weight of a victorious socialist revolution over one sixth of the globe – very unlikely to be reiterated in the future. In any case, its impetus was exhausted after three decades, and a new era started: neoliberalism, an era during which – thanks to the crisis, followed by the collapse of the ‘socialist camp’ – the mode of production succeeded in rolling back most of the concessions previously made to the working classes. A new world emerged, built on the ruins of the socialist experiments, including their attenuated welfare-statist versions – the world of global finance–oriented capitalism.
It is too early to say whether the current crisis, which started as a real estate crisis in the US, morphed into a crisis of the banking system and then crystallised in a sovereign debt crisis, will mark the end of the neoliberal era. In a way, the tectonic plates have only started moving and the balance of forces is still uncertain, although the strategic advantage achieved by the dominant classes during the period of high neoliberalism still operates fully. What looks certain however is that this crisis will leave behind at least one casualty: the so-called ‘European project’, or ‘European integration’, embodied in the institutions of the European Union with, at their core, the Economic and Monetary Union. If we think that this project has been the only one of any real importance consciously designed by the dominant classes of the Old Continent, it becomes clear that we are witnessing a turning point of world historical importance, comparable in some senses to the victory of the West in the Cold War. The importance of the project undertaken by Costas Lapavitsas and his collaborators of the SOAS-based Research on Money and Finance group lies in their pathbreaking contribution to explaining the causes of this major upheaval.
Of course, concerning the EU, we knew that the coordination and diffusion of neoliberal policies have consistently been at the core of the project, especially after its relaunching in 1986 with the Single European Act. It is also well known, thanks especially to the powerful argumentation of Perry Anderson,1 that insulation from any form of popular control and accountability is the founding logic of all the complex nexus of technocratic and expert-staffed agencies which form the backbone of the EU institutions. What has been euphemised as the ‘democratic deficit’, actually a denial of democracy, legitimised in various ways by the apologists of the European project, has become especially obvious since the 2005 French and Dutch referenda on the proposed constitution of the EU, several years before the start of the current turmoil. The missing element from the picture back then was however the political economy of the edifice. It seems that the coming of the crisis acted, as it usually happens in these cases, as a detonator, bringing to the surface pre-existing contradictions and making it possible to reflect theoretically upon them.
Ever since the 1992 Maastricht Treaty, it became clear that the whole EU project, not only in its economic and political dimensions but also as the fundamental theme of Europeanist ideology, was increasingly dependant on the realisation of the EMU. It was indeed the first time in history that a currency common to more than 300 million people living in seventeen different countries was created from scratch, without a unified state behind it. In highlighting the rationale of this enterprise – its sources of strength but also its intrinsic limitations and contradictions – the analysis proposed by Lapavitsas and his RMF colleagues in the following chapters is crucial.
Let us note first that it is no coincidence if this analysis is initiated by one of the rare Marxist economists who has been working for a long time on issues of monetary theory and contemporary finance. Indeed the euro can only be understood in the context of an increasingly financialised capitalism, both as an expression of this now dominant trend and as a powerful tool leading to its further expansion. The euro is a project of world currency, functioning both as a reserve currency and as a means of circulation and payment, designed to compete with the US dollar. And this imperial type of ambition could not have been carried by any national currency within the EU, including that of the most powerful economy, Germany. But neither could it have been accomplished by the currency of a unified European super-state, because European capitalism does not exist except as a convergence of national economies, of nationally defined spaces for the accumulation of capital, or to put it another way, of national social formations, each of which is shaped by its specific configuration and balance of class forces.
The solution to the ‘neither ... nor’ oscillation, which epitomises the nature of the European project as a whole, lies in the famous stability pacts, generalising in the entire eurozone the founding principles of what Habermas at his best had very aptly called ‘Deutsche-mark nationalism’: an independent central bank, absolute priority given to fighting inflation, strict budgetary discipline and a whole culture of procedural approaches neutralising political choices under the cover of sound and virtuous technocratic management. What is at stake here is much more than some particular tradition whether cultural (supposedly ‘Protestant’) or political (that of the Federal Republic emerging from the ashes of an irrevocably defeated project of imperial expression), or even the simple expression of the leading economic role of Germany within the EU. These conditions, which inscribe neoliberalism into the genetic code of the EMU, are actually necessary prerequisites of the project of a world currency in the highly particular, indeed unique, circumstances mentioned above. This is why they provided the terrain for a voluntary strategic convergence of the dominant classes of Europe while at the same time giving to Germany a properly hegemonic role – although never politically explicit – ‘always-already’, as if it were wrapped up in some ‘post-national’ and generally ‘European’ form of legitimation.
The consequences of this are far-reaching. One of the most essential achievements of the demonstration of Lapavitsas and his collaborators lies in their analysis of the way in which a polarisation between a ‘core’ and a ‘periphery’ emerges out of the very structure of the EMU. The general idea, and the terms themselves, are of course familiar to any reader of the rich Marxist and radical literature on combined and uneven development, the gap between the ‘metropolis’ and the ‘periphery’ and spatial inequalities of a systemic type. But now we have a systematic demonstration of the specific way this applies to the area of the most developed countries of European capitalism. The various reports included in this book show how the loss of competitiveness of the periphery (the now famous ‘PIGS’: Portugal, Ireland, Greece, Spain), as the result of higher inflationary levels and rise in nominal labour costs, was just the flip side of the export prowess of Germany and other core countries, with the deficits of the first group mirroring the increasing surpluses of the second. This whole mechanism has been hugely amplified by the sheer existence of the common currency, resulting in cheap credit, both for private agents and for states, and by securing high credibility for this public and private debt bonds in the international markets. Who could dare to think that there was the slightest risk of default from a country part of such a strong and successful world-currency zone as the eurozone?
The success lasted a few years, boosting the overall financialisation of economies internationally, ‘bubbles’ of all kinds in the periphery (especially in real estate, banking and credit-fuelled private consumption), accompanied by export performances and gigantic lending flows from the core. Rising social inequalities, environmental destruction, weakening of the productive capacities of the ‘losers’ – this unpleasant downside remained backstage, obliterated by the success story of the new single currency bringing prosperity and stability to all. It was the moment of the triumph of the Europeanist ideology: a Greek or a Portuguese pensioner, with a few hundred euros as a monthly income, felt part of the club of the rich and mighty, on an equal footing with her Northern European counterparts. ‘Europe’, at last, meant something more concrete, and symbolically binding, than remote bureaucratised institutions, deprived of any popular legitimacy. As Marx famously wrote, quoting Shakespeare, money is ‘the radical leveller that … does away with all distinctions’. 2
With the start of the 2007–8 downturn, repressed reality took its revenge, dissolving the fetishism of the single currency and euro-euphoria. It would be foolish, of course, to blame the euro as such for the crisis, which is of international proportions and has deep roots in the contradictions of the existing mode of production itself. But the euro, and more generally the entire mechanism of the EU, is of paramount importance in explaining the specific
