10.06.2013

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“Future of the Euro Zone Looks Pretty Dim” / Austerity Destroys Whole Generation in US, Europe / Problem is Jobs: “Public Has Less and Less Say”

“The future of the Euro zone looks pretty dim unless primarily Germany changes its stance”, says Noam Chomsky. Germany was forgiven its huge debt by European countries after World War II so it could grow its way out of the crisis and became the major industrial center of Europe. Now Germany is in the lead in trying to prevent similar policies. “Austerity is no way to get out of a crisis, it just makes it worse”. Even the International Monetary Fund has pulled back from it. Meanwhile the famous article of the Harvard economists Reinhart and Rogoff which was used as the intellectual foundation of the austerity programs turned out to be flawed. “Deficits do in fact provide and stimulate demand. (…) Overcoming deficit is not a problem. It´s a problem for the banks and therefore it´s the center of the political debate because of their political power.” But for the population polls show the problem is jobs. “The lack of jobs is destroying a whole generation with all kinds of consequences for the future. In Europe it is even worse. And it is also harming the economy. A huge amount of potential growth is being destroyed because we have to worry about the non-existent threat of inflation.” The public just has less and less say when it comes to neoliberal policies, social cuts and free trade. “It´s not irreversible and there is plenty of protests. It might crystallize into popular movements which will compel serious changes. But it´s a long way to go and Germany is in the center of it because of its power.”

Gäste: 

Noam Chomsky: MIT Linguist, US critic and activist, author of dozens of books about US foreign policy, state based capitalism and mass media e.g. "Manufacturing Consent", "Profit over People", "Hegemony or Survival" and "Occupy". Chomsky is official supporter of Kontext TV.

Transkript: 

David Goessmann: Welcome to Kontext TV. Our guest is today MIT-Linguist, US critic, dissident and activist Noam Chomsky. Chomsky is supporter of Kontext TV. Three years after the last interview with Kontext TV we again got the chance to talk to him.

Fabian Scheidler: Noam Chomsky has become world-famous with his research on a “universal grammar” on which all languages are based. Today he is seen as the father of modern linguistics. In the 60ies Chomsky opposed the US wars in Vietnam, Cambodia and Laos. Since then he has publish dozens of books about US foreign policy with emphasis on Latin America, South East Asia and the Middle East, about state based capitalism and the mass media.

David Goessmann: One of his most popular books is „Manufacturing Consent. The Political Economy of the Mass Media“, written in 1988, in which Chomsky and the political scientist Edward Herman developed a model on how propaganda works in modern and free societies. Other books of Chomsky are “Hegemony or Survival”, Profit over People”, “9-11” and “Occupy”.

Fabian Scheidler: At the age of 85 Chomsky keeps giving interviews, comments the politics of the day, is holding talks around the world and supports movements and activists. However, he almost never appears on US mainstream media. We sat together with Noam Chomsky in his office at the Massachusetts Institute of Technology in Cambridge.

David Goeßmann: Welcome to Kontext TV, Noam Chomsky.

Noam Chomsky: Thank you.

David Goessmann: I want to talk about the Euro crisis. Austerity measures have been applied to several countries like Greece, Portugal and Spain. The German government is in the lead of this policy to cut wages, to cut social security, to privatize state-owned companies. What is your assessment of this policy and what is the future of the Euro zone in your view?

Noam Chomsky: The future of the Euro zone looks pretty dim, unless primarily Germany changes its stance. Germany has also been in the lead trying to impose austerity on the peripheral countries: the south and Ireland. Which is kind of ironic if you look back at resent history. After the Second World War Germany had a huge debt. It was forgiven, that is how Germany was able to recover. Europe essentially forgave the debt. In 1953 the Federal Republic was practically collapsing and it appealed for a debt relief essentially from Europe. It was given considerable assistance at restructuring and cutting its debt. After that Germany was able to grow its way out of the crisis and became the major industrial centre of Europe. Now Germany is in the lead and trying to prevent similar policies in the countries that have pretty much harmed by the specific way in which the Eurozone developed, including by German banks. So the problem in the south is mostly a banking crisis. In Spain for example, the budget was in good shape in 2007 and the collapse was basically a banking scandal, the same in Ireland. And it´s a two way thing  - the banking scandal. It´s the Spanish and Irish banks but it’s also the lenders like the Bundesbank, the Deutsche Bank, and so on. So it´s a two-way affair and it is essentially a banking crisis, not a government crisis. And the consequences are just what you described in Germany. In fact Mario Draghi, head of the European Central Bank (ECB), stated it pretty frankly in an interview to The Wall Street Journal, he said, “the social contract is dead”. Well, that is the consequence of austerity. Just on pure economic grounds austerity is no way to get out of a crisis, it just makes it worse. You can see it the last few years, in fact the ECB has pulled back from it, the International Monetary Fund (IMF) has pulled back from it. You probably saw recently somehow hushed up scandal here about the famous Harvard economists Reinhart and Rogoff's article, which was used as the intellectual foundation of the austerity programmes and it turns out that they made some arithmetical errors and when you correct them it shows...

David Goessmann: A student corrected it.

