From subprime farce to Greek tragedy: the crisis dynamics of financially driven capitalism

At the beginning of his essay on ‘The 18th Brumaire of Louis Bonaparte’, Karl Marx refers to Hegel: all events in history happen twice, and he adds, once as a tragedy, the second time as a farce. That is because people make their history, but not under conditions of their own choosing. It is equally possible to move from farce to tragedy. The farce started in what had appeared to be a minor segment of the US financial system in 2007, the real estate subprime market. Initially, it seemed as if the crisis would be limited to the real estate sector in the US and the most vulnerable victims – the over-leveraged ‘NINJA’ subprime, mortgage-holders with no income, no job, no assets. Even critical economists in Europe were convinced that the US subprime crisis would not cross the Atlantic and disrupt Europe’s ‘real economy’. It was unimaginable that member states of the eurozone like Ireland, Portugal and Greece, and even heavyweights like Spain and Italy, could be pushed to the brink of bankruptcy; or, after half a century of progress, the European integration project brought to the brink of failure. But the mechanisms of the contemporary financial crisis quickly transformed a regional farce into a crisis of the global capitalist formation. This is nowhere better exemplified today than the tragedy of the debt crisis plaguing Greece, and the implications of this for the world’s most important currency union, the eurozone. If the eurozone is to have a decent future (to the extent that this can be achieved under capitalist conditions), it is a very new type of ‘European statehood’ that needs to evolve from the market-oriented one that its establishment proponents have always envisaged. Interventionist policies have to work towards reducing the real economic divergences that exist within the eurozone and the genuine construction this time of a social Europe. This goes beyond making the case that the European Union must become a ‘transfer union’