Posts Tagged ‘European Financial Crisis’

The trouble with globalization

February 24, 2012

The trouble with globalization is that the only global organizations, except maybe the Roman Catholic Church, are international banks, other international corporations and institutions such as the International Monetary Fund, the World Trade Organization and the European Central Bank which serve the interests of the banks and corporations.

Trade in goods and services among people in different countries is a good thing, not a bad thing.  Cooperation among nations for common purposes is a good thing, not a bad thing.  But what globalization has come to mean is nations yielding control over national resources, currency and finances to banks, corporations and international institutions that do not have their best interests at heart.

Naomi Klein has described the extreme of this process in The Shock Doctrine—how the international financial community takes advantage of crises to pressure countries to drive down wages and sell off national assets at bargain rates.  This seems to be what’s now going on in Greece.

Democracy exists (so far) only at the national level.  When a nation gives up its national economic sovereignty, it gives up the possibility of democracy.   Instead it is subjected to governance in theory by international civil servants, but all-too-often in practice by an international financial oligarchy.

The European financial crisis shows the pitfalls of an international currency without international democratic governance.  When a nation such as Greece runs a big trade deficit, its national currency becomes worth less, its goods and services become cheaper in terms of other currencies and its trade tends to come back into balance.  A cheaper Greek national currency would make Greece more attractive as a tourist and retirement destination, and help redress the balance.  But because Greece is in the Euro zone, its goods and services cost more, which works to the benefit of exporting nations such as Germany.

The experience of the past 20 years is that the nations that have fared best economically are those whose governments have acted in the national self-interest and disconnected from the IMF and WTO.   Until there are international institutions that are accountable to the public, that will continue to be true.

Click on Europe’s Transition from Social Democracy to Oligarchy for more from Michael Hudson.