Thursday, 27 October 2011


In the 1980s I was fortunate to meet professor L. S. Stavrianos, author of many books and articles, and a progressive scholar whose work was shaped as much by his Greek-Canadian background, as by the culture of the Cold War. He had just published Global Rift: The Third World Comes of Age, and I asked him to write a foreword for one of my books. In discussing our mutual interest in the Third World, he mentioned to me that an interesting study would be one that compares the Balkans and Latin America, a work that eventually Joseph Love approached from a theoretical perspective in a book entitled Crafting the Third World: Theorizing Underdevelopment in Rumania and Brazil, a book that I was asked to review. 

L. S. Stavrianos explained to me that both Latin America and the Balkans were "underdeveloped" by underdeveloped empires, namely Spain and Portugal in the case of Latin America and Ottoman Empire in the case of the Balkans. Today, we have a situation where comparisons between Greece under austerity and technically bankrupt make a good case for comparative study wi5th Argentina ten years ago.   
The comparison between Argentina of a decade ago and Greece of today is one that has attracted the attention of many analysts as well as politicians within and outside Greece. For example, many, including prominent economists and investors, have written that Greece could pull an Argentine-style default. Others, argue that the comparisons between the two cases are many, except that Greece is an EU member and lacks the substantial economic base of Argentina, thus it is more restricted today than Argentina was a decade ago. Still others note that even in 2011, Argentina has not reached pre-default economic levels, but given the latest IMF-EU report that Greece will remain under austerity and will not be able to borrow from the private sector for at least a decade, one may wonder if Greece would be better off 'to pull and Argentina-style default'. 

Argentina defaulted on $100 billion debt, mostly in foreign hands, froze bank accounts, and the experiment of pegging the peso to the dollar ended. While Argentina's annual fiscal deficit was around 3% of GDP, that of Greece is above 10% in 2011, and while Argentina had a gross public debt of 54% of GDP, Greece suffers a deficit of 165% of GDP that will soon rise close to 200%, thanks to the brilliant policies of the IMF-EU team, and the Greek politicians trying to implement austerity measures but always careful not to do much damage to the chronic problem of rampant corruption and baksheesh capitalism. 

What do Greek politicians say is the solution out of this crisis? That depends on the political party. The ruling PASOK (Socialist party) argues that there is no other option but the one that the IMF-EU presents. The New Democracy Party (Conservative) argue that it can renegotiate a better deal with the EU and it will try to bring growth together with fiscal austerity, if it wins the next election. How do the Conservatives intend to bring growth? Invite foreign capital to buy assets that are now extremely cheap, and a labor market that will revert to values of the 1980s if not the 1960s. Arab investors are interested, and so are many Germans, some French, some Russians and of course Chinese. 

The smaller political parties from left to right have all kinds of solutions, ranging from "Greece must leave the EU" and socialize all large businesses, to Greece must get tough with official corruption and put an end to the Soviet-style bureaucracy that is a burden on the budget - just a reminder that those who have studied Greek history know that the US actually helped put together the so-called "Soviet-style" bureaucracy.

That the Argentina option is not often mentioned is a matter of pride for Greeks, many of whom believe that, as the 'other chosen people', their country is certainly 'better' if not superior than a Latin American republic - again an illusion at all levels, because those who have studied the history and institutions of Latin America and Greece know that are many similarities. The country is doomed to return to the past, perhaps as far back as the 1960s in terms of socioeconomic polarization, living standards, mass exodus of people seeking work around the world, and political instability that goes along with such conditions. The future of Greece is the past. 

While conditions are better in many Western nations than they are in Greece, I have to wonder if Greece is not the canary in the mine every time I read about mass protests throughout Western nations against the political economy impoverishing society. Have we reached a point that a bit of Third World exists within developed countries, just as my mentor Stavrianos wrote three decades ago?

No comments: