JP Morgan to eurozone periphery: “Get rid of your pinko, anti-fascist constitutions”

At times, I do marvel how antiseptic, bland even, that the language of the most wretchedly villainous documents can be.

Last week, the European economic research team with JP Morgan, the global financial giant, put out a 16-page paper on the state of play of euro area adjustment. This involved a totting up of what work has been done so far and what work has yet to be done in terms of sovereign, household and bank deleveraging; structural reform (reducing labour costs, making it easier to fire workers, privatisation, deregulation, liberalising ‘protected’ industries, etc.); and national political reform.

The takeaway in the small amount of coverage that I’ve seen of the paper was that its authors say the eurozone is about halfway through its period of adjustment, so austerity is still likely to be a feature of the landscape “for a very extended period.”

The bankers’ analysis probably otherwise received little attention because it is a bit ‘dog bites man‘: Big Bank Predicts Many More Years of Austerity. It’s not really as if anyone was expecting austerity to disappear any time soon, however much EU-IMF programme countries have been offered a relaxation of debt reduction commitments in return for ramping up the pace of structural adjustment.

The lack of coverage is a bit of a shame, because it’s the first public document I’ve come across where the authors are frank that the problem is not just a question of fiscal rectitude and boosting competitiveness, but that there is also an excess of democracy in some European countries that needs to be trimmed.

“In the early days of the crisis, it was thought that these national legacy problems were largely economic: over-levered sovereigns, banks and households, internal real exchange rate misalignments, and structural rigidities. But, over time it has become clear that there are also national legacy problems of a political nature. The constitutions and political settlements in the southern periphery, put in place in the aftermath of the fall of fascism, have a number of features which appear to be unsuited to further integration in the region. When German politicians and policymakers talk of a decade-long process of adjustment, they likely have in mind the need for both economic and political reform.” [Emphasis added]

Yes, you read that right. It’s in dry, banker-ese, but the authors have basically said that the laws and constitutions of southern Europe are a bit too lefty, a product of their having been written by anti-fascists. These “deep-seated political problems in the periphery,” say authors David Mackie, Malcolm Barr and friends, “in our view, need to change if EMU is going to function properly in the long run.”

You think I’m perhaps exaggerating a smidge? They go into more detail in a section describing this “journey of national political reform”:

“The political systems in the periphery were established in the aftermath of dictatorship, and were defined by that experience. Constitutions tend to show a strong socialist influence, reflecting the political strength that left-wing parties gained after the defeat of fascism.”

All this is a load of historical horse-lasagna anyway. Italy for example never went through a process akin to Germany’s denazification, and in Spain, the democratising king, Juan Carlos, played a major role in the transition. Only in Greece and Portugal were there popular socialist insurrections that resulted in or contributed to the overthrow of the regimes: the Athens Polytechnic Uprising played a key role in the Metapolitefsi or ‘polity change’ (although much, much more than the crushed student protests were involved here, including a failed coup d’etat and the Turkish invasion of Cyprus), and in Portugal a proper left-wing rebellion, the Revolução dos Cravos or Carnation Revolution, brought down the Estado Novo regime. Although it is true in the case of the latter three countries that their late-in-the-day construction of welfare states in the 70s and 80s was largely carried out by social democratic forces, the architects of the Italian post-war state were the Christian Democrats, who dominated government for 50 years.

“Political systems around the periphery typically display several of the following features: weak executives; weak central states relative to regions; constitutional protection of labour rights; consensus building systems which foster political clientalism; and the right to protest if unwelcome changes are made to the political status quo. The shortcomings of this political legacy have been revealed by the crisis. Countries around the periphery have only been partially successful in producing fiscal and economic reform agendas, with governments constrained by constitutions (Portugal), powerful regions (Spain), and the rise of populist parties (Italy and Greece).”

Let’s parse that paragraph, shall we? Weak executives means strong legislatures. That should be a good thing, no? Let us remember that it is the parliament that is sovereign. The executive in a democracy is supposed to be the body that merely carries out the bidding of the legislature. There is a reason why liberal democracy opted for parliaments and not a system of elected kings.

Oh, and we want strong central states. None of this local democracy nonsense, please.

JP Morgan, and presumably the EU powerbrokers they are ventriloquising for, finally are being honest with us: they want to do away with constitutional labour rights protections and the right to protest. And there has to be some way to prevent people electing the wrong parties.

Thankfully though, the authors note, “There is a growing recognition of the extent of this problem, both in the core and in the periphery. Change is beginning to take place.”

In particular, they highlight how Spain has begun “to address some of the contradictions of the post-Franco settlement” and rein in the regions.

But other than that, sadly, the process of de-democratization (okay – I’m calling it that. They call it “the process of political reform”) has “barely begun”.

Well, the JP Morgan paper may have been written in English, but there is a venerable Spanish phrase that that all good anti-fascists right across the eurozone periphery know and is probably the simplest and best response to such provocation: ¡No pasarán!

NO PASARÁN poster-8x6

Poster from the Spanish Civil War: ‘They shall not pass!’

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  1. #1 by Dave Levy on June 7, 2013 - 8:48 am

    Very Good.

    Is reinforcing the argument that the choice not to have elected Kings a decision that the US took differently, deliberate?

    Also you quote the report,

    “….weak central states relative to regions; constitutional protection of labour rights; consensus building systems which foster political clientalism; and the right to protest if unwelcome changes are made to the political status quo”

    With the exception of labour rights, they are describing the USA, and if you include the labour rights, they describe Germany.

    No correlation, No Cause.

  2. #2 by jon livesey on June 7, 2013 - 9:18 pm

    I think you are getting way too excited here. A weak central Government and strong regions gets you the situation in Spain, where we really don’t know what the deficit is because regions can and do run up their own debts.

    Constitutional protection for labour gets you a situation where people who are employed are protect4ed too much, and the unemployed can’t find jobs. That calls for labour liberalisation and allowing employers more say in firing.

    We see this even in the US. States with right to work laws attract businesses from states with strong labour portection.

    There is nothing sinister here. GS are simply pointing out the obvious. If your current laws got you to your current situation, it’s time to look more closely at your laws.

    • #3 by Leigh Phillips on June 7, 2013 - 11:00 pm

      I think we’re going to have to disagree here, Jon, on the causes of unemployment, but that’s a discussion for another day.

      There is indeed nothing surprising about the fact that JP Morgan would agree with your position on labour liberalisation, etc. And their assessment of the state of play in such liberalisation makes up the rest of the report.

      The notable thing is that *as well as this*, they locate what they believe to be contributing to the crisis in some sort of imagined left-wing, anti-fascist constitutionality and legal legacy. Further, they argue that executives need to be strengthened (which would perforce be at the expense of the legislature).

      Throughout the history of modern democracy, conservative elites have favoured strong executives and bicameralism over strong legislatures and unicameralism precisely because they want a check on what they believe to be an excess of democracy.

      The authors of the report are not wrong per se, despite their wobbly understanding of history: there is actually a constitutional framework that is more democratic and more favourable to ordinary people, and another constitutional framework that is more favourable to finance and industry.

      This is an old, old antagonism. See for example the debates between Hamilton and Jefferson.

      • #4 by erzan on June 12, 2013 - 4:02 pm


        Surely if the goal is to better represent the will of the people, it is important to reflect the will which can change over time. Take Turkey, although the executive may have been elected with a majority in election. In mid term the people may not be supporting this executive and that’s where you could have second chamber, as you do in bicameral systems. So that the changed mood of the people could be represented.

        Thus in a Parliamentary system, an authoritarian executive could manipulate it’s majority support in a unicameral legislature and become ‘an elected dictatorship’.

    • #5 by JakeS on June 10, 2013 - 12:53 pm

      “Constitutional protection for labour gets you a situation where people who are employed are protect4ed too much, and the unemployed can’t find jobs. That calls for labour liberalisation and allowing employers more say in firing.”

      No, that’s wrong. It calls for unconditional, unrestricted fiscal defense of full employment. Supported by unconditional, unrestricted central bank monetization of said deficit.

      - Jake

    • #6 by Ted Anderson on June 19, 2013 - 12:18 am

      Hahahaha, yeah. Let me tell you about how “Right to Work” laws have churned out high-paying, secure jobs here in the US of A.

      Oh wait, no they haven’t and we have millions of under-employed people making minimum wage in jobs that were put together to replace stable manufacturing jobs that were shipped overseas so that companies could make even more profit off of an ever-more-efficient and productive working class.

