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Sowing the seeds of revolution - By Kitty Miv, Editor

Kitty Miv, Editor
15 December, 2011

'Austerity'. Lots of it about, and no doubt more to come. The meaning of the word is being stretched, though. For older people, at any rate, it means fairly savage living conditions: perhaps you can buy bread, but there won't be butter to put on it, let alone jam. Soup kitchens in the Depression were a fair example of austerity. But that is not a good description of conditions in the European countries which are currently being subjected to 'austerity'.

In Greece, Portugal, Italy, France and the UK, all of which are avowedly undergoing austerity, it amounts to small percentage cuts in pay, recruitment or pensions for bureaucrats and other public employees, and small increases in taxes for private people. There are token strikes, demonstrations, changes in voting behaviour perhaps, a small amount of belt-tightening, but no significant changes for most people. Certainly nothing to compare with the privations undergone by the German people in the 1930s.

Most commentators on the Eurozone's dash for freedom from debt (doomed before it begins, of course) assume that there will have to be more of the A word. But it will just be another spoonful of the same, mildly unpleasant medicine; and because it is too little, too late, nothing will really change.

There is one community that is really suffering, though, and that is the unemployed. The numbers are scarifying, especially among the young: an entire generation is being taught that the model of enlightened capitalism we have all been brought up with just doesn't work. That is horrifying. Their conclusion is wrong, of course: it is the only model that will work, but the self-satisfied leaders of our rich (yes, rich) societies do not understand that they are sowing the seeds of revolution through their underwhelming and misconceived efforts to preserve the status quo with half-measures.

'Revolution' is another word which is changing its meaning. It used to mean barricades, executions, wholesale destruction and the replacement of a ruling class with another, newer model. Now, we are experimenting with a softer, more grown-up version. But the principle remains the same: regimes grow soft and self-indulgent, they become sclerotic, calcified, lignified, ossified, and they need to be shaken up. It is an aspect of human nature that won't go away.

I do not pretend to know what is going to happen in Europe, or when, or to which countries, but at least I think I can see what will constitute revolutionary change, and it doesn't consist in public sector cut-backs, more taxes, fiscal compacts, inter-Governmental treaties, or any of the nostrums currently being served up by the great and good of Europe. At a time when the overall economy of the region is going to go sideways (at best) for the foreseeable future, such measures will simply drive countries into a deflationary death spiral. But therein lies salvation, or rather revolution, because a point will come at which a population will no longer drink the medicine that is being prescribed, and it will choose to leave the doomed eurozone in order to make its own way in the world.

The banks will go bust (I know it's boring that I keep saying this, but it's really the only way, and anyway they can be sold to China or Dubai), many fat cats will be seriously hurt, but there will be a fresh start in which Keynes's animal spirits will have their way and the young will get their chance. Somewhere in there is a theory of economic cycles, as applied to countries: Kondratieff seems to have fallen out of fashion, but it still seems feasible that it's a good idea to shake the kaleidoscope every now and again to rejuvenate an economy, to redistribute wealth and opportunity.

There aren't too many recent examples: Argentina is one - a country that was top of the world in 1917, wrecked its economy with 50 years of oligarchic elitism, and now has another chance after its economic collapse early in the current century; Russia is another, post 1990, although it's hard to see the reality through the smoke of Kremlin cronyism, which is doing its best to throw away the benefits of the economic revolution that took place in the 1990s; South Korea is another, although with the advantage of starting from a low economic base, and no-one would recommend a destructive war as a price worth paying just in order to shake up a country's economy.

Luckily, there is no need for a war in today's Europe. Kitty's prescription for the sick men of Europe is simple: go bust now! You are going down anyway, it's just a matter of time. So save yourself the agony of another five twists of the austerity tourniquet, do it now and get first mover advantage. It's something you'll never regret.

Ciao, Kitty


About the Author

Kitty Miv, Editor

Kitty was born in Argentina in 1960 to a Scottish cattle rancher and his Argentine wife. Educated in Edinburgh and at Princeton, Kitty worked for the World Bank as an economist, where she met and married an emigre Iranian banker. During her time with the Bank, Kitty worked in a number of emerging markets, including a spell in the ex-USSR as a Transition Economies Team Leader. Kitty is now a consultant in Brussels and has free-lance writing relationships with a number of prominent economic publications. kitty@lowtax.net


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