"THE AMERICAN DREAM" IN A PILL

MIRACLE CURE or POLICY CHANGE FOR THE SHRINKING MIDDLE CLASS?           

Did you know that the American Dream now comes in the form of a miracle pill? A recent marketing and advertising trend is peddling what they call the “smart pill”, presumably a brain pill that not only makes you smart, it can also make you rich because you optimize your brain capacity! This is essentially a vitamin supplement that claims to boost memory, energy, and creativity, but it can also make you rich, very rich because it allows you to use your head more effectively when making those difficult career and investment decisions. You too can realize the “American Dream” just by taking this pill, without going to college, without working hard, without any effort on your part. 

Pills and potions have been sold for their “miraculous” powers for centuries, but especially in the last fifty years amid a culture of “therapism”, a trend that assumes the more pills the patient takes the better for treating everything from serious illnesses to shy demeanor in public places. Although I never thought that I would actually see a vitamin supplement peddled as the cure to low IQ, I am even more surprised that the so-called “brain pill” today is promoted by movie stars as having them smarter but also millionaires. If you too wish to become a rich and famous person take the “smart pill” and all your troubles will be behind you. One could understand a pill that makes shy people less so in public. However, a glass of fine red California wine would probably work even better and with tangible benefits for the cardiovascular system.

Considering that roughly ten percent of Americans take anti-depressants, it is understandable that despair has driven people to blame themselves. This is not to dismiss the validity of medication when necessary and when prescribed with diligence to save lives and relive pain. Nor is this a critique of the “smart pill” as an enhancement drug that may work to energize the brain, again with the caveat of long term side effects. But is the “smart pill” a catalyst for the fate of Bill Gates, movie star Bradley Cooper, etc. and is it a catalyst for addressing low income conditions in society? Let us assume that the manufacturer of the pill were to distribute it free to the entire population in the world under the auspices of the World Health Organization. Would this end poverty in sub-Sahara Africa, uplift indebted Americans straight into the rich and famous category?

As though the “smart pill” were not enough what about a motivational speaker going on TV and arguing that the middle class is shrinking so please get out of the middle class now. How does one extricate herself/himself from the dwindling middle class and rise up to the millionaires club to keep company with Hollywood stars and high tech billionaires? The highly paid motivational speaker replies that you just have to triple your income because America is rapidly becoming the land of rich and poor and you want to join the rich folks. How do you triple your income if you are a) a retiree on fixed income; b) a college student; c) a college graduate in fine arts working at COSCO until that great museum curator job opens up; d) an office worker trying to hang on to your job for another year with an income you need because you husband is working part time; etc. Short of some stroke of luck or illegal activities, you will experience a downward socioeconomic mobility and so will your children in the next three decades because that has been the trend in the last three decades.   

Not to put a damper on the miracle “brain pill” or on the highly paid motivational speaker, but back in the “real world” of the middle class chasing the elusive American Dream, people endure income inequality that government policies have created because they are meant to concentrate wealth. Notwithstanding, the “smart pill” theory and the motivational speaker who has lifted himself/herself out of the middle class by giving you advice at high cost, the assumptions about why and how one is poor and how one becomes rich are as old as the first Industrial Revolution in England.

Once the Industrial Revolution began to spread from England to the continent in post-Napoleonic Europe, scholars, politicians, and businessmen recognized that capitalism creates immense wealth but at the same time enormous poverty, despite the theoretical promise of “general wealth” for all as classical economist Adam Smith argued. The response from the political, business and academic elites in the early 19^th century was that the system is fine, in fact “natural” to mankind. If you are not wealthy it is your own fault because you have negative traits such as laziness, alcoholism, bad behavior etc., you are ignorant because you lack an education, ambition, hard work, and skill/talent. It is important to point out that in pre-unionized workplaces, a worker labored for 16 hours a day six days a week and earned a subsistence wage barely enough to feed a family. Was he poor because of the subsistence wage policy that both business and government demanded must prevail, or because he lacked those fine character traits that are after all determined by the environment in any case, as English philosopher John Locke pointed out in An Essay Concerning Human Understanding?

