Greece’s depression is IMF’s idea of ‘progress’

The International Monetary Fund congratulated itself last week for the splendid job it is doing in Greece, declaring the country “is making progress in overcoming deep-seated problems.” With an unemployment rate of 27.2 percent, an economy that has shrunk by at least 20 percent and children going hungry, one has to shudder at the thought of what a lack of success might look like.

Temple of Zeus photo by Andreas Trepte (www.photo-natur.de)

Temple of Zeus photo by Andreas Trepte (www.photo-natur.de)

The depression in Greece is the logical conclusion of austerity, but while Greece is the first in Europe to arrive it is not alone — the composite eurozone unemployment rate reached a record 12.1 percent in March. The eurozone unemployment rate rose to 24 percent for men and women below the age of 25; the European Union-wide rate is nearly as high.

The IMF’s solution? Eliminate more jobs. In its latest report on Greece, issued on May 3 following its latest inspection visit, the IMF graciously mentioned that Greece’s wealthy don’t pay taxes:

“Very little progress has been made in tackling Greece’s notorious tax evasion. The rich and self-employed are simply not paying their fair share, which has forced an excessive reliance on across-the-board expenditure cuts and higher taxes on those earning a salary or a pension.”

But the IMF report quickly followed up by grumbling that:

“[T]he over-staffed public sector has been spared, because of a taboo against dismissals.”

Perhaps you will not fall off your chair in shock, but it is the latter of these two concerns that gets the attention when the IMF gave its verdict on what it expects the Greek government to do:

“A strong recovery will need to be built primarily on deepening structural reforms. … The government’s welcome public commitment to improving the business environment and accelerating privatization now needs to be matched with results.”

Diktats masquerading as democracy

Those bland-sounding words take on deeper meaning when we examine the “structural reforms” already imposed on Greece by the IMF, the European Commission and the European Central Bank, the “troika” that dictates Greek policy. In February 2012, for instance, the Greek government agreed to reduce the already low minimum wage by more than 20 percent, to freeze all public-sector wages until the unemployment rate falls below 10 percent and to deep cuts in pensions.

The Greek minimum wage is €751 per month (equivalent to US$990 or £636). How well could you live on such a sum?

Overall, wages have fallen 40 percent and health care spending has been cut 25 percent. Meanwhile, most of the money released by the troika goes straight back to lenders, not for internal relief. As a result of this austerity, it is no surprise that retail sales in Greece have declined by 30 percent over the past three years and an estimated 150,000 small businesses have closed. Poverty has become so widespread that an estimated 10 percent of Greek’s children go to school hungry.

All this in a country where its biggest and wealthiest industry, shipping, pays no taxes — its tax-free status guaranteed in the constitution. Greece’s wealthy pay little or no taxes, stashing their cash outside the country. Government employees are the people who can’t evade paying their taxes — yet they are the ones scapegoated for economic troubles. (A common pattern in many countries.)

The IMF made no mention of its own role in bringing about this depression in the May 3 report, instead blaming a “lack of confidence” for Greece’s struggles:

“Looking over the period 2010–2012, the much deeper than expected recession was overwhelmingly due to a progressive loss of confidence. … With fiscal adjustment set to remain a drag on GDP growth for several years to come, the key challenge is to generate the improvement in confidence needed for a recovery in investment to begin to more than offset this drag. This cannot happen unless Greece can secure broad domestic support for the program and the political stability that would come with this.”

Yes, if only Greeks would believe that hunger is a sign of progress, everything would be better! In lieu of a sudden spasm of optimism, generating “broad support” for bleeding the country dry to pay back financiers who made reckless gambles might be difficult.

Ideology masquerading as economics

Although it might be tempting to note that doing the same thing over and over while expecting different results is unreasonable, reasonableness is besides the point here: Austerity programs are designed with ideology in mind, not with economics based on the real world. One clue to this is that “structural re-adjustment” programs invariably demand sell-offs of public assets — holding fire sales of state enterprises means private capital can scoop them up at very low prices, and profit nicely from doing so at public expense.

The neoliberal concept is that people exist to serve markets rather than markets existing to serve people. Entire countries have been harnessed to the dictates of “markets.” This has long been the pattern imposed by the North on the South through institutions like the IMF; now the stronger countries of the North are imposing it on their weaker neighbors. Taxpayers in those stronger countries are on the hook, also, as some of their taxes go toward the bailout funds, for which bailed-out countries are merely a conduit to pass the money to financiers, often from their own country. Much of the money Europeans lent to Greece was used to bail out German and French speculators.

The race to the bottom, of which austerity programs and the continual shifting of production to locations with ever lower wages constitute crucial components, represents an intensification of market dominance over human life. It is also a result of a scramble to maintain profits, which have been under continual pressure from the economic crisis.

But neoliberalism is not the product of a cabal “hijacking” economies or governments; it is the natural progression of a system that insists “markets” should be the arbiter of all human problems and the model for social relations and institutions. Capitalist markets are not neutral abstractions perched loftily above the Earth; they are the aggregate interests of the wealthiest industrialists and financiers as expressed through the corporations and other institutions they control.

“Markets” dictate that school children faint at their desk due to hunger while billionaires grab ever more. We can do better than this.

Austerity or Keynesianism: Can’t we do better than this?

Austerity. Keynesianism. Voting for the Center-Right. Voting for the Center-Left. Let’s call the whole thing off.

Five years of the economic crisis has yet to shake the stubborn idea that, if only the right policy were implemented, prosperity would be here again. And so this week’s two turns of the electoral wheel — agreement on a “grand coalition” government in Italy and the return to power in Iceland of the two parties that presided over that country’s collapse — demonstrate that traveling in a circle leads you to where you just were.

(Photo by Jim Champion)

(Photo by Jim Champion)

The outgoing Icelandic government earned a reputation for “standing up” to banks and the International Monetary Fund, and refusing to saddle its citizenry with the massive debts of Iceland’s swollen banks. At first glance, it seems curious that Icelanders would vote out such a government and return to office the same government coalition that presided over the country’s meltdown. But a closer look reveals a much different story. So different, in fact, that the IMF praised the outgoing Social Democrat/Left Green coalition government of Jóhanna Sigurđardóttir. Here is an excerpt from an IMF report on November 19, 2012:

“Directors commended the progress made in fiscal consolidation, noting that it is broadly on track.”

That doesn’t mean that Iceland’s dose of austerity is coming to an end. The IMF report goes on to say:

“While welcoming the recent monetary tightening bias, Directors viewed the policy stance as still accommodative. They agreed that further monetary tightening is needed to bring inflation back to target and to normalize monetary conditions in advance of capital account liberalization.”

Iceland’s banks are too big to fail

Iceland didn’t tell the IMF, or the world’s bankers, to take a hike. Iceland, until recently, was unlikely to be at the center of any financial controversy — a country of 300,000 people with an economy traditionally based on fishing. Somewhere along the way, it was decided to convert the Icelandic economy into one based on financial speculation, with the result that the country’s banking sector grew to nine times the size of its gross domestic product. Iceland’s banks offered interest rates well above that of other countries, drawing in foreign depositors (much like Cyprus). Big pots of money led to the irresistible temptation to speculate, with bank-officer compensation tied to the volume of loans made. The usual result followed.

Not that regulators, or parliament, were zealous in checking the financial sector. An official report by an Icelandic parliament committee states:

“It appears that both the parliament and the government lacked both the power and the courage to set reasonable limits to the financial system. All the energy seems to have been directed at keeping the financial system going. It had grown so large, that it was impossible to risk that even one part of it would collapse.”