Noam Chomsky: A student found it and a couple of faculty members joined in and published a paper about it. But the general reaction is well it´s still true that debt harms growth which it does in the long run. But as Keynes said, “in the long run we are all dead”.  It doesn´t in the short run. In fact it’s probably a good thing. It´s one of the ways to encourage demand. Deficit is a way to encourage demand at a time when nothing else is doing it. Like in the United States the banks and the corporations, the real perpetrators of the crisis  are bigger and richer than ever. They´ve so much cash they don´t know what to do with it. But they´re not investing and they´re not investing for a number of reasons: For one thing because there is not enough demand, so why bother; so who is going to... consumers can´t create the demand, they´re still struggling with the household debt that accumulated during the crisis created by the banks but... so it´s got to be the government. Deficits do in fact provide and stimulate demand. There are better ways but they do. And overcoming deficit is not a problem.  It´s a problem for the banks and therefore it´s the centre of the political debate because of their political power. But for the population - as polls show very clearly - there is a much more realistic picture: the problem is jobs. The lack of jobs is destroying a whole generation with all kinds of consequences for the future. In Europe it is even worse. And it is also harming the economy. A huge amount of potential growth is being destroyed because we have to worry about the non-existent threat of inflation. Because banks might not like that if it ever happens. So we have a sequester now in the United States but about the deficit, not about jobs. This is another indication of the fragmentation of democracy under the neoliberal programs which have been going on for some time. The public just has less and less say – they never had a lot of say – but now they have less and less say over policy. And it´s pretty well studied: In the United States about 70% of the population, the lower 70% on the income scale, essentially have no influence on policy. Nobody pays attention to them. Influence goes up as you move higher. At the very top you run the show pretty much as Adam Smith described a long time ago. But that is what we see happening before our eyes. It´s not irreversible and there is plenty of protests. It might crystallize into popular movements which will compel serious changes. But it´s a long way to go and Germany is in the centre of it because of its power.

David Goessmann: Obama also wants to cut social security like Medicare.

Noam Chomsky: Against overwhelming popular opposition, but that is true on a lot of things. Take a different issue: gun control. I mean 90% of the population wanted it and it was shut down by Congress. But yes, the standard line, elite line is: We have to cut benefits. They are not called entitlements, they are called benefits. The social security is not a fiscal problem. A small fiscal problem, can pretty easily be patched up over time. Health care is a problem. Medicare expenditure is going up and will harm the economy. But for a reason that you are not supposed to discuss. It´s because of a dysfunctional privatized system. The privatized system which is virtually unregulated and is highly dysfunctional. It has maybe twice the per capita costs of OECD countries and relatively poor outcomes. In fact you see it on the front pages every day except with very little comments. One of the elements of the so-called Obamacare was to encourage local organisations to provide aid for disabled adults. But it´s the United States, so it was handed over to private corporations and they are doing what every business tries to do: make money. It is a big scandal. There is all kind of people and what they say is, "It´s the people going in, it´s the people. The people which are perfectly well are going in and using the equipment" and so on. It´s these bad people. It´s not these bad people! It´s what happens when you put things in private hands. That´s their job, it´s not that they are bad people, either. The job of a CEO is to increase profits. If you think you can do it by ripping off the government so much the better. But until that is handled - and in fact there are pretty good studies – which are kind of showing that if we could simply get health care expenditures to the level of say European countries, not a utopian goal we would have no deficit problem. In fact we would probably have a surplus.

David Goessmann: It seems that free-trade negotiations between the United States and Europe could start by June this year. It would be the largest free-trade deal ever. In the US you already have NAFTA and several other free-trade agreements. There are also talks about of a US-Middle East free-trade area. The EU has recently signed free trade agreements with Peru and Colombia among others and pushes economic partnership agreements with countries of the African, Caribbean and also the Pacific Group of States. What is the strategy behind free-trade enforced by the United States and European countries?

Noam Chomsky: The first thing to say about it is that they are not free-trade agreements. You take a look at the rules of the agreements which are like the World Trade Organisation rules. They are highly protectionist. There are elements of liberalisation and there are elements of extreme protectionism. Like the extraordinary patent regime which never existed in the past. Some other rules don´t even have to do with trade but with privileges for investors. There is some liberalisation but you know tariffs among these countries are not a big issue. They are pretty slight, they don´t have much effect. So they are primarily investor rights agreements. And has all kind of effects like - you can see them. If you couldn’t figure them out in advance you can see them like austerity. So take the North American Free-Trade Agreement. One of the consequences which was obvious at once is that it was going to destroy Mexican agriculture. Mexican campesinos are quite efficient but are not going to be able to compete with highly subsidized US agro-business. So that means they will get crushed. Small business would be crushed because it can´t compete with US multinationals and the obvious consequence is that you are going to have people fleeing across the border. So now we have an immigration crisis. Well yes, it´s called an immigration crisis. I don´t think it is one. But how much of this has to do with the fact that we purposely and consciousely created a crisis in Mexico from which people can escape just by fleeing? In fact one person who understood this was Bill Clinton. When NAFTA was passed in 1994 he immediately started militarising the border. Ok, that made sense. We are creating a refugee flow, we better stop them. These are simply not free-trade agreements. So whatever, we can talk about them, but not in those terms.