From junk1984 in Austria
Image: Anti-austerity protest at Syntagma Square in June 2011.
The then-Prime Minister Giorgakis Papandreou (son of Andreas and grandson of Giorgos) appeared on state television to send his televised message to the Greek people from the harbor of Kastelorizo: “Our ship is sinking,” he said, “and we have to turn to our partners, the IMF and the EU, who will provide us with a safe harbor where we can rebuild it.”
As the saying has it: “a ship is safe in harbor — but that’s not what ships are for.” However, this is how Greece’s self-destructive dance with the Troika began. At the time, the country’s public debt was at 120% of GDP, the unemployment rate at 12%, the youth unemployment rate at around 30%, and suicide rates were an unfamiliar concept.
All I can remember is my friends’ faces covered in Maalox, teargas grenades and Molotov cocktails all over the place, even inside the Metro, the riot police going on a frenzy and beating up people, and — above all — the repetition of those “Yes to all!” statements on the radio, expressed by the majority of deputies inside the Greek Parliament.
It was the day Parliament would vote on the so-called mid-term agreement, a new round of austerity measures that included the shrinking of the Greek public sector and welfare state and the privatization of key state assets. It was also during the heyday of the Movement of the Squares, whose activists had called for a 48-hour general strike starting on June 28.
For the day after — the day of the vote — the plan was to “besiege” the Parliament so deputies wouldn’t be able to enter and vote, or if they did so at least they would feel the pressure from outside and vote no. Ambitious plan, you may say, Quixotic even, but that was what the Syntagma Assembly had decided.
It didn’t work.
“Yes to all,” the deputies said… gas grenades were falling… Maalox for those affected… chemicals… “Say no, for god’s sake!” … people fainting in the metro… beatings… arrests… the cops in the square destroying the camp… and yet again: “Yes to all…” I think those “Yeses to all” hurt us more than any of the chemicals or the beatings of the cops.
Like many of my friends, a generation of well-educated young people (owing to the fact that education in Greece is free), I don’t live in the country anymore. Still, I follow the political and economic developments and I try to spread the word of the economic and social destruction Greece is going through as much as I can.
You know, when we were finishing our university studies we were known as the “Generation of 700 euros”: a generation of well-educated young people who were obliged to live on 700 euros per month, the lowest salary in Greece at the time, which was considered far too little for anyone to survive in dignity in Athens, Thessaloniki, or any other of the big cities in the country.
Little did we know back then that, five years later, under the austerity measures dictated by the economists of the Troika and imposed by a series of slavish Greek governments, the lowest salary would have fallen to 500 euros, our parents’ salaries and grandparents’ pensions (which were not that generous either) would have been slashed by 30-40%, that the unemployment rate would reach 28%, the youth unemployment rate 50%, that suicide rates would quadruple, and that a neo-Nazi party would be in Parliament.
At the same time, the public debt skyrocketed to 180% of GDP, the rich (who would obviously benefit from the 40% reduction in worker salaries) kept becoming richer, and many of us (200.000, to be more specific, or roughly 2% of the population) would be forced to emigrate as a result of the crisis. The world’s biggest brain drain, as The Guardiancalled it.
None of the above is a coincidence. All of this is the direct result of the social and economic policies imposed by the Troika with the help of Greece’s “Yes to all” governments. Exactly the same policies that they are trying to blackmail Greece into continuing today.
However, this time we are being asked by the government — that of Alexis Tsipras — what we really want it to do. And for once, we will be able to say a proud and dignified ‘NO!’, as we had always wanted the deputies who were supposed to be representing us to say! We owe it to our friends who migrated, our parents and grandparents who saw their salaries and pensions being slashed, our comrades who were beaten up and arrested by the cops, and to our dead: to Pavlos and Shehzad Luqman, who were assassinated by Golden Dawn, and to the thousands who committed suicide over the course of the past five years.
It is a matter of dignity — something that can not be measured and cannot fit into the Troika’s economic statistics, but that can give strength to the humiliated to rise up against those who have humiliated them for so long.
Leonidas Oikonomakis is a PhD researcher in Social Movement Studies at the European University Institute, a rapper with the Greek hip-hop formation Social Waste, and an editor for ROAR Magazine.
The campaign to remove Confederate flags and other symbols of slavery from public places, following the murder of nine African Americans by a white supremacist in Charleston, South Carolina two weeks ago, has accelerated.
Since South Carolina Governor Nikki Haley, a Republican, called June 22 for the removal of the “stars and bars” from the Statehouse grounds in Columbia, state politicians and members of Congress of both parties from across the South have followed with demands that flags and other emblems of the Confederacy be taken down. This push has expanded to include statues of Civil War figures such as Confederate States of America President Jefferson Davis and General Robert E. Lee. Democrats and Republicans in a number of states have called for a ban on Confederate emblems on specialty license plates.
