SEMINAR WITH BILL MITCHELL AND THOMAS FAZI – RECLAIMING THE STATE
(i) DTM, neoliberalismoa, Europar Batasuna eta nazio-estatua
On March 2 Fundació Catalunya Europa and Ekona Centre d’Estudis organised a seminar about the book “Reclaiming the State”, recently published by the Australian economist Bill Mitchell and the Italian journalist Thomas Fazi. The seminar was moderated by the economist Jordi Angusto.
The book is based on three pillars; first, the Marxist concept of class conflict, second, the Keynesian focus on full employment, and finally, the modern monetary theory, represented in the concept that it’s not savings that create the credit, but the inverse.
The book explains how neoliberalism has imposed its agenda by ripping off the competences that the state uses to protect its citizens and to maintain the welfare state. According to the authors, the European Union and the Euro are the best examples of this phenomenon, since belonging to the Economic and Monetary Union implies giving up fiscal (deficit spending) and monetary capacity. Therefore, the authors propose to reclaim the nation-state to guarantee social justice through the survival of the welfare state and full employment.
According to the authors, there are two large obstacles to the creation of a fully functioning European Federal State:
1. Different National Identities:
According to Thomas Fazi, there is no common language at the European level, nor the same value system (values in northern countries related to debt and the economy are opposed to southern ones), and certainly not a shared narrative of history. Those are barriers to the creation of a common European State.
Moreover, a federal union needs democratic legitimacy and a shared culture, which does not exist yet in the European Union. Democratic capacities (fiscal and monetary sovereignty) have been transferred to the European Union before having a common political culture, following and opposite path as other Federations (United States, Germany or Australia).
In Mitchell’s and Fazi’s opinion, we are nowhere close to having a European identity, since European people still define themselves according to their national identity. This might seem trivial, but it’s fundamental, since to make citizens really participant of the European Union they must feel it as its own. Even if a consensus was made to create a pan European federal system, the building of an architecture to make it possible is very difficult, since that would require that all member states at the European Council simultaneously agree on a shared path for Europe, deciding to change the treaties accordingly.
As a matter of fact, if we observe the United States or Australia, the true federal institutions were created one hundred and twenty years after the union was formed, and observing the European union in contrast, we can argue that the European Union does not have such a long history.
2. Rooted opposition to fiscal transfers:
Another clear issue on the construction of the European Union is that a fully functional federal system would require fiscal transfers, from rich regions to poor regions. It is well known that northern European countries (see for instance the Joint Statement by 8 finance ministers released on 6, March) are opposed to that, due to a rooted vision about economics that is shared through the entire political spectrum in such countries.
Such European fiscal federation should be democratic to be legitimate, which is not the case of the EMU. To create that, in the author’s opinion, there should be a political loyalty towards the federation that does not exist.
In short, the idea that we can currently transform the European system into a functional system for all countries it’s totally delusional.
In their opinion, to become truly independent Catalonia should exit the EU and the EMU. On the other hand, Pere Almeda underlined that Spain is not a nation-state, but it’s a multi-national state, and that today’s conflict is about the struggle for self-governance, reinforcing democracy and creating a framework of plural identities and multi-level governance.
According to Thomas Fazi, there has been an emergence of regional identity movements all over Europe. In his opinion, this is also related with the European architecture, which creates artificial scarcity through its institutional constraints. Deprived of their fiscal and monetary policy tools, countries cannot effectively redistribute across regions, since that requires fiscal sovereignty, and this creates regional tensions.
Paradoxically, the European Union, which had to bring countries together; has increased instead the tension between countries as well as the tensions within countries, and this is due to the architecture of the Eurozone.
According to Fazi the Economic and Monetary Union has created an artificial scarcity of public resources because of the 3 per cent deficit limit in public budgets and the incapacity of exercising monetary and fiscal sovereignty. This sovereignty allows states to deficit spend or to finance through monetary expansion when needed to activate the idle resources of the economy. Nowadays, macroeconomic adjustments are made through internal devaluations, which impose a heavy burden on workers, increase inequality exacerbating social injustice. The authors advocate for a change on the aims of central banks in order to give them democratic legitimacy.
The construction of an undemocratic European Union
Bill Mitchell explained that the Werner Report (1970) and the MacDougall Report (1977) advised that a functioning monetary union in Europe could not be created without a scrupulous democratic process, adding that the conditions to accomplish such union would not exist in the near future. The Delors Report (1989), made by neoliberals handpicked by Delors, ignored the past two reports and stated that this integration would be effective. According to Mitchell, no federal government would tolerate the degree of economic disparity that has emerged since the currency integration.
In other words, as Fazi suggests, every step in the process of the construction of the European Union, from the creation of a monetary system, to the single market, through the Maastricht treaty and the establishment of the Eurozone has essentially been aimed to separating democratic accountability from macroeconomic policy. According to Fazi believing that we can democratize this system under the current Treaties, is a delusion.
Mitchell and Fazi are not against international governance per se, because they believe that international cooperation is necessary to tackle global issues that cannot be solved in any other way, like for example climate change.
The role of the Nation-State today
The idea of going back to the nation-state was questioned in the seminar, affirming that the concept is becoming obsolete, arguing that a multi-level governance is needed and a subsidiarity principle too.
To this question, Bill Mitchell answers that the major changes that have occurred work through the nation state. The only space where democracy has occurred is at state level. Globalization does not transcend the nation-state, but it happens through it. Furthermore, Thomas Fazi explained that the nation-state is crucial in the economic management, even in the neoliberal era, since for capitalism to survive, states have to intervene massively.
Fazi adds that before aiming for supra-nationalism, we should aim at internationalism (which is historically what the left has fought for). It’s important to have independent sovereign nations, which come together and agree to integrate certain policies. This is very different from supra-nationalism, where the policies are imposed from above and in an undemocratic way.