The Mafia Connection

I said yesterday that today would probably give me lots to write about. In fact, I want to say so much that I am not sure where to start. I had three appointments today – one with the Italian Refugee Council, one with the Centro Astalli of the Jesuits, and a phone interview with a representative of the Greek asylum service. All three were very successful from the point of view of Harald the PhD student, and very troubling from the point of view of Harald the human being. Let me tell you what happened.

This morning I drove back into Catania at 9am, having no trouble at all with finding the IRC’s offices. In fact they share offices with the intercultural centre of the city of Catania, and I certainly felt like the attraction of the day when I entered the building. I don’t know why, but everyone stared at me and two girls were giggling in the corner when I sat down to wait for my appointment. The interview was very useful. I will not summarise every single detail, but essentially the situation is as follows: the agriculture of Southern Italy is entirely dependent on migrant workers. Both my interview partners confirmed that agriculture in Sicily would be “dead” without the cheap labour that immigrants provide. Agriculture in turn is managed by the mafia. It is therefore in the interests of the mafia to get immigrants to come to Sicily. One way this is apparently done is vividly demonstrated by an incident that occurred two years ago at the Italian maritime border. When a migrant boat from Egypt (!!) arrived at that border, the people on it were transferred into a different boat – the latter process was organised by people linked to the mafia. One of my interview partners said that he would not be surprised if the mafia manages the smuggling operations on the other side of the Mediterranean. But this is not were business ends.

Seemingly idyllic Sicilian scenery

About 50 kilometres from Catania there is a small town called Mineo. Although the town is in the middle of nowhere and hardly worth mentioning, it had gained a reputation among the Sicilians since it housed an American army base of about 400 soldiers. The US army had built a whole village for itself, including an entire infrastructure, villas and lots of pretty houses. A couple of years ago, the Americans abandoned the base and left behind a ghost town. The owner of the land the base was built on, an extremely rich man named Pizzarotti, was now in trouble. For years the Americans had paid insane amounts of rent, and now he was left with a worthless piece of land nobody would ever be interested in renting. That’s when he had the idea of converting the place into a camp for immigrants. Mineo now houses 4,500 people. As could be expected, Pizzarotti is notorious for being a Mafiosi himself. Every year the Italian government pays him hundreds of thousands of euros in rent for his property. Most shockingly of all, the Italian government pays with money from the European refugee fund – €37 per day per person. Spend ten seconds calculating in your head and you will begin to see what dimensions we are talking about. Initially the people who lived around Mineo were very upset about the relocation of the refugee camp to their doorstep. Now, they have begun to base their livelihoods on it. Hundreds of people are either employed in the camp itself, or they live off it indirectly by selling food to the residents. Officially the place is called Residenze dei Aranci – Residence of Oranges.

After this meeting I went to the Centro Astalli. It is an amazing institution that provides help for immigrants of all kinds. Many immigrants avoid submitting their fingerprints to the Eurodac-database, because it will ruin their chances of applying for asylum in another EU member state according to the Dublin-Regulation (in most cases anyway). However, this also means not having access to many basic services such as receiving medication. In Sicily, everyone has to right to essential care at public hospitals, but medication costs money. That’s why the Centro Astalli provides all kinds of meds for free, including anti-retrovirals antibiotics. Assistance is also provided for people suffering from alcoholism, which is increasingly wide-spread because people are sleeping outdoors in the cold. Although the centre is run by Jesuits and there were crosses on the walls, I also saw posters with the Islamic prayer times on the walls.

One of the most shocking things the lady who showed me around told me also concerns Mineo. Some criminals have made it a business to drive the residents to Catania and back, expecting money in return. Money is obviously something immigrants lack, which is why the drivers often ask for alternative means of payment. There have been numerous incidents involving prostitution. Furthermore, the drivers will ask the Mineo residents to smuggle drugs back into the camp. This is another way that immigration has benefitted the Sicilian mafia.

After I left, I walked for a bit around town. At the train station there were immigrants sitting on every single bench, many of them no older than 15. At the IRC I was told that 300 unaccompanied minors had recently escaped from a nearby ‘reception’ centre. Of course, 300 people do not just escape – it is obvious that the authorities who were theoretically responsible for protecting them let them leave, knowing very well that this would result in their homelessness.

The amount of human suffering here is difficult to grasp. I remember being in the European Commission a year ago, being told by someone working in the asylum unit that the Italians exaggerate about their problems with immigration. She pointed to the statistics, which show that the number of asylum applications on Italy is totally normal for a country of that size. It is obvious that the people in the Commission have no idea what they are talking about. Spend fifteen minutes in the city centre of Catania or Palermo and you will know that this problem is real.

I’ll stop for today. The phone interview I had with the Greek asylum service was so insightful that it merits a post of its own, which I will write later.

Pitfalls of Austerity Part I: A Misdiagnosed Crisis

Yesterday the European Commission gave its annual recommendations for the member states’ economic policies. Barroso said, that “Europe must move beyond the crisis.” Policy proposals focus on growth, rather than austerity, allowing several member states to take more time to cut their deficits. The EU’s executive celebrated the reduction of countries suffering from severe deficits from 24 to 16 since 2011, calling on Germany to consider wage increases to boost domestic demand. Wow, it seems like the crisis is about to pass! Of course, at the same time the OECD reduced the eurozone’s growth forecase to -0.6% this year, down from -0.1% six months earlier.

