The Bank of Ireland in Dublin, Ireland. (Photo: Alanah)
European financial and political leaders are now imposing a social disaster on Ireland's people. It parallels and worsens the similar disasters underway in Greece and eastern European countries and being planned for Portugal and Spain next. The cause of all these disasters - the global capitalist crisis – emerged from the interaction among capitalism's three great institutions: private property, markets, and the exploitative organization of production. The destruction of human lives and the waste of unemployed resources adds to the injustice of who benefits and who loses from capitalist cycles. All together, the horrors flowing from this period of capitalism dwarf and mock its old claims to be the most efficient and dynamic of systems.
Ireland's private banks plunged into the last 25 years of "free, open, international capital markets" by borrowing globally, lending imprudently, taking on and spreading far too much risk. The "efficiency" of "unfettered capital markets" proved illusory. The resulting crisis made a bad joke out of all the economists, politicians, and journalists who had kept assuring their audiences that modern global capitalism was a limitless engine of progress and prosperity. The crisis exposed the utter bankruptcy of Irish banks. It also exposed the power of collapsed capitalists to force governments to "socialize" their losses by guaranteeing their debts. This moved the banks' unpayable private debts onto the government's books instead as unpayable public debts.
Europe's banks – who lent so much so dangerously to so many Irish banks – could not stand the possibility that Ireland might not be able or willing – under mass pressure – to repay the debts that the Irish government had taken over from their private banks. So the European banks repeated what the Irish banks had done: they forced their European Union (EU) government to loan the Irish government the money to cover the Irish banks' socialized debts.
The EU had already provided such loans to the Greek and other governments. And for the same reasons. In those countries, the global capitalist crisis had exposed either their banks' massive losses or the already excessive government debt accumulated from years of using state borrowing to ease capitalism's failures (or both). In each case, the EU raised the monies for these loans to bail out its member governments by borrowing – yet another layer of socialization of the financial disasters of capitalism.
So now all governments – from the EU on down through its member states - can begin the process of squeezing all Europeans to pay the costs of this socialization of private capitalism's massive mistakes, corruptions, and losses. Those costs include the interest on all the government at EU borrowing and the repayment of those borrowings. Austerity is the program: raising taxes on whole populations and/or cutting public programs and payrolls to raise or free money to pay to those lenders who financed the socialization of private capitalism's failures.
The middle and poorer strata will be told that their suffering from austerity policies (in addition to that stemming from the crisis itself) is part of "everyone's burden." The austerity is thus portrayed as a democratic community-wide necessity. Meanwhile, employers and the rich – the small minority of Europeans with enough wealth to lend to the EU and member governments – will collect the interest and repayments extracted via the austerity programs. "Community-wide" will not characterize the beneficiaries of austerity; that is reserved only for its victims.
This entire capitalist flim-flam operation depends on one thing for its success: the continued willingness of the masses to accept and endure this. After initial protests, the next phase seems to be some resignation in the hopes that no worse than the first phase of austerity will be needed. Yet mass resignation only emboldens the capitalists, rich, and their political apparatchiks to shift still more of the painful costs (of a crisis that remains far from over) onto the mass of the population. Resignation may well reveal itself to be even less acceptable that seemingly ineffective protests were before. And then what?
Finally, consider this: Greek politicians justify their austerity program on the grounds that by lowering wages and other costs of business, they will "become more competitive" and so draw investments and thus jobs, especially from elsewhere in Europe, into Greece. However, now that Ireland, several eastern European nations, Protugal and Spain are undertaking their austerity programs, no investor will commit to Greece without first comparing conditions there with what aere evolving opportunities elsewhere. The same applies to the parallel justifications for austerity in each of those other European nations. Moreover, can anyone doubt that Germany and the other rich countries of Europe will not also take steps to prevent the exodus of their industries to the cheaper zones of peripheral Europe (as they have been doing successfully for years)?
Just as repeated currency devaluations did little to alter the relative position of the poorer European nations before the single currency regime was imposed, so now the dueling austerity programs will do little. But they will hurt the mass of people even more. Score yet another success for the way global capitalism works.
Rick Wolff is a Professor Emeritus at the University of Massachusetts in Amherst and also a Visiting Professor at the Graduate Program in International Affairs of the New School University in New York. He is the author of New Departures in Marxian Theory (Routledge, 2006) among many other publications. Check out Rick Wolff’s documentary film on the current economic crisis, Capitalism Hits the Fan, at www.capitalismhitsthefan.com. Visit Wolff's Web site at www.rdwolff.com, and order a copy of his new book Capitalism Hits the Fan: The Global Economic Meltdown and What to Do about It.