Accueil > Activités > Conférence européenne - Bruxelles - 31 mai 2011

Austerity, debt and social destruction in Europe.

dimanche 12 juin 2011

Notes for presentation

by Ewa Charkiewicz (Pologne)

We can’t look at debt only as debt and then at its consequences, such as austerity measures. We need to reflect more on the role of debt in creating this kind of market economy that developed in Europe since 12th century (the establishment of usury, the invention of creating value from debt) that led to the current state of financial capitalism, or financialisation. The important features of this kind of economy are expansion in terms of space, territorially as well as to social reproduction and affect, and speed up in the turnover of profits (accumulation of capital).

Financialisation - as prime directive and practice of government refers to (i) the state where main policy is macroeconomic, and political decisions are made with an eye on creating markets out of domains of social sector policies, by replacing social analysis with financial diagnostic of social and environmental problems, by governing through budgetary allocations and in decision timeframe reduced to budget /project cycles ; the role of state is reversed, it no longer manages public needs, it is actively involved in creating new markets (ii) as value added management in corporation focused on constant pressures to increase investors’ profits, and (iii) as financialization of every day life, as well as (iv) the emergence of new virtual economy made up of layers of debt based financial products (new kind of fictitious capital) with its revenues dependent on economies of production, reproduction and nature.

There is a profound crisis of political, and what we knew as state. Political is no longer political, the separation between state and economy disappeared, and political has been subsumed under economic, with profound consequences for social reproduction, which is reprivatized to households and women. The current social crisis is the result of neoliberal revolution in frameworks of thinking, governmental programs and policies, in ways companies are governed that in their cumulative effects transfer the costs of risk and hypercompetition to households and cheapen labor by way of pressures on wages, precarisation and intensification of work, accompanied by delegalization or abandonment of social rights. The changes have been introduced over years, by constructing discursive opportunities for shock therapies, as well as in incremental manner, with tactical arguments, masked with appeals to morals or inevitability and subversions of language of freedom and justice. First we were told there is no third way, and then the third way was there but it was neoliberal, and now we witness the collapse of left neoliberalism. Historically, this reordering of the world and every day life is comparable to scale of changes of industrial revolution. Paradoxically, we should all become anti-revolutionaries today.

1. The other Europe. The ‘transitions’ in Eastern Europe responded to, or at any rate provided the solution to decline in rates of profits and allowed for expansion and speed up of accumulation of financial capital. There are some affinities with processes of colonization, and it is informative, that a few days ago American president offered transition as an example for North Africa, while much several months ago president of the EBRD stated the Bank is ready to invest, provide policy advice – to what we know would be deepening integration of North Africa with global financial marketsat the expense of local people if it is to be pursued on the model of transition in eastern Europe.

Lessons from eastern Europe are informative but there are few opportunities to reflect on experiences of transition. In political discourse left or right, Europe tends to imply Western Europe, or old EU, only. Eastern Europe continues to be the other Europe, an add-on, and has a status of skeleton hidden in the closet. This has its historical bio-political roots in sociobiology (First institute to study race, established in 1921 in Sweden by prof. Lundberg was devoted to studying Slavs as an inferior race. In 1930s. Germans nazi scholars took up these methodologies to develop scientific studies on Jews which produced knowledge and arguments that legitimized first stripping Jews of rights and property and then mass murders sponsored and executed in collusion between science, state, and corporations with system of psycho-material rewards to ordinary Germans ; as Girrgio Agameben warns us this system is a hidden paradigm of contemporary politics) 1919 politics of cordon sanitaire of Soviet Russia were continued in the containment policies of the soviet block after the second World (or European) War . The racial pathologization of Slavs and Jews, and political pathologization of the soviet system conflated into each other and produced biopolitical discourse on barbarian Eastern Europeans, and provided justifications for conquest when the soviet system imploded and the region was opened to globalization, and partiotined into Central, Easter South, Western Balkan, NiS according to progress in neoliberal reforms, nation state formulas, and transatlantic geopolitics.

On the left, there is a grievance with lack of democracy, authoritarianism, and centralization of decisions in ‘communist’ party politbureaus which accounts for silence of the left on the topic of Eastern Europe. While these critiques are on the target, the problem is that we do not have studies to understand how economic processes and populations were organized and managed (socialist biopolitics and economic management). The cost of social reproduction were shared (alike in western welfare states) and discontinued in transition, while subordination of development to economic growth and primacy of economic managerialism was continued in neoliberalism.(In socialist state economic managerialism did not extend to social sectors as under neoliberalism). Concerning economic policies, the difference with welfare state capitalism were differences in methods of valorization of economic activities [consumer prices (value) was established on the basis of production costs (+ 2 - 10 % for distribution costs) , and that the socialist economies were not dependent on debt. We need critical reflection and research to study technologies of socialist government of the economy to see how an economy that was not based on debt was organized. Post-neoliberal politics requires this kind of exercise in imagination beyond debt dependence.