Barroso seems lost

The Commission is panicking, and it has got every reason to. The EU’s strategy to combat the crisis is failing, and calling the Commission’s proposals “a shift from austerity,” as EurActiv does, seems almost cynical. Giving the member states a few extra years to cut their deficits cannot seriously be called a policy shift, particularly as the proposal is met with resistance from the EU’s largest member state. Austerity should not be weakened a bit, as this would mean a mere extension of the policy – it has to be abandoned altogether. It is 2013, and austerity has been in place for four years without success. It seems necessary to spell out once more why austerity is a misguided, dangerous and hopeless policy that will lead Europe into an abyss that it might not recover from.

This post is the first of a series of blog posts discussing the fallacies of austerity. It draws heavily on an article by Robert Boyer on the subject. One of the major reasons for why austerity cannot work is because it is based on a false diagnosis of the roots of the crisis – Europe’s policy-makers are administering antibiotics against a virus. The underlying assumption behind austerity is that the crisis is caused by irresponsible public spending, when it has really the result of a private credit boom in the US.

The deregulation of the banking sector in the 1980s allowed for toxic subprime loans to be securitized by mixing them with high quality loans. It was thought that this would spread out the fallout risk of these loans to a minimum, allowing for a surge of private lending to the poorest fraction of Americans. Banks felt relieved of the responsibility related to the need for the careful selection of their debtors, and the real estate bubble was allowed to grow. The untaxed free global trade with financial products enabled these loans to be spread out to Europe in particular, and when the bubble burst, several EU member states became afflicted with excessive debt burdens as a result of having to bail out their ruined banks. The crisis is not the result of irresponsible public spending, but of a deregulated financial market. Spain even ran a budget surplus before the shock of 2008 as a result of its own booming real estate market.

Underlying Causes of Financial Deregulation

Growing inequality in the US in the late 20th century

The story of the crisis begins after WWII. Keynesian policies were adopted, allowing for a steady and sustainable growth pattern in the capitalist world over the post-War decades. Productivity and the mean incomes per household were rising. In the US of the late 1970s, the increase in productivity began to slow down, causing the wages for low-skilled labour to stagnate. Wages for in the services sector and in the high-tech industries on the other hand continued to increase, initiating the growth of the income gap. Initially governments were able to compensate for this trend by the establishment of extensive welfare systems, which were based on the solidarity of those with high salaries. In the 1980s, this assumed solidarity was quickly met with resistance, and governments began to finance their welfare system with cheap credit from their central banks. This caused public debt to grow radically. Public debt may thus be seen as the attempt to states to balance out the rising inequality in their societies.

The increasing importance of the financial sectors was due to the rising dependence of governments on debt, as well as to the use of the financial industries to compensate for the slowing growth figures of the manufacturing sector. Economic growth and high public spending could only be sustained by innovation in the financial sector – the deregulation of the financial ‘industry’ was seen as the most effective method to ensure its continuing growth. It is that deregulation that ultimately allowed for the emergence of the financial crisis of 2008 which triggered the implementation of austerity policies.

Structural Problems within the Eurozone

Polarization of trade surpluses/deficits in Europe

The finance-based growth of the post-1970s was exacerbated in Europe by the introduction of the euro. The introduction of a common currency under strict anti-inflationary regulations disallowed the member states from devaluing their currencies. When the euro was designed, policy-makers did not think of a compensating mechanism for this problem, and it was assumed that the price transparency linked to the common currency would drive the participating economies to convergence. Reality was quite different. Even before the introduction of the euro banknotes in 2002, the eurozone had begun to divide. Still faced with the effort to compensate for the rising inequality within their societies, the member states adopted different strategies to finance their welfare systems without increasing exports by devaluing their currencies. Germany adopted a deflationary low-wage policy, which has the same effect as a currency devaluation. This drove up Germany’s exports. Having no strong manufacturing sectors of their own, other member states focused on an imaginary credit-led growth, leading to the vast growth of their financial industries. When the real-estate bubble burst in 2008, these countries were particularly vulnerable.

Austerity is Fighting the Wrong Malady

The myth of irresponsible public spending is extremely superficial, and falls apart upon a minimum of close examination. As long as the European Commission does not fundamentally change its discourse and its policy recommendations on the crisis, Europe cannot recover. The re-regulation of the financial markets, and the establishment of a permanent European solidarity mechanism is of paramount importance to economic recovery and to the success of European integration. Austerity is not only destroying the economy, but it is translating the economic divisions of Europe into the hearts and minds of Europe’s citizens.

Harald Köpping

Also read: Boyer, R. (2012). The four fallacies of contemporary austerity policies: the lost Keynesian legacy. Cambridge Journal of Economics. 36. 283-312.

Marx vs Jesus? Why Christianity and Socialism Should Go Hand-in-Hand

I am a Christian, and I am a Socialist.

