Citizen Action Monitor

Democratic governments in Italy and Greece gutted — central bankers rule

Public assets, pensions, labour laws targetted

No 444 Posted by fw, March 26, 2012

“In September 2011, at a time when the sovereign debt raiders, as some people call them, were focusing on Italy as their next target, the European Central Bank sent a letter—supposed to be secret, but it was leaked. And in this letter it gave very direct instructions, you could say, to then prime minister Berlusconi about privatization, lowering pensions, changing hiring and firing, regulations and laws—all things one would think should be the outcome of the political process within Italy. So what is this about banks telling countries how to govern themselves?”Paul Jay, The Real News Network

Following is a video and my abridged transcript, with added subheadings, of Paul Jay’s interview with Gerry Epstein, codirector of the Political Economy Research Institute (PERI) and Professor of Economics.   The content of the transcript focuses exclusively on the words of Gerry Epstein.

Banking Technocrats Undermine Democracy, The Real News Network, March 26, 2012.

TRANSCRIPT

Central bankers in Italy and Greece doing bidding of large banks – overruling democratically elected governments, privatizing public services, privatizing water, gutting labour protection laws, cutting public pensions

We have this trend now where instead of democratically elected governments controlling these countries, so-called technocrats, the central bankers, are coming in, taking over as the prime ministers of governments in Italy, in Greece. In Italy we have Monti, and in Greece we have Papademos. These are supposed to be neutral arbiters of economic policy, but in fact are mostly doing the bidding of the large banks. And the other European countries, especially Germany, they want austerity.

And what’s amazing to me about is they’re going way beyond any kind of narrow policies with respect to debt repayment, monetary policy. They’re going into the deep core of social and economic policy in many of these countries. And that letter from the European Central Bank [to prime minister Berlusconi telling him to make deep reforms], went to the highly contested issues that have plagued Italy for many years about labor laws, privatization, and many others.

In Italy, the letter from the European Central Bank to the Berlusconi government said, you have to pursue privatization of public services. And this includes water, privatization of water. And, in fact, just months before, there had been a referendum in Italy about privatization of water, and the voters had rejected it. And now the so-called independent technocratic European Central Bank is coming in and telling them to overthrow what the people have decided and engage in privatization.

Another important goal of these kinds of so-called technocratic policies is to gut labor protection laws. In Italy there are strong protections for—in terms of hiring and firing. And what they’re trying to impose are these so-called labor flexibility, with the idea that this is going to generate more economic growth and more employment. But as David Howell from the New School for Social Research, Dean Baker, and others have shown, labor flexibility does not lead to more employment and more economic growth; it just leads to lower wages and higher profits.

Well, [public pensions] are such a big issue in Europe because for two reasons. One is it’s a big liability of the government, and so there is a big—a high degree of budget impact on that. But the second is trying to undermine the power of labor and forcing workers into the hands of the banks. So if you reduce public pensions, not only do you make it so that workers have to take any job they can get to support themselves and work longer, but it also gives more room for private pension plans. And as we know from the debate over privatizing Social Security here in the United States, that’s been one of the long-term goals of finance. Indeed, the general push of all of these policies is to gut the welfare state as much as policy and return all of these kinds of protections to profit-making opportunities for banks and other private companies.

Orwellian language being used to obscure what is really going on – e.g., “fiscal consolidation” is doublespeak for gutting public services and generating unemployment

Part of what is so evil about this whole approach is the transformation, the distortion of language that is part of it, the use of the term technocrat to hide the fact that Trichet, that Monti, Draghi, all of these people have very, very close ties to the big banks. Most of them worked at one time or another for Goldman Sachs or other big financial firms. We have the same kind of thing, of course, in the United States, where we had Larry Summers, who works for the financial sector and makes millions of dollars doing so, being put forward as a quote-unquote “technocrat”. We have the Federal Reserve that has engaged, as you know, in all kinds of backdoor bailouts of the financial sector again seen as sort of a technocratic solution, but we see the revolving door between the Federal Reserve and the private financial sector, using the term fiscal consolidation for gutting public services and generating unemployment. All of this is Orwellian language, which is meant to obscure what is really going on, which is the takeover of democratic control, which, as you said, is already undermined by money, and putting it firmly in the hands of the financial sector.

Bankers’ anti-democratic policies “infantilize” the people

In The Financial Times, there was an article recently talking about the profile of Papademos, the prime — the technocratic prime minister there, saying that he was heading up a caretaker government, you know, as if the Greek people are a bunch of infants and they have to—we have to wait till they can grow up and exercise their democratic rights.

“There’s a great need for the left forces in all of our countries to really unite to oppose these kinds of policies”

Part of the frustrating thing is that these kinds of elite pushes to control these democratic systems are possible because the left is so divided in the European countries, and divided here in the United States as well, of course. Part of the left in Italy, for example, didn’t protest when this letter came out, because they were so focused on just trying to get rid of Berlusconi, and they’ve accepted Monti as a prime minister because they were just so happy to get rid of Berlusconi. So I think there’s a great need for the left forces in all of our countries to really unite to oppose these kinds of policies. We have to break this whole lock-hold of anti-democratic structures that have been built up by the elites under neoliberal policies over the last 20 years, so that once we have more democratic elections and vision, we actually have the ability to implement them.

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