The logic of public services chips away at ideology of privatization

One should beware vampire squids bearing gifts. It would also be best to cover your ears when the siren songs of privatization are offered.

Even were Goldman Sachs not the buyer, the Danish government’s decision to sell a portion of the state-owned energy company Dong Energy A/S goes against the pattern of recent years of governments taking back control of utilities after having dropped them into the sweaty palms of investors. Shareholders expect maximum profits from investments, and utilities that provide basics like electricity and water are not excepted.

Pont Neuf in Paris

Pont Neuf in Paris

Many a local government has learned the hard way that even water is a commodity from which to squeeze a profit once privatized, with human need an afterthought. Decades of ideology have attempted to instill the idea that the private sector is always superior to government; that government can only mismanage what is in its hands.

Although attempting to flip this discredited, self-serving phantasmagoria by arguing the complete opposite would not stand up to scrutiny, either, the realm of facts and data firmly contradict the standard corporate ideology. Government after government has found that privatization was a mistake in what has become a wave of “re-municipalization” — the return of public services to public management.

Paris takes back its water

France had been a leader in privatizing water, leading to the rise of two of the world’s biggest water companies, Suez and Veolia. As recently as 2006, the private sector provided drinking water services to four-fifths of the French population. In parallel, starting in early 1990s, the European Union began issuing directives mandating that national governments implement legislation deregulating the electricity market. E.U. bureaucrats sought to separate (“unbundle”) generation, transmission and distribution of energy, supposedly to ensure price competition.

In France, according to a paper published in the March 2012 issue of Water International:

“This model was favoured by several factors, including strong fiscal centralization, the rigid character of public accounting, the creation of private water companies, and the establishment of a legal framework that protected the interests of the concessionaires.” [page 3]

The paper, “The remunicipalization of Parisian water services: new challenges for local authorities and policy implications,” written by Joyce Valdovinos, reports that a series of investigations found that there was no way to verify work that should have been long completed, a lack of transparency of technical and financial data, discrepancies between declared profits and actual profits, and the generation of extra profits by manipulating maintenance costs. When a Left coalition won the 2001 city election, it believed returning water services to public management would lead to better functioning, more transparency, greater public control, and the ability to stabilize prices.

Paris’ contracts with Suez and Veolia expired in 2010; during the preceding 25 years water prices there had doubled, after accounting for inflation, according to a paper prepared by David Hall, a University of Greenwich researcher. Professor Hall reports that the two companies had secret clauses in their contacts allowing automatic price increases. Despite the costs of taking back the water system, the city saved €35 million in the first year and was able to reduce water charges by eight percent.

About 40 other French cities intend to “re-municipalize” their water services. Higher prices and reduced services have been the norm for privatized systems, Professor Hall’s paper says:

“A report by the Cour des comptes in 1996 identified many problems with private water services in France, including lack of competition, corruption, and lack of transparency, but also price increases which it firmly concluded were linked to privatisation of water services. … The association of municipalities publishes each year price comparisons, which in 2009 showed that private water prices were on average 31% higher than in public water services.” [page 19]

Sellers’ remorse in Germany

A strong trend toward public provision of services is also under way in Germany, for many of the same reasons. A paper written by Hellmut Wollmann of Humboldt Universität zu Berlin found a similar dynamic east of the Rhine:

“Since the late 1990s, it has become more and more evident that the (high flying) neoliberal promises that (material or functional) privatization would usher in better quality of services at lower prices has not materialized. On the contrary, private service providers have often made use of the next possible opportunity to raise prices and tariffs while at the same time deteriorating the working conditions of their employees.” [page 15]

In response to that, 44 new local public utilities have been set up and more than 100 concessions for energy distribution networks and service delivery have returned to public hands in Germany since 2007, according to Professor Hall’s paper. Further, German goals of phasing out nuclear energy, increasing the use of renewable energy and cutting overall energy usage is impossible without a strong public role, he wrote:

“There is little economic incentive for the private companies to make these investments, and indeed the growing use of renewable electricity undermines the profitability of existing gas-fired power stations. As a result, municipalities and regions have to play a leading role, not only to meet the targets for renewable energy but also to secure sufficient capacity to protect against the effects of markets and the phasing-out of nuclear energy.” [page 12]

One example is the German city of Bergkamen (population about 50,000), which reversed its privatization of energy, water and other services. As a result of returning those to the public sector, the city now earns €3 million a year from the municipal companies set up to provide services, while reducing costs by as much as 30 percent.

Private versus public in the United States

Municipal-owned utilities aren’t magic wands because they can be subject to the hostility of local business leaders. Cleveland’s city-owned power company, then known as MUNY, became the object of a political tug-of-war in the 1970s in which “market forces” were unleashed to detrimental effect. Successful lobbying by the private energy corporation, CEI, that competed with MUNY caused the city government to neglect maintenance and investment in MUNY, leading to it having to buy power from CEI, which in turn provided inadequate connections that often led to outages.

Davita Silfen Glasberg, in her book The Power of Collective Purse Strings: The Effects of Bank Hegemony on Corporations and the State, argued that Cleveland’s default was the result of “control of the city’s critical capital flows by an organized banking community.” Legal maneuvering by CEI caused a city cash flow shortage because of what MUNY was forced to pay to CEI. In turn, Cleveland’s bond ratings were downgraded, rendering the city unable to sell bonds and intensifying its dependence on bank loans. As a result, Professor Glasberg wrote:

“The banking community, which had significant interests in CEI (including stock ownership, pension fund holdings, CEI deposits, voting rights on CEI stocks, loans, and interlocking directorates) refused to renew or renegotiate the city’s loans unless [Mayor Dennis] Kucinich agreed to sell MUNY to CEI. Such a sale … would have solidified the private utility’s control of the city’s electricity business. … For political reasons the financial community had cut Cleveland off. Indeed, the coffers opened once again when the business and banking communities unseated Kucinich, and [George] Voinovich took office.” [pages 139-140]

As part of the deal, MUNY’s rates rose (dampening competition with CEI), the city laid off hundreds of workers and wages of remaining city employees were cut — working people paid the price for corporate profit. Cleveland did withstand the pressure to sell its public utility. The utility, now known as Cleveland Public Power, provides low-cost electricity that saved the city an estimated $195 million between 1985 and 1995.

Absent such blatant interference, U.S. cities have often found that public utilities outperform privatized ones. In Atlanta, for example, the city signed a contract with Suez, which promised to reduce water and sewer costs. Instead, the web site Water Remunicipalisation Tracker reported, repairs were neglected, 400 jobs were lost and sewer rates increased 12 percent a year. After four years, the contract was canceled and the services returned to the public sector.

Denmark’s embrace of Goldman Sachs

The decision by Denmark’s social democratic government to sell a portion of the state-owned energy company flies in the face of considerable recent history, even without the added question of Goldman Sachs’ predatory behavior. The investment bank, which stands out even among its rapacious peers for its ability to extract money from an extraordinary assortment of human activity, is buying an 18 percent share, yet will be given a veto over strategic decisions, essentially handing it control.

In addition, according to the Financial Times, Goldman Sachs not only has the right to sell its share back to the government if the deal doesn’t go its way, but 60 percent of its share is required to be sold back at a guaranteed profit — the purchase price plus 2.25 percent annual interest. And that’s not all — Goldman is using affiliates in tax havens to own its share, leading to much speculation that it intends, like many companies, to avoid paying taxes.

Danes are heavily opposed to this deal. But rather than consider popular anger, the chief executive officer of Dong Energy is instead worried that “Denmark’s reputation as a destination for offshore investors” may be “damaged.” The move is the latest in a series of austerity measures by Denmark’s social democratic government that have included restricting eligibility for child care benefits and study grants, and increasing the retirement age.

The sale to Goldman has also caused one of the three parties in the coalition government to leave in protest, resulting in a minority government that will require support from other parties in crucial future parliamentary votes. It has also reportedly caused a rise in the polls for the conservative opposition. Replicating a pattern seen across Europe and elsewhere, social democratic governments impose austerity, and in the absence of a vigorous organized Left alternative, voters continue to alternate between the major parties or blocs.

The trend toward public provision of services is an as yet rare example of common-sense resistance to dominant capitalist ideology. Enterprises owned by the public or by a collective workforce don’t need to extract huge profits to pay swollen executive salaries or payoffs to speculators — an example that can be followed in many more businesses. With enough organization, it will.

One small step for French workers but no giant leap

France appears on the verge of advancing the rights of workers, and although such a victory will be slight, even a tentative step forward is welcome. But it is no more than that: Once we get past the comedy of business leaders wailing that the sky is falling, do we really have anything other than a small reform that leaves the system intact?

It would seem not. The French National Assembly, on September 30, passed a bill that would grant employees a voice when their company is the target of a takeover attempt and require owners of companies with at least 1,000 employees to seek a buyer for a plant intended to be closed. The French Senate must also approve the bill before President François Hollande can sign it into law.

Marching in Paris against pension reformShould the bill be passed, a committee of workers would be organized inside a company being targeted for a takeover, which would be empowered to appoint an accountant to assess the bid. The board of the target company would be required to take the assessment under consideration before making its final decision. Although it is unclear what legal force this workers’ assessment would have, the company’s “works council” (an employee oversight body larger French companies are required to have) could ask a judge to intervene if it believes the board has not responded adequately to its queries, potentially delaying any deal.

The bill would also put a temporary roadblock in the path of a company that intends to shut a plant or some portion of its operations. Enterprises with more than 1,000 employees that intend to shut a facility with more than 50 workers would be required to seek a buyer for three months. Judge would be authorized to impose a fine if the company fails conduct a search or turns down a serious offer.

The French Senate has a narrow majority bloc of Socialists, Communists, Greens and other Left-leaning members, so it would appear that the bill is likely to pass the Senate, enabling President Hollande to fulfill a campaign pledge to give workers more say in the running of their enterprises.

A tiny change, a giant rage

In reality, these new powers, should they enter into law, would do nothing to alter existing relations within the workplace. Nonetheless the principal of the bill — that workers are entitled to a modicum of control over their working lives, at least in theory — has driven business leaders and the corporate media that loves them into fits of rage.

A Bloomberg report on the bill quotes a series of speculators in full indignation, including a Paris investment banker:

“In the M&A [mergers-and-acquisitions] world, the image of France viewed from outside is deplorable, and this law is adding extra complexity.”

Quelle horreur! Bloomberg itself grumbles:

“Foreign companies have spent $14.8 billion on French targets this year, putting 2013 on track to be the weakest for such deals in at least a decade, according to data compiled by Bloomberg. The new rules may further dissuade potential buyers. France hasn’t seen a major hostile takeover since Mittal Steel Co. bought Arcelor SA in 2006 in a transaction then valued at about $36 billion.”

