The Lost Continent by Gavin Hewitt

The challenge with European democracy is its constantly shifting notions of demos - who are the people who should exercise political determination. The current Euro crisis - and the ensuing imposition of austerity policies on Greece and Ireland, Spain and Italy - demonstrate a democratic irony. As Gavin Hewitt points out, there is nothing democratic about the adoption of austerity; austerity is not a lifestyle choice struggling countries freely assume. The Euro crisis precipitated changes of government (left to right and right to left) in the affected Member States and fierce popular backlash. Yet Angela Merkel, the physician prescribing austerity to faltering countries, responds to democratic signals given by her German electorate (who balk on bailing out their neighbors). Hewitt constructs a story where the democracy of Germany is pitted against the democracy of Southern and Peripheral Europe. 

The Lost Continent focuses on national stories - and national leaders - and so at times has the feel of a tell-all. Silvio Berlusconi, to no-one’s surprise, comes off the worst. His cynical disregard for anyone’s interest saves his own marks, a new low in post-War Italian politics. Imagine how Angela Merkel felt upon receiving his ‘political’ advice to take on a lover. And even more respectable characters, such as Sarkozy, engage in behind-the-back smirkiness with regard to Merkel. But much of the focus falls on Merkel herself; we’re never quite sure whether she is (as she claims) acting just like a Swabian housewife, guided by common-sense and prudence, or whether she is the instrument of peculiar German obsessions outside her control.

And so The Lost Continent is to a great extent a German story of Europe (the UK barely figures). Germany is able to impose austerity on its EU partners because it is German resources that largely fund the rescue. Germany’s economic primacy permits it an outsized influence in contemporary European affairs - Hewitt and various of his informants note that Germany may be more powerful than ever. Germany has benefited from this new Europe; its products are consumed throughout. Its economic success permitted the reunification of Germany, an enormous political and social success (ironically, Merkel developed her political skills in the East).

Introducing Attraverso

Attraverso means "through" or "across" in Italian; it has both a spatial sense (as crossing a mountain range, or a border) and a temporal sense (as across the centuries). It seemed fitting for a new online journal designed to scratch beneath the surface of global financial issues. More than ever, public debate centers around international economic topics: the financial crisis and the great recession, bank reform, pressure on the Euro, austerity and the future of hope.
                               
Attraverso covers the roots of these issues -- and the ongoing institutional innovations proposed to address them. Attraverso is a journal devoted to commentary and reviews of books on international finance and economics. Formerly published as a series within Loyola’s Summary Judgments faculty blog, Attraverso’s content proved vast and rich enough to fill its own space.

International finance is an arena for ideas; it is a cultural practice. Attraverso will be the first online resource dedicated to covering books in this space. The blog is designed to be a dialogue; comments are encouraged.

The blog is edited by Jeffery Atik, a widely published lawyer and economist with deep experience in Europe and North America. He teaches International Banking & Finance and related courses at Loyola Law School, Los Angeles.

WHAT OTHERS ARE SAYING ABOUT ATTRAVERSO

"Professor Atik offers lucid and learned commentary on the most current issues in international finance,” said Heidi Mandanis Schooner, professor, Columbus School of Law at the Catholic University of America. “Attraverso provides a balanced approach to complex issues and, therefore, is on my essential reading list."

Austerity: The History of a Dangerous Idea by Mark Blyth

There is nothing ambivalent about Mark Blyth’s view of austerity: he is against it. Blyth’s Austerity is more than a brief against today’s accepted form of treatment for all that ails a slumping economy - it is an intellectual history of a powerfully attractive idea, though in Blyth’s view, a dangerous one. Austerity fails for a number of reasons: it is unfair (it hurts the poor), it cannot be pursued simultaneously by all (someone must spend to ignite economic expansion), and (most damning) history shows it doesn’t work.

Blyth admits to being a Keynesian. There is no shame in that: many neo-Keynesians are calling for an end to austerity. Blyth states, however, that he need not prove Keynes right (“for what it’s worth, he was right, but that’s in another book”); his goal here is simply to prove austerity wrong.

While austerity figures in contemporary U.S. politics, it is predominantly a European fix and fixation, famously imposed on Greece, Spain, Ireland and Portugal as a condition for European and IMF support in response to the Euro Crisis. Blyth begins the book by correcting the dominant narrative: Greece aside, the Euro Crisis did not originate by reckless government spending, but in private irresponsibility. Excessive private sector lending (provoked by cheap borrowing costs associated with the adoption of the Euro) sank the banks in Ireland and Spain (and their respective economies); the states became indebted in attempting to clean up the mess. Setting this history right is important -- as part of the moral authority for the imposition of austerity is a judgment of state fault. Austerity is not merely an economic prescription -- it is a punitive response. As Blyth points out, there was little else Spain or Ireland could have done. Their banks were not only too big to fail; they were "too big to bail" -- that is, their liabilities were beyond the state’s capacities to absorb. Hindsight suggests the better course might have been to abandon the banks -- but that course would have presented other grave difficulties. By shouldered bank indebtedness, several European states wildly exceeded the European limits on budget deficits and overall indebtedness. So why, Blyth asks, is the Euro crisis consistently described as a sovereign debt crisis? One must blame the state in order to justify the imposition of austerity.