The EU Sows the Seeds of Its Own Destruction 

Working class Europeans are increasingly facing declining living standards and are turning against the EU. The war in Ukraine and the energy crisis has exacerbated this trend, and national governments and the European Commission are only making matters worse.

A shocking 66 percent of the EU working class feel their quality of life is getting worse; only 38 percent of the upper class feel the same way. How long can the European project survive with such a divide?

There is one EU country where this process has already been occurring for decades: Italy.

As I read a recent study on Italy’s decades-long decline in living standards, it was shocking how many of the same policies that precipitated its decline are now being used across the EU. I suppose it shouldn’t come as a surprise since there has never been any admission that the economic playbook followed by Brussels and Italian elites has failed. Instead they only demand  more. More privatization.  More cuts in real wages. More labor flexibility. More austerity. In many ways that was the goal all along:

The idea of those who welcomed and promoted tighter external constraints was that a reduction in the country’s discretion in policy-making would facilitate economic modernization, breaking the negative trend in productivity growth; it would discipline trade unions due to the need to retain external competitiveness by keeping wage growth low, as the option of currency devaluation was no longer available; and it would discipline government expenditures, thereby making Italy more attractive for financial investors. 

All of these policies have been disastrous for the large majority of Italians. It remains the only country in the bloc where wages have fallen since 1990, but maybe it will soon have company. Brussels, rather than seeing such a decline as failure of its policies in the bloc’s third-largest economy, seems to want to emulate it throughout the rest of the EU.

And the result will be the same for the large majority of the EU population as it has been in Italy now for decades. Just a reminder of what that has meant for Italians:

Annual net income of the Italian household, which was €27,499 (at constant 2010 prices) in 1991, declined to €23,277 in 2016—a drop in median living standards of 15%. Mean net household income fell by €3,108 between 1991 and 2016 or by about 10%. Italy is the only major Eurozone country that, in the past 27 years, suffered not stagnation but decline.

Other EU countries are now dealing with similar drops in incomes, and yet are pursuing similar policies to those that Italy has pursued for a quarter century, which leads to the question in an age of declining prosperity: just how much longer can the European project survive?

While there are obvious differences between Italy and the other members of the EU (Italy came into the common currency with a lot of debt, it relied heavily on state intervention so that privatization continues to have a more negative impact there than elsewhere, etc.), but the latter is still pursuing policies that were enacted with zeal by Rome, which helped lead to the Italy’s decades-long stagnation.

Wage suppression has long been the strategy in Italy:

Exporting became more difficult as the real exchange rate appreciated when Italy entered the Eurozone. Downward pressure on real wage growth due to intensified cost competitiveness strategies dampened household consumption. Investment declined as the economic outlook deteriorated and as privatisation promoted a decline in the number of large firms in crucial sectors from the 1990s onwards. And the constraints on fiscal policy led to a decline in the growth contribution of public expenditures, as Italy was forced to run primary fiscal surpluses to meet the European fiscal rules and appease investors.

The EU, and especially Germany, are confronting a similar export competitiveness problem. The response, similar to in Italy, is class warfare waged on labor.

Germany no longer has access to cheap Russian fossil fuels, and it is an importer of critical minerals used in manufacturing such as electric cars. The country’s export markets in Asia are shrinking. The only component of Berlin’s economic model still left is wage suppression, and its doubling down on those efforts. The same way Italy believed it could rely on a steady stream of low-paid workers from the mezzogiorno, Germany thinks it can continue to do much the same.

Real minimum wages have declined in nearly all of the 21 EU countries with a minimum wage, and real wages fell at record speed in Germany last year. There is no plan to fix this.

Germany is instead pushing employers to pay a one-off “inflation bonus” to their employees, which will be exempted from income tax and social contributions for a sum of up to €3,000. Other EU governments, including of course the Meloni government in Italy, are following Berlin’s lead and pushing the “wage restraint” argument. James Meadway writes at The New Statesman: 

Real wages have fallen for the last two years, and German bosses are warning of worse to come. The alternative would be to abandon the export model and reflate the domestic economy – pushing up real wages as a primary objective, squeezing profits in the export-oriented sectors as needed, and driving up public investment to create jobs. But neither the current government nor its opposition appears willing to break with the post-reunification economic legacy. It will be German workers that are forced to pay the price.

Waging war on workers with the stated goal of controlling inflation is similar to what happened to Italy in the 1990s. While Rome’s wage suppression efforts did help tame inflation, they backfired “in terms of aggregate demand, productivity and, ultimately, growth.”