Oh, the humanity! Seven long years of only relatively smaller takeovers. How is a poor investment bank supposed to keep its speculators in the style in which they are accustomed? Although the underlying imperative of capitalist competition — expand or die — propels the frenzy of corporate mergers and acquisitions, the proximate cause is to enable enormous profits for corporate executives, investment bankers and partners at corporate law firms. The bigger the deal, the bigger the payday for those on the inside.

Keeping score of the money but not the human cost

Definitive totals on the numbers of jobs lost to takeovers are extremely difficult to come by; this is not surprising when the corporate media reports on mergers and acquisitions in breathless terms of the size of the deal and with assurances that jobs will be sacrificed on the alter of “efficiency.” In other words, the human cost is not even an afterthought. To take just two examples, Washington Monthly, in a report detailing the increasing monopolization that characterizes most industries, wrote:

“Consider two recent deals in the drug industry. The first came in January 2009 when Pfizer, the world’s largest drug company, announced plans for a $68 billion takeover of Wyeth. The second came in March 2009, when executives at number two Merck said they planned to spend $41.1 billion to buy Schering-Plough. Managers all but bragged of the number of workers who would be rendered ‘redundant’ by the deal — the first killed off 19,000 jobs, the second 16,000.”

The money to pour into these deals has to come from somewhere. So can measures like those passed by the French National Assembly reverse this trend? Because the limited “voice” to be granted workers is connected to France’s “works councils,” a look at these councils will help us answer that question.

Although only a minority of workers in France are protected by a traditional labor union, all who work in enterprises with 50 or more employees are represented by a works council. French law proscribes fines and even jail terms for employers who interfere with the functioning of these bodies. In unionized companies, trade unions put forth the candidates for the works council, although if more than 50 percent of the eligible voters do not vote, a second election is organized in which any employee is eligible to run.

The works councils are required to be consulted on the management and general organization of the company; personnel decisions, including dismissals; and changes to equipment, working conditions, professional-training procedures, or hygiene and safety issues. The opinion of the works council is not legally binding, however, unlike a collective-bargaining agreement negotiated with a trade union. Works councils decisions are binding in only a small number of minor issues, such as the hiring or dismissal of the labor doctor.

As private-sector union membership in France is low, the works councils provide a modicum of enterprise participation for French workers. The bill that has passed the National Assembly represents a tiny incremental gain while leaving all the prerogatives of ownership firmly in the hands of capitalists. The wailing from capitalists and the corporate media is more of a reflection of their desire for total control than any actual change in labor relations.

Works councils as controllers rather than consultants

Although their consultative status currently makes them little more than a safety valve, France’s works councils could, in theory, form the nucleus of actual workers’ control. The concept of real workers’ councils, assuming control over the decision-making of an enterprise, has taken root at different times in several countries. All the workers collectively make strategic decisions, and elect a council to oversee the running of the enterprise (including supervising management) and to act as links with other enterprises.

Meetings to discuss, and vote on, the enterprise’s business would be a part of the regular workweek. All ownership would stay within the workforce — each would own one share and relinquish it upon leaving or retiring. Shares could not be transferred or sold, except to the collective. Management would be recallable and promoted from within.

Why should democracy stop at the entrance to the workplace? Cooperatives are already flourishing. There are the examples of the Mondragon collective and the recovered factories of Argentina, among others, in which assemblies of all the workers make the strategic decisions and elect supervisory boards that are responsible to the assemblies. Mondragon has been a planned enterprise from its foundation; Argentina’s recovered factories are the products of workers struggling to restart production while slowly gaining the confidence to be their own managers.

Cooperatives are as yet minuscule islands in a vast sea of capitalism. Several countries have works councils, including Germany, where employers must reach agreement with them in regards to rules covering, inter alia, smoking bans, dress codes, overtime, introduction of new technical equipment and policies on pay bonuses. Employees are also represented on corporate boards of directors in Germany, Sweden, Denmark, Norway and several other European countries.

Reforms should be taken whenever possible, but reforms can always be taken away. Instead of being the basis of minor tinkering, why shouldn’t works councils be one starting point for a complete transformation? Top-down authoritarian enterprises that give an elite dominating power over the overwhelming majority of humanity hasn’t been working out so great.

Spying? Who cares? Profits are at stake!

Actions do speak louder than words, and thus the start of European Union-United States trade talks as previously scheduled would seem to hold more weight than European political leaders’ displays of public anger at the extent of the spying against them.

Resignation to their subordinate status, the extent of their own spying networks and the knowledge that considerable dirty work is necessary to remain a leading capitalist country are among the contradictory factors at work here. So, too, is a willingness by European leaders to rely on the U.S. to perform much of the dirty work, while European big business needs to sell to U.S. consumers. Business is business at the end of the day. Or at the (hoped) end of the scandal.

With the stream of new revelations showing no signs of stopping, the end of the scandal does not appear anywhere in sight. Nor does the spectacle of contradictory behavior by European countries, most dramatically exemplified by France.

Navy communicationsOn the one hand, the French government declared revelations that the U.S. has spied on E.U. offices and computer networks “completely unacceptable” and demanded a delay in the start of the E.U.-U.S. trade talks, intended to form a “Transatlantic Trade and Investment Partnership.” Yet France not only meekly agreed to the trade talks beginning on time but acceded to U.S. arm-twisting that it close its air space to the plane carrying Bolivian President Evo Morales on the mere suspicion that whistleblower Edward Snowden was aboard.