A recent study on the continued shrinking of the American middle class points to some very troubling statistics, among them that the downward socioeconomic mobilization that started in the early 1980s and will probably continue for the balance of the decade. What is the middle class and how does our definition differ from that of 19^th century Europe undergoing social change because of Industrial capitalism? US government, the media and mainstream institutions define middle class on the basis of a) owning a home, b) car, c) college for the kids, d) retirement fund, e) health care, and f) family vacations. If you have these six things, you too are in the shrinking “middle class” as US government (and mainstream institutions) defines it. But what if you lack one or more of the six criteria and what if your income continues to drop in real terms because cost of living is rising?

Although Americans like their European counterparts became two-income families, some taking second jobs in the last three decades, the cost of living has been rising, while wages, salaries, benefits, and social security income could not keep pace. Income distribution is such in the US that no study see an improvement, while all studies point to Asia and parts of Latin America experiencing a rise in their middle classes. By the middle of the 21^st century, the BRICS nations – Brazil, India, Russia, China and South Africa – will have more than half of the world’s middle class while the US will continue to experience downward socioeconomic mobility in the absence of a major shift in the fiscal system, labor and social policies that will redirect income from the top 10 percent of the population to the bottom 90 percent. While the BRICS combined have the majority of the world’s poor today, the economic power shift from the US and EU will mean that the BRICS will account for most of the world’s expanding middle class by the end of this century. This does not mean that the American middle class will disappear any more than the European middle class disappeared after the Great Depression and World War II.

The issue of the shrinking middle class is not just about how the economy will become increasingly distorted because consumption power will be decreasing. Nor is the dwindling middle class about the distortions this would cause in the tax system that would have to change. As middle class incomes stagnate, this sector of society will be making lower contributions to fund government spending in everything from defense to social security. This may entail higher indirect taxes that falls disproportionately on the mass consumer.
The issue of course is not only about the withering middle class but the survival of democracy, at least as democracy as the two political parties have been promising the American people, if not as Thomas Jefferson saw it. Will American democracy slowly lapse into some kind of a semi-authoritarian system that will continue to call itself democracy in name, and it this future prospect already here? I have argued in a number of articles that quasi-police-military state is already here and democracy only means the right to vote for pre-chosen candidates representing basically the same policies furthering the interests of the upper income group.  

America is facing 76% of the middle class subsisting from paycheck to paycheck and the average person is carrying $84,000 debt or double of what it was thirty years ago. This would not be the case of the top one percent of the wealthiest Americans were not earning 300 times more than the median household income that dropped from $73,000 in 1983 to $57,000 in 2010. For income inequality to stay at pre-1980s level median household income would have to be double its current level. The corresponding thirty-year period when median household incomes dropped, the top 1% of Americans saw their personal wealth almost double from $9.6 million in 1983 to $16.4 million in 2010. That 60% of American households earn less than 50% of the gross income, roughly 30% have zero savings, and another 43% have enough savings for three months is a reflection of a society with very serious socioeconomic problems. It is one thing for EU debtor nations under austerity from Greece to Portugal having a third of their population on the edge of poverty and entirely another when 37% of Americans have credit card debt that equals or exceeds their emergency savings.

Policymakers have been proposing all kinds of solutions ranging from strengthening the corporate sector even more at the expense of labor. Defense spending that takes away from civilian economy combined with a fiscal policy of transferring wealth from the middle and lower classes to the top ten percent is the reason for the erosion of the middle class. Under Keynesian policies from the Great Depression until Johnson’s Great Society the American middle class expanded. It began to contract as the Keynesian system eroded owing to government decisions to keep the military industrial complex strong and keep a strong corporate welfare system that maintains an elite financial class increasingly wealthy at the expense of the middle class.

