7
Most accounts on the Greek debt crisis miss three or four, so to speak, ‘big pictures’ or ‘images’, all of which are interlinked. Even when some of these ‘images’ are apparent in their accounts, they have not been understood together as a whole.
The theoretical ‘image’. This entails failure of theorizing the crisis on the basis of a heterodox theory of money and finance. But theory is important because, as we have argued, it is an abstraction that has the potential to describe and interpret reality better than any description. The generic understanding of financial crisis that stems from heterodox political economy is that financial crises are caused, primarily, by imbalances between the real values/commodities produced and exchanged in a specific market and the mass of money and paper (credit/debt) that circulate in the same market. So was the case with many financial crises in history, and so is the case with the European debt and banking crises today. This deficiency, coupled with the notion of the unequal distribution of actual values and the role of geo-politics/geo-culture, is at the heart of the disintegrative tendencies within the Euro-Atlantic core. And the question can be posed only in this way, because if the EU disintegrates, then NATO may do the same.
The ‘image’ of the power-shift to the ‘Global East’. This concerns the failure of analysts to examine the debt crisis in Greece and the European periphery in the context of what is happening in the world as a whole. If the 1900–40 was a period of transition from Europe’s, mainly formal, imperial system to the USA’s, mainly informal, neo-imperial hub-and-spoke power arrangements, then the period that ushers in with the stagflation of the 1970s opens up a long and protracted decline of the USA, accompanied by a concomitant power-shift to Asia and the ‘global East/South’. We have tried to show that any comprehensive understanding of the current crisis in the eurozone would be insufficient if the issue is not placed within this broader and peculiar context of transition from one hegemonic system to another in a ‘global fault-lines’ context. We have also stressed that this transition is very peculiar. It does not resemble, for example, the transition from the British to US global hegemony, and this should be taken into account for any type of policy-making attempted by the forces of the Left in Europe, especially when they are in power. To give only one example, whereas British economic decline affected directly its military decay – for example, by World War I the USA had already achieved naval parity with Britain in the Atlantic – in the USA matters are rather the opposite: the USA’s economic decline occurs almost in inverse ratio to its military capabilities (this should not be confused with the country’s disastrous wars and, in fact, defeats in Iraq or Afghanistan). A ‘global fault-lines’ perspective helps us address this issue.
The ‘image’ of comparative history and comparative empirical analysis. Gramsci once famously said that ‘to write the history of a political party is to write the history of that country from a monographic viewpoint’.1 But if a party, in the main, is a concentration of national contradictions and forces, then a country is a concentration of global contradictions and forces, of global and regional fault-lines. Thus, the metaphor can be extended: to write the history of a state is to write world history from a monographic viewpoint. We have indeed tried to write the history of Greece, from a globalist point of view and in a comparative perspective. This, in fact, is the correct method. It goes beyond the nationalist horizon of professional historians, whose job is usually ideological: it is to justify and glorify the actions of their ruling classes and pay tribute and allegiance to their kin-states or political party bureaucracies to accomplish personal ambitions. By viewing Greece from a globalist class perspective, that is to say, by viewing Greece as a terrain of concentration of global, regional and domestic contradictions, we have been in a position to overcome the trap of nationalist and ideological narratives on the current crisis.2
7.1 Seisachtheia in Greece, Europe and the world
We can list here the following generic propositions/findings concerning the inter-connection between Greece’s, Europe’s and the world’s crisis today. These propositions assist us in identifying and making plain our normative answers.
(a) There is a pronounced power-shift from the Euro-Atlantic core to Asia that can be quantified/measured by the outsourcing of material production from the former to the latter, and the flow of surpluses from Asia/China to the USA/West accompanied by the indebtedness of the latter. The current phase of financialization/globalization that appeared after the collapse of Bretton Woods in 1971 is extremely complicated and connects almost every part of the world. The best term describing these (and many others) asymmetries and processes is ‘global fault-lines’, not ‘uneven development’. ‘Global fault-lines’ is behind the disintegrative tendencies of the US-led hub-and-spoke neo-imperialism. ‘Uneven development’ does create asymmetries, but these are asymmetries spread from the economic to the political and other levels, thus suffering from certain reductionism. ‘Global fault-lines’ is far more holistic and all-inclusive a concept, taking into account geo-political, ideational and other parameters as co-constitutive elements of the economic instance, which may determine in the ‘first’, rather than in the ‘last’, analysis depending on the contradictions of the historical cycle and conjuncture.
(b) The European project is inherently deficient, for it put the cart before the horse: it created a common currency/market without a fiscal union and a federal state corresponding to it. The beneficiary turned out to be Germany, the power with the strongest industrial base and export-led capacity in the EU. Germany recycles its surpluses at the expense of the European periphery, augmenting the debt of the latter especially under EMU conditions.
