No Exit? Greece's Ongoing Crisis
Plenty of old scores are being settled in these books and essays, just as plenty of claims are being staked to the future. But this is simply to say that crisis literature has become one of the main venues for a country trying to think its way out of the current impasse. Most striking, perhaps, is the degree of consensus on some important issues. All of the works reviewed here divide the responsibility for the crisis between the Greeks themselves and the European elite, with the Greeks being largely (though not entirely) responsible for weakening the country’s position up to the onset of the crisis in 2010, and the Europeans making things far worse than they needed to be thereafter. And all of them implicitly or explicitly reject the view that the reasons for the country’s woes can be traced to the deep past; there is almost no interest here in the Ottoman inheritance and its supposed impact on Greek attitudes about the state (namely, distrust).
The suggestion much discussed abroad, notably by Kenneth Rogoff and Carmen Reinhart in This Time Is Different (2009), that Greece is a serial debt defaulter is also given little credence, and parallels with the Greek debt defaults of 1893 and 1932 are quickly dismissed. Wall Street may have needed to be reminded, at least before 2008, that states can default. But what the larger history of debt default shows is not that some countries should never be lent money, but rather that international capitalism has developed on the basis of systemic global inequalities and has tended to use debt crises as one of the means of adjusting capital imbalances. There is nothing peculiar about the Greek experience that could not be paralleled in numerous other countries in Latin America, Africa and the Middle East.
The crucial date for almost everyone in Greece is 1974, when the colonels’ junta finally collapsed and democracy was restored. For the first time in the twentieth century, the country enjoyed constitutional stability: the former king was in exile, eventually settling in London’s leafy if boring Hampstead Garden suburb, and a two-party system emerged that alternated peacefully and without military interruptions. Ever since I first got to know Greece in the early 1980s, I shared the common view that the post-junta arrangement was, in the context of the country’s history of political turbulence and midcentury violence, a considerable achievement. I still think so. But there is no doubt that the present crisis has laid bare a quite different side of the “transition to democracy” and all it entailed.
Even though Greece had long been plagued by chronic balance-of-payments difficulties, it was only from the mid-1970s on that rapid growth occurred in the public sector. And though the country’s tax system had always revealed a disturbing and regressive dependence on indirect taxes, this new public-private balance posed an unprecedented challenge for the state’s limited revenue-raising capacity, one that it signally failed to meet. In the era of the drachma, the combination of fiscal stasis and increased social expectations— a desire for Greece to move closer to postwar European norms of welfare provision, healthcare and education—required constant devaluation and borrowing abroad, causing chronic inflation. Thus the seeds of the current problem were being sown well before the single currency and the emergence of a new fixed-exchange-rate regime that was to lock in the euro nations even more effectively than the old gold standard. The deindustrialization that occurred in the 1990s, including the reversion to a manufacturing base characterized by low-tech, food processing and handicrafts, only made things worse.
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This is the picture that emerges in the valuable collection of essays Oikonomiki krisi kai Ellada (The Economic Crisis and Greece). The volume was published in 2011 by the newly founded Scientific Society for Political Economy and reflects the powerful revival of Marxist theory in Athens in the midst of the crisis. The approach can also be followed in English through the work of Athens University professor Yanis Varoufakis, whose The Global Minotaur, also from 2011, attributed the chief cause of the 2008 financial crisis to the systemic breakdown of the postwar model of international capital accumulation. Oikonomiki krisi kai Ellada contains an abundance of data and arguments that illuminate the nature of postwar democratization in Greece.
In what is perhaps the volume’s outstanding essay, the economist George Stathakis (recently elected to Parliament with the left opposition Syriza) makes an intriguing observation: he suggests that the austerity programs mandated by the troika from 2010 onward are best seen as the latest in a series of stabilization programs that date to the mid-1980s. All of them have attempted to solve the country’s economic woes by cutting spending and slashing wages, and all have failed—not because they haven’t been adequately implemented, but because, based as they were on neoliberal dogma, they have misdiagnosed the disease and prescribed the wrong medicine. In Greece, it is easier to cut spending than to raise the proportion of state revenues derived from direct taxes on individual incomes, which currently languishes at roughly half the European average. The post-junta transition to democracy, says Stathakis, created a deliberately engineered system of legalized tax exemption for vast swaths of the population. It is the dearth of state revenue, more than the eye-catching issue of corruption per se, that forms the country’s main political challenge. In the 1980s, Greece expanded its national healthcare system and its higher education—but far from spending too much on these things, it didn’t spend enough to guarantee proper services. At the same time, it spent very heavily on weapons: Greece is proportionally one of the biggest arms purchasers in the world. If we compare the Greek fisc with the European average, spending is well in line with the norm; it is the revenue that falls short.
Although these problems emerged in the 1980s, most of the contributors to Oikonomiki krisi kai Ellada focus instead on the decisions made in the 1990s and thereafter, when Greece moved away from the drachma-based, relatively autarkic economic model that Andreas Papandreou had supported to a more globally integrated form of development that would require closer integration with Europe. Read together, several contributions to the volume offer a serious critique of Papandreou’s generally respected successor, the reform-minded Costas Simitis, who led the country (and Pasok) between 1996 and 2004. A veteran of an earlier stabilization program (as well as a sober contrast with the demagogic, leather-jacketed Papandreou), Simitis took it as his mission to modernize the country and make it a full member of the new eurozone. The benefits of joining the single currency would, in the view of his team, more than compensate for the austerity that would have to be imposed to cleanse the Greek economy of its inflationary tendencies.
Indeed, the monetary and fiscal discipline that convergence to the euro demanded was considered a good thing in itself. From the perspective of most of the contributors to Oikonomiki krisi kai Ellada, however—who are well to the left of Simitis, and even more critical of the new reformist Pasok than they are of the radical, statist original—Simitis’s policies amounted to a marketization of the Greek economy far more sweeping and effective than anything carried out by the conservatives of New Democracy. There’s no doubt that privatization really got under way with Simitis, and that as downward pressure eroded wages (abetted by the influx of large numbers of migrants), the government and Pasok created close new ties to the business and financial sectors. There was little structural transformation of production, but Greek firms exploited the new Balkan hinterland, establishing bank branches in Romania and Turkey. This was the dream: Greece as a Balkan Singapore, a European financial hub in the Levant. The precondition: entry into the euro, which eventually took place thanks to some creative accounting. The seemingly happy result: the country’s annus mirabilis of 2004, in which it won the European soccer championship and successfully hosted the Olympic Games.
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