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A crisis of capitalism

History repeats itself, Marx wrote, first as tragedy, then as farce. If you wonder how it might repeat itself the third time, look at Italy: a country where the most effective opposition to government are – literally – comedians, and where the prime minister himself is a joke. This has distorted most analysis of the […]

History repeats itself, Marx wrote, first as tragedy, then as farce. If you wonder how it might repeat itself the third time, look at Italy: a country where the most effective opposition to government are – literally – comedians, and where the prime minister himself is a joke. This has distorted most analysis of the country’s economical and political situation, as if Italy’s problem is just its PM, distracted by sex and trials.

To understand the true nature of the Italian crisis we need to look at it in a wider European context. The limits of the eurozone are well known: it has a “single currency” that isn’t backed by political sovereignty, a central bank that doesn’t act as lender of last resort or finance government borrowing, and no significant European public budget. The flaws of the ECB’s obsessive anti-inflationary stand, and its propensity to raise the interest rate whatever the cause of price rises, are also plain to see. And Germany’s tendency to profit from southern Europe’s deficit while simultaneously imposing austerity budgets on those countries pertains more to psychiatry than economics.

That said, the European crisis is not a home-grown one, the sovereign debt crisis is not truly a public debt crisis, and Italy’s crisis is not Italian-born. German neo-mercantilism induced stagnation in Europe, which survived thanks to US-driven exports. When “privatised Keynesianism” – mixing institutional funds, capital asset inflation and consumer debt (a model exported from the US and UK to Italy, Spain and Ireland among others) – exploded, European growth imploded.

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