Mitterrand’s turn to austerity was an ideological choice not an inevitability

As background research to one of my book projects I have been reading a recent biography of François Mitterrand by Philip Short. Its title “Mitterand: A Study in Ambiguity” points to the capacity of Mitterand himself to blow with the wind but only when it suited his sense of personal ambition. Hiding behind his statesmanship was a man with “infinite shades of deviousness, an aesthete and intellectual, a sensualist, a crook”. The story of Mitterrand and his famous turn to austerity in March 1983 is very important to understand because it is used by progressives to justify their ‘austerity-lite’ stances with respect to economic policy. The New Labour politicians that are attacking Jeremy Corbyn’s policy proposals fit into this camp. The ‘left’ narrative is that the demise of Keynesian policy options was inevitable in the face of globalisation of capital and the growing importance of Transnational Corporations (TNCs). But, my argument is that there was nothing inevitable at all about Mitterrand’s poorly contrived shift into austerity. The progressives who advocate the inevitability thesis conflate the development of the TNCs with the emerging dominance of the neo-liberal ideology (which is concoction from economists intent on pushing the textbook competitive free market model with minimal state intervention). The development of the TNCs didn’t undermine the capacity of currency-issuing nation states. That has been accomplished by the imposition of the neo-liberal ideology and is reversible if the politics can be won. That is what I see as Jeremy Corbyn’s challenge – to win the politics. There is plenty of strong economic argument to help him do that.

Philip Short takes us on an interesting historical journey beginning with Mitterand’s role as a right-wing functionary in the Vichy government enamoured by the collaborating traitor Marshal Pétain.

He subsequently lied when it was discovered he had been awarded the – Ordre de la francisque – which was the decoration awared by the Vichy state to recognise Pétain’s highest regard for individual service.

There is a lot of controversy about this but we get the view that Mitterand was always willing to curry favour with whosoever would provide him with personal advantage.

He later fell out with the regime and operated within the resistance for a time before escaping to London.

We trace Mitterand’s conservative years in the 1950s as part of the Fourth Republic. He was appointed Interior Minister and the hotbed issues were the breakdown of order in the French African colonies and the war of independence in Algeria.

He then became Minister of Justice (1956-57) and oversaw oppressive interventions by the French in Algeria – the imposition of martial law and the execution of 45 Algerian freedom fighters.

By the time of the Fifth Republic, his political ambitions saw him to stand up against Charles de Gaulle and this required him to adopt a ‘leftist’ stance as a convenient vehicle rather than a heartfelt commitment.

This proved to be a masterful move and in 1971 he became the leader of the Parti socialiste (PS) which joined an alliance with the Communists, who were still a strong political force in French politics.

But still, the conservatives held onto power with Valéry Giscard d’Estaing defeating Mitterand in the 1974 Presidential election. This was an important victory and swung the balance of power within the French ministries towards the pro-German, pro-market Finance Ministry.

In the traditional struggle between the French policy makers in the Planning Ministry and the technocrats in the Ministry of Finance (who were more amenable to the German position on integration and economic management), Giscard d’Estaing was in the latter camp.

The new President swallowed the growing Monetarist claims that free markets would lead to stability in global markets and increase wealth for all.

While initially sharing power with the Gaullist Prime Minister Jacques Chirac, this proved untenable and Chirac quit in 1976 in order to rebuild the Gaullist power base in French politics and position himself for a tilt at the Presidency at the next election.

When Giscard d’Estaing appointed Raymond Barre as Chirac’s successor in 1976, he proclaimed him to be the ‘meilleur économiste de France’ (best economist in France).

Barre was also appointed as Minister of Economy and Finance, a position he held until 1978.

The pair promoted a powerful anti Gaullist position with respect to domestic economic policy, reflecting their neo-liberal views, and moved the French perspective on ‘Europe’ closer towards the German ‘economists’ viewpoint.

This period is important in understanding Mitterand’s later role.

Barre presented the ‘Declaration of the Government’, which outlined the new policy plan to the National Assembly on 5 October 1976. The rhetoric and objectives were in stark contrast to the ‘Planification’ associated with the French Planning Office and ‘la tradition républicaine’ that had dominated the Chirac era.

Gone was the former Keynesian emphasis. Barre’s linguistic content and flourish were consistent with what we now hear from politicians in today’s neo-liberal era.

The ‘Barre Plan’, introduced in 1976 and consolidated in 1977, involved a combination of tax increases on fuel, tobacco and alcohol, wage freezes to fight inflation, fiscal austerity, attacks on trade unions and industrial restructuring, particularly in the steel industry.

Barre was the first national leader to proclaim that ‘the fight against inflation is now a prerequisite for national ambitions’.