You may read those two statements with some bewilderment, and you may wonder – wasn’t it Marx who said that religion was the ‘opium of the people’? Doesn’t the ‘C’ in ‘CDU’ stand for Christian, and don’t most Christians vote conservative? While all these things may be true, I believe that Christianity and Socialism are, in fact, not mutually exclusive. I will argue that a coalition of Christianity and Socialism is not only possible, but desirable. I will now proceed to argue this claim from two perspectives – one philosophical, and one moral. It is then up to you to draw your own conclusions.

Capitalism and the Worship of Greed

Capitalism is more than a way to organise the political economy, it is, in fact, an ideology. The ideology of Capitalism presumes that we live in a world ruled by self-interest. The dynamic of the economy develops as the result of the greed and selfishness of every human being. Every decision is based on self-interest, and everyone is attempting to gain as much as possible for themselves. As a result, models can be developed, which attempt to predict human decisions. If we assume that every actor in a situation will always attempt to maximise their profit, human decisions become foreseeable. The natural world is bound to laws, and the behaviour of human beings too, is determined by laws. Capitalism thus views us like automatons in a machine – our behaviour is in essence no different from that of a computer, dictated by the algorithm of self-interest.

You may read this, and you may think that this is not too far from reality. The truth is though, that it removes the ability of human beings to make their own decisions. Free will becomes an illusion, implying that we can no longer be held accountable for our choices. Capitalism is the ultimate apology for greed, selfishness and pride, which Christians see as the worst of human vices.

Historically, Christians have debated intensely about the idea of predetermination. In fact, I have recently read the Epistle of the Ephesians, which seems to suggest that salvation is indeed predetermined (Ephesians 1, 5). However, why would God send prophets to Israel to warn them what would happen, if the Israelites did not change their ways? Why would Jesus call on us to have faith, and to show our faith through our actions, if we have no choice about it? Free will seems to be at the very heart of Christianity.

A machine-world that is pre-determined is alien to Christian theology, for it would portray God as unjust, having created the world knowing full-well that he would plunge us into misery. I can only believe in a just God, if he allows us to make our own choices. I therefore feel that Christianity is philosophically it odds with the logic of Capitalism, allowing me to embrace an idea that allows humanity to choose its own destiny.

Socialism and Christianity

There is something that has always struck me when I read the book of the Acts of the Apostles, where Luke often portrays a utopian society of believers. Private property does not seem to exist, for everything is shared out among the entire community:

“All the believers were together and had everything is common. They sold property to give to anyone who had need.” (Acts 2, 44-45).*

“All the believers were one in heart and mind. No one claims that any of their possessions was their own, but they shared everything they had. […] And God’s grace was so powerfully at work in them all, that there were no needy persons among them. For from time to time those who owned land or houses sold them, brought the money from the sales and put it at the apostles’ feet, and it was distributed to anyone who had need.” (Acts 4, 32-35).

Other books of the New Testament also speak of a social responsibility of people who do well materially:

“Our desire is not that others might be relieved while you are hard pressed, but that there might be equality. At the present time your plenty will supply what they need, so that in turn their plenty will supply what you need. The goal is equality, as it is written, ‘The one who gathered much did not have too much, and the one who gathered little did not have too little’.” (2 Corinthians 8, 13-15).

You may call me old-fashioned, but my definition of Socialism is very similar to the Biblical depictions of early Christian communities. Material success in a capitalist society depends on a number of factors. In our society, being male for example, and coming from a well-educated family, multiplies your chances of making lots of money.

Jesus as a Socialist?

Without the social protection provided by the state, far less people who take the risk of opening up a new business. The state provides social and material security, education and healthcare, and countless other benefits, and the material success of the rich is in part owed to the state, which is what justifies higher taxes for those who can afford to pay them. The Bible confirms Socialist morality with the verses mentioned above, and also with one of Jesus’ most famous statements: “Do not judge, and you will not be judged.” (Luke 6, 37).

For me as a Socialist, the long term aim of humanity should be to bring about the emancipation of every human being from all kinds of oppression. Humanity ought to escape the shackles imposed on it by capitalist determinism. Everyone should have to chance to live his life as he wants, and everyone should be able to use her gifts.

Even in the EU, which is the part of the world with the highest income-equality, this is not the case, and social mobility remains limited. On top of that, three billion human beings do not even have access to clean drinking water. I believe that the only way to provide for the fair distribution of resources is to authorise a central authority with that task – the state. By that I do not mean a Soviet-style undemocratic dictatorship, but a welfare state in which basic services are public property (such as energy, water, banking, traffic infrastructure, public transportation), and in which large private companies function as Mondragón style co-operatives. The implementation of this alternative way of organising society is what I believe the medium-term goal of Socialist parties in Europe should be. I believe that these goals are achievable and that they are in line with Biblical ideas. The establishment of the Socialist society can go hand in hand with following the guidance of Jesus.

Overcoming Old Misconceptions

Christianity and Socialism are two world-views that have remarkably similar political implications. Despite that, many Socialists have historically shown animosity towards Christianity, and vice versa. It often strikes me as hard to believe that Marx so radically misjudged the nature of Christianity by mistaking it for the nature of the Catholic Church. One of the major tasks of early Socialists was however indeed the emancipation from the bondage of organised religion. Socialists today have to beware not to equate the message of Jesus with that of the Church.

Christians, in turn, have to overcome their apathy towards politics. Charity is good, but it will not fundamentally alter the structural problems in human society that cause poverty and human suffering. It is only through political action that poverty can really be alleviated. It is heinous that Christian political engagement today is limited to debates about same-sex marriage, abortion and stem-cell research. The most important commandment of our Lord is to love our neighbour as we love ourselves – how can we follow that commandment without attempting to change the way our society is organised?

“But if anyone has the world’s goods and sees his brother in need, yet closes his heart against him, how does God’s love abide in him?” (ESV – 1 John 3, 17)

I place great hope in political action that is inwardly fuelled by the guidance of the Holy Spirit, and Christianity that is outwardly enriched by the political principles of Socialism. The antagonism that has long separated Christians and Socialists has got to be overcome.

Harald Köpping

*All quotes from Bible apart from one are taken from the New International Version.

Cyprus: Let the Banks Go Bankrupt!

It seems like the euro crisis is entering yet another phase. Negotiations on the bail-out of the Cypriot banking sector seemed to initially go so smoothly. Cyprus appeared to be just another country making use of the European Stability Mechanism (ESM), and while Greece was humiliated, no one saw Cyprus’ application for the European bail-out fund to be particularly shameful. Operation Cyprus was part of a routine that had entered the Council after years of bargaining. Perhaps that was where the problem can be found. Europe’s policy-makers underestimated the Cypriot problem. The Greek state has survived, the euro is still alive; Portugal, Ireland, Spain, Italy – austerity has been harsh, unemployment has skyrocketed, and poverty is on the rise, yet life somehow goes on. Taking out 6.5% of people’s savings from their bank accounts? Well, the Greeks have been treated like crap as well, and parliament still waved things through, right? I suppose technocracy has reached its limits in Cyprus. Alex pointed out the irony of it all in her last post though. People in Cyprus were enraged by the idea of anyone taking out money from anybody’s bank account, whether they were affected or not. When the government suggested not to touch anyone’s savings if they are below €100,000, people still got angry. Sheep protecting wolves, and deer protecting hunters. I supported the expropriation of savings above a certain threshold, because I believe that the alternative, to introduce Greek-style austerity measures, is even worse. However, to understand what is really going on here, one has to understand whose interests are really being protected.

Germany and the EU: really the right target?

I am certainly not a liberal, yet I believe that in this case, a liberal response of non-intervention is the right way to proceed. Europe ought to rid itself of the plague of investment gambling. I regard the purpose of a bank to be to supply people with loans if they want to build a house or start a business. I took a loan to finance my studies in the UK and in the Netherlands. Banks also serve the purpose of keeping my money safe for us. Rather than storing stacks of money under the bed, I bring my money to a bank, expecting them to store it for me. When I do that I do not expect to take a risk, on the contrary! I believe that whatever else banks do is their problem. No one should have to pay for their greed for profit. The Cypriot banking sector was way out of proportion, and parallels to the Icelandic banking crisis in 2008 are numerous. An economy based on the totally non-productive financial ‘industry’, can, in the long run, not succeed (this also applies to Luxembourg, which seems to follow a similar business model; money laundry is by no means a particularly Cypriot problem). If the Cypriot banks face bankruptcy, then to hell with it, let them sink. Rather than using our money to finance immoral business activities in the banking sector, use the funds of the ESM to guarantee people’s savings for up to €100,000. There is no need for private banks. So many people who studied with me now work for the banking sector, which produces absolutely nothing, and which grows on the soil of greed and selfishness. People should spend their creativity and their energy on doing something useful. The Cypriot government should select the bank with the most solid business model, and nationalise it. There is no need for more than one bank in a country with 750,000 inhabitants, and that bank’s total assets do not have to amount to €40bn (more than twice the total GDP!). Let the banks go bankrupt! Rich people would lose their savings (which were useless to the economy anyway, if they were lying dormant on a bank account), shareholders would lose their shares. People need to realise that few people will be affected by this, and that our economy, not just in Cyprus, but in all of Europe, requires an ablution of the financial industry.

The affairs of the Cypriot state must obviously be allowed to continue, and funds from ESM can be made available for that. The main reason Cyprus got into trouble is the entanglement of the Cypriot banking sector with the sovereign debt crisis in Greece, which was of course itself partially caused by the financial crisis in 2008. Nevertheless, while the Cypriot state may of course be criticised, I think that many of these criticisms apply to the dominant members of the eurozone as well. Reforms are necessary all over Europe especially in Luxembourg, not just in Cyprus.

I don’t think that this is what’s going to happen of course. The new phase of the euro crisis is that the bankruptcy a member has very much become an option, and I would not be surprised if that’s what we’re going to see in the next couple of days. Just remember that there would have been an alternative. Supporting further bank-bailouts turns us into sheep protecting wolves.

Harald Köpping

Inconvenient Truths: Lessons from Europe's Past

War brings out the worst in people. That was the message of the new trilogy produced by ZDF about WW2. That is also the message, that Martin Schulz, the current president of the European Parliament wrote in his analysis of the movie today in the Frankfurter Allgemeine. I have been living in Germany for more than a year now, at the great despair of my parents, and I was astonished from the very start by the amount of documentaries about WW2 and all the aspect of the Nazi regime are shown on TV here. It has become a game between Harald and me. Every night he turns on the TV on a channel that shows a documentary about Germany between 1933 and 1945, and I tell him half-shocked, half-amused, “You Germans are so obsessed!” I have always thought, maybe because of my education, that this time was over, part of another era. That the European integration process had waved away bad memories, and that as we move on, this part of Europe’s dark past will forever stay where it belongs: in the history books. The euro crisis proved me wrong; it proved that everything that has been done in western Europe since the end of the Second World War was a very fragile construction.

Five friends' naivity before the war experience

Unsere Mütter, Unsere Väter, is probably the first German movie that I saw about WW2. I haven’t seen all three parts yet, but I am definitely recommending it. I wish they could translate it and show it in Greece, because I have experienced something that I profoundly dislike. It started last Easter when Harald and I went to Greece to spend it with my family. After the traditional lamb a neighbor came over and said to me, that we should say that Harald is Austrian because you never know. There are people out there who might not like the fact that he is German. Harald and I laughed of course at the ridiculousness of the comment. But now that I think about it, it is not that ridiculous. Greek media have bombarded Greek public opinion about how the Merkel-Schäuble block wants to destroy the south. Naturally, it was not long until the first pictures of Merkel portrayed as Hitler were published. It was not long until people started talking about comparing the current situation to WW2. This of course pisses off Harald. Germany lost 10% of its population during the war, Greece 4,5%. and the traces of the war are still visible today in Germany in nearly every street.

Schulz reminds Germans of the great gift that the rest of Europe gave to Germany, allowing it to come back to the table of nations, that the Schuman Plan came as an alternative to Versailles, that it was forgiving and not vengeful. This is the existing narrative of European integration; the narrative of forgiveness. Having this narrative in mind it becomes quite difficult to understand the current situation. European bureaucrats are ill equipped to respond or to understand what is happening in the south. The reality is that France’s initial plan for Germany (as drafted by Monnet) was a very Versailles-style treaty. It was only after American pressure that the Schuman Plan was created. The reality is also that for long Germany was punished, divided by the great powers of this world. The fifty years of socialism are condemned to stay in history books as a dark period, and East Germans today are expected to adopt the history of West Germany.

I have many times compared the Weimar Republic to the current situation in Greece. Economic despair can bring out the worst in people; so can uncertainty about the future. Hopelessness brings out the worst of societies. Both the Weimar Republic and today’s Greece are the victims of our economic system. A system that puts profit and money above people; a system that counts wars as positive and health and education as negative in our GDP; a system that puts a monetary value on life (human and animal); a system that made the majority of people in Cyprus defend the money of the top 1% who have never given a crap about the poor. I was shocked when I saw Cypriot citizens defend their banks and rich people’s money (because when you have above than 100,000 euros in the bank you are rich). I heard that the Cypriot government, in an attempt not to touch the bank’s deposits, suggested tax increased and wage and pensions cuts. We are all the victims of our economic system. Unfortunately we prefer to blame easier targets.

Coming back to the movie and Schulz’s comments, I wish that they could be translated in Greek. I wish both Greek and German public spheres would interact more and better. In reality Germany was never allowed to forget about its Nazi past, but all other European countries were allowed to forget about their inconvenient fascist or nationalist pasts. Greeks should be reminded of dangers of all extreme nationalism and Germans should be reminded of the failure of the West German model in East Germany. “East Germans resent the wealth possessed by West Germans; West Germans see the East Germans as lazy opportunists who want something for nothing. East Germans find Wessis arrogant and pushy, West Germans think Ossis are lazy and good-for-nothing” (The Transparent State: Architecture in Politics in Postwar Germany, by D. Barnstone). Reminds you of anything? It’s ironic isn’t it?

Alexandra Athanasopoulou

Cyprus and the Failed Placebo

The euro crisis is back. It’s not like Alex or I ever believed that it was gone of course. The news from Alex’s family in Greece was anything but promising, and the numbers seem to speak for themselves. At the same time Europe’s policy-makers seem to have adhered to a new strategy: talk the crisis away. The idea was simple. If we say that the worst part is over, we will restore confidence in the credit-worthiness of the eurozone. That’s how it is with crises in the capitalist system: Keynes showed us that there is inherent instability, that crises are inevitable, but that each crisis will eventually subside. The ‘placebo’-rhetoric that Schäuble and Barroso engaged in seems to have failed though. This crisis will not just subside. In fact, it cannot subside, as long as the disparity in the political economy of the eurozone has not been tackled. In fact, the crisis has caused the different member states to drift further apart. While German unemployment is at a record-low, some areas of the region struggle with 25% unemployment, not to mention the millions of youths who struggle to find work.

Since the weekend, you cannot take out money from
a Cypriot bank

The euro crisis has entered a new phase. Merkel announced a few years back that “your savings are safe” – I guess that is another phrase that has vanished somewhere on the landfills of the crisis. Cypriot savings are no longer safe. Every single costumer of Cypriot banks will be charged at least 6.5% of their savings to save the Cypriot banking sector. Those who have over €100,000 on their bank accounts will lose 10%. Obviously those who are affected by this measure are shocked. A precedent is set for the expropriation of the people. No government has fallen, no revolution has broken out. It is likely that this was merely a first in a number of similar events. Bullion traders, rejoice! The important question is though: is this is good idea, and, perhaps more importantly, is it fair?