One of the first steps Rome took was to abolish wage indexation in a bid  to restore “external competitiveness” and it was game on from there:

Italian governments reformed the labour market in several rounds from the early 1990s onwards. In theory, this was supposed to increase cost competitiveness of Italian firms, thereby allowing them to gain export market shares as they came under increasing pressure from competition in China and other emerging market economies while the option of currency devaluations was no longer available. Labor market reforms indeed contributed to reducing inflation and real wage growth. But cheap labour also increased the labour-intensity of production, as an increasing share of temporary employment contributed to reducing the incentives for innovation (Tridico, 2015). Private investment is key to rising productivity and particularly important in high-tech sectors(Kleinknecht, 2020), but the intensification of low-cost business strategies in a more flexible labour market took away incentives for private investment.

Similarly, German business investment has been declining for years and stagnation is an EU-wide trend.

Again from the early days of Italy’s decline:

…wage repression negatively affected growth dynamics by weakening the linkage between aggregate demand and the ‘Kaldorian’ processes of learning, innovation, and industrial renewal. Second, the persistent availability of cheap labor encouraged the spread of low-cost competitive strategies, which, in turn, discouraged alternatives based on investment, innovation and training.

While business investment declines, the EU continues to push labor market flexibility as one of the main pillars of the European policy framework. It is perceived as an instrument to promote growth with positive spillover effects on the workers’ income. But in reality it often leads to wage suppression and more poverty.

Again, one need look no further than Italy:

Since the mid-1990s, labour market flexibilization has been at the centre of the Italian political agenda, notwithstanding the orientation of the governments in charge. Italy’s score for regular contracts was marginally stricter than in Germany and France in the 1990s, but it declined below German levels by 2019.

Temporary, low-paid contracts now account for the majority of new jobs and 5.6 million Italians — including 1.4 million minors — currently live in poverty, an all-time high.

While correlation is not causation, the weakening of organized labor in manufacturing helped pave the way for this flexibility during and after European integration and has meant the increasing precarization of labor from the 1990s onwards.

Economists typically point to too much state interventionism in market processes for Italy’s stagnation and argue that Rome must always enact more market-friendly reforms.

This is what Italy has been doing for two-plus decades. As Philipp Heimberger shows:

Italy’s “reform efforts” have been significant; Italy is actually a top performer in liberalising reforms over the past decades compared with other advanced economies. Overall, Italy has adhered much more closely to the EU’s reform policy rulebook than Germany or France.

Now the EU Commission’s legislative proposals for reform of EU fiscal rules would bring even more austerity not only to Italy but the entire bloc. The EC is pushing this despite its own polling of EU citizens showing that nearly 80 percent favor stronger social policies and more social spending.

Although austerity mandates will hit countries like Italy with higher levels of debt harder, it will also mean fewer jobs, lower wages, less public services and higher poverty across the bloc. The German economy is already stagnating, largely the result of a decline in government and household consumption.

The working class across the EU will of course be hit the hardest, and one wonders how much more they can take of the EU elites’ greed before the cracks in the EU foundation start to crumble. Brussels’ neoliberal austerity policies continue to increase the gap between rich and poor.

Once again, the case of Italy is instructive. The divide between the wealthier north and poorer south is often described as some insolvable problem, but in reality state intervention from the 1950s to 1970s in fiscal and industrial policies closed, and in some cases, erased the gap. Then EU rules destroyed those efforts:

The European regulatory framework made the use of industrial policy interventions

much more difficult while fiscal policy turned restrictive. During the Euro Crisis, Italy lost about 25% of its industrial production; reconstruction of Italian industries was limited by restrictions on fiscal and industrial policies. Importantly, the South of Italy experienced a much larger contraction in manufacturing value added than the Northern parts; business investment, household consumption, and public expenditure in the South also fell significantly more, which further increased the deep territorial divide.

Back to that aforementioned number of 66 percent of the EU working class feel their quality of life is getting worse. Trust in EU institutions also continues to decline. Brussels’ policies are creating a groundswell of opposition to the EU.

Despite Italy’s problems, a majority of Italians so far continues to be in favor of EU and Eurozone membership. However, support has been falling fast. Another round of harsh austerity in Italy could accelerate that trend.

As is the case across much of Europe, support for the EU in Italy is already largely divided along class lines:

Recent survey evidence suggests that support for the euro has a clear income and class bias. The perception of having benefited from the euro grows with income and is highest among self-employed professionals and large employers, technical (semi-)professionals, and associate managers, while production and service workers and small business owners are much less likely to report that they have benefited from the euro. In brief, in Italy support for the euro is concentrated among the economically better off and, with regard to partisan choice, among voters of the centre-left. In turn, the more a person has benefited from the euro, the more likely she/he is to report that she/he would vote to remain in the euro in a hypothetical referendum. Importantly, the majority of Italian voters report that they have not benefited from the euro, which makes support for the single currency rather fragile.

