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.

11 comments on “You can vote as bankers dictate, but is that democracy?

  1. Nice post.

    How representative can be one government that represents almost 42% of the voting mass?

    Shall we take into consideration the very high % of people that didn’t vote?

    Is it correct that 39% didn’t vote?

    With that in mind, can someone assume that the existing government represents only the 25% of the voting people?


    • If the abstentions aren’t 39%, they are very close to that total. I don’t believe the new government will prove to be long-lasting. Both Pasok and Democratic Left refuse to accept any ministerial portfolios, leaving it as a New Democracy/technocrat government supported by the other two. The easier to bail out when little relief to austerity is offered and Greeks become more angry.

  2. “You can vote as bankers dictate, but is that democracy?”

    Probably, in the sense that it is a vote for survival and short-term self-interest, neither of which are undemocratic.

    I share your anger at the political-financial oligarchy, but I doubt a class-based revolution can change anything given the open global economy. In the developed democracies we have moved into a populist vs. elite divide that is fundamentally different than class-based conflict. Voters should demand to be a part of the capitalist system by demanding rules that foster widespread private capital accumulation. Instead, Greek (and other) workers sold their rights for a false promise of bread and circuses.

    To explain, capitalist democracy is controlled by capital. Access to land is the reason the USA is different than Argentina today. They both had abundant resources, but in the US land became the basis of a thriving middle class, while in Argentine it was locked up by an imposed feudal aristocracy. Merely translate that land dynamic to financial capital today and you see where the leverage point has to be.

    • “Populist vs. elite divide”? I am sorry to be so direct, but that is a meaningless statement. Voters are already very much “part of the capitalist system” – it is their labor that is exploited to create the accumulation of capital. It is impossible for there to be “widespread private capital accumulation” because capital accumulation is based on owners extracting surplus value from their workers. Therefore, only a small percentage can accumulate, and competitive pressures will cause further consolidation of accumulation among them. That is the class difference, and as long as there is capitalism, there are classes. Or to put it another way, the imperative of capitalism is “expand or die.” If you don’t expand markets and maximize profits, your competitor will do so and put you out of business.

      As I have previously written, Greek workers are not lazy or overpaid, nor, to use your phrase, consumed with “bread and circuses.” Greeks work more hours than any other people in the European Union, and earn less than do Germans.

      German industrial success is based on a decade of cuts to German workers’ wages, allowing German manufacturers to undercut manufacturers in their export markets. Greece is one of those countries that has been undercut, and it and similarly placed countries can’t devalue their currencies to regain their competitive position. German exports don’t become too expensive because everybody is using the same currency, the euro. So Germany is the biggest beneficiary of the euro. Greece and similarly placed countries could devalue and regain a measure of competitiveness if they had their own currency. Because they don’t, capitalism dictates austerity, and capital ensures that austerity will be forced in its entirety on working people.

      Germany won’t win in the long run, either. As living standards in its export markets plunge, demand for its products declines as well. German workers can’t afford to pick up the slack because their wages have been cut. What will German manufacturers do to maintain profits? Export the jobs to low-wage countries, plunging German workers into crisis. Capitalism is a race to the bottom because of the competitive pressures built into it. Some countries simply get to the bottom before others.

      • No. I’m afraid it is not a meaningless statement and is the reason a class-based conflict will never get off the ground. Seeing the world as a face-off between capitalists and workers is a dead-end and has been for almost three generations.

        Yes, workers participate in capitalism, as an input cost, not as a residual claimant. You know how profit-oriented business operates. The lower the input costs, the higher the profits, and the more successful the company. Successful companies naturally dominate this world. Guilds and labor unions have only been able to secure rents from owners by restricting the supply of labor. The march of globalization and technology has eliminated that advantage and it’s not coming back. Meanwhile, globalization has rewarded the risk-taking capitalists, and elitism has rewarded the non-risk-taking rent seekers. We have to break that symbiosis.

        It seems pointless to make arguments about how hard or little workers work, they can only be paid based on their productivity and all measures of Greek labor productivity are comparatively dismal. (I have lived in Greece and I see no reason to disparage Greeks – they operate rationally under a dysfunctional system.)

        To say capitalism is a race to the bottom is a seriously myopic view. There are no worker paradises, nor have there ever been. Capitalist markets are merely the systemic manifestation of human nature and behavior. These markets can be designed for good or bad and if you can’t see the good, you can’t fix the bad. If you are married to a capitalist vs. labor view of the world, there is no way out. We can discuss these things, or we can rant. The PTB would prefer we rant.

  3. “Capitalism is a race to the bottom because of the competitive pressures built into it.”

    Pete, nature has competitive pressures built into it. Shall we abolish it or condemn it? Or learn to make it work for us?

