The Crisis in Western and Eastern EU: Does the Policy Reaction Address its Origins?

Abstract

We are in a new phase of the global crisis: the struggle to distribute the costs of the crisis. This crisis has been an outcome of a global process of increased exploitation and inequality, since the post-1980s. Neoliberalism tried to solve the crisis of the golden age of capitalism through a major attack on labour. The outcome was a dramatic decline in labour’s bargaining power and labour’s share in income across the globe in the post-1980s period. However, the decline in the labour share has been the source of a potential realisation crisis for the system. The decline in the purchasing power of workers limited their potential to consume. Demand deficiency and financial deregulation reduced investments despite increasing levels of profitability. Thus neoliberalism only replaced the profit squeeze and the over-accumulation problems of the 1970s with the realisation problem. Financial innovations and debt-led consumption seemed to offer a short-term solution to this potential realisation crisis. Since summer 2007 this solution has also collapsed. The crisis was tamed through major banking rescue packages and fiscal stimuli. Now the financial speculators and corporations are relabelling the crisis a ‘sovereign debt crisis’ and pressurising the governments in a variety of countries ranging from Greece to the UK to cut spending to avoid taxes on their profits and wealth.