With youth unemployment through the roof, younger Italians overwhelmingly believe their lives will be worse off than their parents and hold more eurosceptic positions. In last year’s elections, voters went with the fake eurosceptic candidate Meloni. What happens when they get a real one?

And what happens when Italy’s problems increasingly begin to be experienced by much of the EU? The European elites won’t like the answer, as detailed by The Political Costs of Austerity:

Fiscal consolidations lead to a significant increase in extreme parties’ vote share, lower voter turnout, and a rise in political fragmentation. We highlight the close relationship between detrimental economic developments and voters’ support for extreme parties by showing that austerity induces severe economic costs through lowering GDP, employment, private investment, and wages. Austerity-driven recessions amplify the political costs of economic downturns considerably by increasing distrust in the political environment.

Here’s looking at you, Germany.

Rather than change course when faced with the prospect of a nationalist, euro-skeptic party faring well with voters, we instead have German spooks sounding the democracy-threat alarm. Thomas Haldenwang, the chief of the Federal Office for the Protection of the Constitution, said at a news conference last week that far-right views and positions pose the biggest threat to German democracy – or at least whatever is left of it.

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  1. Alan Roxdale

    German spooks sounding the democracy-threat alarm

    The only democratic threat is that the plebs might kick against the PMC oligarchy and vote for their wealth back. Hence it becomes essential to destroy the electoral mandate in order to save it.

    1. digi_owl

      And that is why nothing will change, because EU is a PMC “paradise”.

      I think it was the old bearded one that observed something about workers on their own not revolting. They needed someone from the higher classes to ferment that idea. Without that, all they did were grumble, maybe throw the odd riot, but generally not push through lasting change.

      And as long as Euro and Schengen allows the PMC to have breakfast in Paris, lunch in Berlin and dinner in Rome, nothing will change.

      1. Zzzz Andrew

        And as long as Euro and Schengen allows the PMC to have breakfast in Paris, lunch in Berlin and dinner in Rome

        I believe this is where it is necessary to add “and vespers in Sicily.”

    2. hunkerdown

      “Democracy” means capitalist competition as a truth-generating process. Apply that translation, and the discourses of the ruling class will immediately start to make more sense.

  2. Ignacio

    Those polls in Germany (France, Italy etc) show that the preferred political option is usually not much above 25% on voting intention. Whatever the electoral results a majority of German, French, Italian etc will remain unsatisfied with a government unable to satisfy a good majority. How long will we go with this sad political landscape?

    1. vao

      This will probably go for very, very long.

      Taking Italy as the example discussed at length in the article, the decline began at the time the Maastricht treaty and its constraining provisions started coming into effect in November 1993. 30 years of unremitting degradation — and still no revolt, no groundswell to ditch the Euro/EU/Stability Pact/etc, no genuine, credible political alternative.

      Europeans will most certainly endure their immiseration precisely because it is progressive — the Italians have been at it for a generation after all. By the time the situation becomes truly unbearable, deindustralization, shrivelling of public/State institutions, and atrophy of organizational competence through privatization and offshoring will be too pronounced to restore a more favourable environment. Or perhaps the French will revive their traditions, defenestrate their elites, and motivate a change of course in other countries before it is too late.

      1. Synoia

        True, and AI will add to the misery for the PMC class world wide, as professions which are not tangible (Paper Pushers) ) will feel the full effects of AI relatively quickly as large enterprises shed those clerical and professional workers and temporally improve profits.

        Consider how many Clerical and Management staff will be laid off and replaced by AI in the next 10 years.

        I hear a social contract beginning to be being torn us as I write.

        1. ambrit

          Oh, from my admittedly lowly point of view, that tearing sound began with Reagan ‘breaking’ the Professional Air Traffic Controllers union strike. He did it by using State resources, (Military Air Traffic Controllers,) to replace the striking workers. Then Clinton did “Welfare Reform.”
          Looking around, I am beginning to appreciate Lenin’s emphasis on the Vanguard of the Proletariat.
          Someone has to organize to “pick up the pieces.”

          1. spud

            carters assault on labor unions was the deregulation of the airlines and trucking.

            then he unleashed paul volker on us.

            1. Jorge

              Up through the 1960s, if you wanted to buy medical services for a human being in the US, you could buy it from only one of two kinds of business:
              1. a corporation owned by an MD, or
              2. a non-profit corporation.

              That was it. Thus, all of the Catholic hospitals (Sisters of Mercy Hospital, etc.). This seems to have been reformed in 1972?

              This is the earliest deregulation/neoliberal policy that I can find.