      Get outta here with this “Golly, maybe workers should just make less and then boom, jobs happen!” nonsense.

  3. #7 by Marc on June 9, 2013 - 8:37 pm

    I’m against any changes in financial laws that criminal organizations like JP Morgan, Goldman Sachs and the EU are for.

  4. #8 by εγωκαλε on June 10, 2013 - 1:22 am

    only the best of death for the bankers and all who assist them in making this nightmare reality for europe.only the best rop and soap.only the best …..hung all of the .sooner or later there will be no plce to hide for the few perverts who want to profit more every day and are never satisfied.they never have enough.i say we dont need shoot to kill (virtually of course not in reality we have no guns).but you havre shoot to kill in your brain all the ideas that come from the side of our murderers ,of our torturers of the bankers and the politicians who assist them in their ,we should not allow them the luxury of escaping torture from all those who suffer because of these guys actons.i say the worst for them only.and then you kill them too…..:)

  5. #9 by Timeo Danaos on June 12, 2013 - 7:22 pm

    Social and political rights are significantly weakened if economic rights are non-existent. In austeity-ridden Greece the encroachment on economic rights is happening every day. We also observe a strengthening of the authoritarian State – concentration camps for persons without legal documents, dismantling of the whole system of collective bargaining, a proliferation of presidential decrees “to be” ratified by parliament, policy brutality, racist crimes going unpunished, etc. Our constitution is the last barrier, but there are many, supposedly modernizing, voices for its reform. A common strategy of neoliberals is – when in power – to introduce changes at a constitutional level that are almost impossible to reverse. At a European level this has worked pretty well with the Maastricht and other treaties. This is why they go for the jugular.
    I think that you should add to AusterityLand Bingo another jeu-d’oie game: Snakes-and-Ladders without the Ladders.
    BTW the mantra of labour market flexibility is – in Bob Solow’s words – a “central bankers’ folk theorem” – without any support from economic theory. Their wet dreams are our nightmares

  6. #10 by kaimu on June 16, 2013 - 1:38 pm

    Aloha! Globally there has been a huge loss in terms of representation of the masses. If you recall the US Congress in their first vote rejected TARP and then were forced into a second vote and a day later TARP was born. Of course JP Morgan had a hand in that and it was Goldman Sachs own “retired” Hank Paulson who led the banking cartel invasion of the US Congress that forced TARP onto America. Unfortunately, new global precedence was set. Contrast that modern day bank cartel power that dominates the world to the dictates of the past in the US Coinage Act of 1792 whereby just to secure a job in the monetary industry you had to put up a $10,000USD bond, equal to $150,000 in today’s money and then any acts of fraud that led to a felony was punishable by death. Only now SIBOR fraud in Singapore has criminal law attached to punish traders with jail time. It is the same TBTF banks like JP Morgan involved in SIBOR and LIBOR fraud and TARP; universal and global fraud rewarded. What sort of basis is that for dictating global constitutional reform when these bank cartels, led by JP Morgan, cannot control fraud and cronyism within their own industry; within their own offices? Lets not promote the London Whale mentality as we are in no need of a World Whale! I predict what JP Morgan is promoting here on the periphery is a favorable “banking constitution” for the day when global markets collapse under the weight of their own corruption. In Monopoly terms it is another “get out of jail free” card! These banks are monopolies make no mistake, as much so as Standard Oil and the Seven Sisters were in the 1920s. It was 1933 when FDR ruled by Executive Order issuing more orders than nearly all US Presidents combined. FDR issued more than 3,700 Executive Orders while in office. The only difference now is that we got no Hoover Dams this time. We saved the banks from their own toxic derivatives though! At current US FED QE rates of $85BIL per month we could have built more than 32 Hoover Dams monthly! Instead we own MBS and US bonds … debt and the privilege of servicing that debt for the next 30 years. The youth of America have been economically condemned without even a single vote in Congress!

  7. #11 by Anthony Papagallo on June 17, 2013 - 2:38 pm

    eat shit from the intelligentsia or arm yourself. its not a difficult choice.

