NAFTA and European Union: Different sides of the Atlantic but same function

The logic of the multi-national euro currency is tighter economic integration and loss of popular sovereignty. Unless the eurozone breaks up and its users return to their own national currencies, pressure will be built by the “markets” for further centralization and harmonization of rules. In plain language, tightened control by big capitalists.

The eurozone, functionally, is much the same as the North American Free Trade Agreement across the Atlantic. NAFTA makes corporate profiteering paramount by eroding the ability of the governments within it to enforce regulations; places decision-making in the hands of unaccountable and undemocratic arbitration boards convened by either the commercial arm of the United Nations or the World Bank; and elevates the interests of large corporations and financiers above all other human considerations.

(There are the occasional conspiracy-mongers who claim that NAFTA is a precursor to the dismantling of the United States in favor of some “North American republic” and that the dollar will be eliminated in favor of a regional currency, but besides the fact that these feverish Right-wing conspiracies are laughable on their face they completely ignore the fact that U.S. capitalism needs U.S. military might, that the world capitalist system needs a center with the requisite financial and military clout to act as the enforcer, that the U.S. relies on the dominance of its national currency to be able to run budget and trade deficits, and that the nationalistic U.S. public would rise up, in arms if necessary, against any such idea.)

"Canada in fog" photo by Kat Spence

“Canada in fog” photo by Kat Spence

The key NAFTA provision is Chapter 11, which codifies “equal treatment” in accordance with international law and enables corporations to sue over any regulation or other government act that violates “investor rights,” which means any regulation or act that might prevent the corporation from earning the maximum possible profit. Thus we have had the spectacle of a corporate parcel-delivery service suing Canada in attempt to have the Canadian postal system dismantled and chemical companies suing because a chemical they produce has been banned because it is poisoning water supplies.

Profits at any cost

The idea that safe drinking water is considered a trifle next to the maximization of profits, sadly, is not a mordant joke. Any company that has its shares traded on stock exchanges is legally required to maximize its profits for shareholders, to the exclusion of all else — under capitalism, safe drinking water is unimportant. (Except, of course, for the bottled-water companies that drain aquifers to supply their products.)

Although Canada, which has the most stringent regulations of the three NAFTA countries, has won five decisions before the arbitration boards, three of them were on technicalities in which the merits of the cases were not ruled upon. Only twice has the Canadian government won a clean victory in the dozens of cases brought against it. Just this week, The Globe and Mail newspaper of Toronto reported that Exxon Mobil Corp. won a Chapter 11 arbitration case against the province of Newfoundland and Labrador because Exxon and a partner company were required to conduct research before commencing projects.

A U.S. watchdog group, Public Citizen, summed up the rules of NAFTA and other trade treaties in this succinct fashion:

“This ‘investor-state’ enforcement mechanism elevates private firms and investors to the same status as sovereign governments, effectively privatizing the right to enforce public treaties’ expansive new investor rights. There is no such private enforcement for labor rights or environmental standards. … The [free-trade] pacts provide firms a way to attack other countries’ domestic public interest laws and skirt their court systems.”

If readers in Canada, the United States or Mexico have no recollection of voting on any of this, there is good reason.

No accountability to the public

Similarly, the financiers who dominate European Union policy are not subject to any democratic accounting, either. And under the rubric of not allowing a perfectly good crisis to go to waste, the ongoing eurozone crisis is being used as leverage to install an ever harsher régime. Doing so is completely logical within the imperial construct of the European Union, which is a supra-national institution to impose corporate domination on a reluctant population. National governments are not insulated from popular opinion, but a supra-national structure can impose dictates on those governments, which can then tell citizens that is has “no choice” but to adhere to them so that the country can remain “part of Europe.”

Concomitantly, 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. This wish underlies the anti-democratic push to steadily tighten the E.U., including mandatory national budget benchmarks that require cutting social safety nets and policies that are designed to break down solidarity among wage earners across borders by imposing harsher competition through imposed austerity.

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.

A difficulty for E.U. business elites is that nationalism tends to act as a disorganizing force within the E.U., whereas nationalism is a potent unifying force in China and the United States. But nationalism, as always, has its uses: Instead of uniting on their common interests across borders, all too many Europeans are attacking one another on a national basis. Nationalism, ordinarily an easily manipulated ethos used to provide a unifying glue within countries that are otherwise consciously atomized by capitalist pressures and individualist propaganda, becomes a divide-and-conquer tool par excellence in a supra-national context. And so we have the dispiriting spectacle of venomous attacks on “lazy Greeks,” “arrogant Germans” and the rest of the assortment of tired clichés.

Nationalism is fine for working people, but an impediment for business elites who are increasingly bold in calling for economic policy to be directed by Brussels. In the past week, an assortment of E.U. officials, joined by national leaders elected and unelected, said the E.U. must be bound together more tightly. Arrogant and hypocritical as they may be, these officials are simply enunciating the logic of E.U. capitalism. The most prominent tangible form of these calls are for the issuance of “euro bonds” — government bonds to finance debt issued by the European Central Bank in place of bonds issued by individual national governments.

