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Gerald Epstein is codirector of the Political Economy Research Institute (PERI) and Professor of Economics. He received his Ph.D. in economics from Princeton University. He has published widely on a variety of progressive economic policy issues, especially in the areas of central banking and international finance, and is the editor or co-editor of six volumes.
PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I'm Paul Jay in Washington.In September 2011, at a time when the sovereign debt raiders, as some people call them, were focusing on Italy as their next target, the European Central Bank sent a letterâsupposed to be secret, but it was leaked. And in this letter it gave very direct instructions, you could say, to then prime minister Berlusconi about privatization, lowering pensions, changing hiring and firing, regulations and lawsâall things one would think should be the outcome of the political process within Italy. So what is this about banks telling countries how to govern themselves?Now joining us to talk about this process in Europe, and also how this shows up in the United States, is Gerry Epstein. Gerry is the codirector of the PERI institute in Amherst, Massachusetts, but today he joins us from New York. Thank you for joining us, Gerry.GERALD EPSTEIN, PERI CODIRECTOR, UMASS AMHERST ECONOMICS PROF.: Thanks for having me, Paul.JAY: So talk a bit about the significance of what happened last September, the memorandum, and what's happened since in terms of these quote-unquote "technocrats" becoming the leaders in Italy and Greece, and the role of the banks in this process.EPSTEIN: Yeah. We have this trend now where instead of democratically elected governments controlling these countries, so-called technocrats, the central bankers, are coming in, taking over as the prime ministers of governments in Italy, in Greece. In Italy we have Monti, and in Greece we have Papademos. These are supposed to be neutral arbiters of economic policy, but in fact are mostly doing the bidding of the large banks. And the other European countries, especially Germany, they want austerity. And what's amazing to me about is they're going way beyond any kind of narrow policies with respect to debt repayment, monetary policy. They're going into the deep core of social and economic policy in many of these countries. And that letter from the central bank, the European Central Bank, that you described went to the highly contested issues that have plagued Italy for many years about labor laws, privatization, and many others.JAY: Well, let's look at some of the things that they're demanding in this memorandum and more generally, putting pressure on these governments and others. And, of course, the United States, we see very similar things, where state governments have been elected through a supposed democratic processâI suppose people have a lot of questions about just how democratic is, for a lot of reasons, including how much money can get thrown at these elections nowâbut somewhat similar policies being demanded. So, first of all, there's this issue of privatizations, which seems to be one of the main objectives during this crisis, to get privatizations through. So what does that look like in Europe?EPSTEIN: Yeah. In Italy, the letter from the European Central Bank to the Berlusconi government said, you have to pursue privatization of public services. And this includes water, privatization of water. And, in fact, just months before, there had been a referendum in Italy about privatization of water, and the voters had rejected it. And now the so-called independent technocratic European Central Bank is coming in and telling them to overthrow what the people have decided and engage in privatization.Another important goal of these kinds of so-called technocratic policies is to gut labor protection laws. In Italy there are strong protections forâin terms of hiring and firing. And what they're trying to impose are these so-called labor flexibility, with the idea that this is going to generate more economic growth and more employment. But as David Howell from the New School for Social Research, Dean Baker, and others have shown, labor flexibility does not lead to more employment and more economic growth; it just leads to lower wages and higher profits.JAY: The other thing that seems to be very much in target or focused on is pensions in all countries, the idea, I guess, of lowering pension age and qualifications. Why is that such a big issue in Europe?EPSTEIN: Well, it's such a big issue in Europe because that'sâfor two reasons. One is it's a big liability of the government, and so there is a bigâa high degree of budget impact on that. But the second is trying to undermine the power of labor and forcing workers into the hands of the banks. So if you reduce public pensions, not only do you make it so that workers have to take any job they can get to support themselves and work longer, but it also gives more room for private pension plans. And as we know from the debate over privatizing Social Security here in the United States, that's been one of the long-term goals of finance. Indeed, the general push of all of these policies is to gut the welfare state as much as policy and return all of these kinds of protections to profit-making opportunities for banks and other private companies.JAY: Is part of what's happening hereâif you look at sort of the underlying economic forces at play here, I mean, one part of it isâand we've talked about this on The Real News quite a bitâthe willingness and desire of various elites and financial elites to take advantage of the crisis to undo social policy, New Deal type things in the U.S., welfare safety net in Europe, and all that, and take advantage of sort of the weaker hand of labor and people during this crisis is one thing. But is there also another part of this, which is there's just so much capital with nowhere to go, that because of this unequal distribution of wealth and income, this massive amount of capital in very few hands, and the real economy not a great place to invest in, so what you need to do is pick apart what'sâthere is of the public sector as a place for this capital to go to? Is that part of what's going on here?EPSTEIN: Yeah, I think that's a goodâI think that's an important aspect. They're trying to destroy all of the publicly provided markets to find new markets in, particularly, a period of slow growth. And in a particular a period when they're actually pushing austerity, the size of the overall pie isn't going to grow much, so they have to chip away at previously protected parts of it.Part of what is so evil about this whole approach is the transformation, the distortion of language that is part of it, the use of the term technocrat to hide the fact that Trichet, that Monti, Draghi, all of these people have very, very close ties to the big banks. Most of them worked at one time or another for Goldman Sachs or other big financial firms. We have the same kind of thing, of course, in the United States, where we had Larry Summers, who works for the financial sector and makes millions of dollars doing so, being put forward as a quote-unquote "technocrat". We have the Federal Reserve that has engaged, as you know, in all kinds of backdoor bailouts of the financial sector again seen as sort of a technocratic solution, but we see the revolving door between the Federal Reserve and the private financial sector, using the term fiscal consolidation for gutting public services and generating unemployment. All of this is Orwellian language, which is meant to obscure what is really going on, which is the takeover of democratic control, which, as you said, is already undermined by money, and putting it firmly in the hands of the financial sector.JAY: Yeah. I love this term, technocrat, because it gives this sense that there's this objective problem with an objective set of policies, and the whole society needs to take its medicine, but politicians are too vulnerable to public opinion, so you need some technocrats that are just going to pragmatically do what needs to be done, as if all of this is above interest and has nothing to do with the financial sector. I mean, you're right. It's pure Orwell.EPSTEIN: And in The Financial Times, there was an article recently talking about the profile of Papademos, the primeâthe technocratic prime minister there, saying that he was heading up a caretaker government, you know, as if the Greek people are a bunch of infants and they have toâwe have to wait till they can grow up and exercise their democratic rights.Part of the frustrating thing is that these kinds of elite pushes to control these democratic systems are possible because the left is so divided in the European countries, and divided here in the United States as well, of course. Part of the left in Italy, for example, didn't protest when this letter came out, because they were so focused on just trying to get rid of Berlusconi, and they've accepted Monti as a prime minister because they were just so happy to get rid of Berlusconi. So I think there's a great need for the left forces in all of our countries to really unite to oppose these kinds of policies. We have to break this whole lock-hold of anti-democratic structures that have been built up by the elites under neoliberal policies over the last 20 years, so that once we have more democratic elections and vision, we actually have the ability to implement them.JAY: So I guess at the moment the issue is if people want to take this up, they need to hit the streets.EPSTEIN: Not a bad idea.JAY: Thanks for joining us, Gerry.EPSTEIN: Thank you.JAY: Thank you for joining us on The Real News Network.
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