Some Wednesday snippets. First, I juxtapose the political machinations that the EU President is engaged…
Syriza must stay left of the line – more is at stake than Greece
There were regional elections in the autonomous community of Andalusia (Spain) over the weekend which saw the Spanish Socialist Workers’ Party (PSOE) hold onto power. The results showed that the left-wing political party – Podemos – which received nearly 8 per cent of the Spanish vote (5 seats) at the European Parliament elections in May 2014, was third in the Anadulusian election, gaining 15 of the 109 seats. The parallels with Syriza in Greece are now routinely being made. I am forming the view, however, that unless things change rather dramatically in Greece, Syriza may actually end up only undermining progressive agendas in Europe as they self-destruct under the iron fist of the Troika (I do not use the terms “the institutions” or the “Brussels Group”). This is of great interest to me at present because I am sketching out a 2016 book project at present with a co-author, which broadly focuses on the demise of the left and social democratic movements in the World, although we might pare the scope down with more discussion to concentrate on Europe. Of particular interest is the morbid inferiority of the French left relative to the Germans in the Post World War II period and the way in which American Monetarism has infiltrated and built on that inferiority. Much of the design of the monetary union can be understood through that sort of lens. So a broad canvas right now but that is always the case. Of immediate interest, though, is the possibility that Syriza will set progressive causes back rather than become the spearhead for a sweeping change in Europe and the end of this destructive era of neo-liberalism.
By way of background, the Socialists (PSOE) have been the ruling party in Andalusia since 1982 when the region became an autonomous community and held elections for the first time.
Some press reports have claimed that Podemos “made spectacular inroads in elections in the Spanish region of Andalusia” and that the “vote showed the anti-austerity sentiment that brought Syriza to power in Greece has now taken root in Spain” (Source).
But with the region the epicentre of the housing collapse, entrenched mass unemployment and a range of – corruption scandals – miring the Socialist Party, one wonders whether the result for Podemos is really as strong as some are suggesting.
As an aside, the most recent corruption scandal concerned the abuse of the so-called – ERE – which was a retrenchment fund designed to assist firms in sacking workers. The Socialists established the fund in 2001.
Evidently, many workers were paid out who had never worked at the companies involved, subsidies were paid to companies who had not even applied to retrench workers and various commissions and kickbacks (bribes) were paid to insurance companies, consultants, law firms and government officials. These corrupt payments are seemingly the tip of the iceberg with dodgy land sales
So a real ‘snouts-in-the-trough’ exercise.
This is also region that has the highest unemployment rates in Spain (currently 34.2 per cent) and more than 60 per cent of the 15-24 year olds are without work.
In 2013, the Atlantic Magazine referred to the region as the – The Most Doomed Part of Spain, in 2 Charts
And still the Socialists were able to hang on to power. So how strong is the progressive challenge from Podemos.
The demise of the left in Europe didn’t begin with the onset of the GFC. One might actually posit that the GFC was the culmination of a steady move to the right by political parties everywhere, which allowed ridiculous labour and financial market deregulation to occur and fiscal policy to be eschewed.
I have been reading a book by published in 2000 by Dutch academic Ton Notermans (who works at the Tallin University of Technology in Estonia) – Money, Markets, and the Stae – which explores the evolution of Social Democratic economic policies since 1918 (published by Cambridge University Press).
The opening chapter is entitled – Social Democracy in the Macroeconomy – which is the perfect place to start an analysis like this because the macro focus gave the leftist parties meaning and scope in the immediate Post World War II period that they have now lost.
The essence of his argument is that social democratic parties can only survive in a Capitalist system if they can mediate the class conflict and deliver full employment to workers while maintaining price stability.
Notermans says (p.1):
The social democratic vision of society envisaged a world in which human beings control their circumstances rather than being controlled by them. One essential characteristic of such a society would be that it guaranteed its members a decent livelihood. Rather than large sections of the population being condemned to inactivity by recurring economic crisis, all those able to take up employment should have the possibility of doing so. Those who temporarily or permanently lack the ability to provide for themselves should be able to count on the solidarity of society to provide them with the means for a decent livelihood. The inability to work should not be a condemnation to live a marginalized existence.
There are many other requirements including that the “society should be democratic”.
Notermans concluded that:
In short, the social democratic program aimed to reform the market economy so as to combine political and economic liberty.
In this vein, consider the recent letter written by European Commission functionary (one Declan Costello) to the Greek government –
The Irish Times article (March 20, 2015) – EU mandarin Declan Costello faces Greek wrath over ‘ultimatums’ letter – outlines what happened.
I love the use of the word “mandarin” to give the impression of importance of the person in question. Mutton disguised as Lamb is closer the mark.
Costello is, in fact, one of the Troika ‘monitoring team’ in Greece. The heavy boot from Brussels.
