Austerity vs Democracy: What’s Happening in Greece?

In the 1970s, they called it an

Like most folks, I’ve found the dizzying pace of events in Greece a challenge to grasp. Over the weekend, in a historic referendum, voters there rejected the latest harsh terms for a bailout offered by the nation’s European creditors. Emboldened by the “No” vote, Prime Minister Alexis Tsipras and his left-wing coalition, Syriza, now seek softer terms from the unsympathetic leaders of the European Union (EU), specifically the “Troika”: the European Commission, the European Central Bank, and the International Monetary Fund.

Why does this matter? For those who want to understand why Greece is staggering under the weight of an economic catastrophe and is poised on the razor’s edge of ejection from the Euro (and thus being cast off into “the Third World”), there is a surfeit of commentary and analysis. However, there are a couple of explanations offered over the past few days that are particularly helpful.

One comes from Nikil Saval and Stephen Squibb, editors of n+1. On July 4 they published an illuminating essay, “No Exit: Democracy and Crisis in Greece,” that offers essential context. It is bold, barbed and ideological, but powerfully persuasive and deeply disturbing.

They argue that with the decision to call a referendum, “the specter of democracy intruded into what had been a rather heavy exercise in technocratic rule.” The Europeans have bridled before when an individual nation rejects a referendum, but “when Europe does not get what it wants, it resorts to the direst of threats, including economic catastrophe.”  For Saval and Squibb, the entire project of European integration since the 1980s has proven profoundly anti-democratic. In effect, today’s nightmare in Greece seems, in their telling, an almost inevitable outcome. Consistently, they argue, this pattern prevails:

First, the European Union erects bulwarks against popular will; then, it grudgingly lays its proposals before whatever popular will remains; and finally, should the people reject the proposals that would ultimately diminish their power, the EU threatens them with destruction. Brecht’s “Die Lösung” comes to mind (“Would it not be easier / In that case / for the government to dissolve the people / and elect another?”), as does the charge of the Caledonian general against the Romans in Tacitus’s Agricola (“They make a desolation and call it peace”).

We now know the results of the referendum, but we await the results of any new negotiations between Greece and the Troika. Here is what Saval and Squibb said in advance of the vote:

If Greek voters say “No” to the creditors, they affirm democracy but still confront a Troika that may seek to punish them further. If they say “Yes,” they will lose the government they elected and receive one more in line with European technocracy. In either case, they are being presented with two versions of misery—more austerity within the euro, or the possibility of being shut out of capital markets outside it. Being part of Europe has not proven to be the blessing it was once thought to be.

The writers contend that the EU has a long history of subverting the social democracy Western Europeans built during the Cold War era. “The EU has draped itself in the rhetoric of the Enlightenment and social democracy while quietly losing its claims to the heritage of both.” They point out:

not a single welfare state in the union has enlarged its provisions for the working-class and the poor. On the contrary, every single one has found new ways to roll them back, with Britain’s peppy New Labour raising university fees (and worse), and dour Germany successfully repressing wage growth far below its historical ratio with increased productivity.

The idea of a European Economic Community committed to social democracy and shared prosperity began to give way in the 1980s to another idea—sometimes called “ordoliberal,” after a group of conservative West German economists. These economists held that competition, the control of inflation, and the correlated disciplining of labor were the central tasks of economic management.

The “orthodoxies like ordoliberalism and its fraternal twin neoliberalism” have swept away alternatives ways of imagining and organizing an international economy since 1992, when Europe adopted the Maastricht treaty. Thereafter, the EU has been fully committed to administering a monetary union with a single currency. “In order to ensure its soundness could not be threatened, fiscal discipline of member states had to be enforced,” which the European Central Bank has done.

The single currency was to be backed by a single central bank that had no democratic accountability and whose sole mandate was to keep inflation below 2 percent. By contrast, even the American central bank, the Federal Reserve, is charged with controlling inflation and keeping unemployment low—but then half of its directors are also appointed by a democratically elected president. (For those of you scoring at home, this means that the central financial institution of the EU is constitutionally less progressive than its counterpart in the United States, as odd as that idea might sound.)

What the European monetary union amounts to, in effect, is a repudiation of the post-World War II “’social democratic’ consensus.” The welfare state was out, self-regulating markets were in. Bankers were in charge.

“Since Maastricht,” Saval and Squibb write, “the EU has repeatedly sided with the needs of the currency against the voice of the people—something amply in evidence in the Troika’s response to the Greek referendum.” The EU’s “technocratic disdain for human liberty” now provokes an even greater danger in Greece. If Europe humiliates the Greek government – one elected so recently with a mandate to resist further austerity in a nation hollowed out by economic catastrophe – the new regime that emerges in Athens might well be “fascist.” That is, the country might slouch toward “a militant nationalism of the kind embodied by Syriza’s chief ideological rival in Greece, Golden Dawn.” Much as Fascism seized its opportunity in Italy and Germany in the 1920s-30s, Golden Dawn or some such extremist entity might be the last party standing if Tsipras is discredited by accepting Europe’s unacceptable terms or by presiding over an apocalypse after exiting the Euro.

European treatment of Greece paves the way for Fascism even as it reflects the West’s racist conception of the Greeks:

First, they continue to provide, in the form of suffering, a material basis for an imagined community of 11 million people, precisely by making said people suffer as Greeks. This suffering, it must be emphasized as often as necessary, is entirely out of proportion to any responsibility for the larger crisis on the part of the people in question. Any attempt to naturalize this disproportion by reference to some essential Greekness is the most violent and dangerous kind of lie: a racist lie. Racism is the most dangerous lie precisely because it transforms an irrational, contingent, and unjust solution to a larger collective problem into an eternal and necessary condition. Consider that if half of what we have heard about the Greeks in recent years were actually true, then we would be justified in enslaving them immediately. In fact, they have already been enslaved by the monetary union, and it is their Greekness that has been retroactively reconstructed as a justification for this enslavement, where Greek now stands in for “lazy,” “shiftless,” “good for nothing,” and whatever other ridiculous adjectives we deploy to justify the unfreedom we inflict on others.

What Syriza faces now is stark. Chaos will perhaps inevitably be blamed on the ruling party, even though it inherited the mess and sought to rescue Greece from slavish acceptance of European-mandated austerity.

The challenge, then, is to fail in such a way so as not to take the idea of democracy down with the ship. But the EU has made such a managed failure impossible, insisting instead on the complete and utter humiliation of democracy in Greece.

What’s next?

A Greek exit may be the only viable strategy at the present moment, but this strategy only makes sense—that is, it is only strategic—when connected to a larger theoretical account of the transition to another international economy: one in which labor enjoys the same rights of movement as those granted to capital and is protected by a standardized set of global minimums.

The reason ordo- and neoliberal orthodoxies have triumphed in spite of their obvious unworkability is that they have managed to recast what are ultimately police measures—keeping labor costs down, controlling inflation—as some kind of religious program, equal parts redemptive and sustainable. Valorizing submission and stigmatizing leisure, these orthodoxies are contemporary equivalents of feudal Christianity: a slave morality for the globalized age.

Saval and Squibb show how Greece’s torment reflects the larger assault on democracy in Europe, the orthodoxy of austerity throughout the West, and the damage wrought by the racial stigmatization of nations with faltering economies.

An excellent companion piece for their essay comes from Mark Blyth, a specialist in political economy at Brown University and the author of Austerity: The History of a Dangerous Idea (Oxford, 2013). NPR’s show On the Media first aired a report on July 3, “The (Perceived) Tragedy of Greece,” in which host Bob Garfield talked to Blyth about American and Western media myths about the Greek crisis.

Systematically and sardonically, Blyth demolishes the major claims against Greece repeated ad nauseam by pundits and politicians. Impatient with Westerners who demand that the Greeks “stop whining” and accept their creditors’ terms, Blyth notes that before the global financial crisis, being a member of the Eurozone meant that Greece was showered with loans, treated as if it were as safe an investment bet as Germany.

While the conventional narrative tells us that Greece’s troubles are due to profligate spending on an elaborate welfare state and overly generous pensions, Blyth points out that before the crisis, Greek spending was largely “flat.” There was “no orgy of spending.” It is true that a large percentage of the budget provides for pensions. Why? Because the Greeks are the fifth-oldest population in the world, and therefore even with what amount to “average” pensions, the total cost inevitably adds up.

In the 1970s, elites called it an
In the 1970s, elites called it an “excess of democracy”; now we can’t tell you what they call it. This is a family blog.

We keep hearing that Europe has already bailed out the Greeks more than once and at great cost, while Greece shamelessly asks for more. Not true, says Blyth. Of the rough 250 billion Euros loaned to Greece for bailouts, 205 went immediately to the banks. The government in Athens has received quite little aid, making this oft-repeated claim “rubbish” and “flatly wrong.”

Depictions of the Greeks as lazy inhabitants of a “taverna-type society” serve only to prove the laziness of financial journalists, says Blyth. He notes that the Greeks actually average more labor hours than the Germans. If their labor has not yielded a competitive economy, it is because Greece has an aging population and is unduly dependent upon tourism. That structural deficiency is the problem and not putative Greek laziness. Moreover, if the key to competitiveness is cutting the cost of labor, Blyth acidly asks why Greece isn’t growing now that its labor has been eviscerated by a 25% unemployment rate (and 50% youth unemployment).

Blyth’s biggest complaint is the hypocrisy of many of Greece’s critics who were once cheerleaders. Several years ago, financial journalists touted Greece as a good bet, they “loved Greece.” If the Greeks are an innately shiftless and unproductive people, what accounts for the “over-lending” by Europeans before the financial crisis? The same banks who made bad bets are now demanding that Greece pay. That demand gets amplified by financial journalists and economists who repeat false accusations about Greece. Moreover, “no one gets called on their busted calls.” Inaccurate forecasts of economic growth do little harm to the pundits’ reputations. The “faith-based reasoning” of Greece’s critics protects them from evidence that contradicts their claims. The Euro regime is itself the problem, Blyth concludes.

Taken together, the commentary of Saval, Squibb and Blyth give us a clear sense of what is at stake in the coming days. Greece is not a comedy of errors, but a tragedy. It might also be a harbinger of chaos to come in Europe and beyond.

Larry Grubbs is a senior lecturer of History at Georgia State University and author of Secular Missionaries: Americans and African Development in the 1960s (Massachusetts, 2010).  He is a senior writer at ToM and editor of the blog Matters of Sense, a guide to sensory history and all things sedulous and surreal.

For other ToM coverage of the Greek crisis, see:

Greece and the Idea of Debt

Why German Economic Thought Made the Greek Crisis Inevitable