The new French government has endorsed the issuance of “euro bonds,” adding to the momentum. The proximate cause of pleas for the creating of “euro bonds” is that too many eurozone governments can’t afford to borrow at the high interests rates demanded by financiers and the rich who buy bonds (in lieu of paying taxes, which would end the need for selling bonds in such large amounts). The price of pooling together the risk of all E.U. governments by issuing such bonds is much closer economic integration. And what that means is financiers controlling policy to an even greater degree than they already do.

Financiers, that is, as an international interest group; not German bankers or Germany as a country. The corporate news media continues to cover the ongoing crisis and its slow-motion developments as a contest of wills between Germans (or Chancellor Angela Merkel) and the Southern rim of the E.U. with France as a buffer in between. But, as I have previously written, it is German industrialists, not German working people, who are the beneficiaries of German government policy.

German capitalists win, not German workers

Germany has become reliant on exports as German workers have absorbed a decade of wage cuts, leaving domestic demand inadequate to soak up German production or to pick up the slack when export markets soften. German exports have become more competitive on the backs of German employees, making it more difficult for other eurozone countries to remain competitive because, by not having their own currency that they can devalue, they can’t use that route to give their exports a boost. Thus, German industrialists have prospered through the widespread adoption of the euro, which has “locked in” their competitive advantages.

German, French and other bankers earned fat bonuses because the euro also made it easier for them to make loans to the Southern rim, which also enabled those countries to buy more German products. In turn, deficits mount and production is shuttered in countries such as Greece (where the shipping industry, the rich and even many private-sector middle class people don’t pay taxes), and the price for more loans is more harsh austerity.

But the money doesn’t go to the Greek budget, it goes right back to the banks. The 130 billion euro bailout of Greece is used almost exclusively to service the interest on Greece’s debt — not even to pay down the principal! The so-called “troika” — the European Central Bank, the International Monetary Fund and the European Commission — wire Greece the money, which is almost immediately sent right back. Most of the small amount that is retained by the Greek government is used to bail out Greek banks. The price for this? An unemployment rate of 22 percent and rising, pay cuts of 40 percent for those still employed and large numbers of small businesses closing.

The troika went so far as to demand that the Greek government change its constitution to ensure that banks are paid back before there is any spending on social programs. That is a taste of what will be experienced across Europe if more power is concentrated in the hands of unelected and unaccountable officials at the European level. A de facto financier dictatorship, although one to benefit big industrialists as well as financiers, because financiers are dependent on big industrialists to generate the profits that are poured into speculation (nor is there a neat separation between the two). For working people across Europe, the program can be summed up in two words: permanent austerity.

Cuts for now but no security in the future

And not even German workers, who have acquiesced to their unions agreeing to a decade of wage cuts in exchange for job security, will be immune. German workers’ living standards are slowly eroding, and when German exports slow or decline because buyers in other advanced capitalist countries buy fewer of their their products because of austerity and buyers in developing countries like China buy less because they can no longer sustain the pace of investment in infrastructure and industrial capacity, austerity will hit Germans. The route to German industrialists maintaining their profits under these future conditions will be either deeper cuts to wages, an end to job security, export of production to places with much lower wages or a combination of these.

The alternative to harmonizing economy policy among the eurozone countries (harmonizing with the tightest policy among them) is for the eurozone to break up, and countries to resume using their own currencies and setting their own policies, which would at least be subject to elections, and provide space for policies other than neoliberal austerity.

It is no surprise, then, that centralizing economic policy is the preferred route for European business elites. The arguments among them are over details — Chancellor Merkel is not a stubborn holdout nor obsessed with Weimar-era inflation; she is simply reminding other national political leaders that the harmonization will conform to the tightest policy among them and Germany so happens to have that tightest policy. None of the eurozone’s national leaders are in any sense reducible to “puppets,” but their perceived national interests are distorted by whatever consensus their capitalists arrive at, which in turn are determined by larger market forces. Big industrialists and financiers dominate their societies through control of the mass media and a range of other institutions to the point that their preferred policies become, through repetition, the dominant ideas across society and the ideas adopted by the political leaders who become dependent on them.

Similarly, “markets” seek regulatory harmonization within NAFTA countries at the level of the weakest regulations. Governments must respond because capitalists can move production at will, leaving everyone else at their mercy.

Such is the logic of “markets,” which are not the disembodied forces of nature so often portrayed but are simply the interests of the most powerful capitalist elites. It is futile to expect anything different from their system.

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

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.

Pont Neuf in Paris

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.

Charting a path out of impasse for Greece, and other countries (part 2)

The inability of Greece, Portugal and other “peripheral” European countries that use the euro to devalue their currencies has meant that all “devaluation” required by the global capitalist economy has to come in the form of wage and pension reductions, cuts to social welfare programs such as health care, and other internal austerity measures.

International lending institutions controlled by advanced capitalist countries, led by the World Bank and the International Monetary Fund, have long imposed harsh austerity on the countries of the South as the price to be paid for loans; such loans were necessitated by one-sided trade terms and the massive extraction of capital from them by the multi-national corporations of the North.

What is new is that countries of the North are now having similar austerity imposed on them. As with the stronger countries that also run deficits, the countries so targeted borrow from the rich and domestic corporations instead of taxing them, thereby running budget deficits; the lenders then complain that the deficit is too large and demand budget cuts or they will refuse to buy any more debt or will buy debt only at much higher interest rates. Demands that governments sell off assets at fire-sale prices are always a part of these scenarios, and that is no accident — privatization means big profits for the buying corporations at the public’s expense.

