Europe is not just another geopolitical power block. Photo: Getty
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Slavoj Žižek: Only a radicalised left can save Europe

Austerity is not “too radical”, as some leftist critics claim, but, on the contrary, too superficial, an act of avoiding the true roots of the crisis, says Slavoj Žižek.

After the electoral triumph of the anti-immigrant eurosceptic parties in countries like France and UK, many liberals expressed their shock and worry. However, there was something of a feigned naivety in their surprise and indignation, in their wonder at how the victory of the populist right was possible. What one should wonder about is why it took the anti-immigrant right so long to make a decisive breakthrough.

When Jean-Marie Le Pen made a tasteless gas-chamber joke about a French Jewish pop singer – “we’ll do an oven load next time” (Le Pen denies this was intended to be anti-Semitic) – his daughter Marine Le Pen publicly criticised him, thereby promoting her image as her father’s human face. It is irrelevant if this family conflict is staged or real – the oscillation between the two faces, the brutal one and the civilised one, is what defines today’s populist right. Beneath the civilised public face, there lurks its obscene, brutal underside, and the difference concerns only the degree to which this underside is openly admitted. Even if this obscene underside remains totally out of sight, even if it there are no slips in which it breaks through, it is there as a silent presupposition, as an invisible point of reference. Without her father’s spectre, Marine Le Pen doesn’t exist.

There is no surprise in Le Pen’s message: the usual anti-elitist working class patriotism which targets trans-national financial powers and the alienated Bruxelles bureaucracy. And, effectively, Le Pen forms a clear contrast to the sterile European technocrats: addressing the worries of ordinary people, she brings passion back to politics. Even some disoriented leftists succumbed to the temptation to defend her: she rejects the non-elected Bruxelles financial technocrats who brutally enforce the interest of the international financial capital, prohibiting individual states prioritising the welfare of their own population; she thus advocates a politics that would be in contact with worries and cares of the ordinary working people – her party’s fascist outbursts are a thing of the past. . . What unites Le Pen and the European leftists who sympathise with her is their shared rejection of a strong Europe, and the return to the full sovereignty of nation states.

The problem with this shared rejection is that, as they say in a joke, Le Pen is not looking for the causes of the distresses in the dark corner where they really are, but under the light, because one sees better there. It begins with the right premise: the failure of the austerity politics practised by the Bruxelles experts. When the Romanian leftist writer Panait Istrati visited Soviet Union in the 1930s, the time of the big purges and show trials, a Soviet apologist tried to convince him of the need for violence against enemies, evoking the proverb “You can’t make an omelette without breaking eggs”, to which Istrati tersely replied: “All right. I can see the broken eggs. Where’s this omelette of yours?” We should say the same about the austerity measures imposed by the Bruxelles technocrats: “OK, you are breaking our eggs all around Europe, but where’s the omelette you are promising us?”

The least one can say is that the economic crisis of 2008 offers large proofs of how is it not the people but these experts themselves who, in their large majority, don’t know what they are doing. In western Europe, we are effectively witnessing a growing inability of the ruling elite – they know less and less how to rule. Look at how Europe is dealing with the Greek crisis: putting pressure on Greece to repay debts, but at the same time ruining its economy through imposed austerity measures and thereby making it sure the Greek debt will never be repaid. At the end of December 2012, the IMF itself released research showing that the economic damage from aggressive austerity measures may be as much as three times larger than previously assumed, thereby cancelling its own advice on austerity in the eurozone crisis. Now, the IMF admits that forcing Greece and other debt-burdened countries to reduce their deficits too quickly would be counterproductive… now, after hundreds of thousands of job have been lost because of such “miscalculations”.

It is as if the providers and caretakers of debt accuse the indebted countries of not feeling enough guilt – they are accused of feeling innocent. Recall the ongoing EU pressure on Greece to implement austerity measures – this pressure fits perfectly what psychoanalysis calls superego. Superego is not an ethical agency proper, but a sadistic agent which bombards the subject with impossible demands, obscenely enjoying the subject’s failure to comply with them; the paradox of the superego is that, as Freud saw it clearly, the more we obey its demands, the more we feel guilty. Imagine a vicious teacher who gives his pupils impossible tasks, and then sadistically jeers when he sees their anxiety and panic. This is what is so terribly wrong with the EU’s demands andcommands: they don’t even give a chance to Greece, because Greek failure is part of the game.

