First, there was the credit crunch, and governments around the world stepped in to bail out the banks. The sequel to that debacle is the sovereign debt crisis, which has hit the eurozone hard. The hour has come to pay the piper, and ordinary citizens across Europe are growing to realize that socialism for the wealthy means punching a few new holes in their already-tightened belts.
Building on his work as a leading member of the renowned Research on Money and Finance group, Costas Lapavitsas argues that European austerity is counterproductive. Cutbacks in public spending will mean a longer, deeper recession, worsen the burden of debt, further imperil banks, and may soon spell the end of monetary union itself.
Crisis in the Eurozone charts a cautious path between political economy and radical economics to envisage a restructuring reliant on the forces of organized labour and civil society. The clear-headed rationalism at the heart of this book conveys a controversial message, unwelcome in many quarters but soon to be echoed across the continent: impoverished states have to quit the euro and cut their losses or worse hardship will ensue.
In his rigorous review of Crisis in the Eurozone, written by Costas Lapavitsas and his colleagues from the Research on Money and Finance group, Alex Cistelecan bounces the book’s arguments off Jürgen Habermas’s The Crisis of the European Union.
What comes out of this skillful comparison is the depth of Lapavitsas’s arguments about the nature of the problems that the European Union is facing at the moment. Unlike Habermas, whose focus is mainly on the moral dimension of a problem not even dubbed a “crisis”, the kernel of Lapavitsas’s analysis is to emphasize “the profound and structural nature of these problems, and of the underlying contradiction built into the European legal and institutional construction.”
Costas Lapavitsas has written an article for the Guardian examining the surge of financialization and its “penetration … into every nook and cranny of society”. In the article he explores some of the ideas present in his latest book, Profiting Without Producing, as well as those investigated in Crisis in the Eurozone. In this new article, Lapavitsas argues that since the financial crisis, mature economies have shifted toward accepting and even perpetuating overwhelmingly dominant financial sectors.
Mainstream economics has not come up with any fresh ideas, or new methods of investigation after the gigantic crisis of 2008-9. Nothing has fundamentally changed, and suggestions that something is not quite right with the discipline are usually met with bafflement. The real issue, however, is not to point out the weaknesses, or the intellectual rigidity of mainstream economics, a task that has been repeatedly performed in recent decades. It is, rather, to produce analysis that is genuinely different from the mainstream, while remaining true to economics as a discipline.
In this light, the kind of economics that I find persuasive would have the following features: