Tags
Argentina, EU, European Central Bank, eurozone crisis, Iceland, IMF, Ireland
Ireland
As tens of thousands of Irish flee their homeland each year, workers get their salaries slashed by up to 20%, social programs get chopped, and the austerity true-believers point to Ireland as the model for how a respectful citizenry should properly accept the dismantling of their economies with little complaint. Ireland is setting an “outstanding example,” said Angela Merkel. Sarkozy says they are “almost out of the crisis,” which is incredible considering slashing wages and government spending is exactly how you prevent an economy from improving. But as former ECB head Trichet said, “Greece has a role model and that role model is Ireland.”
If Ireland is the role model, then what is desired by the banking-class is this: deregulate the financial system so they can more easily create housing bubbles. When the bubbles burst, use the government to bail out the banks, then accept tens of billions of dollars from the ECB and IMF with strings attached demanding the slashing of government deficits and any economic future for an entire generation. The really amazing thing is that media and politicians can hail Ireland with a straight face. They can hail a model that has created a mass exodus out of the country and little livelihood left for those still there. Economic indicators amount to a pile of rubbish for working people.
Argentina
Argentina, by contrast, defaulted on a debt to the World Bank in 2002. This is now the ultimate danger to the financiers, that sovereign states will decide not to pay back debts that require devastating austerity on its citizenry. It is not even discussed as a possibility for countries like Greece or Portugal. Yet Argentina in 2002 was in complete chaos. They were cycling through new presidents every few days as workers took over their factories and created their own localized economies and cultures.
And when they defaulted…. well, things were still bad for workers, but at least they still had some scrap of self determination as a country. And guess what, 2002 was rock bottom for Argentina. They still struggle with inflation, but they are now the world’s 22nd largest economy by purchasing power.
In other words, while their economic collapse was still reeeeeeeally terrible for millions of people, defaulting on their debt was not the end of the world. They kept their sovereignty and dug themselves out of the mess on their own, and now have a functional economy.
Iceland
In 2010 and 2011, Icelandic voters turned out in droves to crush referendums to bail out private bank debt to foreign creditors. The British and Dutch banks will no doubt attempt legal action, and the EU will not look favorably on any membership bid by Iceland any time soon, but what was the alternative? How are voters supposed to support a self-imposed depression for the benefit of British and Dutch creditors due to the collapse of a private bank? Isn’t this type of risk part of the cost of doing such business?
As Michael Hudson stated, “it is a central assumption of international law that no sovereign country should be forced to commit economic suicide by imposing financial austerity to the point of forcing emigration and demographic shrinkage.” Only time will tell how the Icelandic voters’ such refusal will affect their economic and political future. One thing is certain, they at least did not willingly put themselves on the sacrificial alter.
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Whether spurred by public or private debt, austerity is pushed as necessary by neo-liberal ideologues and the banking-class alike. Sovereign countries are supposed to willingly destroy their economies for the benefit of creditors, who likely had a hand in creating whatever bubble that started the particular crisis in the first place*. The type of democratic referendum seen in Iceland is a horror for the banking-class, because they know no sane citizen would vote for austerity that does not fix their economy. This is why Greece could not be allowed to have a referendum for their bailout/austerity package.
*The current crisis in Europe is largely due to banks using the government debts they owned as collateral for their own debts many times over. This is clearly irresponsible and should have been barred. Furthermore, the same banks were instrumental in hiding governments’ true deficits from the public. When it became apparent that countries like Greece were in worse shape than previously thought, the value of their bonds dropped, and private banks were exposed as morbidly obese gamblers, sitting on a couch on top of a house of cards, built up on crappy bonds that were used as collateral in several separate loans.