Iceland took over its three big banks, but quickly sold two of them to creditors, who in turn sold most of their interests to foreign hedge funds. The Icelandic government did agree to all conditions demanded by foreign creditors, the IMF and the British government, but had to somewhat back off only because the package was voted down in a national referendum. So it’s not accurate to say that the outgoing government stood up to anybody. As the Icelandic blog Studio Tendra pungently put it:

“Iceland didn’t bail out the collapsed banks, but that wasn’t for the want of trying. … [T]he Icelandic government tried everything it could to save the banks, including asking for insane loans to pay off the banks’ debts. … So the true story is that Iceland tried and tried and tried and tried as hard as we could to save the creditors. The only reason why we didn’t is that the Icelandic government, then and now, is completely incompetent.”

The outgoing Icelandic government did follow two Keynesian prescriptions in imposing capital controls and currency devaluation, but these did not do much to ameliorate the pain — Iceland can’t detach itself form global capitalism.

For the years 2009 and 2010, Iceland’s gross domestic product declined more than ten percent and its household consumption fell nearly 23 percent. Recovery has since been at a snail’s pace. Making matter worse, Icelandic personal debt is mostly pegged to the country’s inflation rate. As Iceland continues to suffer from inflation, the amount a debtor owes grows as his or her wages decrease. (Wages since 2008 have lagged the consumer price index, according to IMF statistics.)

The suicide mission of Italy’s “Left”

So much for the “Icelandic miracle.” Icelanders have yet to question the economic system that brought them misery, instead opting to swap one set of mainstream parties for another set. That has been the pattern in advanced capital countries. Italy is not yet an exception, although the dramatic rise of the Five Star Movement — sort of an electoral Occupy movement — as a third force in the Italian parliament may be the start of a pushback. Or it could be a brief protest vote without lasting effect. For now, however, Italy’s Center-Left standard-bearer, the Democratic Party, has apparently chosen to complete its suicide mission by forming a “grand coalition” with the main Right party, the wildly misnamed People of Freedom Party.

Italy’s post-war political parties may have collapsed two decades ago, but the same personalities and the same policies and the same interests nonetheless continue to dominate the political sphere. The Democratic Party is the main remnant of the Communist Party of Italy, and is also is a receptacle for the late Christian Democratic Party, a centrist formation that once dominated Italian politics. The new Democratic prime minister hails has roots in the Christian Democrats, but is the nephew of an important aide to Silvio Berlusconi, Italy’s morbid combination of Rupert Murdoch, George W. Bush and the U.S. right-wing corporate “populist” Ross Perot.

Mr. Berlusconi is one of Italy’s richest persons, owns most of Italy’s mass media and is continually mired in multiple legal entanglements; he dealt with the last of these by forming his own political party, the recently renamed People of Freedom, which catapulted him into the prime ministership. “Freedom of Capital” Party or “Silvio’s Get Out of Jail Card” Party would be more accurate, but nonetheless Italians voted this personal vehicle into office three times.

Italy’s Democratic Party is as eager to implement austerity as the Italian Right — voting for it changes nothing. Italy’s outgoing “technocratic” prime minster, Mario Monti — appointed without the tiresome pretense of elections — and the head of the European Central Bank, Mario Draghi, both enjoy Democratic Party support, and the new finance minister has worked closely with Mr. Draghi.

The main potential fracturing point in the grand coalition is personality, which might make for interesting reading but is nothing more than a diversion from a serious discussion of alternatives.

The Five Star Movement’s leader, Beppe Grillo, now the main opposition in the Italian parliament, characteristically didn’t mince words in his blog this week:

“In the last few decades many sides have admitted that this political class lacks credibility, this same class that for the umpteenth time is asking for your vote of confidence. It’s as though this governing team had come down from the moon, as though they are not the ones directly responsible or jointly responsible for what has happened up until now.”

Alternating parties but the same austerity

There’s nothing unique about Italy here. With the exception of Greece, where Syriza (the Coalition of the Radical Left) missed winning the last Greek election by two percentage points, voters in all advanced capitalist countries have been content to alternate the main capitalist parties in office while beginning to voice displeasure through social movements and in polls. One important reason is that the dominant alternatives to the Right — Socialist, Social Democrat, Labour, Democratic & etc. — offer no alternatives to the Right; at best they offer “austerity lite.”

Various reasons, each with some measure of validity, can be assigned as the cause: dependence on corporate money, corruption, domination of the mass media by the Right, philosophical and economic myopia, cowardliness. Although these factors form a significant portion of the answer to the puzzle, an underlying cause has to be found in the exhaustion of social democracy in Europe and liberalism (as the term is used there) in North America. These political formations are trapped by their fervent wishes to stabilize an unstable capitalist system.

They wish to discover the magic reforms that will make it all work again. They do have criticisms, even if they are afraid of saying them too loud, but are hamstrung by their belief in the capitalist system, which means, today, a belief in neoliberalism and austerity, no matter what nice speeches they may make.

The Right, on the other hand, loudly advocates policies that are anathema to the working people who form the overwhelming majority but have the mass media, an array of institutions and the money to saturate society with their preferred policies. But, perhaps most importantly, they have something they believe in strongly — people who are animated by an ideal, however perverted, are motivated to push for it with all their energy.

In contrast, those who are conflicted between their belief in something and their acknowledgment that the something needs reform, and are unable to articulate a reform, won’t and can’t stand for anything concrete, and ultimately will capitulate. When that something can’t be fundamentally changed through reforms, what reforms are made are ultimately taken back, and society’s dominant ideas are of those who can promote the hardest line thanks to the power their wealth gives them, it is no surprise that the so-called reformers are unable to articulate any alternative. With no clear ideas to fall back on, they meekly bleat “me, too” when the world’s industrialists and financiers, acting through their corporations and the “market,” pronounce their verdict on what it to be done.

The reformers can call themselves Socialist, Social Democrat, Labour, Democratic or Liberal, but the label makes no difference. The are dancing to the same tune as their legislative rivals. All dancers will back reforms when there is concentrated public pressure; when the pressure subsides, the reforms are taken back and austerity attacks are relentlessly pushed forward. Major reforms in the United States came in the 1930s and in Europe following World War II thanks to rulers’ fears of being swept away; when the movements responsible for forcing these major reforms became content with reform, the rollback began.

Keynesian reforms would be better than austerity, but would be no more permanent than those of last century; moreover, Keynesianism keeps the capitalists in the saddle, allows them to regain their confidence and gives them the breathing space necessary for them to methodically take back the reforms.

The working peoples of the world’s advanced capitalist countries are living through a structural crisis of capitalism, not simply a rather nasty downturn similar to the repeated recessions of the past. Reforms, not even those on the scale of the mid-20th century, are a panacea. The solution is to be found not on a ballot but rather in organized mass action working for a more humane system not content to settle for reforms that will be taken away. If not today, when?

Cyprus pensioners told to pay for crisis. Who will pay tomorrow?

Either bankers are so confident of their power that they increasingly can’t be bothered to disguise it, or we have to stretch the definition of “democracy” so far that the word loses any sense of meaning. This week’s news that the newly elected government of Cyprus was ordered to make its savings depositors pay for a bailout of Russian oligarchs and real estate speculators is stunning even by the standards of the global economic slump.

None of the previous eurozone bailouts had gone so far as to directly confiscate the savings of ordinary depositors. Not even in Ireland, where former Prime Minister Brian Cowen had huffed and puffed that Ireland would not surrender its sovereignty — which he demonstrated by insisting that Ireland’s ultra-low corporate tax rate not be touched. It wasn’t. European bankers had no issue with that, granting him that one concession while imposing cuts to wages, lowering the minimum wage, drastically raising water rates, raising university tuition and reducing health care services.

The intensity of Ireland’s austerity derives from the decision by the former prime minister to cover all potential losses by Ireland’s major banks, no matter how reckless their speculative lending had become. In other words, the Irish government paid off the bad loans made by its bankers and guaranteed speculators in the banks’ bonds would suffer no losses, and passed the bill onto its citizens. This represented an extraordinary warping of the idea that bank deposits, up to a certain level, are guaranteed. Other countries have had various versions of this austerity imposed on them. But now the European Union and its bankers are attempting austerity from a different angle: Partial confiscation of all savings, even if “guaranteed.”

