Saturday, 14 February 2015


Introduction: EU Political Polarization, Downward Socioeconomic Mobility and Core-Periphery Division 

Can the EU survive the challenges of political polarization, downward socioeconomic mobility, and geographic division between the rich core members and the poorer periphery?  The EU has been tested because of the global recession of 2008-2013, and for many EU countries continuing in 2015.

  1. The apologists of the EU believe that nothing at all should change in the EU and it ought to continue its course as an economic and political bloc, expanding in global economic and political influence under globalization and neo-liberal policies that strengthen capital. The apologists believe the EU is not perfect but it is great the way it is and it will survive despite its problems.
  2. The reformists believe that the EU has lost its way, deviating sharply from its commitments to democracy, human rights, and economic and social justice, sinking into an economic/political bloc that Germany manipulates in order to remain competitive in the world. Reformists want the EU to abandon neo-liberalism and return to its democratic roots when the inter-dependent model of integration was in effect instead of the patron-client one today. The reformists question that the EU will be able to survive if it remains committed to neo-liberalism that serves the privileged few in society at the expense of the middle class.
  3. For very different reasons, Communists and right wing euro-skeptics including neo-Nazi political groups want the EU abolished. They believe that it is just a matter of time before the EU lapses into a permanent crisis and collapses. Communists see the EU as an instrument of finance capitalism pursuing anti-labor policies, while the right wingers see it as a supra-nationalist entity that threatens national sovereignty and cultural/ethnic identity with policies of multiculturalism and unprotected borders that allow Muslims to enter Europe.  

Regardless which camp one embraces as closer to the truth, political polarization, downward socioeconomic mobility and core-periphery (north vs. South and East) division within the EU has both political leaders and the financial and corporate elites worried about the euro zone’s future. This is especially after the EU Parliamentary elections of May 2014 and the Greek election of January 2015.

Greek Prime Minister Alesis Tsipras led the center-leftist SYRIZA Party into victory, campaigning against neo-liberal EU policies, against IMF/EU austerity, and against the German-imposed patron-client model of integration. His electoral victory signaled to the rest of Europe that popular sovereignty matters in overturning policy decisions made in Brussels and imposed on the EU members. At the Davos meeting in 2015, representatives of the financial world admitted that the proof that something is not going well in the EU’s current direction is youth unemployment at 50% across the continent, stagnant economy just now trying to revive amid low energy prices, and the failure of the European governments to achieve consensus that would satisfy the dwindling middle class.

Public Debt and Dependency under the Patron-Client Model

Taking advantage of the recession that weakened all EU members, but especially the periphery members, Germany altered the integration model so that there was a massive transfer of capital from the periphery to the core ones thus helping to offset bank losses suffered during the recession. This injection of capital from the debtor periphery to the creditor core members helped to strengthen the financial and corporate sectors in order to keep them competitive with US, Japan, China, and India. The change in the integration model alienated a substantial segment of the population, resulting in the right wing euro-skeptics who argued in favor of dissolving the EU, leftists who insisted that the EU is nothing but an instrument of northwest European imperialism, and the reformists like Greece’s SYRIZA ruling party, arguing that EU must return to its founding interdependent integration model and commit itself to a strong middle class and a social safety net for the masses.
From the very inception of the EU, the interdependent integration model entailed that the stronger economies of northwest Europe, especially Germany, would be providing capital in the form of loans, subsidies, and grants to the weaker periphery southern and eastern members that lacked the ability to compete economically under a strong reserve currency favoring the core nations of the EU. This resulted in massive spending on infrastructural development, new funding for the primary sector of production, tourism and other sectors. In return for capital injections in the periphery, the core EU members secured consumers of products and services, cheap labor, cheap land, and cheap natural resources. No doubt, the major beneficiaries in the periphery nations were the larger enterprises especially those linked to EU financial, industrial and commercial interests, while the state offered some protection and benefits through various programs to small and medium-sized businesses. Advocates of this interdependent integration model argued would result in greater trade within the EU and greater upward socioeconomic mobility. This was indeed the case in the first decade of the 21st century, but the course reversed in the past five years.

Is it good for Europe to experience emerging political transformations that economic skeptics and globalists seem to highly critical, questioning their reforms and agendas?

