A few days ago Bloomberg mag did all it could to aliante virtually all racial minorities residing in the US (which in three decades will be the majority) by insinuating that Bernanke's second housing bubble is the sole source of riches for those not of the Caucasian persuasion. Now it is The Economist's turn to provoke well over half of Italy, by alleging that in not voting for technocratic, Goldman-appointed oligarchs who promote solely the banker backer interests, Italy has made a horrible mistake and has ushered in the circus...
And while it is clear what The Economist's agenda is - the fact that the magazine is owned by the FT, Cadbury, Rothschild, Schroder, and Agnelli is becoming more transparent with every passing day - a far better take on the implications of the Italian election, and the opposite to that of the Economist, was presented here yesterday by Charles Gave.
We repost it in its entirety.
Italian electors’ rejection of Brussels-imposed economic diktat is an extraordinarily important moment in the history of modern Europe - perhaps the best political news since the fall of the Berlin Wall. Given the power of unelected technocrats, it is easy to forget that sovereignty in Europe still resides with the nation state as expressed through elections. The problem for those unelected officials who conspired to capture the political system - think Jacques Delors, Jean Claude Trichet or Mario Monti - is the obvious failure of their great project. For the first time a majority of electors has decisively voted against the euro and rejected policies imposed by technocrats.
As usual, the proponents of technocracy claim that the Italian vote changes nothing substantively and soon it will be business as usual. This is the standard response whenever European electors express disagreement (think of referendums in Ireland, France, and Holland..) and upset this freedom-killing project. Since more than half of Italian voters chose parties with an overt anti-euro stance, I would beg to differ.
The euro project is a financial Frankenstein which could not and has not worked; this Italian vote may mark the beginning of the system’s ultimate demise. Italy is different from other European problem economies since it runs a primary budget surplus, a current account surplus and finances most of its debt internally. Hence, Italy can leave the euro tomorrow and be much better off. Italians have led the way and soon the Spaniards, French and the Portuguese will reject this slavery in order to achieve "reforms" whose only purpose is to make a dysfunctional system work.
But let us stop and consider what these technocratic elites mean by “reform”—an end which is apparently worth so much suffering. To translate their bureaucratese into a commonly understood language let’s first define the different groups which compete for resources and influence in the modern European context:
- The fellows who want to take care of themselves and be left alone - i.e., the entrepreneurs and those working in the private sector. These guys and only these guys create economic growth.
- Those who want someone else to look after them. These fellows tend to work in the public sector or be retired and can be called the “new rentiers.” These guys want to lead a stable and uneventful life.
- The fellows who want to lead their inferiors to a better future because they are smarter and know what is best. Borrowing from Thomas Sowell, I will call them the "anointed" since they very often have a very special relationship with their God, a kind of idol which they call by a strange name: the State. These guys have one and only one objective: the growth of their own political power.
Europe’s anointed decided a long time ago that we had too many little gods in Europe (The French State, the Italian State, the German State, etc.) and we needed to move to monotheism, thereby creating a European State or an altar where everybody could properly worship. Previously, each little individual god had its own "money,” with the peseta, drachma, French franc, etc., used by the local citizens to pay their dues to the local god. But as the French free market economist Jacques Rueff said, "a currency is a sewer in which unearned income is collected." In other words, if compensation is awarded even when nothing of value is produced, such “unearned income” will in time drag down the value of the currency.
The stuff that gets distributed through the sewage system varies greatly from one country to the next. Take the example of Italy, a strange country (which I love dearly) if there ever was one. The north has a large community of entrepreneurs, and the south a majority of “new rentiers”. Up until 2000, Italy had a simple way of solving this problem. Massive transfers were made from the north to the south in the local currency, while the fellows in the north were effectively paid in deutschmarks. From time to time, the lira was devalued which guaranteed that the fellows in the north remained competitive against their German competitors. Similarly, the "new rentiers" received their retirement income in the local currency, which minimized transfers taking place between generations.
Balance was maintained since private sector salaries tended to be indexed (with a lag) to the DM, while retirement benefits and public sector salaries were paid in lira. The same thing happened in France, where an abnormally large part of the population (much higher than in Germany) wanted to be "rentiers” i.e. civil servants.
Because the French and Italian currency sewage systems had more waste to recycle than their German equivalent, the exchange rates adjusted accordingly and harmoniously downwards. As 19th century philosopher Ernest Renan noted a nation is defined by "a willingness to live together" - and every nation in Europe, for most of the post WW2 period, found a way to uphold its local social contract.
To cut a long story short, it is the constitutional right of every country to be badly managed if the survival of the social contract binding the population is at stake. Finding a way to live together is much more important than being well managed.
Unfortunately, this common sense formulation was never understood by the European zealots, who were intent on destroying the old gods to replace them with their new and unique god - a new Roman Empire. In this sense, the similarity with the USSR project is striking (see our discussion of a Christian Europe vs the new Roman Empire in Was The Demise Of The Soviet Union A Negative Event?).
The euro was created as a first step towards a new Roman Empire and the result was that Italians had to effectively transfer deutschmarks to the south. France was also forced to pay its innumerable civil servants in DM. Retirement benefits across the eurozone were effectively set in DM, which savaged the younger generations. The result was that local entrepreneurs lost competitiveness and peripheral eurozone economies started to go bankrupt. The euro has thus caused the probability of recurrent devaluations to be replaced by the certainty of national bankruptcy. This fate can only be avoided by a total surrender of national sovereignty to so called creditor nations, which is a remarkable achievement.
It is against this dreadful backdrop that the Italians have just voted.
However, the fact that the euro is a disaster has absolutely no impact on our "anointed." They are not interested in the well being of the local citizens, but are in fact missionaries for a faith. Since they are appointed from upon high, they are able to preach to the sinners and demand their repentance, i.e., that they should "reform". Monti, for example, was very big on preaching the "reform" sermon.
By “reform”, our proselytizing elite mean the dismantlement of "national contracts” which had managed to unify each European polity. In their place, we have been granted a new social contract whereby the Germans pay for the Sicilian and French civil servants (read a “Federal Europe”).
The Germans are not exactly keen on this idea, so in order to placate their own virtuous fellows, Berlin has offered to organize a world of ever falling salaries in southern Europe—to teach the sinners a lesson. For the lapsed southern Europeans, such collapses in their standard of living is the only way to stay competitive so long as the fixed exchange rate stricture remains. Compliance also implies dismantlement of all the social protections that the rentiers of southern Europe have over many years managed to secure.
As a Frenchman, as a European, I want a diverse Europe in which each nation is managed by its own elected people. If the nation chooses to be poorly managed—so be it, this is what democracy is all about. I am not interested in a Europe where the standard of living falls precipitously for a large part of the population, nor am I interested in humiliating what were once proud countries in the hope that they desert their old deities and accept a new god.
And neither do I want to be administered by unelected technocrats delegated by the northern Europeans on the flimsy pretext that my own politicians are useless; they may be hopeless, but I am entitled to have them that way.
What the eurocrats offer under the banner of "reform" is nothing of the sort but just an increase in their power and the destruction of the incredible diversity which made Europe an endlessly fascinating place.
It is time to return to market prices and democracy and to accept that technocracy cannot work. I love Italy more and more. Indeed, for the first time in years, I can envisage a situation in which I feel bullish on Europe.