Manoel Barbeitos: Some claim that the present crisis of the global capitalist economy is due to the Covid-19 pandemic. Would you agree with them?

Éric Toussant: Any such assertion must be based on rigorous analysis. In the present phase of the crisis, there is no doubt that the pandemic is the main cause. However in March 2020, before the lockdowns decreed in Spain, France, Belgium, the United States and elsewhere, the media tried to say that all the economic problems to come were down to the virus. At the time, I explained that even before the pandemic, the capitalist system was going through a major multidimensional crisis. For example since the first semester 2019, industrial production had fallen in several key economies, with a reduction of production in Germany and in several industrial branches in the United States, meaning a real recession in those countries, and also a drop in growth in China. We were also on the verge of a major financial crisis. Before lockdown all the world’s stock-markets declined. Between 15 February and 17 March, there was a downswing of 30 to 40 % in one month, apart from China where the fall was less marked. There was a general decline throughout Europe and in the United States, well before lockdown.

All this should make it easy to see that the crisis caused by the coronavirus did not occur in a clear blue sky but in a sky full of clouds with the threat of electric storms that at any moment could trigger an even greater financial crisis than the stock-market crash and the banking crisis of 2007-2008.

To say that Covid-19 is an excuse to conceal the crisis of capitalism is either excessive or wrong. Those who make this claim are mistaken; as are those who claim that the coronavirus is the source of all problems. What is needed is a nuanced analysis as outlined above.

MB: In this new global scenario, you think the European Union’s role is increasingly secondary?

ET: That statement also needs to be nuanced. Obviously the two dominant economies in the world are those of the United States and China, but Europe comes third. It is true that China is in the process of overtaking Europe, but it would be wrong to describe Europe as peripheral. It certainly is not. Europe is an imperialist power that dominates a large part of Africa and influences several countries in Latin America, the Middle East and Asia. It is also important to note that within the European Union itself, there exists a power relationship between the centre and the periphery.

MB: There is a view that, on the economic level, the EU’s trajectory has been conditioned for over a decade by the interests of Germany which, with the Troika (the IMF, the ECB and the European Commission), has been tracing the path to follow with an iron hand. Do you share it?

ET: I do not agree with this claim. In my view it is the big capital of the largest European economies that dominates the European Union: the big private companies, the big European companies. Within that framework, German companies are vital, but there are big capitalist companies in other countries too. It is important not to reduce the problem to Germany. The contradiction does not lie in Germany’s relationship with the other EU countries. It lies between European capital, Europe’s big companies and the peoples of Europe. Even the German people are victims of job insecurity.

The capitalist construction of the European Union was not the work of Germany alone. The French government in collusion with French big capital was also an active participant and the other European governments, which are all pro-capitalist, are favourable to the treaties that have been signed. In 2015 the president of the Spanish government, Mariano Rajoy, behaved in exactly the same way as the German Minister of Finance, Wolfgang Schäuble, in dealing with Greece under the Syriza government. The Spanish government was one of the toughest in face of the Greek people’s demands for freedom.

This is why I believe that the struggle is against the capitalist logic behind the European Union. When you have to condemn the German government’s actions, it must be done. But using the same criteria you must also condemn the Spanish, French or Italian governments. Successive Belgian governments have also been in total agreement with the capitalist logic of the European Union. That’s why the former Belgian Prime Minister, Charles Michel, is President of the European Council: he shares the same political orientation as Juncker, the former Prime Minister of Luxembourg and former President of the European Commission (2014-2019), or Barroso, former Prime Minister of Portugal and former President of the European Commission (2009-2014). These governments conform to capitalist logic, as does the present Greek government under Kyriakos Mitsotakis.

MB: The pandemic seems to be shaking up some neoliberal assumptions, for example in the case of the IMF. What do you think of the IMF’s new public stance?

ET: The IMF specializes in the production of documents which do not reflect the IMF’s position. These are working documents, statements… If you read those documents attentively, you will see that in every case, it is indicated that the document does not engage the IMF’s responsibility. The IMF says one thing and does another. You may be sure that it will carry on with its antisocial policies of structural reform. What they call reforms are in fact antisocial counter-reforms, undermining hard-won social benefits. The IMF intends to pursue its policies on matters such as social security, pensions and labour relations. In short, the IMF acts in support of big capital against the popular classes and in favour of the major powers that intend to pursue their domination over the peoples and countries seen as peripheral.

But there is some obvious change, like the temporary non application of the goals of austerity budgets, non compliance with the limits on indebtedness and budget deficit as a percentage of GDP, because the IMF knows that these are the conditions required to keep big companies afloat, and also creditors like the big private banks – Goldman Sachs, Bank of America, Deutsche Bank, BNP Paribas, HSBC, Santander, BBVA, Barclays, etc. – and the big investment funds, like BlackRock or Blackstone.