The journalist Paul Mason has evidently seen the text of the letter and explained in this article – Don’t pass new anti-poverty law, commission tells Greece – that text said:
During our teleconference last night, you mentioned the planned parliament passage tomorrow of the ‘humanitarian crisis’ bill. We also understand that other policy initiatives, including the instalment scheme law, are in train that are to go to parliament shortly.
We would strongly urge having the proper policy consultations first, including consistency with reform efforts. There are several issues to be discussed and we need to do them as a coherent and comprehensive package.
Doing otherwise would be proceeding unilaterally and in a piecemeal manner that is inconsistent with the commitments made, including to the Eurogroup as stated in the February 20 communiqué.
So democratically-elected Greek government – get back in your hole and do as we tell you not as you were elected to do!
The bill in question, by the way, was to provide free electricity to impoverished households and provide some income grants to other poor and homeless families.
The Irish Times article notes that:
Costello is one of the most powerful bureaucrats in the European Commission’s finance directorate, but he is also one of its most despised bureaucrats among the Greeks. One of the first things Tsipras did upon entering office was to decree that elected politicians would no longer meet unelected mandarins such as Costello.
He apparently also drafted another letter, which was leaked and gave the impression it had been written by the Greek Finance Minister, to corner him into accepting the unacceptable at the crisis meetings in February.
Moreover, Costello (a senior figure in the European Commission’s Finance Directorate) is on the public record as endorsing even more “surveillance” of national government economic policies and harsher sanctions that “have real bite” and can be invoked early before a government determines to act in accordance with its elected mandate (Source).
In the same evidence, he also said in relation to changes in EMU governance that “The proposals on EMU governance will take care of fiscal policy as well as macroeconomic imbalances and competitiveness, but you also need something to drive growth in our economies”.
So fiscal policy rules that impose austerity have nothing to do with driving growth! That is the mantra.
This sort of nonsense has become the mainstream as social democratic movements have declined and changed into shadows of their former selves.
Notermans considers the 1970s to be the breaking point for the “golden age” of social democratic parties because they were:
… unable to provide an economic policy program that could effectively address stagnation, unemployment, and inequality. Rather than providing an effective remedy against mass unemployment, social democratic policies seemed to make matters worse. Improving the income of labor and extending welfare state arrangements appeared to threaten the prosperity of the business sector on which the well-being of labor ultimately depended.
This is a very contentious claim and will need to be explored more fully. I will do that in a number of blogs over the next several months.
In my 2008 book with Joan Muysken – Full Employment abandoned – the Post World War II consensus in terms of what we called the Full Employment Framework. We juxtaposed it with the neo-liberal replacement, which we termed the Full Employability Framework.
The Great Depression taught us that, in the absence of government intervention, capitalist economies are prone to lengthy periods of unemployment, the Second World War experience proved that full employment could be maintained with appropriate use of budget deficits.
The employment growth following the Great Depression was in direct response to the spending needs that accompanied the onset of the War rather than the failed Neoclassical remedies that had been tried during the 1930s.
The problem that had to be addressed by governments at War’s end was to find a way to translate the fully employed War economy with extensive civil controls and loss of liberty into a fully employed peacetime model.
That context solidified the centrality of social democratic parties.
The Post World War 2 economic and social settlement in most Western countries was based on three main pillars. First, the Economic Pillar was defined by an unambiguous commitment to full employment.
Second, the full employment commitment (the Economic Pillar) was buttressed by the development of the Welfare State, which defined the state’s obligation to provide security to all citizens. Citizenship meant that society had a collective responsibility to ensure that the well-being of the population was a high priority.
This Redistributive Pillar was designed to ameliorate market outcomes and defined much of the equity intervention by government. It recognised that the free market was amoral and intervention in the form of income support and wage setting norms was a necessary part of a sophisticated society.
That concept replaced the dichotomy that had been constructed previously between the deserving and undeserving poor. The Redistributive Pillar recognised that the mixed economy (with a large market-component) would deliver poor outcomes to some citizens, principally via unemployment.
Extensive transfer payments programs were designed to provide income support to disadvantaged individuals and groups. But this support was – as noted – considered to be ephemeral given the commitment to full employment.
Third, the Collective Pillar provided the philosophical underpinning for the Full Employment framework and was based on the intrinsic rights of citizenship.
The rights of citizenship meant that individuals had access to the distribution system (via transfer payments) independent of market outcomes.
Furthermore, a professional public sector provided standardised services at an equivalent level to all citizens as a right of citizenship.
These included the public sector employment services, public health and education systems, legal aid and a range of other services.
