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Wednesday, 17 November 2010

The Latin-Americanization of Greece and the lessons for the European South*

The Latin-Americanization of Greece and the lessons for the European


At the beginning of February 2010, the European Commission (EC)
announced plans for Greece which were characterised by The Guardian,
with the usual British kind of understatement, as "the most intrusive
scrutiny of an EU member state's fiscal and economic policies and book-
keeping ever attempted", while the Commissioner himself stated, "this
is the first time we have established such an intense and quasi-
permanent system of monitoring" --a system that involved a stiff regime
of quarterly reports from the Greek government on progress towards
fiscal probity and the right of the EC to order extra action, if
needed. That was followed, a month later, by the announcement (made by
the Papandreou government on behalf of the EC) of swingeing spending
cuts and huge tax rises hitting the lower social groups. These
measures involved, in a nutshell, shaving off a month's salary from
the already low (by Eurozone standards) incomes of people employed in
the public sector --who are estimated to be about one million, i.e. 20%
of the total labour force-- squeezing of public spending, rises in
indirect taxes including VAT, freezing of pensions and worsening of
social security conditions with respect to pensionable age,
privatisations etc.

The severe cuts in civil servants' salaries and in public spending,
which will be complemented by the indirect negativeeffects on incomes
(through the multiplier effect), would bring about, according to
Deutsche Bank' s predictions, a decline in the GDP by 4% this year
alone, whereas the total decline of GDP during the implementation of
the program in the next three years would be in the range of -12% up
to -20%. The inevitable effect of these predatory measures will be an
increase in poverty in a country --which (together with Spain) is the
joint record holder of poverty in the Eurozone-- with almost 20% of the
Greek population, being on the margin of poverty, struggling to
survive. Furthermore, unemployment will become massive, as the
dismantling of the productive structure, brought about by the opening
of markets since the country' s joining the EU, will be complemented
now by the effective dismantling of the public sector. However, as the
public sector traditionally played a significant role in absorbing the
excess labor within the country, the effects on unemployment would be
drastic. The combination of poverty and unemployment, with the uneven
effects of the increase in indirect taxes on low incomes, will further
increase inequality, one of the highest in the EU. The inevitable
result would be the creation of a number of wealthy oases for the rich
(locals and foreigners), in the midst of huge deserts of poverty
concentrated in monstrous urban conglomerations --exactly as it happens
in similar cities all over Latin America at the moment.

No wonder that the announcement of the measures have created a huge
"river of anger" that poured in the streets of Athens and other major
cities in repeated general strikes and sometimes violent
demonstrations. Particularly so, as it is more than obvious that the
measures announced will neither catch the enormous tax evasion, nor
shall they force repatriation to the country of the 10 billions of
Euros or so, already escaped abroad in the last couple of months since
the crisis was announced, to be added to at least 60 billion Euros
which had already fled the country! However, had these funds and the
local wealth been subjected to a drastic proportionate extra property
tax (something which is of course inconceivable for the elites), the
famous debt problem could have been solved in a flash, without having
to beg for new loans from the foreign elites, which (with profit in
mind of course!) have been imposing onerous conditions that the future
generations will have to pay for many years to come. This, despite the
fact that it was the same elites and privileged social strata (local
and foreign) who created and primarily benefited from the debt and the
growth 'bubble' it led to.

The predatory measures imposed on Greece by the Directorate of the EU,
expressing the Eurozone's political and economic elites, clearly give
the impression of a complete colonisation of the country by the
transnational elite. It is, obviously, one thing to implement similar
measures by a formal consensus of the people (as in Britain, Holland,
Sweden, etc.) and quite another to enforce compliance with such
measures, as it happens now in Greece. Particularly so, when these
measures do not have any popular legitimacy, given that the ruling
"socialist" party was elected a few months ago on a program that
provided for policies entirely different from those imposed now on the
Greek people. This, despite the fact that the leadership of the ruling
party was fully aware of the economic crisis --which is basically
chronic-- and deliberately deceived the electorate, with the help of
the political and economic elites controlling the mass media, which
were keen to have a "socialist" party elected as the only one capable
to implement such measures because of its comprehensive control of
trade union bureaucrats.

The fact that the economic crisis is chronic is expressed by the post-
war dismantling of the production structure, which was brought to
completion with the opening of its markets to the world market --a
process that was accelerated by Greece's integration into the EU at
the beginning of the 1980s. The effective dismantling of the
productive structure, in turn, inevitably led to the creation of "a
consumer society without a production basis" and a continuous growth
of the external debt, and consequently of the public debt that has
presently exploded. Naturally, these developments did not --nor could
they-- lead, anyway, to the formal bankruptcy of the Greek state, as
this would have opened huge holes in the pockets of German and French
holders of Greek state bonds and would put at risk the stability of
Euro itself. Particularly so, when other countries in the European
"South" face similar problems --i.e., what the capitalist markets call
the "PIGS" (Portugal, Italy/Ireland, Greece, Spain). However, the
price to be paid, particularly by the lower income strata (workers,
employees, under-employed, unemployed and pensioners) in the coming
years, will be very heavy indeed. No wonder the measures were
presented by the media, in a massive brainwashing campaign, as
unavoidable, something which is true only if we take for granted the
present institutional framework of today's capitalist neoliberal
globalisation, namely, the open and liberalised markets, which are the
ultimate cause of the crisis along with the consequential treaties of
Maastricht, Lisbon and the Stability Pact.

