Banker's Choice

So Greece has a new prime minister – Lucas Papademos – and Italy looks about to have a new one, too – Mario Monti. To which not just you and I but damn near every Italian and Greek responds, “Who?”

Neither Papademos nor Monti has ever held elective office, or even run for one. Neither has been a minister, sub-minister or even civil servant in one of their nation’s ministries. Neither has developed, or sought to develop, a public following from their careers as economic technicians, chiefly on the European supra-national level. Yet each is about to lead a major nation.

Papademos and Monti are something new under the sun: national leaders elected by the markets. Imposed, not as pro-consels by foreign occupiers, but by the European banking community, by the finance ministers of the Eurozone powers – chiefly, Germany and France. Each has an impressive resume and a good reputation with the centrist political and economic elites of his own nation, but there’s no reason why the person on the street of Rome or Athens should know who the hell they are.

But imagine if the U.S. couldn’t sell its Treasury notes (which has never been a problem, let’s be clear), and the IMF and Germany and China got together and said that Barack Obama, Joe Biden, the Cabinet and the Congress had to go. Imagine that they then designated as Obama’s successor, say, the guy who followed Tim Geithner as head of the New York Fed (I don’t even know who that is), or Robert Zoellick, the American who heads the World Bank. That’s essentially what just happened to Italy and Greece.

And the way this fits into democratic theory is – well, it doesn’t fit into democratic theory. It’s closer to a coup without tanks. To be sure, these are temporary coups until each nation holds new elections, but Papademos and Monti are not supposed to be mere caretakers until the real leaders arrive. To the contrary, they’re assuming power under instruction from the markets – the markets that have seen Italy’s financing costs rise and the value of stocks everywhere topple – to make sweeping cuts in services and substantial hikes in taxes, cuts so sweeping and hikes so substantial that no elected leader would dare make them. They’ve been instructed by the markets, in essence, to lower the living standards of their peoples.

Both Monti and Papademos look to be corporate liberal internationalists of the kind that in the U.S. end up in the Treasury Department. Papademos went to college and grad school at MIT and taught economics at Columbia from the mid-70s to the mid-80s. He even served as senior economist for the Federal Reserve Bank of Boston in 1980. Returning to Greece in 1985 to work as chief economist of the Bank of Greece, he rose to the post of the bank’s Governor; then served as Jean-Claude Trichet’s chief deputy at the European Central Bank from 2002 to 2010, returning again to Greece in 2010 to become an economic adviser to Prime Minister George Papandreou.

Monti went to college in Italy, but completed his graduate studies in economics at Yale, where he studied under James Tobin (which I suppose increases the chances that he supports a financial transaction tax). He was an economics professor and university administrator in Italy from 1970 through 1994, then was appointed to the European Commission, where he was handed various economic portfolios, including those on financial services and competition, in which capacity he initiated anti-monopoly proceedings against Microsoft and led the investigation that culminated in blocking the merger of General Electric and Honeywell. With Jacques Delors and Daniel Cohn-Bendit, he has supported an initiative to deepen the European Union, and he was the first chairman of Breugel, a Brussels-based EU-oriented think tank. His bio on the European Commission’s website listed him as an adviser to Goldman Sachs, and it’s downhill from there: A conspiracy theorist’s dream-come-true, Monti, according to Wikipedia, is also the European chairman of the Trilateral Commission and a member of the Bilderberg Group.

But there’s nothing conspiratorial about what is happening in plain view in Italy and Greece: Two economists have been imposed from on high to make changes to the Italian and Greek economies – really, to fundamental lifestyles of Italians and Greeks – that neither nation would be likely to make through the normal democratic processes. Some of the changes we’re likely about to see would probably come in any case, but surely not all: Democracies tend not vote themselves into austerity-driven penury. But Italy and Greece (the latter, need I note, the cradle of democracy) aren’t really looking like democracies just now, or even sovereign states.

So what do we call this? A coup? An occupation? The latest version of the 18th Brumaire? (That one’s for the Marxists.) If nothing else, it’s certainly a triumph of capitalism over democracy.

Comments

As much as I believe in Keynesian stimulus I also believe that there has to be a reckoning day for debt when borrowing gets out of control and there are no "adults" to come up with a rational path forward. There are worse things that could happen then having rational economists (I'll have to assume that's what these guys are) take the reins for a short term (especially when the alternative is a buffoon like Berlusconi).