The Obama administration remains concerned that the American Dream is fading because the middle class is weakening. Arguing that the “middle class dream” (synonymous with the American Dream) is fading fast, the Obama administration has a task force operating on the assumption that “everyone wants to and can be in the middle class.” Will the “smart pill” and motivational speakers, secular or religious, help society with the many complex problems in the future? Is income redistribution the answer? The only acceptable solution for US government and mainstream institutions is: a) find another job to supplement your income, b) work harder, c) plan and invest better, d) return to school for more education or re-training; and e) wait for “lady luck” to ring your doorbell because you have conformed to the Calvinist work ethic! If indeed the assumptions of the US government (and the entire mainstream institutional structure) that “securing a middle class” is the key the American Dream, how do we explain US public opinion polls indicating that the “happiness” level (granted the obvious difficult of quantifying it), has been under 50% and steadily declining since the late 1970s?

Even if we accept the US (political and financial elites backed by media, and private consultants) ubiquitous PR campaign, to project the image that upward mobility is the dream achievable under capitalism under the current neo-liberal model, scholarly studies by individual academics and think tanks for the last three decades indicate that there has been downward mobility in America, spreading to Europe. Global outsourcing under neo-liberal policies has resulted in a shrinking middle class likely to shrink more in this decade in the US and EU.

In March 2009, I issued a posting on Stanford University’s World Association for International Studies entitled “Twilight of the Middle Class” where I argued that the middle class in most of the world has been created on paper owing to the credit economy. When I presented the same point in spring 2010 as a guest speaker at a Greek university conference dealing with issues of international political economy and IMF austerity, no one in the audience was surprised that indeed the middle class was built on a mountain of debt under an unsustainable global (public and private) credit economic structure designed to keep wealth concentrated. People know where they stand versus the image they project, a dream that the political and financial are projecting while constantly working to make the social pyramid even narrower.

The larger question today is should the six-point criteria developed by individuals who want to perpetuate consumerism be the basis of the American Dream, or should there be a re-examination of peoples’ values in the wake of this prolonged global recession and I mean all people, not just the middle class that constitutes the popular base of bourgeois political parties? Are these the values America wants to continue exporting to the rest of the world so it can strengthen finance capitalism at the expense socioeconomic chasm and social polarization from which arise extreme right wing elements? Is the essence of humanity predicated on the six points mentioned above?

In the US government report, there was no mention of creativity, no mention of empathy in thought and deed for one’s fellow man, no mention of protection of nature, no mention of philosophical/spiritual self-reflection, no mention of greater social equality or collectivist action that alleviates suffering of the vast majority, no mention for lessening societal and institutional violence. America is becoming more polarized, and Europe is following in its footsteps. At 4% of the world population, the US consumes roughly one-quarter of the world’s resources. However, a mere 1% of the population owns 35% of the wealth. Is there a future for a growing middle class, the realization of the American Dream and the avoidance of sociopolitical polarization under such wealth concentration?

Conclusions

There cannot possibly be middle class growth in the absence of raising living standards of the working class by raising the minimum wage and offering more benefits, especially health insurance. Only government policy from fiscal measures to a pro-middle class and pro-labor regime can reverse the current course where wealth will become so concentrated that it will cause an even deeper and longer recession during the next cycle that I would argue is coming in the 2030s, one century after the Great Depression. This is not inevitable, if the US as well as the governments of the world’s strongest economies do something about grossly uneven income distribution. In the absence of such a policy reversal that only favors the very rich the capitalist system will suffer a serious blow even more devastating than in the 1930s.

 It is really the epitome of absurdity that the mass media promotes "miracle cures" while at the same time it rarely focuses on the hypocrisy of the inexorable relationship between the political and financial elites. In a report about the relationship between campaign contributions and fiscal policy favoring the very rich, it became public that Illinois Republican Governor Bruce Rauner has proposed slashing programs for the middle class and the poor, while he personally - as one of the richest men in ILL - and the state's top income earners benefit from his fiscal policy that essentially redistributes wealth from the lower and middle income groups to the rich. It turns out that Illinois millionaires have made millions of dollars in cotributions to the governor's campaign. In turn, Rauner will use the millions of his contributors to run ads against his opponents who question fiscal policy redistributing wealth from the lower and middle class to the rich. No miracle pill for Rauner and his millionaire contributors and no motivational speakers, just the color of money.

