Saturday, 18 October 2014

GREECE UNDER PERMANENT AUSTERITY



Greece is a country of just under 11 million people with tremendous socioeconomic progress and upward mobility after 1974 when the US-backed military dictatorship fell and parliamentary democracy restored. From 1980 until 2010, Greece developed a middle class and raised its per capita GDP level to an unprecedented degree. The catalyst to economic expansion was mostly the public sector as well as new private capital coming from multinational corporations investing to secure market share for their retail goods and services.

With public sector expansion stimulating private demand, income levels rose close to those of Italy by 2005. However, the problems with the Greek economy were fundamental, rooted in the political economy of "baksheesh capitalism". This system involves the clientist relationships of the two ruling parties (New Democracy and PASOK, both neo-liberal) alternating governing the country by providing crony capitalists and foreign corporations with contracts, tax exemptions, tax forgiveness and in return receiving media support as well as bribes for every favor rendered to the recipient.

The following are just some of the systemic problems that led to the IMF-EU austerity regime in May 2010, a regime continuing to this day.
First, "baksheesh capitalism" characteristic also of other countries like Egypt under former president Mubarak, rested not so much on internal production  and distribution of products and services, but on foreign products and services. Therefore, consumption of imports was driving an economy that was under-producing and sustaining a huge balance of payments deficit financed by foreign loans. 

Second, the level of corruption in the public and private sectors had an enormous parasitic impact, for it drained capital from productive projects into the pockets of those in both private and public life. it was impossible to conduct business without bribery. Everything from medical products to submarines entailed bribery of different officials. No project could be carried out, no matter how large or small in the absence of bribes that of course lined the pockets of officials but drained the economy.

Third, the economy had no built-in incentives for productive investment, resting instead on subsidies coming from domestic or EU sources. For example, when an EU packet of half a billion euro was designated for agricultural development, a tiny amount actually went for that purpose. Instead, money went to politicians and public officials approving the designated funds, to inspectors overseeing how the funds were utilized, and to the recipient farmer who instead of using the money for fertilizers, new seeds, machinery, etc, used it to buy a new home, car, etc. Productive investment was very low largely because the culture of consumption that the corrupt two-party system established had filtered down to the entire society that simply assumed there would be no end to perpetual borrowing to finance consumption of imported products and services.

Fourth, the two political parties ruling Greece in the last forty years, the conservative New Democracy and the more liberal PASOK, both neo-liberal in their approach to policy and both supporting the IMF-EU austerity, built a massive clientist political system that contractors, bankers, TV-radio-newspaper owners, and of course shipping tycoons whose interests they served by also distributing some of the spoils to trade union leaders and bureaucrats. The media covered up the clientist political structure  and to this day refuses to accept that there is such a thing as s structural problem, atributing corruption only to those very few individuals serving a prison sentence. 

However, the two ruling parties have legislation that provides immunity to ministers of government, and the legislature passes laws that extends such immunity to bankers, contractors, m,edia and shipping tycoons who are implicated with politicians in money scandals. In short, the law never reaches the politician or businessmen. The legal system as a structural impediment to a productive economy is designed so that the few thousand families who own roughly half of the wealth in the country retain their privileges along with the two ruling political parties protecting them.

Fifth, the only way that the decadent baksheesh capitalist system of Greece kept going was by falsifying statistics in every sector of the economy, but especially on the budgetary deficit and the budget. To secure respectability of the bond market so Greece could continue borrowing, they hired Goldman Sachs that “massaged the numbers” presented to the EU for approval. This was shortly after Greece joined the euro in 2000 under false statistics that the EU was well aware. Eventually the EU asked Athens to stop the practice of false statistics that was widespread across other countries and with the knowledge of the EU. Goldman Sachs had enough political influence in the EU – Mario Draghi was a former employee of the company – that it could get away with fraudulent practices for a fee, of course, and it was difficult for the EU to admit then as it does now that in reality Greece entered the euro zone under false statistics, largely because both the US and many EU members wanted the Balkan country to join for political rather than economic reasons. 