This whole situation is more a testament to the dysfunctional political situation in so many parts of the world than the power of bankers or capitalists to seize control in a bloodless coup. And dysfunctional politics points straight back to we the electorate. Too much willful ignorance and belief in fantasy politics and not enough simple common sense and gumption to elect politicians who will really represent the interests of the majority of the citizens and work together to solve problems is where the trouble originates.

Perhaps a bit of Italian history will make President Napolitano's choice of Monti as a technocratic custodian of the nation more explicable. As Harold points out, the President was a leader of the old Communist Party, one of its most prestigious and he was also in effect an Italian Social Democrat when the party of that name was mired in the corruption that destroyed the larger Socialist Party (all in Cold War and immediate post Cold War days.) The Communisat Party shared rule with the Christian Democrats and others, although an American veto never allowed it into national government. The murder of Christian Democratic leader Aldo Moro was connected to his efforts to bring the Communists de jure as well as de facto into government. In any event, Monti is a long term friend of the President, who like many Communists was and is a firm supporter of an idea of a united Europe. Monti is also typical of the technocrats who themselves travelled freely back and forth across the Atlantic and across the Alps, but who always thought and sometimes said that nothing good would come of the exclusion of the Communists from government, since the party represented very positive cultural and social forces indispensable to the health of the nation and its democracy. The very sad and frequently disgusting spectacle presented by Berlusconi et al in the recent past suggests how right they were.

Perhaps a bit of Italian history will make President Napolitano's choice of Monti as a technocratic custodian of the nation more explicable. As Harold points out, the President was a leader of the old Communist Party, one of its most prestigious and he was also in effect an Italian Social Democrat when the party of that name was mired in the corruption that destroyed the larger Socialist Party (all in Cold War and immediate post Cold War days.) The Communisat Party shared rule with the Christian Democrats and others, although an American veto never allowed it into national government. The murder of Christian Democratic leader Aldo Moro was connected to his efforts to bring the Communists de jure as well as de facto into government. In any event, Monti is a long term friend of the President, who like many Communists was and is a firm supporter of an idea of a united Europe. Monti is also typical of the technocrats who themselves travelled freely back and forth across the Atlantic and across the Alps, but who always thought and sometimes said that nothing good would come of the exclusion of the Communists from government, since the party represented very positive cultural and social forces indispensable to the health of the nation and its democracy. The very sad and frequently disgusting spectacle presented by Berlusconi et al in the recent past suggests how right they were.

It is surprising, to say the least, that Harold Meyerson should echo exactly the argument of the Italian right wing, in particular the Northern League, which is intoning the mantra "we want elections" and "this is a diktat of Merkel and Sarkozy" in the hope of preserving their corrupt and ineffective rule. As an Italian with many contacts in the Italian left, I have yet to hear one person who does not utter a sigh of relief at Berlusconi's departure, albeit with persistent concern about the country's situation.
Meyerson blithely ignores: 1) The constitutional mandate of Italy's head of state, which allows President Napolitano to appoint an interim prime minister and makes him the only institutional actor authorized to call elections. 2) Recent Italian history, in which "technical" governments above the parties are formed to overcome a deep crisis (there were at least three that I can remember Giuliano Amato, Lamberto Dini, Carlo Azeglio Ciampi). 3) "Democracy" under Berlusconi's rule, which made ample use of patronage and straight out bribes to keep his party aligned and obtain extra votes, while allowing the prime minister to weasel out of his many indictments and enormously augment his media empire. 4) The consequences of calling for immediate elections, which is what Meyerson seems to favor, though unclearly. These elections might not only bring back the right wing government that let Greece sink into its economic crisis and keep the do-nothing right wing coalition in power in Italy; they would also precipitate the bankruptcy of Europe's third largest economy and dissolve the Eurozone. There is much more to add, about the responsibility of the Greek government for presenting accounts falsified with the help of Goldnan Sachs, and about the unconscionable fear of not being reelected that has kept Merkel from taking at the proper time the measures that would have stopped Greece from unraveling. But I just wanted to say that to call this "a coup without tanks" reflects great ignorance about European political structures and history. To attempt an analogy with the US further muddles the readers' understanding and it is not what we would expect from the author of "Foundering Fathers" (AP October 2011). The fact is that speculators (not bankers, who hold a lot of sovereign debt) as well as rating agencies attacked the countries with economic problems where the POLITICAL SITUATION seemed the most uncertain and the most incapable of getting the economy on the path to recovery. And that includes the United States.

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