What Happens in Europe Doesn’t Stay in Europe

John Buell
  is a columnist for The Progressive Populist and   
  a faculty adjunct at Cochise College. His most    
  recent book is, Politics, Religion, and Culture 
  in an Anxious Age.

Reading the corporate media, one gets the impression that the travails of the Eurozone constitute a morality play with a comforting theme. Germany has been a model of fiscal rectitude amidst a sea of profligate governments that are dragging it—and the whole European Union and the common currency-- down.
However comforting this theme may be, it is wrong on several levels. For starters, the countries in Europe that are still doing relatively well—including Germany, Sweden, Denmark—have far more developed welfare states than those of such “profligate” nations as Spain and Portugal. In addition, on a more basic level, the fiscal crisis faced by southern European nations owes more to the German model, the worldwide faith in financial “liberalization,” and the single currency.
European integration proceeded out of the most unquestionable of motives. After half a century of war and the decimation of the continent, European leaders and publics sought an end to violence. What better means of reducing violence than tying nations together economically. Europeans, starting with France and West Germany, fashioned common trade agreements on iron and steel and soon went on from there to create both wider free trade zones as well as a set of common policies to govern health, safety, and civil liberties. These early trade agreements, however, did not include or require a common currency.
From the start, many European social democrats worried that more inclusive European integration would bring together nations with vastly different economic productivity levels. Preserving floating currencies would, however, give nations that experienced shocks or the loss of jobs through balance of trade problems the escape hatch of currency devaluation. But just as importantly, the Maastricht agreement, one of the pillars of European Union, required richer nations to contribute to a stabilization fund to assist poorer nations in developing their infrastructure. Such a fund was viewed as an instrument of economic justice not only for the poorer states but also for a Western European working class that feared the loss of jobs to a low wage periphery.
European integration also took place on another track, one more dominated by financial elites than by working class or even manufacturing interests. Financial interests promoted the idea of a currency union as a means of taking currency risk out of trade within the EU as and thereby facilitating broader trade and development. Corporations would not need to worry about rapid fluctuations in the relative value of particular currencies. Another agenda was in play as well. Some banking elites hoped that a common currency would function much as the nineteenth century gold standard, making it impossible for debtors to inflate their way out of debt. 
The initial appeal of the common currency was not limited to the banking community. Some of the weaker European states expected that teaming up with economic power Germany would allow them to benefit from the latter’s stellar credit rating. Others hoped that they would become little Germanys.  
Germans were willing to go along, but with one proviso. Any agreement must include a central bank that would operate along historic German principles so that the new common currency would continue to carry an excellent credit rating. The European Central Bank (ECB) would have to be independent and would be guided by one mandate—price stability.  As Center for Economic Policy Research co-director Mark Weisbrodt puts it, “The right-wing nature of the monetary union had been institutionalized from the beginning. The rules limiting public debt to 60 percent of GDP and annual budget deficits to 3 percent of GDP – while violated in practice, are unnecessarily restrictive in times of recession and high unemployment. The European Central Bank’s mandate to care only about inflation, and not at all about employment, is another ugly indicator.”
In the prevalent morality play, German’s fiscal rectitude plays a starring role, yet the German economic model is at the core of the periphery’s economic crisis.  Economists at an early November conference on the “Crisis in the Eurozone” at the University of Texas pointed out that Germany in the last decade has forged a new social compact and model of development. The basic postulate is that price stability fosters economic growth. Price stability in turn had two pegs, government austerity and a social compact between management and labor under which wages were kept flat even as productivity rose dramatically.  Labor’s one benefit was a commitment to maintain relatively high levels of employment even during down times. German corporations in effect accepted some redundancies in order to buy labor peace.
The strategy worked, at least for a time, but only because of one other major factor, financial speculation. Under the new Eurozone rules, each nation retained the right to regulate its own banks even as capital could flow more freely than goods and services. Banks and governments in effect forged a common bond in the aggressive quest to pursue new sources of profit.  Since prices were stable in Germany and interest rates low, its banks could take cheaply raised capital and invest it elsewhere. Elsewhere included toxic US mortgage backed securities as well as housing in Spain and commercial real estate in Ireland, among other targets.  The rating agencies, including most prominently Standard and Poor's, which recently downgraded the debt of several peripheral EU nations, blessed the credit worthiness of these toxic instruments, thereby adding fuel to the fire.
The press often suggests that European banks were affected by the Wall Street 2008 collapse, but from the very start they were key players in the run up to that collapse. And since European banks were even more highly leveraged than their US counterparts, their role was very large.
The evolution of this system in effect created real estate bubbles even as it was gradually decimating the productive capacity of the periphery economies. In a recent Foreign Affairs commentary, Mark Blyth and Matthias Matthijs commented: “German lending to the eurozone has been pro-cyclical. Indirectly (through buying bonds) and directly (by spreading its exchange rate through the euro), the country has basically given the periphery the money to buy its goods. During the economic boom of 2003-2008, Germany extended credit on a massive scale to the eurozone's Mediterranean countries. Frankfurt did quite well for itself. … in 2008, Germany was one of the two biggest net creditors within the eurozone (after France). Its positive positions were exact mirrors of Portugal, Greece, Italy, and Spain's negative ones. Of course, as the financial crisis began to escalate in 2009, Germany abruptly closed its wallet. Now Europe's periphery needs long-term loans more than ever, but Germany's enthusiasm for extending credit seems to have collapsed.” 
Once the bubble burst, governments had to take on immense responsibilities to the unemployed as well as to their banks. Spain and Ireland had been models of fiscal rectitude before the crisis. That crisis and the factors that led up to it were the cause rather than the consequence of exploding budgets.
 Some conference participants pointed out the literally self-contradictory nature of the current mainstream agenda. Every European nation is now being asked to cut wages and welfare benefits in order to become more competitive and run balance of trade surpluses. But every nation in a free trade area cannot run a surplus. Someone must buy the goods.  Or perhaps Europe can become like Lake Wobegon, where everyone’s children are above average.  Even S and P, though without acknowledging its role in this crisis, has belatedly recognized,  that: “[T]he financial problems facing the eurozone are as much a consequence of rising external imbalances and divergences in competitiveness between the eurozone’s core and the so-called “periphery. As such, we believe that a reform process based on a pillar of fiscal austerity alone risks becoming self-defeating, as domestic demand falls in line with consumers’ rising concerns about job security and disposable incomes, eroding national tax revenues.”  
 The European crisis, as several conference economists pointed out, could be contained relatively easily. Greek economist Yanis Varoufakis has developed one of the most detailed and widely discussed proposals.  The ECB—acting on its own authority-- could buy bonds of distressed governments and refinance the loans at lower and sustainable rates of interest. With the exception of Greece, these nations could all pull debts and deficits down to manageable levels if reasonable interest costs were restored. A sensible recovery program would also include recapitalization along with central regulation of national banks. And finally, slow growth and the ECB’s relentless pursuit of price stability have been immense problems. Both ecological and economic concerns could be addressed through a European wide infrastructure fund.  
The recent ECB decision to loan money to European banks accepting their risky sovereign debt as collateral is a small step in the right direction. It may buy time and prevent credit freezes.  Nonetheless, it is inadequate. Loans are limited to three years maturities. As such there may be little effect on the long end of the yield curve. More fundamentally, nothing has been done to encourage growth and spending by the wealthier nations.
Unfortunately, as James Galbraith has pointed out, even more than the US case, Europe is dominated by a Calvinist mindset that equates wealth with virtue and debt with moral sloth. Germans complain about the irresponsibility of Southern Europeans, forgetting both that their banks encouraged it and that without such lending, German industry would have enjoyed smaller markets. A German working class, after years of being squeezed itself, can too easily accept such scapegoating.
These self-reinforcing trends could be reversed, but only through action on several fronts.  In the healthier European states, a renewed social democracy might extend more fiscal benefits, support for wage growth, and more aggressive pursuit of shorter hours as a reward for increasing labor productivity. Such steps would benefit not only manufacturing workers but also the growing service sector as well. Demonstrations across Europe might show debtors are real people rather than crude moralistic stereotypes.  A European infrastructure fund could lend more to the periphery, thereby improving long- term development prospects for the entire community.
Taking lessons from Occupy Wall Street, movements and leaders in Europe could do more to show the ways in which private investment banks have harmed both debtor nations and German taxpayers. Finally, one can even dare hope that industrial leaders in Germany might come to realize and publicly argue that austerity hardly helps them either. Stranger things have happened. Contemporary capitalism has more stresses, strains, and inconsistencies than either its defenders or even some of its Left critics recognize.
 Whatever happens, we in the US have a vital albeit hard- to- measure stake in these events. An EU collapse will hurt our banks, many of which have huge credit default swaps (in effect insurance policies against sovereign debt defaults), Too many of our elite and many citizens will also continue to draw and even reinforce the wrong conclusions.