But did this framework break down because it failed? That is Notermans’ contention and basically the contention that underpins those who justify the so-called ‘liberal approach’ which claimed (in Noterman’s words) that “generous welfare arrangements, a strong union movement, and extensive political management of the economy undermined the well-springs of economic prosperity”.
The answer is that the framework did not break down because it failed but was usurped by a growing resurgence of ideas that had been simmering for all the Post World War II period.
The corporate sector, the monied class, were continually struggling to shift the pendulum back in their favour as full employment and welfare arrangements clearly reduced income and wealth inequality and gave workers some power in the labour market.
The employers resented the more equal sharing of national income between workers and capital. But given the experience of the 1930s and early 40s where societies struggled against dictatorships, the social democratic parties had room to move because the citizens were empowered through the ballot box.
The simmering hatred for more sharing and worker power by capital was overwhelmed by the power of the vote – we liked growing wages, better public services, mass education, public hospitals and the capacity to gain employment whenever we desired to work.
The employers still, ultimately, ruled, but faced limited opportunities to be capricious and maintain dangerous and poorly paid working places such was the scrutiny of the state, as the mediator of the class conflict.
Capital funded academics to produce a plethora of material which alleged to show how dangerous trade unions were or how wage rises would kill growth etc. Nothing much has changed except during the full employment period with growing real wages (in line with productivity) it was hard to mount a case that disaster was about to strike.
All that changed when the Arabs retaliated against Zionist aggression and pushed up the oil prices in 1973.
The outbreak of hostilities in the Middle East in October 1973 (the 1973 Arab Israeli War) was accompanied by the oil embargo imposed by the Organization of the Petroleum Exporting Countries (OPEC).
A few days later, on 16 October, the Arab nations increased the price of oil by 17 per cent and indicated they would cut production by 25 per cent as part of a leveraged retaliation against the US President’s decision to provide arms to Israel.
The price of oil rose by around three times within eight months.
That political event was exploited by the growing literature from conservative economists about the dangers of the welfare state and full employment – they were arguing that it would result in accelerating inflation.
The economic models themselves are spurious (and nonsensical) but it was the serendipitous outbreak of inflation associated with the oil crisis that allowed them to dupe governments (and the voters) into believing that the inflation was the direct result of the full employment and wage equity.
Monetarism (championed by Milton Friedman and his colleagues) displaced Keynesian thinking as the dominant economic policy paradigm. How that infiltrated the European debate is an interesting story and will be part of our book narrative. Blogs will appear on this theme in due course.
The rise in acceptance of Monetarism and its new classical counterpart was not based on an empirical rejection of the Keynesian orthodoxy, but was according to Alan Blinder in 1988:
… instead a triumph of a priori theorising over empiricism, of intellectual aesthetics over observation and, in some measure, of conservative ideology over liberalism. It was not, in a word, a Kuhnian scientific revolution.
The reference to a Kuhnian scientific revolution meant that there was no superior knowledge in Monetarism that displaced errant understandings of the Keynesian paradigm.
It was a power grab by the conservatives who then proceeded to dupe the citizenry into thinking that Keynesians were making “matters worse” (in Notermans’ words).
The reality was the problem was (and remains) that the coincidence of unemployment and rising inflation in the 1970s was not a problem of excess demand. The fact is that that the price instability came from the supply side as the OPEC sheiks drove up oil prices.
The policy response to cut aggregate demand and thus increase unemployment was exactly the wrong response. The Monetarists exploited that policy error and claimed that it demonstrated a categorical failure of the Keynesian approach.
Any Keynesian remedies proposed to reduce unemployment were met with derision from the bulk of the profession who had embraced Monetarism and its policy implications. They claimed that the economy would always tend back to a given natural rate of unemployment (which was associated with stable inflation), no matter what had happened to the economy over the course of time.
Time and the path the economy traced through time were thus irrelevant. Only microeconomic changes would cause the natural rate to change. Accordingly, the policy debate became increasingly concentrated on deregulation, privatisation, and reductions in the provisions of the Welfare State.
The so-called structural or supply-side remedies.
Unemployment continued to persist at high levels and soon, underemployment entered the scene.
This is the world we now live in.
The problem is that the media concentration, the billions given to right-wing think tanks and the academic programs pumping out characters like those who enter the multilateral economic agencies (like the IMF), the European Commission, and the treasuries and central banks, has entrenched such a pervasive Groupthink that little alternative debate is possible.
They have choked the policy space available to social democratic parties and infiltrated their ranks. Examples of ideological change within social democratic movements during the 1970s and early 1980s abound.
In France, for example, François Mitterrand – shifted in a diametric fashion after he introduced a neo-liberal austerity program in 1984-84. He had rejected the earlier Barre Plan introduced in 1976 by French Prime Minister Raymond Barre, under President Valéry Giscard d’Estaing, which was the first Monetarist regime in the world.
