The following is the transcript of a short interview I gave to an Indonesian researcher.
1. In your opinion, what have caused the Greek Sovereign Debt Crisis? Is it the internal factors only or there are external factors as well? Is Greece membership in Eurozone influenced the debt crisis? How far the EU’s economic policies have role in causing the Greek Sovereign Debt Crisis?
The Greek problem is part of the 21st century Great Depression which affects gravely its international architecture and particularly the long and strenuous march towards the creation of a unified European imperialist block. The Greek is a profoundly structural twin crisis: the combination of the internal aspect (the overaccumulation crisis of Greek capitalism) with the external one (the downgrading within the international division of labor and particularly within the EU).
The internal aspect expresses a crisis a-la-Marx (i.e. stemming from the falling profit rate caused by the increased organic composition of capital) which is part of the 2007-8 global capitalist crisis. Contrary to both mainstream (subprime crisis) and certain radical (financialisation crisis) explanations, the latter is not a financial crisis but a crisis of the ‘real’ accumulation which was expressed ultimately through the financial channel. Moreover, both the current Greek and the global crisis are the result of capitalism’s inability to solve properly its 1973 structural crisis (reflecting the exhaustion of the previous socio-economic architecture of the system) and the ‘silent depression’ era of poor economic performance that followed. The latter was the result of the failure of the post-1973 capitalist restructurings to create a new functional architecture and boost satisfactorily capitalist profitability and accumulation.
The internal aspect is aggravated by the external aspect (i.e. the structural problems caused by Greek capital’s participation in the European imperialist bloc). Greek capital aspired that, by participating, it would be upgraded from a second-generation middle-range capitalism with limited imperialist abilities to a ‘partner’ in a first-class imperialist block with enhanced imperialist abilities (particularly in the Balkan and Mediterranean areas). It considered that these benefits would surpass the risks of opening the previously well-protected Greek economy to competition from the more developed western European capitals. This, however, led to dissolution of its previous coherent model without replacing it with another equally efficient one. The subsequent delegation of crucial economic policies to Brussels (particularly after the EMU) made things worse. The 2007 crisis aggravated all these problems and leads to a relegation of Greek capital within the EU and the international division of labor.
2. Is it true that EU economic policies only give advantage to big countries (Germany, France) and give disadvantage to periphery countries (Greece, Spain, Italy, Portugal)? Can we see Greece as only the «slave» of EU’s interest (Germany)?
Greek capitalism’s accession in the European integration dismantled its previous coherent and competitive productive structure without replacing it with another equally or more successful. On the contrary, the Greek economy became, to a great extent, a supplement of the Euro-core. This has not transformed it to a dependent economy – in the sense usually employed by dependency theory. Greek capitalism remained a middle-range developed and imperialist economy. However, it was downgraded comparing to its more developed partners.
Additionally, Greek capitalism has gradually lost several crucial policy instruments and this curtails its ability to face the crisis. The common market restricted severely trade and industrial policy and, after the EMU, monetary policy is guided by the ECB and a competitive devaluation is forbidden. On top of that, after the IMF-EU Memorandum fiscal policy is also almost completely controlled by the foreign lenders.
3. Can we see Greek Sovereign Debt Crisis as the real evidence of European Union’s failure as Economic and Monetary Union?
Yes. Monetary integration has several crucial merits for capitalist accumulation. First, it expands and develops the common market as instabilities and problems due to monetary differences are eliminated. Second, it disciplines better intra-capitalist and intra-imperialist antagonisms. Previously, the capitals of a less developed country (with lower labor productivity) could repulse competition from the more developed ones (with higher labor productivity and thus, possibly, lower prices) by resorting to competitive devaluation. By devaluing their currency they could make their products cheaper in international markets and thus compete with the more developed countries, which fall prey to their stronger currencies. Third, all these oblige individual capitals to solve their profitability problems not mainly through intra-capitalist competition (although this remains live and vibrant) but through the increased and more efficient exploitation of workers. Last, but not least, the euro aspired to contest the dollar as the world reserve currency and, thus, challenge US world hegemony.
