Europe's deflation torture is a gift to the Far Left
If Europe’s ultra-Left has so far reaped little dividend from the great "Crisis of Capitalism", this will surely change as the eurozone’s 1930s policies of wage deflation sap the credibility of the governing centre and the EU itself.
By Ambrose Evans-Pritchard
Published: 6:20PM BST 23 May 2010
The tragedy of the interwar years in Germany was that the Social Democrats - then the world’s foremost socialist party - became fatally tainted by acquiescing in Bruning’s deflation torture from 1930 to 1932. They did so, of course, because they dared not confront the orthodoxies of the Gold Standard.
By then the fixed-exchange mechanism had gone horribly wrong - in much the same way that EMU has gone horribly wrong - because the surplus countries were not recycling demand to maintain equilibrium. It had become a job-destruction machine. The result in Germany was the Reichstag election of July 1932 when the Communists and Nazis won over the half the seats.
As historian Simon Schama wrote over the weekend in the Financial Times - "The world teeters on the brink of a new age of rage: we face a tinderbox moment" - there is typically a lag-time between economic shocks and social fury. Luckily there is no Fascist threat this time. It is the (more benign) Marxist Left that stands to gain. more