Mitterand’s shift showed how far the French had shifted from their Gaullist ‘Keynesian’ days.
Which brings me to Syriza – in terms of my contention that it runs the danger of damaging any hope of a return to progressive, social democratic policy regimes for years to come.
There was an interesting article in the Jacobin magazine yesterday (March 23, 2015) – Time Isn’t on Our Side – that bears on this contention.
The article by London academic Stathis Kouvelakis provides the best account of what is happening within Greece and between the new Greek government and its European masters.
It claims that Syriza politicians are engaging in “media spin” to proclaim a “victory” after the February 20 negotiations with the Eurogroup.
Kouvelakis concludes:
But even without going into a detailed analysis of the commitments undertaken by the Greek government while signing the agreement, it’s clear that it didn’t take long before reality refuted the main points of the preceding argument … it became clear that the government’s hands were tied …
As a consequence, during the first month of the left government, a period of unprecedented legislative inaction prevailed, a vivid reflection of the long-prepared “iron cage” in which the European Union (EU) had imposed on the undisciplined Greeks …
In essence, this means that the redistributive measures that could provide genuine relief to the working class and other popular strata, and would allow Syriza to stabilize its social alliances, are deferred indefinitely.
He also says that the first few months of Syriza have already “highlighted the contradictions of the Thessaloniki Program, on the basis of which it was elected and which it was supposed to implement without negotiation.”
As the Costello letter demonstrates, the Troika won’t let them do anything that is “unilateral” – that is, which the Greek government determines itself is in the best interests of the Greek people and consistent with its elected mandate.
Then he gets to his main hypothesis:
The plan – or rather, the range of strategies – currently being considered by the Europeans can be summed up as follows: either trigger in the short term the collapse of the Syriza government, or, and this appears to be the prevailing option, drag it into a new strategic retreat in April, which will prepare the ground for a final capitulation in June.
This is consistent with the way the Eurogroup is behaving, the astounding “no, no, no” intervention by the ECB boss, the press briefings by the likes of Wolfgang Schäuble, Angela Merkel and the arrogant letters from Costello.
Syriza has been caught in a “deadly trap” because it refused to advance the obvious alternative – exit.
This is part of another strand of the demise of the left in Europe which our book will explore – the obsession by the educated left in Europe with the concept of ‘a grand Europe’ as an expression of modernity and sophistication.
They cannot see that the way they have acceded to the creation of this ‘Europe’ is the antithesis of sophistication. It has created increased poverty, mass unemployment and spawned a revival of populist fascist-type political movements.
Unless Syriza changes the internal Greek dialogue to educate the people about the exit option and the opportunities is has if it restores its currency sovereignty and leads the nation out of the austerity trap, it will be squeezed by the Eurogroup into becoming just another ‘social democratic’ vehicle for austerity and income distribution from wages to profits.
It will thus either collapse from internal tensions or become a servant of the austerians. Either way, its earlier progressive narrative will be discredited and the neo-liberal TINA mentality will be reinforced.
Kouvelakis says that Syriza is fighting a “war” – and he quotes, approvingly, the Greek Interior Minister:
… the country is at war, a social and a class war with the lenders” and that in this war “we will not go like cheerful scouts willing to continue the policies of the memorandum.”
He urges Syriza to use this kind of language and eschew “the language of facile optimism that creates illusions and causes confusion that tomorrow may prove costly”.
He considers that:
From this point of view, the most reasonable proposal is a negotiated exit from the euro, which would be combined with a writing-off of the major part of the debt, and would free both sides from the negative effects of a forced Grexit and from the endless preoccupation with an unsustainable Greek debt.
Syriza needs to broach this formally with the Greek people and to stop the “PR stunts and rhetorical contortions”.
Conclusion
The stakes are high. The left has a sorry record in recent decades for resisting the class hegemony of capital (and its financial elites) and the politicians and ‘mandarins’ that are paid more than they are worth as enforcers.
Syriza is like a line in the sand. I hope they stay on the left side and restore the hope that social democratic governments delivered for 3 decades before they were usurped by a hostile ideology.
That is enough for today!
(c) Copyright 2015 William Mitchell. All Rights Reserved.
Unfortunately as the Spanish experience shows, people will not change their allegiances and continue to support ‘their team’ regardless of how badly they are treated.
So politicians chase the fickle who swing elections, safe in the knowledge that the majority will put their X where they always have.
There is no democratic pressure to change, because propaganda is more powerful.
“The policy response to cut aggregate demand and thus increase unemployment was exactly the wrong response.”
What would have been the correct policy response in the case of the OPEC price hikes exactly?
Thanks,
Mike
As far as I can tell the first Costello letter was a newspaper duck. The only thing he did was convert to PDF.
