The two subjects that hold European policymakers and the more serious part of the American electorate currently in suspense offer perfect and dismal examples of delusion because accompanying stories – where the euro crisis came from and President Obama’s track record – have been given the wrong beginning.
For North Europeans relying on mainstream media, the story of the euro crisis never had a beginning anywhere close to where it should have been. This deficiency was mostly due to another political phenomenon deserving more scrutiny than it receives: When governments or other institutions with authority are faced with an unpalatable subject, prompting questions that may spell deep trouble for them, they change the subject hoping that no one will notice. That is what Angela Merkel did when the credit crisis of 2008 revealed that German banks had swallowed so much of the toxic assets created by their American counterparts that this had in effect killed them. But in Merkel’s story the crisis began with a lazy Greek population, consisting of lots of tax evaders and overpaid officials who took too many holidays. The French and the Dutch authorities were similarly embarrassed with the factual bankruptcy of their banks, and gratefully endorsed the story that Merkel was allowed to dominate with in the headlines.
This helped stoke strong indignation that spread over the northern euro countries; why should we, well-behaved taxpayers, have to bail them out? By the time the German broadsheet Das Bild had created a commonly accepted picture portraying hard-working Germans versus irresponsible Greeks there was no going back for the Chancellor. That tabloid, along with the domestic financial interests and their allies, blocked a return to rational analysis of the bank crisis, preoccupied as she was with minimizing threats to her staying on as chancellor in a new coalition after next year’s elections.
There were other possible beginnings that would have allowed a sound approach to the controversy from a different direction. Such as low German domestic demand compensated for by years of voluminous German exports to peripheral Europe, including Greece, which required funds for buying that German stuff; funds happily being pumped into southern Europe by German banks. As these were raking in premiums and interest, their credit risk analysts slept soundly because the credit rating agencies had given their blessings with blanket triple A ratings for all the euro countries. Is Greek governmental irresponsibility then only a figment of people’s imagination? Who cares? Merkel changed the subject. Whatever Greek conduct or motives, these did not cause the euro crisis.
Yet another starting point, shining light on a subsequent phase of the crisis, could have been the unfortunate miscalculation by the architects of the euro as a common currency who believed that their successors would inherit their understanding that there was insufficient pan-European political infrastructure to support their creation. They took for granted a continuation of leadership of some calibre, and acted on the premise that the demands of evolving reality would ensure the building of the necessary political underpinnings. This story element has become better known, but incidentally and not as an indictment of Europe’s putative current leadership as they forever confer over recipes to deal with the crisis.
A disastrous characteristic of the European Union is that its heads of government cannot, collectively, think far beyond the relatively trivial affairs of their domestic political life. At the crucial juncture when European banks were tottering, the key positions were held by a crafty enough politician but one with an East German political upbringing, cut off from ideals about gradual European integration, and a TV celebrity French President whose love of solving crises was corrupted by half-formed ideas resting on neoliberal and atlanticist impulses. Neither of them had the necessary intellectual and political courage to ditch the principle underlying the American choice of catering to the interests of banks rather than of populations.
It has been rather obvious for some time that Europe’s political elite is not up to the political challenges of what the European Union has already achieved with integration of its economic institutions. They have consequently not been able to construct a collective European authority that would give the continent an effective political presence on the world stage as well as a means to deal with the internal troublesome political consequences of rapid economic integration. Without such authority, the ramshackle Union seems to be held together primarily by its members simultaneously bending to external authority, both ideological and material.
In several areas, especially that of economic developments, it simply allows itself to be guided by American example or intimidation. Just how intellectually dependent the member states of the European Union have become can be gleaned from panicky front page reactions when ratings agencies announce a downgrading of the creditworthiness of European entities. Editors and policymakers appear to be unaware that these ‘authorities’ are commercial businesses, guilty of large-scale fraud that helped bring about the credit crisis to begin with. If we pay attention we also see soldiers of some EU member states being sent to risk their lives in American wars that in no conceivable manner serve European interests, and in fact add to European liabilities.
Europe has imported economically disastrous ideology, priorities and organization through various academic and journalistic channels, and most detrimentally through the personnel leading the feeble institutions that have been given some authority to address problems that will determine the fate of the euro. The European Central Bank is that only in name, as it has not functioned as a lender of last resort, and is manned by top level personnel determining things on the basis of a neoliberal mindset. The IMF has long been an instrument under ultimate control of the American Treasury, and its austerity and privatization recipes for countries in economic trouble have, in Latin America, Asia and Africa, mostly led to misguided policies creating ever greater misery. Recently it admitted that its economists had miscalculated how austerity would affect Ireland. The revolving door that determines appointments at the top of these institutions (which includes the arch producer of toxic assets, Goldman Sachs) ensures continuation of ideological principles that mostly benefit what has become known as the 1%. No other set of events has demonstrated this more starkly than the related European policymaking choosing to help banks with their existing top management at the expense of the welfare of populations in the European outskirts.