          2. Paul Art

            I tend to go further back to the founding of the DLCC with Al From and Tony Coelho and the rise of the Bluedogs

        2. AIex I&I

          Ah, now I got it, thanks – namely PMC = Professional Managerial Class, or?
          The von Ursul’esque jet-set.

          Apropos, an uninformed question from out of the loop:
          Are the above-explained circumstances much different in the USA (austerity, privatization, wage decline) ? OK, i should of course research by myself.

          1. Synoia

            The US is well ahead. Richest country on the planet and it will not house its population.

            CA is no special case, because if one is living outside , CA has the best year round climate.

          2. Jorge

            Alternatively, the “Professional-Managerial Caste”.

            I think of it as us technocrats, the people who manage things but do not own them. The ur-PMC member has a large salary, a large house, and a jumbo mortgage on that house. We do not pay cash for houses.

            Caste is very appropriate- we (not me) pay for private schools instead of pushing public schools to improve, and our children get farther ahead faster. When you hear about unpaid internships- that’s the parents paying for the kids room&board, and the PMC self-replicates.

    2. DJG, Reality Czar

      Ignacio and vao–valuable comments from each of you. Plus, compliments to Conor Gallagher, who has written another excellent analysis (in English!) of what is really happening in Italy. Most of the Anglosphere press is still in the Italians Are Excitable! level of analysis.

      Some observations:
      –Ignacio asks about the inability to form a satisfactory majority. Here in Italy, American ideas have been imported wholesale, as deadly as they are. Analyses pretend that there is a centrosinistra and a centrodestra. It’s U.S. bipartisanship. Talk about nonproductive. So the older idea among Europeans of a coalition with negotiated objectives is being undermined. Does that apply to where you are?
      –Historically, Italians voted for EU powers because it would solve the great dilemma of having the largest communist party in the West and somehow deal with the Christian Democrats, who had failed to produce real gains for the populace for some time.
      –The result is that both the Partito Comunista Italiano and the DC (Christian Democrats) collapsed.
      –Into the breach stepped: Berlusconi!
      –Much of the Italian right, that is, the Lega and the Fratelli d’Italia, is under the tutelage of the U.S. Republican Party. So they trot out lame U.S. economic ideas like the flat tax (not feasible in Italy). The Lega and the FdI have managed to gut reddito di cittadinanza (guaranteed income) as well as the Keynesian Superbonus. As always with stupid neoliberal maneuvers, the point is to kill successful programs.
      –Conor Gallagher links to a Pew Research article about European attitudes based on 2019 data. Already, Italy is at the bottom for satisfaction.
      –COVID and the Ukraine war have only made matters worse.
      –People are leaving. (Till recently, to London, natch.) It doesn’t have to be this way.
      –And what does the Partito Democratico intend to do to break the impasse? Why, elect Elly Schlein, who is a thoroughly gattopardesco phenomenon. Tutto deve cambiare perché nulla cambi.
      –There are dissidents in Italy. Giuseppe Conte, whom Gattopardesca Schlein has been avoiding for weeks, makes her uncomfortable because of his vocal opposition to Italy shipping armaments to Ukraine. Nicola Fratoianni of the Sinistra Italiana is supposedly a solid ally of the Partito Democratico. I doubt that she consults him.

      Yet there are strong indications that very few Italians are buying the Atlanticist crap. As I returned from an errand, I saw that the signature-gatherers for three referendums (two to abrogate any arms sales and one to redefining financing of the Sistema Sanitario Nazionale) were out in Via Roma.

      I signed weeks ago, when they first started the signature campaign. We’ll see how the powers that be try to mess up this citizens’ effort. Ursula van der Leyen will respond with a display of blue-and-yellow couturier.

    1. tevhatch

      I can’t see how even a precipitous decline in wages/Euro will help Germany, much less the EU, become competitive if they are locked out of the inputs from Russia and China, which is what Washington seems set upon. I’m wondering which parts of the EU will become cheap tourist centres, and which parts will become 2000’s Detroit, (where you could not even directly walk across the street from the hotel to the Cobo Convention Center, but must take a taxi to arrive safely). At best it might help Germany finish eat up the rest of the EU, but there is not much left on the plate.

  3. Piotr Berman

    Complex issues, how to preserve standard of living when the return on investments are higher in countries with lower labor costs. It used to be that accumulated investments in machinery, infrastructure and education was giving the edge to developed countries. But over the years, each of these edges eroded, while liberalization of trade accelerated that process.

    Then you have additional problems with energy costs, voluntary abandoning of markets (sanctions) and diverting resources toward militarization of EU that became a junior partner of NATO in institutional hierarchy. One can formulate solutions for the additional problems, and perhaps even the structural one: capital DOES NOT HAVE TO flow to low cost countries, eroding productivity edge that still exists (I guess), or it can flow slower. But this is like offering non-Confucian policies in Imperial China.