No, that doesn’t mean that the normal austerity terms aren’t being imposed by the European Central Bank, the eurozone’s finance ministers and the International Monetary Fund. For weeks, rumors had circulated that, this time, that there would be a sharing of the cost of a bailout as Cyprus inched closer to a bailout. In the ordinary sense of this concept, that would mean that bondholders and the banks themselves would shoulder some of the burden. Not surprisingly, there had been pushback against this idea with financiers complaining that making them take responsibility for their own speculation would be disruptive to financial markets.

Finance ministers want pensioners to pay for crisis

Plan B was is to make working people and pensioners who have their life savings in banks and had nothing whatsoever to do with the latest eurozone crisis instead shoulder the burden. The Cypriot government was told point-blank to confiscate a portion of depositors’ savings or all money would be cut off, which would cause an immediate collapse of its two primary banks. No matter that deposits up to €100,000 are guaranteed. To avoid a bank run, Cypriot banks are closed for at least three days so that Cypriot parliamentarians can be hectored by eurozone finance ministers to do their duty.

The Cypriot parliament said no in its March 19 vote, but “no” votes in other countries have been reversed under pressure, so this drama has not yet run its course.

Cyprus needs €17 billion to bail out its banks, but European Union and International Monetary Fund officials are loaning only €10 billion, insisting that the remainder come from a deposit tax and other internal measures, including privatizing utilities. And why do Cypriot banks need all this money? Because they over-extended themselves on loans to real estate developers and others, the same story as in so many other countries. They also absorbed losses when Greek government bonds they owned were devalued in the wake of Greece’s ongoing crisis. An added complication is that about 40 percent of Cyprus’ total deposits are by foreigners, mostly Russians, causing extra challenges.

Cypriot banks are widely seen as money-laundering havens for Russian oligarchs, and a straight bailout of the banks would appear to many eyes as a bailout of money launderers. That in itself would not look good. In addition, German Chancellor Angela Merkel faces re-election later this year and, given repeated assertions by German right-wingers that Germany is bailing out slothful Mediterraneans, is loath to leave herself exposed to more such charges.

Imposing a “deposit tax” only on deposits greater than the government guarantee would be one way out of this political dilemma, but that would leave Russia angry. Not only does Russian President Vladimir Putin seek to protect his country’s oligarchs, but Russia has previously granted Cyprus a loan on which the Cypriot government hopes to re-negotiate easier terms. As it is, Russia strongly protested the proposed confiscation that would have affected everyone.

The Cypriot government is caught between multiple rocks and hard places — subordinate to Germany, the northern European Union countries that ally with Germany on financial issues, Russia, the European Central Bank and the International Monetary Fund. It is also subordinate to financial markets, a nice term that really means international financiers and speculators. Countries far bigger than Cyprus are subordinate to financial markets, and even large countries like Germany are not independent of market forces.

Cypriot banks hold assets estimated at eight times the country’s gross domestic product — Cyprus, like Ireland and Iceland, which had similarly bloated banks, can’t sustain a financial sector swollen to such a dangerous size. Cypriot banks offered interest rates far above rates found elsewhere, which attracted foreign depositors but also signaled significant risk. Banks that do not ask questions of people who deposit huge sums of money are not closely regulated. The downside of that risk has materialized, but rather than impose the cost, financiers and the government ministers who represent them prefer to say “never mind” to the deposit insurance counted on by working people and pensioners banking their life savings.

A crisis of financial domination, not national characteristics

The social risk here, in a broader sense, is that the Cypriot crisis will be seen through nationalist lenses. To accuse “slothful Mediterraneans” or “arrogant Germans” is to be blind to the larger structural forces at work, which pay no attention to national borders. Financiers last year imposed new unelected governments on Greece and Italy so that their preferred policies be carried out. If they can topple one government, they can topple other governments; the pious declarations that Cyprus’ confiscation of savers would be a unique event that won’t be repeated rings hollow given those precedents.

Austerity comes in many forms and no country’s workers are exempt — the German manufacturing “miracle” in fact has a down-to-earth cause — a decade of wage cuts for German workers. Germany is ever more dependent on exports as its domestic ability to consume slowly declines due to the steady drop of wage cuts. When those export markets begin to dry up, German workers will not be able to pick up the slack and German manufacturers and financiers will impose stronger austerity on German workers to buoy profits.

For now, German workers are relatively privileged, a difference exploited to foster divisions. Austerity has been much harsher in the eurozone’s Mediterranean countries and Ireland. Thus far, we have seen only the beginnings of any political fightback, in the form of strong electoral showings by Syriza (the Coalition of the Radical Left) in Greece and the 5 Star Movement in Italy. For the most part, Europeans have continued to alternate among their local dominant parties.

Frequent massive demonstrations demonstrate widespread anger — that is important, as the route to reversing austerity and the system that imposes it lies in mass action. It is a healthy sign of cross-border solidarity that demonstrators in front of the Cypriot parliament carried signs saying (in Italian and Spanish) “today me, tomorrow you.”

But anger without organization ultimately dissipates like steam released from an engine. Such organization has to translate, in part, to challenging political power, which in turn is intimately linked (and subordinate) to economic power. Austerity does not fall out of the sky; it is an expression of power to benefit those in power. Capitalists, including financiers, can remove governments and confiscate savings. What’s next? The return of debtors’ prisons? Mandatory unpaid labor to boost profits? Those might sound far-fetched, but unchecked power has a way of moving toward limitless power. Organizing to reverse this is simply self-defense.

There are no national solutions for Greece, or any other country

There is no Greek solution to Greece’s crisis. There can be only an international solution. However that solution unfolds, the day when a radically different course, a clear alternative to austerity, can no longer be avoided is perhaps drawing closer.

Aware of their dwindling support and the increasing desire among Greeks for a different course, the two “left of center” parties propping up the pro-austerity right-wing government of Greece may yet balk at committing a final suicide.

Four days after the expiration of a deadline handed down by European Union finance ministers, the leaders of Pasok and the Democratic Left were still refusing to fully agree to demands for yet another round of cuts and labor “reforms,” the standard euphemism for eliminating job protections. Those leaders’ reluctance to agree to terms with Prime Minister Antonis Samaras, and their apparent ending of talks (at least for the moment) on October 23, adds more uncertainty to the already conflicting signals coming from the Greek government.

The “troika” — the International Monetary Fund, the European Central Bank and the European Commission — have been unyielding in insisting that Greece impose more austerity on its citizens in exchange for the latest tranche of financing totaling €31.5 billion.

On the one hand, we have Mr. Samaras, head of the conservative New Democracy party, saying at last week’s European Union summit that Greece will be broke next month without the latest loan installment, yet declaring:

“The economy and society are at their limits, the bloodline of the economy that is liquidity is at point zero; unemployment has reached nightmarish levels and every Greek is facing a personal tragedy.”

On the other hand, the Greek finance minister, Yiannis Stournaras, in an October 22 speech to the Greek parliament, declared the country’s nightmare does not reside in the austerity cuts demanded in exchange for fresh loans, but rather in not imposing the cuts:

“The cost for the country will be boundless if we don’t get the €31.5bn installment. … If we don’t get the loan people will go hungry.”

Perhaps the finance minister, one of the “technocrats” who hold most portfolios in the current government, is unaware that Greeks already are starving. Several rounds of imposed austerity has brought only misery to the people of Greece. Here are some of the results:

  • Overall unemployment is at 25 percent.
  • Youth employment is at 55 percent.
  • Average wages have been cut 40 percent.
  • Cuts to the health care system of 25 percent since 2009.
  • Economy has shrunk 18.4 percent since 2008.

The years of austerity were supposed to turn around the Greek economy, yet the deficits only become larger. The country’s deficit for 2011 is now estimated to have been 9.4% and its debt has widened to 171% of gross domestic product. If more people are thrown out of work and those still employed take home less, then less can be bought and less taxes will be paid.