    • A little bit of competition is fine; the problem is when everything turns on it. The type of competition inherent in capitalism leads to a few winners and many more losers. Cooperation is just as much a part of human nature as competitiveness. To see competition as the only human characteristic is myopic — and a self-serving way to keep all of us at each others’ throats.

      If Greek labor is unproductive, it is because of the backwardness of Greek capital. Productivity is a function of the tools, machines and techniques introduced into the production process. The productivity of the world’s workers have increased severalfold over the past century because of modern equipment and machines; any other factor is too minuscule to factor in. If Greek capitalists don’t invest in their companies, then that is the fault of the capitalists not the employees.

      Unfortunately, all you are doing is repeating the same tired neoliberal arguments we are bombarded with. I am certain you enunciate these through true conviction, but repeating them with enthusiasm does not make them any more accurate. I don’t have the time to pick apart all the fallacies in your comments, so I’ll just point out one: The use of “rent” as a macroeconomic term has to do with a monopolist or semi-monopolist extracting a larger profit than he/she would ordinarily be entitled to. (One of the foremost neoliberal advocates, Anders Aslund, uses the definition “Profits in excess of the competitive level.”) Rents have absolutely nothing to do with unions, guilds or any wage of any working person.

      Rents, however, are what any capitalist naturally seeks if possible. Microsoft is a good example — its products are inferior knockoffs of other companies’ better, earlier-released products that become dominant through its near monopoly on personal-computer operating software. Microsoft has a huge profit margin — sometimes as high as 40 percent. How can a company that makes such inferior products get that? Through a monopoly, not through outcompeting peer companies. All industry sectors tend to monopoly or oligarchy – that is the end result of capitalist competition. Concentration of capital, more capitalists run out of business and more peoples’ wages decline. When people don’t have the money to buy the products anymore, it winds down. Not all at once, not in a dramatic crash, not without occasional upswings, but the overall movement is what it is. We can be blind to it, as propaganda wishes us to be, or we can look reality in the eye and try to work out a solution to a structural problem.

  4. “A little bit of competition is fine; the problem is when everything turns on it. The type of competition inherent in capitalism leads to a few winners and many more losers.”

    So, competition is not really the problem – it’s the results you don’t like. I have to say that your second statement reveals your misunderstanding of competitive markets and the winner-take-all phenomenon. The problem we have is that markets are less competitive because part of the competitive urge is to corner the market. This is most easily accomplished with non-market strategies – such as can be pursued through political institutions. Political intervention can more easily be deployed for private interest with enough lobbying money or organizational capacity (as it is with unions). The second problem is that political power has led to policies that reinforce the concentration of capital, (favoring the 1%, a group which includes politicians and labor leaders!). Those can easily be changed if we realize the problem. Tax policy that favors debt leverage is the main culprit.

    Your analysis is unfortunately driven by your desired conclusion, which means you end up in a cul-de-sac, far from the truth. Labeling ideologies is another box that hems in your thinking. If you don’t think modern unions are rent-seekers, you don’t know the meaning of the word. Unions, esp. public unions, can exercise monopolies even more effectively than corporations because of the structural nature of the workplace vs. the marketplace. Granted, this has changed radically with globalization and mobile capital. This is why unions and their supporters had better learn to think outside the box–the world has changed, as it did over the 100 years after Marx.

    Your last paragraph merely states the obvious. What you don’t get is that 20th century industrial organization and worker capitalism is no solution. I would suggest a vacation in Hong Kong or Singapore, as the average citizen on the street gets it. If you prefer Europe, I suggest Estonia.

    I’m afraid that’s all I can offer you as I’m sure it won’t move you. Before you condescend to people who disagree with your worldview, you should realize there are people out there with far more education and research experience in these matters. I’ll leave it at that. Good luck.

    • Once again, “rent” is gaining excess profits from a monopolistic or other ownership of a property or land. That is the textbook definition of the marco-economic term. I specifically quoted Anders Asulund’s definition because he is likely more of a believer in “free markets” than even you and, although he is somebody I strongly disagree with, is a very well known writer and advocate for neoliberalism, or laissez faire if the old-fashioned term is preferred. If you are not familiar with him, he was one of the leading economists who advocated for “shock therapy” in Russia and the other former components of the Soviet bloc during the 1990s. So your disagreement on what constitutes “rent” is not with me, it is with the field of economics, and with prominent “free market” advocates who are professional economists.

