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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Public Sector Jobs Carnage

Job losses in the public sector are happening much more rapidly than predicted, which will have serious knock-on effects in terms of reducing demand in the economy as a whole, as well as reducing tax payments and increasing the amount of money needed to repay the deficit. This is according to figures from the Chartered Institute of Personal and Development and published by the BBC this morning. Put together with the misguided comments from Cameron about people reducing their credit card debt, which were later pulled from his conference speech last week, this adds to the growing sense that Conservative politicians do not understand how to respond to the second Great Depression which faces us.

An early political move by the New Ricardians was to create the Office for Budget Responsibility - a figleaf to justify their unacceptable policies. Such an Office only has a reason to exist if it can provide informed judgements about the economy that are also genuinely independent. Yet it has repeatedly produced reports to support Conservative policy, and its predictions have been inaccurate to the point of uselessness.

In November 2010 the OBR predicted that the government cuts would lead to 410,000 job losses in the public sector between 2010/11 and 2015/16, a revision downwards from the 610,000 it had predicted that June. The CIPD statisticians indicate that the original figure was correct. So why did the OBR change it? Was this to support the government in difficult political times?

The hard news for the UK economy is that the risk-averse managers in the public sector are cutting jobs more rapidly than their immediate financial situation demands, so that the number of jobs lost since the beginning of this financial year is five times what the OBR predicted. With projections as far out as that, with consequent impacts on deficit management, what is the use of the OBR?

It proves its usefulness to the government by enabling a Treasury spokesman quoted in the article to opine as follows: 'Half a million private sector jobs were created last year and the independent OBR has forecast that there will be 900,000 more jobs created in the private sector than lost in the public sector by 2015'. But if this forecast is as unreliable as the rest then it provides no basis for policy-making, just an opportunity for the spokesman to save the government's face.

It begins to seem increasingly likely that the OBR is a research unit created to provide statistically impressive but factually inaccurate cover for a government bent on its own destructive course. As such, it is itself a waste of money in these days of austeria. It should either be funded from Tory party coffers or abolished.
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Repudiating Odious Debt

The frustrating reality of the situation we face in this unwarranted Age of Austerity is the difficulty of turning the anger against the banks and the unwillingness to pay for their corporate corruption into meaningful political action. While it seems unglamorous the answer may be to establish a national Audit Committee.

This idea comes from Ecuador, where President Correa was elected in 2005 to preside over an economy which was oil-rich but whose wealth was being drained whose people were left in poverty because 50% of national income was being spent on servicing foreign debt. The Audit Committee was established to investigate who were the creditors and how they had persuaded the former politicians to take on the debt. Eventually, it found that some 70% of the debt was illegitimate and the creditors were forced to sell at reductions of around 90%.

The story is told in a film called Debtocracy, whose main focus of attention is the debt situation in Greece, where a national Audit Committee has been established. The idea has now spread to Ireland. Exploring the sources of and responsibility for national debt can help to shift the violence in the streets towards a quasi-judicial process and may help to focus political anger, but as London-based economist Costas Lapavitsas makes clear in the film, these are political rather than economic or legal decisions.

The film also helpfully resuscitates the concept of 'odious debt', created by the US in the 19th century to enable it to repudiate the debts it inherited from Spain when it conquered Cuba. It used a similar legal wheeze to renege on Iraq's debts after the 2003 invasion, although it kept this quiet for obvious reasons.
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Resist Divide-and-Conquer Tactics

The Tory rhetoric over today's strike is a clear attempt to divide and conquer. We are told that the poor downtrodden taxpayer is subsidising the fat cats of the public sector, and that private-sector pension schemes are poor and the public-sector schemes should be as poor. No attempt is made to argue that private companies should provide properly for their employees' retirement. We are to be set against each other, workers in private or public sector, taxpayers and public sectors workers, when it is quite apparent that most of us fall into more than one of these categories at once.

I am proud to be striking today. I am proud to be defending the right of myself and my colleagues to contribute a reasonable amount to dignity in old age, should we be lucky enough to get there. I was pleased to receive the instruction to strike from my rep., together with the helpful information that 'UCU believes the proposals are not only unfair, but totally unnecessary. The TPS was renegotiated in 2007 to make it affordable and sustainable over time. There is no crisis or deficit in the scheme. This is nothing more than an ideologically motivated attack by a government that wants us to pay for an economic crisis we did not create.'

The changes to pension contributions, which represents an increase of some 50% or about £150 per month, are actually a tax specifically on the public sector, the government's target of choice, to extract money to pay for the deficit caused by the banking crisis. Since our future pensions will be politically controlled there is no limit on the number of times the government can come back to us for more money, or how many times they can reduce our consitions, our pay, or our future pensions. No limit, that is, except our unified political resistance.

In The Great Transformation Karl Polanyi gives an interesting new perspective on the strike. If labour is to be distributed in a market, he argues, then the seller, i.e. the worker, has a perfect right not to sell until his price is reached. It is the absurdity of considering labour a commodity like any other that causes the strike to appear anomalous. Here is his lucid prose from p. 239:

'Actually, strikes in vital services and public utilities held the citizens to ransom while involving them in the libyrinthine problem of the true functions of a labor market. Labor is supposed to find its price on the market, and other price than that so established being uneconomical. As long as labor lives up to this responsibility, it will behave as an element in the supply of that which it is, the commodity "labor", and will refuse to sell below the price which the buyer can still afford to pay.

Consistently followed up, this means that the chief obligation of labor is to be almost continually on strike. . . The source of the incongruity of the theory and practice is, of course, that labor is not really a commodity, and that if labor was withheld merely in order to ascertain its exact price society would very soon dissolve for lack of sustenance. It is remarkable that this consideration is very rarely, if ever, mentioned in the discussion of the strike issue on the part of liberal economists.'
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