Therein resides the true message of the “irrational” popular protests all around Europe: the protesters know very well what they don’t know, they don’t pretend to have fast and easy answers, but what their instinct is telling them is nonetheless true – that those in power also don’t know it. In Europe today, the blind are leading the blind. Austerity politics is not really science, not even in a minimal sense; it is much closer to a contemporary form of superstition – a kind of gut reaction to an impenetrable complex situation, a blind common sense reaction of “things went wrong, we are somehow guilty, we have to pay the price and suffers, so let’s do something that hurts and spend less…”. Austerity is not “too radical”, as some leftist critics claim, but, on the contrary, too superficial, an act of avoiding the true roots of the crisis.

However, can the idea of a united Europe be reduced to the reign of the Bruxelles technocrats? The proof that this is not the case is that the US and Israel, two exemplary nation states obsessed with their sovereignty, at some deep and often obfuscated level perceive European Union as the enemy. This perception, kept under control in the public political discourse, explodes in its underground obscene double, the extreme right Christian fundamentalist political vision with its obsessive fear of the New World Order (Obama is in secret collusion with the United Nations, international forces will intervene in the US and put in concentration camps all true American patriots – a couple of years ago, there were already rumors that Latino American troupes are already in the Midwest planes, building concentration camps. . .). This vision is deployed in hard-line Christian fundamentalism, exemplarily in the works of Tim LaHaye et consortes – the title of one of LaHaye’s novels points in this direction: The Europa Conspiracy. The true enemy of the US are not Muslim terrorists, they are merely puppets secretly manipulated by the European secularists, the true forces of the anti-Christ who want to weaken the US and establish the New World Order under the domination of the United Nations… In a way, they are right in this perception: Europe is not just another geopolitical power block, but a global vision which is ultimately incompatible with nation-states, a vision of a transnational order that guarantees certain rights (welfare, freedom, etc). This dimension of the EU provides the key to the so-called European “weakness”: there is a surprising correlation between European unification and its loss of global military-political power.

So what is wrong with the Bruxelles technocrats? Not only their measures, their false expertise, but even more their modus operandi. The basic mode of politics today is a depoliticised expert administration and coordination of interests. The only way to introduce passion into this field, to actively mobilise people, is through fear: fear of immigrants, fear of crime, fear of godless sexual depravity, fear of the excessive state itself, with its burden of high taxation, fear of ecological catastrophe, fear of harassment (Political Correctness is the exemplary liberal form of the politics of fear). Progressive liberals are, of course, horrified by populist racism; however, a closer look soon reveals how their multicultural tolerance and respect for (ethnic, religious, sexual) others shares a basic premise with anti-immigrants: the fear of others clearly discernible in the liberals’ obsession with harassment. The other is fine, but only insofar as his presence is not intrusive, insofar as this other is not really other. . .

No wonder the topic of “toxic subjects” is gaining ground recently. While this notion originates from popular psychology that warns us against the emotional vampires who prey on us out there, this topic is expanding much further than immediate interpersonal relations: the predicate “toxic” covers a series properties which belong to totally different levels (natural, cultural, psychological, political). A “toxic subject” can be an immigrant with a deadly disease who should be quarantined; a terrorist whose deadly plans should be prevented and who belongs to Guantanamo, the empty zone exempted from the rule of law; a fundamentalist ideologue who should be silenced because he is spreading hatred; a parent, teacher or priest who abuses and corrupts children. What is toxic is ultimately the foreign neighbour as such, so that the ultimate aim of all rules governing interpersonal relations is to quarantine or at least neutralise and contain this toxic dimension.

On today’s market, we find a whole series of products deprived of their malignant property: coffee without caffeine, cream without fat, beer without alcohol. . . And the list goes on: what about virtual sex as sex without sex, the Colin Powell doctrine of warfare with no casualties (on our side, of course) as warfare without warfare, the contemporary redefinition of politics as the art of expert administration as politics without politics, up to today’s tolerant liberal multiculturalism as an experience of the other deprived of its otherness – the decaffeinated other who dances fascinating dances and has an ecologically sound holistic approach to reality, while features like wife beating remain out of sight. . .