Of course, in desperation, people could continue paying money to motivational speakers and try to become rich turning over real estate, day trade on the stock exchange, or speculating on commodities and gold. There is also the magic pill that accounts for movie stars and billionaires, although the side effects of the pill are not known because not enough studies have been done on this. There is also prayer to your local church or temple so you can have a different fate. While all of the above may solve your individual problem, at least make you feel better that you tried, the continued decline of the middle class will remain a reality as will the political and social instability that will invite among the general population that is increasingly outside of the mainstream.

We live in a world of solutions that come in the form of a pill, or in a speech by some celebrity speaker who claims that magically you too can be transformed into another person, or in a minister of the church who asks that we keep the faith in God who loves all His creations, and after all the rich are not happier than the poor who will inherit the Kingdom of God. As if this were not enough, we have the politicians promising the moon to all only to deliver it to the privileged elites, and the commercial media essentially echoing whatever the politicians, businesspeople, pill pushers, motivational charlatans and others are peddling to line their pockets while the middle class dwindles and the working class becomes poorer. Change for such a world will not come in a pill bottle, from a charlatan’s speech or from the Heavens. Grassroots problems can only be solved through grassroots solutions. The 21^st century is not about “Messiah politics”, but about small practical steps that will eventually lead toward a larger solution if enough people are involved in determining their own fate.

A LETTER TO JAIME ORTEGA, PUBLISHER OF THE DAILY JOURNALIST ABOUT JOURNALISM

Hello Jaime,

First, a big thanks for posting the piece I sent and sorry that it is so long. I am very grateful indeed. Second, you know that the EU approved the 4-month extension for the SYRIZA  government, after a compromise. I will not bore you with any details, but I want to bring to your attention the hollowness and commercialization of journalism in our times, something that is generally recognized or at least ought to be recognized in schools of journalism in universities. I am not writing this to you because I honestly believe that Greenspan and every other individual peddling stories about a "Grexit" (Greece getting out of the euro zone) owes an apology to the public now that we have the EU-Greece deal. The issue here is blatant misinformationa and disinformation that goes under the label of "journalism".

It is indeed very difficult for the average person reading, listening, or watching the news to determine if the deliverer of news is:

a) paid above and beyond the publishing company to offer an opinion through the delivery of news;

b) an ideologue or politically connected person who refuses to acknowledge there is another side to the story;

c) a plant from government or international agency such as IMF, bank, financial firm or other corporation whose aim to gain some tangible benefit?

d) under-informed, misinformed, or simply lacking the depth to be able to tackle complex issues. This is not about all of the stories in the last several weeks regarding Greece getting out the euro. We live in a world where it is difficult to determine what is news, what is an "infomercial", what is political propaganda, and above all, what has substance and some modicum of depth even if it fits in all of the aforementioned categories.

It is not that I am amazed at the hollowness of news reporting, but that journalism has assigned itself the role of public guardian so that society is not deceived by public and private sector interests. In some respects, I feel sorry for NBC news anchor Brian Williams who fell victim to his blind ambitions and had to blatantly falsefy stories because he was mesmerized by the nature of sensationalist, commercial, propagandist, and hollow journalism in our times and sought to benefit from it personally.

Perhaps this is a reflection of our civilization, this is where we have evolved and simply because we possess the technical means in the communications sector we assume our age is making progress, that it is more advanced than at any time before before we have cell phones and laptops. Not that journalism was intended to offer in-depth, insgightful, objective analysis of issues regarding society and to be above politics and ideology, but what we have today is really unworthy of the title for the most part. 

best wishes,

Jon

WHO IS DESTABILIZING THE EU, Greece or Germany?

Does Greece with just 2% of EU GDP have the ability to destabilize the EU simply by refusing the IMF-EU imposed austerity program, or does Germany have such power because it has been trying to impose its economic hegemony over the rest of Europe?  

On 19 February 2015, German Finance Minister Wolfgang Schaeuble rejected a Greek compromise proposal for a Greek “bridge loan” that would essentially buy six-month time for the new SYRIZA government in Athens to restructure the fiscal system and stabilize the government’s finances while meeting domestic needs.