Although the International Monetary Fund quietly admitted earlier this month that austerity does not work, the troika is holding to a hard line in demanding still more austerity measures. Greece is expected to come up with another €13.5 billion in cuts. The troika demands implementing a six-day working week; further cuts to the minimum wage; further reductions to pensions; “increased flexibility” of work schedules; tens of thousands of government workers and professors be laid off; and income-tax rate gradations flattened, which would increase the tax burden on those who aren’t wealthy.

The latest €31.5 billion installment won’t be going to Greeks; virtually all of it will go to banks. A conservative Greek newspaper, Kathimerini, reported (based on a leak from Pasok) that Germany’s finance ministry demanded that an escrow account be set up that would ship money to the European Central Bank. The proposed escrow account would not only be the recipient of all the bailout money, but Greece’s tax revenues would also sent there.

To put this in plain language, Greece would be reduced to a vassal state in which it had no control over its finances and its tax revenues would be used to pay banks instead of for government functions.

European Union finance ministers had demanded, as long ago as February 2012, that such an escrow account be set up for bailout money, but the extension to Greece’s internal revenue is something new. Kathimerini quoted Germany’s finance minister, Wolfgang Schäuble, as declaring:

“In the last program [for Greece] we introduced mechanisms; we need to strengthen those in the sense of control mechanisms, perhaps also automatic stabilizers.”

The “automatic stabilizers” are measures that would automatically further cut Greek government spending beyond whatever is agreed if the deficit grows wider. Given that austerity will lead to less revenue, a wider deficit is the likely outcome. Seeming to draw a line, Democratic Left leader Fotis Kouvelis on October 23, following the impasse in talks with Samaras, added still more contradiction to the government coalition’s signals. Kathimerini reported:

“ ‘If the unacceptable demands of the troika are met, they will increase sackings, unemployment and the recession,’ said Kouvelis, adding that he felt the troika was aiming to ‘flatten’ any working rights that remain.”

It must be asked, however, why Mr. Kouvelis’ Democratic Left, and Pasok, are propping up Mr. Samaras’ pro-austerity government, since such goals have long been in place. Mr. Samaras’ New Democracy — Greece’s leading big-business party — has strong links with European capital and has no basic disagreement with the ruthless austerity being imposed across the continent despite the prime minister’s public worry that the Greek “economy and society are at their limits.”

The waves of strikes that have washed over Greece is a development that Samaras can’t fail to notice. Yet he and his government have nothing to offer other than more austerity; the “troika” certainly has nothing else to offer. A radically different course is necessary. Greece can not survive as an island unto itself — to repeat, there is no Greek solution to Greece’s problems, only an international solution. Financiers and industrialists operate internationally, and working people have no alternative to uniting across borders in order to defend themselves.

That does not, however, mean that Greece can’t adopt new programs internally. The main political current offering a radically different program is Syriza, the Coalition of the Radical Left, the largest opposition party and which currently leads in polls. In a talk last summer, a Syriza representative laid out a different course:

“The reversal of the descent towards degradation and marginalization cannot be achieved without the implementation of a radical program of reforms and transformations of the state, the political system and the entire ‘body’ of the Greek social formation. … [T]he crisis we are living through is a crisis of the system itself, rather than simply a management crisis of the system. Everything must change: the political system, the state, the relation of the citizen with the state and with politics. Consequently, the way out cannot be found in a return to some version of the past. The way out lies in opening up new paths to new productive and consumption paradigms, to new forms of real democracy, to new social arrangements based on equality and solidarity, the respect of human dignity and the environment.”

Among the highlights of Syriza’s program are:

  • New taxation policies to lessen the burdens on low-income people and small businesses to make taxation more fair and to eliminate the large problem of the “black market” whereby many Greeks don’t pay taxes.
  • Elimination of the “clientist” system that rests on the “inside dealing” of the two-party system (New Democracy and Pasok) through a drastic overhaul of the administrative system and empowerment of citizens through bottom-up and top-down changes.
  • New institutions of workers’ control and social control to increase day-to-day democracy and accountability.
  • Democratic planning involving the parliament, the scientific community and society at large, linked to specific policies.
  • Development of long-term plans to reconstruct the economy on the basis of increased bargaining power for labor; reducing dependence on imports and external borrowing, supporting employment and respecting the environment; and building a society of justice, full employment and solidarity, with an enhanced and equal position in the European and international division of labor.
  • Changing the banking system to support the real economy and a targeted productive reconstruction, establishing public control over banking, and recapitalizing banks through the issuing of ordinary voting shares.

Such a program is by no means “revolutionary,” and Syriza supporters don’t claim it is. But such a program (which has much more to it than the above summation) is no mere reform, either; rather, it offers a radically different way of organizing Greek society tomorrow that can be built with the bricks of today. This program also keeps Greece connected to Europe; Greece can’t prosper in isolation.

Present-day Europe, in the form of a European Union dominated by the unaccountable and undemocratic European Central Bank, is not capable of becoming a platform for such a program as outlined by Syriza. Ultimately, Greeks, Europeans and everybody else can only prosper in a democratic system geared toward social good, public accountability and an economy oriented toward full participation and the development of all men and women.

The dismantling of the current structure of the E.U., one-sided trade agreements, international financial institutions and the immense power concentrated in corporate hands will have to be mirrored everywhere. If we are living in a globalized world, then the world’s salvation can only be on a global basis.

A medieval present of austerity, a future of feudalism

By Pete Dolack

Austerity is just another word for punishment. The corporate mass media serves us a daily diet of central bankers, government ministers, financiers and industrialists lecturing us that we must swallow bitter medicine as repentance for living beyond our means.

Those who caused the economic collapse ask everyone else to swallow the medicine, and those financial doctors are not yet done writing their austerity prescriptions. Saddled with high unemployment, a shrinking job base as production and services are steadily moved to overseas low-wage havens and a lack of incentive to invest as the products that are made can’t find a market, the solution, we are told, is: Cut wages and social programs more. Medical doctors long ago stopped using leeches and blood-letting as their primary “cure.” Mainstream economics, sadly, has yet to evolve beyond that medieval stage and its practitioners have no licenses that can be revoked.

The costs to working people who have been forced to pay for the excesses of financiers has been high in many countries. Rather than isolate individual countries, a tactic used to enable finger-wagging at Irish, Spanish, Greeks & etc., let us instead look at several countries at once, and see if we can spot patterns.

Spain: Pain for people, bailouts for banks

  • 25 percent unemployment
  • 52 percent unemployment for people younger than 25
  • Spending cuts and tax increases biggest in Spain’s modern history

Spain ceded its remaining sovereignty on July 10, when the so-called “troika” — the European Central Bank, International Monetary Fund and European Commission — agreed to give Spanish banks a bailout in exchange for the usual harsh conditions. The twist here is that the bailout will go directly to Spanish banks, rather than the previous European practice of using a national government as an intermediary. This is a bookkeeping trick so that the deficit of the Spanish government is not technically increased, but Madrid nonetheless will now have its finances directly supervised by the troika.

The next day, Prime Minister Mariano Rajoy dutifully wielded the ax. According to a report in El País, the national sales tax will rise to 21 percent from 18 percent; cuts in wages and benefits to civil servants and the unemployed will be imposed; tax benefits for employers who hire will be reduced; Christmas bonuses will be eliminated; tax setoffs on mortgage payments will be eliminated; and energy prices will increase. Those measures are on top of earlier rounds of austerity, including new rules to make firing workers easier. In just the first three months of 2012, about 375,000 jobs were lost, representing an estimated loss of about 950 million euros in income tax receipts.

The hard-line vice president of the European Commission, Olli Rehn, strongly hinted that more austerity will be expected: Spain “will have to comply fully” with the new conditions and impose more cuts if told to, El País reported. The Spanish economy was already expected to contract this year, and these measures will depress consumer spending further. Yet consumer spending is the engine of economic activity in Spain, as it is in any other advanced capitalist country. Blood-letting.

Spain is the one country that experienced an even larger housing bubble than the United States. When the bubble burst, Spain’s system of community banks, known as “cajas,” were hit hard because they had lent heavily in real estate and construction. The cajas were consolidated in an effort to create banks with more assets, but instead larger banks with bigger debts was the result. Debts that are to be repaid by austerity imposed on Spanish working people.

Ireland: Asserting ‘sovereignty’ by keeping taxes low on corporations

  • 15 percent contraction in economy
  • Middle-class wages have been cut by about 15 percent
  • 15 percent unemployment

Fifteen does not appear to be Ireland’s lucky number. Seeing no future for themselves at home, Irish students are leaving in droves — more than 1,000 per month. Irish banks engorged themselves on loans to fuel a housing and construction bubble at home, with bank executives and speculators making fortunes but homeowners left holding the bag when the bubble burst and prices collapsed. Ireland’s three biggest banks were bailed out when Brian Cowen, then prime minister, unilaterally stepped in and announced that the government would assume all the debts of the banks.

The ex-prime minister put on a show, huffing and puffing that Ireland would not give in to unreasonable demands, would not surrender its sovereignty. Where did Mr. Cowen draw the line? Was it cutting wages, lowering the minimum wage, drastically raising water rates, raising university tuition or reducing health care services? No, none of those were of concern to him. What he did get worked up about was Ireland’s ultra-low corporate tax rate — set far below what working people must pay. He demanded, and received, one concession: No increases of corporate taxes.

The result was an 85 billion euro bailout of the Irish government by the European Central Bank and International Monetary Fund, all of which goes toward paying back speculators. Ireland has already seen five austerity budgets since 2008, and its repeated raising of taxes and cutting of spending is likely to last for at least three more years. The sales tax is now a punishing 23 percent, while taxes on incomes, cars, homes and fuel are all higher; government-benefits payments have been cut.

An Irish economist, Morgan Kelly, who nearly alone in his country predicted the housing crash, summed up the bailout this way:

“Everyone is a winner, or everyone who matters, at least. … The Germans and French banks whose solvency is the overriding concern of the [European Central Bank] get their money back. Senior Irish policymakers get to roll over and have their tummy tickled by their European overlords and be told what good sports they have been. And best of all … the senior management of the banks that caused this crisis get to enjoy their richly earned rewards.”

Latvia: “Solving” problems through emigration

  • Unemployment peaked at 20.5 percent
  • Real gross wages fell seven percent in 2009 and another eight percent in 2010
  • Population has fallen from 2.7 million in 1991 to 2.2 million in mid-2011

The return to capitalism as Latvia regained its independence with the fall of the Soviet Union in 1991 has not been smooth sailing. First there was hyperinflation, as prices rose more than 1,000 percent in each of 1991, 1992 and 1993; a widespread loss of savings during economic turmoil in 1995 and 1996; and another crash in 1998 as the Russian ruble collapsed. A credit boom sparked by cheap loans from Swedish banks following Latvia’s ascension to the European Union in 2004 did not last long — and times have become so difficult that Latvia is undergoing a demographic implosion as Latvians see no choice but to leave.

Lativa’s unemployment rate has fallen to 16 percent — a decline due to the heavy rate of emigration. The economy contracted by 25 percent for the three years of 2008 through 2010. Assisting in that decline was a 30 percent cut in public-sector wages and cuts to pensions — a so-called “internal devaluation” as the Latvian government refuses to devalue its currency to make its export products more competitive; it maintains a peg to the euro in hopes of joining the eurozone. A slight rebound in 2011 is hyped by neoliberal apologists as “proof” that Latvia is on a sound course, but a look at the bigger picture reduces that claim to rubbish.

The U.S. economists Jeffrey Sommers and Michael Hudson, in a tart analysis, note that nationalism keeps austerity-minded parties in power because the main opposition to austerity comes from a party that represents Latvia’s sizable Russian minority; anti-Russian sentiment continues to remain strong enough to override all other considerations. They write:

“Birth rates fell during the crisis – as is the case almost everywhere austerity programmes are imposed. Only now is Latvia seeing the social effects of austerity. It has among Europe’s highest rates of suicide and of road deaths caused by drunk driving. Crime is high because of prolonged unemployment and police budget cuts. There is less accessible, lower-quality education and there is a soaring brain drain alongside blue-collar emigration.

“The moral for Europeans is that a Latvian economic and political model can work only temporarily, and only in a country with a population small enough (a few million) for other nations to absorb émigrés seeking employment abroad. Such a country should be willing to have its population decline, especially its prime working-age cohort.”

Lithuania: Another Baltic Tiger “stabilizes” through emigration

  • Unemployment peaked at 18.6 percent
  • Three consecutive years of economic contraction, including by 15 percent in 2009
  • Highest emigration rate in Europe

Latvia’s Baltic neighbor has feared little better. A fast-falling economy has led to an exodus out of Lithuania. As in Latvia, unemployment has declined because so many have left. And although the economy did grow last year, that does not mean all the losses will soon be made up: the International Monetary Fund projects that by 2015 Lithuanian gross domestic product will remain 12 percent less than it was in 2008.

Most the emigrants are young people. In 2010, eight percent of all Lithuanians ages 25 to 29 emigrated. The European Institute reports Lithuania’s austerity measures include a two-year freeze in public-sector salaries; a 30 percent cut in public spending; an 11 percent cut in public-sector pensions; and cuts to parental-leave benefits.

Portugal: Forgoing investment in exchange for a dictated bailout

  • Unemployment has reached 15 percent
  • New laws making it easier for employers to fire workers
  • Rent controls eliminated

Portugal last year accepted an 80 billion euro bailout, in return for which the government had to postpone the building of two high-speed rail lines and a new airport, cut spending, impose yearly layoffs and sell off state energy companies. As a result of the austerity, the economy is expected to contract by another 3.4 percent this year.

The European Union did not leave any room for democratic discussion — although the bailout was negotiated during an election campaign in Portugal, E.U. finance ministers announced there would be no release of bailout funds without an agreement by all Portuguese parties. “We call on all political parties in Portugal to swiftly conclude an agreement on the adjustment programme and form a new government after the upcoming elections with the ability to fully adopt and implement the agreed fiscal consolidation and structural reform measures,” the statement said.

Greece: Experiencing the logic of neoliberalism first

  • 22 percent unemployment
  • 40 percent wage cuts
  • 13 percent shrinkage of economy, with another seven percent decline expected this year

With all the coverage of Greece, no more than a brief summing up is necessary here. Two crucial results of the 130 billion euro bailout agreed to early this year are that Greece was required to change its constitution to ensure that banks are paid back before there is any spending on social programs and that the bailout is used almost exclusively to service the interest on Greece’s debt — not even to pay down the principal. Small businesses, the backbone of the Greek economy, are closing by the tens of thousands because few people can afford to buy what they once could.

As I have previously written, Greeks worked, on average, 42.3 hours per week on their main job — the most working hours of any people in Europe). Their reward is the most punishing austerity of any European country. One aspect of that austerity is the crumbling of Greece’s health care system, which has endured a 25 percent cut in spending since 2009. The result of those cuts is under-staffing, shortages of medicines, dangerously long waiting periods for operations and increased out-of-pocket expenses that many can’t afford.

Greece’s largest industry is shipping. Not only do Greek shipping tycoons pay no taxes (not unusual among Greek big business), but the industry’s tax-free status is enshrined in the constitution. Greek business leaders don’t pay taxes, but the people who can’t avoid paying taxes — government workers — are demonized as the cause of Greek’s problems, and are being laid off in large numbers, while those who remain have been saddled with draconian wage cuts. Similar wage cuts and layoffs are imposed in the private sector.

Austerity for who?

It would seem to defy understanding how more of the medicine that has made most of the world’s economies sick could possibly be seen as the solution, until we observe the pattern.

Financiers can’t tolerate losses flowing from their own greed and reckless gambling. Their solution is to have the state guarantee their stratospheric profits, bonuses and salaries. Governments can only do so through extracting money from their citizenry and facilitating the upward flow of wealth within corporate structures. Industrialists don’t mind those subsidies for financiers because the banks will be more willing to lend to them in a time of economic uncertainty and the “market discipline” applied by financiers boosts their own profits.

Markets do not serve people; rather, people exist to serve markets. And “markets” are simply the aggregate interests of the most powerful capitalists, both financiers and industrialists. Entire countries — a list not limited to those sketched above — have been harnessed to the dictates of “markets.” This has long been the pattern imposed by the North on the South; now the stronger countries of the North are imposing it on their weaker neighbors. Taxpayers in those stronger countries are on the hook, also, as some of their taxes go toward the bailout funds, for which bailed-out countries are merely a conduit to send the money to financiers.

The race to the bottom, of which austerity programs and the continual shifting of production to locations with ever lower wages constitute critical components, represents an intensification of market dominance over human life. It is also a result of a scramble to maintain profits, which have been under continual pressure from the economic crisis.

All that is on offer is more pain, more austerity. The most any government, all of which lie prostrate at the feet of their biggest capitalists, is able to offer are weak, unfocused attempts to inflate another financial bubble or to indulge in fantasies of “green capitalism” whereby the same economic system that causes massive environmental destruction will somehow be re-tooled to profit further by cleaning up its own mess.

We are to be servants of the richest, so say “markets” — more a resemblance to feudalism than to a democratic society. Continuing to do so is not simply irrational; in the long run it will be suicidal.

You can vote as bankers dictate, but is that democracy?

By Pete Dolack

Voters in Greece sort of voted as they were ordered to by European financiers and banking officials. Or least enough voters did so for them to declare victory.

The stability that financiers and banking officials cherish, however, appears elusive. Greece will have a new austerity government although anti-austerity parties won a majority of votes. For, to put it in the current Greek terminology, the pro-“memorandum” parties earned only 42 percent of the vote between them. Yet those two parties, New Democracy and Pasok, won a majority of seats in Greece’s parliament.

Those parties, along with coalition partner Democratic Left, will govern for now, but they will not rule.

The 50-seat bonus given to the first-place finisher, a peculiarity of Greek electoral law, did what it is intended to do — make the formation of a government easier. Without the bonus, there would have been too much fragmentation and the likelihood of a third election in as many months. As it is, the June 17 re-vote provided a vivid illustration of a bitterly divided country, although the vote was more consolidated than was the May 6 vote.

New Democracy, Greece’s major party of the Right, won 30 percent of the vote this time as opposed to 19 percent a month ago; Syriza, the Coalition of the Radical Left, won 27 percent of the vote as opposed to 17 percent a month ago. At bottom, such consolidation probably reflects more than any other factor the relentless pressure applied by officials of the European Central Bank, the European Union apparatus, the Bundesbank (Germany’s central bank) and finance capital in general. They quickly served notice that the pressure is not off when they demanded the formation of a government to their liking.

Before the results were official, the finance ministers of the countries using the euro as their common currency (referring to themselves as the “Eurogroup”) issued a statement that declared the election “should allow for the formation of a government that will carry the support of the electorate to bring Greece back on a path of sustainable growth. … The Eurogroup therefore looks forward to the swift formation of a new Greek government that will take ownership of the adjustment programme to which Greece and the Eurogroup earlier this year committed themselves. The Eurogroup expects the [lending] institutions to return to Athens as soon as a new government is in place to exchange views with the new government on the way forward and prepare the first review under the second adjustment programme.”

European Union officials were said to be insisting on the largest possible coalition, although New Democracy and Pasok, Greece’s discredited parties who formerly alternated in government, do have a majority of seats by themselves thanks to New Democracy’s 50-seat first-place bonus. Double-talk promises by the two parties that there is no alternative to continuing with the “memorandum” (as the agreement with the European Commission, European Central Bank and International Monetary Fund is called in Greece) was paired with their insisting they would negotiate new terms.

In essence, New Democracy and Pasok said, “Vote for us and we’ll get more loans and better terms.” But let’s parse the finance ministers’ statement above. The key passage is their “expectation” that the “Greek government that will take ownership of the adjustment programme,” making sure to note that Greece has “committed” itself. Minor tinkering with the details aside, that means stick with the (austerity) plan. Considering the highly politicized state of Greeks these days, the number who voted for one of the two austerity parties out of fear induced by the daily warnings of economic armaggedon must surely be higher than those who believed the unrealistic promises. The statement given by the finance ministers isn’t any different from what they, and the financiers whom they represent, had repeatedly delivered in the five weeks between elections.

Banking officials realize they have to “reward” Greeks for voting as they were told, and will make minor concessions, mostly likely by extending some repayment periods. The basic program, however, is not going to change, as German Chancellor Angela Merkel made clear in a proclamation at the Group of 20 summit a day after the election: “There can be no loosening of the reform steps.”

The translation of Chancellor Merkel’s statement is that the “markets” — financiers in the form of investment bankers, bond traders, hedge-fund managers and other speculators — will be making the decisions. That is consistent with her insistence that further “relief” from mounting debt depends on a willingness to subordinate further to financiers and central banks. Chancellor Merkel is not a stubborn holdout nor obsessed with Weimar-era inflation as she is often portrayed; she is simply reminding other national political leaders that any eurozone harmonization will conform to the tightest policy among them and Germany has that tightest policy. The “markets” insist on it.

The choice facing not only Greeks but all peoples living in eurozone countries is to accept the logic of capitalist development or to mount a coordinated, cross-border fightback. Accepting the logic of E.U. capitalism is to accept that financiers and central bankers will continue to impose austerity and the inevitability of relinquishing the power to make political decisions to them so that decisions are made by unaccountable bureaucrats in a supra-national governing structure rather than by national governments subject to elections.

Not that elections are currently decisive. The new Greek government will govern, but it will not rule. That was made clear last year, when former Prime Minister Georgios Papandreou dared to suggest a popular referendum on austerity plans. The Guardian reported at the time that Chancellor Merkel and then-French President Nicolas Sarkozy “summoned” the Greek prime minster to a meeting to inform him there would no referendum. There wasn’t. What did happen was a dictated revision to the Greek constitution mandating that repayment of debt would supersede any other government spending.

Markets aren’t voted upon. But, again, markets are the amalgamation and distillation of the most powerful big capitalists, and it is those interests that will not be put to a referendum. New Democracy and Pasok had already submitted to this power and, having made their commitment, can do nothing other than go on submitting to it.

There are far from the first. Here are two quick examples. When the Sandinistas stood for re-election in 1989, Nicaragua had endured several years of debilitating terrorism and economic sabotage from the Contras and their U.S. organizers. There was no ambiguity here: the United States told Nicaraguans to vote out the Sandinistas or the war will continue. Weary Nicaraguans voted to end the war and for a coalition that dangled promises of U.S. aid in exchange for voting as they were told. The war did end, but no more than a tiny fraction of the promised aid was delivered. Nonetheless, the anti-Sandinista coalition, having made its commitment, carried out the dictated privatization that was a windfall to foreign capitalists because the state properties were sold well below market value — the price for what aid did arrive.

A second example is South Korea. Austerity was imposed on that country as the dissident leader against military dictatorship, Kim Dae-jung, became South Korea’s first opposition president at the end of 1997. Speculators had fueled construction booms and stock-market bubbles across Southeast Asia in the mid-1990s, causing an inflation in the local currencies until it was no longer profitable to speculate on the exchange rates. At that point, speculators pulled their money out, causing the value of those currencies to plunge and triggering the region’s 1997 economic collapse. Countries such as Thailand had to impose harsh austerity, including widespread layoffs, in exchange for loans needed after the collapse. President Kim took office two weeks after South Korea accepted loans with similar conditions, and although the United States had failed in its effort to defeat him, “market discipline” did more to neutralize him and demoralize his supporters than direct U.S. political pressure could have done.

