We Are All Greeks

Over the weekend I was able to engage in some discussions about events in Greece. It is an increasingly desperate situation akin to similar situations in democratic countries put under pressure by finance capitalism. Political views are polarising between the extremes. Syriza, the coalition of left parties, is building towards a majority, but the fascists Golden Dawn are handing out bread and simple slogans - and they are also infiltrating the police. When people are hungry enough they may vote for a socialist party; whether that party is allowed to take control of the country is another matter.

Our comrades from Greece spoke movingly about how supported they felt by the use of the slogan 'We are all Greeks', that has been seen increasingly in recent months. It goes beyond the need for solidarity; it goes beyond the need to attack racism, however subtle; it goes to a deep understanding that the nature of capitalism as a system that requires co-operation if it is to serve human needs without leading to war. The rules of the global system need to be focused on balance and prosperity for all, rather than enabling the stronger, larger economies to profit at the expense of the rest.

This was the argument made by Keynes at Bretton Woods, in his desperate and failed bid to create a global financial and trade system that would not set us on the path to future wars. It is simple: in a system of exchange one country's success will inevitably lead to another country's failure and so rules have to be introduced to enable the weak to gain as well as the strong. Economic policy should be based on the principle of circulation rather than accumulation. While Germany refuses to recirculate its accumulated wealth in Greece it will not only damage the Greeks and increase tensions, but ultimately damage itself.

Keynes argued for the bancor, a neutral trading currency, and for countries to be fined for holding trade surpluses as well as trade deficits. What was agreed was the dollar as the trading currency and no rules to achieve trade balance. The euro was created to enable Europe to compete against the dollar, but it created its own imbalances which are the responsibility of the system designers, not the Greek people.
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Solidarity with Greece

The following is a statement launched by the European campaign for Citizens Debt Audits. They would welcome you support and your use of social media to spread the statement.

In solidarity with the Greek people, against illegitimate debts and austerity measures, let us mobilize!

For joint actions around the Greek elections, and

for large Euro-Mediterranean’s mobilizations in autumn 2012!

The response to the financial and economic crisis is the same everywhere: cuts in expenditure and austerity measures under the pretext of reducing deficits and the repayment of a public debt which is the direct outcome of 20 years of neoliberal policies. Governments in the service of finance and big European capital are actually using this pretext to further reduce social spending, lower wages and pensions, privatize health care, dismantle social benefits and deregulate labour laws, increase taxes on the majority while social and tax giveaways are generalized for the big companies and the highest net worth households. 

Measures of violence against the populations, similar to those tested in the Greek social laboratory for two years, are already being implemented in Portugal, Ireland, Spain, Italy, and in Eastern European countries. Latvia, Romania, Hungary and Bulgaria have inaugurated the same sad litany of austerity measures, with drastic fiscal cuts (significant decrease in wages, closure of schools and hospitals, partial or total axing of social benefits, rise of VAT rates...). All the European peoples are threatened. This political orientation, which results in growing unemployment and poverty, must be radically rejected. Everywhere, companies are closing down and industrial wastelands are created, all for the greater glory of immediate gains. Everywhere, social inequalities are increasing. The public debt grows whilst many countries enter into economic recession. 

Finally, while governments of technocrats are put in place by the creditors flouting universal suffrage and the most elementary democratic rules, new European treaties (ESM, European Stability Mechanism, and TSCG, Treaty on Stability, Coordination and Governance in the Economic and Monetary Union) are adopted to the detriment of democracy, for the benefit of financial markets and behind the people's backs. These treaties grant immunity to senior civil servants, allow for the participation of the private sector in close collaboration with the IMF, impose a limit on deficits and give priority to the repayment of debt, no matter the consequences. 

