Bankers Mug Greece Today, You Tomorrow
– sign at recent anti-austerity demonstration in Athens
One world, one global ruling class, one ideology, headquartered in New York and a few other Western capitals. It wants our money. There’s only one thing stopping it, the people of each new target, and today it’s the Greece’s turn. The only question is whether its people will submit to IMF-style austerity or walk away from the blackmail. Well, they’re fighting back, saying “NO,” and that makes me optimistic. Solidarity with Greece! We’re better off here (wherever we are!) if our Greek brothers and sisters can stop the austerity machine over there. Here’s the latest from Reuters:
ATHENS (Reuters) – Greek protesters vowed on Tuesday to surround parliament to prevent deputies from debating new austerity measures on June 15, and unions said they would bring the country to a halt in a national strike. …
“Now that the government is putting the medium term austerity program to vote, we (will) encircle the parliament, we (will) gather and we (will) stay at Syntagma,” the self-styled People’s Assembly of Syntagma Square said in a statement.
“Our first stop is the general strike of June 15th. We won’t stop until they withdraw it.”
The size of cuts that the Greek ‘Socialist’ Party has agreed to impose are mind-boggling. The World Socialist Website writes:
To comprehend the magnitude of these cuts, the figures must be related to Greece’s population of 11 million and the size of its economy—roughly $305 billion in 2010. Scaled to an economy the size of the United States, this would amount to yearly US spending cuts of $250-$375 billion and asset sales of $3 trillion dollars. This would mean cutting funding equivalent to half of the US senior-citizen health program Medicare each year for five years, and selling off roughly 20 percent of the main S&P 500 stock market index.
Significantly, the scale of the cuts is not far removed from proposed deficit reductions laid out by US President Barack Obama in April—amounting to $4 trillion over the next 12 years.
Like I said, this is not about Greece vs. European bankers alone. Barack Obama is also on the bankers’ team, and we’re all potential targets of banker-and-investor-class-subservient austerity drives. You simply can’t explain, for example, the steam-rolling bipartisan deficit-reduction drive in the U.S. as anything rational, not when there’s 9.1% unemployment. Dean Baker writes:
… it’s worth asking how the proponents of deficit-reduction think that lower deficits will lead to increased growth and job creation in an economy mired in a severe slump. There is not an easy answer.
… at the end of the day, we don’t have a coherent story as to how reducing the budget deficit will boost growth just as the creationists don’t have a coherent explanation for what we know about the plant and animal kingdoms.
As the Reuters report from Greece notes, earlier deficit-reduction austerity measures have crushed the Greek economy:
Austerity measures [imposed March 2010] have already hammered the economy, and a 5.5 percent contraction in first quarter gross domestic product and unemployment above 16 percent have added to discontent.
The Greek commerce umbrella association representing small businesses said on Tuesday it would protest against the new tax hikes with its members shutting their shops for three hours.
“The answer to the country’s big problem, recession, cannot be other than a restart of economic activity and investment in the small business sector, which is the spine of employment,” GSEE and ESEE said in a statement.
They’re right, and austerity is just plain crazy from a human point of view. Who cares if a bunch of fat cats lose a few thousand dollars or euros on their bad gambles? Well, they do, and it makes good sense to see deficit reduction as part of bankers and other creditors effort to make ‘the rest of us’ pay for their failed investments of the past four years. They made bad bets but they own the political system. The non-owners have to make the owners whole and then some.
But Michael Hudson is right that there’s more to the agenda than short-term enrichment of unwise or luckless investors. The larger project likely is ending welfare state, using what you save from doing so to further enrich the wealthy, and then making all of it irreversible by, as Michael Hudson puts it, replacing economic democracy with financial oligarchy:
How Bankers use the Debt Crisis to Roll Back the Progressive Era
Jun 13, 2011 – 12:34 PM
What is to be reversed is the “modern” agenda. The aim a century ago was to mobilize the Industrial Revolution’s soaring productivity and technology to raise living standards and use progressive taxation, public regulation, central banking and financial reform to distribute wealth fairly and make societies more equal. Today’s financial aim is the opposite: to concentrate wealth at the top of the economic pyramid and lower labor’s returns. High finance loves low wages.