He believed in maintaining a strong currency through the harsh suppression of domestic costs. The focus shifted from regarding the fiscal balance as a reflection of the pursuit of functional ends, such as a strong domestic economy with low unemployment, to one where the balance became an objective in its own right and deficits were vilified.

Barre claimed that harsh fiscal austerity was necessary and that the economy would emerge stronger, with lower unemployment. The ‘bitter pill now, better future health’ message he preached is strikingly similar to the contemporary narratives heard throughout Europe.

Barre was very unpopular by the end of the 1970s, especially among the workers who were looking for a new political saviour to get the nation out of the neo-liberal miasma.

Barre’s problems extended beyond his nasty manner. ‘Barrisme’ (Barre’s policy regime) was a total failure. The economy deteriorated just as his Keynesian opponents had predicted. Economic growth came in well under the forecasts.

The unemployment rate, which in 1976 was just over 4 per cent, rose to 5.2 per cent in 1978, and by the end of his Prime Ministership it had risen to 7.4 per cent. Further, inflation was not reduced substantially and the currency continued to depreciate.

Not much has changed has it – there is no such thing as growth-friendly austerity.

The scene was set for a triumphant ‘leftist’ return to power in France and Mitterrand was successful in the 1981 Presidential election and became the first Socialist president of the Fifth Republic.

His government immediately set about doing what a sovereign government should do: use fiscal and monetary policy to expand employment, reduce unemployment and expand the social wage.

His electoral manifesto was the – 110 Propositions pour la France – which espoused a series of Keynesian policy measures including large-scale public works, expansion of social housing and other community infrastructure and facilities.

It proposed to fund research and develop innovative ways to fund small and medium businesses that struggled to gain working capital through conventional means.

It proposed to create 150,000 jobs in the public sector as a vehicle for improving health services, education, the postal service and the efficiency of government.

It proposed the nationalisation of nine key industrial groups (a sop to the Communist allies).

It proposed to reduce working hours to 35 hours per week and to impose a solidarity tax on wealth to reduce inequality. Income support payments would also be increased.

Jeremy Corbyn’s current policy position would not look all that different to the 100 Propositions. It was classic social democratic positioning and the French people loved it.

But the French were still intent on remaining in the European Monetary System (EMS). They wanted everything: political popularity associated with the lower unemployment and improved living conditions, a straitjacket on perceived German pretensions to European power, and continued German subsidies to the Common Agricultural Policy (CAP).

On the one hand, domestic policy sovereignty was crucial if it was to lower unemployment and this predicated against participating in the EMS.

On the other hand, the desire to undermine German influence and to find a way to subsidise their farmers under the CAP forced them to engage in the European dialogue. They were caught betwixt!

By the third currency realignment in March 1983, the French were at the crossroads and the incompatibility of these competing ambitions was obvious.

At that point, France had a choice. It could retain its policy sovereignty and pursue its legitimate domestic objectives by floating the franc or remain within the EMS and subjugate its domestic policy freedom to the dictates of the Bundesbank.

Unfortunately, for the French and for Europe in general, they chose the neo-liberal path, however culturally alien this was to them

History tells us that the French government fell lock step into the increasingly dominant Monetarist policy approach that involved using rising unemployment as a policy tool to discipline the inflation process.

That political reality was too stark for the public to accept and necessitated a smokescreen being erected to disassociate the rising unemployment from macroeconomic policy choices.

The rising unemployment was reconstructed by the political and bureaucratic spin doctors as a ‘structural’ problem reflecting a failure of individuals to be self reliant and assiduous in job search and skill development. A bevy of securely employed and highly paid economists pumped out a massive number of ‘research’ papers, which served to give authority and legitimacy to this ideologically tainted and empirically bereft view.

Most of this ‘authority’ lacked credibility, but then mainstream economics has never really been concerned with its theoretical inconsistencies or lack of empirical traction.

The shift in policy in March 1983, the so-called ‘tournant de la rigueur’ (turn to austerity), took France back to the ‘fight inflation first’ policies of Giscard d’Estaing in the late 1970s and ended the few years of social advance in France.

The shift in language, from ‘d’austérité’ (as coined by Raymond Barre) to the softer ‘la rigeur’ was just window dressing.

The socialists were abandoning their principles to become part of the neo-liberal political convergence that captured social democratic parties in most advanced nations during this period.

The sudden shift in policy in March 1983 should also be seen in the context of the longstanding intellectual battle between the planners and the Finance Ministry economists as to the pros and cons of the free market and the growing obsession among economists in the Banque de France with the primacy of price stability in economic policy making.

The tensions were there before March 1983 and each time that France was forced to devalue (October 1981 and June 1982), the Banque de France demanded fiscal policy cutbacks.