Faced with such coordinated attacks on our social gains, resistance is getting organized among Euro-Meditarrenean peoples, there are national general strikes and the ‘indignados’ movements are increasingly active. In Iceland the people refused to pay the Icesave debt to the UK and the Netherlands. In Europe as in Egypt and Tunisia, initiatives for a citizens’ audit of public debt analyze how much of the public debt is illegal, illegitimate, odious or unsustainable, and must therefore be cancelled. Paying creditors is stealing what rightfully belongs to the population and payments will continue to be the cause of college and hospital closures, pensions cuts, etc.  The Greek resistance persevered for 2 years and recent election results in Greece show a strong rejection of current neoliberal policies. We here express our firm support of the refusal, by the Greek people in their ballots on 6 May 2012, to negotiate with the Troika and to apply its memorandums and the creditors’ villainous conditionalities.

However the neoliberal steamroller has not yet been stopped, and it is high time for the populations and their organizations to develop mobilization on a more significant scale.

Along with other European and international networks such as the Joint Social Conference, the International Citizen debt Audit Network (ICAN) calls for a common mobilization of all groups and trends within the social movement, without exception, including trade unions, ‘Indignados’ and ‘Occupy’ movements, women’s movements, alterglobalization associations and NGOs, political organizations, leading figures, grassroots citizens, intellectuals and artists.

Aware of the need of convergence of all mass mobilizations, we call for large Euro-Mediterranean’s mobilizations in autumn 2012, coordinating an international level of solidarity with the Greek people, against illegitimate, illegal, odious or simply unsustainable debt and austerity measures, to be organized around the traditional week of global action against debt and international financial institutions which, this year, coincides with the 25th anniversary of the death of Thomas Sankara.

In the same spirit, we call for the creation or reinforcement of grassroots’ committees together with local audit groups in all European countries – they would spearhead resistance against the EU’s attacks and give substance to our solidarity with the Greek people and all harassed peoples.

Together we can !

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Back to the Land

I have been away from my blog for a while because of tidying up a typescript for my new book called The Bioregional Economy: Life, Liberty and the Pursuit of Happiness. As I've been writing it I have leaned more and more on Polanyi who, it seems to me, is the economist for our times.

Polanyi has an uncanny knack of being able to take a long historical perspective. This is rare amongst commentators and policy-makers, but particularly rare amongst economists. It is well known that the discipline of economics defined economic history as outside its purview some decades ago. Not knowing your own history means you cannot learn from your own mistakes, which is an important explanation for why we have found ourselves in the Great Depression II: Revenge of the Austericons.

Polanyi famously describes the 'great transformation' from a stable, sustainable economy, based on social relationships and connected to the land, to a capitalist market economy, where people are turned into the 'fictitious commodity' of labour and decisions are made by those who control capital, without any need to take account of their social consequences. One of the questions I raise in my book is how we might reverse this transformation and find our way back to the land and back to wholesome social relationships.

It appears that part of this transformation may already be happening as a result of the crisis of capital. On the Guardian economics Live Eurozone Blog (11.11am), Helena Smith reports that

'Greece is undergoing a mass internal migration as a result of the economic crisis that has engulfed the nation since December 2009. After years of being spurned for the bright lights of big cities, rural areas are making a comeback as unprecedented numbers of unemployed young Greeks move en masse to the countryside encouraged by government stipends to cultivate tracts of land that have been left untended for years. A survey conducted at the behest of the Agricultural Development Ministry by the polling firm Kapa Research found that more than 1.5 million Greeks were considering relocating to rural areas with one in five already having made the move. Around 75 % were under the age of 44 – the group worst hit by joblessness in a nation where more are now out of work than employed.'

The state has launched a €60bn programme of subsidies on plots of land, a scheme which is attracting graduates who have despaired of finding white-collar jobs in the cities. In Thessaloniki trained agronomists have put their knowledge into practice and are renting land from the university to grow rice and cotton. You can find a short video of their experiences on Youtube.

This leads me to question how much these experiences might be shared in the UK, if our Depression continues. Greece has only been a member of the EU for 40 years and was previously an agricultural society, so the link to the land is still strong. In the UK for many the experience of living from the land was lost 100 years ago or more.
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Greek Chorus

I've thought about calling this blog 'thinking the unthinkable' but I decided to use such a cliched strapline was probably itself unthinkable. Perhaps 'explaining the inexplicable' would be more appropriate. But what I am not prepared to do is repeating the unrepeatable and so, in response to a request from a friend and colleague for some guidance on the Greek situation, I am offering a tidying up and pulling together of various previous posts.

