Bringing the Troika to Paris

I have argued for years, and in my last post on this blog, that a big part of the story we have seen in Europe over the past eight years is a result of social engineering. This has involved a major offensive by the European authorities, taking advantage of an economic crisis, to transform Europe into a different kind of society, with a smaller social safety net, lower median wages, and -- whether intended or not -- increasing inequality as a result.

In recent weeks France has faced strikes and protests as the battle has come to their terrain, over a new, sweeping labor law. Among other provisions, the law would weaken workers' protections regarding overtime pay, the length of the work week, and job security. But most damaging of all are the provisions that would structurally weaken unions and undermine their bargaining power. These would push collective bargaining away from the sectoral level, and toward the level of individual companies, thus making it more difficult for unions to establish industry standards for wages, hours, and working conditions.

Such structural "reforms" have been promoted by the European authorities (including the IMF) for years, and the ostensible rationale is to reduce unemployment. Economist Thomas Piketty succinctly sums up the major flaw in that argument:

In the labor law you find the same mixture of lack of preparation and cynicism. If unemployment hasn't stopped climbing since 2008, with an additional 1.5 million unemployed workers (and 2.1 million category A jobseekers in mid 2008, 2.8 million in mid 2012, 3.5 million in mid 2016) it's not because the [current] labor law has suddenly become more rigid. It's because France and the eurozone have provoked, through excessive austerity, an absurd slowdown of activity from 2011 to 2013, contrary to the U.S. and to the rest of the world, thereby transforming the financial crisis that came from the other side of the Atlantic into an interminable European recession.

In a recent discussion (video at 46 minutes), economist Yanis Varoufakis, who was Finance Minister of Greece until last July, recounts a conversation that he had with his German counterpart Wolfgang Schauble. It was at the height of the conflict between Greece and the European authorities last summer:

I had many interesting conversations with the Finance Minister of Germany, Dr. Wolfgang Schauble. At some point, when I showed him this ultimatum, and I said to him... "Would you sign this? Just, let's take off our hats as Finance Ministers for a moment. I've been in politics for five months. You've been in politics for 40 years. You keep barking in my ear that I should sign it. Stop telling me what to do. As human beings, you know that my people, now, are suffering a Great Depression. We have children at school that faint as a result of malnutrition. Can you just do me the favor and advise me on what to do? Don't tell me what to do. As somebody with 40 years, a Europeanist, somebody who comes from a democratic country, just Wolfgang to Yanis, not Finance Minister to Finance Minister."

And to his credit, he looked out of the window for a while. .. and he turned around and he said, "As a patriot I wouldn't." Of course the next question was, "so why are you forcing me to do it?" He said, "Don't you understand?! I did this in the Baltics, in Portugal, in Ireland, you know, we have discipline to look after. And I want to take the Troika to Paris."

The Troika has arrived.