In 1983, Jacques Delors, as the Economics, Finance, and Budget Minister (1983 to 1984), strengthened the neo-liberal program that Barre had begun.

The reduction in domestic inflation that resulted from the ‘scorched earth’ approach was celebrated as the first serious sign towards a convergence reality, while the sharp rises in unemployment were brushed under the carpet and forgotten.

Various bureaucrats, supported by free market orientated academics worked overtime to convince everyone that the unemployment was not a result of a lack of jobs created by excessively restrictive fiscal and monetary policy, but rather a sign that people were not searching for work hard enough and were lulled into a welfare dependent lassitude.

The war on the victims of this folly in macroeconomic policy gathered pace through the 1980s and culminated in the 1994 release of the OECD Jobs Study, which became the bible for those intent on ignoring the fact that the unemployed cannot search for jobs that are not there.

There was also a distinct shift in attitudes among the socialists towards Europe from March 1983. For example, the ultimately tragic French socialist politician Pierre Bérégovoy wanted France to leave the EMS when he was Minister for Social Affairs in 1981.

By the time he became the Minister of the Economy and Finance in 1984 he was a champion of austerity and a strong French franc, and even more assertive about these matters than Delors.

On 16 May 1983, the European Council extended a large bailout to France to stabilise the franc on the condition that it tighten fiscal policy. The French had agreed to limiting the fiscal deficit to 3 per cent of GDP in 1983 and 1984, restraining social security and unemployment insurance payments and cutting the capacity of state owned enterprises to borrow.

Further, the Banque de France was required to reduce the money growth target to create a marked reduction in the rate of domestic credit expansion.

The decision was brazen. For being compliant and abandoning its ‘Keynesian’ desires the French government was given some short-term funds to bolster the exchange rate. The tone of the discussion and the wording in the official resolution were akin to the paternalistic statements issued by IMF when it extended harshly conditional loans to struggling nations, which undermined the governments’ capacities to advance the well-being of their citizens.

The result was also similar to the experiences of the poorest nations who have been given these conditional IMF loans. France’s output gap (the difference between actual output and the maximum potential output) nearly trebled between 1982 and 1985 as economic growth, household consumption and private investment slumped and more than a half million workers joined the jobless queues over the three year period.

The official unemployment rate rose from 7.4 per cent in 1982 to 10.2 per cent in 1985 and continued to increase after that. Not surprisingly, the saving ratio (household saving out of disposable income) fell from 16.4 per cent in 1982 to 13.5 per cent in 1985 as a result of the failing economic growth and rising unemployment undermining household incomes.

Yet, Mitterrand is still held out as the “most successful left-wing leader of any of the three leading western European countries (France, Britain and Germany), measured by longevity in power and arguably also by electoral dominance” (Source).

Why is all this important?

The ‘tournant de la rigueur’ that Mitterrand took in 1983 is held out by left-wing intellectuals as an inevitable response to increased globalisation and the end of the autonomy of the nation state in economic terms.

Mitterrand’s later ‘partnership’ with German Chancellor Helmut Kohl in forging broader European integration was the driving force in the subsequent introduction of the Maastricht treaty. Jacques Delors, Mitterrand’s austerity hatchet man, assumed a major role in the process that created the disastrous Eurozone.

There are two things that the ‘left’ repeatedly invoke and they both involve Mitterrand, in one way or another. First, that globalisation and the internationalisation of finance ended the era of nation states and their capacity to pursue policies that were not in accord with the profit ambitions of global finance.

The claim is that if a government tries to pursue full employment and redistributive policies then the financial markets will punish such a government through so-called ‘capital flight’ which would cause the currency to depreciate and the share markets to collapse.

The result would be economic crisis.

The narrative then claims that Mitterrand had no option but to abandon the Keynesian Social Democratic policies encapsulated in the 110 Propositions.

To the ‘left’, Mitterrand thus represents a pragmatist who was cogniscant of the international capitalist forces he was up against and aware enough to be flexible to do the best for France.

The alternative view (which I hold) is that Mitterrand was never a champion of the left. He just used that platform to achieve his presidential ambitions and the 110 Propositions were just a political vehicle to demonstrate a start departure from the deeply unpopular policies that Barre had pursued in the late 1970s.

He is not a role model for the left. He could have taken quite different decisions – the first of which would have been to abandon the fixed exchange rate policies and to give the French rural lobby a reality check.

Far from being helpless against the power of international capital, a sovereign, currency-issuing state like France at the time still held all the cards.

The ‘helpless nation state’ claim is rehearsed in another book that I have read recently by Noreena Hertz (The Silent Takeover: Global Capitalism and the Death of Democracy, published in 2001).