As to the second, both laws he apperantly vetoed have been passed now.
Neil, With all due respect, I think your position is a trifle oversimplified. In the end, there is always the threat of violence, in this case, of the economic kind. This latter kind of takeover, as it were, has now become a kind of norm. (Cf. the work of Guriev & Treisman)
Bill, the sad thing about the duping that took place via the narrative that Keynesianism not only wasn’t working, it may have been making things worse is so far from the truth, it can’t even be said to be wrong. Joan Robinson referred to the period from WW2 to the ascendance of the neoclassical paradigm as that of “bastard Keynesianism”, while Samuelson called his position neoclassical synthesis Keynesianism, intending this to be covering the general point of view. Both were aware that Keynes’ position had never been truly implemented. Even so, the parts of his paradigm that were implemented seemed to work, however imperfectly, for a while. What might have happened had Keynes’ program been truly implemented I doubt that Keynes would have wanted to predict, as this would have demanded that he predict a future course of events, contravening his view of the concept of uncertainty, which was distinct from that of Fisher’s.
It is quite dispiriting this lack of a narrative on the part of the left. Without one the left will stay like a rabble pulling and pushing without conviction. I think we are starting to see that in Greece as opinion flounders on what is best policy. Courage requires conviction. The left has very little, so self destruction is all too likely, which is most unfortunate.
Dear Bill
The left is enamored of a centralized Europe because of its anti-national bias. As I pointed out before, it is hard for a party to defend vigorously the interest of ordinary people in a single country if it feels that that it has to think in supranational terms. If Golden Dawn had won the election, it probably already would have put a moratorium on debt servicing. The Syriza people want to serve the interests of ordinary Greeks but also be good Europeans and be friendly to immigrants. They can’t do both.
In Sweden, the social-democrats now plan to take in around 90,000 refugees this year despite the fact that in Sweden it takes on average 8! years to integrate a refuge in the labor market. These refugees are going to compete with Swedish beneficiaries of the welfare state. In today’s world, a leftist party with a nationalist outlook should be the strongest supporter of stringent immigration restrictions. They are not because of their anti-nationalist bias.
Just as competition between producers is good for consumers and competition between landlords is good for tenants, so competition between employers is good for employees. A full employment policy means that employers have to compete much more keenly for employees, and that automatically increases the bargaining power of labor. A full-employment policy should not only increase the number of jobs but also improve existing jobs.
Globalism also undermines the left. If people become convinced that globalization is somehow inevitable and that we all have to remain “internationally competitive”, then they will much more readily accept low wages and poor working conditions. After all, how can we compete with countries like Bangladesh and India if our wages are so high. If free trade between high-wage countries and low-wage countries really puts downward pressure on wages in high-wage countries, then the obvious solution is to restrict trade between high-wage and low-wage countries. The ideology of globalism is there to convince people that this is totally impossible and shouldn’t even be considered because globalization is, well, just inevitable.
Regards. James
The vast majority of people in every country are working people. So, in the democracies, why do they continue to vote against their own interests? Neil gave an answer. Along with that, I would say that the general level of wealth (due to advances in technology) is so much higher now, that even the people suffering the most don’t seem to be miserable enough for a revolution. Look how long it took Greece to take the step they did (much longer than I once believed). Are they in the streets now, burning police stations in response to Syriza’s turnabout? Will they? People have to be pretty desperate to risk injury or death, and that is what you face, if you decide to oppose your rulers, even in our enlightened democracies.
Bill focuses primarily on the unused mechanics of modern monetary systems (not today though). The inequality we see rising everywhere is only partly, if at all, due to ignorance.
“In Sweden, the social-democrats now plan to take in around 90,000 refugees”
Not true. Your numbers are about the amount of _asylum seekers_. Most of them will not get the refugees status due to hard restrictions and therefore not be let in.
Agree with Bill. To Bill’s history of how the welfare state was discredited, I would only add that the collapse of communist countries played a big role, too, allowing the right to claim “there is no alternative.”
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It’s debatable whether the collapse of the USSR was due to their economic system, or to other factors. Governments and empires collapse for a variety of reasons.
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If the Kiev government collapses, will we say “see, that proves that capitalism doesn’t work?” No, we’ll just assume that the Kiev government was corrupt and incompetent. Why don’t we make the same assumption about the Soviet bloc governments?
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This is part of another strand of the demise of the left in Europe which our book will explore – the obsession by the educated left in Europe with the concept of ‘a grand Europe’ as an expression of modernity and sophistication.
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Agree. There is a Rodney King style wishful thinking that “can’t we all just get along?”
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The reality is that different nations have different interests. That economic competition among nations is a form of warfare.
