causes of severe economic problems in europe?

[Pretty Flaco]

Over here in America it's always blamed on "socialism" or social democracy. It's always blamed on giving concessions to workers. But what really caused the economic problems? Can anyone find me an accurate and detailed analysis?

[Rooster]

Quote from David Harvey

One of the major barriers to continuous capital accumulation back in the 1960s and early 70s was the labour question. There were scarcities of labour both in Europe and the US and labour was well organised, with political clout. So one of the big barriers to capital accumulation during that period was; how can capital get access to cheaper and more docile labour supplies? There were a number of answers. One was to encourage more immigration. In the United States there was a major revision of the immigration laws in 1965 that in effect allowed the US access to the global surplus population (before that only Europeans and Caucasians were privileged). In the late 1960s the French government was subsidising the import of Maghrebian labour, the Germans were bringing in the Turks, the Swedes were bringing in the Yugoslavs, the British were drawing upon their empire. So a pro-immigration policy emerged which was one attempt to deal with the labour problem.

The second thing you go for is rapid technological change which throws people out of work and if that failed then there were people like Reagan, Thatcher and Pinochet to crush organized labour. And finally capital goes to where the surplus labour is by off-shoring, and this was facilitated by two things. Firstly technical reorganisation of the transport systems: one of the biggest revolutions that happened during this period is containerisation which allowed you to make auto parts in Brazil and ship them for very low cost to Detroit or wherever. Secondly the new communications systems allowed the tight organization of commodity chain production across the global space.

All of these solved the labour problem for capital, so by 1985 capital has no labour problem any more. It may have specific problems in particular areas but globally it has plenty of labour available to it; the sudden collapse of the Soviet Union and the transformation of much of China added something like 2 billion people to the global proletariat in 20 years. So labour availability is no problem now and the result of that is that labour has been disempowered for the last 30 years. But when labour is disempowered it gets low wages, and if you engage in wage repression this limits markets. So capital was beginning to face problems with its market, and there were two things which happened.

The first was the gap between what labour was earning and what it was spending was covered by the rise of the credit card industry and increasing indebtedness of households. So in the US in 1980 you would find that the average household would owe around $40,000 in debts now it’s about $130,000 for every household, including mortgages. So household debt sky-rockets and that brings you to financialisation, and that was about getting the financial institutions to support the household debts of working class people whose earnings are not increasing. And you start with the respectable working class, but by the time you get to the year 2000 you start to find these sub-prime mortgages circulating. You are looking to create a market. And so finance starts to support the debt-financing of people who have almost no income. But if you hadn’t done that what would have happened to the property developers who are building the houses? So you try and stabilize the market by funding that
indebtedness.

The second thing which happened was that from the 1980s onwards the rich are getting far richer because of that wage repression. The story we are told is that they will invest in new activity but they don’t; most of them start to invest in assets, i.e. they put money in the stock market, the stock market goes up so they think it is a good investment so they put more money in the stock market, so you get these stock market bubbles. It is a ponzi-like system without the Madoff’s organizing it. The rich bid up asset values, including stocks, property, and leisure property as well as the art market. These investments involve financialisation. But as you bid up asset values this carries over to the whole economy, so to live in Manhattan became all but impossible unless you went incredibly into debt, and everyone is caught in this inflation of asset values, including the working classes whose incomes are not rising. And now we’ve got a collapse of asset values; the housing market is down, the stock market is down.

From Reading Capital.

[OhYesIdid]

From Reading Capital.

Dude, is this online? I've read the first paragraph somewhere before, but it wasn't properly quoted. Linky?

[Rooster]

The book as far as I can make out are just his lecture notes and maybe some transcripts which have been tidied up. You can find that at http://davidharvey.org/ but in nearly all of his works, videos and lectures, he goes over this a lot. I got that quote from http://yolacrary.blogspot.com/2009/03/david-harvey-on-financial-crisis.html

I gotta go try and get some sleep now but if you need more info on Harvey then I think other comrades will be able to direct you to sources.