  4. Piotr Berman

    Political situation in Germany is intriguing. Unlike in France, the opposition to status quo is not symmetrically split into left and right that, luckily to defenders of status quo, hate each other. This trend flows to AfD, and now it visibly erodes the base of CDU/CSU that should be pro-business, while the status quo is quo has negative impact on employers and workers. But I have seen no news lately about ANY positions of CDU/CSU, perhaps it is the fault of my Twitter, you get news on topics you followed before.

    Before, there were some prominent voices in CDU/CSU that co-existence and conflict resolution with Russia is better than Holy War that ensued. The next government without CDU/CSU is impossible, current coalition totals less than 50% of support, and even with Linke (that may get into Bundestag or not) it would still be under 50%. That gives a dilemma to the traditional conservative party of Germany:

    1. Stick to Atlanticism, even that it hurts the economy and may collapse the party support in the subsequent election cycle
    2. Reform now and go for coalition with AfD, analogous to a similar coalition in Austria that did work for a while. AfD has some ideas that are not acceptable (I am guessing here) but a coalition could agree on the good parts.

    About Meloni and other fake anti-Atlanticists. I think that part of that “fake” comes from the pressures to conform that have various forms, some not so visible. Putting together a viable budget includes refinancing the debt, and interest rate may depend on ECB, and there may be other pressure methods as well. Thus reflexes toward independence and alternative ways can be kept in check in spite of popular discontent, voters shift allegiance toward a new party, new party disappoints, next election cycle another collection of fresh faces appears, Italy and other countries went through many repeats (how status quo prevails over discontent in multi-party systems).

    1. Keith Newman

      @Piotr Berman, June 25, 10:50 am
      Your final paragraph sums up the situation pretty well and not only for the EU – many political parties, one set of policies for anything important. We used to laugh at the old Soviet Union with its one party system, but our Western overlords have replicated it with a one policy system.
      In our system of representative democracy policy changes can only come through political organising and the election of political parties that will introduce real change. The hurdles are very great – diversion into harmless sidelines, differences between personalities over trivia, fakery, betrayal, etc. And if a party with real alternatives does get close to power it will be viciously attacked (eg Corbyn).
      It’s hard to know how long this situation will last. Sadly I am not very optimistic.

  5. The Rev Kev

    Thanks for this great post, Conor. I suppose that the EU bureaucracy is going to depend on the media and their security services to tamp down any protests. Even last year you had massive demonstrations in European cities that somehow the media just could not see. But there are far too many factors in play that are getting worse that will turn the entire EU into a pressure cooker. Inflation is ramping up as are food prices. This winter they will not have the gas supply to keep people warm and so will probably send every citizen an anti-Putin scarf. No doubt that people will show their displeasure at the polls but how will the EU respond? Cancel the opposing parties like they just did in Moldova? Make legal challenges to any party that wins that is not with the program? Start demanding that only computer voting is safe from the Russians? But you are talking about potentially hundreds of millions of unhappy campers in the EU which is not a force to be dismissed. And I have no faith in the EU leadership to meet these challenges as they reek of corruption and incompetency.

    1. chris

      Thinking about that, it comes down to what kind of winter the EU has.

      If it is another mild one, then perhaps the balance can be easily kept by cudgel and contempt of the working people. If it is a record breaking cold, and people are given the choice between freeze to death or starve to death, and there isn’t enough fuel for governments to subsidize even if they have the funds and will to do it, then, I don’t think all the governments will make it through intact. I don’t figure the people will have any successful uprising. Hungry freezing plebians tend to not make great fighters. But could one or more governments be overrun and replaced with an iron hand of the Pro-US regime? Yeah, maybe. Could we see martial law in a supposedly enlightened western democracy? Yeah, I think we could.

  6. Bugs

    Thanks for this thoughtful and researched post. I’m very pessimistic about the future of both French politics and the EU. For about a generation, we’ve been shipping off the absolutely least competent politicians to Brussels as either European MPs or Commissioners, perhaps with the exception of the Competition Directorate, where there have been until recently, some who bucked corporate lobbying. I could give examples, but I’m too lazy to do the research right now. I do remember being in plenary sessions where important Directives were being considered and more than half the seats were empty.

    In France, I’m convinced that if either LFI under Mélenchon or Marine Le Pen were elected, they would quickly swerve neoliberal to adhere to the Atlanticist constraints, just as did La Meloni, who I admit, I was fooled by. I do think we’re in for a bit of a shakeout after Macron enters final lame duck phase, and that might be interesting. I speculate that it will be slightly advantageous to the remnants of the traditional Gaulliste right, making a bloc to keep out Marine. The sheer personal hatred of the traditional left for Mélenchon will keep him from a majority. We have EU elections coming up so that should be something of a barometer. Of course no one will deviate from the full on support for the Ukraine war.