How much of the complaints from France, Germany and elsewhere in Europe are posturing and how much is genuine anger is an open question, but perhaps ultimately irrelevant. Le Monde has revealed that the France intelligence agency DGSE spies on the French public’s phone calls, e-mails and Internet activity in a manner similar to that of the U.S. National Security Agency (NSA). And Mr. Snowden has revealed that German spy agencies are “in bed together” with U.S. spy agencies.

The chief of Germany’s foreign intelligence agency has confirmed that his agency works closely with the NSA, Der Spiegel reports, with the U.S. agency using several German locations to engage in data collection. The arrangement is justified by the “fight against terrorism,” the favorite all-purpose excuse to trample constitutional norms and privacy concerns, both of which tend to be taken more seriously among Europeans than United Statesians. In its report, Der Spiegel asked:

“Is it really conceivable that the German government knows nothing of what the NSA is doing on its own doorstep? Last month Interior Minister [Hans-Peter] Friedrich said in a parliamentary debate on the NSA snooping: ‘Germany has fortunately been spared big attacks in recent years. We owe that in part to the information provided by our American friends.’ Sentences like that reveal a pragmatic view of the US surveillance apparatus: What the NSA gets up to in detail is secondary — what counts is what its snooping reveals. And that information, intelligence officials admit, is indispensable.”

The German government sees itself as dependent on the U.S., and that counts for more than public displays of anger that culminated in a German minister condemning revelations of U.S. spying on Germany as “methods used by enemies during the Cold War.” Whatever momentary anger her government may have felt, Chancellor Angela Merkel has not wavered in her support for the Transatlantic Trade and Investment Partnership (TTIP) talks. Germany’s economy, after all, is dependent on exports — increasingly so during the past decade as German workers have absorbed a decade of wage cuts — and German manufacturers are likely salivating at the thought of increased exports to North America.

You can be angry, but you’re still subordinate

After all the displays of anger and assertions of sovereignty, European government showed themselves not only subordinate to the U.S. but to their own industrialists and financiers. The U.S. government is similarly a captive of its own big business interests — that is what right-wing calls to “starve” government are about. It was all smiles on July 8 as the TTIP talks began, on schedule, with embarrassing discussions of spying relegated to a “parallel” track, separate from what really counts, the main negotiations to dismantle regulations.

Both newly seated U.S. Trade Representative Michael Froman and European Trade Commissioner Karel De Gucht made the ritualistic grand claims of the benefits that will fall from the sky if the TTIP is implemented, and business groups competed with themselves to issue the highest “estimates” of the increase in wealth. The Centre for Economic Policy Research in London, for example, claimed the TTIP would stuff pockets with more than US$100 billion a year from added growth.

Similar pie in the sky promises were made for the North American Free Trade Agreement and many other trade deals, so, dear reader, all is forgiven if you are skeptical about such claims. “Free trade” agreements elevate corporations and investors to equal status with governments on paper, and above governments in reality because disputes between businesses and governments are sent to unaccountable tribunals controlled by organizations like the World Bank and in which the judges are frequently lawyers who specialize in representing corporations in disputes with governments.

Ambassador Froman, the new U.S. trade representative installed by the Obama administration, will not represent any change in direction. The American Enterprise Institute, a leading lobbyist for multi-national corporations, gave its seal of approval:

“No white smoke floated up from the White House when the president announced that he had chosen deputy security adviser Michael Froman as the new US Trade Representative; but there was a huge, collective sigh of relief from all elements of the US business and trade policy communities. … Michael Froman is an excellent choice. He is close to the president, was deeply involved in passage of the Bush [free-trade agreements] with [South] Korea, Colombia, and Panama.”

Ambassador Froman’s neoliberal credentials are assuredly in order. He worked as chief of staff to former Treasury Secretary Robert Rubin, who played a leading role in the Clinton administration’s deregulation of the financial industry, and before that was a managing partner at Citigroup. He seems to have done well at Citigroup, receiving more than $7.4 million from the company from January 2008 to when he joined the White House early in 2009, including a year-end bonus of $2.25 million.

Full speed ahead! The U.S. Chamber of Commerce — a hard-line organization that has never seen a regulation it likes or a tax that is justified — had already called for a speedy agreement before any pesky elections get in the way. Eurochambres had declared that it sought “the highest possible standards of protection for investors” — thinly disguised code for an elimination of rules and regulations. As Systemic Disorder has previously noted, the Trans-Pacific Partnership, intended to go beyond NAFTA and formally codify the maximization of corporate profits as the central principle of governments, is the model for the TTIP, and it is unlikely that it is a coincidence that the two giant trade pacts are being negotiated simultaneously.

Some country has to be the top dog

The growth of spying operations and the shrinking of democratic spaces that accompanies bilateral and multilateral trade agreements progress hand-in-hand. The capitalist system has always required a center to hold it together. Capitalism has had a succession of dominant centers; each successive center has been bigger to be able to cope with increasingly complex tasks.

When London succeeded Amsterdam as the financial center, the financial center became located within a country with a powerful military, not only a large merchant fleet as Amsterdam’s United Provinces possessed. When New York succeeded London, the country at the center became continental in size, possessing a military that can be projected around the world, further intensifying the links between financial and military power that had solidified during Britain’s rise to dominance.