Newt Gingrich as Intellectual

Tim Hanafin
Johns Hopkins University

Newt Gingrich has recovered sufficiently from a few misstepsearly in his campaign to return as a real voice in the Republican machine. Apparently, we have to take Newt seriously again, if not as a bona fide candidate then at least as the Republicans’ touted resident intellectual. It provides a degree of solace of sorts to realize that even that machine needs a character like Newt to give it legitimacy.

The ego of this intellectual is cartoonishly large. His self-regard defies parody: he once said in earnest, “people like me are what stand between us and Auschwitz.” He’s a bully, and he takes himself seriously enough to relieve the burden on others to do so. If he’d stayed out of this year’s race, he’d merely be the national know-it-all, hectoring his many detractors and enemies from the sidelines. As it is, he’s chosen to run, and he clearly thinks the presidency is his by right. On December 4, Newt pronounced, “I will be the nominee” (video). On December 22, he told the entire GLBTQ and allied population that if they’re going to be like that they should go ahead and vote for the other guy because he doesn’t need them.

The way he’s running his campaign, you get the sense Newt feels he’s doing us a favour; he seems to wonder why he can’t just do something nice for us all without getting the third degree. For example, last spring Newt was observed reversing his position on Medicare reform inside the space of three days, which piqued some interest. However, he lost patience with answering questions about it almost immediately, pronouncingon the following Thursday, “any ad which quotes what I said on Sunday is a falsehood.” In their insolence, the media generally refused Newt’s command to throw his words down the memory hole, and Newt was lambastedwidely for that phrase. In response, Newt’s press secretary, Rick Tyler, issued a florid press release, presented here in the form of a dramatic reading by John Lithgow on The Colbert Report:

Newt styles himself as a philosopher and a mandarin of policy and political vision. It’s clear he cultivated this cred, such as it is, to use it as a cudgel against his opponents. To attack his intellectual pretentions on their own terms would be to miss the point. Take, for example, his contributionto the ‘debate’ about the so-called ground zero mosque in New York. Newt scores points by erroneously presenting Islam and Christianity as natural, perennial enemies and by implying the centre’s name, ‘Cordoba house’ was not a reference to a shining example of a uniquely cooperative culture and society, but a deliberate symbolic insult, a reference to a conquest that Muslims in general, Newt implies, would like to repeat sometime soon. He concludes that American ‘elites’ are too ignorant of history to realize ‘Islamists’ are jeering at them behind their backs. Since Spain actually stands, until 1492, as a place where a rough territorial pluralism of sorts between Judaism, Christianity and Islam survived for a long time, it’s a whiggish revision of the history of Islam in Spain. It could have been written by a Grand Inquisitor who forgot to rail against the Jews and the Protestants as well as the Muslims. It’s silly,but it’s not meant to be taken seriously by anyone who cares about the matter. He cut this history from whole cloth to paint a historical veneer over the manufactured outrage against the creation of a Cordoba House in Manhattan today.  
Newt's intellectual vanity is only the base of an even-grander self-image as the historical hero of the uniqueness of American civilization. In a 1997 reporton Gingrich, the Congressional Select Committee on Ethics found handwritten notes he had distributed to his political advisors concerning a course he once taught called “Renewing American Civilization.” In these notes, Gingrich described himself as an “advocate [and] definer of civilization,” a “teacher of the rules of civilization,” an “arouser of those who form civilization,” the “organizer of the pro-civilization activists,” and the “leader (possibly) of the civilizing forces.” All of which Newt calls ‘Newt Action.’ He even drew a picture of himself undertaking ‘Newt Action’:

Credit to www.bessettepitney.net/2011/11/gingrichs-self-image.html
This hand-drawn diagram was submitted as supplementary evidence in a congressional report on Newt’s professional ethics, and was attributed to him personally. Of course, if you look closely you’ll see that after drawing himself as a tiny little stick-figure Sun King, and after realising, perhaps, that others might not share or appreciate his views vis-à-vis his own indispensability, Newt wrote, humbly, “a pattern rather than a single point.” This means, I guess, that he was willing to acknowledge he might not be the sole cause of world-historical change. Nevertheless, whether pattern or point, it’s all pure Newt action.

Maybe this is not that unusual for the type of person who fancies him- or herself presidential material. I don’t think you could do that job without a huge ego. But Newt transfigures it into a gargantuan ego. It seems winning the presidency would be, to Newt, the ultimate (or perhaps the only possible) vindication of his intellect. It’s the destiny of a man with a brain like his. Or, to say the same thing, it’s America’s destiny be ruled by Newt in a Newt way.

And maybe Newt believes it’s his intellectual destiny to ascend to the presidential throne. But it is doubtful whether many others believe that, not even the 30% of those polled recently who consistently favour him. Newt’s appeal extends only as far as being aggressively obnoxious has become a virtue in U.S. political culture, which is to say, not quite far enough yet. Nonetheless, his claim to be an intellectual may still carry subliminal clout in the political culture. There is a large portion of the U.S. population that feels intellectually condescended-to by ‘elites,’ the media, the media-elites, liberals, liberal-elites, the academy, the liberal media, so on and so on. This is a feeling that the Republican party fosters and exploits as their bread-and-butter. If people like Newt, it’s because Newt puts ‘elites’ in their place. He may be a snob, but he’s theirsnob. Indeed, he may take advantage of a tendency within the liberal intelligentsia to correct false histories as if everybody should already have known this.
So Paul Krugman was wrong to say Newt was a stupid man’s idea of a smart man. If the stereotypical ‘smart man’ ridicules trumped-up know-it-alls for not being half as smart as they think they are, then to a large portion of Americans, Newt and Krugman sound exactly alike. In the end, Newt doesn’t need to have real intellectual credibility any more than George W. Bush needed to really be from Texas. Newt, like Bush, fulfills a resentful political-cultural wishes for revenge. Perhaps, in his case, the hidden attraction is to take revenge on a culture which does not care enough to educate its populace.

Celebrating Death, again

Steven Johnston
Neal A. Maxwell Chair in Political Theory, Public Policy, and Public Service, University of Utah