The EU political transformations are symptomatic of economic transformations imposed by the core countries that are also the creditor members on the debtor members who have no choice but to cooperate because they use a single currency.  Because monetary policy is basically in the domain of the core countries, especially Germany, the fiscal, trade, investment, labor, social and all other policies of all EU members follow the dictates of the core members and Germany that argue in favor of maintaining a strong reserve currency. Those who favor neoliberalism and globalization under a strong EU patron-client model believe that there is no alternative to austerity, privatization of public assets, and strengthening the financial and corporate sectors at the expense of the social welfare state.

Critics from the right usually in the Euro-skepticism camp argue against the single currency and in favor of national sovereignty rather than having a massive continental bureaucracy dictate to each member nation how to conduct its domestic affairs. In other words, economic, political, and cultural nationalism take precedence over continent al integration as far as euro-skeptics are concerned because European nations are losing their identities along with their national sovereignty. With the cooperation of other northwest EU members, Germany took advantage of the recession to use the public debt issue in order to:
a) shift capital to the northwest countries from the periphery countries in the South and East to help finance the recovery;
b) impose neoliberal policies on the periphery members that would reduce them to dependencies of the core ones that would become even stronger; and
c) reduce the EU into an instrument of the core countries that would permit them to remain competitive on a global scale with the world’s strongest economies in the 21st century.

The leftist and left-center critics see an EU that has become politically conservative to the degree that all European Socialist parties, including Portugal, Spain, Greece, France, and German Social Democrats that were once Marxists are now worshipping in the neoliberal temple of globalization for the benefit of banks and multinational corporations. Behind neo-liberal policies are the titans of EU capitalism that use the banking system to launder money and avoid paying their fair share of taxes. These financial and corporate interests are behind EU monetary, fiscal, trade, investment, and labor policies, financing the campaigns of politicians that provide legislative and political cover for them. In short, the EU is nothing but an instrument of big capital, immersed in massive corruption, as the Luxemburg, HBSC, and other banking scandals have revealed.

The recession and austerity policies that followed only strengthened the core members while weakening the debtors across Southern and Eastern Europe, making it increasingly difficult to resist the dictates of Germany when it comes to any policy from raising indirect taxes that impact workers and the middle and lower income groups across EU to privatizing public property so the very wealthy could buy them for a massive discounted price. These are all part of neoliberal ideological commitment that strengthens core members and the top ten percent of the wealthy within all nations in Europe.

After several years of recession that cut deep into middle class living standards and eroded not just working class wages and benefits, but contributed to rising unemployment and dim prospects for upward socioeconomic mobility what could people except from the mainstream political parties other than more of the same? Considering there is 10.5% official unemployment in the EU, a steadily decline in middle class and workers’ incomes, and lack of prospects for the youth the EU, EU Parliamentary election results in 2014 as well as those in Greece in 2015 were not surprising. As was the case during the Great Depression of the 1930s, European voters in 2015 are seeking solutions in the left and extreme right wing opposed to the neo-liberal policies under the EU patron-client model.

What do the anti-EU parties represent? 

While the ultra-right wing offers fantasy of immediate solutions of strong nation with which people identify, the left promises greater social justice. An unemployed professional, a small grocery store owner, a college graduate unable to find a job without much money or great prospects for themselves and their children can embrace the promise of a new social contract that will bring social justice, or they can embrace the mythology of the strong and pure nation-state free of foreigners, gypsies and Muslims who are the scapegoats for all calamities of Europe. The public reaction to the EU’s transformation from a democratic bloc into a neo-liberal German-dominated one was seen in the parliamentary elections of 2014, in the Greek election of 2015, and in Spain’s most popular party that is very similar ideologically and politically to Greece’s center-left SYRIZA.

