Angela and her Mediterranean colonies: a new tale?

 

Rolf Petri

 

Reading an article in the Guardian of 31 March, one could learn that Germany’s “iron chancellor Angela Merkel rules Europe, imposing German values on feebler client nations, bailing out southern Europeans with their oversized public sectors, rampant tax evasion and long lunches”, and demanding “that Germany’s new colonies save in the interests of stability”.I know well the most unbearable German teacher and striver behavior in Europe (which is but one version of western teacher behavior badly perceived in the world), but nevertheless I feel southern victimhood pathos likewise ill-founded, albeit it is not difficult to understand that today the disparity between national and German influence is strongly felt. I don’t know much about the economies of other Euro-Mediterranean countries, but something about the Italian one. Since Italy should be considered a Mediterranean country, it is looking to Italy and the German–Italian relations that I wish to contradict the North–South colonization metaphor at least under three different aspects. 

The first aspect is that from a structural point of view, the neo-Braudelian construction of a “Mediterranean Europe” is a chimera. Mediterranean people may share olive trees, flat bread, seafaring, the concept of honor, family-backed social relations and whatever you want, but in the economy, each of the EU countries of the Mediterranean area is quite different from each other. After speeding up state-guided investment policies in industry during the 1930s and 40s, Italy accomplished full industrialization in the late 50s through dynamics and patterns which up to the 70s had much more in common with Japan’s path to industrialization than with any other Mediterranean example. Notwithstanding the steady increase in services after 1970, the country still in 2004 remained above the EU-average industry contribution to GNP, as did the later industrialized Spain and Portugal, whereas Greece and Cyprus where less characterized by manufacturing. Portugal, Spain and Greece belong to the group of countries which receive more EU transfers than they pay in, whereas Italy is the third greatest net contributor to the EU which in 2010 alone transferred half of the sum that Brussels forwarded to Poland. By 2000, before its recent dramatic income losses, Italy had reached the GNP per capita level of Germany, which in that year was 3% above the French, 22% above the Spanish and 40% above the Greek level. Such different structures in the domestic economy interrelate with different structures of foreign economic relations. Among Europe’s Mediterranean countries there were always remarkable differences in both respects, and there never existed such a thing like a common pattern of Mediterranean industrialization or deindustrialization.

What Italy recently shares with other Mediterranean (and non-Mediterranean) EU partners is economic decline, but this does not mean that the causes and features of that decline are common. The Italian one is structural, dates back to the 1970s and 80s, and as unpopular it may be to mention, it has also much to do with EEC and EU policies and the way the monetary union was prepared. It was from the late 1970s that the plan of a monetary union, envisged to protect the EEC from the disintegrative potential of international money flow and currency speculation, began to substantially interfere with Italian economic policy. It is impossible to go into details here; however it was the monetary policy of central bank governor Carlo Ciampi more than prime minister Bettino Craxi’s alleged cheerful public spending that during the 1980s produced the most substantial stock of public dept. This restrictive policy was brought forward to hold back price inflation and salary increases and foster private investment, whereas the largely state-owned big industry, both its efficient and inefficient parts, was privatized, ending up often with being bought-out to be shut down by foreign competitors. Forceful industrial policy, the country’s most prominent feature from the 1930s to 1970s, was almost completely abandoned together with direct state intervention in industry and the banking sector. The Italian model of industrialization, after all a model of success, lost its former basic characteristics due to declining technological cycles, the crisis of big industry, insufficient research and development investment, political corruption and intrinsic managerial deterioration. However, it lost its strength also because of the ideological climate of those years, and as an indirect consequence of the choice made in favor of joining the monetary union. It is important to underline that, however compelling, it was a choice. And the possible consequences of that choice, which we can observe today, were pretty clear from the start, whatever intellectual dishonesty and political opportunism may suggest today.