The projection of, and willingness to apply, force is crucial to the maintenance and expansion of the capitalist system. That force nowadays may be more often financial and commercial rather than military, but the military and intelligence services are in reserve. From the dozens of coups in Latin America to the forcible installation of regimes willing to do U.S. bidding in Iran and Iraq decades apart to propping up dictatorships around the world, the common thread has been using power to gain advantage for U.S. multi-national corporations. “Free trade” agreements are another methodology to the same goal.

All of the world’s advanced capitalist countries are a part of this system. They acquiesce in it however much they sometimes chafe at their subordinate status (in relation to the U.S.); their willingness to enter into trade pacts binds them to the dominant power. No single country is large enough or possesses a big enough military to challenge U.S. domination; today, only a unified Europe could challenge U.S. hegemony. European capitalists desire the ability to challenge the United States for economic supremacy, but cannot do so without the combined clout of a united continent.

The E.U., in its current capitalist form, is a logical step for business leaders who desire greater commercial power on a global basis: It creates a “free trade” zone complete with suppression of social accountability while giving muscle to a currency that has the potential of challenging the U.S. dollar as the world’s pre-eminent currency.

Thus the proposed TTIP is in the interest of industrialists and financiers on both sides of the Atlantic Ocean at the same time that its approval would spell disaster for working people — more concentration of power in the biggest corporations; less ability for citizens to influence government policy; and weaker labor, safety and environmental regulations. Concentration of power and shriveling of democracy can’t be accomplished without a stifling of dissent, which in turn requires, inter alia, more spying and less accountability by spying agencies.

There are common interests at the same time that spying is also deployed to gain competitive advantages for favored corporations; the latter is exemplified by U.S. bugging of E.U. offices. Those shared interests in maintaining the system, however much the advanced capitalist countries may compete, tend toward cooperative relations. Thus although countries like France and Spain demonstrate their subordinate status in humiliating fashion by closing their air spaces under U.S. orders, the blocking of President Morales’ plane is not reducible to only that subordination; European governments have shared interests in maintaining the system. That force is what maintains it speaks for itself.

Producing more but earning less around the world

We are working more and earning less. Productivity is up, but paychecks don’t keep pace. Average wages have been stagnant for four decades as the one percent has enjoyed spectacular gains in wealth.

The disproportion between increases in worker productivity and wages is perhaps most pronounced in the United States and Germany, but is common among the world’s advanced capitalist countries. This upward flow of income has long-term implications because the mass of wealth concentrated into few hands has led to an increase in destabilizing financial speculation — there are not enough opportunities for productive investment and consumer spending erodes because working people have less to spend.

In turn, reduced spending means there is little or no incentive for capitalists to invest, leading them to plow more money into speculation and to move production to newer low-wage havens because their profit margins are squeezed. Round and round the world has gone as the global economic crisis has persisted for half a decade with no end in sight.

The U.S. economy is still the world’s largest and is the model that its powerful capitalists work to export around the world; moreover, the massive U.S. trade deficit means the U.S. is to some extent propping up the world economy. Yet unemployment remains stubbornly high in the U.S. (even if lower than in the European Union). The U.S. economy simply isn’t creating jobs fast enough — that is the conclusion of a February 1 report issued by the Economic Policy Institute. The report, written by Heidi Shierholz, says:

“The U.S. labor market started 2013 with fewer jobs than it had 7 years ago in January 2006, even though the potential workforce has since grown by more than 8 million. The jobs deficit is so large that at January’s growth rate, it would take until 2021 to return to the pre-recession unemployment rate.”

Apologists for austerity as the “solution” to economic downturn often claim that the problem is a mismatch between the skills of job seekers and the skills needed by businesses. It is true that unemployment is lower among more educated people and higher among lesser educated people, but the rate of the increase in unemployment since the economic crisis began has been similar among all groups; in fact it is slightly higher among those with some college or a college degree than those with high school or less.

Among workers age 25 or older who are not high school graduates unemployment has risen 1.7 times since 2007, the Economic Policy Institute reports, while for college graduates it has risen 1.9 times. Among all workers, the rate of long-term unemployed has more than doubled during the past six years. The report says:

“The fact that we still have large numbers of long-term unemployed is unsurprising given that the ratio of unemployed workers to job openings has been 3-to-1 or greater since September 2008.”

Job growth lags behind GDP growth

The economies of the advanced capitalist countries simply aren’t growing fast enough to generate jobs. Because of competitive pressures that lead to layoffs, plant shutterings and moves to locations with much lower wages, and the increasing sophistication of computers and machinery, capitalist economies only increase employment during periods of robust growth, when demand requires more production. Unemployment ordinarily decreases only when an economy grows at least three percent annually.

Fred Magdoff and John Bellamy Foster, authors of the book What Every Environmentalist Needs to Know About Capitalism, summarized this conundrum:

“Capitalism is a system that constantly generates a reserve of unemployed workers. Full employment is a rarity that occurs only at very high rates of growth, which are correspondingly dangerous to ecological sustainability. As Christina Romer, former chair of President Obama’s Council of Economic Advisers, tells us, ‘We need 2.5 percent growth just to keep the unemployment rate where it is. … If you want to get it down quickly, you need substantially stronger growth than that.’ … [I]t is clear that if the GDP growth rate isn’t substantially greater than the increase in the working population, people lose jobs.” [pages 56-58]

As competition for jobs steadily becomes more acute, the dynamics of capitalism dictate that wages will be buffeted by strong downward pressures. Over the long term, not only the past few years, that has happened. A study published in the Spring 2012 edition of the International Productivity Monitor demonstrates the extraordinary mismatch between productivity gains and wages. The authors, Lawrence Mishel and Kar-Fai Gee, write:

“During the 1973 to 2011 period, the real median hourly wage in the United States increased 4.0 percent, yet labour productivity rose 80.4 percent. If the real median hourly wage had grown at the same rate as labour productivity, it would have been $27.87 in 2011 (2011 dollars), considerably more than the actual $16.07 (2011 dollars).” [page 31]

Almost every penny of the income generated by that extra work went into the pockets of high-level executives and financiers, not to the workers whose sweat produced it.

