The Class Logic behind Austerity Policies in the Euro-Area

Written on June 2nd, 2015 in politics Comments Off

… Can SYRIZA Put Forward a Progressive Alternative? – Published on The Bullet, Socialist Project’s E-Bulletin No. 1124, by John Milios, June 1, 2015.

1. The Nexus of Economic Crisis and Austerity

1.1. Austerity as a cost saving capitalist strategy:

  • After the outbreak of the 2008 global economic crisis, extreme austerity policies prevailed in many parts of the developed capitalist world, especially in the European Union (EU) and the Euro-area (EA). Austerity has been criticized as an irrational policy, which further deteriorates the economic crisis by creating a vicious cycle of falling effective demand, recession and over-indebtedness. However, these criticisms can hardly explain why this ‘irrational’ or ‘wrong’ policy persists, despite its ‘failures’.[1]
  • In reality, economic crises express themselves not only in a lack of effective demand, but above all in a reduction of profitability of the capitalist class. Austerity constitutes a strategy for raising capital’s profit rate.[2]
  • Austerity constitutes the cornerstone of neoliberal policies. On the surface, it works as a strategy of reducing entrepreneurial cost. Austerity reduces labour costs of the private sector, increases profit per (labour) unit cost and thus boosts the profit rate. It is complemented by economizing in the use of “material capital” (alas, another demand curtailing strategy!); and also by institutional changes that, on the one hand, enhance capital mobility and competition and, on the other, strengthen the power of managers in the enterprise and share and bondholders in society. As regards fiscal consolidation, austerity gives priority to budget cuts over public revenue, reducing taxes on capital and high incomes, and downsizing the welfare state.

Austerity as a Class Project: … //

… 1.2 Austerity and financialization: … //

… 1.3 Austerity and the Euro-area: … //

… 2. The Greek Case: Can SYRIZA Challenge Neoliberalism?

2.1 The financial gap of the Greek public sector:

  • After five years of extreme austerity policies in Greece and the reshuffling of the political system as we used to know it (mainly through the break-up of the Socialist Party (PASOK), that has stayed in power for more than twenty years in the last three decades), the national elections of January 25, 2015 led to the victory of the Left. SYRIZA (Coalition of the Radical Left), having gained 149 out of the 300 seats in the Greek parliament, formed a coalition government with ANEL (Independent Greeks), a small anti-austerity party stemming from the conservative political camp.
  • The mandate given to the government by the electorate is twofold: (a) to stop austerity policies; and (b) to secure a deal with the official lenders of the country (the EU, ECB and IMF, which were called the ‘Troika’ and are now referred to as the ‘Institutions’) in order to cover the financing needs of the Greek public sector. The ‘financial gap’ of the Greek public sector mainly refers to liabilities to the Institutions in the framework of the bail-out programs of the previous years.
  • On February 20, 2015 the Greek government reached an intermediate agreement with the lenders, which includes a four-month extension of the existing “Master Financial Assistance Facility Agreement” (MFFA), signed by the previous government, which is “underpinned by a set of commitments.” At the end of this transitional period a new agreement between Greece and the Institutions will be signed, which according to the program of the government would include a new fiscal framework for the next 3-4 years and a new national plan for reforms.
  • The February 20 agreement was a ‘truce’ – but truce is by no means a tie. Given the fact that the Institutions adjudicate on whether Greece’s commitments have been reached or not, this Agreement has proven to be a step on slippery ground. As every decision still requires approval by the Institutions, even scheduled installments as they appear in the previous Program, are still pending, subject to a positive evaluation by the Institutions.
  • The February 20 agreement is not entirely closed to demands that increase moral hazard, i.e. to promoting arrangements to the benefit of the welfare state and labour interests. However, the key point of the agreement is that the Institutions will assess, supervize and indicate which particular reforms do not create problems to public finances and do not jeopardize future economic growth and the stability and smooth functioning of the financial system. This assessment-surveillance sets a serious impediment to the implementation of the political program and the social transformations sought by SYRIZA in the first place.
  • While the question of how the government will be able to meet its financing needs remains open, statements by the ECB and the IMF are eloquent proofs of the continuous assessment that new pledged reforms are interpreted as substitutes for the commitments of the previous agreement.

