Because monetary theory is not so very important to the left, they tend not to know a lot about it. I have met Marxists who could dazzle me with their theoretical understanding of class struggle and other pet hobby-horses, but were helpless when I shifted the conversation to the role of the central banks in influencing the economic orthodoxy. Deep down inside, most lefties believe that even talking about monetary policy means that somehow "capitalism" has won, and they surely do not want that.
But in spite of not coming from a culture that was conceived in monetary debates like USA, Yanis Varoufakis is pretty damn good. He is still a long way from being as theoretically sound as say, was Nestor Kirchner of Argentina, but he seems to get it. At least he seems to understand that his economic problems are Europe-wide, and I think he understands that the flaws in the Euro were written into the Maastricht Treaty. All of which is a damn fine start but the fact remains, he only has the weapons available to debtors and right now, he is fighting a lonely battle. The Finance Ministers of places like Spain and Portugal have sold their souls to the banksters so are quite happy to betray the Greek FM—even if they would be lightyears ahead by expressing a little solidarity.
It's a big fight with big stakes. Yanis Varoufakis will be lucky to change much—even though almost anyone who has any idea what he is trying to accomplish wishes him well. Actually we need thousands of folks who think like him so we can begin to change the economic debate.
Varoufakis is Proposing Austerity on the Banking Class
Euro Banks vs. Greek Laborby MICHAEL HUDSON and SHARMINI PERIES MAR 01, 2015
SHARMINI PERIES: The four-month extension secured by the Greek finance minister, Yanis Varoufakis, on Friday came with the condition that Greece provide a list of measures to quell the concerns of its international lenders, especially the German banks represented by the finance ministers in Brussels, who feared that Athens might bail on the promises to cut spending and implement austerity measures. So, on Sunday, Athens provided that list. Now joining us to discuss the tabled plan is Michael Hudson. He is a distinguished research professor of economics at the University of Missouri-Kansas City. His upcoming book is titled Killing the Host: How Financial Parasites and Debt Bondage Destroyed the Global Economy.
MICHAEL HUDSON, ECONOMICS PROF., UNIV. MISSOURI, KANSAS CITY: Thank you.
PERIES: So, Michael, these international banks represented by the finance ministers now in Brussels, when they were in crisis and we the public treasury bailed them out, they had no problem with that. Why are they now refusing to assist Greece at a time of need when in fact some politicians and even the troika is being more receptive to what Greece is saying?
HUDSON: Because what’s at issue really is a class war. It’s not so much Germany versus Greece, as the papers say. It’s really the war of the banks against labor. And it’s a continuation of Thatcherism and neoliberalism. The problem isn’’ simply that the troika wants Greece to balance the budget; it wants Greece to balance the budget by lowering wages and by imposing austerity on the labor force. Instead, the terms in which Varoufakis has suggested balancing the budget are to impose austerity on the financial class, on the tycoons and tax dodgers. He proposes that instead of lowering pensions for workers and retirees, instead of shrinking the domestic market, instead of pursuing a self-defeating austerity, we’re going to raise two and a half billion euros from the powerful Greek tycoons. We’re going to collect the back taxes they owe. We’re going to crack down on illegal smuggling of oil and the other networks and on the real estate owners that have been avoiding taxes, because the Greek upper classes have become notorious for tax dodging.
This has infuriated the banks. It turns out the finance ministers of Europe are not all in favor of balancing the budget if it has to be balanced by taxing the rich, because the banks know that whatever taxes the rich are able to avoid ends up being paid to themselves. So now the gloves are off and the class war is back.
Originally, Varoufakis thought he was negotiating with the troika, that is, with the IMF, the European Central Bank and the Euro Council. But instead they said, no, no, you’re negotiating with the finance ministers. And the finance ministers in Europe are very much like Tim Geithner in the United States. They’re lobbyists for the big banks. And the finance ministers said, how can we screw this up and make sure that we treat Greece as an object lesson, pretty much like America treated Cuba in 1960?