Sixth, Germany under Merkel changed the EU integration model so that it resembles NAFTA where the US enjoys a hegemonic role, while Mexico is the client state. The new EU integration model after 2010 is even worse than NAFTA because Germany uses the common currency to insist that member states follow austerity policies that merely produce ever larger surpluses for Germany and create greater debt for the periphery. The US and IMF have criticized Germany for following this model that now seems to have backfired for Germany because it has a problem exporting goods and services to a common market with weakened consumption power and high unemployment levels. Certainly Italy and France are objecting to the continued austerity regime that only benefits Germany within the euro zone. Nevertheless, not a single government so far has changed course. The reason for this is because the powerful financial and corporate elites in their own countries, Greece included, demand austerity continue because their assets are in the hard currency.

On the surface, the economy of Greece appeared as fast growing before austerity in 2010. Economic indicators showed income growth and low income inequality with relatively low unemployment rates until the deep global recession of 2008. Despite the signs that beneath all that glittered on the surface there was a bubble beneath waiting to explode, the clientist system kept going because it catered to the small domestic capitalist class and foreign corporations making money selling everything from automobiles and cell phones to banking and insurance services.Economic grwoth and low employment however rested not with the large domestic and foreign firms, but small shops and housing construction that was a means to launder money and hide assets from tax collectors.

There was no doubt that one result of the US-centered deep recession that started in autumn 2007 would spread to the EU and there was no doubt that financial retrenchment would place in fairly short time. Financial retrenchment was combined with the massive transfer of capital from periphery economies (developing) as well as semi-periphery as in the case of Greece, Portugal, Ireland, and Eastern Europe. This is what took place from 2010 until 2014, further weakening the periphery and semi-periphery economies that at the same the EU and IMF placed under fiscal austerity. 

This deadly combination sent GDP growth to negative territory, with Greece losing more than 25%, while its public debt rose from 120% of GDP in 2010 when the IMF promised to lower it below 100, to the current 180% of GDP. Both Germany and the IMF kept promising that austerity would deliver low unemployment rates, higher growth rates, higher investment, low balance of payments deficits and much lower debt. The exact opposite of what they promised has taken place, and the IMF admitted that along the way "mistakes" were made. In its entire sixty year history austerity policies deliver exactly what has taken place in Greece which is hardly the exception, but rather the rule to such policies intended to concentrate capital.

In the real economy this has translated to a massive reduction in wages, benefits and social security incomes, sharp cuts in all social programs, especially health and education, combined with a massive rise in taxes on the lower 80 percent of the population that owns less than one-third of the wealth in the country. Meanwhile, austerity has resulted in a sharp rise of Greek millionaires at a time the middle class has shrunk sharply and weakened owing to income cuts. Leading the EU in unemployment at 27% officially, while the real rate is about one third of the labor force, Greece now has a population near or below poverty close to 60 percent. The 60 percent is according to the Parliament’s scientific committee, while the official government statistical service has the poverty number at the much more respectable 45 percent.Despite these realities, the IMF, EU and the neo-liberal ruling parties insist there is no alternative but for the middle class and workers to "make sacrifices".

This is not even the worst aspect of IMF-EU austerity that Germany insists is for the best long term interests of Greeks who ought to rely more on tourism, although it only represents about 6-7% of GDP. There is a massive exodus of college educated young people going anywhere they can find employment. This is partly because many of those who stay behind and work and may never be paid by their employer, public or private. The rate of workers not receiving payment for work performed is staggering, but not as staggering as the number of suicides in the last four years in a country that historically had one of the lowest suicide rates in the world.

The government confiscates people’s savings accounts even in small amounts if they have unpaid taxes owed. At the same time, the government does not honor its own obligations toward workers in some sectors such as shipyards, or toward taxpayers, private and public companies alike such as the electric company. Finally, the government has engaged in mass dismissals of workers on the payroll so that it can hire a private firms to carry out the exact same services at twice the cost. This is part of neo-liberal privatization that starts with everything from cleaning services in ministries and hospitals to gold mining operations essentially gifted to private firms.  All of this is carried out in the name of neo-liberalism that has had a political cost of extreme polarization.