In part 1 of this discussion, posted on April 4, I presented arguments in favor of radical economic transformation but with Greece remaining in the eurozone. In this post, I will present arguments, although also in favor of radical economic transformation, for Greece dropping the euro and re-instituting its former national currency, the drachma.

A ‘progressive exit’ from the euro

In the conclusion of an interesting paper, “Eurozone Crisis: Beggar Thyself and Thy Neighbor” by eight authors led by economist Costas Lapavitsas, the authors argue for an “exit conditional on radical restructuring of economy and society,” or what they call a “progressive exit.” Such an exit, they wrote, “cannot be national autarky” and would have to “confront the deeper problem of attaining national development in a globalized economy.”

Within Europe, the costs of austerity have been disproportionally shifted on to the “peripheral” countries such as Greece, Portugal and Ireland, but without investment and without addressing the underlying causes of the economic crisis. “Competitiveness” can’t be raised when wages are already lower than they are in Germany. Because there is no single European state, there is no prospect of a unified fiscal policy; therefore, any reforms to the eurozone won’t alter the dynamics of stagnation and inequality.

The authors note that competing plans they define as “good euro reforms” propose more national independence, democratic accountability of the European Central Bank and European Union-wide social programs. But those plans’ underlying goal of maintaining the euro as a “world currency” — as a currency that competes with the United States dollar — with highly divergent national deficits and policies would be impossible, the authors wrote. The logic of a single currency, they argue, requires a “European budget run by a unitary state with a sufficiently integrated presence across the eurozone to support a common currency.”

Leaving the euro under present conditions, with the current capitalist dynamics untouched, would also be a bad solution, the authors wrote, because the onus would be on local capitalists to restructure production and expand investments, and they see capitalists in countries like Greece and Portugal as incapable of meeting such a challenge. Under such a scenario, such countries would be undercut by the lower wages in the global South, leading to stagnation, successive devaluations and the slow erosion of labor income.

The “progressive exit” from the euro that the authors advocate would come with pain, they acknowledge:

There would be devaluation, which would release some of the pressure of adjustment by improving the balance of trade, but would also make it impossible to service external debt. Cessation of payments and restructuring of debt would be necessary. Access to international capital markets would become extremely difficult. Banks would come under heavy pressure, facing bankruptcy. The point is, however, that these problems do not have to be confronted in the standard conservative way.

Sustainable growth could be ensured, they argue, “provided there was drastic economic and social transformation” built on the mobilization of “broader social forces capable of taking economic measures that would shift the balance of power in favour of labor.” Among the measures to be taken in this scenario would be to nationalize banks, guarantee deposits, orient banking toward socially beneficial lending and imposing capital controls. Public banking in itself, however, would not be sufficient, the authors write:

The combination of public banking and controls over the capital account would immediately pose the question of public ownership over other areas of the economy. The underlying weaknesses of productivity and competitiveness already threaten the viability of entire areas of economic activity in peripheral countries. Public ownership would be necessary to prevent collapse. The specific sectors taken under public ownership, and even the form of public ownership itself, would depend on the characteristics of each country. But public utilities, transport, energy, and telecommunications would be prime candidates, at the very least in order to support the rest of economic activity.

Investment would be re-oriented toward housing, urban planning, transportation and research and development. The tax base would be broadened through taxes on income, wealth and capital while reducing indirect taxes.

Progressive exit for peripheral countries would be predicated on genuine structural reform of economy and society. Such change has nothing to do with the tired shibboleths of liberalisation. If productivity is to be set on an upward path, peripheral economies have to be weaned away from consumption, low savings, individual borrowing, low investment, and speculative bubbles. Structural change requires public mechanisms that could mobilise available resources for investment. It also requires transforming education by committing additional resources and expanding its reach to the poorest. Improving education would, in time, produce gains in labour skills, thus also benefiting productivity.

The authors note that the political and social alliances to bring about such a change are not yet in existence, but wrote that working people in the “core” countries would be natural allies of those in the “peripheral” countries. Such comprehensive cross-border alliances would be necessary.

It would be necessary for peripheral countries to maintain access to international trade, particularly within the EU. It would also be necessary to seek technology transfer and capital from abroad. There are no guarantees that such flows would be forthcoming, particularly as the established order in Europe would be hostile to radical change. But progressive exit also offers the prospect of different development for workers in the core countries, who have come under heavy pressure during the last two decades. Labour in core countries would be a natural ally of peripheral countries attempting a radical transformation of economy. And if the eurozone came apart in the periphery, it could also unravel at the core, allowing for genuinely cooperative relations among European countries.

Exiting the euro while forming new regional alliances

Noting that Greece has ceded its independence to “experts” who will oversee its budget and that the latest round of bonds issued to pay speculators are governed by English law rather than Greek law, international affairs professor Vassilis Fouskas also proposes a radical restructuring of the economy and an exit from the eurozone.

Writing in openDemocracy, Professor Fouskas argues that the “only solution for Greece remains a debtor-led default and exit from the euro-zone under the leadership of a radical democrat political movement.” Furthermore,

The disintegration of the productive base of the country over the last two decades due to the competition it faced from the countries of the European core and, above all, Germany, make any futurologist betting on a substantial Greek recovery within the euro-zone sound ridiculous.

