Why The European Union Is Doomed
by Charles Hugh Smith
he structural flaw at the heart of the E.U. dooms it and the euro to either dissolution or radical tranformation.
To understand the structural flaw which dooms the European Union, we need to start with the Union’s fundamental financial characteristics.
The European Union established a single currency and trading zone for the classical Capitalist benefits this offered: a reduction in the cost of conducting business between the member nations and a freer flow of capital and labor across borders.
This “liberalization” of trade and capital flows is often referred to as Neoliberal Capitalism: short-hand for opening markets and enabling free enterprise to take on tasks formerly reserved for government (the Central State) or State-sanctioned corporations.
The key feature borrowed from Classical Capitalism is that the risks of enterprise and the investing of capital are (supposedly) transferred from the State to the newly liberalized private sector. But this turns out to be a charade played out for propaganda purposes: when the expansion of credit and financialization ends (as it must) in the tears of asset bubbles deflating and massive losses, then the Central State absorbs all the losses which were supposedly private.
I define Neoliberal Capitalism much differently: markets are opened specifically to benefit the central State and global corporations, and risk is masked by financialization and then ultimately passed onto the taxpayers. The essence of Neoliberal Capitalism is: profits are privatized, losses are socialized, i.e. passed on to the taxpayers via bailouts, sweetheart loans, State guarantees, the monetization of private losses as newly issued public debt, etc.