    1. digi_owl

      The right-populists will indeed, as they are well dressed wolves.

      They deliberately get the working class riled about non-EU immigration while quietly exploiting inter-EU wage differences for personal gain.

      And i suspect that problem of the left-populists is that they have a steeper hill to climb. First of all because they will operate under far harsher scrutiny thanks to lingering “red scare” thinking. And secondly because the right-populists will make sure to seed the bureaucracy with political landmines etc that makes it likely the population will run out of patience before the left get it all cleared out.

      I think some politician up here in Norway referred to it as squeezing out so much toothpaste the opposition would never be able to get it back in the tube.

    2. Deborah

      I’m pessimistic about France’s future, too, because I think that we are in the midst of a civilisational crisis where the role of work and money is very unstable. Many people in my generation in France (67 years old) were raised with the idea that they would have a career, or stay in one job and one place, close to home, and raise families, then retire… for example. But the americanisation (chosen mobility and job precarity…) of French life has taken a heavy toll on a traditionalist country, and people tend to forget that following WW2 there were U.S. military bases in Germany and in France (in Italy, too, maybe ?). The great pressure to maintain belief in the European Union, which, by the way, is/was also known as the the United States of Europe, is to prevent a repeat performance of WW2 in Western Europe. People in the U.S. really have no idea of what a war on your own soil means, or they have not had an idea for quite some time now : it tends to be abstract and theoretical in their minds. You have to see all those monuments to the dead of WW1, with the dead of WW2 sometimes tacked on afterwards, in every village, town, and city in France to have an awed appreciation for the magnitude of industrialized war and death, and the way it saps souls for generations afterwards, and destroys societies.
      But the EU is losing ground as the conditions that led to WW2 : unsettling of rural populations, too much concentration of population in urban areas, destruction of social tissue, as we say in French, disillusionment in the ideology of progress make themselves felt more and more. Imposition of numeric control from the top down in endless bureaucratic administrative red tape does not help the matter.
      Europe is still looking to be saved by those who pulled the strings during WW2, while many people refuse to look at the U.S.’s role in the second WORLD war to begin with, and the military-industrial model it was developing which is now our reality in Europe and beyond.
      And the traditional differences of right and left in France are no longer pertinent, I fear.
      I don’t like analyses that separate the world into plebs and elites because they are simplistic, and they don’t do justice to the rich… or the poor, for that matter. And they don’t account for the demise of the MIDDLE CLASS. It’s too easy to say that it’s the other guy’s fault.

  7. Anonymous 2

    It is important to distinguish between matters which are the responsibility of EU member states and those where EU rules apply and therefore decisions are made at Brussels level . These often get confused and the EU gets blamed by some for decisions made at national level. France, for example, is not prevented by EU rules from running a high tax, high benefit economic system, which delivers significant benefits to ordinary people. Scapegoating the EU for decisions made at national government level was of course a major reason for Brexit, which the UK voters are now regretting. Living standards are falling in the UK as well now, so the problem is not exclusive to the EU member states. The truth is that Europe is going through a rough patch at present for a variety of reasons. What does the future hold? I have no crystal ball and naturally worry, but not exclusively about Europe. The world more generally seems to me to be a mess and IMO should be our focus of concern.

    1. Michaelmas

      Anonymous 2: It is important to distinguish between matters which are the responsibility of EU member states and those where EU rules apply and therefore decisions are made at Brussels level . These often get confused and the EU gets blamed by some for decisions made at national level.

      Come on. In the real world, minimal research into the EU’s origins as the European Coal and Steel Community (ECSC) and then the EC, makes clear the primary role that members at the highest level of von Hayek’s Mont Pelerin Society played in designing the organization to implement specifically the kind of neoliberal policies the OP above cites.

      Thus, Wilhelm Röpke was personal advisor to Konrad Adenauer, West German Chancellor, and his Minister of Economics in the late 1950s, and supervised the creation of the ECSC/EC at the German end, before leaving to literally become president of the Mont Pelerin Society in 1961-62. Ludwig Erhard, the second Chancellor from 1963-66, was a member of the Mont Pelerin Society since 1950.There were many others.

      Thus, too, Robert Mundell, chief designer of the Euro when it was introduced in 1999, was also the father of ‘Reaganomics’ and went on record very happily boasting about how the Euro would work to ‘discipline’ — immiserate — the European working classes.

      …The euro would really do its work when crises hit, Mundell explained. Removing a government’s control over currency would prevent nasty little elected officials from using Keynesian monetary and fiscal juice to pull a nation out of recession.