We need to begin with an understanding of the misguided euro project, which was driven by corporate interests and political ambitions and was unpopular with economists from the start. The sort of strait-jacket it imposed on countries' interest rates assumed a uniformity of economic development and social values that simply did not exist. The strictures that were entered into and are now being enforced are similar to those imposed by the gold standard in the 1930s, and so brilliantly explained by Karl Polanyi in his Great Transformation. For a more radical view of the purpose of the Euro project you might enjoy a paper by Ramón Fernández Durán called 'Mars Vs Venus, or Dollar vs Euro?'

This helps us to answer the question of whose fault it is - the financiers and corporate power-brokers who sought to increase their power and ease their extraction of surplus value. It was the poor design and inadequate debate that resulted in the tragedies now playing themselves out in Greece, for which the Greek people cannot be held accountable and should not be made to suffer. Similar arguments were made by Mary Mellor, and were posted to the blog in May 2010.

This brings us to what is to be done. Here I point to the lessons from Argentina, where a country's leaders refused to see their society destroyed and forced their creditors to the negotiating table. Politically this is the only acceptable option: a democratic decision about who gains and who loses value. In the free-for-all that is now threatened in Greece the financiers will flex their muscle while pensioners and the soon-to-be unemployed will be the losers. The tragedy not just for Greece but for the world is that similar negotiations at the global level have not been taking place and are desperately overdue if we are to preserve our democratic right to decide how our economies function.
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From Democracy to Plutocracy

Davos is over: the corporate power-brokers have returned to their notional national boundaries and their over-priced lives, leaving the rest of us to struggle through the disaster that their version of a global economy has bequeathed to us. More than anything else, this annual ritual of the wealthy on the piste makes clear where real power lies in the 21st century world.

It is in Greece, however, that we will see the battle for power, the battle between the ideas of democracy and capitalism, fought out in the coming days. The struggle for the future of Greece is too symbolic to be other than a cosmic joke: the origin of the word 'democracy' becoming the site of its demise. Although since Athenian democracy vested power in the hands of a tiny elite supported by slaves may mean that it is apt that it is also the backdrop for the global challenge to a system of rule by the people for the people.

The decision by Brussels that Papandreou should not be allowed to hold a referendum, followed rapidly by the replacement of democratically elected politicians with bankers, and the agreement reached by 26 EU members that they would allow unelected European officials to control their domestic economic policy have all made clear that the interests of finance are taking power away from the people who vote and the politicians they choose.

Over the weekend the German economy minister Philipp Roesler took the dangerous next step along this path by proposing that Greece should explicitly give control of its economic policy to European bureaucrats. This is just a natural extension of what happened in Marseilles and might be a threat that is coming the way of other countries soon. In spite of its historical resonance it is not the fact that this proposal was made by a German that matters, but the fact that democratic politicians are to be replaced by technocratic lackies of the financiers.
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Squandering the Wealth of Life

In the immediate aftermath of the 2008 financial crisis, Bank of England staff attempted to estimate the financial costs to the UK economy. In 2009 Andrew G. Haldane, Executive Director for Financial Stability at the Bank estimated that the permanent loss to the UK economy from the banking crisis was anywhere between £1.8trn. and £7.4trn.

The softer, less measurable, more human consequences are only just now becoming clear. A paper in the Lancet in July 2011 began to measure the impact of the 2009 crisis on health, and specifically on suicide rates. Economic crises unsettle people in various ways, but the most obvious, pressing and observable is the loss of employment, which quite literally kills. The authors of the paper considered the pre-2004 EU members and the more recent members separately.

The graphic from the paper reproduced here compares unemployment rates amongst adults with rates of suicide across the EU. Unemployment began rising rapidly in 2009, with a 35% increase over 2007 levels. Shockingly, however, the increase in suicide preceded this, suggesting that it results from fear of unemployment and general rise in anxiety as a result of the instability caused by financial shock. As the authors conclude:

‘the steady downward trend in suicide rates, seen in both groups of countries before 2007, reversed at once. The 2008 increase was less than 1% in the new Member States, but in the old ones it increased by almost 7%. In both, suicides increased further in 2009. Among the countries studied, only Austria had fewer suicides (down 5%) in 2009 than in 2007. In each of the other countries the increase was at least 5%.’

