Greece is now in its fifth consecutive year of recession, with official or statistical unemployment at about 28%, a GDP drop of roughly 25% in the last three years of IMF-EU austerity and anticipating a further rise in unemployment and continued drop in living standards for labor and the waning middle class (on top of the 22% private sector salary drop in 2011) for the balance of the decade.Amid all of this, prices of necessities have remained steady while taxes of all types have risen sharply, thus adding to declining living standards.
In short, the massive IMF-EU bailout of Greece has resulted in massive transfer of capital resources from the country to the creditors abroad and to a handful of large and institutional investors domestically, while leaving a public debt that is unsustainable and cannot be serviced unless there is an additional haircut of at least 50% of current levels, or about $200 billion. In spite of Greece remaining in the euro zone, in spite of savings its banks, in spite of staying loyal to the IMF and EU, Greece has been unable to save the vast majority of people from sharply declining living standards amid an increasingly authoritarian, polarizing political climate, combined with an adamant refusal to combat racism and xenophobia that the neo-Nazi Golden Dawn Party are promoting.
A number of institutions like Citigroup, as well as well-known economists who work of hedge funds and had a financial interest in the analysis they offered publicly has argued that Greece would drop off the euro zone and return to its national currency. These predictions, well-timed for those shorting the euro and other financial products in Greece and EU, turned out to be nothing more than opportunism. At the same time, there are the prominent US media outlet, everything from the New York Times to Forbes and Wall Street Journal, that argued Greece is headed for political polarization to the degree of a possible civil war. Clearly those analysts lack even a modicum of understanding of the reality in the social and political arena, but they do have their own agenda that is totally unrelated to Greece. While we have seen mass protests and demonstrations in Turkey and Brazil, neither of which is under austerity, Greece has not experienced the same social upheaval, leaving some German analysts to argue that further argue that further austerity measures are possible and would not cause sociopolitical unrest as some fear.
How is it possible to have such dramatic financial, economic and social developments and not witness social unrest? Does this mean that a substantial percentage of Greeks were indeed part of the corrupt clientist network that was responsible for the public debt mess, as Theodore Pangalos (PASOK politician) argued in trying to find a pretext for the system of baksheesh capitalism that thrived in the country? How much austerity can the Greeks stand before taking to the streets and overthrowing their corrupt government - currently the conservative New Democracy and PASOK (Socialist) coalition that are both loyal to IMF-EU neoliberalism?
Between 2013 and 2016, Greece must find between $25 and $35 billion in public sector cuts and tax hikes either from existing or new sources in order to be able to service its debt and meet domestic obligations. This represents between 15% and 20% drop in GDP, although the OECD estimates a 10% of GDP in new cuts and new taxes would be sufficient. Such a fiscal adjustment would throw the hospitals, schools, and social security funds into further debt for which new loans would needed, and then new measures, and so goes the cyclical nature of austerity. Because Greece uses the common currency, it cannot do anything about monetary policy, so the entire burden falls on fiscal measures and of course anything to entice new domestic and foreign investment, all of which hinge on a stable political climate currently lacking and about to deteriorate in the near future.
The fundamental problem is not the public debt that cannot possibly be serviced as long as IMF-EU austerity continues. The core of the problem is a weak, parasitic and dysfunctional economic base, resting on tourism, shipping, financial services and primarily small shops that employ the majority of an overly-educated surplus workforce in an under-performing economy, all of which have a huge tax evasion problem and operate on the margins of legality. How does the economic base improve and the state forges a new policy mix to reduce the underground economy and tax evasion? First, there must be a government not immersed in a clientist system that rests on bribery and political appointments, but on merit and honesty. This is a virtually impossible task given the culture of corruption. Secondly, there must be plan that targets certain sectors - mining, agriculture, tourism, shipping, light manufacturing etc. for development. Such a plan is missing because the neoliberal-oriented governments, both PASOK and New Democracy - remain in a clientist mode. This means that political bosses dish out contracts to their favorite capitalists at home and permit any kind of foreign investment to the detriment of the public sector and the overall economy.