In her article in The Observer (April 8, 2001) – Why we must stay silent no longer – Hertz argues that:

Thanks to the steady withdrawal of the state over the past 20 years from the public sphere, it is corporations, not governments, that increasingly define the public realm …

She discusses the attempt by the then German Finance Minister Oskar Lafontaine to “to raise the tax burden on German firms”. The response of the firms was that “If the investment position is no longer attractive, we will examine every possibility of switching our investments abroad”.

In addition to relocating abroad, “other companies threatened to stop buying government bonds and investing in the German economy”.

The result is that governments have bowed to these threats and:

This is the world of the Silent Takeover, a world in which governments can no longer be relied on to protect the people’s interests. Blinded by the allure of the market, they now put corporate interests first.

So-called ‘left’ politicians have hence been cowed by the ‘power’ of global capital and have steadily shifted towards supporting austerity and the abandonment of the state as the vehicle for full employment.

To preserve some semblance of their attachment to the past they adopt ‘austerity-lite’ positions which are smothered in statements about fairness and reducing inequality but they essentially support policy structures that undermine both fairness and increase inequality as well as leaving economies mired in high unemployment and underemployment.

The second ‘belief’ that the ‘left’ adopted was that large blocks of states (that is, Europe) could have the capacity to counter some of the worst vicissitudes of globalisation.

So Europe as a political force is much stronger than France as a nation state and can introduce policies that impact on all nations which means that capital flight has reduced scope to create damage.

It is this view that you encounter when talking with leftists who are pro-Europe. They also conflate the retention of the euro with this belief in the advantages of a united Europe.

Mitterrand was a master at cultivating this leftist adulation of an integrated Europe – as a symbol of sophistication and modernity.

There was an article in the Jacobin Magazine (August 19, 2015) – The Many Lives of François Mitterrand – which attempts to make sense of the austerity shift that occurred under François Mitterrand.

The article considers the behaviour of French President François Hollande in the recent Greek disaster constitutes “just how rotten the carcass of European social democracy has become”. His government’s support for the Troika “in the evisceration of Greek democracy was hardly unique on the European center-left”.

This is a tale of the demise of Social Democracy.

The article considers that:

Thirty-five years ago, a previous PS-led government faced a situation strikingly similar to that which confronted Syriza after its election this January.

That the party of Hollande and Valls could once have represented anything resembling Greece’s party of the radical left might seem bizarre to us today. But in 1981, when PS leader François Mitterrand swept into office as the first president from the Left in the history of the Fifth Republic, the hopes he inspired were similar to those generated by Syriza after its election in late January.

That is the hypothesis that sets up the discussion but like all attempts by the left to compare the plight of Greece or any Eurozone nation succumbing to the austerity imposed by the Recession Cult that the Troika represents it fails at the first step.

As noted above, Mitterrand’s government was caught betwixt two mutually inconsistent policy ambitions. They wanted to undo the damage that the Barre Plan had inflicted on the French economy and society but at the same time they wanted to stay in the fixed exchange rate system that was dominated by the German mark.

France was always going to face downward pressure on its exchange rate while it tried to maintain the currency peg with the mark. Any domestic policies that sought to expand employment and increase domestic spending were always going to come up against the Current Account constraint while the central bank was responsible for managing the fixed peg.

With rising imports and a widening external deficit, especially in the context of the mercantilist policies of Germany, central bank policy was biased towards higher than preferred interest rates and domestic recession.

That was the problem that plagued all the members of the ERM and is why Britain, wisely, bailed out after Black Wednesday – which occurred in September 16, 1992 when the Chancellor Norman Lamont was confronted with an unmanageable pressure on the pound, and wisely restored his own power by leaving the ERM.

Britain could then escape the anti-inflationary bias that the German Bundesbank imposed on the currency block and pursue domestic policies.

In the same way, the solution for Mitterrand in 1983 was not to abandon full employment policies but to rid the nation of the external constraint imposed on it by the exchange rate arrangement.

It would have meant a struggle with the rural lobby as the CAP would have become difficult to manage much less sustain but the French people would have been much better off than they have subsequently become.

Syriza did not have that option – unless it was prepared to exit the Eurozone, a much larger shift in policy with much wider impacts than a meagre float of the French franc.

This is not to say that Syriza was in an impossible situation. It would have been better off leading the nation out of the destructive Eurozone and restoring its own currency sovereignty and then floating it on international markets.

So while the European left hark back to Mitterrand’s decision to impose austerity as an inevitability in the face of the onslaught of transnational capital, the real problem is that they fail to fully understand the capacities that a currency-issuing government posseses.

There is no doubt that if the French had have abandoned membership of the EMS as Britain did in September 1992, it would have been able to implement a substantial proportion of the 100 Propositions.