Is this detoxification of the immigrant Other not the main point of Nigel Farage’s Ukip programme? Farage repeatedly emphasises that he is not against the presence of foreign workers in the UK, that he highly appreciates the hard-working Poles and their contribution to the British economy. When he was asked on LBC about why he said that people wouldn't like to have Romanians living in the appartment next to their own, the contrast was immediately drawn with German neighbours – what worried him, he said, were people with criminal records being allowed to enter the UK. This is the stance of the “civilised” anti-immigrant right: the politics of the detoxified neighbour – good Germans versus bad Romanians or Roma. This vision of the detoxification of the Neighbour presents a clear passage from direct barbarism to barbarism with a human face. In what conditions does it arise?

Walter Benjamin’s old thesis that behind every rise of fascism there is a failed revolution not only still holds today, but is perhaps more pertinent than ever. Rightist liberals like to point out similarities between left and right “extremisms”: Hitler’s terror and camps imitated Bolshevik terror, the Leninist party is today alive in al-Qaeda – does this not rather indicate how fascism replaces (takes the place of) a failed leftist revolution? Its rise is the left’s failure, but simultaneously a proof that there was a revolutionary potential, a dissatisfaction which the left was not able to mobilise. And does the same not hold for today’s so-called “islamo-fascism”? Is the rise of radical Islamism not correlative to the disappearance of the secular left in Muslim countries? Today, when Afghanistan is portrayed as the utmost Islamic fundamentalist country, who still remembers that, 30 years ago, it was a country with strong secular tradition, up to a powerful Communist party which took power there independently of the Soviet Union? As Thomas Frank has shown, the same goes for Kansas, the homegrown US version of Afghanistan: the very state which was till the 1970s the bedrock of radical leftist populism, is today the bedrock of Christian fundamentalism. And the same goes for Europe: the failure of the leftist alternative to global capitalism gives birth to anti-immigrant populism.

Even in the case of clearly fundamentalist movements, one should be careful not to miss the social component. The Taliban are regularly presented as a fundamentalist Islamist group enforcing its rule with terror – however, when, in the spring of 2009, they took over the Swat Valley in Pakistan, New York Times reported that they engineered “a class revolt that exploits profound fissures between a small group of wealthy landlords and their landless tenants”. If, by taking advantage of the farmers’ plight, the Taliban are “raising alarm about the risks to Pakistan, which remains largely feudal”, what stops liberal democrats in Pakistan as well as the US similarly “taking advantage” of this plight and trying to help the landless farmers? The sad implication of this fact is that the feudal forces in Pakistan are the “natural ally” of the liberal democracy. . . And, mutatis mutandis, the same goes for Farage and Le Pen: their rise is the obverse of the demise of the radical left.

The lesson that the frightened liberals should learn is thus: only a radicalised left can save what is worth saving from the liberal legacy. The sad prospect that lurks if this doesn’t happen is the unity of the two poles: the rule of nameless financial technocrats wearing a mask of populist pseudo-passions.

MILES COLE
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The new Brexit economics

George Osborne’s austerity plan – now abandoned by the Tories – was the most costly macroeconomic policy mistake since the 1930s.

George Osborne is no longer chancellor, sacked by the post-Brexit Prime Minister, Theresa May. Philip Hammond, the new Chancellor, has yet to announce detailed plans but he has indicated that the real economy rather than the deficit is his priority. The senior Conservatives Sajid Javid and Stephen Crabb have advocated substantial increases in public-sector infrastructure investment, noting how cheap it is for the government to borrow. The argument that Osborne and the Conservatives had been making since 2010 – that the priority for macroeconomic policy had to be to reduce the government’s budget deficit – seems to have been brushed aside.

Is there a good economic reason why Brexit in particular should require abandoning austerity economics? I would argue that the Tory obsession with the budget deficit has had very little to do with economics for the past four or five years. Instead, it has been a political ruse with two intentions: to help win elections and to reduce the size of the state. That Britain’s macroeconomic policy was dictated by politics rather than economics was a precursor for the Brexit vote. However, austerity had already begun to reach its political sell-by date, and Brexit marks its end.

To understand why austerity today is opposed by nearly all economists, and to grasp the partial nature of any Conservative rethink, it is important to know why it began and how it evolved. By 2010 the biggest recession since the Second World War had led to rapid increases in government budget deficits around the world. It is inevitable that deficits (the difference between government spending and tax receipts) increase in a recession, because taxes fall as incomes fall, but government spending rises further because benefit payments increase with rising unemployment. We experienced record deficits in 2010 simply because the recession was unusually severe.