PERIES: Hold on for one second, Michael. Let’s explain that, because Yanis Varoufakis, the finance minister of Greece, is very well-briefed and very well-positioned to negotiate all of this. Now, why did he think he was negotiating with the troika when in fact he was negotiating with the finance ministers.
HUDSON: Because officially that’s who he’s negotiating with. He took them at their word. And then he found out–and yesterday, James Galbraith, who went with him to Europe, published in Fortune a description saying, wait a minute, the finance ministers are fighting with the troika. The troika and the finance ministers are fighting among themselves over what exactly is to be done. And to really throw a monkey wrench in, the German finance minister, Schäuble, said, wait a minute, we’ve got to bring in the Spanish government and the Portuguese government and the Finnish government, and they’ve got to agree.
Well, the position of Spain is to keep its Thatcherite neoliberal party in power. If Greece ends up not going along with austerity and saving its workers, then Spain’s Podemos Party is likely to win the next election and the ruling elite will be out of power. So Spain’s leaders are trying to make sure that Varoufakis and the SYRIZA Party is a failure, so that it can tell the working class, ”You see what happened to Greece? It got smashed, and so will you if you try to do what they do. If you try to tax the rich, if you try to take over the banks and prevent the kleptocracy, there’s going to be a disaster.”
So Spain and Portugal want to impose austerity on Greece. Even Ireland has chimed in and said, my God, what have we done? We have imposed austerity for a decade in order to bail out the banks. Even the IMF has criticized us for going along with Europe and bailing out the banks and imposing austerity. If SYRIZA wins in avoiding austerity in Greece, then all of our sacrifice of our population, all of the poverty that we’ve imposed, all of the Thatcherism that we’ve imposed has been needless and we didn’t have to do it.
So there’s a whole demonstration effect, which is why they’re treating Greece almost as a symbol for labor saying, wait a minute, we don’t have to impose austerity, we can collect taxes from the tax dodgers.
Remember a few years ago when Europe said, Greece owes 50 billion euros in foreign debt? Well, it turned out that the central bank had given to the Greek parties a list of tax dodger. It was called the Lagarde list (for Christine Lagarde, head of the IMF), featuring Greek tax dodgers who had Swiss bank accounts. These Swiss bank accounts added up to about 50 billion euros. So in a sense, Greece could pay off the debt that it’s borrowed simply by moving against the tax dodgers.
But this would be at the expense of the Swiss banks and the other banks. So in effect the banks would be paying themselves. And they don’t want to pay themselves. They want to squeeze income out of labor and let the tax dodgers and the Greek tycoons succeed in stealing from the government. So, in effect, the troika – not the troika really, as much as the finance ministers – are backing the tax dodgers and tycoons in Greece that SYRIZA is trying to move against. And the IMF is for once taking a softer position. Even President Obama has chimed in by apparently calling German Chancellor Merkel and saying, look, you can’t just push austerity beyond a point, because you’re going to push them out of the euro, and you’ll push them out of the euro on SYRIZA’s terms, where SYRIZA can then turn to the Greek population and say, we did what we promised here. We stopped the austerity. We didn’t withdraw from the euro; we were driven out as part of the class war.
PERIES: Michael, earlier you were also making an analogy between what’s going on in Greece and what happened to Cuba.
HUDSON: Cuba under Castro created an alternative social system. He wanted to spread the wealth around (it was a Marxist system in his way). He wanted to get rid of the crooks around Batista who were running the country, the rich who didn’t pay taxes, and he wanted a social revolution. So the American government worried that if Cuba succeeded, there was going to be a revolution all throughout Latin America. Latin Americans could realize that they can take over the American sugar companies, the American banana companies and make the rich pay the taxes and the corporations pay the taxes and the exporters pay the taxes, not simply labor. We can unionize labor, we can educate it – and if Cuba can educate labor, that would be a disaster for the neoliberal plan, because if labor’s educated and has a program, it will realize that there is an alternative to Thatcherism.