Regarding transition, it is interesting to reflect that market reforms started before 1989. Hungary joined IMF in 1982 and Poland in 1986. Private companies were organized under umbrella of Komsomol in the USSR in 1980s. In Poland several attempts were made at commercialization of food prices, which actually triggered the emergence of Solidarity Trade Union which protested against socialist market reforms in 1980 ; in 1986 laws were introduced in Poland that changed ownership of property from “the ownership of workers and farmers” to state ownership, and later paved way for privatization. The foundation for deregulation and economic restructuring was already laid by socialist party government.

2. Neoliberal state and debt dependent growth. Transitions began without debt, now massive debts and outflow of capital from Eastern Europe is going on. Eg between 1995 – 2005 the outflow of capital from Russia was 284 billion USD. Regarding pre-transition debt, the exception was Poland, which had huge debt and was on the verge of bankruptcy in 1989. This was one of the reason why socialist party managers entered into roundtable talks with opposition which led to arrangements in political power sharing, and paved way for “shock therapies”. “Free market” and democracy came to Eastern Europe in neoliberal form.

For middle and low income households transition was a permanent financial crisis. The groups most affected were former industrial and farm workers, and in particular women from these groups who had to shoulder the obligations of social provisioning and care in the context of lack if income. The second generation of transition, the majority of young people who enter labor markets today do not have any prospects of existential security now and in the future. Methods to calculate poverty thresholds actually obscure the scale of poverty, and enact the new class racism of neoliberalism directed towards the poor. Transition implied delegalization of social rights, and privatization of social sectors. This takes place in incremental ways, with gradual steps, and is masked by rhetoric of catching up with West, return to Europe, proclaiming new affluence and wealth - while actually poverty skyrocketed and many countries in the region did not reach the pretransition GDP levels, or plummeted below in the outcome of the latest financial crisis. (Colleagues from Hungary and Poland will talk more about it).

One of the important dimensions of neoliberal transitions was that to a large extend preexisting means of livelihoods and industries have been rapidly destroyed (as if war went through the territory) and new investment did not compensate for employment loss (eg in Poland between 1990 – 2000 net loss of jobs in the outcome of privatization and closures was 2.5 million while 1.5 million young people entered labor market), or jobs have been substandard. For impoverished populations, the only access to cash was to borrow from loan sharks, including UK based Provident, which alike many other companies got a new lease on life by expanding to Poland, Ukraine, Slovakia. At the same time fiscal competition and corporate quest for profit, and self-serving interests and lucrative obedience to neoliberalism by local micro-class of managers of transition led to various forms of subsidies to business, from privatization shams enabled by law to establishment of special economic zones, which depleted public revenue. Eg in Poland the mining rights are sold for 1.5 % of profit (for comparison in Nigeria the government gets 50 % of income of oil companies from local drilling). Another example is Dell that moved factory from Limerick to special economic zone in Lodz, where in addition to tax exemptions it obtained the subsidy of 28 million euro. Public revenue is depleted by direct or hidden subsidies such as tax holiday and by fiscal competition, while at the same time the government is increasing debt to finance its public obligations, and investment projects. Notably, the decision making power whether to incur debt or not is not with parliament, but with the minister of finance, and the only limit is the constitutional ceiling of 60 % and local elite desires and corporate pressure to join the euro zone, hence they have to meet targets that put caps on budget deficit.

The second aspect of transition was that the logic of the market was extended to social sectors, and finally, to the state itself, when public administration were reorganized on the model of the enterprise. Municipalities in Poland are behaving as investors, they create municipal corporations, and arbitrarily transfer what was common property (eg housing stock or hospitals) into corporate assets. When the state is managed as a corporation, then investments that generate revenue are assets, while the citizens who cannot afford life in private subscription, and need health care, education, communal housing, unemployed or disability assistance – become liabilities that need to be minimized. Notably, a recent solution to communal debt proposed by Minister of Finance in Poland was to create local markets for communal debts. Indebted municipalities can continue to borrow from banks and investment funds, providing that they buy the permission to incur debt up to 60 % of local revenue from other municipalities that are less indebted. (The lessons from marketization of climate policy have not gone unnoticed)

Countries such as Poland became laboratories for marketization of social sectors of government. First, health care, pensions, housing, child care, communal services, disability and social assistance, education became problems of finance (eg financial diagnostic superseded medical diagnostic in health care reforms in Poland), and then these new knowledge and arguments provided basis for policy decisions, while human rights arguments were displaced and invalidated. Then, on the basis of communal property limited liability corporations have been established to provide services, and now they are in the process of being sold to international investors, which in turn take credit or create special investment vehicles to finance these purchases.

