What a splendid sight the last Smiling Dave’s post has turned out to be. Who can’t appreciate the sheer deliciousness of an anarchist recommending a country (Italy) stay on the Euro. That’s what we’re all about. Right after shilling for NATO and giving a thumbs up to the NWO, we are majorly into giving the positive sides of the Euro for screwed up countries! We also like to stick up for the gulag, nuclear arms races, and a well-armed police force to keep the proles in check.
The whole process of how Smiling Dave arrives at his radical conclusion is a sight to behold. He starts by positing Italy produces “little to nothing” or “almost nothing”. That’s funny because most years Italian manufacturing output is estimated as being the 6th largest in the world. So according to Smiling Dave there are at most just five countries in the world which produce anything worthy of note. All the others make even less stuff than Italy which already makes just about jack shit!
Ever heard of Fiat, Alfa Romeo, Lancia, Iveco, Aprilia, Ducati, Vespa, Beretta, Benelli, Zanussi, Ferrero, Lavazza, Parmalat, Diadora? You think you have, but actually they’re just figments of your damaged mind! Too many shrooms, bro. If they were real it would mean there is load of stuff that is Italian made, but from what we know from Smiling Dave that just isn’t possible.
Dave insightfully informs us a currency which could only be spent on Italian goods would turn into “useless garbage”. Since Italians don’t make anything anyone could use their currency would be worthless. You know, because who could have a use for a Lamborghini?
On the strength of this observation Smiling Dave concludes Italy is therefore better off staying on the Euro. If it were to go back to Lira, it would be shooting itself in the foot. Italians would not be able to import anything because they have nothing to offer in return. Because you know, what could the 8th economy in the world by exports have to export?
In truth it is some outlandish stuff, which means Dave must have committed some truly horrendous errors to get there. They are naivete, collectivism and pessimism. Each is unforgivable, naivete in someone handing out political recommendations, collectivism in a Rothbardian anarchist, and pessimism in a radical.
Smiling Dave diagnoses the Italian problem as “too much consumption, too little production”. What he means by that is that Italians who work productive jobs are too burdened by cohorts of other Italians who have non-productive jobs and only consume. So far so good, but he then goes on to assert devaluation or indeed any kind of “playing around with the money” can do nothing to affect this situation. This is a statement that flies in the face of the facts.
Let us consider how the wage rates of people working productive and parasitic jobs is determined. The wage rate of the producers is determined by the market. State or union regulations concerning rate of pay may only work to keep somebody out of work. Since it is not the state or the unions which create productive jobs, but the market, it is only the market which can dictate pay. The salary rates of parasites in public employ on the other hand are actually determined by the state. The jobs of public employees are actually created by the state, which in collaboration with powerful public employee unions, gets to determine their rate of pay.
It being the case the wages of the producers fluctuate on the market, and the loot of the parasites is fixed by the state what happens with each when the currency of payment looses value? The worker is paid according to his productivity so if what he is paid in has lost value, he will receive that much more of it. The bureaucrat on the other hand is paid however much his union has managed to negotiate from the government. If the value of the currency he is being paid in depreciates there is no automatic mechanism to restore his real wages. His loot post-devaluation will actually be less than used to be the case.
Far from being of no consequence devaluation can be one way to reduce the loot of a great deal of (poorly positioned) tax feeders and open the door to reducing the burden on producers. In fact historically speaking governments in fiscal crisis have found it far easier to devaluate and in this way renege on fiscal commitments across the board, rather than having to renegotiate with representatives of groups with a claim to a part of the loot. Notoriously inflation-prone pre-Euro Italy was a classical example of a state in a continuous cycle of making unsustainable promises and escaping these through devaluation.
So actually by refusing to even consider “playing with money” could unburden at least the state coffers, if not the producers outright, Smiling Dave makes himself blind to the time-tested remedy of fiscally irresponsible European states for the predicament Italy finds itself in now. Pre-Euro fiddling with money is exactly what southern EU states would be doing right now to keep excess tax-feeders at an arms length.
It is an ugly process and far from the stylish course of action I would prefer, which would be to smash the state and introduce anarchy, but it would certainly be preferable to the continued Euro-agony being proposed by Smiling Dave. In his own terms currency devaluation would mean one part of those with parasitic jobs would no longer be receiving “mountains of food”, but mere “molehills”, lessening the need of the state to go into further debt to pay them off .