Rejecting the proposal from Athens, a proposal that most of the EU members are willing to support, Germany demanded that the new  SYRIZA (center-left) government of Greece continue with IMF-EU austerity as previous (neo-liberal oriented) governments had agreed in the past five years. Of course, austerity has resulted in a drop in GDP of 25%, drop in one-third of incomes (wages, benefits and social security) for about two-thirds of the population, unemployment of 26% and a mass exodus for college educated people, while leaving the public health care system in shambles because money was transferred from health care to paying interest on debt. At the same time, debt-to-GDP ratio rose from 110% before austerity to 175% in 2015. The strongest argument against austerity is that every single promise the IMFand Germany made about its results - economic development, lower unemployment, lower debt-to-GDP ratio, healthier government revenues - turned out to be entirely false.


For its part, Germany insists that Greece is trying to negotiate an extension of euro zone funding with no strings attached and it must abide by all neo-liberal policies previous governments agreed to implement, regardless of the cost to the middle class and workers, to health care and education, as long as the defense sector stays untouched because Germany exports weapons, submarines, etc to Greece. Meanwhile, Athens promises to meet its debt obligations as long as it has better terms and no interference in domestic policies. This means no interference in the country's institutions impacting everything from health care and education to the fiscal system and privatization of public assets that Germany wants sold for pennies on the euro to billionaires waiting for the fire sale. Ruling out any compromise, Schaeuble argued that: "Our room for maneuver is limited. We must keep in mind that we have a huge responsibility to keep Europe stable."

The German finance minister clearly presents his government as the guarantor of EU stability and Greece as the catalyst for instability. The EU’s largest creditor nation, Germany is the victim of the EU’s largest debtor nation, Greece, so Berlin must protect the integrity of the EU as far as Schaeuble is concerned. The question is whether this is the case, or is the German finance minister demonizing the weak debtor nation, buying time and forcing it to make even more compromises so that the failed IMF-German-imposed program prevails in Greece. This would then send a message to all of the EU that Germany is hegemonic and its austerity and neo-liberal policies will prevail over the periphery members in the EU that Germany has reduced into quasi-colonies, as the Greek prime minister implied in a recent speech before Parliament.

 

Germany has a long history of trying to impose its hegemony over Europe, going to war when Prussia led the unification of the Germanic states in 1870. Germany went to war again in1914 in a blatant attempt to secure more colonies, semi-colonies and spheres of influence, and global markets. In 1939, Hitler, following the long-standing German tradition of hegemony went to war against the rest of Europe, putting an end to the strategy of war as a way of securing the goal of hegemony. In the second half of the 20^th century, Germany turned to the concept of European economic integration to accomplish the goal of hegemony where war had failed in 1914 and 1939.    

 

One of Germany's best historians of the 20th century, Fritz Fischer, argued in his works dealing with the German Empire that the goal of Prussian (Junker aristocracy)-led regime from 1870 to 1914 was to be a world power, otherwise the alternative was decline. (See Fischer's Weltmacht oder Niedergang: Deutschland im ersten Weltkrieg, 1965)

 

The concept of global power status is deeply ingrained in German culture and today it manifests itself in the patron-client integration model that Angela Merkel has been pursuing in order to achieve the goal, while at the same time enjoying the support of German banks and corporations, many of which the government is itself a stockholder. In other words, German contemporary foreign financial and economic policy as practiced through the mechanisms of the European Union have a historical basis, and reflect the "Fischer Thesis" of World Power or Decline!

One could argue that just because Germany was founded as a nation by going to war against neighboring France in 1870, that does not mean Germany in early 21st century is militaristic like old Prussia. The same argument could then made about Germany's quest for hegemony in 1914, and again in 1939. In this case, let us wipe out the memory of the holocaust, Jews, gypsies, Communists, among other war crimes, including those that the Third Reich committed throughout the Balkans, including Greece. Let us simply accept that Germany in the early 21st century is not militarist and it is not pursuing political hegemony at the expense of its neighbors, having learned bitter lessons from history. Can we possibly make the same argument about German economic hegemony ambitions?