A significant part of the GDP growth in Poland (one of the few countries in the region where GDP growth superseded pre transition levels) was generated with fiscal transfers from the EU (eg. regional funds). However, EU funded projects had to be pre-paid, which means that the state had to borrow to prefinance these projects, while the decision on investment priorities (where and what) were not taken locally, but they were predetermined and strictly regulated in Brussels. On top of state debt, corporate debt and private debt markets were expanded to countries in transition (renamed emerging economies). In a way transition has been a bonanza for various public and private debt products.

(3) Feminist critique. As we all know, for international financial institutions and governments, public debt becomes a problem when it is framed as debt default risk, and is solved by cutting public expenditure on social sectors, by privatization and downsizing public administration, increasing exploitation of natural resources. Feminist scholars and activists have analyzed structural adjustment policies in the South or restructuring in the North/West to show that this entailed increase in poverty and reprivatization of social reproduction to households, and increased pressures on women’s care work on top of their contribution to food production and paid work. Hence feminist scholars address feminization of labor markets and feminization of survival, and analyze financial debt crises as the crises of social reproduction. When the state is shedding its responsibility for public services, the work does not disappear, someone has to do it and finance it. As noted by some feminists economists, economic efficiency leads to social inefficiency. In particular when the costs of social reproduction are not shared between households and firms this affects women from low income households, because they compensate with unpaid care work for lack income and loss of services provided by the state. But middle class households are squeezed, too, into becoming a new global cognitariat. While debt seems to be hot air, in fact debt based economic system and speed up in the turnover of profits depends on increased inputs of work and resources, while at the same time depletes them, e.g. by exhausting the energies of the bodies forced to do low paid, unsecure work. Reproduction time of people and nature is on collision with speeded up time of reproduction of financial capital. Hence we need a gender and human rights audit of the debt dependent economy, a sort of debt product chain analysis focusing on the linkages between virtual financial economy and its inherent instability, economy of production, and economies of reproduction and nature. Such analysis would be incomplete without the reflection on the role of the state.

(4) Alternative strategies which many of us here have already initiated, are to think together, and to develop critical knowledge and analysis, and arguments to enable post-neoliberal politics. We have think together with women and men who conduct local struggles.

(i) We need to show what is taking place beyond the spectacle of democracy, and pin-point in-depth causes of immiseration of growing numbers of people in effect of transferring of social costs of economic growth and capital accumulation to social reproduction/care economy. The dependence of consumers, corporations and states on debts needs to disentangled.

(ii) We need to make visible that the transformation of political into economic depends on the rise of new authoritarianism and intensifications of political controls. This is not only the case of the rise far rights politics in Europe as we have discussed it so far, but the problem at the very core of neoliberal government of people and economy. When the state is governed according to economic rationality and the logic of enterprise democracy becomes fictitious and social entitlements and human rights arguments are subverted or displaced. The Spanish calls for real democracy now are profoundly warranted. When the sovereignty migrates to Capital and Church, the new political subject of the state or EU is not citizen - but investor. Hence putting political energies to develop analysis, arguments, and broad public support for reforms from inside to reclaim the social and human rights is required. Markets pre-existed financial capitalism ; we have to explore how to reorganize markets beyond dependence on debt so that they can meet human needs and share the costs of social and environmental reproduction, and to use these frameworks to press for reforms, and for strategic interventions in politics

(iii) last no least, as social and environmental crisis deepens and neoliberal state and business actors are set to solve it by pushing social and ecological debt on the rest of us, and hedge their risk by transcending planetary boundaries as they prepare for commercial exploitation of extraterrestrial space, and as the planet, resources and populations have been encircled with intensified techno-politico-military controls – there is an urgent need for development of practical local or translocal experiments in providing livelihoods that revive cooperative arrangements, create alternative companies and exchange systems between producers and consumers, redesign local markets - in a manner that slows down money flows, and transforms thinking on value currently farmed as costs of capital to reattach it to costs of reproduction and to limits the pressures on care, labor and nature.

(In this short note I draw on ideas from Rosa Luxemburg, Michel Foucault, Giorgio Agamben, Spike V. Peterson, Theresa Brennan, Janine Brodie, Mary Mellor, Ariel Salleh, Brigitte Young, Elmar Altvater, Diane Elson, David Newcomb, among others)

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