Instead Italy is precluded from devaluing by its currency union with Germany and other northern EU states, and pays for the “mountains of food” through loans, the inflation from which is then (disproportionately) eaten by Germany and the other northern EU states. In a sense the association with Germany prevents Italy from remedying the problem on its own, while also providing it with a (less satisfactory) band aid for it.
Unfortunately Smiling Dave does not stop at giving spotty economic analysis which anyone may do. He goes further to speak up for the continued use of the currency of the EU mega-state, which on the contrary, I believe radical anarchists should refrain from. It is mind boggling to see a recommendation on a daily-political issue that is this far reaching being made on the basis of the most limited analysis, which takes into account nothing except for the tinniest aspect of the Euro situation — the fact it in some small way represents a subsidy of the EU north to the EU south
In fact the meaning of the Euro goes far beyond the subsidy in purchasing power to countries like Italy. Just about right now the crisis the Euro finds itself in is giving rise to some very scary political developments. A host of European governments are introducing measures of increased economic authoritarianism under the guise of “austerity” that is supposedly needed to “save the Euro”. Even worse there are designs to limit the national sovereignty of EU member states which find themselves in fiscal woes, again for the sake of the common currency. Attachment to the Euro is speeding up the process of making European national governments accountable, not to its citizens, bur rather to the EU.
That in mind it is extremely naive to be recommending continued attachment to the currency of the EU based on something as insignificant as a tiny German subsidy it represents. When it is the cause of why everything else is going to hell in a hand basket, who cares if the devil wants to gift you twenty bucks? Europeans should aim to get off the Euro, if just to deny the Europeanist elites the opportunity to use the Euro crisis to increase their stranglehold on them.
Yes, as Bagus explains there is an element to the Euro situation which translates into producers in the northern EU states to some degree subsidizing consumers in the southern EU states. Just as there is an element to the overall EU situation where EU labor regulations are causing labor in southern EU states to be unprofitable and sending jobs northwards, as Bagus also explains. However, the way Smiling Dave talks about this is in the most sensationalist, unrealistic and total terms imaginable.
Obviously Italy is a giant producer in its own right and the standard of living the Italians enjoy is for the greatest part a consequence of just that, and not of being subsidized by Germany. There is obvious proof of this in the fact it is far wealthier than a host of other countries which also use the Euro. If indeed Italians lived off nothing but German subsidies then how do they manage to live two or three times as well as the Portuguese, or the Slovenians, who also use the Euro and are presumably also being subsidized by the northern EU states?
If Smiling Dave visited Italy he would not find everyone chillin’ at the beach, he would find millions of workers in modern factories working expensive machinery to create products in demand on the market. His maximalist talk about how “almost nothing is made in Italy” is ridiculous. It makes it sound as if the entire Italian workforce was made up of people either on welfare, or with cushy public sector jobs living off checks being sent from Berlin. In reality the greatest part of the standard of living enjoyed by Italians is a consequence of how much they produce themselves. The Euro-German subsidy represents merely a tiny bonus to it all, the cherry on top so to say.
As such, it is first of all a bonus the Italians would not need, if their government could decrease the claim on the national wealth presented by public employees, for example by paying them off in devalued currency. They would especially not need it if they would escape EU labor regulations. Most importantly it is necessary to ask who consumes this cherry on top and where did Smiling Dave forget his methodological individualism?
It is certainly not the people who are robbed by the state and already consume less than they produce who consume the Euro-German subsidy. Instead it must be the tax-feeders who are already parasitic on Italian producers who get the first taste of the cherry on top as well. Do Italians in productive jobs benefit, even if just in the present, from their parasitic countrymen having more money to blow on their goods and services? This is difficult to answer. We may imagine a hairdresser who, because a part of her clientele has more money, may now charge 25€ for cutting hair, instead of the previous 20€. She is now better off. But how about a worker who now has to pay 5€ extra if he is to have his hair cut? He is worse off.
Problem is that the subsidy to Italy via the Euro does not actually create more physical goods and services. It merely distributes an even bigger number of “entitlement coupons” to Italian tax-feeders, making it even more difficult for Italian producers to compete with them as consumers. So while any economic benefit for Italian workers stemming from this is questionable, a societal downside is obvious. The parasites who already have more money than they earn, and already enjoy a place on the societal ladder far in excess of what they are worth to the market, get to rise still higher in comparison to the those Italians who produce for the market, but thanks to state looting have little to show for it.