      A union, or any group of employees, can not extract “rent” because their compensation is in the form of wages, which are set either in collective bargaining or by fiat by the employer. Wages are an expense (and therefore a deduction from profits) to the employer and therefore form the same relationship as the cost of machinery or raw materials. In capitalist relations, labor (or, to be technical, an employees’ “labor power”) is a commodity, not fundamentally different from any other expense. The interest of the owner of capital is to reduce costs in order to increase profits. The interest of the employee is to gain higher wages. As these interests are in opposition, negotiation is the mechanism by which a union attempts to assert the interests of the employees. If the unions successfully negotiate a raise, then the employers’ expense has increased. That is no different than if the cost of a raw material increases. The raw material has not extracted “rent” – that would be preposterous — rather, the employers’ expenses has simply increased.

      The role of competition here is that as markets mature, labor costs rise and other expenses increase, the rate of profitability declines. The owner (or the manager in a company whose stock is traded on stock markets because managers there assume the role and prerogatives of owners) can either introduce an innovation in production to reduce the cost of production (here is where competition can be beneficial) or the owner can reduce costs by skimping on raw materials (not good for the finished product) or by reducing wages and benefits (not good for the employees). But if one capitalist does this, thereby boosting profits, then the capitalists’ competitors are going to replicate those moves, and the gain of the first capitalist is eroded, once again introducing the problem of a decline in the rate of profitability. There is only so much machinery that can be introduced, so ultimately the capitalist has to reduce the costs of labor. That means erosion to wages and benefits, and when that can’t be pushed anymore, production is moved overseas where workers can be paid a tiny fraction. The resulting unemployment increases competition for jobs, creating strong “market” pressures for wages to decline further.

      The personal characteristics of the capitalist is irrelevant. The capitalist is forced by the rigors of competition to do this, because his/her competitors will do it and run him/her out of business otherwise. For the same reason, the capitalist must get bigger — a larger size brings economy of scale and other advantages, and because moving into new markets is the only way to buoy profitability in the long term. Eventually there are no more markets to conquer. Companies can swallow one another (they already do that because of the need to grow) until only a handful of dominant companies remain. In the end, we are back to cutting costs – specifically, labor costs. This competition is built into the capitalist system and can not be avoided — ignoring this dynamic will put you out of business. So all-out competition swamps all other considerations, and that competition will, and does, become a race to the bottom. It is a systematic problem and has nothing to do with any capitalist’s personality or with employees who are (in good times) trying to claw back for themselves a bit of the surplus value taken from them or (in hard times) trying to slow down the decline in their wages.

      And, to touch briefly on “political power,” the formulation you offered is backwards. It is the concentration of capital that creates power, and that economic power is easily translated into political power. Political institutions and government simply reflect the allocation of power in a society, and today that power in capitalist societies is heavily weighted toward the biggest capitalists, who can buy and sell politicians at will. And they do. That should not come as a shock for they are simply acting in their own interests. As the concentration of capital and upward flow of money continues, then the beneficiaries of those capital and money flows gain more power and are able to further bend the political system in their favor. Once again, this is a structural phenomenon.

      Many people, myself among them, believe that the solution to this structural problem is a different economic structure. I advocate cooperative enterprises, where all the workers make collective decisions and vote on their management (from their own ranks), and that cooperatives are rooted in their communities, accountable to their communities, and that cooperatives relate to each other in a cooperative way and that pricing is done through open negotiations. There would be far more to this, of course, but that’s the basics. Competition would still exist here: If ten companies make a widget and five make high-quality widgets and five make low-quality widgets, then the latter will have to make a better widget. But they don’t have to worry about their plant being suddenly shut or moved to China because why would anybody move their job thousands of miles away? If they become uncompetitive and lose their markets, they may have to vote to close their plant, or decide to offer a different product where they would be competitive. They can decide that themselves and because they won’t be summarily dispersed by a capitalists’ unilateral decision, the skills of the cooperative workers can stay in the community and put to a better use instead of being wasted through unemployment.

      I’ll leave at that, as the above paragraph merits far longer discussions, which I will write in future posts. You came to a blog with a Left perspective, so you shouldn’t be surprised that I didn’t fall to my knees when presented with a Right-wing argument, especially one that I and everyone else is bombarded with. The only criterion I have for comments here is that the argument presented is done so intelligently, a hurdle that you easily clear, obviously. What you shouldn’t expect is to be able to critique without a challenge. If I left a comment on a Right-wing blog, I would expect a vigorous rebuttal and wouldn’t complain when I received it. I have no problem at all with challenges to me, because if I can’t defend a position I must abandon it. But you seem to believe that the standard of who has more education or experience is how precisely one agrees with you. I’ll have to disagree on that as well.

  5. JAH says:

    “Came about smartly, and delivered a well aimed broadside ….”

    You’re getting good at this.

    Looking forward to the pending post on co operatives, per our past discussions.

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