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The Uncommon Market

7 May 2012

The European Union is currently the world's largest economy but not all is sweetness and light. There is conflict between the various governments on how it should be run, to say nothing of the competition between nations for trade and profit. The focus is on the countries sarcastically called PIGS, i.e. Portugal Italy, Greece, and Spain, those drowning in debt.

Two schools of thought prevail - Keynesian economics, advocated by economist John Maynard Keynes in his "General Theory of Employment, Interest, and Money" which, to put it bluntly, is spend, spend, spend your way out of a recession, "We should at once increase expenditure, both on consumer goods and capital goods. We should give people more money, not less, to spend. If need be, we should borrow to cover government expenditure. We should not aim at balancing the budget year by year." This has never been successfully tried. One government to practise such advice was Britain's Labour Government in the 1970s. Their achievement was to increase unemployment from 750 000 to 1.5 million! France, under Mitterand attempted but quickly abandoned the policy because it was unable to decrease unemployment. An attempt was made before Keynes expounded his theories (1936) by President Roosevelt with his 'New Deal'. This was his government-financed construction projects that had only marginal success.

Keynes ideas are not the only ones being advocated to get the EU out of its current sorry state while preserving capitalism. Angela Merkel of German chancellor thinks punishing the PIGS will be good for them. Unlike them, Germany has a surplus and buys little from those countries. Merkel is the opposite of Keynesian economics, that of austerity no matter how painful. She believes the European Court of Justice must become the Euro-Zone's overall court and decide the budgets of the member nations. Another unspoken thought is that Merkel's first responsibility is to the needs of Germany's capitalist class. As the main economy in the EU, certainly Germany would have a preponderance of decision-making on the future of the PIGS, Britain, and any other country in financial trouble. This would obviously be resisted by the governments of those countries who are responsive to and responsible for their own capitalist class. Economist Paul Krugman believes Merkel's ideas are impractical and this is the wrong time for austerity that will cause member countries to collapse rather than recover.

Let's review some of the questions that are being asked. Are Merkel and the German interests that she represents using the EU crisis as a springboard to power? It looks that way and member nations would not like the idea. If the ideas advocated by Keynes and Merkel are impractical, then what is the long-term answer to the Euro-Zone problems? There is no answer, at least within the framework of capitalism. In 1957, some of the leading states in continental Europe thought that by amalgamating into a common market they could better compete on the world market. They reasoned that though that may mean a loss of some national independence, it would be made up by access to a larger market for its products both in Europe and in the rest of the world. This may work relatively well when the world economy is buoyant but that doesn't last forever as so many capitalists, politicians, and economists have learned to their dismay.

Capitalism is a market system. No one can predict when it will do well or when it will decline. When a market for a given product is high, more will be produced to take advantage of the sales potential but eventually that market will become saturated, the sales will dry up, and companies will cut back on production, lay off staff, and face bankruptcy. This has occurred in recent years and has been exacerbated by the sub-prime mortgage crisis. All of this has affected the Common Market, some countries more than others. Attempts to lift the countries struggling, or leave them to their fates, has caused some disputes, to say the least. The effects among the PIGS are just becoming apparent through government-imposed austerity plans. Perhaps dictators or extreme groups will arise as happened in the economic crisis in 1930s Germany. Two things are crystal clear.

One is that the result will not be good for the working class. Once again we have a colossal capitalist mess and attempts within capitalism will naturally favour the 'owning' class. The second is that the working class has no stake in any of capitalism's plans to get itself out of this recession. The workers will not be asked to participate in solving the problem but instead will be the targets of unemployment, poverty and insecurity.

In a socialist society, none of the above would exist because markets and all they imply, buying and selling, speculation and profits, would not exist. Production would be to satisfy need, not profit, and everyone would take what he/she needed from the common store of society's wealth. Simple, isn't it? A lot less complicated than the market system we have now. What you need is there for you, so why not organize politically for its speedy arrival?

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