[Jose Gracchus]

I think the leftcoms are highly critical of Harvey, I know I poked around a little bit in Paul Mattick Jr.'s review. I don't recall their major critique of him, and what might be salvaged from his work.

[Forward Union]

Leftcoms are highly critical of everything except pure, untouched Marxist thought as it appears in Platos realm of forms.

[bailey_187]

i made a post in this a while ago, which is a summary of reading some peopes work on the subject

So i been doing reading of papers on this site: http://www.researchonmoneyandfinance.org/ (http://www.anonym.to/?http://www.researchonmoneyandfinance.org/)

Here is a general outline of the reasons for the debt crisis, as far as i can understand



The root cause of the crisis is the imbalence between the Eurozone core (Germany, Austria, Netherlands primarily) and the periphery (Portugal,Ireland, Greece, Spain)

The inclusion of the peripheral countries into the Eurozone has turned them into a market for the core. This is the because the core tends the relativly industrialised, while the periphery is not.

Inclusion of the periphery countries into the Eurozone has removed many potential policies for the Eurozone economies ot promote industry. The EU means there can be no industrial policy in any of these countries. The other way to promote industry would be currency devaluation, but a single currency in the Eurozone and controlling of such matters by the ECB has meant this is also not an option.

Therefore the only way to promote industry in your economy for a Eurozone state is to lower wages an deregulate. Therefore wages have be depressed in most EU states over the past years, and labours share of income as a percentage has fallen. However this was most aggresive in the core, and the core overall has been a more attractive place for industry.

However, with the suppression of wages in the core, there is a lack of domestic agregate demand for the goods produced by the industry the low wages attracts. Therefore the destination for the increased production of goods has been the periphery. This has resulted in the core all running high current acount surpluses (exporting much more than importing), at the expense of the periphery running large current account defecits (importing more than exporting).

In the periphery then, this gap between production and consumption, created by high imports and low exports, has been filled by private debt (i think Spain is the most accute example of this) and public debt (Greece and Portugal?)

Also, i am not sure about this but, to promote domestic industry in the absense of an industrial policy or exhcnage rate mechanisms, peripheral countries such as Spain have spent massive amount on internal infastructure, e.g. the spending on highways in Spain, which are now some of the best in the EU. Or is this a case of the state feeling the need to invest, to create employment to fund the gap mentioned earlier between production and consumption?

Also, unable to engage in industrial expansion, the peripheral economies have focused on "bubbles" e.g. the housing bubble in Ireland and Spain. This has meant the recession has been more severe in these countries (both are still in recession, while the core is not), increasing the cyclical defecit


could people in htis thread criticise the arguments, expand on them or correct were i am explaining them wrong

http://www.revleft.com/vb/cause-eurozone-debt-t139954/index.html?t=139954

[Thirsty Crow]

Leftcoms are highly critical of everything except pure, untouched Marxist thought as it appears in Platos realm of forms.
On the other hand, if you bothered to go through the critique of Limits to Capital maybe you'd have to admit that there are certain weak points in Harvey's exposition and critique of Capital.
But yeah, I guess that'd be too difficult. Instead, it's much easier and safer to engage in meaningless analogies.

If anyone is interested in the review, here it is: http://libcom.org/files/mattick.pdf

[S.Artesian]

Leftcoms are highly critical of everything except pure, untouched Marxist thought as it appears in Platos realm of forms.


Didn't Harvey come out stating that the world was facing the imminent depletion of petroleum supplies? Wasn't that why he though Bush invaded Iraq? Not sure, but I seem to recall that from awhile ago?

[Zanthorus]

I think the leftcoms are highly critical of Harvey, I know I poked around a little bit in Paul Mattick Jr.'s review. I don't recall their major critique of him, and what might be salvaged from his work.

The critique is the not-so-insignificant charge that Harvey does not properly grasp Marx's theory of value, the problem of the transformation of values into prices of production and that he explicitly rejects Marx's explanation of crisis on the basis of the tendency of the rate of profit to fall on a false basis.