The ‘left’ seem to have formed the view that global finance rules and the nation state is dead. There is no doubt that the development of transnational corporations, which preceded the ideological shift towards neo-liberalism as the free market economists re-emerged from the slime, posed new challenges for sovereign governments.

But short of the TNCs equipping armies to invade nations, advanced governments always had the policy tools and the legal frameworks to discipline the TNCs.

There is thus a difference between globalisation (by which I mean the growth of TNCs and international supply chains) and the neo-liberal ideology (by which I mean the dominance of free market economics, the demonisation of government intervention, the demands to eliminate the welfare state and the widespread deregulation of financial and labour markets).

Those two developments are separable and distinct although the latter certainly reinforces the threats imposed on nation states by the former.

My view is that the ‘left’ has conflated the two developments and consider globalisation equals the demise of the nation state. It hasn’t. The neo-liberal ideology is serving that function and that is a matter of choice.

Democracies can choose whether to undermine the nation state – by, for example, signing up to these so-called ‘free trade agreements’ and creating tax havens for TNCs and deregulating labour markets to allow the TNCs to increase their profit rates at the expense of the local population.

There is nothing inevitable about that at all.

This argument also has relevance to the progressive calls for Tobin taxes, or Robin Hood taxes or a global financial tax (take your pick).

At the height of the meltdown in 2009, Gordon Brown aka “Mr Light Touch regulation”, tried to save himself from ignomy by calling for such a tax.

It is a popular policy option espoused by progressives everywhere but is equally deeply flawed. Please read my blog – A global financial tax? – for more discussion on this point.

First, it assumes the government needs revenue in order to spend, which we all know is false.

Second, it begs the question: Why do we want to allow these destabilising financial flows anyway? If they are not facilitating the production and movement of real goods and services what public purpose do they serve?

It is clear they have made a small number of people fabulously wealthy. It is also clear that they have damaged the prospects for disadvantaged workers in many less developed countries because governments have promoted a neo-liberal ideology at the same time the TNCs were becoming more important.

More obvious to all of us now, when the system comes unstuck through the complexity of these transactions and the impossibility of correctly pricing risk, the real economies across the globe suffer. The consequences have been devastating in terms of lost employment and income and lost wealth.

So I don’t see any public purpose being served by allowing these trades to occur even if the imposition of the Tobin Tax (or something like it) might deter some of the volatility in exchange rates.

The solution is that governments should stop signing ‘free trade’ deals and instead should sign an agreement which would make all financial transactions that cannot be shown to facilitate trade in real good and services illegal. Simple as that. Speculative attacks on a nation’s currency would be judged in the same way as an armed invasion of the country – illegal.

This would smooth out the volatility in currencies and allow fiscal policy to pursue full employment and price stability without the destabilising external sector transactions.

A single nation could also take unilateral action in this regard.

Take the example of Argentina as a guide. When it defaulted on its international debt obligations, the threats were thick and fast that it would be declared a pariah by the so-called investment markets and starved of global funds.

It didn’t take those threats seriously and instead embarked on a program of domestic expansion and within a few years it was fighting an appreciating currency. Why? Because international capital was flooding back in to take advantage of the profit opportunities available in a growing economy.

Same old. International finance does not have an ideology even though the ‘left’ assumes it does. The only motivation is profit and a semblance of certainty.

The Argentinean example also showed that the notion of capital flight is somewhat overrated. The ‘hot money’ shifts but if it is invested in real productive capital (plant, equipment, buildings etc) it cannot shift. The people then have options if the investor wants to bail out.

Avi Lewis and Naomi Klein’s 2004 movie – The Take – demonstrated that the workers can successfully take back productive capital and control it to their own benefit.

The ‘left’ should thus abandon their eulogisation of Mitterrand and understand his turn to austerity and neo-liberalism was a choice rather than an inevitability.

The Jacobian article cited above claimed that “the Mitterrand experience reflects the radicalization inside European social democracy during the 1970s” but also demonstrated the “limits of that radicalization”.

The author claims that far from being a radical plan to impose socialism on France, Mitterand’s 110 Propositions represented:

… a Keynesian economic program, not a socialist challenge to the prerogatives of capital. Yet in implementing that program, Mitterrand ran up against the limits of what European capitalism would tolerate. As a result, his government soon faced a dilemma – whether to proceed with its initial economic agenda, in the face of growing difficulties and entrenched hostility from business interests, or abandon its program of Keynesian reflation.

At least, the author acknowledges that the difficulties “were exacerbated by France’s membership in the … EMS … By tying the French franc to the German Deutschmark, the EMS restricted the government’s ability to adjust monetary policy to meet the country’s macroeconomic needs.”

By transforming the PS into “an agent of the market”, Mitterand ignored the past history – whenever governments used fiscal deficits to stimulate the economy, economic activity improved and employment growth strengthened.

The problem was that the growth came up against the external constraint which was severe due to the imbalance in exporting strength between Germany and the rest of the European nations.

That was the problem.

Further, when Mitterrand came to power, the US was running a very restrictive monetary policy (high interest rates – the Volcker Shock) which undermined the export markets of the European nations.

But there was still mass unemployment in France and plenty of scope to bring those idle resources back into productive, income-earning use had the government persisted with its 110 Propositions.

The additional problem was that Mitterrand’s regime became dominated by the growing Monetarist/neo-liberal ideology that held out the panacea was to deregulate, cut fiscal deficits and impose the anti-inflation policies of the Bundesbank.

So the turn to austerity really only demonstrated how a politician who always had “one foot in every camp” sold out the principles of his party to retain power rather than resist the growing dominance of the neo-liberal ideology and leave the EMS.

Membership of the EMS forced the nations to heel to the Bundesbank oppression. The Deutschmark dominated and no member state could break out with its own domestic spending plans without risking a major currency problem.

Mitterrand was seduced by his “Finance Minister (and future European Commissioner) Jacques Delors to adopt “strong franc” policy at the expense of rising unemployment. It suited the neo-liberal ideologues to weaken the state.

But it was a choice not something that was unavoidable.

There is a lot more to write about but today I am done.


My research into this question is on-going and I will write more when I have something further to say. The whole story will be revealed sometime in the future when I publish the entirety in book form.

The discussion has immense relevance for the current British Labour leadership struggle and the different positions taken by candidates and their supporters.

The position taken by Jeremy Corbyn challenges the ‘left’ view that the demise of Keynesian policy options was inevitable in the face of globalisation of capital.

I believe he correctly understands the difference between the development of the TNCs and how this has opened economies to increased trade flows etc and the emerging dominance of the neo-liberal ideology (which is concoction from economists intent on pushing the textbook competitive free market model with minimal state intervention).

The development of the TNCs didn’t undermine the capacity of currency-issuing nation states. That has been accomplished by the imposition of the neo-liberal ideology and is reversible if the politics can be won.

That is what I see as Jeremy Corbyn’s challenge to win the politics. There is plenty of strong economic argument to help him do that.

Upcoming Event – Reframing the Debate: Economics for a Progressive Politics, London, August 27, 2015

The NHA is very pleased to be able to present an evening with Professor Bill Mitchell, Professor of Economics and renowned proponent of Modern Monetary Theory, during his visit to the UK at the end of this month.

Come and join Professor Mitchell in conversation with Richard Murphy (Tax Research) and Ann Pettifor (Prime Economics), both currently economic advisors to Jeremy Corbyn’s campaign.

How can the debate on the economy be reframed around the things that really matter – people and the environment? Does MMT hold the key?

This is sure to be a fascinating debate.

The Event will be held on Thursday, August 27, 2015 from 18:30 to 20:30 (BST).

John Snow Theatre
London School of Hygiene and Tropical Medicine
Keppel Street
WC1E 7HT London
United Kingdom

WWW site for Registration.

The event is free and all are welcome.

Upcoming Event – Book Launch Maastricht, August 31, 2015

The official book launch for my new book – Eurozone Dystopia – Groupthink and Denial on a Grand Scale – will be held on Monday, August 31, 2015 at the Maastricht University, the Netherlands.

The Launch will be held at the SBE Building, Tongersestraat 53, Maastricht University.

Room: A0.4.

The event will run from 13:15 to 14:30 (drinks to follow).

There will be two excellent speakers:

1. Dr László Andor, former Commissioner for Employment, Social Affairs and Inclusion in the Barroso II administration of the European Commission.

2. Professor Arjo Klamer, Professor of Economics of Art and Culture at Erasmus University in Rotterdam, The Netherlands. He “holds the world’s only chair in the field of cultural economics”.

The public is welcome to the event and there will refreshments available. I hope to see a lot of people there in Maastricht on August 31.

That is enough for today!

(c) Copyright 2015 William Mitchell. All Rights Reserved.

This Post Has 16 Comments

  1. Excellent piece Bill. I hope you bring this up when you’re in London. You’re right: it will be a question of whether Corbyn can break the historical repetition or not. If he does he needs to first shatter this myth.

    It still needs to be stressed though that the UK has problems due to global supply chains. When the sterling falls in value it is clear that the trade balance does not improve due to the rise in price of imported inputs.

    This strongly suggests that the UK needs an import-substitution policy of some sort. Preferably without explicit protectionism which would be political poison. Investment-led seems the way to go. Otherwise if the capital markets cause a fall in the sterling again as they did in 2008-09 living standards will fall without any gains in competitiveness. This could create a vicious cycle.