This is the problem that Varoufakis wrote about in an article earlier this month in The Guardian on how he came out of the Marxist movement. He said, the problem that we’re facing in Greece is that if we withdraw from the euro, if we’re forced out, there’s going to be an economic trauma. The left wing throughout Europe, as in America, doesn’t really have an economic program. It has a political program, but not really an economic program. So the only alternative to SYRIZA with an economic program are the New Dawn movement and the neo-Nazis. And what Varoufakis is worried about is that he’s not only contending with the European finance ministers on one front; he’s also contending on the Greek front with the right-wing parties that are the nationalist parties, like Marie Le Pen in France – the parties that are saying, yes, we have an alternative: withdraw from the euro.
But it’s not the kind of withdrawal and alternative that the left wing would have, because there really isn’t much of a left wing in Greece, apart from the small SYRIZA party, certainly not Papandreou’s socialist party, and certainly not the nominally socialist party in Spain, which is a Thatcherite party, and it’s certainly not the British Labour Party, which has gone the way of Tony Blair.
So the problem is that Varoufakis has about four months to educate the Greek public in the fact that, yes, there is alternative, here’s what it is. The alternative to neoliberalism doesn’t have to be right-wing nationalism. There is a socialist alternative, and we’re trying to work out as many arrangements we can, so if we’re driven out of the euro and if the banks go under, we have a fallback plan. He can’t come right out and say this is the plan right now, because it has to be made very clear that it’s the finance ministers of Germany, Spain, Portugal, Ireland, and Finland that are driving Greece out, not the IMF, not the European Central Bank, and not even centrist governments. more
The Democratic Right to Cry: "Enough!"
Greece Under German Pressureby SERGE HALIMI MAR 01, 2015
The Greeks don’t need to have the meaning of the word “democracy” explained to them. Even so, they have been given countless lectures since voting in a leftwing government determined to end the austerity policies that have made their lives a misery for six years. The schoolmasterly reprimands have come from people who know what they are talking about: they are people who imposed treaties their electorates had voted against and reneged on campaign promises as soon as they came to power. They are now in a trial of strength with Syriza, which has been trying, against terrible odds, to stick to its promises and beliefs. That trial was all the tougher since those beliefs may spread thoughts of resistance to those hitherto resigned to powerlessness. This confrontation has been about more than just the fate of Greece: the future of European democracy is at stake (1).
Immediately after Syriza’s victory, a message seemed to go round the whole continent: in the arrogant version of that message, Germany — along with Spain, the Netherlands, Portugal and Finland — made clear that the change of government in Athens made no difference: the policy the Greeks had rejected must be pursued unchanged. In more emollient tones, Italy, Belgium and France whispered the same thing: as French foreign minister Laurent Fabius put it, “Respect for the electorate has to be reconciled with respect for Greece’s commitments to reform.” But every EU government seems acquainted with only the reform part of this; they have been annoyed by Alexis Tsipras reminding them of the other part.
Though Syriza is isolated in the EU, hounded by its creditors and faced with capital flight, it is in fact trying to rehabilitate concepts that have become alien to democratic life, such as “sovereignty”, “dignity”, “pride” and “hope”. But how could it do so in a state of permanent financial crisis when it is forced to back down in each successive negotiation? And do so all the more painfully as the means designed to throttle the will of a restive populace were shown publicly, while the tormentors chuckled as they recounted the most recent confrontations.
Tsipras knew they were waiting for his total capitulation. Because every time he dug his heels in and mobilised the support of the Greek people, it was a challenge to the straightjacket of the current economic order and the engrained way of doing politics. After all, it took barely 24 hours after his election for President François Hollande to visit Berlin, tear up his campaign promises — the renegotiation of the European stability pact and the battle against his “real enemy”, finance — and calmly endorse his predecessor’s policies.
Less than 10 days after Syriza came to power, the eurozone’s central bankers fired their first salvo when they suddenly cut Greece’s banks off from the main source of funds. This was their way of forcing Greece to negotiate an urgent agreement with its creditors — other EU states and the IMF — and to reinstate the previous government’s austerity programme. Hollande judged the European Central Bank’s actions “legitimate”, as did the Italian prime minister, Matteo Renzi. We may not always know where exactly the French president stands, but we are in no doubt where he does not stand — with the people of Greece.
