Managing the Euro: Mission Impossible!

1.  No state, no money.  Together, a state and its currency constitute, under capitalism, the means to manage the general interest of capital, transcending the particular interests of competing segments of capital.  The current dogma that imagines a capitalist system managed by the “market,” i.e. without the state (reduced to its minimal functions of ensuring law and order), is based on neither any serious understanding of the history of real capitalism nor any “scientific” theory capable of demonstrating that management by the market produces — even as a tendency — any such equilibrium (a fortiori “optimal”).

The Euro was created in the absence of a European state that substitutes for national states, whose essential functions of managing the general interests of capital were themselves on the way toward being done away with.  The dogma of a currency that is “independent” of the state is an expression of this absurdity.

“Europe” does not exist politically.  Despite the naive illusion that calls for transcending the principle of sovereignty, national states alone remain legitimate.  The political maturity that could make people of historical nations accept a Europe constituted by a “European vote” doesn’t exist yet.  One can only hope for it at this point; it remains the case that we would have to wait for the emergence of a politically legitimate Europe for a long time.

Worse, “Europe” doesn’t exist socially and economically either.  A Europe composed of 25-30 states remains profoundly unequal in terms of capitalist development.  The oligopolies that control the economy of the region (and its current politics and political culture besides) are groups whose “nationality” is determined by that of their major directors.  These groups are primarily British, German, and French, only marginally Dutch, Swedish, Spanish, and Italian.  Eastern Europe and in part Southern Europe are to Northwestern and Central Europe what Latin America is to the United States.  Under these conditions, Europe is little more than a common, indeed single, market, part of the global market under late capitalism of generalized, globalized, and financialized oligopolies.  From this perspective, as I have written before, Europe is the “most globalised region” of the world system.  This situation, reinforced by the impossibility of a politically united Europe, results in differentiated levels of real wages, systems of social solidarity, and regimes of taxation that cannot be done away with in the framework of such European institutions as exist today.

2.  The creation of the Euro was therefore an act of putting the cart before the horse.  The politicians who created it, by the way, have sometimes admitted this, claiming, however, that Operation Euro would force “Europe” to invent a transnational state, thus pushing the horse before the cart.  That miracle didn’t happen.  In the late 1990s, I had occasion to express my doubt about this maneuver.  My expression (of “putting the cart before the horse”) has since been taken up by one of the senior officials behind the creation of the Euro, who had at that time told me in no uncertain terms that my judgment was unduly pessimistic.  Such an absurd system could only give an appearance of working without a major hitch, I wrote back then, if the general conjuncture remained favorable and uncomplicated.  What has come to pass therefore should have been expected: as soon as a crisis (which initially appeared to be financial) hit the system, it proved impossible to manage the Euro, which doesn’t allow for coherent and effective responses.

The current crisis is set to persist and even deepen.  Its effects are varied and often uneven, from one European country to another.  The social and political responses to the challenges that they constitute for the working class, the middle class, and the political establishment are and will vary from one country to another.  It is impossible to manage the conflicts that are bound to arise from them in the absence of a real and legitimate European state, in possession of a monetary instrument to enable such management.

The responses of the European institutions (including the ECB) to the (Greek and other) crises are therefore absurd and destined to fail.  The responses can be summed up in one phrase — austerity for all, everywhere — and are analogous to the responses of the then governments in 1929-30.  And just as those responses aggravated the real crisis in the 1930s, what Brussels advocates today will produce the same result.

3.  The possible course of action in the 1990s should have been defined within the framework of the establishment of a “European monetary snake”: each European state, remaining de facto sovereign, would manage its economy and currency according to its own needs and capacities, albeit constrained by trade opening (the common market).  Interdependence would have been institutionalized by this monetary snake: national currencies would be exchanged at fixed (or relatively fixed) rates, revised from time to time through negotiated adjustments (devaluations and revaluations).

The — long-term — prospect of “hardening the snake” (in preparation perhaps for the adoption of a common currency) would have been open.  The progress in that direction would have been measured by the — slow and gradual — convergence of levels of efficiencies of production systems, real wages, and social benefits.  In other words, the snake would have facilitated — and not obstructed — a potential progress through bottom-up convergence.  That would have required the participating countries to agree to these goals and the policy means to, among other things, control financial flows, which entails the rejection of the absurd system of deregulated and borderless financial integration.

4.  The ongoing Euro crisis could provide an opportunity to abandon the absurd system set up for the management of this illusory currency and to replace it by a European monetary snake in accordance with the real capacities of the countries concerned.

Greece and Spain could start the process by deciding: 1) to (“provisionally”) exit the Euro; (ii) to devalue their currencies; and (iii) to establish foreign exchange controls, at least as far as financial flows are concerned.  These countries would then be in a strong position to really negotiate the rescheduling of their debts and, after audits, the repudiation of debts associated with corruption and speculation (in which foreign oligopolies participated and profited handsomely!).  The example, I am convinced, would gain a following.

5.  Unfortunately, the chances of such an exit from the crisis are probably next to none.

The choice to manage the Euro “independently of the states” and the sacrosanct respect for the “law of financial markets” are not products of some absurd theoretical thought.  They are perfect instruments for keeping the oligopolies in command.  They are part and parcel of the overall European edifice, itself conceived for the sole basic purpose of precluding any challenge to the economic and political power exercised by the oligopolies for their own benefit alone.

In an “Open Letter by G. Papandréou to A. Merkel,” published on many Web sites, the Greek authors of this imaginary letter compare Germany’s past and present arrogance.  Twice in the 20th century, the ruling classes of Germany pursued the chimerical project of fashioning Europe by military means, whose power was overestimated each time.  Isn’t their current goal of hegemony over a Europe designed as a “Mark zone,” in turn, based on a similar overestimation of the German economy, whose strength is relative and which is in fact fragile?

It won’t be possible to exit the crisis unless and until a radical Left dares to take political initiative and build anti-oligarchic, alternative historic blocs.  Either Europe will be Left, or there will be no Europe, as I have written.  The European electoral Left rallying as it is now to the idea that “Europe as it exists is better than no Europe at all” makes it impossible to break the impasse, which demands the deconstruction of the current European institutions and treaties.  Failing that, the system of the Euro, and such “Europe” as exists behind it, will plunge themselves into a chaos whose outcome is impossible to foresee.  All scenarios are possible, including what they say they want to avoid: the resurgence of the far Right.  Under these conditions, for the United States, whether a European Union will survive as a completely powerless entity or it will break up matters little.  The idea of a united and powerful Europe that forces Washington to take its interests and points of view into account is a mere illusion today.

6.  I have made this reflection concise, to avoid saying the same things again, having already commented upon various aspects of the European impasse in my previous writings:

L’hégémonisme des Etats-Unis et l’effacement du projet européen, Section 2, 2000
Obsolescent Capitalism, Chapter 6, 2003
The Liberal Virus, Chapter 5, 2003
Pour un monde multipolaire, Chapter 1, 2005
La crise, sortir de la crise du capitalisme ou sortir du capitalisme en crise?, Chapter 1, 2008

Samir Amin was born in Egypt in 1931 and received his Ph.D. in economics in Paris in 1957.  He is director of the Third World Forum in Dakar, Senegal.  His numerous works include The Law of Worldwide Value (forthcoming), Eurocentrism: Second Edition, The World We Wish to See, The Liberal Virus, Accumulation on a World Scale, Unequal Development, and Spectres of Capitalism.  The original article “Gestion de l’euro: mission impossible!” was published by Marianne2 on 29 May 2010.  Translation by Yoshie Furuhashi (@yoshiefuruhashi | yoshie.furuhashi [at]

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