To understand the fate facing the people of Greece, you have to imagine an intruder coming to your home, putting a gun to your head and demanding that you turn over your earnings, surrender your savings, and sell off your car, your television, and your refrigerator t. Greek citizens neither benefited from the profit frenzy of international bankers nor encouraged their irresponsible behavior, yet they are being asked – no, forced – to pay the price for the damage incurred in the collapse of the world capitalist system.
Greece – a small corner of the European Union – and its people know little of the exotic instruments concocted in the world’s financial centers to overproduce massive amounts of phantom capital fueling the growth of this rapacious system. They are only indirectly acquainted with the arrogant, irresponsible actions of giant investment banks like Bear Stearns, Lehmann Brothers or Goldman Sachs. Very few Greeks see their future tied to the success of the predatory financial behemoths that roam the global economy. And yet they are being forced, at gun point, to pay for their losses.
When the media fog lifts, this is clearly the plight of Greece’s eleven million citizens.
If home invasion, armed robbery, and extortion are crimes, then surely Greece is a crime victim. And the European Union, the European Central Bank and the International Monetary Fund are the criminals. They are aided and abetted by the bond bandits who prey on debt, pouncing on a country struggling to revive its sinking economy. And their puppets – pathetically willing accessories to the crime – are the PASOK leaders and parliamentarians who attempt to legitimize the crime.
With few exceptions, countries have been obliged to take on additional debt to stimulate economic growth in the face of a severe drop in global investment and broad demand. Capitalist economies have no option other than sinking further in decline. In earlier times, deficit, debt-producing spending produced improved growth and accompanying inflation. Growth and inflation, in turn, increased tax revenues and cheapened debt, allowing the public debt to shrink in proportion to the economic product. This has long been a feature of capitalist recoveries from mild to severe recessions. Conventional economists teach this as though it were a universal law.
But we live in exceptional times and conventional economists are seldom right about anything any more.
Today, two factors have changed this dynamic. First, the near-total domination of neo-liberal ideology has shaped opinion to fear public debt of any degree. What was once the dogma of the fringe right has, thanks to over forty years of focused, class-based intellectual encroachment, spawned a uniformity of thought among the media, politicians, and opinion makers bordering on faith and defying history and facts. What began as the so-called “Washington Consensus” in 1989 has become an international consensus, gaining near-theological obeisance. International capitalist institutions like the International Monetary Fund have eagerly embraced its tenets.
Debt hysteria, like patriotic fervor, induces baseless fears that perversely shape policy decisions. Like contrived patriotism, debt fright masks a hidden agenda – in this case, a hatred of all socially useful public spending.
Secondly, for decades, changes in the global economy ushered in a new dynamic that manipulates and exploits debt far beyond anything we have seen before. With many of the capital-rich countries surrendering their manufacturing to low-wage areas, financial activities – the management, manipulation and creative expansion of capital – took on a greater role in these economies. New techniques, instruments and institutions evolved to accumulate surplus value – profits – in the hands of the few engaged in the financial game.
As capital accumulated – US financial profits accounted for over two-fifths of all profits before the collapse – it became increasingly difficult to maintain the rate of return spurred by financial ascendancy. (In Marxist terms, the tendency for the rate of profit to decline reared its ugly head.) Riskier and riskier speculation sought to find a home for the overproduction of capital until the system collapsed, the scenario that we all know so well.
Fueled by an injection of public funds, the financial sector has returned to speculation with a vengeance. In addition, they are now finding new profits in attacking the debt of the most fiscally vulnerable countries and forcing the conversion of private debt into public debt. The financial sector was neither wounded nor chastened by its folly. Instead, it has roared back, attacking sovereign debt in vulnerable countries like Greece, Ireland, Portugal and Spain. Speculative capital has turned virulently predatory.
The combination of these two elements – one subjective, one objective – has placed Greece in a death spiral. With unemployment soaring over 16%, taxes on the poor enacted, homelessness on the rise, salaries and benefits sliced, and social services eviscerated, Greek workers face a future of decline.
If there is one insight central to the science of Marxism, it is that appearances seldom reveal the real social realities; indeed, they most often mask them. The interplay of personalities, the clash of proclaimed interests, or the statements of policy makers conveyed by the corporate media are seldom the actual forces at play in social developments. Instead, material forces evolving from the system’s dynamics are usually the decisive factors in driving change.
In the case of Greece and, soon, the other vulnerable European Union countries, finance capital -- particularly its most predatory elements (hedge funds and private equity firms) -- has exploited the crisis to generate profits by betting against Greece’s ability to manage its debt. These bets have predictably influenced the market, making it even more difficult for Greece to secure and pay off its debts. As selling and redeeming bonds became more costly, Greece lost the ability to generate a recovery from further deficit spending.
Without a boost from public sector spending to jump-start economic activity, tax revenues shrank further, crippling Greece’s ability to meet debt payments and again find favor with the bond profiteers. The painful, tortured route to economic destruction ensued.