  8. #12 by Savina on June 18, 2013 - 6:46 pm

    Thank you for a very interesting post. I have to correct you though on your take on Italian history: yes, the Christian Democrats were in power for 50 years in Italy, and yes, they did largely determine post-war politics in Italy until the early 90s. However, the Italian Constitution was written by an elected assembly entirely composed of 556 representatives of the anti-fascist movement of various political leanings, 207 of whom were Christian Democrats, while the left wing parties had 228 seats, meaning that it is in fact true that the Italian Constitution has very important guarantees and clauses that were established due to the strong presence of the left in the Constitutional Assembly, and borne out of the common experience of fighting the Nazis and Fascists that all the political parties coming out of the war had gone throug. The comparison with the denazification process in Germany also does not completely hold, since Italy had a very strong resistance movement, which liberated many of the Northern Italian cities occupied by Nazis on its own, before the arrival of the Allied forces. For this reason Italy was able to negotiate peace with the Allies on very different terms than Germany was. With this I don’t mean that the lack of reflection on fascism in Italy was unproblematic, just that it is very different from the situation in Germany.

    • #13 by Leigh on June 20, 2013 - 2:26 am

      Thanks, Savina. You are of course correct. I didn’t want to get into the subtleties of the post-war settlement, but suffice it to say that my one paragraph is not the whole story. In that paragraph,

      I mainly wanted to argue that contrary to the JP Morgan historical account, the idea that all southern countries have anti-fascist constitutions and a socialist legal framework is not really true.

      For a great history of post-war Italy that goes into much more of the detail that I couldn’t go into, my favourite is Paul Ginsborg’s A History of Contemporary Italy 1943-1988.

      • #14 by Alessandro on June 20, 2013 - 3:17 am

        “So, when I told you that this is dead paper, no, it is not dead paper, it is a testament, a testament to a hundred thousand dead. If you want to go on pilgrimage to the birthplace of our Constitution, go to the mountains where the resistance fighters died, go to the prisons were they were jailed, go to the camps were they were hanged. Anywhere an Italian died to redeem freedom and dignity, go there, young people, with your thoughts because it is there that our Constitution was born.”
        – Piero Calamandrei, 1955

        Art. 1: Italy is a democratic Republic, based upon labour.

        Art. 3: [...] It is a duty of the Republic to remove the social and economic obstacles that, by limiting in practice the freedom and equality of citizens, prevent full personal development and the effective participation of all workers in the social, economic and political make up of the Country.

        If JP Morgan does not like this, we can make space for them in Loreto.

        Ora e sempre, Resistenza.

      • #15 by Savina on June 22, 2013 - 6:26 pm

        Ok, I just wanted to point out that the Italian constitution is in fact anti-fascist and much more left-leaning than what one would expect from a country where the left was not in Government until the mid nineties, and even then, not for long.
        And I completely endorse your recommendation of Paul Ginsborg, a great scholar of Italian Contemporary history.

  9. #16 by willyrobinson on June 19, 2013 - 11:40 am

    The JP Morgan document is actually very instructive, and it’s a useful analysis even if your politics is diametrically opposed to theirs. At last there’s some tangible meaning for the word ‘reform’ as used by eurocrats and wealthy member states. Many thanks for the link – w

  10. #17 by Doug Henwood on June 19, 2013 - 5:47 pm

    Despite that pinko anti-fascist legacy (and is “legacy” as a synonym for something perhaps venerable one of the dumb words of our time?), the fiscal tightening in the Europeriphery has been profound – more, in some sense, than the U.S., where elites are stymied in their ability to cut Social Security and Medicare (for now). What more do these ghouls want? Silly question, I know…

    • #18 by Leigh on June 20, 2013 - 2:33 am


      If any readers by the way have not listened to Doug’s radio show, Behind the News, it’s probably the best economics-oriented programme out there. Myself, I regularly cook dinner to it, as the podcast is usually the perfect length for this task.

  11. #19 by z on June 19, 2013 - 9:23 pm

    “divide and conquer” through by heavy handed approaches unto others to abandon what saves them from uncivilized cultures. IN a sense this is a mutation of colonialism approach to inifiltrating developing countries social and civic responsibilities to its populous.

    rule of law and organized civic societies have been around much longer then our new soo called “democracies”.

  12. #20 by Page de suie on June 24, 2013 - 5:08 pm

    malheureusement, ceci reflète l’avis de la plupart des “capitaines d’industries” qui n’attendent que l’avènement d’un nouveau fascisme à l’européenne pour sortir du bois…