Europe’s political parties of the anti-neo-liberal center-left represent the middle class and a segment of the workers that have no political voice because the European Socialist parties have embraced austerity and neo-liberalism under the German-imposed patron-client model. The fear of EU’s major political parties – conservative and Socialist both representing neo-liberalism is that reformist political parties are coming along and taking away the middle class and working class voters with them to victory as was the case in Greece. This would mean that either the mainstream political parties have to make concessions to the middle class and workers by diluting their neo-liberal agenda that only focuses on strengthening capital or they face eventual demise.
Besides the leftist and center-leftist challenge to the EU’s political mainstream, there is the rise of extreme right wing and ultra-nationalist elements that neo-Nazi parties, as in Greece where the Golden Dawn is the third largest party, to ultra-nationalist xenophobic parties as the UK Independence Party that led in the EU Parliamentary elections of May 2014. All of the right-wing euro skeptic parties oppose the EU bureaucracy, the concept of a united Europe, the appearance of trying to bring about greater social equality within EU, allowing Europe to be more open to non-Europeans and permitting greater multiculturalism, diluting national identity, excluding all illegal aliens from any social welfare program, favoring national businesses over foreign ones, ending European subsidies for EU members, and ending the supra-national state in order to strengthen the national one. The euro-skeptics from the right have stolen votes from traditional conservatives just as the left and center left took away votes from the Socialists who are now neo-liberal. The growing socioeconomic rich-poor gap across the periphery but also some core EU members is now reflected in the increasingly polarized political arena.

The results of the European Parliamentary election on 25 May 2014 should not have come as a surprise to the EU leaders, especially to Germany’s conservative Chancellor, France’s Socialist President and UK’s conservative PM, all linked together by their commitment to globalization, neoliberal policies, and strengthening the corporate welfare state at the expense of the social safety net and socioeconomic mobility of the middle classes. That Marine Le Pen’s ultra-right wing party, a camouflaged neo-Fascist xenophobic political party, won 25% of the vote and became the resounding victor indicates not only a problem for France’s debilitated Socialist Party that is hardly much different in its economic approach than any European conservative party, but Le Pen’s (Front National) FN party victory signals a serious political problem for all of Europe. If we consider that extreme right wingers in the UK, neo-Fascists and neo-Nazis across Europe increased their popularity in the EU elections, as did leftists outside the confines of the traditional leftists - Socialists and Communists - then we must ask what policies are the root cause for the anti-EU and Euro-skepticism sentiment that has become so strong.  

That France has elected a neo-Fascist party to the EU Parliament and Greece among other countries opted for leftists/center-leftists sends a message to the EU of how polarized Europe has become as a result of the deep economic recession and austerity regime. This is not to suggest that the EU is about to break up or even change very much from its current neoliberal/monetarist policy orientation. After all, new nations like Ukraine are eager to join, as the behind the scenes manipulation that has been unfolding throughout 2013 and 2014 reveals. Nor is the EU about to become unstable and its reserve currency about to weaken along with its global trade relations because of political polarization. At least for now, the question is what happened that things have gone so badly for the EU mainstream political supporters and what does this signal for neo-liberalism. 

As the self-proclaimed neutral arbiters of society, mainstream EU conservative and Socialist politicians opted to strengthen not just banks during the deep recessionary cycle that started in 2008, but they also used austerity measures as a means of transferring massive wealth from social welfare programs to corporate welfare. At the same time, governments used austerity as a means to sell lucrative public enterprises to private concerns invariably linked to the ruling political parties (clientist politics), invariably at low cost and to the detriment of the public interest and taxpayers. Privatization schemes that had started in the Reagan-Thatcher decade accelerated in the last five years (2009-2014) in EU because politicians argued this was the way to “save” capitalism and return society to growth and development. When the mainstream EU parties promise upward mobility across the board but deliver greater wealth concentration at the expense of the middle class and workers it is only natural to have political polarization bound to continue not just in the periphery but at the core as well.

Are EU transformations only shown in economies that show similar characteristics, mostly Mediterranean’ that share differences with Northern European countries? 

President Hollande’s decision to dismiss the cabinet in August 2014 after the economy minister criticized the German fiscal and monetary model imposed on all of Europe signaled the unmitigated submission of French Socialists to neoliberalism. The decision of the French Socialist government further signaled to the EU that there is no policy difference between the neoliberal direction and goals of conservative Germany and Socialist France that was once believed to be free of German influence. Announcing a new round of tax reductions to the businesses and cuts in the budget targeting social programs, Hollande, who has a mere 17% public approval, caved under the pressure of banks, financial firms and large corporations that support the German austerity model. This officially marked the end of Socialism in France as anything but a name used for public relations purposes to secure votes from those identifying with the party that once stood for class-consciousness based economic, political and social policies and its roots are in the Marxist tradition.