No single country can stand outside the forces of capitalism. Syriza, had it finished first and been able to form a government, could not simply delink Greece. Syriza’s voters unambiguously sought an end to austerity, an end to immiserating an entire country to maintain financiers’ profits and the renouncement of the memorandum including a halt to debt payments. A Syriza-led government could do those things, but would still be forced to maneuver within the parameters of the world capitalist system.

It is estimated that the Greek government is owed 45 billion euros in unpaid taxes. On top of that total, many wealthy Greeks and some middle class Greeks who work in the private sector pay little or no taxes. Greece’s most powerful industrial sector, the shipping industry, pays no taxes and has its tax-free status enshrined in the constitution. New Democracy’s base is the wealthy and others who don’t pay taxes. The party’s backers would not tolerate a change and have a network of links with international capitalists intertwining their interests.

Syriza and the other Left parties in Greece could require them to pay taxes, but the ease with which the wealthy can move their assets and bank accounts to other countries would greatly diminish the effect. Inevitably, nationalization of key industries would move on to the agenda, and that would bring to the fore a serious questioning of the capitalist system.

That system can’t be challenged by any one country, certainly not one as small as Greece. A credible challenge can only be a multi-national challenge. And a challenge to austerity, or the larger system that imposes it, will not take place in the ballot booth.

For the past several weeks, Greece had been on a knife edge, a political Schrödinger’s cat. Accepting the memorandum, rejecting the memorandum. The latest election gives the appearance of acceptance at the same time more voted to reject. A stalemate. But that is not any more stable. Greece can not accept and reject simultaneously. If the choice, finally, is to reject, then the rejection can only be an international rejection. The world’s financiers and industrialists are united across borders; the rest of us must be as well.

We may be Greek working people, British working people, U.S. working people, Argentine working people, and so forth, but we share a common humanity — the basis on which to join together. It is Greece today but it will be you tomorrow.

Greeks and French vote against austerity, but what did they vote for?

By Pete Dolack

The weekend’s election results in Greece and France can be interpreted in different ways. The most obvious reading, and not at all untrue despite its obviousness, is to see them as a continuation of European voters’ rejection of their governments.

Ten of seventeen Eurozone governments have fallen or been voted out in the past fifteen months, and throwing out the incumbents is a natural response to an extended period of economic malaise. So just as Spain voting in its conservative party to punish the socialists’ austerity can’t reasonably be portrayed as a Spanish lurch to the Right — the conservatives, after all, promised to impose more austerity and swiftly became unpopular when they did as they said they would — we should be cautious in proclaiming a French shift to the Left.

Then again, since there is nothing socialist about the French Socialist Party, we have ample reason to avoid saying France has shifted leftward. Europeans clearly are sick of the mindless austerity being imposed on them, but for the most part have not advanced beyond wanting to throw out the incumbents. The surest way to do that is to vote for the main opposition party, but doing so only reinforces the system that is not working.

French voters at least had alternatives to vote for in the first round of their presidential elections, but the Left Front candidate who offered a clear Left alternative to France’s two main parties, Jean-Luc Mélenchon, finished a disappointing fourth with 11 percent of the vote, below what he had been polling. Worse, the far Right candidate, Marine Le Pen, won 18 percent. The Socialist François Hollande and Union for a Popular Movement’s Nicolas Sarkozy earned only about 55 percent of the first-round voting between them — the French demonstrated they are seeking an alternative.

But what alternative? That is as yet unknown. But the strong showings by crypto-fascists in France (Le Pen) and outright fascists in Greece (the Golden Dawn party) demonstrate the danger inherent in allowing economic malaise to continue without a solution or alternative. If the Left is unable to offer a coherent alternative, the extreme Right will threaten to fill the vacuum. Golden Dawn won seven percent of the vote in Greece on Sunday, elevating a fascist party into a national parliament. And if you have doubts about Golden Dawn being fascist, here is an excerpt from a report by Maria Margaronis in The Guardian on May 7:

“Its leader, Nikolaos Michaloliakos, threw Greek journalists who wouldn’t rise for him out of his press conference and dedicated his victory to ‘the brave boys in the black shirts.’ ‘Those who slander us,’ he barked, and ‘those who betray this country should be afraid: we’re coming.’ Near Kalavryta in the Peloponnese, the site of one of the most terrible Nazi massacres in the 1940s, Golden Dawn graffiti calls for ‘a new Holocaust to clear the filth from the country.’ ”

Greece has enough history with Right-wing extremism that the Golden Dawn’s words can not be dismissed as mere antics. The Nazi occupation of Greece during World War II, conducted through a Greek puppet government, caused hundreds of thousands to die of starvation, and tens of thousands more to be executed. An armed resistance movement, organized by Left groups but widely supported, gradually forced the Nazis to withdraw. A government was installed in Athens by the British, but the Communist-led resistance, having liberated the country, had strong support and could have taken power. Josef Stalin, however, ordered Greece’s Communists not to do so. In return, the British-backed government made mass arrests of resistance fighters while allowing Right-wing gangs to kill others by the thousands. In response, Communists resorted to an armed struggle, reversing themselves in a much less favorable position, touching off a civil war that crushed them and displaced millions, so furious was the counter-insurgency. The British heavily supported the régime it had installed while Stalin simply stood by because he did not want further tensions with his former World War II allies.

Execution, long imprisonment or exile became the fates of many Greeks. The Left was outlawed for three decades, and a period of disastrous Right authoritarian government culminated in the murderous military junta of the “four colonels” from 1967 to 1974. That junta imprisoned several thousand people just in its first month, many of whom were tortured, and imposed a brutal dictatorship. Although this history, completely entangled with Cold War politics, might seem to have no bearing on present-day Greek politics — and definitively rendered armed uprisings by the Left a relic of the past — it left Greece with a legacy of deep social divisions, a weak political center and an archaic class structure compounded by an exemption from paying taxes for the favored.

Considerable force was applied to provide Greece’s capitalists with large advantages. But although in recent decades they have been content to maintain their privileges via traditional legal means, the system they have been reliant on has become unstable. Stirring up nationalism has been a common method for the world’s privileged to maintain power, and nationalistic attitudes below can easily take a violent direction.

When fascists declare an intention to “clear the filth” and threaten violence, they mean it: Fascists speak with fists and weapons, not words and ideas. The showings of Len Pen and Golden Dawn are alarm bells are ringing, loudly. And fascists do not need a majority to seize power — Hitler never received more than a third of the vote and was appointed chancellor by German president Paul von Hindenburg; Mussolini never won more than a tiny percentage of votes. Force elevated them to power, with just enough people susceptible to their simplistic siren songs to provide the shock troops.

The Greek Left — split three ways among the Coalition of the Radical Left (Syriza), the Communist Party of Greece (KKE) and the Democratic Left — did score much higher than the extreme Right, a combined 31 percent of the vote, although this was at the low end of the 30 to 40 percent they had collectively polled during the past couple of months. Syriza finished second and only two percentage points behind the mainstream Right party, New Democracy. But because of a quirk in the Greek electoral system — otherwise a proportional-representation system requiring only three percent of the vote to enter parliament — the May 6 results rendered it impossible for the Greek Left to form a government by themselves, even if the parties could reconcile their significant differences.

That quirk is that the first-place finisher gets a bonus of 50 extra seats above what it earns from its proportional share of the vote. New Democracy, as the first-place winner, therefore was awarded 108 seats instead of 58 — a massive boost. Put another way, N.D. has more than a third of parliament’s 300 seats despite winning nineteen percent of the vote. That, in theory, made the most likely government to be formed a “grand coalition” of N.D. and the mainstream Left party, the “socialist” Pasok, plus at least one other because New Democracy and Pasok together finished short of a majority.