Prime minister Antonis Samaras has been relying on the EU and IMF to 'save' Greece, that is, to provide liquidity to service the debt and the banks. This means that the government has been looking to save the comprador bourgeoisie to the debtriment of the national capitalists who are now complaining that the IMF-EU austerity system is indeed ruining national capitalism while benefiting international capital, namely German-based investment. The comprador bourgeoisie are part of the problem because they have stashed away billions in foreign baks and off shore companies, refusing to pay taxes they owe and refusing to repatriate and invest in the country from which they made the money.
Given that the comprador bourgeoisie are not providing the sources to support the weak fiscal structure, this leaves the national bourgeoisie along with the workers and weak middle class to pay and at the same time become the backbone of the recovery. However, the beneficiaries of cheapened asset values, everything from labor costs to real estate values will not be the workers, middle class and national bourgeoisie, but primarily foreign investors and large Greek investors whose liquid assets are outside the country and who evade paying taxes.
Greece is currently in a downward phase of underdevelopment, something that is a process like development. The country was underdeveloped by its patron Great Britain from the 1830s to 1940s, then by the US from the Truman Doct5rine to the end of the Junta in 1974, and after a brief period of modest development from 1980 to 2005, the process of underdevelopment has started again under German hegemony. The future of the country is as a struggling developing Balkan nation beholden to the hegemonic northwest European core, especially Germany that enjoys economic preeminence in the EU.
Is there anything that can be done to have a better future, one other than a dependency of Germany and northwest EU? It could always leave the EU and opt for national capitalist development, but the problems would not end there. It can also opt for national capitalist development within the EU, but that would be very difficult, because Germany insists on neoliberal policies that benefit its economy. When Prime Minister Samaras recently fired everyone of the public TV and radio employee and shut down their operations, EU officials, even some Germans, were shocked that Greece is reverting to its authoritarian past. Not one of them linked austerity to authoritarian politics, and no one of them argued that democracy is threatened by neoliberalism.
The center-left Democratic Left Party left the coalition during the crisis over public TV and radio, but Samaras and his German patrons continue to argue that Greece is well on its way to recovery. Meanwhile, the IMF, Germany as well as EU officials warned Greece not to have elections, for that would undermine austerity and neoliberal policies that precipitated the political crisis. This is not the first time that EU and IMF have insisted on no elections, but it is worth noting the same advocates of democracy and elections are adamantly against freedom and elections if that means threatening neoliberalism and austerity.
The existing PASOK-New Democracy regime would not last more than a few months, before it collapses owing to massive presure from the EU-IMF to adopt new harsher fiscal measures and public sector cuts. There will be new elections that would most likely not allow any political party to enjoy a clear parliamentary majority. Meanwhile, the neo-Nazi Golden Dawn Party has been growing. This is the part that has been backing the prime minister in his closing of public TV and radio and the one backing the New Democracy ruling party not to adopt anti-racist legislation. This is the same party that denies the holocaust took place and argues that the problem with Greece is to free itself of illegal aliens. The sources of financing for this party that has much in common with the ruling party is questionable. Reports indicate that shipping tycoons and other wealthy elements are behind it because they want to make sure the masses gravitate toward the extreme right and the leftist parties (Communist and SYRIZA) are kept in line amid harsh austerity measures.
In many respects, the future of Greece is a reflection of its tragic polarizing past of the Cold War era (late 1940s to 1974). This was an era of US hegemony and right wind political dominance, with lack of social justice under extreme socioeconomic polarization. This was the era when Greeks were leaving their country in massive numbers, going to Australia, US, Canada, Europe, and elsewhere, seeking work. Today, we are back to the future, as young educated Greeks are leaving because their own country cannot absorb the most energetic and talented population it has created at a great cost to its taxpayers.
Many years ago when I was vising the Delphi archeological site, a retired tour guide who was a former teacher remarked to me that Greece has been a country unable to keep talent within its own borders for centuries, largely because the political elites are in the service of a very small EXTERNALLY-DEPENDENT socioeconomic group to the detriment of the rest of society. Now that austerity has taken the masks off Greece everyone can see it is not an EU member equal to its northwest counterparts. On the contrary, Greece is comparable to its Balkan neighbors. With this realistic image in mind, maybe the new generation can assess the current situation more accurately, instead of entertaining illusions of grandeur, so they can plan a future with greater social justice for the next generation of all people and not just the comprador bourgeoisie.