I havent finished reading the article yet, but wanted to say a few things. I guess I agree with your class war analysis but must disagree with your remedy, trade unions and generous welfare benefits. The union movement is some 10% of the work force and has little interest in the welfare of the non-unionized worker. Why work if you dont have too? The diisfunctional position of Europe today is the result of following your policies as part of the drive to war, when all welfare benefits and workers power become problematic
Mike
Mosler thinks the oil induced inflationary wave was spent by 1980, I.e. Nothing needed to be done and therefore the high interest rates volker imposed, which led to both the sharp double recession and Reagan election, was not necessary. Not at all my previous thinking, which was that the fed chased inflation, raising rates but always keeping them a little under the inflation rate, thereby goosing asset prices.
So, would modestly higher rates just after carter took office in 1976 have avoided housing inflation without inducing recession? Even if true, this would not mean anything should have been done to fight the one time inflationary burst on account of oil shortage, I.e. Inducing recession to combat supply side inflation is a cure worse than the disease.
>So democratically-elected Greek government – get back in your hole and do as we tell you
I mean…that’s what Syriza agreed to in the Feb 20 agreement. Nobody forced them into it, Syriza could easily have decided to start spending within their means and not take any more loans from the Troika. Did the Greek people elect them to lie and cheat the people who supply them with much-needed funding?
>austerity
The Greek government is now spending over 60% of GDP. You call this austerity. Can you give a quantitative answer: at what point, in terms of % of GDP, does it stop being “austerity”?
>So fiscal policy rules that impose austerity have nothing to do with driving growth! That is the mantra.
Well, in 2009 Greece went all out with stimulus, with the deficit over 15% of GDP. They have been running deficits ever since. Do you think these policies have been driving growth? Seriously, I want you to give a quantitative answer. What do you believe is the value of the marginal fiscal multiplier in Greece? What was it in 2009? Why?
And in any case, we have seen ACTUAL austerity have incredible success in the Baltics. Cold, hard facts, not ideology.
As for the Grexit scenario, personally I think it’s a joke. First, it fully relies on the idea that the Europeans would forgive the debt. If they don’t, it’s a complete catastrophe. Second, it would simply be a way to preserve the patronage/clientelism of the last 30 years. It’s costing the country over 8% of GDP, every year. Do you know how many poor people’s homes you can provide free electricity to with 8% of GDP? And yet Syriza and yourself seem uninterested in preventing special interests from stealing from the Greek people. Where does all-encompassing corruption, where does pervasive corporatism fit into the “social democracy” framework?
Even in the middle of the crisis and despite the urging of the Troika we have seen successive governments do nothing to even attempt to fix this situation. A return to the drachma would make it even worse.
Dear Anon (at 2015/03/25 at 5:49)
You said:
Austerity is about the direction of fiscal shift not the level. Greece has had a dramatic shift and is now running a primary fiscal surplus. It is the largest fiscal shift in the World at present. That is austerity. You don’t seem to understand the difference between change and level and the fact that the level is conditioned, in part, by the spending behaviour of the other sectors. So 60 per cent of GDP might actually be deficient public spending.
You also said:
First, you should differentiate between the primary and overall fiscal balance. They are now running a primary surplus.
Second, you should also distinguish the shift in the deficit in 2009 as a result of the cycle (automatic stabilisers) from discretionary actions taken by the government. You don’t seem to understand the difference. Trying to suggest that a rising deficit is the result of a discretionary stimulus that didn’t work to stimulate growth fails to comprehend that the deficit was rising because GDP growth was collapsing as total spending contracted (including discretionary public spending as austerity was imposed).
Third, if the government had have introduced major job creation schemes rather than paid off the foreign banks then the dynamic in Greece would have been totally different.
On matters of public corruption, vested interests etc – that is a separate issue and has to be dealt with under any monetary arrangement. I am not disinterested in it. I a just not qualified to write about it.
best wishes
bill
And in any case, we have seen ACTUAL austerity have incredible success in the Baltics. Cold, hard facts, not ideology.
actually, your sentence is very much ideology, here are just a few links to help disperse it, though I suppose you are much more interested in preserving it by twisting ‘facts’
http://www.economonitor.com/dolanecon/2013/10/18/why-the-baltic-recovery-is-not-a-success-story-for-austerity-lessons-for-the-us/
http://www.neweconomics.org/blog/entry/the-myth-of-successful-baltic-austerity
Dear Simsalablunder
Du har rätt. 90,000 is the number of asylsökande that according to Migrationsverket will arrive in Sweden in 2015. Still, it is a very high number compared to what other European countries are doing. Moreover, even if asylsökande are rejected, they will have to be temporarily maintained by the government. Sweden is being extraordinarily generous, but the more generosity people show to foreigners, the less generosity there is left for their countrymen.