Because taxpayers can’t be bled dry forever, nor can ruling elites deliver economic growth, Professor Fouskas argues for a “radical political program” backed by a “united front of the radical left in Greece.” He advocates an immediate exit from the eurozone and denomination of new debt in drachmas; nationalization of banks and capital controls to prevent the systematic buying of Greek assets with foreign money but encouraging foreign direct investment in productive sectors of the economy; boosting wages to offset devaluation; and taxing large estates and “Greek shipping capital.”

Although this program is more nationalistic than any of the others presented in this and my April 4 post, Professor Fouskas does also argue for “drastic cuts” in Greece’s defense budget, re-orientation of foreign policy toward Balkan countries, Turkey, the Arab world and Asia. His goal would be “the development of regional organisations and NGOs promoting the fraternity and solidarity of all peoples of the former Ottoman and Soviet spaces.”

A criticism of this program would likely be — and I would agree — that it insufficiently acknowledges the need for solidarity with Europe. Such a program couldn’t accomplish its goals without simultaneous movements across the European Union moving toward radical structural changes. Nonetheless, Professor Fouskas is correct in writing that Greece has no prospect for anything other than being bled dry within the current structure of the eurozone.

Exiting the euro as part of a multi-national uprising

Dropping the euro as its currency in itself is far from sufficient, the commentators on all sides of this debate have agreed. At the Left Forum in New York City last month, there seemed to be a consensus that Greece should leave the eurozone and default on its debt. Doing so would not be without considerable pain, but the current situation can’t continue — no people can be bled indefinitely.

“The point isn’t that neoliberals are crazy,” David McNally, a political science professor in Canada, told a Left Forum audience. “They are, but are expressing the pathology of capital.” Linking the austerity being imposed on Greece with the larger struggles beginning to take form across the world, Professor McNally said, “Anti-austerity politics can only be an anti-capitalist struggle,” arguing that “Greece should default and leave the euro. You then have to issue a manifesto to the working class of the world and internationalize the struggle.”

Adding to those thoughts, on his blog, Professor McNally wrote, “For the only hope today of reclaiming democracy in Greece (and elsewhere) resides in the prospect of a mass uprising against modern debt-bondage that extends the rule of the people into the economic sphere.”

The commonality with all the viewpoints presented in this discussion is that an uprising across the advanced capitalist countries, refusing to further accept savage cuts in a system that has ceased delivering adequate standards of living, is the route of the impasse. No single country, certainly not one as small as Greece, can become an island of plenty in a world of austerity.

Divisions within the Greek Left

A question that naturally arises is: Can the Left parties of Greece put the country on a different path? Three parties of the Left — the Communist Party, Syriza and the Democratic Left — have consistently polled a combined 30 to 40 percent. It is possible for the Left to be elevated to power, but it seems unlikely it would be in any alignment other than a coalition with one another. But they are deeply divided.

The Communist Party of Greece, or KKE in its Greek abbreviation, is something of a throwback, continuing to adhere to a sectarian and orthodox Communist line 20 years after the dissolution of the Soviet bloc. The KKE favors Greece leaving the eurozone, the European Union and Nato and refuses cooperation with any other party, while advocating the socialization of production. But the party has been content to wait until objective conditions swing in their favor — this is a traditional orthodox Communist line that combines strong rhetoric with postponing action until the hazy, undefined future.

Writing in the November-December 2011 edition of New Left Review, Stathis Kouvelakis summed up this paradox:

“[The KKE] has been cautious on this subject since the start of the debt crisis, stressing that none of the problems the country confronts can be resolved until the ‘power of the capitalist monopolies’ has been overturned and ‘popular power’ established (under the party’s direction, naturally). This ‘leftist’ rhetoric in fact serves to justify a quietist practice when it comes to mobilizations, concerned above all to avoid joining any unified actions of the left, and to portray Syriza … as ‘opportunist forces’ that are ‘playing the game of the bourgeoisie and of the EU.’ “

Syriza – the Coalition of the Radical Left — contains 16 groups within it, advocating a variety of Left positions other than that of the KKE. Syriza seeks to work with other Left parties, and while it contains differing opinions on retaining the euro and definitively advocates remaining within the E.U., it calls for a thorough restructuring of the E.U. 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.

Syriza leader Alexis Tsipras, in an interview published in Athens News, advocated a Left coalition based on common grounds:

The common framework exists. It has been shaped in city squares, workplaces, neighbourhoods and social solidarity networks. It is about ridding ourselves of the bailout memorandum. It is about the imperative need to put a stop to the voracious appetite of usurers. It is about public regulation of the banking system and about taxing wealth. It is about turning to a development model based on stable and permanent employment, expanding social goods and bolstering the welfare state. That’s the only way to get out of the crisis. … It is obvious that Europe will either change or break apart. There is no Greek solution, only a European one. … [C]hange cannot come from the EU directorate or from banks. It will begin at grassroots level, within societies, and will be imposed, because there is no other way. The dilemma is between a Europe of capital or a Europe of solidarity and democracy.

