Foreword

As I write this foreword, Greece has not defaulted. Not yet. Pundits everywhere declared the default inevitable, or perhaps, on reflection, somewhat evitable and, anyway, some added, it won’t be the end of the world. On 8 March 2012 Robert Peston (BBC News) announced, ‘we should perhaps be hoping that Greece defaults tomorrow’. And then he went on to suggest that, in a way, Greece had already defaulted. Jeffrey Rubin, former chief economist of CIBC World Markets, warned (Huffington Post, 16 May 2012) that it might be the end of the world or, at least, of the world as we know it:

‘Greek default would send shock waves through Europe’s banking system. Massive write-downs by banks are sure to be followed by even larger taxpayer-funded bailouts. Similar to the response to the sub-prime crisis, governments will argue that some institutions are simply too big to let fail. But the cost of bailouts won’t be limited to Europe. A Greek default would start in Athens, but it wouldn’t be long before it’s felt in Paris, Berlin, New York and Toronto. In today’s intertwined financial markets, everyone has exposure to everyone else’s problems.’¹

If this collective anguish shows anything it is that the world is truly interconnected. It has often been remarked that Greece’s GDP is only 2 per cent of that of the EU and that its population of only 11 million inhabitants is a fraction (also 2 per cent) of the EU’s 503 million. But that is not small. Two per cent of the population makes Greece larger in the EU than, in proportionate terms, Birmingham is in the UK, Naples is in Italy or Lyons is in France. And it is pretty obvious that there would be serious problems for the UK, Italy and France if cities of such size ‘defaulted’.

Interconnectedness gives Greece considerable power: if the country did not matter, it would have been allowed to sink without trace long ago. We know this because, as this remarkable book reminds us, Greece has already defaulted many times since 1826. Such events caused barely a ripple in the economic vicissitudes of Europe in the 19th and 20th centuries. As the authors show, dealing with Greece meant dealing with a state whose finances have always been in trouble.

Historically speaking, defaults are not that unusual: a number of Latin American countries have often stopped paying their debts. Two economists at George Washington University, Graciela Kaminsky and Pablo Vega-García, have pointed out that, between 1820 and 1931, there have been 67 sovereign debt defaults in Latin America from the richest country (Argentina) to the poorest (Bolivia).² And the world did not end.

Today we are not so sure.

To understand the basis of the frenetic speculation and anxieties of the last few years of which Greece has been at the centre, it is necessary to step back, take a deep breath and look at the wider context: historically and globally. This is what this book seeks to do and it does so admirably. ‘It’s the economy, stupid’, Bill Clinton declared famously. One should add, ‘it’s never just the economy’. Fouskas and Dimoulas adopt a wider perspective: the economy, yes, of course, but also geography and history and politics. Greek weaknesses and peculiarities are examined: its nature as a laggard as far back as the 19th century; its foreign policy subservience first to the European Great Powers (who after all ‘invented’ modern Greece and gave the country a Bavarian king in 1832) and then, in the post-war era, to the USA; the presence of an exceptionally strong diaspora of Greeks throughout the Mediterranean but also in the USA, Great Britain, Argentina and the Balkans (when Greece was created, four out of the top ‘Greek’ cities were outside Greece); the impact of an issue, Cyprus, which has no parallel in the rest of Europe and which caused the downfall of the regime of the colonels in 1974; the presence in the 1950s and 1960s of a strong Left (mainly Communist), yet unable to achieve its legitimate political place because of overt political repression. Greece was not a Keynesian state in the 1950s and the 1960s when Keynesian policies prevailed in much of Western Europe. It became one in the 1980s when Keynes had fallen from its pedestal: throughout the 1980s Greece privileged the fight against unemployment over and above controlling inflation unlike everyone else. This policy was perhaps unavoidable as it enabled the new socialist party, PASOK, to establish the kind of political strength that social democrats had elsewhere but not in Greece. These policies, which are a proximate cause of the present crisis, cannot be understood if one does not understand the particular anxiety of Greek bourgeois elites and of the intelligentsia to catch up with what they regarded as the core countries (Britain and France in the 19th century to which was added Germany in the second half of the 20th century).

And the Greek crisis is not just about Greece. As the authors rightly argue, the country’s political and economic history must be seen in a comparative perspective. Being anxious about catching up with the ‘advanced’ countries, far from being a Greek peculiarity, is the condition of laggards everywhere: from Russia to 19th-century Japan, from Latin America to other Mediterranean countries such as Italy and Spain.