The fact that it is fear and uncertainty that causes suicide, as well as the reality of unemployment and poverty, indicates the irresponsibility of the Coalition strategy of creating an aura of austeria in order to make it easier to impose their draconian cuts. This undermining of social confidence can itself cause increased rates of suicide, which are only a marker of more general social dis-ease.

Greece gives us an indication of the future for the people of Europe if these desperate austerity measures are continued, a policy that Cameron recently argued for at Davos. Official statistics for that country indicate a 40% rise in those taking their own lives between January and May of 2011. Studies of rapid social change repeatedly indicate that the increase in uncertainty and the fraying of the social fabric are not only politically dangerous but also very destructive to human life and health.
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Time to Create the Renten-Euro?

Why do currencies fail? If you did not know any better you would assume it was because the people in the countries supporting them became lazy and demanded free plastic surgery at a moment's notice while spending all their days reclining in the sun enjoying a view over the Agean. Or some other scenario we can enviously imagine while stuck at our computers in the summer rain - us and the Germans we share our northern Atlantic climate with.

It was not so long ago that we were looking at this same scenario from the other end of the telescope. The narrow focus on the Second World War in UK history teaching means that many of us have a strong mental image of the collapse of a European currency, with the useful visual mnemonic of hungry shoppers trundling a wheelbarrow full of notes to the local bakery. The whispered suggestion that the Euro may have lost credibility to the extent that it be replaced by a new currency (as the Mark was replaced by the Rentenmark in 1923) makes clear the parallel with that period of German's history.

The most unhelpful talk of punishment should bring this image to mind, because nobody suggests that the German hyper-inflation between the wars was the result of the burghers setting up their deck-chairs along the Rhine in the hope of catching a bit of sun. We all learned, and we should remember now, that the German economy was destroyed by the demand for an unrealistic level of reparations. Punishing Germany for its economic woes, as many are suggesting we should punich Greece now, destroyed its currency and allowed space for fascism to flourish.

The CIA have helpfully compiled a list of the countries of the world ranked according to the size of their debts as a proportion of the GDP. I have no idea how reliable this data is, but surely the more important point is that so many countries have these debts. This suggests that there is something structurally wrong with the system of national and global financing, rather than the demand of people the world over for a decent life, or their willingness to work a reasonable amount of hours to achieve that.

The system of creating money as debt should be our target: for creating instability, and for permitting the extraction of the value of work by those who do none. If we are seeking targets in deck-chairs, those who live from rental earnings of their financial investments would be a good place to start. Tweet

Danny the Green on Greece

An impassioned plea from Danny Cohn-Bendit in the European parliament to rethink the policy on Greece has been posted on YouTube. The link is too large for Blogspot so you will have to cut and paste: http://www.youtube.com/watch?v=dQGkP68AVTI&annotation_id=annotation_971859&f Tweet

If it is all Greek to you, read on

I'm convinced that much of the discussion about finance, global and corporate, is deliberately obfuscatory. Simple activities that could be described using words like 'gamble' or 'risky investment' are concealed in arcane phrases such as 'taking a position' or 'creating a collateralised debt obligation'.This certainly worked - even the CEOs could not understand what was going on.

But I know a woman who does. Mary Mellor has helped me find my way around the mysteries the financialised global economy, and she has also had the good sense to publish a book on what when wrong, and what we should do to put it right. It's called The Future of Money: From Financial Crisis to Public Resource. As a taster, here is her take on the mysterious drama being played out in Greece:

'The Greek situation demonstrates the problem of an interconnected global financial system. When the new socialist government took over in October 2009 it revealed that the previous government had hidden deficits in its accounts (with the help of Goldman Sachs). This was a ‘Bear Stearns’ moment. Early action at this point could have stablilised the European monetary system pro tem (but not in the longer term without reform) but the leading European economies dithered, particularly Germany where the government was facing regional elections. Bear Stearns became Lehman Brothers. Greece is a small economy within the EU (around 3% of GDP) and around 0.5% of the world economy. Its total debt was around 300 bn euros. Its immediate needs were around 8 billion euros. By the time rescue was at hand it was facing short term interest rates of up to 38% and an immediate need of a hundred billion euros. What was needed in the early stages was an injection of euros which could have been issued by the ECB. Why did this not happen?