I think the answer to both questions in yes. Government policy has rendered saving up money redundant. Inflation rates are higher than interest rates, so if you still have a savings account with a significant amount of money on it, it is perhaps time to get rid of it and invest in a house or some other physical commodity. Low interest rates are intended to boost domestic consumption, because money is made cheaper. At the same time, inflation acts as a hidden tax. I would rather prevent the devaluation of money by means of the Cypriot policy, than to flood the money supply with more or less interest free loans from the ESM.

Nevertheless, I don’t think Cyprus went far enough. Rather than submit to EU/IMF hegemony for the time being, and to surrender its economy to a structural readjustment programme, Cyprus should have covered their entire budget deficit using people’s savings. However, the 6.5/10% rule is overly simplistic, and the percentage should have increased gradually from 1% for €10,000 to 20% for over €200,000. Everyone with savings under €10,000 shouldn’t have had to pay at all. Using this scheme, the €18bn that Cyprus apparently required could have been collected using the domestic money supply. I believe that should this policy have to be repeated, this will be the way to go. If you argue that the government shouldn’t take money from people just like that, perhaps you should consider that this is really just an emergency tax.

Whether or not this policy will work out is another question. If I lived in a country affected by such measures, I would immediately withdraw all my money from my bank account. This is probably what will happen in much of the European south, if it has not already taken place (like in Greece). I don’t know what’s going to happen in the next few weeks, although it seems increasingly apparent that Italy’s problems are far from over. A stable money supply does not solve problems of mass unemployment, corruption, and, most importantly, economic dependency. Germany has done nothing about its low-wage policy, and continues to be the manufacturing engine of the continent. This causes money to flow into Germany, and out of the south. Without a solidarity mechanism in place, problems can only worsen.

Harald Köpping

Mondragón: There is an alternative

“There is no alternative.” That is the motto that seems to currently dominate the political discourse in Europe. The other day I read a story on the Guardian that got me thinking… Ed Miliband, head of the British Labour Party, said that “capitalism is the least worst system we’ve got.” The goal of his party is not the abolition of capitalism, but the taming of the creativity towards a “decent” and “humane capitalism.” As opposed to the Cold War era, nowadays it is rare that financial capitalism as a whole is question, even within parties where one may expect it.

Nevertheless there are alternatives, albeit not state-centred ones. Kim Stanley Robinson, one of my favourite science-fiction authors, used his Mars Trilogy to portray the colonisation of Mars, and its transformation into a more hospitable world. He describes very realistically how a new society might develop outside the Earth’s biosphere, freed from the archaic and deeply-rooted value-systems and dogmas. Robinson’s books may have been written in the 1990s, but he recognised in an almost prophetic manner the enormous potential of cooperatives. He refers particularly to the Mondragon Corporation, the world’s largest cooperative, and one of the ten biggest Spanish companies. This post is meant to describe this very feasible alternative to the capitalist mode of production, which can be implemented without revolutions of paradigm shifts, and that very successfully.

Mondragon focuses on social justice and not profit

The Mondragon Corporation was founded by the Catholic priest José Maria Arizmendiarrieta in the 1950s, in the fact of Spanish mass unemployment. In 2011 83,560 people worked at Mondragon. Mondragon consists of over 100 enterprises, and produces fridges, escalators, machine parts, and other specialised equipment. Eroski, one of the largest Spanish supermarket chains is equally part of Mondragon. A new employee can buy herself a share of the company after six months for €12,000. That money will be used for investment and innovation, as well as for social purposes. In return an employee will become an integral part of the cooperative. The managers of Mondragon are elected once a year by a general assembly of all employees, and the business structure of the company is completely democratic; on all levels the employees themselves decide about the future of Mondragon. Every worker feels personally responsible for the cooperative, and employees display the kind of knowledge about their company that is usually only seen among managers. But that is not the only area where Mondragon sets revolutionary standards: the executives may only earn up to 8 times as much as the minimum salary of a simple worker. Nearly every employee ears more though, which is why this gap is really far smaller. One needs to take into consideration that we are talking about a company will an annual turn-over of €15 billion. Josef Ackermann, former CEO of Deutsche Bank, used to earn 400 times as much as the average employee, and in many companies of a similar size those kinds of proportions are no rarity. In the city of Mondragon, where the Mondragon Corporation was founded, unemployment is only 8%, compared with a nation-wide unemployment of 25%. In spite of the crisis no jobs were destroyed; due to the large number of enterprises that are part of Mondragon, workers could be allocated according to demand. Mondragon thus provides us with a role model of a successful cooperative. Between 1990 and 2011 the number of employees has quadrupled.

Mondragon is a role model in many ways. One the hand, it shows the advantages of a coordinated labour market which could allow “redundancies” to become unnecessary. As the employees themselves manage the company, motivation is much higher. On the other hand, a democratic enterprise structure is simply more just! Gramsci writes that a hegemonic structure can only brought down by the establishment of a counter-hegemony. The transformation of purely profit-oriented companies into cooperatives could form the substance of such a counter-hegemony.

I’m going to end this post with a quote by Kim Stanley Robinson: “The system called capitalist democracy was not really democratic at all. […] So. We must change. If self-rule is a fundamental value, if simple justice is a value, then they are valuable everywhere, including the workplaces where we spend so much of our lives.” So that’s that.