2.2 Priority to the internal front:

  • The above analysis leads us to the conclusion that we have an international relation of forces which significantly restricts freedom of action on public finances but also in other areas. Nevertheless, the outcome of the negotiation will be determined neither by tactical moves nor the ‘external front’, but the ‘front’ within Greek society. The present situation leaves the government and SYRIZA with the only way out of the impasse of neoliberal European corset of ‘storming forward’:
  • … // …
  • A new similar attempt was put forward by Yanis Varoufakis with the following declaration at the 20th Banking Forum of the Union of Greek Bankers, on the 22nd of April, 2015: “In the year 2015, after five years of catastrophic recession, where ultimately everybody is a victim, there are only a few cunning people who have profited from this crisis. The era in which a government of the Left was by definition contrary to the milieu of entrepreneurship has passed. If we get to a point when there is growth, we can start talking again about conflicting labour and capital interests. Today we are together.”[9]
  • Furthermore, it is characteristic that in the Memorandum, economic growth relies on exports and every wage increase is automatically considered as being against competitiveness. No matter how empirically erroneous this perspective is, it still reflects the viewpoint of the Institutions and, unfortunately, still of the Greek Ministry of Finance.[10]
  • The mainstream approaches that we have presented, do not reflect the positions of the Finance Minister alone.[11] A considerable part of SYRIZA’s cadres comprehends austerity and the Memoranda as simply ‘an economic mistake’, merely in the sense that it constitutes a recipe for recession that is unable to boost growth.
  • In a society where the loss of 25 per cent of GDP and the impoverishment of large part of the population is just the visible aspect of the rapid intensification of social inequalities, in a society where mass unemployment is the numerical complement of a severe deterioration in working conditions, in a society of multiple contradictions and expectations, the policy of the SYRIZA government can only become hegemonic if it clearly supports the interests of the working majority in their struggle against capital. There is no room for a policy generally and loosely defending everything ‘Greek’ or ‘European’. Such an approach never has, and never will represent the perspective of the Left.
  • We face a historic challenge and we must respond without hesitations and vacillation.

(full long text, endnotes).

[John Milios is Professor of Political Economy, National Technical University of Athens, and member of the Central Committee of SYRIZA. Talk written for the Forum international – 20-22 mai 2015 – Lausanne (Suisse): “Le troisième âge du capitalisme, sa physionomie socio-politique à l’orée du XXIe siècle. En mémoire d’Ernest Mandel (1923-1995)”].

Related Links:

Volume 3 of (Karl Marx’) Capital, on marxists.org;

on en.wikipedia:

  • Class (social) the hierarchical arrangement of individuals in society, usually defined by wealth and occupation;
  • Class (philosophy) an analytical concept used differently from such group phenomena as ‘types’ or ‘kinds’;
  • Financial crisis of 2007–08;
  • Austerity;
  • Absolute surplus-value;
  • The Class (2008 film) is a 2008 French drama film directed by Laurent Cantet. Its original French title is Entre les murs, which translates literally to “Between the walls” or “Within the walls”. It is based on the 2006 novel of the same name by François Bégaudeau. The novel is a semi-autobiographical account of Bégaudeau’s experiences as a French language and literature teacher in a middle school in the 20th arrondissement of Paris, particularly illuminating his struggles with “problem children” Esmerelda (Esmeralda Ouertani), Khoumba (Rachel Regulier), and Souleymane (Franck Keïta). The film stars Bégaudeau himself in the role of the teacher …;

Other Links:

2,300 Humvees in Mosul alone, Iraq reveals number of US arms falling into ISIS hands, on Russia Today RT, June 1, 2015;

Goodbye Section 215, Patriot Act key surveillance provisions expire [2 VIDEOS], on Russia Today RT, June 1, 2015;

