Some of the stories coming out of the eurozone are heart-breaking. Greece's unemployment has risen by 10% since february, a full-blown bank run seems to be taking place & fascists are being elected; Spain is back in recession; unemployment there is over 25 per cent, rising to a horrendous 50.5% for under-30s (in Greece, it's an equally nightmarish 50.4%); Portuguese are emigrating to Angola (of all places) at a rate of 20,000 a month.
Amid all this pain, my socialist friends are getting louder. "The bankers did it. Austerity policies in Europe are dangerous. Someone has to stop 'the madness' We need Growth, not cuts."
Are they right?
Sure, the UK is in a double dip recession, and some people compare the current recession with the great depression: while true in some narrow ways, such a parallel with the Grapes of Wrath is foolish given how wealthy we remain overall - especially compared with Portugal or Greece.
My grandfather had a brother who died of malnutrition in the 1930s. Now, even those at the very bottom of the ladder have the safety net of the NHS & the benefit system. Even compared to the recessions of the 1970s & 1980s, we are better off. Strikes & demonstrations are inconvenient, not a national crisis.
However, the Steinbeckian depression analogies are appropriate when analysing what is happening in Greece, where the suicide rate has increased five-fold, where bank accounts are emptying out, as anybody with any sense is moving their money out of the country or into non-financial assets.
Ed Miliband, and every other socialist, says that he will replace "austerity" with "growth". Why didn't anybody think of that before?
Unfortunately, his predicatable slogan is underpinned ludicrous proposals. One of the points in his five point "National plan for Jobs & Growth" is a 5% reduction in VAT on DIY supplies. Is that going to work? Really? Would that work in Greece? We'll grow by all buying cheap paint in Homebase? If you believe that, I have a bridge I'd like to sell you.
Recently, when asked how he would deliver Growth, he replied: "Labour is on the side of working families - we will deliver change even in tough times". What does this even *mean*? Let's give him the benefit of the doubt, and assume he is less stupid than his statements suggest, and he wants a Keynesian solution.
Spending on infrastructure - "shovel-ready" projects, as Barack Obama has called them - is, of course, a standard Keynesian solution for an economy that is caught in a downward spiral. Under normal circumstances, such spending might be a great idea. Ed Milliband would love it. There would be hard hats, jobs, honest unionised labour, tea, roadworks, paperwork, delays, paperwork and strikes. And paperwork. I grant you, there is a chance it might work here.
However, where Milliband's "spend to grow" agenda goes wrong is in the past and future application of his theory. When Labour was in government, they decided to rely on the external market lending to fund public spending, instead of taxes. If you want to rely on the markets, you'd better be prepared to do what the markets want.
Alternatively, if you genuinely want Keynesian economics, you'd better have the balls (or Balls?) to cut spending during the boom years to pay for it during the bust. Keynesian means counter-cyclical, not running endless spiralling deficits.
But, within the EU, however, there are plenty of reasons to be sceptical that this strategy would work. If building roads and trains made your economy grow, Greece and Spain would be booming. The past 3 years have seen huge splurges in infrastructure spending, funded by the EU, much of it agreed during the boom years. But this kind of spending has done very little to change the fundamental problems that now plague both Greece and Spain - in particular, youth unemployment.
Worse, in some ways, EU funding for infrastructure has created problems. In Greece, milking the EU for subsidies has long been an industry in itself: politics in many EU countries has long been dominated by decisions of exactly where to splurge EU cash.
Even in France, where Hollande is leading the charge against austerity, it is hard to argue that the problem is that the state is not doing enough. Despite Sarkozy's claims to have brought in austerity - the unpopularity of which Hollande owes his election victory to - the French state currently consumes 56% of GDP & has some of the highest taxes in the world. How much more state spending can create growth?
The truth is,the real problem with growth, *is* the Eurozone and the EU. The Euro enabled the "Club Med" nations to borrow vastly beyond their means to fund keynsian projects, with no checks or balances on the spending. Politics in Greece, Portugal, Spain and Italy became about who could promise more EU cash to the voters. The EU enabled the suicide economics which has prolonged and deepened the recession in Europe, meaning the banking crisis became a depression. Now the depression is on, the Euro has trapped europe in a depression, and the cancer is metasizing into the non-Euro economies, as our only permitted free-trade area chokes. It's not about Growth or Austerity - it's about Europe.
European politics has meant that the only option open to the countries within the Eurozone has been to devalue by shedding jobs and cutting wages, which has only increased the recessionary spiral. While Germany & France are united on keeping the Euro afloat, all of the perpheral economies are *fucked*, so Merkel can win elections in Germany. While I won't go as far as the kind of blood-curdling rhetoric which emerges from Nigel Farage, any democrat should be concerned about the naked removal of the elected rulers in Greece & Italy when they dared to stand up to Merkel & Sarkozy.
Indeed, the recent "fiscal compact" that the Merkel & the EU insist on imposing on Greece and the other peripheral nations (which only Cameron had the balls to oppose) would actually ban the kind of Keynsian policy some think would save the Euro through growth.
Where is the only place in Europe enjoying real, sustained growth? Germany, of course. Germans can happily insist on austerity for everyone else, knowing, paradoxically, that by keeping the euro cheap, it gives them an enormous competitive advantage in exports. So the German economy soars away, and the only price is pain and turmoil in Greece, Portugal, Spain and everywhere else in Europe. The only threat to this is the chance that the Greek people may elect a Keynsian anti-bailout party, who may say "No".
This crisis is an object lesson in globalisation. National politics - except those of Greece - are effectively suspended until the euro crisis is resolved one way or the other. Here's hoping it's resolved soon.