Europe Replacing Economic Democracy with Financial Oligarchy
Jun 05, 2011 – 07:03 AM
We see that anti-democratic impulse all over the basic economic blackmail of Greece and other countries for the sake of international bankers’ profits, and also in the details of the latest austerity package. WSWS writes:
The latest proposals from EU officials and Eurozone governments will award quasi-dictatorial powers to non-elected bodies to sell off socially necessary institutions and services such as hospitals, power companies and telecommunications to the highest bidder. The result will be higher consumer prices for essential services and the complete abolition of any sort of safety net for the needy and the working population?already plagued by mass unemployment.
John Mauldin, a foreign exchange investment advisor explains the European bankers’ terror from a Michael Hudson perspective:
Hudson first lays the European crisis at the feet of banks and the institutions (ECB, IMF, and the EU) that are taking the Greek (and other) bank debt and putting it into public hands. He has a very real point. Then he points out that Greece is far better off just walking away, a la Iceland (at least read the last part of this post, on Iceland). And in polls he cites, 85% of the Greek people are against taking on the debt and paying the banks.
As I wrote last week, there is a revolution going on all over Europe, slowly building up as people realize that the “solution” being offered benefits banks and not German taxpayers or Greek creditors. Ireland will be watching. There is no easy way out. …
The crisis for Greece – as for Iceland, Ireland and debt-plagued economies capped by the United States – is occurring as bank lobbyists demand that “taxpayers” pay for the bailouts of bad speculations and government debts stemming largely from tax cuts for the rich and for real estate, shifting the fiscal burden as well as the debt burden onto labor and industry. The financial sector’s growing power to achieve this tax favoritism is crippling economies, driving them further into reliance on yet more debt financing to remain solvent. Aid is conditional upon recipient countries reducing their wage levels (“internal devaluation”) and selling off public enterprises.
The tunnel vision that guides these policies is self-reinforcing. Europe, America and Japan draw their economic managers from the ranks of professionals sliding back and forth between the banks and finance ministries – what the Japanese call “descent from heaven” to the private sector where worldly rewards are greatest. It is not merely delayed payment for past service. Their government experience and contacts helps them influence the remaining public bureaucracy and lobby their equally opportunistic replacements to promote pro-financial fiscal and monetary policies – that is, to handcuff government and deter regulation and taxation of the financial sector and its real estate and monopoly clients, and to use the government’s taxing and money-creating power to provide bailouts when the inevitable financial collapse occurs as the economy shrinks below break-even levels into negative equity territory.
But the IMF and related institutions also never forget to work their sorcery on the less developed world. Indian writer Vijay Prashad writes of an IMF report authored for a recent meeting of G8 leaders:
Hastily, the IMF report came to the point: “The key role will have to be played by the private sector, including by attracting foreign direct investment. Thus, government policies should support an enabling environment in which the private sector flourishes.” If the IMF and the G8 have their way, the Arab Spring, like the Eastern European Autumn of Nations, will flounder in the winter of economic discontent, as the profits rush to the “private sector” (monopoly firms that do not fly the Egyptian flag, or any flag, for that matter). The congenitally unimaginative IMF is preparing Egypt to be the next decade’s Greece.
By the way, though the austerity attack on Greece predictably has failed at its ostensible purpose, there is an alternative. The real solution to Greece’s artificial economic crisis has for several years been obvious, but the ‘problem’ is that it is a solution that hurts Greece’s creditors while it helps the country’s people. Nouriel Roubini writes, not just about Greece but about all the countries on the Eurozone periphery:
… there is really only one other way to restore competitiveness and growth on the periphery: leave the euro, go back to national currencies and achieve a massive nominal and real depreciation. After all, in all those emerging market financial crises that restored growth a move to flexible exchange rates was necessary and unavoidable on top of official liquidity, austerity and reform and, in some cases, debt restructuring and reduction.
Of course today the idea of leaving the euro is treated as inconceivable, even in Athens and Lisbon. Exit would impose big trade losses on the rest of the eurozone, via major real depreciation and capital losses on the creditor core, in much the same way as Argentina’s “pesification” of its dollar debt did during its last crisis.
Yet scenarios that are treated as inconceivable today may not be so far-fetched five years from now, especially if some of the periphery economies stagnate. …
‘Stagnate’? No, Nouriel, much worse than that. And the larger point is that we’ll each of us be on the periphery soon enough.