What this means is that Smiling Dave would screw over the Italian producers for the sake of the Italian tax-feeders. Yes, we can appreciate that Italy staying with the Euro would benefit Italians in parasitic jobs. They get somewhat more “entitlement coupons” to place than would otherwise be the case. However, who foots the bill? For the time being this is the producer in Germany, however, the societal ill effects of the parasites having even more means and status are suffered by the Italian producers. Also if Germany absorbs the inflation of the loans though which Italy conjures up this cherry on top, it does not actually repay the loans themselves. Assuming this dynamic of ever greater loans must someday come to an end it follows sooner or later the Italian producers will be stuck with the bill for this bonus bonanza of their tax-feeders. Even if it can be shown they derive some small amount of net economic benefit from the Euro-German subsidy this will be nothing once they are hit with the bill. Smiling Dave is ready to mortgage the future of Italian producers so that the good times may roll for the time being, primarily for the Italian tax-feeders.
Meanwhile the fact Italian ties to the Euro are preventing the possibility of a devaluation are having great deal of adverse consequences for them. The country is sure to slide further into debt, which is going to be their problem, not of the tax feeders. With the state therefore sure to run considerable deficits for the foreseeable future the argument for lessening of the tax burden on the productive classes is that much less likely to be given political prominence. If devaluation even temporarily gave rise to a situation where the state came close to running budget surpluses, economic liberalization and decrease in the level of looting of the productive classes would have at least a theoretical chance at seeing the light of day — no such luck this way where proponents of high taxes on the producers can hide behind arguments of fiscal necessity.
We should also keep in mind the situation of the vast masses of people in the southern EU states like Italy, who are unemployed although they are in principle perfectly willing to work productive jobs. A very large portion of these are young people who have never yet held a job. In part the cause of such unemployment has been labor regulation, including a vast array of collective bargaining agreements that make it difficult for less experienced workers to underbid their better-skilled counterparts. Devaluation would aid them as well. In the same way devaluation would make assurances of the state to the state employees as regards their pay far less meaningful, it would also wreck havoc with the guarantees won by the unions from the industries. For example a guarantee every worker must command a pay of at least 1500€ becomes far less of an obstacle to first employment when that becomes 3 million Lira, but corresponds more closely to something like 1000€, which is likelier not to exceed the worth of an inexperienced worker to an employer.
Improving on the present conditions. Turning the tide of centralism and the loss of national sovereignty in the European Union. Reducing societal injustices. Defusing ticking debt-bombs. Creating the conditions where arguments for economic liberalism may carry the day. Reducing the number of the unemployed. These are some of the hopeful goals Smiling Dave would have Italians turn away from and for what? For the sake of the status quo and for the continuation of a bonanza for the least deserving Italians, that the best among Italians are one day going to have to foot the bill for.
In fact the gist of the message from Smiling Dave to Italians is downright insulting. He characterizes them as people who “produce almost nothing”, as little better than bums who waste their days away while letting themselves be supported by those hard-working Germans. And his recommendation for such Italians as he sees them? Stay that way! Not only does he explains Italians as welfare bums he seems to think that for the foreseeable future that is the most they can aspire to. Instead of giving encouragement to aim for something more than having their tax-feeders benefit from the Euro-German subsidy he shrugs his shoulders and recommends they try to ride it out for as long as it lasts. Such miserabilism!
We have established that for the Italy to continue on the Euro-course does not make good sense once you consider Italian producers are not the beneficiaries and/or take into account how devaluation could ease the fiscal burden on the state. Nonetheless even if the Euro-German subsidy represented a substantial free benefit to all productive and would-be productive Italians, why settle for that? Normally you would advise a person on welfare to try to get work and the self-worth that goes with it. You would not advise them that, since they are getting something for nothing, and since they are of no use at anything else, they may as well try to stay on the dole for as long as they can. Even in such a case, if he were right about everything else there would still not be right of Smiling Dave to assert Italy leaving the Euro would be “a big mistake”.
Why not recommend Italy exit the Euro, adopt the Lira and furthermore revert to the gold standard like the one it was on for fifty years since its founding in 1861 until 1914? Is that too hopeful for Smiling Dave? Too unoriginal? Because surely it would be an improvement on the status quo and sure to force the solution to a host of problems that country is plagued by. Is it a little unrealistic? It is, but if even Rothbardian anarchists of all people are likelier to raise the alarm about what a “big mistake” leaving the Euro will be for Italy, instead of proposing hopeful, radical alternatives they become even that much less realistic.