(c) Greece, historically, rests on some very peculiar fault-lines. The country, and rightly so, has – since its very foundation as a territorially limited Kingdom in 1830 – been perceived by imperial powers as geo-strategically and geo-politically important, yet, from an economic and political point of view, substantially weak and easy to be manipulated. Greece has always occupied a dependent/subaltern position in the international division of labour and a very weak and technologically backward industrial sector, hence its persistent balance of payments problem throughout its history.3
(d) Another major fault-line on which the country rests is the anxiety of its bourgeois elites to ‘catch up’ with the Western core, be it ‘Britain and France’, or the USA, or the EEC/EU. But the failure of those elites to achieve that goal since the 19th century has been spectacular. Thus, Greece always lags behind. Recent examples include: failure of the Greek state to intervene in aggregate demand management in the 1950s and 1960s; introduction of a peculiar Keynesianism in the 1970s and 1980s at a time when such a policy was in retreat in the West; late adoption of neo-liberal financialization from the mid-1990s onwards.
(e) A state can go bankrupt regardless of its participation in a monetary union. In this regard, the EMU did not create the core-periphery split within the EU, although it certainly aggravated it in absence of a European federal state with fiscal powers. Therefore, a ‘default and exit strategy’ alone cannot solve Greece’s problem, not least because, as we have shown, the sources of the Greek debt crisis as such are not only external, but also internal and concern the peculiarity of the nexus between comprador financial interests and the dilapidated state machine. It should also be taken into account that Greece, throughout its modern history, has been a bankrupt, rather than solvent, state.
If the above propositions are essentially correct, what policy should inform the action of the Greek and European Left? An ancient Athenian, Solon, did not simply legislate the abrogation of the debt of slaves with his ‘seisachtheia laws’; he also devalued the currency, the so-called ‘mna’, in order to facilitate payment of debt from ordinary citizens, and introduced new democratic institutions. We go one step further. We argue for a policy of international and socialist seisachtheia.
As we have seen, the debt is not only unsustainable in Greece and the European periphery, but in the world as a whole and especially among the leading powers of the Euro-Atlantic bloc – Germany being, relatively, the exception. For Greece and the rest of the periphery, this may (or may not) entail a debtor-led default and exit from the eurozone, but the immediate task of the labour movement, above all in Greece, should be the destruction of the institutional and political connection between the corrupt comprador cum financial capital and the state administrative elites in order to address the domestic sources of debt creation (in other periphery countries the crisis is not sourced by comprador capital). Moreover, Greece’s exit alone is not feasible or desirable, if not accompanied by an international strategy of debt cancellation both by the Greek and the European Left, as well as the democratic forces within the USA. This is because of the complicated, inter-penetrative and asymmetrical nature of today’s financialization. A technical exit alone from the eurozone will not bring about the desired results, namely boosting the export-led industrial capacity of the country, increasing income from sources such as tourism, regeneration of the real economy, especially of agriculture, alternative energy projects, such as solar energy, etc. Abrogation of debt payment and debtor-led exit would mean nothing if not accompanied by a radical domestic restructuring of the nexus between real economy and the state under the leadership of productive social classes, a social agency that, in the main, needs to be created in Greece, Europe and the West. For this to happen, Greece needs to be surrounded by markets from which it can borrow, and those markets would be shut, or they would be very expensive, if a policy of international seisachtheia is not implemented either beforehand or simultaneously. In addition, there is a political problem. If Greece’s exit from the eurozone is not negotiated and agreed upon by its lenders, who in the meantime should have committed themselves to a program of international debt cancellation, then the danger of a dictatorship, whether left-wing or right-wing, should not be excluded under conditions of class polarization and disappearance of middle classes. In other words, a return to the 1930s, as many have already rushed to prophesy, may come true. From this perspective, the desirable course of action is international seisachtheia and return to an environmentally sustainable model of industrial development and agriculture under the leadership of new Left forces and, failing this, in conditions of continuous generalized pauperization, a negotiated exit from the eurozone in coordination with all other periphery countries, that is Ireland and the other Southern European countries. Nothing else, in our view, can benefit the peoples of Greece, Europe and the world. Germany’s strategy towards the periphery borders on Bismarkian lines, which is a ‘hub-and-spoke’ method – as we saw in the first part of the book. First, it was Greece that was a ‘special case’, with a corrupt civil service and a parlous state finance that needed to enter a bailout programme; then it was Portugal, Ireland and Spain and even Italy, all ‘special cases’ for which different treatments applied. The last such ‘special case’ was Cyprus. Germany pursued different strategies towards each of the indebted countries in order to isolate them from each other and deter especially the formation of a South European front against its interests.
The restoration of Greece’s productive capacity on a new basis may take time to take root and achieve positive results. A new political party system is certainly in the making and great care should be taken by it so as to avoid repeating the mistakes of all previous kampfplatz. Other periphery countries within the EU are facing similar, although not identical problems. We believe that neither the EU nor the Euro-Atlantic core will be the same after the end of this crisis, regardless of what happens to them and the dollar-euro relation, and whether or not they subscribe to a seisachtheia perspective. The ECB, as Martin Wolf argued, has succeeded in removing the tail risk of a eurozone break-up by gaining German support for a promise to buy sovereign bonds, but no one knows what would happen if it had to start delivering on the promise.4 Thus, the key to a successful democracy is the collective agency and not banking strategies. Only an open, democratic and progressive mass movement, guided by truly organic intellectuals recognized by the movement itself, can deliver not just the seisachtheia agenda described above, but also block the rise of neo-Nazi reactionary forces in Greece, Europe and beyond.