisingly, no Europe enthusiasm has sprung up and right-wing populists find their frustrated public. The Europe project is on the verge of bankruptcy because it was delivered up to the practical constraints of the market and the authority of money. In the 1980s Jacques Delors, one of the great commission presidents, raised the question: "Who can fall in love in a domestic market?" The Brussels and Berlin austerity dictates are certainly not love potions. However a majority of the European population is still for the Euro monetary union (52 percent in May 2012) while 40 percent is against. Only 40 percent believe things are developing in the right direction (32 percent believe the opposite).
The skepticism is understandable. At the end of June 2012, the Euro countries resolved that ESFS and ESM directly support the banks and not indirectly by the respective government... The transfer union and the ESM have lost their terror for Merkel.
Supporting "system-relevant" banks is a good deed. Supporting social states is not. The deficit in the state secondary budget where debt service is registered is tolerable because a surplus is realized through austerity in the primary budget of normal state revenue and expenditures. Until recently, ESM stood for the "European Social Model," not for the "European Stability Mechanism." But this obviously disappeared in the Orwellian memory hole. Oh Europe!
The state adjusts the macro-economic order so losses of private micro-economic fraudsters are minimized. The entries in the state budget are not glass-bead games. They change the income streams and living conditions of individuals, social groups and classes. Conflicts occur since these are affected differently. This is not new. We witness this now in Greece, Spain, Ireland, Italy and other countries of the crisis-shaken euro-zone.
In Athens at the beginning of the 6th century, the wise statesman Solon tried to settle conflicts by "shaking off burdens" (seisachtheia). Debt relief could not be avoided in ancient Athens because the excessively indebted small farmers and artisans had to sell themselves into slavery to pay their debts and make possible a new beginning for their families.
No just community can arise. A balance between the poor debtors and the rich creditors was necessary. The unbearable debts had to be shaken off. This has not changed in principle in modern Athens and in Europe altogether. "Shaking off burdens" can be carried out in the scope of a debt audit - a kind of declaration of bankruptcy for states - that should regulate a just distribution of losses. What succeeded in ancient Athens must also succeed in modern Athens and in Europe's EU states knocked about by the financial crisis.
European central bank chief Mario Draghi attempts bailout-boats called the "Growth Pact" instead of "shaking off burdens." Whether they are seaworthy and bring the euro-passengers to new shores is completely unknown. The underlying idea is simple and attractive on first view. The debts should be gradually paid off out of a growing GDP. The attempt "to grow out of debts" did not function in the debt crisis of the South in the 1980s. Nevertheless some hope for such a recipe for success - possibly dressed up as a "Green New Deal" guiding growth-oriented investments in ecological areas. 
Green investments must also be profitable in a capitalist economy. Without profit, there is no investment incentive. Green businesses will also try to lover piece-labor costs, extend working hours and force down wages and salaries. They also strive for superior competitiveness in the global competition. They push back the less successful businesses and contribute to over-production. Thus the attempt to master the crisis starts the next crisis.
The crisis spills over to areas of life beyond the economy. Sustainable growth cannot manage without consumption of nature. Since "Peak Oil" is reached, the supply of fuel may still grow through re course to renewable fuels from biomass. However this only intensifies the competition over land use. Sooner or later "peak soil" will follow peak oil. This kind of mastery of the economic and financial crisis leads inevitably to a food crisis and even to a hunger crisis in many poor world regions.
Isn't expanding public services commanded for ecological and social reasons instead of expanding material production? Aren't there many investment opportunities creating jobs in the public health and public education systems, in caring for children and older persons, in solidarity- and citizen work, in mediation of conflicts or the formation and development of the community?
These tasks demanding high competence must be organized and extended as non-profit activities. They cannot be carried out in a profitable capitalist way, even with subsidies that must be branched off from growth with the help of tax revenues. "De-growth," the withdrawal of growth advocated by growth critics, is not enough. Thus the alternative to austerity requires the transition to "post-capitalist" terrain. The "system question" cannot be avoided.
(1) "Süddeutsche Zeitung, 4. Juni 2012.
(2) Schon 1847 sah Marx als Folge der Arbeitsteilung in der modernen Gesellschaft, „daß sie die Spezialitäten, die Fachleute und mit ihnen den Fachidiotismus erzeugt". Siehe: „Das Elend der Philosophie", in: MEW 4, S. 157.
(3) Siehe Robert Mundell, „A Theory of Optimum Currency Areas", in: "The American Economic Review, Bd. 51, Nr. 4, 1961.
(4) „Monetaristen" sind eigentlich die Anhänger der „Chicagoer Schule" Milton Friedmans, die Inflation durch Begrenzung des Geldmengenwachstums (etwa möglichst geringe Lohnzuwächse) eindämmen wollen und öffentliche Investitionsprogramme ablehnen. In der europäischen Integrationsgeschichte gelten als Monetaristen diejenigen, die sich von einer Währungsunion positive Impulse für die realökonomische und politische Integration versprechen. Die „Krönungstheoretiker" glauben dagegen, dass der Integrationsprozess erst nach weitgehender realökonomischer Angleichung durch eine Währungsunion „gekrönt" werden kann.
(5) Der Maastricht-Vertrag von 1992, die Gründungsurkunde der Europäischen Währungsunion, begrenzt die jährliche Neuverschuldung der Eurostaaten auf maximal 3 Prozent des BIP, die Gesamtverschuldung auf 60 Prozent des BIP.
(6) Diesen Glauben teilten selbst nicht neoliberale Politiker wie Exbundeskanzler Helmut Schmidt.
(7) Wissenschaftlicher Beirat von Attac, „Die Finanzmärkte kontrollieren statt die Bevölkerung von Schuldnerstaaten auszupressen. Zehn Argumente zur europäischen Finanzkrise", "Standpunkte, 35/2011, Rosa-Luxemburg-Stiftung, Oktober 2011.
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