OBLIGATORY NEOLIBERALISM

By Ignacio Ramonet Reprint | | Print |

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PARIS, Aug 2 2010 (IPS) - "Lower your head, fierce Sicambrian; love what you have burned, and burn what you have loved." So Bishop Remigius commanded the barbarian Clovis, converting him to Christianity so he could become the king of France, about 1500 years ago. The same command might have been addressed to social democrat Jose Luis Rodriguez Zapatero by the heads of state of the Europgroup in Brussels last May 7 when they joined the International Monetary Fund (IMF) and the financial markets to make the Spanish premier abjure any social whims and swear allegiance to the neoliberal creed.

Just five days later, with the fanaticism of converts (and feigned reluctance) the Spanish prime minister -who stated in 2004, "I will govern for the weakest," and repeated in 2008, "I will govern thinking of those who have nothing"- announced a wildly unpopular programme. Five million pensioners, three million government employees, hundreds of thousands of elderly in need of assistance, and half a million new parents as of 2011 will suffer the consequences of these drastic cuts.

At the same time, other social democratic heads of state, in Greece and Portugal, found themselves forced to make this voyage to Canossa, as it were, to recant and prostrate themselves and comply with the very ultraliberal philosophy that they had previously fought against .

It was a striking change. Just two years earlier, since the collapse of Lehman Brothers in the US, the proponents of neoliberalism were defeated and on the defensive. They were the ones recanting back then. The "crisis of the century" seemed to demonstrate the failure of their ideology of deregulation and the need for the state to reassert itself to save the economy and preserve the cohesion of society.

Governments, including those on the right, were reasserting their elemental role in economics, nationalising financial entities and strategic firms, injecting massive amounts of liquidity into the banking sector, multiplying stimulus plans. Both economists and government officials were pleased by these efforts, which reflected the lessons learned from the crisis of 1929, when it was shown that deflationary policies, the restriction of credit, and austerity led to the great depression.

Thus in fall of 2008 the entire world proclaimed "the return of Keynes". The US launched a 700 billion dollar rescue plan for the banks, soon followed by the infusion of another 800 billion dollars. The 27 members of the European Union reached an agreement on a 400 billion euro stimulus package. And the government of Rodriguez Zapatero, stating in November 2008 that "three consecutive years of budget surpluses now allow us to incur a deficit without jeopardising the credibility of our public finances", announced an ambitious 93 billion euro Stimulus Plan for the Economy and Employment.

Moreover, at various G-20 Summits, the leaders of the most powerful countries decided to abolish tax shelters, rein in hedge funds, and punish the abuses of speculation that caused the crisis. Jose Manuel Durao Barroso, president of European Commission, announced: "The political authorities will never again allow speculators to raise their heads and drag us back into this situation."

And yet here we are in the same situation. Once again the markets and the speculators are in the driver’s seat and the politicians are on their knees. What happened? The weight of the sovereign debt incurred by states to save the banks [i] has been used as the pretext for a spectacular change of situation. Without scruples, the markets and financial speculators, backed by the ratings agencies which had been completely discredited for months, launched a direct attack in the heart of the European Union against the most indebted countries, now accused of living beyond their means. The primary target is the euro. The Wall Street Journal [ii] revealed that a group of prominent hedge fund directors met at a hotel in Manhattan on February 8 and decided to join together in an effort to drive down the euro to parity with the dollar.

The markets want their revenge. And they are demanding more forcefully than ever, in the name of "necessary austerity", the dismantling of social protections and drastic cuts in public services. The more neoliberal governments are taking advantage of this state of affairs to demand greater "European integration", in the name of which they are trying to force the adoption of two instruments that do not exist: an economic government of the European Union, and a common fiscal policy. With the backing of the International Monetary Fund (IMF), Germany has imposed structural adjustment programmes on all EU members (Greece, Portugal, Spain, Italy, France, the UK, Romania, Hungary, etc) whose governments, blindsided by the cuts in public spending, complied without complaint. Even though this threatens to push Europe into a deep depression.

Along the same lines, Brussels wants to sanction countries that don’t respect the stability pact [iii]. Berlin is trying to go further and add a highly political punishment: the suspension of the right to vote on the European Council. The goal is clear: to prevent all governments from straying from the neoliberal path.

At bottom, this is the political fallout from the current sovereign debt crisis: there seems to be no room in the EU for any form of progress. Will the citizens of the EU allow this leap backwards? Will they accept the elimination of any leftist democratic solution that seeks social advancement? (END/COPYRIGHT IPS)

[i] A report by the European Commission indicates that the total of funds committed for the banks has risen to 3.3 trillion euros, or 28 percent of the GNP of the EU. (El Pais, Madrid, 20 June 2010)

[ii] The Wall Street Journal, NY, 26 February 2010. http://online.wsj.com/article/SB100014240527487037950045750877418 48074392.html

[iii] Adopted in 1997, limiting the public debt to 3 percent of GDP.

(*) Ignacio Ramonet, director of "Le Monde diplomatique en espanol" ( www.monde-diplomatique.es).