The political result of all this is a sharp rise of neo-Nazism, with the neo-Nazi Golden Dawn party ranking number three in public opinion polls, and if it were for the fact that the politically-dominated judicial system is prosecuting every single parliamentary representaitve, Golden Dawn would rank number two in the polls. In secretly recorded conversations between advisers of the conservative prime minister Antonis Samaras and Golden Dawn elected officials, it has become very clear that the ruling party had a plan to collaborate with the neo-Nazis so that they would prevent the center-left SYRIZA from coming to power when elections take place. Parliament demanded an investigation of the secret collaboration between neo-Nazis and the government, but instead the ministry of Justice took preventative measures and arrested and jailed the leadership of Golden Dawn

Under EU, US and Israeli pressure, the prime minister had to crack down on the neo-Nazis, especially after they assassinated a popular rapper, and had engaged in assassinations as well as other criminal activities before the rapper’s incident. Targeting mostly foreigners, but also Communists and gays, the Golden Dawn dreamed of creating a Nazi-style regime that would rid society of foreigners, gays and leftists of all types. There have been reports that behind the neo-Nazis were not just conservatives inside the government, but the police and judges as well as millionaires in the shipping business.

Given that the neo-Nazis represent the third largest party according to opinion polls, while the center-left SYRIZA and Communist Party combined represent a bit more than a third of the voters, the political system has become very polarized. People have been beaten down so much by a corrupt system very much part of a culture of baksheesh capitalism that they believe it is partly their fault. In fact, this is exactly the message that the two ruling neo-liberal parties want people to believe, arguing that corruption at the retail level is at fault - the son of an old lady in a mountain village now dead still collecting her social security benefits. Despite some popular protests, people have become fatalistic, waiting and hoping for a better future that never comes because austerity is now a way of life. Amid this reality, the government as well as austerity apologists from Chancellor Merkel and the IMF to financial analysts insist there is no alternative to austerity, as though God mandate it in the Ten Commandments and those suggesting otherwise will turn to salt. 

Austerity is now in its fourth year and it has become a way of life because its policies are here to stay forat least another decade unless there is a systemic change in society and not just a government of SYRIZA that would restore some lost social benefits to the poor as it has promised. That Greece is in worse shape than Argentina, as I have written in a separate article, that it has higher poverty rates, higher public and private debt rates, and fewer prospects to lower unemployment from 27% to under 10% is indicative of how capitalism under the neo-liberal globalization model has evolved in 2014.  

Although the government tried to find a way out of the IMF and EU austerity oversight so that it can have national sovereignty reestablished over policy, the financial markets immediately reacted by raising 10-year bond yields close to 10% before that number retreated a bit. The only way that they returned to the "respectable" 8% level - astronomical for a government and a signal that  it must stay under austerity regime - is because the prime minister announced strict adherence to all IMF-EU austerity measures agreed so far. Moreover, it now seems certain that there will be a new package of austerity measures, but they will have a label that the public finds more acceptable to endure.

The contradictions of the austerity measures that Greece has pursued are found in the consequences of a society that in 2014 resembles the era of the military Junta of 1967-1974. Never before has any government behaved in an authoritarian manner as the neoliberal administrations (both PASOK and New Democracy) except for the colonels of the US-backed Junta. Destroying collective bargaining, destroying the right of workers to strike because the courts declare strikes illegal, destroying the ability of people to demonstrate because anti-austerity protests are deemed synonymous with anarchism if not terrorism, the government has done everything in its power to return Greece to the good old days of pre-WWII era when Great Britain dictated policy and the Cold War when the US did the same thing. 

A mere semi-colony without a trace of sovereignty left, Greece has lost the illusion of pride rooted in the classical world. The neo-liberal regime tries to revive Greek nationalism and inculcate a sense of pride into the public by pointing to some new archeological findings from the post-Alexander the Great era, and by bringing to the country the new wife of actor George Clooney to say that the Elgin Marbles, stolen by the British and housed in the Birtish Museum must now be returned. Nothing wrong with a society immersed in classical culture and myth, but the reality of mass emigration of college-educated young people, poverty, high unemployment, and suicides due to absence of hope for the future cannot possibly be countered by the Elgin Marbles and new archeological discoveries that glorify ancient civilization. Joseph Campbell was correct about the power of myth in a culture, and it is true that Illusions keep humans beings balanced, but life's essentials for survival are even more important.
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