From Al Jazeera: http://www.aljazeera.com/indepth/opinion/2013/05/201352623459882636.html
There is a striking contrast between how the eurozone and the United States are handling their financial crises.
Mark Weisbrot
26 May 2013
The eurozone recession is now the longest on record for the single currency area, according to official statistics released last week, as the economy shrank again in the first quarter of this year. A comparison with the US economy may shed some light on how such a profound economic failure can occur in high-income, highly-educated countries in the 21st century.
While the US economy is still weak and vulnerable, the record 12.1 percent unemployment in the eurozone is still a lot worse than our 7.5 percent here. The most victimised countries like Spain and Greece have unemployment of about 27 percent.
The contrast between the US and Europe is all the more striking because Europe has much stronger labour unions, social democratic parties, and a more developed welfare state. Yet the eurozone has implemented policies far to the right of the US government, causing needless suffering for millions more people. How does this happen? The answers have little to do with a “debt crisis” but everything to do with macroeconomic policy, ideology, and – perhaps most importantly – democracy. As such these questions are relevant not only to the populations of both of these economic superpowers, but to most of the world.
Let’s start with democracy: most of the eurozone countries have little to no control over the most important policies that the government can use to increase employment and income, including monetary, exchange rate, and increasingly, fiscal policy. They have ceded this control to the eurozone authorities – most importantly the European Central Bank (ECB). The decision makers for the more victimised countries – including Spain, Greece, Ireland, Portugal, and Italy – are now “the Troika”: the ECB, European Commission, and the International Monetary Fund (IMF). They have their own agenda, and their priority is not restoring employment or even bringing about a speedy economic recovery.
Before returning to that agenda, let’s contrast the economic decision makers of the eurozone with those of the United States. Our central bank, the Federal Reserve, is officially independent of the government. Like the ECB, it has often acted against the interests of the majority, favouring powerful financial interests – most recently in its enabling of the $8 trillion housing bubble that caused the Great Recession. But the Fed is still accountable in some ways. Fed Chair Ben Bernanke has to report regularly to Congress, and the Fed has some fear that Congress might reduce its autonomy if it were to ignore the public interest too flagrantly (they were not pleased about legislation approved by the US House last year that required, for the first time, an audit of the Fed’s books; it remains blocked in the Senate).
Continue reading at: http://www.aljazeera.com/indepth/opinion/2013/05/201352623459882636.html
