I read recently a book by the economist Barry Eichengreen called Golden Fetters. This is about the collapse of the gold standard during the Great Depression of 1929-39.
The gold standard involved fixing the exchange rates of currencies by tying each to a specific amount of gold. Eichengreen shows how government after government responded to financial and economic turbulence by seeking to preserve their currency’s parity with gold.
This involved raising interest rates and cutting public spending. The effect was simply to worsen economic depression. Eventually, starting with Britain in 1931 and finishing with France five years later, the cost of maintaining parity became too great. This forced every major state to break the link with gold and devalue their currencies.
We’re seeing a version of this with the eurozone crisis today. The euro ties together 17 very different economies into a single monetary system.
The crisis has seen the weaker states being forced to adopt savage austerity measures in order to maintain their membership of the eurozone.
So far none have followed the example of the 1930s—withdrawing from the eurozone and defaulting on the external debts that have been used as a lever to force austerity on them.
Returning to their own national currencies would allow them to devalue, which might, by reducing the price of their exports, help to stimulate economic recovery.
Instead supposedly “technocratic” governments are being imposed that will keep these countries within the eurozone and implement the austerity demanded by the so-called Frankfurt Group.
This informal caucus is effectively running the eurozone. It includes German chancellor Angela Merkel, French president Nicolas Sarkozy, Christine Lagarde, managing director of the International Monetary Fund and Mario Draghi, the new president of the European Central Bank (ECB), among others.
First they forced the Greek prime minister, George Papandreou, to resign. Then they pushed the “Greek Tories”, New Democracy, to agree to participate in a government of “national unity”. That government, which includes the far-right Laos party, was formed late last week under Lucas Papademos, ex-vice president of the ECB.
They then repeated the same act with Italy. A resignation was extracted from Silvio Berlusconi. Then, through the agency of the ex-Eurocommunist Italian president Giorgio Napolitano, another government of “national unity” was formed—this time headed by former EU commissioner Mario Monti.
The victims of these interventions are the centre-right as well as the centre-left. Moreover, these political changes are engineered by the Frankfurt Group working in tandem with the financial markets. Together they precipitated Berlusconi’s fall by pushing up the interest rate on Italian government debt.
It’s a nice historical irony that he succumbed to the very markets that he worshipped. But this doesn’t alter the fact that the normal workings of parliamentary government are being overridden by fundamentally undemocratic forces.
The idea that the new governments will consist of neutral technical “experts” is nonsense. They will be implementing a class solution to the crisis—that of preserving the eurozone and hence sustaining the positions of German and French capitalism.
All this at the expense of the vast majority of the population. These will be governments of the 1 percent against the 99 percent.
These operations were eased by the fact that, not simply Papandreou and Berlusconi, but the entirety of the Greek and Italian elites are universally despised. Similarly, in the 1930s liberal parliamentary regimes were discredited by their failure to steer a way out of the crisis.
We know who the beneficiaries were then—Hitler, Franco and a host of more petty right-wing tyrants.
There is nothing inevitable about history repeating itself. But there is no doubt that the eurozone crisis is taking a particularly ugly political turn.