History Repeats Itself: Europe & the Extreme Right
By Shlomo Maital
History DOES repeat itself.
After WWI (whose centenary, 1914-2014, will soon be observed), the victors (Britain, France) punished the losers (Germany) with outrageous demands for ‘reparations’, at the Treaty of Versailles. J.M. Keynes was there; he warned, in a book The Economic Consequences of the Peace, that the ruinous reparations would lead to a new war. It did. To pay the reparations, Germany simply printed marks. This destroyed the economy through ruinous hyperinflation, and led to the rise of the Nazis and Hitler.
Today, Europe has adopted a misguided policy of austerity, forcing Greece, Spain, Ireland, and to some degree Italy, to adopt stringent spending cuts and tax hikes. True, these countries overspent. But the right way to emerge from excessive public debt is to grow the economy so the debt shrinks and so tax revenues help pay for it. The wrong way is austerity – shrinking government demand, when consumption and investment and exports are all declining. You cannot grow an economy by shrinking demand. Yet many economists support ruinous austerity. Did we forget what Depression did to Germany? Well, it is doing similar bad things to Greece, Spain and other countries.
Now, it is time to pay the Piper. The European Parliament elections have brought a huge victory for parties on the extreme right – Euroskeptics, neo-Nazi, anti-immigrant, and anti-Semitic. It was inevitable. When times are bad, people look to those who have simple remedies – blame the foreigners, the Jewish people, and Brussels.
I’m embarrassed and ashamed to admit I am an economist. Not only do we economists fail to grasp reality, we have also forgotten history, and the warnings of the man who invented macroeconomics, J.M. Keynes.
If the neo-Nazis have risen in Europe, we have nobody to blame but ourselves.