The fate of laggards in history is somewhat curious. They are supposed to catch up yet they cannot exactly replicate the action of the path-breakers, for these operate in an environment in which, by definition, there are fewer competitors. If you are on top and no one challenges you, there is no need to try to change anything: there is a rationale behind the conservatism of old elites. But the elites in laggard countries have to be dynamic because they feel constantly threatened by outsiders who may overtake them as well as by other classes and social groups (workers and peasants) who fear that they will be sacrificed in the race towards modernity. It is one thing to initiate change, it is another to have change thrust upon you. The socio-economic pull of the West was such that, outside the magic circle of the ‘advanced’ world, the elites in peripheral countries such as Greece had to try to lead industrial and political revolutions. The external world impinges far more on the laggard than on the pioneers.

But ‘laggard’ is a rough category, as is the more recent one of ‘under-developed’. Countries which have little in common are lumped together because the one thing they certainly have in common is that of not being in the top group. Greece was certainly a laggard country, but so was Paraguay. The similarity ends here. As countries ‘caught up’, new and more complex differentiations emerged. In the end, the industrialization of so-called laggard countries required not only favourable circumstances and resources but also the development of a political will.

We should also bear in mind that when we talk of industrially laggard countries we use the state as a unit of analysis. But within the territory of each state, one often finds advanced sectors coexisting with backward ones. If we ignored national boundaries, and hence politics, the outposts of the industrial world in mid-19th century Europe would include the British Midlands, the Glasgow area, parts of German-speaking Switzerland, francophone Belgium, Alsace and Lyon in France, the Ruhr in Germany, Moravia (then in Austria-Hungary) and Lombardy in Italy. Thus France as a whole was certainly industrially ‘backward’ compared to Britain and Germany but Alsace, at least in the decades following the Napoleonic wars, outperformed the British average. Similarly, present-day Greece exhibits significant internal differentiations. Its richest region, Attica (the region dominated by Athens) is richer, in terms of GDP per capita, than Berlin or Manchester or, indeed, the whole of Poland, the whole of Hungary and the whole of Southern Italy (2009 Eurostat figures).³

This is the wider historical setting within which Fouskas and Dimoulas develop their ‘Marxisant’ approach, as they call it. This, mercifully, is not some dogmatic attempt to rewrite the crisis as if it were an updated chapter of Das Kapital, but a far more unified approach which starts from an examination of the financialization of the global economy, a phenomenon which barely existed in Marx’s days, and then moves into the realm of politics and, in particular, to the unfinished construction of Europe. This is at the centre of the analysis as the EU is a peculiar hybrid constantly torn between integration and disintegration. The euro countries possess some of the features of a state because they have a currency in common but there is no strong central authority with the necessary powers to supervise the currency or to impose the required fiscal discipline. The author’s argue that today the disintegrative tendencies in the EU are stronger than the integrative ones. These tendencies are exacerbated by a recent factor, the global downturn and a long-term tendency: the global shift to the East.

In theory the collapse of Communism should have reduced the geo-political importance of Greece. But the disintegration of Yugoslavia created a new regional role for Greece: no longer the NATO outpost it was during the Cold War but a launching pad for the financialization and stabilization of the Balkans in the difficult 1990s. This, the book explains, led to Greece embracing neo-liberal economic reforms under the direction of the Left (i.e., the PASOK of Prime Minister Costas Simitis, Andreas Papandreou’s successor). This is what led to the further interconnection of Greece with ‘Europe’, that is Germany and France and their banks. The famed high military spending for which Greece stands justly accused (the highest in Europe as a proportion of GNP) is not due merely to the militaristic nature of Greek society, or to the obsession with the Turkish threat, or the desire to use military spending to keep unemployment down; in the main, the authors argue, it was due to the role assigned to Greece in the Cold War: the militarization of Europe’s ‘soft underbelly’. Dependency was always a feature of Greece, which freed itself from Turkish rule in the 19th century not through a kind of Italian-style Risorgimento but through the direct intervention of the great powers. This, after all, was a country always dependent on others: it had no significant raw materials and was always compelled to import technology and know-how. How to finance this? Had the country developed a thriving economy, it would have been able to raise finance through taxation. As it is, major projects such as railways construction and the building of the Corinth canal had to be undertaken through foreign borrowing (including borrowing from Greeks living abroad) and foreign investment.

Once the rule of the colonels collapsed (1974) and after a short conservative interregnum, all the new PASOK government could do was to build a kind of welfare state by borrowing heavily, against the trend of neo-liberalism. The alternative would not have been to follow the neo-liberal trend for this would have destabilized the new democratic regime. The alternative would have been to construct a welfare state concurrently with a restructuring of the economy. The failure of PASOK, argue Fouskas and Dimoulas, was not due to welfare spending but because of the wrong kind of economic policy.