In 2009 governments had raised spending and cut taxes in an effort to moderate the recession. This was done because the macroeconomic stabilisation tool of choice, nominal short-term interest rates, had become impotent once these rates hit their lower bound near zero. Keynes described the same situation in the 1930s as a liquidity trap, but most economists today use a more straightforward description: the problem of the zero lower bound (ZLB). Cutting rates below this lower bound might not stimulate demand because people could avoid them by holding cash. The textbook response to the problem is to use fiscal policy to stimulate the economy, which involves raising spending and cutting taxes. Most studies suggest that the recession would have been even worse without this expansionary fiscal policy in 2009.

Fiscal stimulus changed to fiscal contraction, more popularly known as austerity, in most of the major economies in 2010, but the reasons for this change varied from country to country. George Osborne used three different arguments to justify substantial spending cuts and tax increases before and after the coalition government was formed. The first was that unconventional monetary policy (quantitative easing, or QE) could replace the role of lower interest rates in stimulating the economy. As QE was completely untested, this was wishful thinking: the Bank of England was bound to act cautiously, because it had no idea what impact QE would have. The second was that a fiscal policy contraction would in fact expand the economy because it would inspire consumer and business confidence. This idea, disputed by most economists at the time, has now lost all credibility.

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The third reason for trying to cut the deficit was that the financial markets would not buy government debt without it. At first, this rationale seemed to be confirmed by events as the eurozone crisis developed, and so it became the main justification for the policy. However, by 2012 it was becoming clear to many economists that the debt crisis in Ireland, Portugal and Spain was peculiar to the eurozone, and in particular to the failure of the European Central Bank (ECB) to act as a lender of last resort, buying government debt when the market failed to.

In September 2012 the ECB changed its policy and the eurozone crisis beyond Greece came to an end. This was the main reason why renewed problems in Greece last year did not lead to any contagion in the markets. Yet it is not something that the ECB will admit, because it places responsibility for the crisis at its door.

By 2012 two other things had also become clear to economists. First, governments outside the eurozone were having no problems selling their debt, as interest rates on this reached record lows. There was an obvious reason why this should be so: with central banks buying large quantities of government debt as a result of QE, there was absolutely no chance that governments would default. Nor have I ever seen any evidence that there was any likelihood of a UK debt funding crisis in 2010, beyond the irrelevant warnings of those “close to the markets”. Second, the austerity policy had done considerable harm. In macroeconomic terms the recovery from recession had been derailed. With the help of analysis from the Office for Budget Responsibility, I calculated that the GDP lost as a result of austerity implied an average cost for each UK household of at least £4,000.

Following these events, the number of academic economists who supported austerity became very small (they had always been a minority). How much of the UK deficit was cyclical or structural was irrelevant: at the ZLB, fiscal policy should stimulate, and the deficit should be dealt with once the recession was over.

Yet you would not know this from the public debate. Osborne continued to insist that deficit reduction be a priority, and his belief seemed to have become hard-wired into nearly all media discussion. So perverse was this for standard macroeconomics that I christened it “mediamacro”: the reduction of macroeconomics to the logic of household finance. Even parts of the Labour Party seemed to be succumbing to a mediamacro view, until the fiscal credibility rule introduced in March by the shadow chancellor, John McDonnell. (This included an explicit knockout from the deficit target if interest rates hit the ZLB, allowing fiscal policy to focus on recovering from recession.)

It is obvious why a focus on the deficit was politically attractive for Osborne. After 2010 the coalition government adopted the mantra that the deficit had been caused by the previous Labour government’s profligacy, even though it was almost entirely a consequence of the recession. The Tories were “clearing up the mess Labour left”, and so austerity could be blamed on their predecessors. Labour foolishly decided not to challenge this myth, and so it became what could be termed a “politicised truth”. It allowed the media to say that Osborne was more competent at running the economy than his predecessors. Much of the public, hearing only mediamacro, agreed.

An obsession with cutting the deficit was attractive to the Tories, as it helped them to appear competent. It also enabled them to achieve their ideological goal of shrinking the state. I have described this elsewhere as “deficit deceit”: using manufactured fear about the deficit to achieve otherwise unpopular reductions in public spending.

The UK recovery from the 2008/2009 recession was the weakest on record. Although employment showed strong growth from 2013, this may have owed much to an unprecedented decline in real wages and stagnant productivity growth. By the main metrics by which economists judge the success of an economy, the period of the coalition government looked very poor. Many economists tried to point this out during the 2015 election but they were largely ignored. When a survey of macroeconomists showed that most thought austerity had been harmful, the broadcast media found letters from business leaders supporting the Conservative position more newsworthy.