MB: What can we expect from the ECB in this crisis? Is there really any change in its dogma? Why?

ET: The ECB’s main preoccupation is to maintain the Eurozone and to save private banks by injecting money. It has been doing this to an incredible extent. The public doesn’t know that not only do banks receive normal credit at an interest rate of zero percent, but on top of that, the ECB has lent them hundreds of billions of euros at the negative interest rate of -1 % (in the LTRO framework of long-term refinancing operations).

This is what has been happening in recent months. Europe’s big private banks would once again be on the verge of bankruptcy had it not been for the intervention of the ECB, which does everything necessary to help private banks and further encourage concentration of banks, as can be seen at the moment in Spain with the merger of Bankia and Caixa.

MB: The European Commission has announced that the budgetary objectives fixed in the TSCG (Treaty on Stability, Coordination and Governance) are on hold. What do you think of this apparent flexibility? What does it mean?

ET: Clearly the European Commission has suspended the implementation of its most recent pacts and treaties on budgetary deficit and debt. That’s true. But it is also true that we should analyse the direction in which public spending is going. Is it going towards improving people’s living conditions or is it mainly being used to defend the big shareholders of big companies? As you know, there is an aid package of several hundred billion euros for big companies. For example, Lufthansa (Germany) is getting €9 billion, Renault €8 billion, Air France €5 billion, KLM €3 billion… Obviously there are unemployment indemnities to be paid for and we have no objection to this type of spending. However we consider that governments should get that money back through taxation of the super-rich and of big companies. A capitalist company has a responsibility to pay its employees. Governments are increasing public spending and public debt on the pretext of helping people when they are not actually doing so. This increase in public spending is illegitimate because it favours a privileged minority. On the other hand, it is worth mentioning that the aid of several hundreds of billions of euros being handed out to companies has not been made conditional upon not laying off workers. So the same companies that are getting the several billion in aid are also announcing thousands of redundancies. Who will pay the unemployed? They will be paid with public money that will increase public debt, so that in two years’ time you will be hearing, “Ladies and gentlemen, because of the phenomenal increase in public debt, once again we are obliged to impose severe austerity measures”. For these reasons, we must denounce this pretence of turning to more humane policies when in reality it is socially unjust policies that are being pursued. It has got to be stopped.

MB: Apparently the idea of a “recovery plan” based on a form of mutualization of public debt has been accepted. Is this true? How should we interpret it?

ET: In an agreement signed on 21 July 2020, the heads of government decided that the European Commission could contract a debt in the name of the European Union. It is something new, but there is a very important “but”. The whole thing is burdened with conditions. For example, if the Spanish State wished to have access to this money, borrowed from the European Commission or transferred directly in the form of a donation, it would have to request the agreement of the other governments, among which would be Germany, the Netherlands, Finland and Austria… who would then demand of the Spanish State (or Italy or Portugal, etc.) that they make structural reforms on pensions, labour contracts, and so on. Thus loans from the IMF or the ECB are conditional upon structural adjustment plans in the grand tradition of neoliberal ideology. It is a poisoned gift; in fact it is not a gift at all. Just when it is time to abandon neoliberal policies forever!

MB: In Spain, the banking system is now deep in a new process of bank concentration through mergers affecting the major banks. What is your analysis of these mergers?

ET: They answer to other kinds of logic, totally at loggerheads with the general interests of citizens. Generally speaking, greater bank concentration goes against the interests of the users of the banking services and goes against the interests of the people. Why? Because it increases the influential power of those banks, i.e. their ability to influence policies. In Spain, you know that henceforth Santander, BBVA and the bank resulting from the Caixa-Bankia merger will control almost everything, will decide on the rules of the game, and impose their conditions on their clients.

Moreover they will be in an even better position to blackmail the government by threatening bankruptcy which would entail catastrophic effects. The activity of these banks is mainly speculation, especially by investing on the stock-markets, buying and selling public and private debt paper, and so on. There needs to be radical change.

MB: Some of us feel that, in view of the size of these mergers, (’too big to fail’), there is an increase in banking and economic risks. Would you agree?

ET: There is no doubt at all that over the last forty years, the tendency for banks to take ever greater risks in pure speculation has been accelerating. This is of no use whatsoever in the real economy. And it is the reason why I advocate radical change in the banking sector.

MB: Do these mergers mean that Spain is getting further away from the possibility of having a public bank?

ET: Of course they make that possibility more remote; except that luckily, there is another side to the coin. If we had a people’s government, it would be much easier to socialize the banking sector because there would not be 50 banks to socialize. By expropriating the Bottin family, who own Santander, and the big shareholders of BBVA or of the new entity that results from the Bankia-Caixia merger, it would be possible to control almost the entire Spanish banking system. They construct financial monsters, but for a truly courageous people’s government, the task would be much easier than before to expropriate the owners, as there are not many of them.