The second point to highlight is that a North–South metaphor of international power relations tends to suggest northern brutal dictatorship to the detriment of southern independence. This suggestion would hardly deliver a reliable description of Italy’s position in the EMU and Maastricht process. Since the 1970s the area of the European Economic Community, which for geopolitical reasons was step by step extended from the six founders to many other countries, came under the threat of being pulled apart by speculation and currencies which due to diverging structures of world-market integration either followed the snake path of the deutsche mark or that of the US dollar. To the EEC/EU governments and the supranational Brussels technocracy a monetary union seemed thus compelling. To avoid its political failure, the plan tried to bypass rather than take into account the national diversities in economic structure, foreign commercial relations, and national traditions of monetary, fiscal and economic policy.

To focus again on Germany and Italy, if the euro was established by the means of a “postdemocratic” decision-making in February 1992, according to the famous Maastricht criteria, it was not because German public opinion was eager to colonize Mediterranean peoples. On the contrary, at that time strong opposition arose in Germany against the project, nurtured by the “atavistic” German fear of currency instability and the – well-founded – fear of future real labor income losses. The Maastricht criteria served mainly to appease German public opinion and make it possible that the political, economic and technocratic élites bring forward the German adhesion against the strong skepticism diffused among voters. In Germany, the memory of the politicians’ and experts’ promises of the early 1990s is still vivid, and this is the main reason why Merkel cannot abandon, modify or suspend the Maastricht criteria without being accused of breaching faith. It is important to recall that the fanciful promises called Maastricht criteria, which Germany herself was not able to respect, had been the political precondition of German adhesion to the euro project. This is the historical background of new opposition to the euro arising in Germany today and of the expectations invested in the Federal Constitutional Court’s decisions, which are perceived abroad as an imperialistic interference into the national sovereignty of others. One can say that the Maastricht criteria were mystifying right from the start, useful mainly to render political demagogy and appeasement possible. Why, then, were they accepted by the other partners?

To answer the question, it may be of interest to briefly observe what happened in Italy during the same period. In 1992 and 1993, Italy, due to the tensions within the world currency markets, together with the British pound suffered from a traumatic depreciation of the lira, which until 1995 was suspended from the exchange rate mechanisms of the European Monetary System. The economic troubles coincided with the political trauma of the corruption scandals of Tangentopoli and the annihilation of the traditional Italian party system. The sentiment of fear was strong and the Italian voters accepted the heavy adjustment policies of prime minister Giuliano Amato, which among other measures comprised an overnight expropriation of 0.6% of all bank deposits (the recent Cyprus experience is not so original as it may appear) and provoked recession in the following year. Italian taxpayers and voters accepted these and other measures in order to meet the Maastricht criteria, i.e. appease the German taxpayers and voters who otherwise would not have taken on board either themselves or their Italian fellows. Who of the two was more demagogic?

This is, of course, an idle question to put, as there were no significant German–Italian asymmetries in deception and self-deception about the Maastricht criteria. What is hardly acceptable today is the simulated surprise that something went wrong, and that the world unexpectedly did not adjust to the parameters defined during the Maastricht meeting. Nothing went wrong, actually, with the world, as the disintegrative forces presently operating in the eurozone represent well-predictable effects of the Maastricht policy. Those whimsical criteria respected then and reflect now not just a German fear translated to economic theory, but also an extract from the widely adored bible of predominant neoliberal beliefs. The disintegrative potential of such one-sided guidelines of monetary policy, under the even more critical absence of political unity and fiscal sovereignty, was highlighted during the 1990s both by conservative German critics who opposed to the monetary union, such as the economist Rolf Pfeffekoven, and by Italian critics who opposed not the euro as such but the stability pact, for example the Keynesian economist Fernando Vianello. Albeit developed on radically different theoretical grounds, both critiques converged in predicting that exogenous shocks would cause asymmetric effects on the fiscally and structurally disunited European economies, now deprived of their former monetary defensive mechanism; and that these asymmetries would provoke political tension and the revival of nationalist confrontation in Europe. What happened in the eurozone after 2008 is the fulfillment of their easy prophecies. 

