Not protecting themselves

Jun 12th, 2012 | By | Category: International

The Midlands weather matched the economic gloom as RTE Radio 1’s Pat Kenny interviewed economist David McWilliams about the European crisis. A listener sent in a question to McWilliams, should they open a bank account in France or Germany in order to transfer their modest savings to a country where there is no prospect of an exit from their Euro and no propsect of their savings be greatly devalued at a single stroke?

McWilliams answer was telling ‘Everybody has to look at what has happened over the past few years and protect themselves as well as they can’.

‘Protect themselves as well as they can’: which means what in practical terms?

If one divides the population into three broad groups: there are those at the socio-economic scale who have no means by which to protect themselves, but nor do they have savings to be devalued; there are the elite, who will have the capacity to shift large amounts of money to the safe havens where elites customarily keep their money; and there are those in the middle who have worked hard for the savings they have, but who have neither the means nor the resourcefulness to protect themselves in the way that McWilliams urges.

The German economists who dominate European policy making have a collective fear of inflation. The hyperinflation of 1923 wiped out the savings of the German middle classes, and, a decade later, prompted the deflationary policies of the Depression years and the political and economic inertia which allowed the rise of Adolf Hitler. It was the squeezing of the people in the middle which pushed them into the ranks of National Socialism.

The austerity policies that failed in the 1930s continue to fail eighty years later, yet when Irish voters were asked two weeks ago to vote for the policies that have exacerbated the crisis, 60% of them did so. The deal with Spain that was to be the salvation of Europe on Sunday evening was revealed as an emperor with no clothes by Monday lunchtime, and by this evening Spanish borrowing costs had reached a record high,

Of course, McWilliams is right. It would be foolish for anyone to do anything other than to protect themselves as well as they can,  but people who are persuaded that government economic policy makes sense are hardly likely to take action. It is only when people are squeezed, only when the opportunity to take pre-emptive action is past, that they see the need to protect themselves. Disgruntled and angry middle classes around the periphery of Europe present a dangerous prospect.










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  1. The economic parallels with the 1930s are very real. The political ones are starting to appear with the vote for the Front Nationale in France and the rise of the Nazi-like Golden Dawn in Greece. The elites who feel threatened by any sign of a rise from the left will fund the likes of the Front National and Golden Dawn in the same way that they funded the Nazis in Germany in the 30s. Interestingly, German bankers were among those behind the Nazis – and it’s largely the German Banks whose interests are being protected by the Structural Adjustment Programmes (aka Bail outs) being imposed on the non-elites today.

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