Although the public demanded that governments hold banks accountable, the G-20 have swept under the carpet the underlying causes for the last recession that started toward the end of 2007 in New York (Lehman Brothers) and spread to the rest of the world. Just a few years ago, the US and EU leaders were crying out for structural reforms that would not permit a repeat of the decadent and corrupt banking-insurance-investment sector crisis that took down with it the world economy, put enormous downward pressure on middle class and working class living standards and raised unemployment to double-digit levels in much of the Western World.

It is indeed rare in 2015 to hear elected officials speak about structural reforms that would place greater state regulation and controls over a neoliberal model that the political and financial elites do not question. The G-20 has not raised the issue of everyone paying taxes and trying to fight corruption as in the infamous HSBC $100 billion scandal. Yet, systemic reform was necessary so people continue to have faith in the system that brought us the banking crisis and downward economic mobility. Against the background of a revived banking and corporate sector, the talk now is how to proceed with even greater vertical growth that concentrates wealth because capital concentration that Keynes once argued was the root cause of the problem but the neoliberals see as the panacea.

Even after the latest revelations involving corporations and individuals sheltering and laundering money through banks in Luxemburg and other places with offshore accounts so they would avoid paying taxes in their own countries, the EU has done nothing. This is because EU governments and EU Commission President Jean-Claude Juncker, also the prime minister of Luxemburg remain beholden to finance capital.  The collapse of the middle class democratic consensus is symptomatic of the failure on the part of governments to fulfill the social contract and remain committed to social justice at some minimal level.

How should Germany and France among others respond to “reform”?  

The term “reform” does not mean the same thing to everyone. For example, reform for leftists and centrist political groups entails protecting labor rights, protecting the small businesses and professionals, providing subsidies to small farmers, public hospitals, and public schools, protecting wage scales and social security benefits. In short, the progressive reformist wants to protect the middle class and workers through the fiscal and legal system, while maintaining a commitment to social welfare rather than corporate welfare that strengthens big business at the expense of the lower classes.

By contrast, reform to an advocate of austerity and neo-liberalism entails:
a. slashing the public sector and privatizing as many services as possible, even if that means paying contractors much higher than if government workers performed the same task;
b. curbing as many trade union rights as possible, including collective bargaining and ending any kind of government protection for workers from employer abuses;
c. raising indirect taxes and lowering corporate and income taxes on the wealthy to stimulate investment, regardless of whether the stated goal is achieved;
d. massive consolidation of all professions, from truck and taxi transport to pharmacies so that multinationals are able to enter the market thus gradually replacing the small businesses.
e. provide subsidies only to large farmers and animal husbandry operations – milk, cheese, yogurt, meat processing, while ending subsidies to the small farmer.
f. slashing wages and benefits, cutting social security and raising retirement age, and gradually ending all subsidies to public health and education, while maintaining police and defense spending at high levels, despite pay cuts for officers.

The above scenario is one to which Germany and France have responded, with both conservatives and Socialists embracing such “reforms” as necessary to make EU “stronger”. No doubt the EU has become stronger, but only the financial and corporate interests at the expense of the middle class and labor.
From 2009 until the present, all governments of Europe went along with the concept of “reform” as monetarists and neo-liberals defined it, not as the center-leftists and leftists understand it. All of Europe looked to France as the leader to offer an alternative to the German concept of reform, but the French government under Conservative and Socialist leadership has been about the same toward the EU and toward the German-imposed patron-client model of integration. Rhetoric on both the Conservative and Socialist parties notwithstanding, both simply followed the lead of Chancellor Merkel in the last five years, and neither dared propose anything different. One explanation for the subservient role of France to Germany’s neo-liberal and austerity orientation is that the French capitalist class, especially the banks, espouse the German position on monetarism, fiscal policy favoring the wealthy, labor policy intended to weaken the trade unions, and social policy intended to further transfer assets from social welfare to corporate welfare. 