The third component of the rising Greek Left is the Democratic Left, a party only recently come into existence and composed of splits from other Greek Left parties and PASOK, the Greek “socialist” party now disgraced after agreeing to the full implementation of the bankers’ austerity. The party says it would only enter a coalition government after the elections if there is some convergence with the other parties on the policies that need to be adopted to lift Greece out of recession, according to Athens News.

The Democratic Left promotes itself as a moderate alternative to the KKE and Syriza. The party firmly advocates continued membership in the E.U. and the eurozone, but would seek to renegotiate Greece’s loan terms. The party said it would loosen deficit-reduction targets; implement policies to fight corruption and tax evasion; and promote growth through measures such as reversing recent edicts that slashed the minimum wage. At least in public, the party has suggested it could consider entering a government coalition only if KKE and Syriza moderate their positions.

Greece, and the rest of the advanced capitalist world, will be living in interesting times.

Charting a path out of impasse for Greece, and other countries (part 1)

There is no Greek solution to the crisis of Greece, only a European or international solution.

The internal logic of neoliberal austerity – or, more to the point, the systemic development of capitalism and the concomitant social forces arrayed by the amassers of capital who insist that “markets” should decide ever more social and political outcomes — has reached its most advanced stage in Greece. The crisis confronting Greeks is not the unique outcome of an unprecedented collision of circumstances, nor, as I wrote in my Feb. 22 post, is it a punishment for supposed slothfulness.

International solidarity among the working peoples of the world’s capitalist countries — actively opposing the dictation of industrialists and financiers, of late most forcefully channeled through bond traders and their financial institutions — is the route out of ongoing economic crisis. That is so for Greece as well as all countries.

Temple of Zeus photo by Andreas Trepte (

That is taking a longer-term viewpoint. But what should be done in the short term? There seems to be a widespread, if not near unanimous, consensus among those who do not agree entire countries should be reduced to penury to ensure full profits to speculators that Greece has no choice but to default on its debt and re-orient its national budget toward investment instead of austerity.

But how should that be accomplished, and what other policies should accompany default? Crucially, should Greece drop the euro as its currency and bring back the drachma? Here, there is considerable divergence of opinion. In this and my next post (what you reading is the first of two parts), I will present arguments by several economists and social scientists who differ not only in some of the details but also on the question of Greece leaving the eurozone. I will also present a roundup of the positions of the main Greek Left parties, who are at odds with one another.

The question of the ‘Argentina option’

My own opinion (albeit with doubts) has been that of Greece taking the “Argentina option” — following the basic prescription of Argentina a decade ago when it reached a similar impasse. In short, this option would mean Greece leaves the eurozone, nationalizes its banks, defaults on its debt and whatever small portion it ultimately pays back would be denominated in devalued drachmas rather than euros. Doing so would require that strong capital controls be imposed ahead of time and would inevitably mean at minimum a short period of freezing bank holdings.

In this scenario, the Greek government would value the new drachma at one euro, but foreign exchange markets would immediately attack the new currency and the drachma would likely lose something like two-thirds to three-quarters of its value in short order. Repayments in drachmas would be at the initial exchange rate, not at the later devalued rate. This would constitute a “big bang” devaluation, making Greek products cheap for export and Greek vacations cheap for foreign tourists. It would also make imports very expensive for Greek consumers and machinery imported into Greece also very expensive. There would be considerable pain in the short term for Greeks – there should be no sugar-coating.

Argentina suffered through several months of considerable pain (although Argentines already were suffering greatly from economic collapse), but within a year, Argentina’s exports became attractively cheap and because imports became expensive, a stimulus to internal production was created. Within a year, Argentina’s unemployment rate fell by two-thirds and it had achieved budget and trade surpluses.

Argentina had agricultural and manufacturing strengths that Greece does not possess, although Greece is not without an infrastructure and it does have a tourist sector that Argentina did not have. Greece, moreover, is more integrated with its powerful neighbors than was Argentina with its equivalents. And, again, a European-wide problem has to have a European-wide solution.

Arguments for Greece staying within the eurozone

Adding to my doubts is that as I read various papers and commentaries, the arguments that call for radical change with Greece continuing to use the euro are strong, perhaps stronger than the other side. So although I began my studying for this post from the perspective of an advocate of Greece leaving the eurozone, I will present more arguments for the contrary position.

Supporting Greece remaining within the eurozone, but advocating a vigorous program of radical structural transformation, economist Özlem Onaran argues that the European Union should be leveraged in spite of its current structure to internationalize the resistance of working people and that an anti-euro position risks mobilizing the Right.

In her paper, “Fiscal Crisis in Europe or a Crisis of Distribution?“, an excellent summation of the European economic crisis, Professor Onaran writes that Europe is undergoing a crisis of distribution and that a “reversal of inequality at the expense of labor is the only real solution, which in turn connects the demands for full employment and equality with an agenda for change beyond capitalism.” This is an argument for an “alternative Europe” that can be built only from an international response to the international power of capital.