In this context, competitiveness, (which depends on low wages and
employers' contributions/taxes, high productivity, price stability,
etc.) plays indeed a crucial role with respect to an exporting economy
that bases its development on the free movement of commodities and
capital (like Germany or China!). The Euro, therefore, cannot be
separated from the Stability Pact, as is hastily suggested by the
reformist Left, because --in the given institutional framework-- it is
only when the common currency is complemented by criteria like those
prescribed by the Stability Pact that monetary stability and the
competitiveness of the advanced capitalist countries in the Eurozone
can be achieved. In other words, the policies of squeezing wages,
prices and budget deficits, are necessary for the EU economic elites
to be able of surviving in the competition with the corresponding
elites in USA, China, etc.

But, if such policies are to the benefit of countries like Germany,
which played a leading role in the design of the Euro, they are in no
way beneficial to countries like Greece, Spain, or other countries in
the European "South". Thus, it is true that the policy of "hard euro"
and the consequent policies of squeezing wage costs had led to a
significant improvement of German competitiveness and consequently of
the German balance of payments which, starting with a deficit of 1% of
GDP in the Balance of Payments on Current Account in 2000, achieved a
huge surplus amounting to 5% of its GDP today. It is also true that,
in the same period, the labour cost in the European South has risen
faster than in the North and that in countries like Greece and Spain
the increase in labour costs, faster than in Germany, has led to the
decline of their competitiveness and has consequently worsened their
balance of payments (Greece's deficit tripled in absolute numbers and
Spain's increased by as much as six times, etc.). --which ultimately
led to an increase in the public debt to finance the bubble of
"growth" that Greece or Spain had enjoyed since their adoption of the

Yet, this does not mean that to avoid surpluses in the North and
deficits in the South all countries in the Eurozone should follow the
same policies of squeezing wages and salaries. One should not forget
that, historically, wages in the South were (and still are) almost
half of those in the North (e.g. the minimum monthly wage in Greece,
Spain and Portugal in 2006 was less than half of that in the European
North). Therefore, implementation of such policies throughout the
Eurozone would simply lead to further divergence between the North and
the South rather than to convergence, which is supposed to be a main
aim of EU and the EMU! In other words, a real convergence in wages and
salaries would have led to such huge differences in competitiveness
between the European North and the South that no transfer of funds
from a new institution (like the proposed by the reformist Left
European Monetary Fund) would have been capable to eliminate. This is
why a real convergence within a capitalist market economy has not been
achieved even within single capitalist nation-states like Italy,
Germany, UK, etc., let alone a monetary union like the EMU!

So, the problem with the EU and the EMU is neither their "lack of
solidarity" towards a member state, nor the policies of "hard Euro"
followed by the European Central Bank and the German and other elites,
as the reformist European Left suggests. The real problem is the EU
and the EMU themselves! As it could be shown by both theory and
historical experience, in any economic union consisting of members
characterised by a high degree of economic unevenness (as is the case
with the EU), the establishment of open and liberalised markets for
commodities and capital would inevitably lead to a situation where
those that primarily benefit from the free movement of commodities and
capital would be the more advanced regions/countries (which have
already developed high productivity levels and advanced technologies)
at the expense of the rest. It is not therefore surprising that,
historically, none of the presently advanced capitalist countries
--which are now keen to promote the freedom of trade, etc.-- opened its
own markets before it had already achieved a high level of
competitiveness for its own exports, under protected markets.

It is, therefore, imperative that the anti-systemic Left, in Greece
and in Southern Europe in general, directly challenges the present
European integration in terms of markets and capital, and fights
instead for the establishment of a new confederation of European
peoples, initially in the European South, where they share common
economic, political and social problems. This is a first step towards
the creation, in the future, of a new institutional framework which
institutionalises the equal distribution of political and economic
power among South European peoples, and among all citizens within each
part of the confederation --a development that could serve as a model
for the integration of European peoples as a whole, within a pan-
European confederation of Inclusive Democracies. This implies the
elimination of power structures and relations, which characterise the
present so-called "democracies" and capitalist market economies, and
their replacement with new societies where the peoples directly, and
not through "representatives," control the political process, as well
as the economic process through the collective ownership and control
of economic resources, within a framework of self-management by
workers, peasants and students of factories and offices, farms and
education places respectively, in a way that reintegrates society with

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