Greece counts down to default after Tsipras slams EU demands as unreasonable, on The Independent.co.uk, by RUSSELL LYNCH, June 01, 2015;

Greeks desert banks as country battles crisis, on news.com.au, May 31, 2015;

Canadian Mining Industry Abuses in Guatemala – and how Indigenous Communities are Fighting Back, on Global Research.ca, by Michael Welch and MiningWatch Canada, May 31, 2015;

Grand developmentalism, MDGs (Millenium Development Goals) and SDGs (Sustainable Development Goals) in Sub-Saharan Africa, on Pambazuka News, by A. Bayo Ogunrotifa, May 29, 2015:
The proposed Sustainable Development Goals suffer from the same failings as the Millennium Development Goals they are replacing. Ideas and practices of sustainable development should reflect the complexities of development issues and not be based on abstract agendas and strategies that are constituted in a universalist frame …;

Corruption Kills, the Human Toll Of The FIFA Scandal, on Politicus Sports, by Trevor LaFauci, May 29, 2015:(includes an uprededent death toll in Quatar): most among this week’s FIFA bribery allegations was a piece by The Washington Post on Wednesday looking at exactly how dangerous the culture of deceit and deception around FIFA has become …;

The Reoccurring Financial Woes of Greece, 15.42 min, on The Real News, by Michael Hudson, May 28, 2015 (Video and Transcript): Michael Hudson says a leading economist in the IMF European Division resigned in anger and had written a number of reports that denounced the IMF as captured by private bond holders and speculators when former chief Dominique Strauss-Kahn was its head;

Consistency and validity is not enough, on RWER Bloh, by Lars Syll, May 23, 2015;

Find on Al-Ahram weekly online, May 28, 2015:

Gestion d’un crash d’avion – exercice à l’Aéroport de Genève:

  • L’exercice Buteo 2015 consacre le professionnalisme des acteurs de la sécurité dans le canton de Genève, dans Genève Aéroport, le 27 mai 2015: Quelque 750 personnes ont été impliquées dans la gestion conjointe d’une crise majeure par les acteurs du plan d’urgence de Genève Aéroport et leurs collègues du dispositif cantonal OSIRIS;
  • Un avion tombe à Cointrin, 130 morts et 90 blessés fictifs, dans Tribune de Genève, le 27 mai 2015: Crash aérien, Cent figurants et 600 acteurs ont participé à cet exercice grandeur nature en bout de tarmac (avec 28 images en diashow).
  • Une participante m’écrit: … J’y étais donc en tant que “figurante blessée”. C’est une expérience très forte, car il y avait des mises en situation réalistes … et ça m’a bien fait réfléchir! Notamment sur l’aspect “prise en charge” vs “auto-responsabilisation des victimes” et “entraide”, notamment quand des liens de parenté ou affectifs se confrontent avec une (in)-compréhension des priorités d’intervention.
    Il y a quelques sujets intéressants pouvant être discutés … dans le scénario je devais voyager avec mon marie et mon fils. J’ai commencé à appeler leurs prénoms pour les retrouver en cherchant partout. Un pompier m’a conduite vers un “nid de blessés” et je refusais d’y aller en disant que je devais d’abord retrouver les membres de ma famille. Plus le pompier m’éloignais de la zone sinistrée, plus je criais et hurlais de plus en plus fort, me retournant vers le lieu du crash (UPDATE plus tard: la voici s’appliquant à jouer bien son rôle – photo et vidéo, dans France3):
    Puis je m’échappais du nid de blessés pour retourner les chercher (… et les finalement trouver vivants).
    Bref, cela faisait partie de la mise en scène dans le but de compliquer la tâche des sauveteurs. Cela m’a donné l’envie de faire de l’impro théâtrale style “jeux de rôle” … ;-)
    Selon ma pathologie, j’étais consciente jusqu’à H + 90 mn, puis comateuse, puis devais décéder à H + 270 mn … J’ai pu être prise en charge par l’ambulance 3h25 du matin … donc, on va dire que je m’en suis tirée.

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