Regards. James
Conflating the 90,000 asylum seekers with those who actually will get the refugees status is constantly done to make a problem look worse than it is. Nowadays Sweden have a party with roots in neo-nazism who’s does this deliberately over and over again and their story telling has been picked up by media and other parties since their threatening method appeals to prejudice.
The number of asylum seekers goes up and down and is not something the government can change from year to year unless they decide to stop people from seeking asylum altogether, which is against The Universal Declaration of Human Rights, which Sweden has agreed to follow.
The temporarily maintained arrangements is much more a problem for the asylum seekers than it is for swedes. Asylum seekers are far to often maintained in housings with disgraceful living standard left with nothing to do other than go on each others nerves.
This has to do with politics where the directives to the Migrationsverket are for them to buy services from lowest bidding private entrepreneurs. This in conjunction with the fact that Sweden has not been building enough houses for decades, makes maintaining refugee seekers a very lucrative business.
>Second, you should also distinguish the shift in the deficit in 2009 as a result of the cycle (automatic stabilisers) from discretionary actions taken by the government. You don’t seem to understand the difference.
I’m not sure what you are trying to say here. What is the difference? Are you trying to say that the fiscal multiplier is lower for automatic stabilizers than discretionary spending? Surely the opposite is the case, especially in Greece.
>Trying to suggest that a rising deficit is the result of a discretionary stimulus that didn’t work to stimulate growth fails to comprehend that the deficit was rising because GDP growth was collapsing as total spending contracted (including discretionary public spending as austerity was imposed).
In 2009 the Greek government was spending more than at any other time. In absolute terms. Spending increased by 6.5% from 2008, and the deficit was huge even in 2008 when the economy was flat, not shrinking. The deficit was rising because spending was exploding.
>They are now running a primary surplus.
No they’re not. ND was running a primary surplus. Revenues have collapsed under Syriza and they’re running a primary deficit again. They’re already billions short of the budget.
>if the government had have introduced major job creation schemes rather than paid off the foreign banks
“Paid off foreign banks”? When did that happen? Perhaps you come from some alternate dimension. Because in my dimension, Greece defaulted in 2012 and banks holding Greek debt lost over 100 billion euros.
Certainly Greece should have done more in terms of job creation. The Troika was even asking for it: a lot of the structural reforms in the programs were aimed at combating unemployment. But Greece did not follow through on the programs, and the Troika didn’t impose any penalties when the reforms didn’t happen. A complete failure for everyone involved.
>On matters of public corruption, vested interests etc – that is a separate issue
It really is not a separate issue. It is the fundamental reason Greece is in this situation in the first place, and the reason it has so much trouble getting out of it.
Anon, I’ll respond to the first two paragraphs. What you don’t seem to be understanding is that in a recession the deficit is going to rise for two main reasons. First if GDP is collapsing, and government spending does not change — either increase or decrease, the deficit will automatically rise because of the collapse in GDP and decrease in tax revenue due to the recession. Secondly the automatic stabilizers will also increase in a recession because that is when they are most needed. This is things like unemployment benefits etc, and these raise in a recession, and this again all else being the same will raise the deficit.
Dear Anon (at 2015/03/25 at 22:56)
This will be my last response. You seem to be in denial about the imposition of austerity in Greece, the damage it has done, and the fact that a substantial portion of the bailout funds went to service debts owed to foreign banks.
As to what actually happened, according to Eurostat data, total General Government in Greece spending rose in euro terms by 4.8 per cent between 2008 and 2009, while revenue fell by 6.5 per cent. This generated a fiscal shift equivalent to 5.3 per cent of real GDP, a substantial one year shift at a time that real GDP was declining rapidly.
But one also has to see the rising government spending in context of what had gone before. In the year from 2007 to 2008, government spending increased by 12.2 per cent while revenue rose by 5.3 per cent.
So spending growth actually seriously decelerated in 2009 compared to 2008 at at time that real GDP growth was already negative (-0.4 per cent in 2008 and -4.4 per cent in 2009).
By 2010, spending had been cut by 8.1 per cent as the austerity started to bite. Real GDP fell a further 5.4 per cent and so it went.
Spending cut in 2011, 5.2 per cent, real GDP growth -8.9 per cent; 2012 spending growth -6.4 per cent, real GDP -6.6 per cent.
Revenue fell in each year from 2011 to 2013 as the economy collapsed.
Further, by 2013 total government spending was 15.7 per cent lower than its peak in 2009 and revenue was 6.7 per cent lower. Real GDP was 26.4 per cent lower.
That looks like serious austerity to me.