For America’s elected representatives, the 2011 holiday season called for gift-giving, both material and symbolic. The recipient, if you will, was patriotism. First came the “Vow to Hire Heroes Act.” Now we have the Civil Service Recognition Act. The Democratic and Republican parties may be split on which version of neoliberal capitalism ought to govern America’s social, economic, and political life, but they can always agree on the fundamentals of patriotism, including the need to feed this insatiable affective cultural machine. Patriotism is always on guard for new sources of sustenance to maintain its glossy sheen. Nothing rivals dying for your country, unless, of course, it’s killing for your country—though when it comes to killing, the celebration tends toward the discrete.
The Civil Service Recognition Act provides for (to quote the statute) “the presentation of [a] United States flag on behalf of federal civilian employees who die of injuries incurred in connection with their employment.” It is not just military service personnel who risk—and lose—their lives working in the name of the American people (members of the diplomatic corps offer one prominent example). Nor do you need to serve abroad to have your life placed in danger. It can happen on the home front as well, a space increasingly militarized and securitized in the last thirty years.
Who would object to honoring those who 'serve' their country and pay the proverbial ultimate price? Well, the American Legion, for one. Initially, it condemned the bill, citing the following language as objectionable: A flag shall be furnished and presented…in the same manner as a flag is furnished and presented on behalf of a deceased member of the Armed Services who dies while on active duty.” Fang Wong, the Legion’s national commander, objected to the equation of civilian and military service, privileging the latter: “Civil service workers do not sign a pledge to defend America with their lives, they are not forced to serve in combat zones, and their work routines do not include engaging enemy forces overseas.” Not surprisingly, right-wing bloggers joined in the condemnation, one describing it as “The Flags for Bureaucrats Act,” arguing (I use the term loosely) that it was “just another trapping of power available from the federal government to all those people in the ever expanding federal bureaucracy.” The statute was quickly changed, as supporters of the bill insisted no equation was intended—or possible. The American Legion supported the amended bill without hesitation. Patriotism’s love affair with death again won the day.

Still, and somewhat strangely, the ritual enacted into law hasn’t changed (a flag will still be presented). How to make sense of this? It seems that the American Legion was primarily interested in policing the terms of American political discourse. You simply cannot say publicly (this applies especially to the state) anything that seems to equate civilian and military service. The latter is sacrosanct.

What allegedly distinguishes these forms of service? Though Fang Wong won’t explicitly say it, it’s the act of killing for country that separates the two. Presumably most civilians who die in the performance of official duties do not kill, but this distinction does not always hold true—just ask the CIA. Does the exception prove the rule?

Ironically, the right-wing hysteria may be warranted, a defensive reaction designed to deflect attention from another reality not to be exposed—the mercenary character of the military forces of the United States, which are routinely showered with (more and more) trappings to join and remain in the military. If anything, the military represents the pinnacle of achievement in the American welfare state, though many Americans might be loath to think in such terms. This is the comparison that must be unthinkable, certainly unspeakable. What’s more, the real issue is not that civilian service might rise to the level of military service; the fear is that military service is no more elevated than civilian service. As Andrew Rosenthal points out, many conservatives don’t consider government jobs real jobs; well, how is it that a military career became so highly valued in a country whose founders were deeply suspicious of a standing army? Many conservatives deride professional politicians (Mitt Romney, ludicrously, tried to tarnish Newt Gingrich with this label in a recent GOP debate). While not endorsing such a judgment (I like politics), I would ask how professional military service achieved its exalted status. Shouldn’t it be something that everyone does, briefly, when young? And if a permanent military force is needed, why isn’t it on the list of America’s necessary evils (like government itself)? How is it, for example, that make-work jobs fighting an imperial war in Iraq come to be honored? How was it contributive to America’s collective project?

Finally, the Civil Service Recognition Act, ostensibly reflecting a generous political impulse, excludes and marginalizes as much as it includes and honors. It privileges forms of service informed by death rather than life. Service here functions as a euphemism for sacrifice, itself a euphemism for death. Not surprisingly, then, the thousands of citizens of the Occupy movement will receive no formal recognition for their democratic activism on behalf of justice, fairness, and the 99% (even though they, too, it turns out, risk their lives in its pursuit).

If anything, democratic activism, perhaps especially if undertaken by the wrong people, often fosters state violence and disenfranchisement. Republicans across the country have undertaken a party-sponsored program to systematically eliminate as many likely Democratic voters (openly targeting students) as possible from the electoral process in pursuit of a one-party state. Tragically, those who do in fact kill and die in the name of America’s democratic values thereby see their efforts, in the end, subverted, even destroyed, by those who deploy them with undue ease. For what exactly are they killing and dying?