On the other hand the EMU project is fraught with dangers and difficulties. The risks have to do with its well-known problem of being a non-optimal currency area. This means that it tries to put under the same monetary mean several very diverse economies, which instead of converging they have actually started to diverge dangerously. Crises tend to have ‘asymmetric’ effects on diverse economies and thus they exacerbate their imbalances. This strains even more the function of common monetary unit. The current crisis is a typical example of this case and it had, rightfully, challenged the very existence of the euro.
Moreover, the EMU project did not create an equitable angelic world but favored some at the expense of others. It boosted the competitiveness and the overall dominance of a ‘hard core’ around Germany at the expense of the less developed economies and particular the European South. Apart from politico-economic intrigues at EU’s commanding heights, the main fundamental cause of this dichotomy is the fact that the abolition of national monetary, industrial and commercial policies (and the severe curtailment of the fiscal policies for the weaker economies) made intra-EU competition a competition on the basis of ‘absolute advantage’. This has the distinctive characteristic (sometimes branded neo-mercantilism) that the gains of the winners have to be paid by those left behind. This has exacerbating unequal development and the divergence between EU’s two main groups.
Additionally, ceding monetary and commercial policy to Brussels had additional adverse policy effects for the Euro-periphery. Common EU policies followed the sometimes completely different needs of the Euro-core. For example, for a significant period, monetary policy remained lax – according to the core’s needs – whereas the Euro-periphery required a stricter conduct. This intensified the dilapidation of South’s productive structure as it favored sectors linked to the Northern group and damaged others more crucial for national development.
4. In terms of the sovereign debt crisis, can we also blame the Greek banks as one of its causes? Should the Greek banks be supported? And why should not the state keep control of the banks, since it is paying for their recapitalization? What is the alternative for the Greek banks?
The Greek banks are a minor culprit for the Greek crisis. In fact, Greek banks had a lesser degree of leverage comparing to their European counterparts. Therefore, ‘toxic’ assets were relatively fewer in their accounts. However, the fall of the general profit rate affected their revenues (which are a part of the surplus-value extracted by productive capital). Furthermore, Greek banks are the main bastion of Greek capital, since inside (and behind) those all the main Greek capitalist fractions are hidden. Thus, the Greek state financed them, in the beginning of the crisis, without getting their control. And, under the Memoranda, the state borrows from the IMF and the EU in order to recapitalize the banks, again without assuming their control. In a nutshell, the Greek people are paying for the bankers to keep their properties and businesses. Of course they should already have been nationalized. Their nationalization and their operation for the purpose of public good and not of the private interests of their owners is an essential part of an alternative economic strategy.
5. Are the austerity measures taken by Greek Government and European Union in Memorandum of Economic and Financial Policies effective to solve the sovereign debt crisis? If it is not effective, why? What’s wrong with the austerity measures? And among the austerity measures, which policy is the most effective in reducing the public debt to minimize the crisis, cut in public sector size and wages, pension system reform, privatization, or what? What are the impacts of the austerity measures on Greece’s economic growth, either macroeconomics or microeconomics? And also on Greek society?
The austerity measures are part of the wider strategy of the Memoranda between Greece and the EU and the IMF. The Memoranda’s declared aim is debt reduction. Its undeclared aim is Greece’s restructuring from a state-fed capitalism to a privately-led one. This second aim implies that if Greek economy becomes more competitive (and possibly export-led) it will boost public revenues. It follows the typical IMF lines: (a) fiscal consolidation (with extensive cuts and privatizations) and (b) competitive disinflation (which means primarily austerity and ‘internal devaluation’, i.e. a barbaric assault on wages). There is, however, a crucial difference with typical IMF programs: currency devaluation is missing since the programs’ aim is to keep Greece within the EMU. This implies that the entire adjustment burden falls directly on wage cuts. This is also a pro-cyclical strategy in the sense that it attempts a structural transformation within a crisis. It follows a ‘bourgeois Marxist’ logic: crisis solution requires capital devaluation (and primarily that of variable capital). Thus, the economy is actually directed deeper in recession (by mainly restricting fiscal policy and its anti-cyclical role) in the hope that a steep recession together with the structural transformation would lead to an equally steep boom. This strategy has another undeclared (for obvious social and political reasons) element: foreign (primarily EU) capitals would take a growing chunk of the new, restructured economy.