To deflect attention of the public from the serious erosion of their socioeconomic benefits in the last ten years, the French government has been using the race/religion/ethnicity card against immigrants from Africa, Muslims seeking a better life in the West, and gypsies who have been in Europe since the late Middle Ages. Immigration from outside the continent as well as internal migration from Eastern Europe, and especially gypsies, has inflamed European right wingers targeting Asians and African, especially of Muslim faith. The xenophobe issue is inexorably intertwined with the Muslim terrorism issue as far as many are concerned. The religion/race card has not worked and it will not work unless the government addresses the real needs of the middle class and workers that have nothing to do with roaming gypsies and militant Muslims. After all, those who really harbor hatred for foreigners, Muslims and gypsies have already turned to the far right National Front Party of Marine Le Pen.

While paying lip service to the concept of pluralism and open society that respects human rights of all people, the austerity and neo-liberal policies that Germany has been pushing and France going along entails a reality of harshness toward foreigners, especially the groups I mentioned above that are discriminated in daily life. Neither Germany nor France are prepared to embrace the definition of reform as the leftists and center-leftists – SYRIZA of Greece and PODEMOS of Spain – intend it, namely, a modicum of social justice.

Would a divided Europe benefit Putin in anyway? 

Russian President Vladimir Putin could benefit in some respects by having a divided Europe because he would be striking energy and trade deals bilaterally with greater ease instead of facing the pressure of the entire EU on Moscow. However, Russia will still have to deal with the reality of a Europe that is part of the Atlantic alliance system under NATO and this is a significant issue unlikely to change the balance of power any time soon. While Russia could temporarily celebrate a political victory in case the EU dissolves, just as the West celebrated the collapse of the USSR, in terms of the regional and global balance of power it would not mean much for Moscow and it would not elevate Russia’s global standing. On the contrary, we may actually see higher defense spending on the part of European countries, after a possible collapse of the EU than we have today and this would mean higher defense spending in Russia.

Only anachronistic-thinking Cold Warriors think in terms of Russian benefits if the EU collapses, considering that the question assumes there is an enemy no different in 2015 than under the old USSR in the 1950s. The negotiations between Putin, Ukraine President Poroshenko, Merkel and Hollande resulting in a deal intended to end hostilities is indicative of the interdependent relationship between northwest Europe and Russia. Regardless of whether a German-French brokered deal is effective, EU-Russia relations cannot be destroyed to the detriment of all parties concerned simply because the US is interested in destabilization of Eurasia through various means from diplomatic and military pressure to political and economic leverage with nations surrounding Russia.

The reality of Russia’s economic integration with the West, especially with EU, cannot be subordinated to revived and recycled US Cold War policies toward Moscow when the global balance of power is rapidly shifting from the West to East Asia. While the EU must consider its long-term economic relations with Russia, taking into account Russia’s concern about NATO encirclement policy that the US has been pursuing and Europe has been following, European governments of today and in the future cannot follow antiquated Cold War policies of confrontation when cooperation yields far greater rewards and accounts for stability at home. This is clear from the pressure European financial and corporate interests are placing on their governments to find a political solution for the Ukraine crisis.

Just below the surface of EU-US agreement on containing and encircling Russia rests the fundamental divergence of economic and geopolitical interests of the NATO partners. Europe is taking all the risks while the US is trying to reap all the rewards of an unstable and weaker Russia that would have to spend itself into poverty because of high defense procurements. What is in it for the EU, other than higher defense spending that further weakens the already weak civilian economy? The promise of waiting Russia out until it caves to US-NATO demands is an unrealistic scenario. China will never allow Russia to collapse for it is not in its interest that the West prevails in the Eurasian balance of power, and it is not in Beijing’s interest to have the US perpetually destabilizing various parts of the world as a means of exerting influence.

Public statements notwithstanding, Germany and the US had been on a collision course over the military solution Washington was pursuing for Ukraine, vs. the diplomatic one that Merkel was seeking because in the end it is Germany and EU paying the price for US aggressive foreign policy. In other words, it is not in the best economic or political interests of Germany and the EU to have a weak and unstable Russia as the US envisioned when using the Ukraine as a sphere of influence to destabilize Russia. At the same time, Russia under a quasi-authoritarian leader like Putin needs Europe as a major trading partner, and any instability in the EU, including dissolution, would not benefit Russia other than in a symbolic sense. 

Should Europe unify only its military, but not their economies given the recent circumstances?

