Following political and economic matters in our media environment is always a two-fold task, especially if you aim, as I do, to comment or share information yourself on occasion. First, there is the dominant narrative to account for: the framing and selection of facts found in the mainstream media, which bounces around in the volleying chatter of talking heads, like a beach ball for all to see. And then there is something closer to the truth, to be sought in non-corporate and less state-aligned avenues of the public sphere such as Democracy Now! (or, say, our own Matthew Payne on the Fukushima nuclear meltdown).
Often the truth is significantly messier and more complex than the dominant narrative. But not always. Sometimes, the truth is itself quite simple in its broad outlines and in such cases obfuscations, elisions, and diversions are deployed to obscure it (the Israel/Palestine conflict is a chief example). The truth about the current crisis in Greece, while complex in its mechanics, falls into the second category of relative simplicity, and may be put like this.
Someone is going to have to take a big hit, and it’s either going to be the great majority of people (workers, families, retirees, etc), with an accent on the most vulnerable, or it’s going to be a much smaller group of elite bankers and wealthy bondholders.
Nestled in the “Too Big to Fail” mantra familiar to everyone after the meltdown of US banks in 2008 is the premise that the public welfare is dependent on (and in the case of austerity, subservient to) the interests of banks and finance capital. It’s a premise, of course, that carries a thuggish threat: without the stabilization of the rotten financial architecture which itself precipitated the crisis*, society will completely collapse. It’s blackmail of the highest order, and the passionate resistance of Greeks, while desperate, is thoroughly just in its refusal of this blackmail. To understand why, I turn to economist Costas Lapavitsas, whose plainspoken analysis opened a recent forum at the University of London (“The Rise of the Indignant: Spain, Greece, Europe”).
According to Lapavitsas, the austerity plan narrowly approved by Greek parliamentarians is so strenuously opposed by the majority of Greeks because they’ve looked at the projections of the plan’s authors and the outcome is clear: default is inevitable.
The austerity plan is based on a report known as the Medium-Term Financial Strategy that includes a current assessment, future projection if the status quo were maintained, and finally the proposed austerity measures as solution.
The Current Assessment
Two years after the initial crisis and a year into its first round of austerity Greece remains in a serious recession. GDP has contracted by 4.5%. The deficit is 10.5% of GDP (the 2nd highest in Europe after Ireland). Official unemployment is about 15% and youth unemployment over 40%. Compounding the recession is a credit freeze. While exports have in fact increased, Lapavitsas says this increase is drawing to an end.
If the first round of austerity were simply continued without revision, the report projects that by 2015 Greek debt would represent 200% of GDP, the deficit would be 15% of GDP, and interest on the debt would be 12.3%. In short, in a couple more years, Greece will be bled white and bankrupt.
Prescription: Second Round of Heightened Austerity
The report’s authors thus propose doubling down on the austerity, with massive contraction of spending (30 billion euros) and the liquidation of 50 billion euros in public assets. The real kicker is how this would all shake out according to the austerity peddlers themselves.
Debt: 140-160% of GDP
Deficit: 8% of GDP
Interest on debt: roughly 10%
In short, in a couple more years, in the midst of protracted recession and marked decline in standards of living, Greece will be bled white and bankrupt. That is, these numbers are essentially just as unsustainable as those they’re designed to remedy.
So, why is this obvious farce being pushed? Two reasons: banks and large bondholders in Europe. The austerity measures are merely designed to buy time before an inevitable default. The essential factor being that by the time Greece does default, its debt will have moved to public holders (it will be workers and taxpayers–the European public–who get the “haircut”, instead of private lenders and bondholders). The austerity buys time and provides a mechanism for the successful transfer of most of the losses to the public.
But default, as even Alan Greenspan has said, is inevitable.
The Left Alternative
The alternative is to pull the plug: default now. The default should be a democratic process with an independent audit commission. The impact of default will be severe and within Greece necessitate the nationalization of banks and the reorganization of the Greek Central Bank. Outside Greece the European Central Bank will be hit and financial unrest will indeed spread across Europe. But the majority of Greeks are not responsible for the corruption, tax-evasion, speculation, and duplicitous accounting of Greek elites and their bankers.
Tied to Lapavitsas’s argument is a claim that Greece should exit the European Monetary Union, which as a neoliberal institution has acted like a “vice crushing the Greek people” (with German industry in particular decimating Greece’s industrial base). David Harvey notes the irony that Germany, along with France the largest foreign holder of Greek debt, has defaulted more than any other nation in the last century.
In sum, the stakes in Greece, as the world over, are between the neoliberal political project of disciplining labor and consolidating the class power of the wealthy, on the right, and the ability of peoples to organize, fight back, and assert control over their own lives and shared future, on the left. As more than a million YouTube viewers know, if they find Harvey persuasive, capitalism never solves its crises, it simply moves them around. Only the organized resolve of everyday people can ensure that such financial crises–like disaster capitalism–are not used to dismantle the democratic and social gains hard won by generations past.
Perhaps, even, the people of Greece, Spain, Ireland, etc, should look to the courageous precedent set by the people of Egypt, Tunisia, Yemen, and others in the Arab Spring in struggling to define a more just and democratic future. In an interview watched by people all over the world on the weekend, Julian Assange noted that the techno-economic base and patterns of daily life in Cairo under the “soft dictatorship” of Mubarak were very similar to those in London, raising the question of where the real power in a society rests. We too, it seems, live in “interesting times.”
* For a structural account of the 2008 economic meltdown, that sets the financial crisis within a broader context of capitalist crisis, see, for example, the excellent interview with economic historian Robert Brenner from 2008.