[Marxism] No! But what now? - Michael Roberts on Greece
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Sun Jul 5 15:26:01 MDT 2015
No! But what now?
Michael Roberts blog, July 5
. . .
How can the Greek economy be made to grow? There are three possible
economic policy solutions. There is the neoliberal solution currently
being demanded and imposed by the Troika. This is to keep cutting back
the public sector and its costs, to keep labour incomes down and to
make pensioners and others pay more. This is aimed at raising the
profitability of Greek capital and with extra foreign investment,
restore the economy. At the same time, it is hoped that the Eurozone
economy will start to grow strongly and so help Greece, as a rising
tide raises all boats. So far, this policy solution has been a signal
failure. Profitability has only improved marginally and Eurozone
economic growth remains dismal.
The next solution is the Keynesian one. This means boosting public
spending to increase demand, introducing a cancellation of part of the
government debt and leaving the euro to introduce a new currency
(drachma) that is devalued by as much as is necessary to make Greek
industry competitive in world markets. This solution has been rejected
by Troika, of course, although we now know that the IMF wants ‘debt
relief’ at the expense of the Euro group (ie Eurozone taxpayers).
The trouble with this solution is that it assumes Greek capital can
revive with a lower currency rate and that more public spending will
increase ‘demand’ without further lowering profitability. But the
profitability of capital is key to recovery under a capitalist
economy. Moreover, while Greek exporters may benefit from a devalued
currency, many Greek companies that earn money at home in drachma will
still be faced with paying debts in euros. Many will be bankrupted.
Already over 40% of Greek banks loans to industry are not being
serviced. Rapidly rising inflation that will follow devaluation would
only raise profitability precisely because it will eat into the real
incomes of the majority as wages failed to match inflation. There
would also be the loss of EU social funding and other subsidies if
Greece is also ejected from the EU and its funding institutions.
Eventually, perhaps in five or ten years, if there is not another
global slump, either the first or second solution can restore the
profitability of Greek capital somewhat, on the back of a Eurozone
economic recovery. But it will be mainly at the expense of Greek
labour, its rights and living standards and a whole generation of
Greeks will have lost their well-being (and their country as they go
elsewhere in the world to make a living). Both these solutions mean
that Greek labour will still be poorer on average in 2022 than it was
The third option is a socialist one. This recognises that Greek
capitalism cannot recover to restore living standards for the
majority, whether inside the euro in a Troika programme or outside
with its own currency and no Eurozone support. The socialist solution
is to replace Greek capitalism with a planned economy where the Greek
banks and major companies are publicly owned and controlled and the
drive for profit is replaced with the drive for efficiency, investment
The Greek economy is small but it is not without an educated people
and many skills and some resources beyond tourism. Using its human
capital in a planned and innovative way, it can grow. But being small,
it will need like all small economies, the help and cooperation of the
rest of Europe.
The no vote at least tells the rest of European labour that the Greeks
will resist the demands of European capital. That could encourage
others in Europe to throw out governments in Spain, Italy and Portugal
that continue to impose austerity at the dictate of the Troika. That,
in turn, could bring to a head the future of the Eurozone as a
Franco-German project for capital.
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