  2. Dear Bill

    First, I don’t think that Pétain was a traitor. A collaborator, yes, but not a traitor. I know that the 2 words have practically become synonyms, but a collaborator is simply a realist who takes the position that, since we aren’t powerful enough to expel the enemy from our territory, we have to collaborate with him to some extent in order to make the best of a bad situation. Life has to go on, and we can’t all join the resistance. For the first 2 years of his presidency, Pétain was massively popular, being cheered wherever he went. For the first 2 years of the German occupation, 95% of the French could be regarded as collaborators, simply because the prospect of German defeat seemed extremely remote.

    Somebody said of the former East Germany: “Es gab wenig überzeugte Kommunisten, auch wenig idealistische Regimgegner und ein großes Heer von Angepassten”. Exactly, and that’s how France was in the beginning of the occupation. Heroism is exceptional.

    Many people implicitly assume that all multinational capital is like a bag of money, which global capitalists can simply pick up and take out of the country. Not so of course. McDonald’s can’t just grab all its restaurants in, say, Argentina and take them to the US. If it wants to withdraw from Argentina, it will have to sell its restaurants, but that of course means that someone else has to be willing to buy them. There is no reason to assume that a foreign-owned business can’t be regulated as well as one owned by a citizen of the country. If a government creates a very hostile climate for business, then that will affect domestic investors as much as foreign ones.

    Regards. James

  3. “If a government creates a very hostile climate for business, then that will affect domestic investors as much as foreign ones.”
    Then implement changes so “corporate confidence” is no longer of concern. Nice shilling for corporations though James.

  4. “The solution is that governments should stop signing ‘free trade’ deals and instead should sign an agreement which would make all financial transactions that cannot be shown to facilitate trade in real good and services illegal. Simple as that. Speculative attacks on a nation’s currency would be judged in the same way as an armed invasion of the country – illegal”

    This will make it illegal for the drones , never NEVER the masters of finance.

    I disagree fundamentally with the Keynesian war economy.
    In my opinion FDRs policies proved this conclusively as the USof A rapidly became a nightmare for the common man.
    Banning gold ownership (however useless it is)for the drones or other similar practices forces the common man to work for the machine.
    The machine is most certainly not a nation and indeed never was.
    So please forgive me for my scepticism toward the all shoulders to the wheel meme.
    Your concentration of thinking toward a JG rather then a sharing of land and capital betrays your statist corporate instincts.

    As for your critic of the French rural lobby ……forgive me but the last time I checked rural France did not exist.
    Its a theme park , a suburb or deserted mountain village.
    The farms remain but can now be easily picked off as they now have no local connection.
    All local businesses have been wiped out by the corporate sector.
    They now control all means of production and distribution.
    France has become a urban nightmare much like the UK experiment.
    All roads lead to London and Paris as that is where the money is for no other reason then the dynamics of usury.
    This concentration of money claims is now causing more then the previous national rural to urban population movement , it is driving worldwide migration toward these artificial centers of concentration .

  5. Just to add a clarification
    Speculation is necessary is the present system as speculation is the current means to tap the Industrial surplus.
    Banning speculation will not prevent the transfer of the industrial surplus to the connected people who reside within the temple.
    You first distribute the industrial surplus democratically , then there will be no incentive to speculate.
    You have got the entire mechanism back to front for some reason.
    You do not transfer the surplus to people via a JG as that simply adds costs to production and thus destroys the industrial surplus before it can be effectively distributed.

  6. James, your definition of “collaborator” isn’t precise enough for me. A collaborator who isn’t a traitor will be one who possibly sees resistance as futile and reluctantly goes along with a program in order to mitigate the ill effects it might be producing as much as he or she can under the given circumstances. They may even engage in outright rebellion, such as hiding Jews, using their collaboration as a front. I am not suggesting by any means that Petain did the latter, nor am I suggesting that he wasn’t a traitor, who is someone who more or less enthusiastically goes along with the program, only that I think your definition doesn’t quite capture what it means to be a collaborator as opposed to a traitor.

    Do you think Petain fits my conception of a collaborator?

  7. Tspiras has resigned. All the comments below are from lefties saying how worthless democracy is. They really are convinced that there is no alternative.
    Thinking like a non-MMT person who views all govts as having the same problems Greece has, even if they live in currency issuing governments, must be pretty hopeless.
    It would be better if Tspiras had never been elected and Samaras still PM.

  8. @Bob
    Meanwhile in the real world the US and UK are complete sociological disasters also……..
    The money power controls all states.
    At best they are its different lab rats.

    You could state with at least some conviction that citizens of the US lost what remained of their power to the money monopoly by the 1890s as the land of oz became the liberal materialist nightmare that we know today.

    20th century political divisions have no meaning and indeed never did.
    As for the UK………..Jesus , its the bloody mother ship.

  9. Very interesting article.The groupthink demise of Keynesianism was extraordinary.
    May I suggest a one word powerful contribution to this phenomenon,corruption.
    That at least is one thing Mr Corbyn is immune to.

  10. Great article! The pieces of the puzzle are starting to fall into place. But I think there’s still one piece missing.

    It seems to me that the franc fort policy didn’t start with the technocrats (Giscard, Barre, Delors, …). It is much more deep seated than that. In fact the longing for a franc fort started with the General de Gaulle himself. In the 50ies the franc was like the Italian lira, a comedy currency frequently devalued. By the end of the 50ies you needed thousands of francs to buy the basic necessities. This was intolerable to de Gaulle. He wanted France to be a great power. Who has ever seen a great power with a weak comedy currency? De Gaulle also bought into the French pipe dream that the European Union would allow France to harness the economic power of Germany (LOL!).

    Like Greece today, France circa 1981 was caught between 2 contradictory dreams: stay within the European Exchange Rate Mechanism (the ancestor of the euro) or Keynesian stimulus. In the end, like Greece, France chose currency over people. In both cases, the question of self image was important. The Greeks want to stay in the euro as a mark that they’re western European rather than part of the Balkans or the Middle East. The French (or at least the elite) want a strong currency and the EU because they want to cling to the belief that they’re still a great influential nation like in the old times.

    Today, if the French want a flourishing economy, they must leave the euro and accept the reality that they’re a modest country with a modest currency. Surely the populace has come round to this. But the elite will want to cling to the euro. France needs a new revolution to become a modest country.

  11. I wouldn’t hold out any hope for Jeremy Corbyn to do anything sensible. We were hoping for the Greek government and people to do something sensible. Look what happened.

    While capitalism exists there will never be any significant correction of these problems. Capitalism itself is the problem. The current behaviour of the economy is systemically predetermined by the capitalist set-up. Within the capitalist system there are few alternatives: not exactly no alternatives but very few and certainly no fundamental corrections for its problems.

  12. Dear Larry

    I really can’t tell you whether Pétain personally could have done more for France and less for Germany. He may not have met your definition of a collaborator, but I still think that it is unfair to call him a traitor. It seems certain that the Vichy regime was more anti-Semitic than can be explained by German pressure. However, anti-Semitism isn’t treason, otherwise Hitler would have to be regarded as a traitor to Germany. Let’s not forget that about 75% of French Jews survived the war while about 75% of Dutch Jews perished in it. It may further be pointed out to Anglo-Saxon supremacists who like to tell jokes about French “surrender monkeys” that the behavior of the inhabitants of the Channel Islands under German occupation was broadly similar to that of the French.

    Regards. James

  13. Dear James (and Larry)

    Whatever definitions you wish to innovate with in relation to collaboration and/or treason, the historical fact remains that Philippe Pétain was tried by the provisional government under Charles de Gaulle in August 1945 for treason and was sentenced to death, which was commuted to life imprisonment as a result of his age.

    It was in that legal sense that I used the term traitor.

    best wishes

  14. “Let’s not forget that about 75% of French Jews survived the war while about 75% of Dutch Jews perished in it. It may further be pointed out to Anglo-Saxon supremacists who like to tell jokes about French “surrender monkeys” that the behavior of the inhabitants of the Channel Islands under German occupation was broadly similar to that of the French.”
    James this is a logically fallacy I think. The fact that Dutch Jews died does not mean the death of French Jews or Vichy France is justified.
    As to “surrender monkeys” that has really only came into strong modern usage by the Bush Administration, along with “freedom fries” and related BS. France and Britain are quite similar in ways.
    PS: every time Europeans use “Anglo-Saxons” my sides are splitting, it may have the opposite effect as you intended 🙂

  15. Bill you often refer to german econonic strenght but can you please help me understand where it comes from? For example italy and germany had similar economic trajectories after wwii but since the 70-80’s germany did lot better. Which are the causes? What does or did germany have that italy lacks or lacks?

  16. Not very convincing arguments on comment is free…
    “Exiting the Euro would probably be extremely costly, especially if the country decided to renege on its debts – no lender would provide finance to Greece without even more punishing interest rates. At the moment membership of the EZ provides something of a cushion, albeit not a heavily padded one.”

    “He did what it took to stay in the Euro – which is what his people wanted above all else. Exiting the euro would have been letting them down.”

    “What mandate?

    No austerity?

    So where’s the money going to come from?”

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