Defaults across the European Union and caps on wealth are necessary but can only be imposed if they are coordinated, Professor Onaran writes:

The most important obstacle today to initiate any progressive economic policy in Europe is the speculation on public debt and the governments’ commitment to satisfy the financiers. Public finance has to be unchained via debt default in both the periphery and the core. This has to be coordinated at the EU level as part of a broader public finance policy to make the responsible pay for the costs of crisis and to reverse the origin of the crisis, i.e. pro-capital redistribution. This involves a highly progressive system of taxes, coordinated at the EU level, on not only income but also wealth, higher corporate tax rates, inheritance tax, and tax on financial transactions. A progressive income tax mechanism could also introduce a maximum income with the highest marginal tax rate increasing to 90% above a certain income threshold in relation to the median wage. A progressive wealth tax on government bonds with the highest marginal tax rate reaching to 100% for holdings above a certain amount of bonds could be formulated as a way of restructuring the debt; this would make the banks, the private investment funds, and the high wealth individuals pay the costs of the fiscal crisis.

Spending should be re-oriented toward social good and the environment, the European Central Bank should be under democratic control and allowed to lend to member countries, and wages should rise to account for the productivity gains of the past three decades that have gone to capitalists:

To facilitate convergence a minimum wage should be coordinated at the EU level. Fiscal policy and incomes policy should also be coordinated: higher productivity growth in poorer countries of the EU will help to create some convergence in wages, but regional convergence should be supported by fiscal transfers and public investments to boost productivity in poorer regions. Furthermore a European unemployment benefit system should be developed to redistribute from low to high unemployment regions. This requires a significant EU budget financed by EU level progressive taxes.

Full employment policies would also be adopted under Professor Onaran’s program:

To maintain full employment, a substantial shortening of working time, again coordinated at the EU level, in parallel with the historical productivity growth is also required. This is also an answer to the ecological crisis: if the use of environmental resources is to maintain a certain ‘sustainable’ level, economic growth, in the long term, has to be zero or low, i.e. equal to the growth rate of ‘environmental productivity’. However, for such a regime to be socially desirable it has to guarantee a high level of employment and an equitable distribution of income; i.e. shorter working time and substantial redistribution via an increase in hourly wages and a decline in the profit share.

Such a program would be accompanied by measures that would enable workers to assume control of firms whose private owners attempted to shutter them, such as has been done in Argentina, where a wave of factories came under workers’ control when owners decided to asset-strip their factories for short-term gain rather than continue operating them. Banking would become a public utility with social participation in investment decisions.

Financial regulations including capital controls are important but not enough. Finance is a crucial sector which cannot be left to the short-termism of the private profit motive. This sector has already been de facto nationalized, but without any voice for the society and with a commitment to privatization as soon as possible. The crisis has shown us that large private banks are exploiting their advantage of being “too big to fail.”

Underlying Professor Onaran’s program is that national solutions in small countries can lead to “a persistence of underdevelopment” and that a low-wage periphery for multi-national corporations “is a threat to the wages and jobs in the core as well.” Indeed, such a process has long been under way as manufacturing is continually moved to take advantage of still lower wages in newer locations.

A call for investment within an intact eurozone

Another economist based in Britain, Michael Roberts, disagrees with Professor Onaran’s thesis that the European crisis is caused by a lack of purchasing power by European workers, but does agree with much of her proposed solutions and that Greece should not exit the eurozone. “The Greek or even the British working classes will not be saved by having their own currency in a capitalist Europe,” Professor Roberts wrote in a September 11, 2011, post on his blog.

In a more recent post, on March 28, 2012, Professor Roberts re-iterated the view that investment is necessary to end the downward spiral of living standards:

[M]y objection to the Keynesian solution would not be that wages should not be increased but that the Keynesian alternative puts the cart before the horse. What the likes of Greece or Portugal need is investment. That leads to jobs and then to higher incomes and spending. Sure, boosting incomes would help demand but it would not provide sustainable growth if the increased income merely eats into profits, curbing private investment. Increasing wages is not enough or even counter-productive if investment decisions remain under the control of the private sector.

Further, Professor Roberts wrote, “Leaving the euro and devaluation on its own would not provide sustainable growth.” He argues that winning Europe-wide support would be better than simply dropping the euro; countries such as Portugal and Greece are too weak to disconnect themselves.

Private investment is in free fall in these weak European economies. There is a clear case for public investment. This can be financed by public ownership and control of the banks to direct credit to infrastructure projects and to revive small businesses. Governments can reduce their debt burdens by restructuring (defaulting on) their debts with Europe’s banks that caused the mess in the first place. This is the alternative to taking Troika money to bail out the banks and complying with fiscal austerity, ‘internal devaluation’ and depression for a decade or more.

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. The arguments presented above seek to find a long-term solution to the European economic crisis that are applicable to the rest of the world’s advanced capitalist countries.

Arguments in favor of Greece (or other small European countries) leaving the eurozone also take a long-term perspective. I should also be careful to distinguish that arguments for dropping the euro and re-adopting a national currency are not advocacy for any of these countries to leave the European Union, an entirely different matter. Solidarity among working people across borders is the indispensable ingredient to a radical transformation of Europe or any other geographical region toward a system that benefits everybody rather than only a minuscule minority at the top of financial and industrial enterprises.

Professors Onaran and Roberts present formidable arguments in favor of Greece (and others) remaining within the eurozone. In my next post, on April 11, I will present arguments in favor of Greece exiting the eurozone, and I will also briefly summarize the different positions of the main Left parties and blocs within Greece. Polls give the three about 30 to 40 percent of the vote for the upcoming election, now speculated to be scheduled for May 6.


European monetary fables tell a story, but for whom?