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In my view, mediamacro and its focus on the deficit played an important role in winning the Conservatives the 2015 general election. I believe Osborne thought so, too, and so he ­decided to try to repeat his success. Although the level of government debt was close to being stabilised, he decided to embark on a further period of fiscal consolidation so that he could achieve a budget surplus.

Osborne’s austerity plans after 2015 were different from what happened in 2010 for a number of reasons. First, while 2010 austerity also occurred in the US and the eurozone, 2015 austerity was largely a UK affair. Second, by 2015 the Bank of England had decided that interest rates could go lower than their current level if need be. We are therefore no longer at the ZLB and, in theory, the impact of fiscal consolidation on demand could be offset by reducing interest rates, as long as no adverse shocks hit the economy. The argument against fiscal consolidation was rather that it increased the vulnerability of the economy if a negative shock occurred. As we have seen, Brexit is just this kind of shock.

In this respect, abandoning Osborne’s surplus target makes sense. However, there were many other strong arguments against going for surplus. The strongest of these was the case for additional public-sector investment at a time when interest rates were extremely low. Osborne loved appearing in the media wearing a hard hat and talked the talk on investment, but in reality his fiscal plans involved a steadily decreasing share of public investment in GDP. Labour’s fiscal rules, like those of the coalition government, have targeted the deficit excluding public investment, precisely so that investment could increase when the circumstances were right. In 2015 the circumstances were as right as they can be. The Organisation for Economic Co-operation and Development, the International Monetary Fund and pretty well every economist agreed.

Brexit only reinforces this argument. Yet Brexit will also almost certainly worsen the deficit. This is why the recent acceptance by the Tories that public-sector investment should rise is significant. They may have ­decided that they have got all they could hope to achieve from deficit deceit, and that now is the time to focus on the real needs of the economy, given the short- and medium-term drag on growth caused by Brexit.

It is also worth noting that although the Conservatives have, in effect, disowned Osborne’s 2015 austerity, they still insist their 2010 policy was correct. This partial change of heart is little comfort to those of us who have been arguing against austerity for the past six years. In 2015 the Conservatives persuaded voters that electing Ed Miliband as prime minister and Ed Balls as chancellor was taking a big risk with the economy. What it would have meant, in fact, is that we would already be getting the public investment the Conservatives are now calling for, and we would have avoided both the uncertainty before the EU referendum and Brexit itself.

Many economists before the 2015 election said the same thing, but they made no impact on mediamacro. The number of economists who supported Osborne’s new fiscal charter was vanishingly small but it seemed to matter not one bit. This suggests that if a leading political party wants to ignore mainstream economics and academic economists in favour of simplistic ideas, it can get away with doing so.

As I wrote in March, the failure of debate made me very concerned about the outcome of the EU referendum. Economists were as united as they ever are that Brexit would involve significant economic costs, and the scale of these costs is probably greater than the average loss due to austerity, simply because they are repeated year after year. Yet our warnings were easily deflected with the slogan “Project Fear”, borrowed from the SNP’s nickname for the No campaign in the 2014 Scottish referendum.

It remains unclear whether economists’ warnings were ignored because they were never heard fully or because they were not trusted, but in either case economics as a profession needs to think seriously about what it can do to make itself more relevant. We do not want economics in the UK to change from being called the dismal science to becoming the “I told you so” science.

Some things will not change following the Brexit vote. Mediamacro will go on obsessing about the deficit, and the Conservatives will go on wanting to cut many parts of government expenditure so that they can cut taxes. But the signs are that deficit deceit, creating an imperative that budget deficits must be cut as a pretext for reducing the size of the state, has come to an end in the UK. It will go down in history as probably the most costly macroeconomic policy mistake since the 1930s, causing a great deal of misery to many people’s lives.

Simon Wren-Lewis is a professor of economic policy at the Blavatnik School of Government, University of Oxford. He blogs at: mainlymacro.blogspot.com

 Simon Wren-Lewis is is Professor of Economic Policy in the Blavatnik School of Government at Oxford University, and a fellow of Merton College. He blogs at mainlymacro.

This article first appeared in the 21 July 2016 issue of the New Statesman, The English Revolt