The obstacle for Germany is not Greece and the periphery nations in the EU that are powerless to determine what happens to the monetary bloc. After all, Greece like all of the periphery EU members have always been dependencies of the core countries. From its creation as an independent nation in 1832 until the present Greece was always a debtor nation and always a dependency of Great Britain from 1832 until the Truman Doctrine, and then on the US from 1947 until the 1970s when it took a turn toward much greater European integration and depndence. 

 

Germany's problem today is actually the core EU members, especially the UK that wishes to redefine its relationship with the EU, and the US that wants a balance of power in Europe with a modicum of containment imposed on Germany through the EU and NATO. At the same time, there is the reliance of Germany on Russian energy that makes it vulnerable and the global competition from China that is investing hundreds of billions in Europe, thus investing in market share at Germany's expense. Greece is small, symbolic, and a political issue that reflects Germany's larger problems in its quest for global status.

 

The issue for Germany is to inject sufficient fear into the rest of Europeans about any nation deviating from German policy dictates so that they follow faithfully as they have in the past. Greece is only the example Germany is using to accomplish its goal, because Greece has only “negative political and economic leverage” while Germany has positive leverage. In short, Greece, like all debtor nations in our modern times can threaten suspension of payments thus causing instability among private and public bondholders who would rather secure a deal securing some return on investment than no return.

 

The massive transfer of wealth from Greece to Germany in the last five years of austerity has resulted in several billion euro profits for German banks. True, German taxpayers have provided loans to Greece used to repay German and other EU creditors, but the money never goes to Athens, but directly to the banks including European Central Bank that has also made huge profits from Greek bonds. In other words, in the short term European taxpayers are making loans to Greece to pay the EU banks, while Greece will be saddled with debt for the next 80 years. This kind of negative leverage actually destabilizes markets because large institutional investors fear not making as much money as they hoped. Of course, there is one other type of negative leverage Greece enjoys that really angers Germans, even if they do not support their government's tough policy. The left-center SYRIZA government has repeatdly asked Berlin to open negotiations for war crimes and several billion - anywhere from 30 to 150 billion euro - that Germany owes Greece. Berlin insists it will not discuss war crimes and damages owed to Greece.

 

On the other hand, there is the positive leverage that Germany exercises as the hegemonic creditor nation. In order to secure austerity that keeps the currency strong at the expense of debtor nations whose economies are weak and become even more dependent on the creditors, Germany and by extension the EU is refusing liquidity to the debtor nation. The threat of Germany immediately throws off the bond and stock markets, because it means that the absence of agreement with the debtor will mean financial and economic turmoil.

 

Germany’s positive leverage stems from its massive economic power within the EU and clearly as the dominant country it has the ability to stabilize or destabilize as it wishes. At the same time, Germany feels the pressure from the US and China, pressure it resents as we have seen over the disagreements on the Russia-Ukraine crisis. In its quest for global power status, Germany wants a freer hand in the EU that it considers its back yard, just like the US considers the Caribbean and Central America its back yard. With France politically and economically weak, the major obstacle to Germany is the persistence of anti-EU sentiment coming out of the UK. It is possible that the UK will have an even larger economy than Germany at some point before 2024, and this is something that Germans take into account when they position themselves for hegemony today. In short, the German-UK power struggle is important today, though hardly fierce enough for these two economic rivals to go to war as they did in 1914.

Beyond the very tragic issue of millions suffering lower living standards, and beyond the very real prospect of their continued suffering for a number of years under such conditions, there is the fear that other countries could also meet with a similar fate as Greece. The question for EU leaders must be to what degree is Greece and for matter all of the periphery (southern and eastern European countries) sovereign and to what degree do citizens have a voice in the illusion of a democratic process that really belongs to the banks and multinational corporations that the state represents?

THE EUROPEAN UNION: CURRENT STATUS AND FUTURE PROSPECTS

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 21^st 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 21^st 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.   

Conclusion

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.