The third point is that the North–South paradigm camouflages the transversal social frontlines of the present crisis. Let us exemplify some of them, comparing again Germany and Italy. Still at the end of 2010, the wealth of Italian private households was about 370% of their yearly average income, a ratio inferior to those of Japan, USA and the UK, but superior to those of France and Germany. In the same year, the Italian average family’s dept level was roughly 70% of their income, far below the ratios of other countries, such as Germany (100%) or the US (150%). Of course, these are average data. In the same year, in Germany 16% of the overall population – 8% of the working and 68% of the unemployed – were considered “at the risk of poverty”. 

Not only for the latter, it would make little sense to speak about German–Italian relations in terms of colonialism. It is true that German banks and public households exploit the spread of state bond interest rates for attracting financial resources from the taxpayers of European states with a high public debt, Italy among them. It is not less true, however, that also German taxpayers back with their taxes the ECB operations directed to refinance Italy’s (such as other euro countries’) public dept, the interest revenues of which are mainly earned by Italian citizens. By being forced to do this, they do not just help the Italian average family household to stay richer at least in relative terms, and less in debt, than the German average family household; nor do they just relieve the Italian state through the prescriptions of the ECB from adopting growth-friendly macroeconomic intervention. They also save the Italian state from being forced to operate a strongly progressive income and property taxation, and undertake serious measures against Italian tax evasion which is estimated to be €180bn a year (a sum that in one single year equals 9% of the total Italian public debt accumulated over 50 years). It looks little plausible that the majority of the German workers or unemployed would exploit the upper- and middle-class Italian taxevaders or colonize upper- or middle-class Italian landlords. If any, they are obliged to cofinance the persistent social inequality and injustice in Italy, even to a degree they would not willingly accept in their own country.

Most of Merkel’s voters are not bankers or brokers, but workers and middle-class taxpayers who similarly to most of their European fellows are influenced by political mystifications of all sorts, such as the stereotype of Italian dolce vita and “spendthrift” behavior (being gratefully rewarded with Hitler moustaches). Nevertheless, they cannot be credibly told that it might be a good idea to prevent with their taxes the Italian system from becoming less unequal and corrupt. Merkel never “forbade” Italy to fight tax evasion or impose property taxation which could bring the public debt under control within a limited span of years. It is the Italian “colony” itself which for the sake of its strongholds of social and economic power, as well as of widespread private saving strategies (besides private investment in real estate, 67% of Italy’s public debt is in the hands of Italian private and institutional creditors who yield good revenue from the public drama) and tax-avoiding behavior, prefers laying a heavy, de facto regressive tax burden on labor and other small incomes, choking off firm investments and abandoning the domestic consumer market to recession.

 

Conclusion

To stick to the examples I made here, and still simplifying, one could say that German taxpayers as well their Italian taxpaying fellows are both exploited by German bankers as well as by rich Italian private landlords and tax evaders. In Italy and in Germany, as well as in other countries, the present problems stem from the redistribution of resources from the bottom to the top, from the poor to the rich, from labor to capital, from public to private, from income to possession, from profit by production to revenue by property, and from manufacturing to finance, in short: from the consequences that the drift of the world economy over the last 30 years reserved for the European capitalist countries. These were years of “globalization” under monetarist and neoliberal hegemony, and the rules laid down at Maastricht not just by Germany, but by all governments, technocrats and public opinion makers who wanted Germany to join the euro project, belong to the same sample of ideas. The ideological and theoretical hegemony of these ideas is still stronger than any perception of reality. It hinders even moderately efficient reactions. What makes the 2009 financial crisis in a way worse than the 1929 one is the incapacity of overcoming economic myths. In economic theory and economic policy, at least, the years that followed 1929 were years of demystification. Nothing similar is happening today. What is similar to the 1930s are unfortunately the extra-economic myths which powerfully re-emerge on the scene. They tackle geopolitics, cultures, religion, national and group honor, and Braudelian civilizations; and oppose patriotic paranoia and identity gospels to evil alien influences. The European North–South paradigm seems to contribute little to the understanding of the historical paths, the political responsibilities, and the social core of the present crisis.

 

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  ΧΡΟΝΟΣ 03 (07.2013)