Europe is as unified militarily as it will ever be because it is part of the Western alliance and defense system. The US knows that it is becoming increasingly very difficult to defend the existence of NATO because: a. the Cold War is over, and b. the “war on terror” is a manufactured campaign to keep the military industrial complex going strong and to maintain the political and social status quo at home by deflecting the focus of the public from issues concerning their interests. Considering that a new global power structure means that East Asia is the world’s economic center, the US hopes to use its military superiority as leverage to impose higher defense spending on its NATO partners. Europe has gone along with the US, following its foreign policy lead in Afghanistan, in the “war on terror”, in regime change in Libya and Syria, and in the Ukraine. But for how long, considering that the US wars in Iraq and Afghanistan were failures, NATO intervention in Libya has yielded greater instability and “terrorism”, the covert war against Syria’s authoritarian regime ended up in strengthening ISIS militants, and the covert involvement in Ukraine inadvertently helped neo-Nazis and corrupt pro-Western oligarchs.

The specific cases of US failures of military solutions to political crises in Iraq, Afghanistan, Ukraine, and the general global US policy of destabilization are forcing European political leaders to make very difficult decisions regarding economic sanctions and raising defense spending. Meanwhile, China is benefiting by striking trade and investment deals with Russia and Europe, while the US is constantly pushing military solutions to crises at a huge cost to the West. EU leaders have to decide it China as the most constructive and stability-engendering power today and in the future as an economic and political power, or if the US pursuing recycled Cold War policies is the future. For the now and the next decade at least, the EU will remain committed to the Atlantic alliance, but longer term is questionable.

While Europe is firmly on the US side and has been since Wilson committed troops to help the allies fight Germany, I do not see the Europeans modeling the EU after the US militarily in the same respect as Germany has emulated the patron-client integration model. Nor do I see the EU dissolving and replaced by a military alliance, an idea that only extremists on the ideological spectrum would even contemplate. EU financial and political elites see the EU’s future in consolidation and expansion economically without taking the kinds of diplomatic and military risks the US engages that result in regional destabilization.   

The EU will survive and will not break up any time soon, no matter the economic, social, political, and foreign policy challenges. The next crisis in the capitalist economy will force governments to make even greater concessions to banks and corporations at the expense of the slashing living standards from the middle class and workers. This will necessarily entail greater division within EU and greater popular opposition to its continued existence, for it will cease to serve the majority of the people and only cater to the financial elites. It will take several crisis of capitalism for the EU to collapse and not one deep recession and one left-centrist reformist regime in Athens opposing austerity, neo-liberalism and the patron-client integration model. After all, there are many countries waiting anxiously to join the EU, despite the fact that it has sharply deviated from its original mission and its interdependent integration model intended to help the economically weaker members.

It took many decades for political leaders to convince their citizens that EU membership was good for everyone and not just for banks and multinational corporations based mostly in northwest Europe. It has taken a relatively shorter time for people to judge for themselves the degree to which the EU best serves the interests of all people in all the member states and not just the core. The prevailing skepticism of whether there are really any benefits to the national economy and society as an EU member, or if membership really serves the domestic financial and political elites as well as the core EU members, especially Germany, is an issue that cannot be overcome with propaganda, but rather substantive policies resulting in real changes across Europe.

Such changes will not come because the powerful banks, insurance, pharmaceutical, defense, and other multinationals are behind the regimes of Europe and they resist any change in the patron-client integration model, and in making a commitment to social justice by strengthening the middle class and workers that have suffered high unemployment and major cuts in living standards. Along with some programs designed to reduce unemployment by strengthening businesses and providing even greater tax and other incentives to corporations to hire and keep workers, there will be a major propaganda campaign for voters to support the EU. Without tangible results in socioeconomic improvement, the result will be continued rise in the right wing and left wing political parties and disparate groups that want their countries to leave the EU or they demand a different integration model.  

The contradiction of the EU is that it is trying to project itself as the most desirable bloc with the strongest reserve currency on earth, as it tries to attract new members in Eastern Europe, while at the same time, it is chocking growth and development within the periphery areas precisely because it has a strong currency under monetarist policies and neoliberal course of privatization and corporate welfare programs undercutting the middle class as the popular base of a democratic society. Survival is indeed certain for the short term, but longer terms the decline and fall of the EU under the current integration model is inevitable.

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