ADDENDUM: the following is in response to comments from LINKEDIN blog.
1. I would agree with the suggestion that legalizing illegals would actually help immensely in fiscal terms and actually bring more revenue for the debt-ridden social security fund.
2. I am not sure that the majority of military conscripts have the resources to pay off obligations, given that unemployment for those under 30 hovers above 50%.
3. Privatization is at the core of IMF-EU neoliberal policy. This is a tricky issue, because it seems on the surface plain enough, but it is very complicated. First, asset values have dropped sharply and the income from privatizing would not be nearly as much today as it would have been 3 years ago. Second, the government usually sells public assets to 'favorite' domestic and foreign capitalists in a manner that leaves many to question if the politics of clientism and baksheesh capitalism is thriving. For example, this took place with lottery agency, to mention just one. Privatization has been tried in many countries with very bad results in cases of utilities, mining, etc. Even France and UK had to rethink this route, to say nothing of Germany that demands privatization of others, but reserves a large role of government ownership for itself. Finally, privatizing implies fiscal, economic, social and political stability. Greece does not enjoy any of those, and it probably will not for the next few years.
The assumption that many people make is that IMF-EU austerity is about achieving equilibrium in public finances and balance of payments. This is a pretext to impose austerity measures that results in massive changes in the socioeconomic structure, in everything from labor-management relations to public health and education, from the role of foreign investment vs. the role of the state as engines of economic growth and development to the role of the media as we recently saw with ERT. The core of the issue is a transition from the social welfare state to corporate welfare and that cannot be achieved unless austerity is in place. Another key issue here is the transition from the inter-dependent integration model that existed in the euro zone until 2010 to a patron-client model that entails reducing living standards in the periphery EU countries (Southern and Eastern Europe) by having their asset values, including labor, reduced in relationship with the core EU members. For evidence of this, please see the various OECD studies indicating such a trend.
The role of the state as an agent of harmonizing the interests of social welfare while promoting the market economy has changed by the necessity of the global recession of 2008-present, which has entailed an intense global competition. State revenue vs. expenditure under the Keynesian system is undergoing rapid change around the world. The fact is that deficit financing has run into conflict with neoliberal thinking. Capital must be freed and transferred from the public sector that absorbs it from the mass taxpayers for the benefit of making it available to financial institutions acting as the backbone of the market economy. The assumption is that financial institutions will do the right thing and make loans available to businesses for growth and development, which would in turn reduce unemployment and raise living standards. This is only an assumption. However, human beings are not necessarily driven by doing the right thing if they are left on their own devices, but instead are driven by greed and irrational desire to accumulate wealth regardless of the social cost. Just look at the countless banking scandals in the US and EU in the last ten years, everything from money laundering for drug lords to running illegal operations within bank departments that manipulated interest rates.
On Apologists of Neoliberalism/Critics of Keynesianism
Niall Ferguson is a well know apologist for the Republican Party, anti-Keynesian and propagandist for neoliberalism that wants the state to be devoted to the protection and promotion of capitalists at the expense of society at large, namely, the broader working and middle class. He emphasizes public debt because that is something governments, businesses, media and establishment apologists emphasize in order to deflect attention from the decaying political economy's inherent contradictions. The bottom line is that the existing political economy has never focused on addressing the core issue concerning the majority of the people, namely, social justice. With very few exceptions, most notably Norway that is energy-rich, the political economy based on the state-directed corporate welfare "market system" is decaying from within.
The anti-Keynesian elements now blaming public debt rarely point out that public debt is at these levels because of the corporate welfare system and heavy defense spending by the core countries, especially the US. Trying to deflect attention from a decadent political economy, whether that effort is conducted by the media, politicians, university professors, or bloggers, is nothing more than cheap propaganda. People know if they are better off today under the post-Keynesian neoliberal political economy when there is rapid downward socioeconomic mobility, or during the core of the neo-Keynesian decades of the 1950s, 1960s and 1970s when there was upward socioeconomic mobility.