Fables have long been used to tell stories and impart “moral” lessons. Not limited to bedtime stories, fables are a common device to propagate “lessons” that powerful interests wish to suffuse through a society. A favorite fable nowadays is that of the virtuous Germans and the lazy Greeks. Punishment – excuse me, “structural adjustment” — is the natural denouement of this oft-told fable.

In reality, this mythology has about as much to do with reality as the big bad wolf blowing down grandmother’s house.

Greek workers actually work many more hours than do Germans, and earn less. The “secret” to Germany’s economic dominance within the European Union is cuts to German wages. Germany has undercut other countries that use the euro as their currency by suppressing wages, a process that took form under a Social Democratic government.

View of Vikos Gorge, Greece (photo by Skamnelis)

According to the Organisation for Economic Co-operation and Development (an intergovernmental club of the world’s advanced capitalist countries), Greeks worked, on average, 42.3 hours per week on their main job and 2,109 hours for the year 2010. Germans worked, on average, 35.7 hours per week on their main job and 1,419 hours for the year 2010.

To put those figures in further perspective, Greeks worked more hours than any other people in the European Union; only South Koreans worked more among the world’s advanced capitalist countries.

So much for “lazy” Greeks. Moreover, the average annual wage of a Greek worker is 73 percent that of the German average, despite the cliché of the pampered, overpaid Greek trotted out at every opportunity.

German industrialists profit on backs of German workers

Nonetheless, it was written above that it was suppression of German wages that is a major underlying cause of European economic imbalance, although the already low and falling-further wages in Greece are leading to a collapse of domestic demand there. European Central Bank policy is to target inflation at two percent per year. But, according to the International Labour Office, German wage increases since 2001 have averaged half of one percent per year, consistently below the German inflation rate. To put it another way, the ILO has calculated that German productivity has remained virtually unchanged in relation to the productivity of all countries that use the euro, while German wages have declined by more than ten percent relative to the composite wages of all other euro-zone countries.

In other words, the prosperity of German manufacturers has come at the price of a decade of wage cuts (adjusted for inflation) suffered by German workers. Sound familiar? Reduced income leads to reduced consumption, so exports account for a steadily rising portion of German gross domestic product. In relative terms, it becomes more difficult for other European Union countries to compete with German products, particularly in other countries using the euro, because German manufacturers increasingly can undercut them. Manufacturing capacity elsewhere is shuttered, reinforcing German dominance and increasing unemployment in the countries on the receiving end of the exports.

A British economist, Engelbert Stockhammer, in a paper published last year, described this phenomenon bluntly:

“Germany has pursued a policy of aggressive wage restraint resulting in large current account surpluses. German gains in competitiveness (since the introduction of the Euro) have not been founded on superior technological performance, but on more effective wage suppression. … Simply put, German wage suppression rather than fiscal profligacy is at root of the crisis of the Euro system. … Europe needs a set of economic institutions and policy rules that addresses such imbalances and their underlying mechanisms.”

The imbalances within the European Union, the economic crisis caused by financial bubbles and reckless financial speculation, the ever increasing ability of capitalist elites to impose their preferred policies on governments, the increasing ability of financial speculators to maintain a stranglehold on capitalist economies and the pervasive ideology of neoliberalism to the near total exclusion of alternatives has led to the precipice. The punishing austerity being imposed on Greece had previously been reserved for countries in the developing world or outside the capitalist core; now these immense social forces are attempting to crush an advanced capitalist country.

It’s no accident the European Union is undemocratic

The particular constellation of forces that have led Greece to its present position originate in Brussels as well as in Berlin. At the European level, there is a conscious project at work. The European Union is, at bottom, an attempt by European capitalists to remold their societies to be more like the United States, with its extreme disparities in wealth and privilege. An impediment to such a goal is that people across Europe have the habit of asserting themselves, not only to defend their social gains but sometimes to push forward. There was a general strike in Denmark in 1998, as an example, in which one of the key demands was for a sixth week of paid vacation. (We in the United States ought to let that one sink in.)

European capitalists also desire the ability to challenge the United States for economic supremacy, but cannot do so without the combined clout of a united continent. This wish underlies the anti-democratic push to steadily tighten the European Union, including mandatory national budget benchmarks that require cutting social safety nets and policies that are designed to break down solidarity among wage earners and different regions by imposing harsher competition through imposed austerity. These rules are designed by central bankers to benefit European big business. Europe’s capitalists and central bankers are no less shy about adopting neoliberal ideology than their counterparts elsewhere, but are reliant on a supranational project to override national governments that must contend with popular resistance.

The Friedrichstrasse in Berlin (photo by De-okin)

Thus, economic downturns and stagnation are always portrayed as the fault of working people refusing to be more “flexible” or earning too much money or “selfishly” expecting to retain hard-won benefits.

The European Union, 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 without 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. The weakness of the supranational form is that it collides head-on with nationalism, which acts as a disorganizing force within the E.U., whereas in countries like the U.S. and China nationalism is a potent unifying force.

An irony here is that it is precisely nationalism that German capitalists and their corporate media outlets wield to maintain the policies that have worked out so well for them. The German newspaper Bild — the equivalent of a Murdoch tabloid — is fond of screaming headlines such as “Now they want more!” in response to further loans to Greece. Never mind that the Greek government is merely a pass-through; the loans are going straight to the banks, bond traders and hedge funds that hold Greek debt, and it is Greek workers, not German workers, who will be paying the price. A terrible price it is: During 2011, Greek public- and private-sector salaries were cut by one-third and pensions reduced, while many employees and pensioners have ceased being paid at all. This month (February 2012), the Greek parliament, literally on the orders of the European Central Bank and International Monetary Fund, voted to cut the minimum wage a further 20 percent, unilaterally end job security and begin to lay off 150,000 government workers.

Recall late last year, when former Prime Minister Georgios Papandreou dared to suggest a popular referendum on the then latest round of austerity. The Guardian reported that French President Nicolas Sarkozy and German Chancellor Angela Merkel “summoned” the Greek prime minster to a meeting to inform him there would no referendum. A remarkable word. “Summoned” is what a government does when it calls in an ambassador to issue a complaint. Heads of sovereign states are not “summoned.” One imagines that French and German bankers and bond traders were proud that day.

Austerity no matter who is in office

By no means, however, are German capitalists dependent on Merkel’s Christian Democrats remaining in power. It was none other than the Social Democratic Party — a party that righteously proclaims itself the party of working people — that codified austerity on those same working people. Back in 2003, Gerhard Schröder, then the Social Democratic chancellor, pushed through his “Agenda 2010” legislation.

Schröder said, “We must not get trapped in defending our past achievements, but instead must work to our future.” Since those “past achievements” included old-fashioned concepts such as good wages and pensions, Schröder said, “The core challenges before us are accepting the reality of globalization, the ‘digitalization’ of our economy and an aging society.” Classic Right-wing code words. “Accepting” this “reality,” Agenda 2010 cut business taxes while reducing unemployment pay and pensions.

German unions represent workers across industries, and contracts are negotiated industrywide so that one company can’t play off its employees against those working for a competitor. Despite this advantage, unions allowed wages to decline in exchange for job security as German industry became stronger. Unemployment has been dropping — at least Germans received the promised job security — but their purchasing power is slowly declining, reinforcing the trend toward Germany becoming overly dependent on exports. More than half of Germany’s exports go to European Union countries.

Meanwhile, in Greece, the main Right-wing party, New Democracy, went on an arms buying spree when last in power a few years ago, unneeded military hardware paid for with loans. And the rich in Greece don’t pay taxes, in a country with one of Europe’s biggest economic disparities. Government workers are being demonized as the biggest problem in Greece, but it is precisely government workers who can’t evade paying taxes — their employer makes sure of that.

Local problems can’t be solved locally

How does Greece get out of its vicious circle? Ultimately, there is no Greek solution, only a European or global solution. International solidarity and working people in all countries acting in concert to defend themselves and working toward a better world than the unsustainable scramble of all against all we currently live in are the routes out of economic crisis.

In terms of immediate steps, Greece is not without a defense against the downward spiral of austerity. Comparisons are being made with Argentina, which defaulted on its debt that was too big to pay and allowed the foreign-exchange market to drastically devalue its currency. There is much talk of Greece defaulting, but that is only one half of the “Argentina” option — Greece simultaneously would have to drop the euro and re-adopt its old currency, the drachma.

Argentine’s fascistic military dictatorship of 1976 to 1983 laid waste to the country’s economy, and a civilian president, Carlos Menem, imposed an austerity program in the early 1990s in conjunction with selling off state enterprises at below-market prices. As a result, Argentina’s foreign debt grew to unmanageable proportions. When neoliberalism had reached its logical conclusion there — economic collapse — working people set up barter clubs and in some cases took over factories that had been shut down, restarting production and converting them into cooperatives. A new president, Néstor Kirchner, suspended debt payments after taking office, eventually paying only 30 percent of the odious debt after negotiations.

One of the reasons why the Argentine economy collapsed was because the country’s rulers had insisted on maintaining the value of the Argentine peso even with the U.S. dollar, and wouldn’t allow its currency to decline in value. Greece uses the euro and therefore can’t devalue. Without a currency devaluation, internal cuts are the remaining option to meet market demands. When Argentina defaulted and allowed its peso to float freely, the peso’s value fell drastically. As a result, Argentina’s exports became attractively cheap and because imports became expensive, a stimulus to internal production was created. Within a year, Argentina’s unemployment rate fell by two-thirds and it had achieved budget and trade surpluses.

If Greece did return to the drachma, the currency’s value would be pummeled by foreign-exchange markets, making Greek products and tourism a value. Because imports would become very expensive, there would be no choice but to increase domestic production. There would also be uncertainty: Greece doesn’t have the same material resources as Argentina does nor does it have export industries as strong, so it is impossible to say that Greece would rebound as fast as Argentina did a decade ago. Taking the “Argentina option” would be a gamble and would have to be accompanied by capital controls and the nationalization of banks.

Dropping the euro would not be free of additional pain in the short term (especially because the cost of imports would rise) and a Greece with its own currency would not have the same measure of independence that Argentina possessed. Moreover, such moves would not touch the underlying instabilities of the global capitalist system nor would it in any way lessen the requirement of international solidarity to find a global solution to a global crisis. But could anything be as bad as the steady diet of austerity, punishment and humiliation Greeks are now enduring?