The only sensible exit from the vise gripping Greece was to stand up to finance capital and extract a new deal or exercise its sovereignty by voiding its debt – defaulting. But Greece’s “socialist” party, PASOK, instead turned to the eager criminals of the IMF, the EU and the European Central Bank for “help”. Only the Greek Communist Party and the advanced sector of the working class, PAME, advocated swift exit from the financial vise.
Where the media presents Greece’s plight as simply one of irresponsible government bringing pain on itself and the attendant economic hardships as the market’s revenge, the truth is far different. The Greek crisis is what an unrestrained, dominant, and predatory financial sector produces. But we must also recognize that the financial monster devouring Greece is itself the product of a capitalist system dependent upon finance to sustain its continued accumulation of surplus value. Those who think that taming the financial behemoth will restore a kinder, gentler capitalism are ignorant of the system’s logic.
By turning to the triumvirate (the EU, IMF and the ECB), the PASOK government surrendered the country’s sovereignty and its economy to three enemies of the Greek people, three enemies with often contradictory agendas.
The European Central Bank is the strong-arm enforcer for European banks. Its goal is simply to ensure that Euro-banks are not damaged by any Greek events, that the banks’ investments and loans are protected. It adamantly opposes any policy that will ask euro-banks to sacrifice. The ECB opposes default at all costs, threatening to not buy Greek bonds if Greece defaults. It supports EU bailouts because they transfer Greek debt from the private sector to the public sector. J.P. Morgan estimates that public sector sovereign debt liabilities against Greece will surpass their private sector counterparts in 2013 as outstanding bonds are paid off. This trend is expected to continue, going forward. The ECB welcomes this exit by private banking since it will leave the banks immune from any negative consequences. They have no interest in the fate of Greece’s working people.
The International Monetary Fund, on the other hand, serves as an active agent for international capital. Through extortionate loans, it imposes the conditions for capitalist exploitation upon countries desperately in need of financial help. Privatization, diminished social securities, and dis-empowered workers constitute its agenda. Clearing a path for US imperialism drives the policies of the IMF, with the interests of the other imperialist powers playing a secondary role.
The details of the austerity package for Greece – privatization, unemployment (to discipline workers), destruction of social services, etc. – are the work of the IMF. It was with glee that international capital welcomed the demand for a $71 billion privatization of Greek public assets, including Athens Airport and Greek railways. The Wall Street Journal cynically dubbed it a “National Tag Sale.” The IMF, too, has no interest in the fate of Greece’s working people.
The European Union, a political body, reflects the political will of the dominant governments of the EU: Germany and France. Both countries’ governments subscribe wholeheartedly to the neo-liberal dogmas, prescribing austerity for growing public debt. In this respect, they endorse and lead the EU to support the IMF regimen. But they have political reservations about the terms of the extortionate deals crafted to impose austerity. They resist committing their own public funds to buy the Greek government's collaboration in selling out the Greek people. So-called “bailouts” come at the expense of public funds provided by the EU constituent governments. They prefer to find another weapon to hold to the head of the Greek people. But the EU, as well, has no interest in the fate of Greece’s working people.
Like all criminal syndicates, the unity of the triumvirate is threatened by selfish interests. The German government recently proposed a restructuring of privately held Greek debt (largely euro-banks), but the ECB slammed the door on this since it would call on European banks to sacrifice. France is now proposing similar actions with the ECB similarly in opposition. Neither government wants to commit its own public funds to the sustenance of Greek government debt. While they agree on the crime, they cannot agree on the weapon.
It would be a profound mistake to see the mugging of Greece as an isolated, inconsequential event. Rather, it is a template for the way ahead for international capital.
In the days before the betrayal of the Greek people by the 155 PASOK representatives, stock markets world-wide were falling, in fear that the massive strike and demonstrations of the Greek people might frighten these spineless politicians into rejecting the extortionate deal demanded by the IMF, the ECB and the EU. The mere possibility that resistance would derail the program shook the foundations of capital. In the days following, the markets leaped forward more than they had in months.
Greece is neither isolated nor inconsequential.
The pattern established in Greece is being repeated in other countries, like Portugal, Ireland and Spain. Italy and the UK are next in line, with others to follow. The game plan will undoubtedly be tailored to different circumstances and different balances of forces, but capital will relentlessly strive to squeeze profit from the living standards of working people and expropriate the public wealth held socially. The weapon in this assault is debt manipulation.
Some on the left sounded the death knell of neo-liberal capitalism in the depths of the crisis. Clearly, that was a profound mistake. Neo-liberalism, financial predation and global capital have mounted a vigorous counter-attack, leaving those illusions dashed.
We can, however, draw important lessons from the Greek struggle. While the Greek people, led in this conflict by Communists and class-conscious workers, failed to stop the mugging, they are not defeated. They will have much to say about the next chapter in this unfolding story.
For us in the US, the assault on the Greek people should remind us of what we face. While we should be inspired by the resistance in Wisconsin, Ohio and other states, we must recognize what a daunting, difficult struggle lays ahead. And we should not be seduced by phony political allies like the Democratic Party, the US counterpart to PASOK, in this fight.
With all respect to our many causes, this is the central battle of our times.