Such a government, to put it mildly, would be seen as illegitimate by Greeks — more than two-thirds voted against the two ruling parties and their policy of pitiless austerity. But that illegitimacy surely was not the reason that N.D. leader Antonis Samaras handed back his mandate to form a government after one day instead of using all three days he was granted to find willing coalition partners. There are two conclusions that can reasonably be drawn: Samaras does not actually want to govern, or he is calculating that nobody will be able to form a coalition and new elections will be called for June that he believes he will win by a greater margin.

The first scenario in the preceding sentence arises because, in essence, Samaras would have his bluffed called were he to become prime minister. The N.D. is Greece’s Big Business party, and has consistently boosted those interests while expanding its base through policies that enable Greece’s middle class professionals to avoid paying taxes the same as the rich and powerful. But its support, in practice, for austerity are a direct contrast to its verbal claims of opposition to austerity, a contradiction exposed by its “solution” to Greece’s crisis: tax cuts for businesses. The Big Business backers of New Democracy are too connected with business and financial interests elsewhere in Europe to abrogate the austerity agreements with the European Union, European Central Bank and International Monetary Fund.

Greeks voted against austerity. What did they vote for? That is not nearly so easy to answer.

Syriza, itself a coalition of Trotskyist, Maoist, Eurocommunist and other non-orthodox communist Leftists, has called for a coalition with the KKE and the Democratic Left, in contrast to the orthodox communist KKE that eschews working with other parties and the moderate Democratic Left that, during the electoral campaign, sought a coalition only on its terms. As Syriza won more votes than KKE and the Democratic Left combined, and as the party most willing to join hands with other anti-austerity parties, it might develop into a home for Greeks sick of austerity and willing to throw off the shackles of European Union financiers.

Syriza contains differing opinions on retaining the euro (although its leader, Alexis Tsipras, favors remaining in the eurozone) and definitively advocates remaining within the E.U. but with a thorough restructuring. Syriza demands a suspension in debt payments until the economy recovers, followed by a “selective” default; redistribution of wealth; and a re-orientation of priorities toward growth-inducing investment. A day after Syriza’s second-place finish, as multi-sided negotiations to form a government began, Tsipras told Athens News:

“We strongly believe that the country’s salvation will achieved through the rejection of these barbaric measures, through relief from recession and the looting of pensions and salaries, through the cancelation of austerity measures and their replacement with measures to boost the economy and tax built-up wealth so that funds are found to help the weaker sections (of society). … Our message of our people to European leadership is clear, the Greek people last night rejected the policy of austerity, as it is being rejected by all the peoples of Europe. The time has come for it to be withdrawn.”

Having been given the mandate to form a government as the leader of the second-place finisher after Samaras said he is unable to form one, the Greek newspaper Kathimerini reported that Tsipras’ coalition negotiations will center on these demands:

  • The immediate cancellation of all impending measures that will impoverish Greeks further, such as cuts to pensions and salaries.
  • The immediate cancellation of all impending measures that undermine fundamental workers’ rights, such as the abolition of collective labor agreements.
  • Reform of the electoral law and a general overhaul of the political system.
  • An investigation into Greek banks, and the immediate publication of the audit performed on the Greek banking sector by BlackRock.
  • The setting up of an international auditing committee to investigate the causes of Greece’s public deficit, with a moratorium on all debt servicing until the findings of the audit are published.

The “policy of austerity” has unquestionably suffered a “crushing defeat,” but without any consensus among Greeks as to what the alternative should be. Regardless of whether Greece leaves the eurozone and re-adopts its former national currency, the drachma, Greece’s future is in Europe. There is no Greek solution to Greece’s crisis, nor is there a French solution to France’s stagnation, nor a national solution to any other country’s economic malaise.

The only way forward for Europe is for a European Union radically different from the one that exists — an E.U. that is democratic and designed to benefit all peoples, not a dictatorial bureaucracy interested only in maintaining the fabulous wealth of a capitalist elite, in particular financiers, at the cost of everybody else.

In previous posts, I have summarized programs proposed by various economists, some envisioning Greece remaining in the eurozone and some envisioning Greece dropping the euro and returning to the drachma. What these programs have in common is a vision of a European-wide economic restructuring.

To summarize some of these ideas: The E.U. should be leveraged to internationalize the resistance of working people; full employment demanded as an explicit goal; banks should become publicly owned and democratically controlled so that capital is directed toward socially useful investment instead of speculation; a highly progressive taxation system should be coordinated at the E.U. level; wages raised to account for improved productivity that has, for three decades, gone to capitalists; governments should default at least some of their debts to banks; bank deposits should be guaranteed; and there should be more investment in education to enhance future productivity.

Some of these, or at least moderate versions of some of these, are articulated by the Greek Left. These are, however, yet to be articulated by European politicians elsewhere. Politicians such as Hollande argue for reforms within the current E.U. framework, not a break from that framework or even a strong questioning as to why ensuring profits to bond holders and speculators should be the highest principle of Europe and that entire countries should be immiserated for it.

Although a reformist, it can be said that Hollande came to advocate strong reforms, winning backing for ideas such as including a 75 percent tax rate on France’s highest earners, the hiring of new teachers and social spending to stimulate the economy. Sarkozy, on the other hand, dangerously adopted some of the arguments of Le Pen and her National Front party in a craven attempt to win her voters — thereby giving legitimacy to extremists who scapegoat immigrants and attack intellectuals. Such programs (and its equivalents elsewhere, including the “tea party” in the United States and Geert Wilders’ Freedom Party in the Netherlands) are demagogic attempts to deflect attention from the structural issues underlying economic malaise and the vast wealth inequalities that are destabilizing society. Although these have the appearance of grassroots “populist” movements, they are always supported by Big Business interests and are often, as is case with the “tea party,” lavishly funded by those interests.

Elections for the French parliament occur in mid-June, and that might provide more guidance as to where France is going. But the mainstream Center-Left governments of Europe that have imposed austerity have fallen just the same as Center-Right governments doing the same. It is possible that a spell of both applying roughly similar austerity policies will finally spark the rupture that is necessary. If that proves to be so, then we will be able to look back and say that Greece — having rejected both its major parties — arrived first. But a systemic break with the capitalist logic of austerity can only be an international movement: It is indisputable that “socialism in one country” can’t survive a hostile capitalist world, and a small country such as Greece all the more so could not survive as a socialist island in a capitalist Europe.

Inevitably, a post-capitalist Europe would be an example for the rest of the world, not excepting other advanced capitalist countries. I want to be clear here that I — and those whom I have summarized here and in previous posts — are advocating a democratic system, one much more democratic than currently exists. The 20th century’s top-down, state-owned and -controlled economic system that developed in the Soviet Union failed, and failed for real reasons — sufficient reasons can be found internally. Rather, what is advocated is cooperation in a decentralized economy.

Political democracy is not possible without economic democracy. Economic democracy is impossible without production being oriented toward human, community and social needs rather than private accumulation of capital. Everybody who contributes to production earns a share of the proceeds — in wages and whatever other form is appropriate — and everybody should be entitled to have a say in what is produced, how it is produced and how it is distributed, and collective decisions in turn should be made with community involvement.

A Left that can articulate a democratic vision of a better world can succeed. The signs are around us: the rapid assent of the Occupy Wall Street movement in the United States, the electoral success of the Greek Left, the mounting fury around the world at a rigged capitalist system that is failing humanity. But a better world can only be made through international struggle and a radical vision of economic and political democracy. Such a task will not be easy: The rulers of the capitalist world have a panoply of weapons at their disposal (control of the workplace, the ability to fund groups to do their ideological bidding, seemingly limitless budgets for police and militaries among them) and a historical willingness to fund extreme Right movements when feeling threatened.

The breakthroughs of the extreme Right in France and Greece over the weekend are sober reminders that a descent into barbarism and dictatorship under conditions of scarcity is also a possible future if we do not find a way out of the ongoing economic malaise.