Which brings us to the, related, other great example of a prevailing story with the wrong starting point, one that helped shape the reality of the European crisis.
This story says that when President Obama was inaugurated in 2009 he not only inherited the worst national economic circumstances since the Great Depression, but was also soon confronted with an utterly hostile Republican opposition, which prevented him to fulfill his promises around straightening out the financial system.
For important practical political reasons it is to be hoped that this fallacy should endure at least until November 6, so that those Americans who are known as liberals may, holding their noses, help keep the other guy away from the power pinnacle. Whatever he represents, it would require an enormous amount of wishful thinking to see Romney as a preferable alternative for ‘most powerful man in the world’ position. But from November 7 the departure point of this particular story ought to receive the scrutiny it deserves, not only to set history straight but also as a future warning against timidity, plutocratic seduction, and missing extremely rare opportunities for political repair.
Turning our thoughts back to the autumn of 2008, we see the bankruptcy of Lehman Brothers triggering a flood of revelations adding up to a picture of the American financial system having built its structures for making money from money – rather than from helping with the production of goods or services – on quicksand. The Lords of Finance hovered mentally between a condition of panic and near panic. The American public was, for the first time being terrified by a homegrown evil force as distinct from the vague foreign enemies held responsible for the worst attack since Pearl Harbor. Editorials in, for instance, the Wall Street Journal, and columns by right-wing, Republican, or simply market worshiping voices, not to mention those on the ‘left’, were asking at the time whether capitalism as we had known it until then could conceivably survive. What had only been a dim thought, restricted to readers and writers of left-leaning websites, the notion that the country had undergone a radical revolution with prospects of an ever receding ‘American Dream’, was at the end of 2008 becoming commonplace.
This all helped elect Barack Obama. Americans with an activist temperament all across the political spectrum were beginning to accept the idea that a counterrevolution was called for. The lies of eight years of government under George W. Bush, the growing distrust in communities split over the question of what America’s national purposes ought to include, all helped stimulate a longing for someone with a plan to cleanse the national soul and policy stables. And at that very moment Obama appeared on the scene, suddenly and unexpectedly, with ostensibly more national savior credentials than any other top politician within sight.
Would Obama have politically survived dramatic moves to actually repair the financial system? Could he have proceeeded on the basis that the large banks were indeed bankrupt and had to be re-organized, returning the ones protected by tax payers and insurance to their original function of lending to entrepreneurs? Of course he could have. The country had been waiting for it.
Instead of moves that could have become part of the counterrevolution for which the American nation seemed prepared, at least in principle, the freshly inaugurated president began by bending over backwards to accommodate Republicans in Congress and right-wing opinion makers in the media. A very small number had voiced grave doubts earlier about his plans based on his choice of Robert Rubin acolytes like Larry Summers and Tim Geithner and other officials on the top two layers of economic officialdom. These had formed the very financial policy elite creating the deregulated circumstances that made the financial crisis possible. Some more wondered in what way Rahm Emanuel, product of the Chicago Democratic machine, could possibly bend actual policy in a direction promised by Obama’s rhetoric. Fewer could see that the most trusted confidant in Obama’s entourage, Valerie Jarrett, was not the kind of person with the worldview and deeper understanding of global necessities to in any way impress upon the new president the dire seriousness of the situation he was now expected to help shape.
Widespread hope for a new beginning, something that Americans learn to consider as a kind of birthright, had been so strong that Obama’s supporters explained away his ‘reaching across the aisle’, and his striving for bipartisanship and consensus, as complicated chess moves, not even of the conventional kind but of esoteric three-dimensional chess, so as to achieve dominance of America’s political apparatus with which to bring about the counterrevolution. Whatever can be said about Obama’s motivation, his presidency did not begin with a struggle to straighten out the country’s financial system. Instead, as with so many other things that came later, except for America’s drone and targeted assassination campaign, he left it to others to supervise action that most of all kept things as they had been, or made them worse by bringing them into the realm of the ‘normal’.
Few recent global events have received such a unanimous verdict as the American banking crisis having wrought huge economic misery throughout the world. The beginning of the story of how this played out under Obama should not be that rightwingers and Republican opposition or racist villification prevented the new American president to deliver on his promises. He never tried.