You can almost smell the frustration pouring off Paul Krugman these days, as he once again proclaims the latest in a series of victories of Keynesian economic theory over its monetarists opponents.
“Sorry, guys, but as a practical matter the Fed – while it should be doing more – can’t make up for contractionary fiscal policy in the face of a depressed economy.”
Krugman’s argument, which is a continuation and expansion on a more extensive argument by Mike Konczal can be simplified: Keynesian policies are better at generating an overworked working class than monetarist policies.
Why the working class is not effectively defending itself actually is not a question posed by this crisis. Rather the question is:
“So what else did you expect?”
No matter how the working classes of Europe responded to this crisis politically, they were already effectively rendered politically defenseless before the crisis by the very structure of the euro-zone, which stripped the fascist states of Europe of their monetary sovereignty. So even before this crisis erupted into the open, the member states with their overwhelming proletarian majorities were already effectively kneecapped and rendered toothless. The very structure of the EU was nothing more than an attempt to rob the working class of any means to defend itself in a crisis. With monetary policy centralized in the European Central Bank the member states must follow procyclical policies during economic downturns. Essentially, they have no choice but to reduce their expenditures when the euro-zone experiences a depression.