The ‘fault-line’ analysis deployed in this book goes beyond the nationalist horizon still too often prevailing in these kinds of studies and far surpasses the rather narrow journalistic accounts which see the causes of the Greek predicament to be solely due to Greece and the Greeks. In the era of globalization, political and historical analysis needs to be globalized too. And this is what Fouskas and Dimoulas have achieved with remarkable skill and dazzling scholarship.

Donald Sassoon

Acknowledgements

We acknowledge a very special debt of gratitude to Constantine Tsoukalas, to whom we warmly dedicate our book.

We are grateful to Donald Sassoon and Leo Panitch who read a first draft of our argument in 2011, offering valuable advice and comments. Then Donald, brushing aside his busy schedule, kindly agreed to write the Foreword. We are also indebted to Savas Robolis for his constant advice and encouragement in completing this research. Martin Wolf has discussed with us the Greek/eurozone crisis and spent half a day with our students giving a lecture on ‘Will the Euro-zone Survive the Crisis?’ His answer was, 50:50. This is still the case.

From the early 1990s until his untimely death in June 2009, Peter Gowan had been a constant discussant, especially on the notion of ‘hub-and-spoke’ imperialism: we are still influenced by his original and thought-provoking insights. We are also very thankful to Gilbert Achcar for many stimulating and engaging conversations on the concept of ‘global fault-lines’ and for the interest he has shown in our work on the Greek debt crisis. Constantine Dimoulas is very thankful to Catherine Michalopoulou for helping him see complex sociological meanings behind the numbers, and Athena Trelli for her immense support, despite her everyday duties and commitments.

The theoretical argument we put forth in Chapter 2 has benefitted from comments by Joseph Choonara, Maria Markantonatou, Darrell Whitman, Yiannis Tolios and Irena Ateljevic. Once again, we thank Bülent Gökay, the pioneer of the concept of global fault-lines, as well as the editorial team of the Journal of Balkan and Near Eastern Studies. We are very thankful to Gül Tokay and Ayla Göl for a wonderful and illuminating conversation on the concept of geo-culture over a nice pub meal in London in January 2013. Vassilis K. Fouskas will always be indebted to the Stanley J. Seeger Center in Hellenic Studies at Princeton University, for giving him the opportunity to use the facilities of the Center and the Firestone Library of the university on two occasions, in 2005 and 2011. Some of the material incorporated in this book has been researched, presented and discussed in the Center’s unique intellectual and friendly environment.

We thank Jairo Lugo for many enlightening conversations on the Latin American debt crisis and Wolfgang Deckers for giving us so many insights on Germany.

We thank Nikos Kotzias, John Milios, John Kitromilides, Elias Ioakeimoglou and Costas Lapavitsas for many discussions on the global financial crisis in general, and the Greek debt crisis in particular, although none of them may be entirely satisfied with the outcome they see here. Sabine Spangenberg sent us comments on sections of Chapter 6: we are very thankful to her. Paul Hoffman, our MA student, had volunteered to put the bibliography together: we are very grateful to him.

Tim Shaw is an excellent Palgrave-Macmillan series editor, and Christina Brian and Amanda McGrath have put up with all our tedious requests. They have also put up with us missing so many deadlines for the delivery of the manuscript. We are indebted to them.

Parts of the text and tables that appear in Chapter 6 have been published in our joint article, ‘The Greek workshop of debt and the failure of the European project’, Journal of Balkan and Near Eastern Studies, v. 14, n. 1, March 2012. We thank Taylor & Francis for giving us permission to reproduce some of its copyright material here. We would also like to thank Richmond University, the American International University in London, for a grant it gave to Vassilis K. Fouskas to visit Paris in 2012 for fieldwork on this project.

Last but not least, we would like to thank Tolis Malakos, one of the finest brains of our generation, for so many stimulating conversations on Greek and European politics. We also thank Alex Kazamias for drawing our attention to Nikos Beloyiannis’ book on Greece’s debt problem; Stan Draenos for many interesting discussions on the role of Andreas G. Papandreou in the 1960s; and Takis Tsakonas for ‘not letting us get it wrong’ on Greece’s policy of rapprochement with Turkey. Maritsa V. Poros has been more than kind by offering to read the entire manuscript. She has made very valuable comments and suggestions, for which we both thank her.

Timeline of main events in Greece and Europe (October 2009–March 2013)

Sources: The authors’ diary and The Economist, ‘Is anyone in charge?’, 1 October 2011.