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France: Socialism Meets Deflation

Much of European academia was captured by marxist thought in the postwar era, including many European economics departments. There are many European “economists” today who know quite a bit about the labor theory of value and the internal contradictions of capitalism, but know very little about money, banking, and monetary economics. Macro- and micro- economics were seen by the marxists as the obsolete texts of a doomed system. Studying them was like studying a dead language. Consequently, marxism and the marxist perspective are to a great extent the only tools that the European Left has to work with as it seeks to reverse the economic devastation wrought by monetary union.

The hapless products of the marxist economics departments of the past now find themselves in leading roles in the eurozone. Yesterday’s student radicals are today’s statesmen. Americans need to understand the importance of the socialist Left in Europe: in every European country, the Social Democratic party plays a major role in parliamentary politics; every European country has had one or more socialist governments; and many European countries currently have governing socialist majorities in parliament. These marxist members of the European political class now confront a problem for which they were not educated: disastrous monetary policy.

While Marx did indeed have a theory of money, it is not terribly useful in sorting out today’s travails:
“The general price level will move in medium and long-term periods according to the relation between the fluctuations of the productivity of labour in agriculture and industry on the one hand, and the fluctuations of the productivity of labour in gold mining, on the other.”
---Eric Mandel, “Marx’s Theory of Money”

Today’s socialist finds himself quite at sea when he looks to Marx for a solution to the eurozone crisis. This certainly hasn’t stopped many eurozone politicians from trying to fit Europe’s problems into a marxist construct. The recent president of Cyprus (and of Europe) was only able to understand the crisis in the comic-book terms of greedy capitalists and oppressed workers. This is what his own party had to say about the Cyprus bailout negotiations:
“We will not accept terms that will destroy the popular strata, abolish working peoples’ gains, and sell off for pittance public property to big capital. We shall stand on the side of the class-based trade union movement in the mobilisations it is planning if the Troika insists on its policies. We shall not enter into a procedure that will be in complete contradiction with our ideology and history.”
Takes you back to Petrograd, doesn’t it?