Around the world, workers see little of the gains

Workers in other advanced capitalist countries did not fare quite as badly, but the general pattern is there.

In Canada, for instance, labor productivity increased 37.4 percent for the period 1980 to 2005, while the median wage of full-time workers rose a total of 1.3 percent in inflation-adjusted dollars, according to a Fall 2008 report in the International Productivity Monitor. The authors of this report, Andrew Sharpe, Jean-François Arsenault and Peter Harrison, provided caveats as to the direct comparability of productivity and wage statistics, but find the mismatch to be real as labor’s share of Canadian gross domestic product has shrunk. The authors note that, in Canada, almost all income gains have gone to the top one percent. They write:

“If median real earnings had grown at the same rate as labour productivity, the median Canadian full-time full-year worker would have earned $56,826 in 2005, considerably more than the actual $41,401 (2005 dollars).” [page 16]

Wage erosion is also at work in Europe. Making a few calculations from International Labour Organization statistics on labor productivity and wages, provided for individual countries, I found that average real wages in Germany declined 0.5 percent per year for the period of 2000 to 2008 while German labor productivity increased 1.3 percent per year. (This was the only period for which I could find statistics for both categories.)

The prosperity of German manufacturers is built on the backs of German workers, who have absorbed a decade of pay cuts. Because the International Labour Organization uses average, rather than median, figures, the disparities are likely made to appear smaller than they might be because the wealthiest are increasing their share of income faster than anybody else, distorting the average. (“Average” is the halfway point between highest and lowest; an average will rise if the highest has risen while all others are stagnant. “Median” is the number representing someone at the 50th percentile, or the middle number if everybody was arranged in order, and thus is more representative.)

Using the ILO statistics, French workers’ average wages kept pace with productivity growth for the period 2000 to 2008 while Spanish workers lagged, earning 0.5 percent more in wages per year while productivity increased 0.9 percent per year. Income inequality has increased in France since the mid-1990s, an indication that growth in pay for the highest earners likely masks declines for most workers and therefore could account for the statistical stability in the French wage/productivity ratio.

By contrast, in Britain, a Resolution Foundation paper found a differential between productivity and wage gains, although smaller than that of the United States, but also that British workers did not lose as much ground as did French, German, Italian and Japanese workers. That conclusion is based on a finding that the share of gross domestic product going to wages in those countries has steeply declined since the mid-1970s.

What we have is a structural problem, not a problem confined to a particular country, caused by a government nor solvable by adopting a specific monetary policy. Nor is personal greed the underlying cause, regardless of the personal qualities of individual capitalists.

Intensified competition over private profits, and that “markets” should determine social outcomes, inexorably leads to a consolidation in which industries are dominated by a handful of giant corporations, and those corporations gain decisive power over governments and relentlessly reduce overhead (especially wages and benefits) in a scramble for survival. More inequality means less pay for employees, reducing demand and weakening economies, which leads to more unemployment and less leverage for employees in wage negotiations as corporations use any means necessary to maintain their profit margins.

That a new boom or bubble might occur in the future does not alter the overall picture; such a development would only be a temporary blip. If it is the structure that is the problem, then only a different structure can be the solution.

The high cost of private profit in health care

By Pete Dolack

The United States spends huge amounts of money on health care. But it is only in comparison to other countries that the magnitude of health care spending becomes clear. Because the U.S. health care system is designed for private profit rather than public health, the U.S. spends an extra $1.15 trillion per year beyond what it would otherwise.

If that total astounds you, you are not alone. When I first began making calculations to determine excess spending in health care, the figures were so large that I had difficultly believing them and performed the calculations over again. The result was the same.

The excess spending on health care is not only growing, it is growing much faster than the rate of inflation, in concert with overall health care spending. For instance, the annual average of excess spending for the period of 1990 to 2000 was $685 billion. For the period of 2001 to 2010, the annual average ballooned to $1.15 trillion.

And despite all that extra spending, U.S. residents have poor health results in many key indicators, in comparison to the world’s other advanced capitalist countries. Still more amazing, 51 million people in the U.S. are without health insurance, while all other peer countries have universal care. This is the system that millions of U.S. citizens believe is the best in the world thanks to the world’s most developed public relations and misinformation industries.

The rest of the world is quite in disagreement, to the point that even the harsh austerity-minded Conservative prime minister of the United Kingdom, David Cameron, has repeatedly had to deny (whether or not sincerely I will leave to others) any intention to emulate the U.S. system as he attempts to impose changes on the country’s National Health Service.

U.S. health care is by far the world’s highest

Let’s do a bit of digging under the surface of numbers. First off, an explanation of where the $1.15 trillion in annual excess spending comes from. I calculated the number by first obtaining total health care spending per capita* of the three largest economies within the European Union (France, Germany and the United Kingdom) and of Canada, the neighbor of the United States. I then averaged the numbers for the years 2001 to 2010 (the latest for which full statistics are available) as compiled by the Organisation for Economic Co-operation and Development (OECD), the club of the world’s advanced capitalist countries and the largest developing countries.

