In a lecture in Geneva in 2011, the journalist, Myret Zaki, told a tale of recent events in international financial markets. Early in 2010 the currency-speculator, George Soros, joined by five US hedge-funds, bought up Greek government debt in such quantities that a mass movement of competitors ensued. The debt interest-rate rose from 7-8% to 20%, and the Greek authorities, despite having just received an EU bailout, declared bankruptcy for the second time in a year.
The hedge-funds’ aims were 1) a killing for their investors, and 2) a drastic weakening of the Euro against the dollar, their preferred currency of transaction. Moreover Soros hoped for a financial domino-fall among Euro member-states which would destroy the currency and perhaps the EU itself, an organisation he viewed as too socialist by far. The leading hedge-fund, Goldman Sachs, had actually advised corrupt Greek governments before 2010 in ways to conceal their real financial position. Now the firm turned its coat, sharing privileged information to help undermine that position fatally.
Nothing in this operation was illegal – hedge-funds being unregulated internationally, and Soros gambling his money in a personal capacity. The conspirators themselves never bothered, after the event, to deny their intentions. The operation failed only when EU leaders bailed out Greece again to defend the Euro. But the conspiracy itself damaged Greek people’s lives, innocent bystanders in the complex and confidential affairs of international financial markets.
Clearly, those markets are inherently corrupt and corrupting. According to Zaki, financial speculation now exceeds tax evasion and money-laundering in the volume of funds manipulated and the personal fortunes made. Yet still the neo-liberal economists dominating policy in Northern societies refuse reform of the system. In fact, they increasingly argue the solution is not more regulation, but no regulation – and that functions of state should themselves be open to being bought and sold. This debate is live again since the further economic troubles in Greece. All of which should give us pause to think about the long-term development of the Euro and the EU.
Here there are two opposing models of institutional construction. One is functional integration: the idea that merging states’ inbuilt functions will enable economies of efficiency. It’s the idea behind the formation of regional intergovernmental organisations, like ASEAN and the African Union after the EU: not only trade, but practical learning and saving, will benefit from sharing key tasks across state boundaries. On this logic, it makes sense also to have a common currency; but this step comes last, not first, in the construction process. The ultimate goal may be integrated states, or even a single state – a United States of Europe. Or the EU future could remain open, somewhere between single state and intergovernmental organisation.
The opposite view is a purer economism. Currencies precede states. Sound money depends on security of property and predictability in financial transactions. Sound money underpins the state itself – comes first in the planning process; so integrating several states depends even more upon it. You can envisage a common currency in an organisation like the EU, but only if you also envisage a single state at the end of the road.
It’s because these two models are diametrically opposed – and probably always have been, in the minds of European leaders – that confusion exists about the EU’s identity. After all, the first-stage and last-stage models for common-currency creation were both ignored, and the Euro was invented in the middle of the EU’s development. Given this institutional instability, only in prosperous times can the EU ride out large-scale speculative attacks. At least, if the international financial system is to be maintained, enabling liquidity to continue to flow across borders. Earlier this year European leaders chose once again to bail out Greece for this reason, even though it meant encouraging Peter to pay Paul, through Greek reimbursement of debts to the IMF.
But why defend the system anyway, when it’s so nonsensical? When it allows unscrupulous people to do harm by manipulating occult and arcane financial devices? Surely, EU reform lies in the opposite direction, through revitalising the functions of state – those material services which should be run by the people, for the people, like our infrastructures of energy, transport and communications – precisely those which, since the ‘single European market’, have been sold off to hedge-funds and venture-capitalists, and which they have subsequently and brainlessly been selling on to each other.
It’s time to change the EU’s moral basis; to throw out this acid of privatisation and self-seeking individualism which corrodes all social relations. This task is even more urgent than the EU as a social project (one of the original founding aims) because the EU itself, as a convention of democracies – the only one of its kind in the world – is nothing without moral reform. For this reason key functions of state should be taken out of financial markets altogether, and saved from the speculators, crooks and airheads of our unlucky culture.
By the same token, we can justifiably ask of private investors they concentrate their activity in democracies, instead of following the lowest common denominator of wages to countries like China. If successful inventors like Dyson must invest outwith Britain, why not in Greece? It is because there is so little advanced manufacturing in that country that its economy is so fragile.
For the rest, the neo-liberal economic orthodoxy that individual wealth-creation gives rise to liberal-democracy has patently been exposed as wrong and crass by recent experience in China, where a massive growth in consumerism has gone hand-in-hand with maintaining oligarchy.
Let’s be clear about our values. A strong society rests on active ownership of the shared practical functions of states. And beyond Scotland, beyond Britain, we can fairly ask of private investors that they show some European patriotism.
Peter Lomas is a contributor to the Common Weal and writes on European issues