      “It puts monetary policy out of the reach of politicians,” he said. “[And] without fiscal policy, the only way nations can keep jobs is by the competitive reduction of rules on business.”

      All this was laid out by von Hayek, who in his “The Economic Conditions of Interstate Federalism,” explicitly frames the free movement of capital, goods, and labour – a “single market,” in von Hayek’s own words – among a federation of nations as a means to severely restrict the economic policy space available to democratic governments against the market, and subordinate employment and social protection to goals of low inflation, debt reduction, and increased competitiveness.

      That’s what you see in the modern day EU. Article 107 TFEU allows for state aid, for instance, only if it’s “compatible with the internal market” and doesn’t “distort competition.” Whether or not state aid meets these criteria is at the sole discretion of the European Commission – and courts in member states are obligated to enforce the commission’s decisions.

      Anonymous 2: France, for example, is not prevented by EU rules from running a high tax, high benefit economic system, which delivers significant benefits to ordinary people.

      Bumf. You and I both know very well that if in the real world Macron got his way and all France’s present citizen-friendly high-tax, high-benefit policies were suspended and French state-run enterprises privatized, the full weight and pressure of EU law would very firmly be brought to bear to prevent those citizen-friendly policies being reinstituted and these enterprises renationalized.

      The EU was specifically designed to hand governance to inter-elite networks insulated from popular control, and thereby lock in the anti-democratic and neoliberal policies that the OP cites, while simultaneously creating obfuscation about its role in doing this — obfuscation you are now promoting with lines like ‘the EU gets blamed by some for decisions made at national level.’

      Shame on you.

      1. Anonymous 2

        Well, Michaelmas, you misunderstand and misrepresent my comments. Instead of seeking clarification, you then insult me.

        This board used to be better than this.

  8. JonnyJames

    Years ago, I was naive and thought European Integration was a great. Now, I realize that it is mostly just a pro-oligarchy, neoliberal austerity straitjacket.

    The seeds of its own destruction: The TEU or Maastricht Treaty (1992) “convergence criteria” handcuffs national govts. and imposes structural austerity. This, in combination with a single currency, set the stage for self-imposed “structural adjustments”. It’s as if the IMF wrote the treaties (maybe not too far off the mark?). It is no surprise at all that EU denizens are not happy about it. In fact, I thought the EU would start to unravel sooner. Brexit is just the beginning.

    In addition, the term oft-used term “democratic deficit” in EU governance is clearly a euphemism. The Commission is not elected and consists mostly of financial and corporate “expert” technocrats. In short, it is a giant conflict of interest and “transparency and accountability” are lacking. The EU Parliament is a joke, just look at the turnouts at EU MP elections as well as their very limited institutional power.

    The results of past referendums on subsequent treaties is also telling. As the article points out, Italy is not happy, but also France and even the Netherlands and others. We’ll see, but the worsening standards of living will likely continue and public unrest will increase. It remains to be seen if public opinion will result in meaningful changes in policy.

    1. digi_owl

      Frankly EU should have unraveled after 2008, except that Greece was made an example to scare the others back in line.

      1. JonnyJames

        True, I should have mentioned that as well: what was done to Greece was horrific. It should be viewed as a massive institutional crime, and some of us do view it that way. Democracy and the rule of law? Yeah, right.

        1. Michaelmas

          Jonny James: what was done to Greece was horrific. It should be viewed as a massive institutional crime, and some of us do view it that way.

          ‘The burden of disease in Greece, health loss, risk factors, and health financing, 2000–16: an analysis of the Global Burden of Disease Study 2016’

          Worth a look. To translate to real-world terms, 50,000 or so Greeks died because of the EU’s imposition of its austerity policies on Greece — in other words, because Merkel in Germany and Hollande in France were unwilling to tell their electorates they were bailing out German and French banks, and thus the bailout to those banks was carried out through the backdoor of Greece with 92-93 percent of those funds going straight to commercial financial institutions in Northern Europe and never touching the Greek economy.

          Moreover, this was done at the same time that Mario Draghi at the ECB was initiating his policy of doing “whatever it takes” in terms of quantitative easing. The entire Greek debt would turn out to be less than a couple months of ECB money printing.

          1. JonnyJames

            Thanks for the link! I’m even more disgusted, but not surprised.

            I agree, and the debt was fraudulently inflated and then more compound interest snowballed…it was a set-up…worse than the Mafia.

  9. Kali El

    How to fix the “problem” of unions for the upper-class investors who want to wring as much profit out of their investments as possible? One method is obvious and has probably been the cause of the new less unionization and lower wages — the demand by EU leaders for EU states to accept mass illegal immigration from low-wage nations. This looks like a plan to lower wages all around by pressure from desperate illegal migrant workers who will work for far less than non-migrants.