The composite average of Canada, France, Germany and the U.K. for 2001 to 2010 is US$3,479 per capita per year. That number is less than half of the U.S., which had by far the world’s highest health care spending at $7,325 per capita per year. The differential was then multiplied by 300 million, the approximate U.S. population during the past decade. If you prefer a different measure, the U.S. spent 17.4 percent of its 2009 gross domestic product on health care expenditures, again the world’s largest by a wide margin. The average of the 34 countries of the OECD is 9.6 percent.

And if that is not enough, here is one more astounding comparison: Not only are out-of-pocket expenses by U.S. health care consumers higher than in any of the four comparison countries (no surprise there) but per capita government spending in the U.S. is higher than in any of the four comparison countries. Those four have varying versions of what U.S. right-wing ideologues venomously denounce as “socialized medicine” — health care systems either run or closely regulated and supervised by a federal government paid for through taxation — and yet each government nonetheless spends less than does the U.S. government on a per capita basis.

Despite the massive transfer of money to private insurance companies by employers and employees, on a per-capita basis government health care spending by itself in the U.S. is higher than total health care spending in Canada.**

The authors of the paper “Why is health spending in the United States so high?” (a supplement to an OECD statistical report) attempted to draw conclusions from a mass of data on health care expenditures:

“It does not have many physicians relative to its population; it does not have a lot of doctor consultations; it does not have a lot of hospital beds, or hospitals stays, when compared with other countries, and when people go to hospital, they do not stay for long. All these data on health care activities suggest that U.S. health spending should be low compared with other countries.”

The reason that spending is anything but low is because of the high prices extracted throughout the system. The costs of a range of medical procedures or surgeries are much higher in the U.S. than elsewhere, as are pharmaceutical prices. The authors write:

“Overall, the evidence suggests that prices for health services and goods are substantially higher in the United States than elsewhere. This is an important cause of higher health spending in the United States.”

The OECD is an organization that is representative of the world’s most powerful capitalist countries, so the report does not inquire into underlying causes or in any way challenge the economic system that leads to such results; it merely reports facts and figures. Those facts and figures, however, give us a useful starting point. The wasteful spending on health care are subsidies for pharmaceutical manufacturers, hospital-chain operators, insurance companies, managed-care companies and medical-products manufacturers. Money flows to those corporate entities directly from your pocket and indirectly from you via government spending.

Each U.S. citizen’s annual share of wasteful, excess spending on health care — excess spending that goes into the coffers of some of the country’s largest corporations among the many industry profiteers — amounts to $3,846. Business leaders, their lavishly funded think tanks and pressure groups, and the public-office officials who represent them continually assert that private enterprise is always more efficient. It would seem that the efficiency lies in extracting money and wealth.

Government more efficient because goal isn’t private profit

Noting that “high administrative costs and lower quality have also characterized for-profit HMOs” (health maintenance organizations funded by insurance premiums that supervise health care), a Journal of the Canadian Medical Association article provides the following figures for the percentage of revenue that is diverted to overhead:**

  • For-profit HMOs: 19 percent
  • Non-profit plans: 13 percent
  • U.S. Medicare program: 3 percent
  • Canadian Medicare: 1 percent

In contrast to the rhetoric so often employed, government is far more efficient at delivering health care than the private sector. (This is also true in retirement plans, where the U.S. Social Security program’s overhead is much lower than mutual-fund managers or other financial-industry enterprises.) An important reason is that the government does not skim off massive amounts of money for bloated executive pay nor does it need to generate large profits to enrich financiers.

Such large expenditures also flow from a lack of competition. Few people in the U.S. have a choice of insurance provider, which is dictated by their employer, and insurance companies and HMOs frequently limit choice of doctors, and often deny coverage so as to maximize profits. A company that has stock traded on exchanges is legally required to maximize profits above any other consideration; it is no different because health care happens to be the product.

A few summers ago, I found myself in a debate with a Canadian woman who was critical of her country’s health care system. I acknowledged that Canadian health care is not perfect, but then gave the example of a friend who had recently died in his 50s of a heart attack because his insurer decreed that he did not require medication for his weak heart and he could not afford it on his own. Does that happen in Canada?, I asked. She replied with silence.

As in any other mature industry, most market share has consolidated into a few hands, a condition that is known as an “oligarchy.” Although competition in younger or more fractured industries does result in price reductions, when an industry is reduced to a small number of dominant corporations, price competition is usually a casualty.

Health care constitutes several industries — insurance, pharmaceuticals, hospitals and medical equipment, among others — and each adds to the cost. Giant pots of government money are involved, always a lucrative source of private enrichment. And insurers have people over a barrel because health insurance comes through their employer, who make deals with a single insurer, take it or leave it.

Health care provision also has unique attributes that further inflate costs. In “The high costs of for-profit care,” by Steffie Woolhandler and David U. Himmelstein (the Journal of the Canadian Medical Association article quoted above), the authors write:

“Why do for-profit firms that offer inferior products at inflated prices survive in the market? Several prerequisites for the competitive free market described in textbooks are absent in health care. First, it is absurd to think that frail elderly and seriously ill patients, who consume most health care, can act as informed consumers (i.e., comparison-shop, reduce demand when suppliers raise prices or accurately appraise quality). …

“Second, the “product” of health care is notoriously difficult to evaluate, even for sophisticated buyers like government. … By labeling minor chest discomfort “angina” rather than “chest pain,” a U.S. hospital can garner both higher Medicare payments and a factitiously improved track record for angina treatment. It is easier and more profitable to exploit such loopholes than to improve efficiency or quality.