As Europe’s vice tightened and the financial markets stepped up the pressure on Greece, the rules of the game were becoming all too clear. Greece faced a diktat: in exchange for the funds it needed, it was being forced to endorse dogmatic, harmful demands with immediate effect, all of which were contrary to its government’s programme: further cuts in pensions and salaries; a further hike in the VAT rate; the privatisation of 14 airports; further reduction of trade unions’ bargaining power; the allocation of its rising budget surplus to paying off its creditors, at a time when the social distress of the people is acute. Pierre Moscovici, EU commissioner for economic affairs, summed up: “[Eurogroup] ministers all agreed there is no alternative to the demand that the current programme be continued.” Before he came out with Margaret Thatcher’s “there is no alternative”, Moscovici (perhaps remembering that he was a member of a socialist party) claimed: “What we want to do is help the Greek people” (2). Help them, while ruling out any departure from the austerity policy that has ruined them.
‘A debt colony that should suffer’
As its finance minister Yanis Varoufakis has made clear, Greece is “determined not to be treated like a debt colony that should suffer” (3). What is at stake goes beyond the right of a people to choose their destiny, even when a judge of democratic niceties as fine as German finance minister Wolfgang Schäuble reckons that they have “elected a government which is acting somewhat irresponsibly” (4). Because the question also concerns the possibility of a state extricating itself from destructive policies, rather than having to further toughen those policies each time they fail.
Since Europe’s institutions turned their attention to Greece and subjected the EU’s most depressed economy to its most draconian austerity policy, what success have they had? No better than was expected and just as they were warned: ballooning debt, collapsing spending power, lacklustre growth, soaring unemployment, declining health standards. But the EU’s sound system remains stuck: “Greece must respect its commitments.” The holy alliance, utterly convinced it is right, is unwilling to listen even to the US president, whose analysis is supported by a host of economists and historians. Barack Obama explained: “You cannot keep on squeezing countries that are in the midst of depression. At some point there has to be a growth strategy for them to pay off their debts” (5).
Greece’s economic collapse, which has now lasted six years, is comparable to the damage that four years of military destruction and foreign occupation inflicted on France in the first world war (6). Which explains why Tsipras’s government gets enormous popular support — even from the right — every time it refuses to prolong such a destructive policy, and why it is unwilling to survive “like a junkie waiting for his next fix” (7). But Syriza has few friends outside Greece. As in Agatha Christie’s Murder on the Orient Express, to investigate the potential killers of Greece’s hopes would mean interviewing every EU government, and the chief suspect would be Germany: the failed disciplinary strictures are German, and it intends to squeeze those — especially in Mediterranean countries — who refuse to endure them indefinitely (8). In Spain, Portugal and Ireland, the governments’ motive for the crime is more sordid. Their citizens would benefit if the iron fist of austerity stopped pounding them. But their governments are afraid, especially when they feel threatened by a domestic challenge from the left, that Greece will demonstrate that it is possible to refuse to follow “a well-marked path, a known path, a path that the markets and the institutions and all the European authorities know,” the path that French finance minister Michel Sapin claims must be “explored right to the end” (9). The prospect of Greece breaking free would show that all these governments were gravely mistaken to make their people suffer needlessly.
Everyone knows that getting Greece’s debt repaid would be like “extracting blood from a stone” (Paul Krugman, The New York Times, 29 January). So why isn’t it equally clear that Syriza’s economic strategy to finance urgent social expenditure through a determined fight against tax fraud could draw on a young, determined, popular, political force, originating in social movements and free of the compromises and corruption of the past? Even if not marked out, the path is discernible. The uncertain future brings to mind what the philosopher Simone Weil wrote about workers’ strikes in France in June 1936: “No one knows how things will turn out. There is reason to fear a range of disasters. … But no fear can erase the joy of seeing those who have always had to bow their heads, by definition, standing up for themselves. … Whatever may happen next, we will always have had this. For the first time, and forever, there will be other memories floating around these heavy machines than silence, coercion and submissiveness” (10). The Greeks’ struggle is universal. Our good wishes no longer suffice. The solidarity it deserves calls for action. Time is still, as always, running out. more