'Because of the ideology of money issue as a private commercial matter. The ECB is not empowered to lend to governments only to the financial system as a private entity. This makes the assumption that governments and financial systems are separate, but this is not the case. As demonstrated by the 2007-8 financial crisis the financial problems of the private sector, particularly its debt crisis became a debt crisis for states. As states poured money into the sector they were forced through their ideology of privatised money to borrow from the ‘financial market’. Who were the financial market? The banks whose debt they had just rescued. Banks made money lending to states through the front door who had just rescued them through the back door. The Greek situation is even more ludicrous. Banks have lent to the Greek government. Other governments will not provide support, so banks are facing billions in bad debt. It is rumoured some banks in France, Germany or Switzerland may be threatened. They will need to be rescued by the very same governments who would not support the Greeks in the first place.'

In the mean time, of course, huge profits have been made by the financial intermediaries - money that will be paid by the Greek workers. Tweet

Ethical Deficit

I was shocked to read such a blatant example example of casual racism in this week's Sunday Times, which I foolishly picked up out of interest while on a train. It made me realise the slide in standards of analysis and morality that the Murdoch ownership of the Times brand has provoked.

This assault on the good people of Greece by those with extended waistlines back-balances that contrast with their atrophied moral consciences reveals the worst aspects of the UK Establishment. The intention of such writing is that, once we have satisfied ourselves with stereotyping and insulting our Mediterranean brethren, we will apply our own shoulders to the wheel with renewed vigour lest, perish the thought, we might be confused with people who enjoy leisure time or seek to lead the best lives they can with the minimum of effort.

In the battle for hearts and minds that will ensue once the ballot boxes are put back into their locked cupboards we will witness the return of two of capitalisms most unsavoury cheerleaders: the Fat Controller and the Calvinist preacher. If Rod Liddle represents the former then Gordon Brown has always been haunted by the latter: the musty smell of the manse that hangs around him is the main reason that we have never taken him to our hearts.

How far distant we are from the Greeks remains to be tested over the coming months. Will we really buy the line that we should work harder to pay for the bankers' bonuses? Has the work ethic survived the years of debt-fuelled plenty? A common cause of grievance is that we have been deprived of a democratic opportunity to choose how the economic crisis should be tackled - as in Greece, whose politicians also sidestepped the issue in their legislative elections in October last year.

The lazy and dangerously divisive journalism from the Murdoch scandal-sheets should not divert us from the issue that is at stake: how the value in our economy is shared between working people and those who control capital. On a more personal level, I leave it to readers to decide who are really the pigs. Tweet

Who is rating whom?

What exactly are the credit-rating agencies up to? I've been intrigued by the debates about who in the world economy is really behaving like a pig. Under the rules agreed at Maastricht, all the EU members have to produce a periodic report detailing how well they are meeting the criteria agreed there in terms of national economic probity. This relates primarily to how much you borrow relative to how much you earn as a nation, measured in terms of GDP. The latest reports for 2009-10 are available on the EU's website.

Reading through these is a lesson in the cultural variety of Europe and so finding the necessary figures is not as straightforward as we might hope. The figures reproduced here illustrate two distinct measures of the state of a country's finances: the amount each needs to borrow this year (the deficit) and the amount of historical borrowing (the national debt). Both are as a percentage of GDP - the accepted measure of how much life there is a nation's economy.

This is important, because it means that the absolute sums of money Greece needs to borrow are much smaller than those Germany is borrowing, but because the comparator is larger Germany's debt appears relatively small. This is valid, in the sense that Germany can pay for its debts because it exports more. But the size of borrowing by Europe's larger nations reduces the pool of available investors, and itself makes Greece's debt less attractive. As speculators work against Greek debt, Greece has to pay a higher rate of return, which pushes it further into debt.