“Even for honest firms, the careful selection of lucrative patients and services is the key to success, whereas meeting community needs often threatens profitability. … [For-profit] hospitals duplicate services available at nearby not-for-profit general hospitals, but the newcomers avoid money-losing programs such as geriatric care and emergency departments (a common entry point for uninsured patients). The profits accrue to the investors, the losses to the not-for-profit hospitals, and the total costs to society rise through the unnecessary duplication of expensive facilities.”

U.S. fares very poorly in a comparison of national systems

In the spirit of comparison-shopping, here is a brief examination of the five countries under discussion, the United States and the four comparison countries.

  • German health care system: Everybody is covered. Workers pay eight percent of their gross income into a “sickness fund,” a nonprofit insurance company; employers pay the same amount. These contributions account for almost all money in the system. Workers choose among 240 sickness funds. There are no deductibles. Everything, including drugs, is free for children younger than eighteen. The government regulates all insurance companies closely.
  • French health care system: Everybody is covered. Workers pay 21 percent of their income into a combined retirement and national health care system; employers pay about half that amount. Payroll and income taxes largely fund health care. There are no waiting lists for elective surgery or to see a specialist. Doctors’ fees are negotiated with medical unions, while hospital fees are regulated. Patients with one of 30 long-term and expensive illnesses pay nothing for care.
  • British health care system: Everybody is covered. The National Health Service is funded by income taxes, employs physicians and nurses, and owns most of the hospitals and clinics. The service also pays directly for all health care expenses, with prescriptions and dentistry being the two exceptions. There are sometimes long waiting lists, which are commonly attributed to there being no restrictions on services, particularly hospitalization.
  • Canadian health care system: Everybody is covered. The federal government sets standards; provincial and territorial governments administer the system. Medically necessary hospital, physician and diagnostic services are free, although most dental care and prescription drugs are not covered. Services are primarily through private providers. Long waiting times for specialists are a problem, with reduced government payments cited as an underlying cause.
  • U.S. health care system: 51 million are not covered. Coverage is through an employer (of which the employee pays a portion), or through own purchase of private insurance, but most can’t afford to do so. Insurance companies frequently dictate what, or if, services will be provided. Coverage generally requires out-of-pocket expenses and includes a “deductible” before payments begin. Patient bankruptcies due to inability to pay bills are common.

Another weakness of the U.S. health care system is that is based on the concept of a “family wage” instead of a “social wage.” That is both cause and effect — unlike other countries where health care is a right, in the U.S. health care is a privilege, and the large disparities in the ability to obtain it reflects the canyon-like inequality there and also aggravates social inequities. Not only because health care is tied to an employer, giving a boss more power over employees, but because a family’s health care coverage is tied to the person who has the job that provides it — usually the man in a traditional family. But it could be any one person in a non-traditional family or within a gay or lesbian household.

Universal health care systems are gains of movements

Feminist pioneer and theorist Kathie Sarachild of the influential group Redstockings, in a July 4 interview on the Joy of Resistance: Multi-cultural Feminist Radio program, summarized this concept. She said:

“The family wage is another way of saying this old idea that men should support the family. [U.S.] society is built on the idea that men should get higher pay than women because men would support the family and women would stay home and take care of the children. … Even though there were always women who worked, they received less pay than men did because of this family-wage concept. …

“A lot of [the European social wage] came out of socialist and communist theory. … The labor movement and the feminist movement in [Europe] have been able to win a social-wage system, which pays to raise the next generation [through universal health care and paid leave when a child is born instead of being dependent on an employer to pay a ‘family wage’ to the man].”

Nationalized health care becomes part of a basket of social benefits, including more vacation time, life-long education and elder care that liberates working people from dependence on an employer. A shorter work week would also bring benefits, Ms. Sarachild said:

“If the work week were shorter … there would be more jobs. There’d be less unemployment because the work week is shorter so there are more paid jobs. There would be more time at home for the father and mother to be with the child. …. [With the introduction of a] social wage, the unfair family wage would not be necessary. … [Women] are not as dependent on the man, and both of you are not so dependent on the employer.”

The lower wages of women in the “family wage” system boost corporate profits on the backs of women, Joy of Resistance host Fran Luck points out, and many women are forced to stay in bad relationships because they would lose their health care.

For men and women, the price of private profit is enormously high: 22,000 people die and 700,000 go bankrupt per year as a result of inadequate, or no, health insurance in the United States.*** The U.S. ranks among the bottom five of the 34 OECD countries in per capita doctor consultations, hospital beds and average length of stay in hospitals,**** and is well below average in life expectancy and infant mortality.

The country’s people pay more than $1.15 trillion per year on top of what they should pay to swell corporate profits and executive and Wall Street wallets — in return, we receive worse coverage. That is the price of capitalism.

* OCED figures. Spending per capita in U.S. dollars adjusted to create purchasing power parity.
** Steffie Woolhandler and David U. Himmelstein, “The high costs of for-profit care,” Journal of the Canadian Medical Association, June 8, 2004, pages 1814, 1815.
*** T.R. Reid, “No Country For Sick Men,” Newsweek, Sept. 21, 2009, pages 43-44.
**** “Why is health spending in the United States so high?,” OECD report, page 5.

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.