[S.Artesian]

The critique is the not-so-insignificant charge that Harvey does not properly grasp Marx's theory of value, the problem of the transformation of values into prices of production and that he explicitly rejects Marx's explanation of crisis on the basis of the tendency of the rate of profit to fall on a false basis.

Other than that, no problems with Harvey's "Marxism."


If we want to talk about Europe, then we need to eschew all these substitute divisions like "periphery and core," and the notions of "effective demand," and look at the profitability of production in country after country, and what the most advanced countries did in the years 2001-2008 to try and augment profitability.

In short, it all depends on that ever so fundamental relation of Marxism-- between the elements of capital, constant and variable; the conditions of social labor in both its "objectified" existence as commodities, and its living existence as the commodity of wage-labor.

[Forward Union]

Didn't Harvey come out stating that the world was facing the imminent depletion of petroleum supplies? Wasn't that why he though Bush invaded Iraq? Not sure, but I seem to recall that from awhile ago?

I'm not defending Harvey. But Petroleum is also known as crude oil and the phenomina you have outlined has been described as peak oil - a problem which is considered an 'imminent' by almost everyone willing to talk about it.

[S.Artesian]

I'm not defending Harvey. But Petroleum is also known as crude oil and the phenomina you have outlined has been described as peak oil - a problem which is considered an 'imminent' by almost everyone willing to talk about it.


A problem that has been debunked numerous times by geologists, petroleum engineers etc. That's 1-- it is a false problem. And 2 is that "peak oil" has nothing to do with the production of oil as a value, but rather refers to the imminent depletion of oil reserves, when the very term reserves is an economic and not a physical category. So if production of oil as a commodity does not determine how capitalism responds to issues of "supply and demand," then we might as well toss Marx and the labor theory of value, the law of the tendency of the rate of profit to fall, etc. etc. out the window.

You can do that, but then I would question your Marxism and exactly how you can explain why capitalism does what it does.

I strongly recommend Gorelick's Oil Panic and the Global Crisis, a rather dispassionate and restrained analysis of peak oil which nevertheless refutes Hubbert and his epigones point by point, or rather barrel by barrel.

[Jose Gracchus]

http://3.bp.blogspot.com/_4ify7vDXrDs/TNwHbog-QFI/AAAAAAAAGtc/NzbkTXxOaqQ/s1600/Hubbert_global_oil_prediction.jpg

Note. I do think it is kind of suspect how "PEAK OIL RAWR" in its classic post-05 popular presence, kind of substituted for real left analysis of the nature of the U.S.'s foreign policy in the Middle East, energy economics, and the like. Nonetheless, for both global warming and other reasons, as well as the inevitability of some crunch in the availability of crude in this century, I do think we should make moves to move away from it decisively. Nonetheless, the idea you're months or a couple years away from breadlines and COLLAPSEOMG as the PO cult can allege, is not well-founded.

[Das war einmal]

I'm doing a study about that subject at the moment and it appears that there are several causes to this current crisis. It's something that still lingered from the oil- and energycrisis late 70's and has, in part, artificially delayed by giving credits on large scale to people and organisations who in fact couldn't afford them. The stimulation to consume was necessary to delay the crisis of production.

This is the main reason for the existence of these bubbles.

Next to that nearly all European countries were not following their own rules they made that were required to take part in the Euro. Greece in particular, delivered fake graphs and lied about their balances. This however, was known for years, still countries like Germany kept lending and selling lots of army material despite the knowledge that Greece couldn't afford this, but it made a nice little profit while it lasted.

The whole charade is coming down. The IMF gives countries loans under strict orders to privatize and cut government spending, which leads to strikes and riots, further deteriorating the economy. Creditrating is sinking at incredible speed, therefor investors are backing off like hell.

[Tablo]

Just wanted to say I used to be really into all of that peak oil stuff. It is true there is a peak oil point, but the Hubbert garbage underestimates the remaining oil reserves dramatically. Some places, like the US(other than Alaska), really have used most of their reserves, but the Earth is quite a large place and we have many more places to drill.

Not that I think we should continue to depend on petroleum. It is in the long term interests of humanity to find more renewable sources of energy.