The first figure illustrates how much the countries expect to borrow this year. It illustrates that, in a recession, countries borrow hugely to keep their economies from imploding. Capitalist economics and the debt-money system makes this inevitable. But the comparison makes clear that the UK is borrowing more than Greece, with Ireland only slightly behind. This has been illustrated graphically by researchers at the University of Sheffield. The reason that Greece is coming under the cosh is that its politicians are not convincing the credit raptors that they will succeed in cutting wages and services, whereas Ireland has.

If we turn to the second figure, which illustrates total national debt, then we see the problem for Greece, whose historic debt is 124% of its national output in any year. This is the result of a country with a small capacity for production attempting to give its people a European lifestyle. But wasn't that the promise the European Union offered?

And what about the UK, which comes out of the second figure looking surprisingly - dare I say suspciously - healthy? As Faisal Islam explained on Channel 4 News on budget day, the reason that more money was found and the UK's deficit had apparently shrunk was almost entirely the result of changing the projections about economic growth. Even with these unrealistically positive expectations, our national debt is still projected to rise to 77% of GDP by 2013. I dare say the politicians in Greece wish they could get away with this, but they can't. Because we have the pound and they have given up their own currency to become subject to the whim of Germany, the bulwark of the Eurozone.

It was the large and powerful economic nations of Europe who created the euro, and in spite of the mealey-mouthed justifications around sharing the wealth with the transition and Mediterranean countries, it was always going to work in their interests. Export markets increased and the transaction costs of sending goods overseas fell. The price that had to be paid was supporting the weaker economies of the EU; Germany and France are now reneging on their part of the deal.

This is a dangerous game. The Greeks have already responded to German self-interest by raising the spectre of the Second World War. So the monetary pact is increasing the very tensions in Europe that the EU was created to prevent. Tweet

Told Euro So

Smugness is never an appealing characteristic, but I think we Greens are sometimes a little too reticient in taking the credit for being right. On our political wing discussions about the imminent collapse in the financial system were everywhere for a good five years before it happened. And recent events across Europe have shown that we were right about the euro as well.

The central case for the UK not entering the euro was that we would lose political control over our economy, if we gave up the ability to control our national currency. Entering a single-currency area would require us to accept the interest rate of the most powerful economy in that area, in the case of the euro that would mean Germany.

The disasters that have befallen especially Ireland and Greece have arisen from them having to take the euro interest rate, which was much to low for their economies during the last decade, leading to housing-market bubbles and speculative inflation in their economies. Now that the bubble has burst they are having to accept an interest rate that is too high, whereas in the UK our central bank has been able to reduce the cost of borrowing money to a mere administrative charge, giving the economy the best possible chance of recovery.

The lesson is not that we are prudent and the marginal Greeks and Irish are feckless. Rather it is that in global capitalism size matters, and that controlling your own currency matters most of all. Greece's deficit is 12.7% of its GDP, way beyond the euro limit of 3%. But the UK's is already 7% and that takes no account of the potential banking liabilities we have taken on, nor the off-balance-sheet debts represented by PPP contracts.

And beyond these special cases, the wilder baying of the market hounds is, as the Spanish government has claimed, an irresponsible attempt to change investor sentiment. While they are untrammelled by political controls, speculators will seek to gain market advantage by artificially increasing or decreasing the value of currencies and national bonds. Whatever we think of the situation of Greece, the Spanish economy is not demonstrating any inability to make good on its debts: its debt-to-GDP ratio is below the EU average, less than that of the UK and well below the 60% allowed by the European Central Bank.

The conclusion should surely be that what counts is not the view of the bond traders or the power of the markets, but our courage to stand up for ourselves. Greece will come out of this crisis better than Ireland - with fewer cuts to services and wages - because the Greeks have the courage to exercise their democratic freedoms and go onto the streets. The Irish, by contrast, seem to have believed the myth about the battle between capital and labour over economic value as being something historical. In fact, the power games between Europe's politicians, the central bankers, and the speculators is being played out daily in our news bulletins. Tweet