The public corruption and vested interests did not suddenly appear in 2008. Greece was able to survive with those institutional constraints much better before they joined the euro.
best wishes
bill
Dear Simsalablunder
It remains to be explained why Sweden is expected to receive around 90,000 asylum seekers this year while Norway will not receive more than 11,000. Sweden’s population is about 9.5 million and Norway’s around 5 million. If Norway were to receive proportionately as many as Sweden, it would receive approximately 47,000. The likely explanation is that the Fremskrittsparti is a part of the Norwegian government while in Sweden the Sverigedemokrater are shunned by all the other parties.
Anyway, this is not a blog about Scandinavian politics, so this will be my last word on the subject. Vänliga hälsningar. James
Sweden 2015 – Youtube
Poverty in austuerity EU, a new phenomenon in structural adjusting EU. Poor Roma people from mainly Romania but also other poor east EU countries now have free movement in EU. Since last summer Roma beggars have grown dramatically in Sweden, in all major cities there is Roma beggars outside every major stores and shopping centre and they live as in the linked film, in makeshift shacks made of pallets and covered with plastic sheets or simple tarpaulins. Sanitary facilities is non existent. Romania is relatively worse off now economically than during Ceaușescu austuerity in the 80s paying foreign debt, in Geary-Khamis dollar its hardly any difference while world average have moved a bit upward. Saved from communism hell to neoliberal “heaven”. If Greece is a disaster many eastern countries is far worse off.
The behaviour of the left is of no surprise to social creditors.
The great and perhaps only benefit of these characteristic banking attacks on the commons is to highlight the true power dynamics behind the curtain.
Well, if you make clear that you will not follow The Universal Declaration of Human Rights then you will get less asylum seekers. So if other parties follow Sverigedemokraternas agenda there will be less asylum seekers. But of course nothing will be gained by that. Denmark has gone that path and its society is by no mean more harmonious.
Just to make clear, Sverigedemokraterna is the party with roots in neo-nazism. They were open about it in late 1990. Today they’re not open about it though their politics is the same.
«The corporate sector, the monied class, were continually struggling to shift the pendulum back in their favour as full employment and welfare arrangements clearly reduced income and wealth inequality and gave workers some power in the labour market. The employers resented the more equal sharing of national income between workers and capital.»
From Harold MacMillan’s diary:
“As a kind of tranquiliser I am taking a course of Henry James! What a world – how quiet and peaceful and happy it was for the “upper and upper-middle classes”. Now it’s a nightmare. Happily, it’s a much better world for the masses, as has been brought home to me most forcibly in writing the history of the inter-war years.”
Other elite member were not so happy, in particular the upper middle classes, who really resented how expensive it had become to hire servants.
Today’s middle and even middle income class have the “aspiration” to boost themselves into the ranks of that “quiet and peaceful and happy” lifestyle of the middle upper classes thanks to massive property capital gains.
«The reality was the problem was (and remains) that the coincidence of unemployment and rising inflation in the 1970s was not a problem of excess demand. The fact is that that the price instability came from the supply side as the OPEC sheiks drove up oil prices.»
That was well discussed at the time as obvious. But the propaganda machine started talking about a wage-price spiral, where wage increases push up prices, not a price-wage spiral, where price increases pushed up wages.
However there a bit in truth of there being a wage-price spiral…
The price-push shock of the oil crisis of the 70s had to be absorbed by the oil consumers, and that meant either business owners, workers or both.
The disgrace of the left and of the union movement was that the trade unions who thought they controlled the commanding heights of the economy, those who thought they were indispensable, decided to push the cost of higher oil not just on business owners but also on the majority other workers that were not involved in critical sectors. This meant that a minority of critical sector workers showed their unions to be viciously selfish guilds, rather than trade unions, and this harmed deeply the image of trade unionism in general. Given a choice of being ruled by Scargill and others like him or by the Tories even leftist workers chose the lesser evil. Add to this that it was an open secret that the more obpreposterous unions were “inspired” by soviet agents and their actions became a national security issue.
«And in any case, we have seen ACTUAL austerity have incredible success in the Baltics. Cold, hard facts, not ideology»
While I have respect for the arguments that the Greek government can do what they want as long as they stop asking for money, and that Greece is perhaps the least “deserving” example of anti-austerity arguments, the idea that the austerity in the Baltics was an “incredible success” seems to me pure delusional ideology.
The Baltics economy totally collapsed because of the austerity, and some of them lost 20% of their working age population to emigration. Perhaps after many years of collapse some numbers have started going up but only because of something like a “dead cat bounce”, as economic activity actually has not recovered, but. The Baltics are a splendid example of all that is wrong with austerity.
And also all that is wrong with the converse of neoliberal austerity, as their economy collapsed after several years of neoliberal-style foreign-debt fueled property bubble, and fully deserved the subsequent collapse.
“even leftist workers chose the lesser evil.”
Yes, the SDP/Liberal Alliance.
All hail the holy FPTP electoral system.