First Published in jimsresearchnotes 10 Feb 2012
Ambrose Evans-Pritchard in Telegraph Online 5 February 2012 on the decline of French influence – French socialists’ Latin revolt against Germany opens his article as follows:
“The Carolingian union is all that anybody in French public life can really remember. It worked marvellously for two generations, levering French power on the global stage, and the euro was of course their own creation, intended to tie down a reunited Germany with “silken cords”.
“How can they now face the awful truth that this elegant strategy has blown up in their faces, enthroning Germany as undisputed hegemon?” (my emphasis added)
But this is only the start, and Evans-Pritchard goes on to spell out the rapid growth of the German economy while the French economy has deteriorated:
“While both countries had the same sorts of export surplus in the early 1990s, they have diverged massively since the D-Mark and franc were fixed in perpetuity. Germany has a current account surplus of 5pc of GDP: France has a deficit of 2.7pc, anathema for Colbertistes.”
You can see from IMF data that the silent coup took place in the fat years of the global boom when Germany forced down unit labour costs; -1.7pc in 2003, -4.0pc in 2004, -3.3pc in 2005, -1.8pc in 2006.”
As, indeed, the architect of Ordoliberalism, Ludwig Erhard, first as Economics Minister under Konrad Adenauer, then as Chancellor. Since reunification Germany has continued to grow like topsy. Yet despite the heavy and sustained subsidisation of France by Germany during this time, French discontent has grown, as Evans-Pritchard shows:
“France lost ground year after year due to wage creep and weaker productivity. Enough time has now gone by to leave it stuck inside EMU with a misaligned exchange rate, and talk of euro exit is at last starting to be heard.”
Evans-Pritchard goes on to make a different but equally important point, that Merkel is adopting the same kind of inflexible Iron Chancellor role that Germany has traditionally played in Europe, albeit this time not militarily, but fiscally:
[Sarkozy’s] gamble on the status quo has failed. Mrs Merkel has not yielded an inch, and has now forced him to swallow a fiscal treaty that erodes French sovereignty without offering any remedy to the crisis at hand.
Her contradictory medicine for half of Europe has itself cost France its AAA rating, as Standard & Poor’s made clear when it unleashed its volley of downgrades last month. “Fiscal austerity alone risks becoming self-defeating,” it said.
Evans-Pritchard makes another important point:
“My own view is that Germany has overplayed its hand badly and will face a whirlwind diplomatic retribution. Its narrative of the EMU crisis – virtuous Northerners rescuing profligate Greco-Latins – was oppressively dominant for two years but has at last been discredited and is now repeated only by pub bores.”
The unfolding Greek Tragedy: Greece is the victim of two inter-related problems: the EU inability to make a decision due to what Fritz Scharpf called the Joint Decision Trap, and the fact that the eurozone is being imposed on an EU that is culturally diverse – a cultural diversity that is its great strength and beauty. As a result the euro cannot succeed without Germany using hegemonic power, as, indeed Evans-Pritchard has long argued, as has Jeremy Warner in Telegraph Online 9 Feb 2012:
“Europe has been attempting to run before it has learnt to walk. Under the cosh of market stricture, necessary, modernising change is now brutally being forced on the eurozone’s deficit nations. Yet the fact remains that European economies remain a million miles away from the sort of convergence necessary for effective monetary union. What’s more, the breakneck speed with which Europe is now taking its medicine is proving economically disastrous. The latest data out of Greece show an economy in a state of almost total collapse, a death spiral of plunging output, multiplying bankruptcy and calamitous capital flight. For how much longer can Greece’s always tenuous grip on democracy survive such an onslaught? Support for established political parties is plummeting, and extreme forms of populism are on the rise.”
The same point is made by even more forcibly by Louise Armistead “Greeks approve ‘tombstone’ austerity deal with troika.”
Merkel’s decision to campaign for Sarkozy’s re-election in the upcoming French Presidential Election, the first round being in only 6 weeks time is also remarkable, even seen from Berlin. See also the strong statement by Jeremy Warner concerning this in Telegraph Online 9 Feb 2012, and his concern over a buildup to a crisis of enormous magnitude.
And this takes me back to the disjuncture between economic narratives and rise-and-fall theories of change, and in particular Karl Polanyi, and the return to the “new” laissez-faire.
See the Guardian 25 January 2012 “Davos 2012: soul-searching at the World Economic Forum”, which opens with these words:
“The ghost of Karl Polanyi is stalking Davos. The theme of this year’s annual meeting of the World Economic Forum is The Great Transformation, the title of Polanyi’s book criticising what he saw as the utopian nature of free market capitalism in the 19th century.”
It is particularly interesting that the global one percent at Davos are interested in Polanyi. So we are back to the rise and fall of social problems, and in this case as developed by the Karl Polanyi Institute of Political Economy at Concordia University in Canada. The more I read of Polanyi’s research the more impressed I am with the achievements of his successors. Polanyi’s work is truly making a major comeback, and the reasons are not far to seek. The new laissez-faire is gripping the EU as much as it is gripping the USA and the rest of the world.
Fred Block and Karl Polanyi “The Writing of the Great Transformation” Theory and Society, Vol. 32, No. 3 (Jun., 2003), pp. 275-306. And Fred Block “Polanyi’s Double Movement and the Reconstruction of Critical Theory” Revue Interventions économiques (2008 Vol. 38 pp. 2-14) are just two works that I must examine much more closely.
Block (2008) Abstract: “Karl Polanyi argued in The Great Transformation (2001 )that the development of market societies over the past two hundred years has been shaped by a double movement. On one side is the movement of laissez faire–the efforts by a variety of groups to expand the scope and influence of self-regulating markets. On the other side has been the movement of protection–the initiatives, again by a wide range of social actors, to insulate the fabric of social life from the destructive impact of market pressures. The essay starts by laying out the broad outlines of the double movement idea, and then it elaborates the micro-foundations of the protective counter movement to explain how agents sometimes have the opportunity, the power, and the capacity to challenge and change the institutional structures of market societies. After examining barriers to the mobilization of a protective counter movement, the final section explores the possibilities of moving beyond the double movement.”