    But that is still problematic for the investor elites for a few reasons:

    1) Those new workers will tolerate low wages for only so long, they will want higher wages due to the high cost of living in Europe, and you can’t keep importing new desperate migrants forever.

    2) Crime will always increase in proportion to increasing poverty + increasing lack of social mobility in a liberal society due to lowering wages. A higher percentage of people resorting to crime to advance their economic and social situation is the result of increasing the poor population instead of decreasing.

    3) One way they came up with to combat the expected ever-increasing crime problem is with mandatory digital ID + mandatory digital money, where all legal transactions are monitored and controlled by artificial intelligence.

    From To Agenda 2030 and Beyond

  10. Will

    I realize the Tories handled it about as bad as could be imagined, but with Brexit as such a shining example of what can happen when you leave the boat, how is the average EU citizen to imagine anything better is possible?

    1. Mikel

      The City of London can’t be left out of the equation regarding Brexit.

      However, with that in mind: one defector can be marginalized, isolated, demonized, economically ganged up on (and then told, “see, look what you did to yourself)…more defectors would be the potential for other types of alliances altogether?
      Just considering the possibility….

  11. Altandmain

    Political legitimacy is about economic prosperity more so than anything else. There’s a reason why governments like the CPC in China have so much political support. In many ways, you could argue that by being more responsive to the needs to the people, China is more democratic than the Western nations in a sense that democracy should be a system of government “for the people”, even if it is not “by the people”.

    The EU has seen a major decline in real wages and increasingly, inflation. This will lead to deindustralization and a large proportion of the population facing poverty.

    Ultimately, integration in Europe became a platform for US geopolitical goals to vassalize the EU and to enforce neoliberal economics.

    Over the next few years, as the full impact of decoupling from Russia becomes apparent, I think that we will see the big test – will the Europeans passively accept the decline of their living standards the way the Italians have so far, or will they stand up against the plutocrats? Germany’s one time payment is not going to be enough – this inflation is not a temporary situation that will occur in just 1 year. It will be an ongoing problem and ultimately, it will require regime change in the EU nations and UK, to begin a rapprochement with Russia.

    As for the Europeans complaining that the populists represent a threat to democracy – the existing Establishment is already an oligarchy. The ordinary people would never have supported neoliberal economics nor the recent provocations against Russia if they understood the implications to their living standards. These moves were made without any public feedback and indeed, genuine democratic challenges are aggressively being suppressed.

    As such, the European Union has lost its legitimacy, at a time when Putin in Russia has gained legitimacy, thanks to the strong recovery Russia has had since the US puppet under Yeltsin devastated the nation in the 1990s.

  12. spud

    very good one Conor. when i read head lines in the u.k. about longing for membership in the free trade E.U. zone again, i shudder that anyone is that stupid. what they really are are shills.

    free trade economics is austerity. austerity is fascism.

  13. Isla White

    Left out of this analysis is factoring in distrust of the authorities; Italy’s grey economy and the effects of organised crime on Italy’s GDP.

    North Europeans have long commented on the abundance of police dramas on TV; much of it set in ‘our’ country or elsewhere in the northern EU and showing different levels of authority and expertise. Not at all common in the southern EU.

    Weekly dramas and series; from the plodders walking the streets up to chief constables and detective chief superintendents . Uniformed and detectives; hot crime , so showing rapid access to properties and – where necessary – important individuals homes …. or cold crimes re-examined. Just occasionally a bad copper is unmasked by the ‘good ‘uns’.
    We grow up able to watch that weeks episode or repeats on other channels. We also have ‘real’ police dealing with real crime, particularly traffic police.

    Contrast this with the few examples of the latino versions of police dramas. The star detective routinely warned off by his boss to ‘tread carefully’; the main suspect (s) are high status – perhaps even criminal elite who are also ‘protected’.
    He doesn’t so is taken off the case. From then on going rogue. Battling not just the mafiosi shadows in the background but his own bent colleagues messing him about in the foreground.

    Organized crime in Italy

    Mafia receipts have been estimated to reach 7–9% of Italy’s GDP. A 2009 report identified 610 comuni which have a strong Mafia presence, where 13 million Italians live and 14.6% of the Italian GDP is produced. The Calabrian ‘Ndrangheta, as of 2022, the wealthiest and most powerful crime syndicate in Italy, accounts alone for over 3% of the country’s GDP

  14. Camelotkidd

    This articulate analysis demonstrates the brutal efficiency of Gladio, instigated initially in Italy as a way to discredit the Italian Communist Party.
    As Michael Hudson has exhaustively documented the ruling classes always resort to assassins and terror to maintain their power

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