Europe’s lost Decade – Paths out of Stagnation

Hansjörg Herr

The Great Recession of 2008-2010 reflects an economic instability that had built up over the previous decades. Within the European Monetary Union (EMU), the crisis of the financial market-driven development model is overlaid by a largely homemade state debt crisis and an undefined integration goal. The western world, and more particularly Europe, is facing a lost decade.

The market radical globalisation project

The 1950s-60s may be counted among the best years of the young capitalist social order. This was because everyone could have a slice of progress. The dynamic consumer demand was based on a relatively well-balanced income distribution. Investment activity was high and stable, given the low level of economic uncertainty and the stable development of demand. Precarious employment relationships were just as rare as complicated financial market products or obscenely high managerial pay. The 1970s saw the start of a crisis that reflected an inability to adapt the prevailing economic model. The crisis led, notably in the UK and the US, to the election of conservative governments who embarked on a radical reshaping of the policy framework.

What Europe can learn from the South

Nicolas Pons-Vignon

After having caused a massive increase in inequality throughout the world, which led to the build-up of politely called “imbalances” and which fireballed into a financial, then economic, crisis, neoliberal policies are threatening to push many economies into a precipice with unknown political and social consequences. Yet, the European countries at the heart of this turmoil are showing little sign of resistance; the growing social movements opposing bailout and austerity have thus far failed to influence dominant parties and national policies. Instead, it appears that the very same policy mix of austerity and privatization which shattered African, Latin American and ex-communist countries in the 1980s and ’90s is being inflicted on Europe. The irony lies in the fact that most economists now agree that these policies have indeed had disastrous consequences. The belief that what led to a growth collapse and social disaster elsewhere will have positive consequences in Europe is an illusion which is sustained by the mainstream media and by powerful interest groups. Lambert (2012) thus highlights the French media’s predilection for consulting a coterie of economists who are closely linked to (or rather remunerated by) financial interests, and who invariably play down the responsibility of banks in the crisis and the usefulness of taxing finance rather than, say, ordinary citizens through increased value added taxes. In Italy, the “structural reforms” supposedly aimed at boosting growth focus on accelerating flexibilization of the labour market, in a context already marked by very high levels of precariousness.