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Proletarian issue 67 (August 2015)
Greece: Syriza caves in
Grexit is inevitable, despite the capitulation of Greece’s government to the austerity demands of the European bankers.
Those who really thought that Syriza would be able to deliver on its promises of reversing austerity, and who looked forward to seeing Greece’s creditors forced to ‘dance to the tune’ dictated by the young and dynamic prime minister Alexis Tsipras, who had promised to boldly break with tradition and sweep away all that is corrupt in the Greek political scene, have been brought down to earth with an unceremonious and undignified crash.

After weeks of having concession after concession rejected by the finance ministers of Europe (representing Greece’s creditors), Tsipras has finally thrown in the towel altogether and accepted all the creditors’ demands. In return for this capitulation he has been ‘rewarded’ with a third bailout that he had been insisting the country did not need – despite knowing full well that the terms of this bailout spell suicide for the Greek economy.

Not only did he throw in the towel, but he was backed in parliament by most of his party – with some (relatively) honourable exceptions. And this within less than a week of the Greek people having voted by over 60 percent against creditor proposals that were much less severe than those that have now been accepted (ie, €13bn in cuts has now been accepted, as opposed to the €9bn ‘austerity’ figure that was rejected overwhelmingly by the majority of the Greek population in the referendum of 5 July!)

What is particularly egregious is not so much that Syriza was unable to bring any form of ‘socialism’ to Greece by parliamentary means – as no doubt most of the various opportunist trends in the working-class movement had been expecting it to do – but that it was not even able to lead a default on the debt and an exit from the euro. Such an exit might at least give Greece some chance of a meagre economic recovery, even under conditions of capitalism, by allowing the country to devalue its way into competitiveness.

The liberal economist Paul Krugman wrote in the New York Times that “The truth is that Europe’s self-styled technocrats are like medieval doctors who insisted on bleeding their patients – and when their treatment made the patients sicker, demanded even more bleeding.

A ‘yes’ vote in Greece would have condemned the country to years more of suffering under policies that haven’t worked and in fact, given the arithmetic, can’t work: austerity probably shrinks the economy faster than it reduces debt, so that all the suffering serves no purpose. The landslide victory of the ‘no’ side offers at least a chance for an escape from this trap” – except that it didn’t, since at the critical moment the Syriza government chose to ignore completely the clearly-expressed will of the Greek people. (‘Ending Greece’s bleeding’, 5 July 2015)

Such will ever be the fate of social democracy – a political strand that tries to convince workers that it is possible at all times to secure stability and a reasonable standard of living for the working class under capitalism if only the right ‘policies’ are put in place. Let the Syriza experience help to hammer home the lesson yet again of the bankruptcy of the whole basis of social-democratic theory.

Time and again throughout the imperialist era we have seen ‘fiery radicals’ turned to jelly when faced with flat refusal by the ruling class to part with a penny of its profits. We have also seen the enthusiasm of said ‘radicals’ for visiting fire and brimstone on any workers or nations insolent enough to suggest any such aberration, if necessary letting them suffer the agonies of mass starvation and fascist repression in order to force them to see ‘reason’ – imperialist reason, that is.

Russian-based news website produced a helpful history revision course from Britain’s Neil Clark:

In Britain, we had our own version of the Greek ‘crisis’ in 1931. And, like today, it was a politician nominally of the ‘left,’ the Labour Party leader Ramsay MacDonald, who eventually sided with the bankers against ordinary working people. A ‘banker-led coup’ occurred that replaced the democratically-elected Labour government with a new capital-approved National Government, which moved to introduce steep cuts in public spending and slashed unemployment pay. The new government was dominated by the Conservatives, but had the turncoat ‘socialist’ MacDonald at the helm and another Labour traitor Philip Snowden as Lord Privy Seal ...

Another shameful betrayal of the people by a ‘left-wing’ party happened in Hungary in 1994. Hungarians, fed up with four years of falling living standards since the end of ‘goulash communism’, voted into power the Hungarian Socialist Party whose leading figures were ex-communists. The Socialists, it was believed, would temper ‘market’ reforms, and preserve the best parts of the old system. Their election victory set off alarm bells in elite western circles: ‘The commies are back in Hungary, something must be done!’

Prime Minister Gyula Horn, who had attacked the idea of energy privatisation, came under enormous pressure from international finance capital and its political emissaries to change course. Early in 1995, he did just that and made a spectacular U-turn. He sacked genuinely socialist ministers and appointed a fanatically neo-liberal university professor, Lajos Bokros, to introduce a package of deep spending cuts. The Socialists and their ‘Free Democrats’ coalition partners launched major privatisations – including in the energy sector – which passed into the hands of western corporations.

The working class people who had voted for the Socialists in large numbers in 1994 had been well and truly betrayed, but the international money men rubbed their hands with glee at the profits they could now make from Hungary. Horn, portrayed as a dangerous leftist by pro-capitalist media in 1994, was now hailed as a great ‘reformer’ – the man who put Hungary firmly on the path towards EU and Nato membership.” (‘Alexis Tsipras: Latest so-called ‘leftist’ to sell-out to the bankers’, 15 July 2015)

Clark gives a host of other examples of social-democratic betrayal, even going so far as to say: “In fact, we can say that the story of ‘leftist’ or ‘progressive’ governments in power in Europe in the last thirty years or so has been one betrayal after another.” However, the rest of his article made it clear that he still has not understood that, for all its apparent love for the working masses, social democracy is committed absolutely to the preservation of capitalism and will always put that goal before the interests of the working class. The truth is that workers only ever get a look-in when things are going well for capitalism (times that are getting scarcer with the deepening of the general crisis of the capitalist system), at which times some ‘largesse’ may be shown – if this in some way benefits capitalism as well (typically the purchase of social peace).

Who can ever forget the grossest betrayal of them all a century ago, when the social-democratic parties of Europe all rushed to support their countries’ imperialists and to mobilise the masses of workers to serve as cannon fodder in the killing fields of the first world war?

Refusal of bourgeois economists to recognise the inherent contradictions of capitalism

The guiding economic ideology of social democracy is class collaboration in the service of imperialism. To this end, present-day social democracy is pushing austerity onto the masses of the people to assist capitalism’s survival. Much is being made this month of the fact that a third of Labour MPs have voted against the austerity measures put forward for approval by Labour’s acting leader, Harriet Harman. Perhaps more thought should be given to the fact that two-thirds of them – ie, twice as many as the ‘rebels’ – are only too happy to embrace austerity – for the masses, that is.

Bourgeois ideologues consider that, since society is a human construct, it should therefore be possible to control it in all its aspects by human will – by the election to government, or by the imposition, of far-sighted individuals, highly trained in economics or blessed with exceptional common sense, who will take the necessary measures to end crisis forever. The assertion of Marxism, that the laws of capitalism are outside any possibility of human control as long as the capitalist system lasts, is dismissed by these ideologues as ‘economic determinism’, unworthy of consideration.

Gordon Brown, the last Labour prime minister, famous for having pronounced the ‘end of boom and bust’ (not very long before the 2008 economic crisis arose, in fact), thought that the bold worldwide application of Keynesian fiscal stimuli would, by boosting demand in the economy, put paid to the economic crisis.

In reality, however, the crisis that set in shortly after Gordon Brown made his foolish assertion still holds the world in its throes. All that his beloved ‘fiscal stimulus’ achieved was to pile up debt upon debt, with the taxpayer as guarantor. The need to service these huge debts has of course very quickly had the effect of taking more demand out of the economy than the ‘stimulus’ had originally put in, thus aggravating the crisis.

Karl Marx in his writings, especially in Capital, worked out why it is that capitalism cannot be prevented from descending into periodic crises of overproduction. Essentially, he explained, this is because the need to reinvest the accumulated profits of production so that they make further profits demands that capital continually expands, while at the same time the cut-throat competition among individual capitalists demands a constant search for methods of production that enable commodities to be produced that are cheaper than those of their rivals – a requirement that is best met by cutting down the amount of labour power expended (that is, the number of workers employed) relative to the quantity of commodities produced:

We have seen that the ever-increasing perfectibility of modern machinery is, by the anarchy of social production, turned into a compulsory law that forces the individual industrial capitalist always to improve his machinery, always to increase its productive force.” (F Engels, Anti-Dühring, 1877)

This in turn acts as a restraint on wages as, relative to capital employed, the share of wages is constantly being restricted by reduction in the work force – workers find themselves competing for jobs as the availability of labour power more and more outstrips the demand, so that wages, the price of labour power, are held back. This perpetual restraint on wage increases means that effective demand (ie, demand backed by the ability to pay) for the commodities produced by capitalism is rarely able to keep up with capital’s vertiginous expansion, and so periodic crises of overproduction are the result.

In response to these regular crises, capitalists are forced to curtail or even abandon production, throwing millions of workers on to the dole queue, thereby further depressing effective demand for capitalist commodities. Hence:

While the productive power increases in a geometric, the extension of markets proceeds at best in an arithmetical ratio.” (F Engels, 1886 Preface to K Marx’s Capital)

Crisis of overproduction presenting as a financial crisis

Any crisis of overproduction generally expresses itself as a financial crisis for this reason: faced with a crisis of overproduction, with its shortage of outlets for productive investment, and in a vain attempt to overcome it, capitalists resort to feverish speculation. This is reflected in an expansion of speculative loans and in the speculative driving up of share prices, resulting in bubbles such as the recent tech and real-estate bubbles.

In the end, as the crisis deepens and spreads across all areas of economic activity, the loans made in good times cannot be paid back, which in turn brings financial institutions – the nerve centre of the capitalist economy – to the brink of bankruptcy. Faced with such a nightmare, the capitalist governments either have to let the affected banks fail and thus deepen the crisis even further, or step forward to bail out the banks at the expense of the taxpayer – ie, by mortgaging the future earnings of both taxpayers and governments.

The rescue of the banks makes way, as has been happening for the last few years, for a sovereign debt crisis, to get out of which the governments have been attacking working people through cuts in social expenditure and increased taxation. Once again, the ultimate effect of this genius financial wizardry can only be to slash effective demand for many years to come, since fewer and fewer workers have any spending power at all.

A succession of Greek governments, too, thought that it was possible for governments to spend their way out of economic stagnation – and there was no shortage of European banks keen to lend them money. When economic crisis struck the world, however, not only could Greece no longer service these debts, but the banks that had lent money to the country were in deep trouble from having over-extended themselves (all over the world, not only in Greece) – hence the first bailout in 2010.

The Greek economy, despite heavy borrowing, was especially uncompetitive and therefore first in line for business failure in the cut-throat world of capitalist competition to which it became especially vulnerable as soon as Greece joined the EU. So, successive Greek governments upped public expenditure by creating government jobs, spending money on infrastructure projects and even increasing welfare benefits (albeit these remained very modest by European standards).

According to Keynesianism, this is how one averts crisis – by boosting demand and averting ‘under-consumption’. Only it doesn’t work. All that happened was that the Greek government ran up an unpayable debt. It should be noted in passing that this money was for the most part spent on necessities, not on frivolities, for all that the creditors decry the Greeks as ‘profligate’. It did not help Greece that a good deal of this borrowed money was used to purchase goods and services from French, German and other European imperialist concerns rather than the uncompetitive Greek alternatives.

Even then, the Greek debt was minimal in absolute terms. It was the weakness of European banks in the face of the world financial crisis that led to panikos:

A recent article in Foreign Affairs magazine explained the situation as follows:

The roots of the crisis lie far away from Greece; they lie in the architecture of [a href=""]European banking[/a]. When the euro came into existence in 1999, not only did the Greeks get to borrow like the Germans, everyone’s banks got to borrow and lend in what was effectively a cheap foreign currency. And with super-low rates, countries clamouring to get into the euro, and a continent-wide credit boom underway, it made sense for national banks to expand private lending as far as the euro could reach.

So European banks’ asset footprints (loans and other assets) expanded massively throughout the first decade of the euro, especially into the European periphery. Indeed, according to the [a href=""]Bank of International Settlements[/a], by 2010 when the crisis hit, French banks held the equivalent of nearly €465bn in so-called impaired periphery assets, while German banks had €493bn on their books.

Only a small part of those impaired assets were Greek, and here’s the rub: Greece made up 2 percent of the eurozone in 2010, and Greece’s revised budget deficit that year was 15 percent of the country’s GDP – that’s 0.3 percent of the eurozone’s economy. In other words, the Greek deficit was a rounding error, not a reason to panic. Unless, of course, the folks holding Greek debts, those big banks in the eurozone core, had, over the prior decade, grown to twice the size (in terms of assets) of – and with operational leverage ratios (assets divided by liabilities) twice as high as – their ‘too big to fail’ American counterparts, [a href=""]which they had done[/a].

In such an over-levered world, if Greece defaulted, those banks would need to sell other similar sovereign assets to cover the losses. But all those sell contracts hitting the market at once would trigger a bank run throughout the bond markets of the eurozone that could [a href=""]wipe out core European banks[/a].

Clearly something had to be done to stop the rot, and that something was the [a href=""]troika programme for Greece[/a][a name="_Hlt425858714"][/a], which succeeded in stopping the bond market bank run – keeping the Greeks in and the yields down – at the cost of making a quarter of Greeks unemployed and destroying nearly a third of the country’s GDP.” (‘A pain in the Athens’ by Mark Blyth, 7 July 2015)

The new bailout conditions that Tsipras is accepting will wreak even more havoc:

This third bailout programme will severely increase taxes on consumer goods, slash pensions, and transfer €50bn worth of public assets to a private fund, presumably based in Athens (although Luxembourg was proposed), with the purpose of paying back the odious debt. Should Greece fail in meeting creditor-mandated budget goals, automatic spending cuts will kick in, further crippling the Greek state and society.

Inevitably, Greece’s only remaining major industry, tourism, will be dominated by German investors. Irish economist David McWilliams [a href=""]posits[/a] a scenario where the tourist sector (hotels and resorts) will likely become foreign-owned, consumer goods will be imported, and all profits will be subject to foreign (German) repatriation, leaving Greece without a cent. From there on, the Greek people will be relegated to labouring in the tourist sector or elsewhere, earning just enough to keep the wheels of their cage turning.

For Greeks who already live in profound turmoil, surrounded by extreme unemployment, record-high suicide rates, a crumbling healthcare system, and pervasive homelessness, the deal Tsipras brought before the Greek parliament reads like economic sadism.”(‘Greece: Capitalism’s latest war on democracy’ by Alexandros Orphanides, Counterpunch, 17 July 2015)

If Syriza finds itself in the unenviable position of, on the one hand implementing the most drastic austerity programme dictated by European Union imperialism, and on the other hand being condemned for doing so in breach of its earlier stance, it has no-one to blame but itself.

It won the last Greek election on the basis of promises to free the Greek people from the bondage of creditors in the form of the Troika and to wash away the shame of Greek humiliation. Then it held a referendum, which it won resoundingly, on whether it should accept the terms on offer from the Troika prior to the present bailout programme – terms which were less harsh than those of the current dispensation.

Apologists for Syriza assert that Syriza had ‘no option’ but to accept these terms because it had no strong cards in its hands. But there are precedents of countries defaulting – Argentina comes to mind – with far fewer cards than the government of Greece.

Briefly, the strength of Greece’s government lies in the fact that if it defaulted and exited the euro, it would cause real havoc in the eurozone and put paid to the entire euro project. Second, Greece occupies an extremely important geostrategic position between the volatile Balkan states on the one hand and Turkey on the other.

Greece is also a member of Nato, and it terrifies US imperialism to envisage a situation in which a Greece out of the euro comes closer to Russia and China and, as a result, strains the warmongering Nato alliance to its limits.

Besides all this, Greece is a perfect location for the citing of pipes carrying Russian energy to several destinations in Europe and Asia. Should these plans come to fruition, it would lessen the dependence of Russia on countries like Ukraine, which is currently run by a fascist clique supported by US imperialism and the European Union.

Had the Tsipras government not lost its nerve and capitulated, the European Union would have been under extreme pressure from the United States to see sense and accept Syriza’s earlier stance. That is not to be. In doing what it has done, Syriza has revealed in a very short period of time that, as a new variant of Greek social democracy, it has neither the will nor the strength to resist the pressure put upon it by imperialism.

The crumbling of Syriza will not make for an instant social revolution of the Greek proletariat, but it cannot fail to give an important lesson to the Greek working class that could potentially help it take its first steps along the long and tortuous road towards its social emancipation.

What is more, the acceptance of these terms, as indeed the terms of the previous bailouts, by no means guarantee Greece’s continued membership of the eurozone. It is the considered view of the majority of the economic commentators that a Greek exit from the euro is inevitable. This is what Wolfgang Münchau of the Financial Times, for instance, recently had to say in this regard:

The fact that a formal Grexit may have been avoided for the moment is immaterial. Grexit will be back on the table when you have the slightest political accident – and there are still many things that could go wrong, both in Greece and in other eurozone parliaments. Any other country that in future might challenge German economic orthodoxy will face similar problems.

This brings us back to a more toxic version of the old exchange-rate mechanism of the 1990s that left countries trapped in a system run primarily for the benefit of Germany, which led to the exit of the British pound and the temporary departure of the Italian lira.

What should the Greeks do now? Forget for a moment the economic debate of the past few months over issues such as the impact of austerity or economic reforms on growth. Instead, ask yourself this simple question: do you really think that an economic reform programme, for which a government has no political mandate, which has been explicitly rejected in a referendum, that has been forced through by sheer political blackmail, can conceivably work?” (‘Greece’s brutal creditors have demolished the eurozone project’, 14 July 2015, our emphasis)

All that the ‘bailout’ has done is to postpone the day of reckoning. Greece has replaced part of its old unpayable debt by a new, larger and even more unpayable debt. Hardly any of the money borrowed will end up in Greece, even though the Greek people are having food snatched from their mouths in order to service the loan.
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