MB: Are the measures approved by the European Commission and the ECB in the wake of the pandemic going to make public and private debt rocket again?

ET: Of course they are. There is a simple explanation, which concerns the way State budgets are financed. Debt is linked to State revenue. Today’s governments want to help capitalists get rich and have decided to reduce the taxation of profits for big companies. Since these governments do not wish to tax the fortunes or the profits of the very wealthy, the budget rests on two pillars: taxation that mostly affects the popular classes, like VAT and income tax; and debt. Debt is set to dramatically increase because we have governments that refuse to take strong measures to tax the very wealthy or the profits of big companies. The Spanish State’s debt will increase enormously, as will those of the other countries of Europe and the United States.

We of the CADTM are against increasing that debt. If public debt served the people and if there was fiscal justice with proportional taxation of the super-rich, we might think it was normal for public debt to increase. However the present increase of Spanish debt under the Sanchez-Iglesias government, as before under Rajoy’s government and before that, Zapatero’s, is an illegitimate increase. I am highly critical of the policies of Pedro Sánchez and Pablo Iglesias. Despite their discourse, they carry on giving presents to the richest 1 %. It is totally unfair.

MB: What will the consequences be for States and citizens (families and non financial businesses)?

ET: The debts of working-class families are also increasing considerably. At present, in Spain, unemployment benefits are being supplemented, which partly compensates for loss of income, but not entirely. Before, people had inadequate salaries, many worked as casual labour with no job security and low salaries. Now the situation is worse. People who want to maintain their standard of living and pay for expenses such as healthcare, must become more indebted in order to meet their mortgage payments. They have to take out a loan, thus contracting new debts to enable them to repay the old ones. For these reasons, I think a large part of popular household debt can be considered as illegitimate debt that should be cancelled. All this provides arguments in favour of socializing private banks and expropriating big shareholders; if you transform private banks into a public service, debt cancellation becomes much easier.

Private banks will never agree to cancel household debt. That leaves two possibilities. The first is for low-income families with unsustainable levels of debt to be given a legal right to have their debt cancelled. The second, which is not contradictory, consists of expropriating the big shareholders of banks and transforming private banks into a public service. The CADTM believes that it should not be a public bank, but a public service combining banking and insurance. In the same way as education or health, for example, are run as public services. That would also mean expropriating the private hospital sector and the big pharmaceutical companies.

MB: To conclude, what positions should the progressive political and social forces of Europe adopt in this context?

ET: Priorities must be defined. We should start with the needs of the people who have to be protected in a very serious health crisis. People must improve their living conditions and their income. They must have access to good-quality public services. The environmental crisis and climate change must also be dealt with. That enables us to define priorities.

Firstly, progressive forces must push for socialization of the private banking and insurance sectors, by expropriation. The second priority would be the expropriation and socialization of the energy sector, of production and distribution of energy, to ensure a service of electric light, heating, etc. in the interests of the population and abandoning fossil fuels and nuclear energy. Energy must be produced from renewable sources, using small centres of energy production near where people live, which is perfectly feasible.

The pharmaceutical sector must be socialized at international, European and national levels. The big laboratories should be public services. Research for a vaccine should be financed with public funding and the resulting vaccine exempt from intellectual property rights or patents, and should belong to the common heritage of humankind.

Among the most immediate measures, there should be an exceptionally high tax on large properties, the highest incomes and the profits of big companies. There should also be a job-creation programme based on the struggle against climate change, the health crisis and so on. This would mean increasing jobs in the health sector, in everything connected to the ecological transition, housing and upgrading existing housing to consume less energy.

MB: And debt?

ET: Of course. We must suspend repayment of public debt so that we can stop paying for it with our taxes and stop financing the budget with new debts. We should also carry out a debt audit with citizen participation.

As for the debts of the popular classes, cancellation measures should be approved for low-income families.

MB: Is there anything you would like to add?

ET: I would just say that it is essential not to think only of the interests of European populations. It is essential to review the issue of immigration and refugees’ rights, fight against the European fortress and denounce that inhuman and selfish Europe that condemns to death thousands of people who try to cross the Mediterranean or other borders. Such European policies must be condemned and radically changed. We also need a complete change in the relations between European countries and other countries, in Africa, the Middle East, Asia and Latin America. The debts that the European countries claim from the peoples of the South must be cancelled. We should even be thinking in terms of compensation for the pillage that went on over centuries and continues today.

(Eric Toussaint is a historian and political scientist. He is the spokesperson of the CADTM International, and sits on the Scientific Council of ATTAC France. Article courtesy: CADTM.)