Harald Köpping

We Couldn't Have Known! - Myths of the Crisis Part I: The World Was Caught By Surprise

The purpose of this series of posts is to debunk some of the myths of the crisis that have been fed to us by media and governments. The first such myth is the idea that the crisis was unexpected and caught the world by surprise. We do not distinguish here between the euro crisis and the financial crisis, which, as we will argue in the next post, form part of the same overarching crisis. The purpose of this myth is to remove any kind of responsibility from policy-makers and bankers – no one is really to blame, the crisis just happened, like that, and no one could have known. Right.

Before discussing the specificities of the contemporary crisis, let us explore how the thing that the crisis is all about was created in the first place, because this will give us some clues why crises in the capitalist system are endemic and inevitable. Money is created by the central bank, which in our case is the ECB, and which in the American case is the Federal Reserve. States go to the central bank, and hand the bank a piece of the state that’s called a government bond. If the state wants to create, let’s say, €1 billion, it has to give the central bank government bonds worth €1 billion. The state will then go on to deposit those €1 billion into a bank account with one of the numerous commercial banks that exist. This is how money is created; it is now possible to take out loans from those commercial banks, making the money available to the general public. When a state receives money from the central bank in exchange for government bonds, the state promised to pay back that amount – in other words, all existing money is debt. And not only do states have to pay back that money, but they also have to pay interest, which is why the amount that needs to be paid back is always larger than the amount of money in existence. States always have to take out new loans from the central bank to pay their interest, which constantly increases the existing money supply, and which is commonly referred to as inflation: an increase in the money supply causes money to be devalued. The existing money in circulation is thus always slightly less than the current debt level, causing an exponential increase in money supply as well as in the debt level. A default (i.e. someone stops paying the money back) is therefore at some point inevitable. The subprime was about ‘toxic’ loans which were sold from one bank to the next, causing a systemic toxicity build-up – once house owners were unable to service their loans, some banks went bankrupt, while others were saved by national governments. In the euro crisis states are unable to service their loans, potentially leading to the same development. All this is indeed well known, and there were numerous economists who predicted these developments (e.g. Bernd Senf, Heiner Flassbeck, the documentary Maxed Out, as well as mainstream economists like Dean Baker, Fred Harrison, Kurt Richebächer… This list is very long).

Eurozone: absolute debt level in million euros

I recently came across a paper by Gernot Köhler called Global Keynesianism and Beyond from 1999. In that paper, there is a section titled ‘Controlling Global Financial Capital’, where Köhler calls for the introduction of a “frequently quoted proposal” known at the “‘Tobin tax’, namely, a tax on international financial capital transactions.” This proposal is now being discussed, but it is undeniable that it was well-known that an uncontrolled banking system is extremely dangerous. It is all the more tragic that this kind of system has brought unemployment and poverty on tens of thousands of people in Southern Europe.

The money system is the systemic root of the crisis, and the introduction of a financial transaction tax is an essential step towards controlling the financial ‘industry’. Everybody knew that the system we have makes crises inevitable, which is why the idea that the crisis caught everyone by surprise is a myth. 

Harald Köpping

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The Dirty Twenty-Seven: Europe’s involvement in the global arms trade

Between 1932 and 1934 the world’s leaders came together in the city of Geneva to attend the most significant conference of all time: the Disarmament Conference. The American President Roosevelt summarised the aims of the conference: “If all nations will agree wholly to eliminate from possession and use the weapons which make possible a successful attack, defences automatically will become impregnable and the frontiers and independence of every nation will become secure.” After tough negotiations, and after Hitler was assassinated by Julius Leber, the conference became a monumental success: it was decided to ban offensive weapons! Robert Oppenheimer spontaneously decided that he would abandon nuclear physics to work on hydrogen fuel cells instead, and the new leaders of Germany were so euphoric that they convinced France to commonly found the Pan-European Federation.

The world's leaders meet in Geneva

This is of course not how history turned out; but imagine a world without arms – war would be obsolete, and a huge amount of human suffering would never occur. A general ban of the global arms trade would be a good start on the way towards this vision.

But let’s get back to reality. In 2011, 2.2 trillion US-dollars were used globally for military expenditures. The military budgets of the UK, France and Germany are among the world’s top-ten, and as a whole the 27 Member States of the European Union spent $281 billion on their militaries, amounting to 1.5% of the EU’s GDP. In comparison, about 5% were spent on education.

What is even more shocking is that the crisis-struck Member State Greece has the 19^th largest military budget on the planet. It is only slightly smaller than that of Israel or Spain. Greece spends 4.3% of its GDP on the military, compared with 4.1% on education. Proportionally no EU Member State spends as much on its military, and globally there are only a handful of states that spend more. I don’t know what is more threatening, invasion from its giant neighbours to the north (Albania, Macedonia and Bulgaria), or occupation by its NATO-ally Turkey. While Europe is forcing absurd austerity measures on the Greek population, which have lead unemployment and poverty to skyrocket, the German government has sold Greece military equipment worth €403 million in 2010, and Greece continues buying Leopard-tanks and submarines (okay, sometimes they don’t work) from German weapons manufacturers. Motives of ‘solidarity’ in the Greek ‘rescue package’ are completely dismantled in the face of this ridiculous policy. It is crazy to assume that any EU Member State is facing a serious military threat, and the Greek policy of cutting pensions while buying tanks is bordering the criminal.

The EU’s involvement in the global arms trade is no less significant. Whether it is Afghanistan, Iraq or Libya – the West fights wars against the same countries that it sold weapons to ten years earlier. Between 2005 and 2009 European arms exports to Libya for instance had more than quadrupled, including materials such as military planes and tear gas. The planes that Gadhafi used to bomb his own population were produced in France and Russia. Similarly, civil wars in Sudan and Congo are fought with weapons produced and sold by the West, putting further pressure on the moral credibility of European governments. At the same time, Europe is celebrating the production of weapons like the Eurofighter as success stories of European integration, and the integration of Europe’s military industry is seen as positive – what could possibly be more cynical?

I don’t understand why states cannot simply agree not to sell weapons anymore, but it seems that the profit generated by the fact that the arms industry is one of the largest industries in the planet outweighs the ethical problems resulting from it. The accumulation of capital is more important than the potential prevention of war in the polico-economic system we live in. Many people however, are not even aware of this condition, and I am thus hopeful that mere awareness will cause us to question this system, and to elect politicians that will seize to contribute to the dirtiest business on the planet – the international arms trade.

Harald Köpping

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Space: the Fiscal Frontier? - How Capitalism Has Hijacked the European Space Programme

Humanity’s future is in space. What better safeguard is there for the long-term survival of humanity than the colonisation of Mars? Few things have managed to inspire people as much as Yuri Gagarin’s first orbital flight around planet, or as Neill Armstrong’s first steps on the moon, as he watched the Blue Marble on the shallow horizon. No state has claimed property to parts of space – it is sacred ground, where no arms are meant to be placed, and were only peaceful activities are meant to be conducted. The exploration of space is one of humanity’s highest aspirations, and a human presence on another world remains one of our most powerful visions. Yet, in the age of capital, this awe-inspiring project has fallen victim to capitalist megalomania, and the EU has played its part.

Space policy was one of the first areas where Europe has agreed that only a common strategy would allow for a successful undertaking. Particularly after WWII, no European state was strong enough to bear the burden of building up a space programme on its own, and after a somewhat bumpy start, the European Space Agency (ESA) was founded in 1975. ESA’s Convention states that its programme serves “exclusively peaceful purposes,” and until the 1990s, this remained more or less the case. ESA’s Giotto was the first successful mission to a comet, the small probe Huygens was the first to land on Saturn’s moon Titan, European spacecraft are currently orbiting Mars and Venus, and Rosetta will hopefully be the first man-made object to successfully land on a comet.

However, in recent years, and particularly since the start of EU involvement with the European space programme in the early 2000s, non-research based projects have become the focus. It was the European Commission that pushed for Europe to build its very own satellite navigation system: it’s called Galileo, and costs 4 billion euros. GMES (Global Monitoring for the Environment and Security), the second EU “flagship programme” in space, costs around 2.7 billion euros, and will give Europe an independent earth observation capability. Both projects are financed by the EU and its Member States, but built, implemented and operated by ESA. Both projects have specific military purposes: Galileo’s high-precision signal will primarily be used by military customers, and GMES’s earth observation capabilities can also be used for espionage. ESA has gone astray from its originally purely peaceful mandate, and is now openly participating is so-called dual-use activities, which serve both civilian and military purposes. At the same time, ESA’s more ambitious research-based projects, such as the Aurora programme, which intends to send Europeans to Mars by 2030, are now seen as unrealistic and not implementable. Even in space, the things that make us human – our curiosity and our drive to explore the unknown – had to give in to a system that is based on a commodity fetish.

Vision of a European astronaut on Mars

Even our space programme has to produce growth and profit (which are the official justifications for building Galileo and GMES), which underlines that the capitalist system is undermining human technological progress. To transport people to the ISS, we rely on the Russian Soyuz-system which was developed in the 1960! Technological developments are deliberately held back for the sake of profit, which is why the idea of hydrogen-powered cars is still science-fiction, and why our space programme has hardly made any technological progress since the 1970s. In the hive mind of neoliberal economists, it makes sense to merely develop technology to the point where there is a slight advantage vis-à-vis one’s competitors. We should be in space, and we should all be driving electric cars, but the neoclassical economic principles that are religiously believed in undermine technological progress, which is urgently needed to create a sustainable future for humanity on this planet.

I know that many of you will think, “Well, why would we spend money on exploring space anyway – people are starving!” Human suffering on earth has both nothing and everything to do with money. Water and wheat are sold as commodities, and while stock market traders in Europe may open their champagne bottles when food prices are rising, the vast majority of human beings pay the price. Money does not feed people, and money does not build schools and hospitals – it is human beings who have to that. If development aid means giving money to poor people to buy European and American products, we need to begin reconsidering our development policy. But that topic deserves a post of its own.

What is certain is that we must not allow the principles of capitalism to bury our most sacred dreams and ambitions alongside its numerous other victims. Europe has to reorient its space policy towards exploration, both to fulfil what it means to be human, and to secure the long-term future of humanity.


Harald Köpping


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