The Memoranda strategy is deeply flawed and for this reason its reformations fail systematically. Not because of its general logic: exit from overaccumulation crisis can come only through massive capital devaluation. But because its time-frame and the extent of productive powers’ destruction required are historically overambitious. The cumulative GDP loss for the period 2009-12 would be approximately 20%, 2013 would surely be one of steep recession and the first year of reverse is continuously pushed back. This recession worsens all crucial indicators (debt to GDP ratio, public revenues etc.). The only one positively affected is trade balance deficit which is decreasing because of the contraction of internal demand. The Memorandum strategy pushes forward and overambitious program that violates the current historical socio-economic limits of Greek capitalism. The ‘chinisation’ of the working class together with the ‘proletarianisation’ of the middle-classes and the bankruptcy of sections of Greek capital can create a truly subversive situation.
6. Is European Union the only actor who can save Greece from the debt crisis? What should European Union do, in terms of economic policies?
As I argued above, EU is not a benefactor let alone a savior of Greece. Quite the opposite: it aggravates the problem.
8. In your opinion, how can the Greek Sovereign Debt Crisis be solved? What are the most effective and efficient solutions? Are the solutions you offered profitable for both sides, Greece and European Union? And how long does it take to solve the sovereign debt crisis?
The only realistic alternative to the distractive strategy of the Memoranda is a total disengagement from the EU. Within the auspices of the EU there is no salvation; neither for Greece nor for the other euro-periphery countries. The expectation of a deus-ex-machina progressive transformation of the EU is simply a fairytale and this has been proven during the recent decades.
Such a strategy would have a cost but this less than the colossal costs of and the destruction of the Memoranda strategy. Only through the disengagement from the EU the country can regain the necessary tools of economic policy (monetary, financial, industrial, commercial, etc.) that should be used according to the characteristics and needs of the Greek economy. A simple exit from EMU, particularly for a less developed country like Greece, is ineffective as it will continue to be bound by the rules of the common market and the benefits of a competitive devaluation of the new currency would be short-lived. The disengagement from the EU must be accompanied by:
(1) The default on the external debt.
(2) The introduction of capital controls.
(3) The nationalization of the banking system in order to avoid its collapse and to use it to finance the economy.
(4) The creation of an effective system of progressive taxation in order to stimulate the popular and middle-class’ demand and simultaneously the hunt of the big capital’s tax evasion.
(5) The managed depreciation of the currency, so as to facilitate commercial competitiveness combined with a system of price controls in order to avoid any undue inflationary increases in particular types of mass consumption goods.
Finally, such a strategy should be accompanied by a program of productive restructuring of the economy. This program should be based on a general economic plan created by the state. A key ingredient of this planned restructuring of the productive economy is the social ownership and control of at least the strategic economic sectors.
This alternative economic strategy is profitable for the Greek people but not for the EU whose interests are in direct opposition to those of the former. This alternative economic strategy solves the sovereign crisis (by defaulting on the external debt) but moreover, aims to solve the deep economic crisis of the Greek economy that lies behind the debt crisis.
8. What will happen if Greece exit from the Eurozone? What is the economic impacts of Grexit, especially for Greece itself and European Union (Eurozone)?
A Grexit would cause significant problems to the EMU. Apart from the immediate economic costs (whose extent is open to speculation), it would have significant geopolitical repercussions since it would prove that the boat is taking water. A most probable immediate consequence is that other countries would also leave or be forced to leave. The dismantle of the EU, this modern politico-economic monster, would be beneficial for the European peoples.
Greece and the EU: Capitalist Crisis and Imperialist Rivalries, IIPPE conference paper, http://www.iippe.org/wiki/File:CONF_GREEKCRISIS_Mavroudeas.pdf
The Greek External Debt and Imperialist Rivalries: ‘One Thief Stealing from Another’, http://mrzine.monthlyreview.org/2010/mavroudeas200210.html
The crisis of the European Union and the failure of its ‘salvation plans’, http://www.spectrezine.org/crisis-european-union-and-failure-its-%E2%80%98salvation-plans%E2%80%99