This sudden rush to take down symbols of racism and slavery that the American political establishment has kept in place for decades is a defensive response to an outpouring of public horror over the Charleston killings and popular hostility to racism. This powerful reaction has taken the political establishment and both parties by surprise, forcing them to reckon with vast changes in popular consciousness of a broadly democratic character, particularly in the South.
They fear this development, particularly as it follows protests across the country against police killings and other signs of social discontent. By removing symbols of slavery and racism, they are seeking to preempt the development of a broader, deeper and more politically conscious movement of the working class.
US Representative Mark Sanford, a former governor of South Carolina, gave an indication of the outpouring of public anger against symbols of the Confederacy, saying last week that legislators’ phones, including his, “had just been blowing up” from constituents demanding that the flag be taken down. “I’ve never seen South Carolina politics move this quickly,” he said.
A Rasmussen poll published June 24 reported that only 21 percent of likely US voters want the Confederate flag to keep flying at the South Carolina capitol, compared with 60 percent who want to see it removed.
These are indications of a vast change in popular consciousness in the United States, in contradiction to the insistence of “left” and liberal purveyors of racial and identity politics that there has been no significant change since the heyday of Jim Crow segregation and that American society is steeped in racism. The South, in particular, has undergone huge demographic changes, with an influx of Asians and other nationalities, a shift from the countryside to the city, and a development of industry and growth of the working class.
The reaction to the Charleston church killings is very different than the popular response in the South to atrocities carried out by segregationist forces half a century ago. When Klansmen bombed the 16th Street Baptist Church in Birmingham, Alabama in 1963, killing four black girls—the fourth such incident in that city in less than a month—nobody was prosecuted and there was little open opposition within the white population.
There was a similar response in the South to the 1964 Klan murder in Mississippi of three civil rights workers: Michael Schwerner, Andrew Goodman and James Chaney.
But despite the rightward lurch of the entire political establishment over the past 40-plus years and its efforts to pollute public consciousness with all forms of social backwardness, xenophobia and militarism, the civil rights struggles of the 1950s and 1960s had a lasting impact and racial attitudes in the general population have changed dramatically.
The public response to the Charleston shootings increased the sense within the political establishment of the immense chasm that separates it from the broad mass of the people, and its own isolation. The removal of symbols of slavery and racism is a tactical measure aimed at broadening its support within the population.
At the same time, it is accompanied by renewed efforts to remove the issue of racism from its real social, political and historical context, in order to obscure the fundamental class divisions in society and present racism as something pervasive, ineradicable and deeply embedded in the American psyche.
In his eulogy for slain pastor and South Carolina State Senator Clementa Pinckney, President Obama continued to spearhead this ideological campaign. Having the previous week called racism part of the DNA of Americans, in Charleston on Friday he spoke of it as America’s “original sin.”
He hailed the removal of the Confederate flag as “one step in an honest accounting of America’s history.” Such an accounting is urgently needed and would be most welcome, but if it were serious, it would produce results very different from what Obama wants.
It might start with an explanation of why the political establishment kept noxious symbols of slavery and racism in place for so many decades. The public display of the Confederate flag is not a relic of the Civil War and its immediate aftermath. It was first hoisted above South Carolina’s Capitol in 1962 by Governor Ernest Hollings, a Democrat who later became a US senator, as a demonstration of defiance of Supreme Court rulings against Jim Crow segregation. In Alabama, the display of Confederate flags outside the Capitol in Montgomery dates back to the 1990s.
The political establishment kept the flag flying in the South for definite political reasons. Racism has always been an ideological tool of the ruling class. Under slavery, it was used to justify a socioeconomic system that brutally exploited people of African descent. Later, with the rise of industrial capitalism and the transformation of the United States into an imperialist power, it was used as a weapon to divide the working class and impede the development of socialist consciousness.
The historical and documentary evidence is voluminous and indisputable, and it would take several volumes to outline the history of racism in relation to the struggles of the American working class.
It can be established, however, that the use of racism as a political weapon to defend capitalism against the threat of working-class rebellion goes back to the first mass upsurge of the American working class, the great railway strike of 1877. A study of the strike in the city where it first broke out before spreading across the country, St. Louis, includes the following passage:
At an early strike meeting an eloquent address by a Black speaker asked whether whites were ready to support demands made by Black workers and received a resounding “We will!” in reply. One of the five early Executive Committee members was Black… Integrated crowds were the rule in St. Louis. Just after the strike, a WPUSA (Workingmen’s Party of the United States of America) leader advocated unity of the races behind labor demands and shortly thereafter S. Louis had one of the few Black sections of the Socialist Labor Party in the United States. (“’Not Only the Ruling Classes to Overcome, but Also the So-Called Mob’: Class, Skill and Community in the St. Louis General Strike of 1877,” David Roediger, Journal of Social History, Vol. 19, No. 2, Winter, 1985).
The response of the authorities was to dispatch black troops to attack the strikers.
Henry Ford employed the same tactics in an unsuccessful attempt to break the 1941 United Auto Workers strike for union recognition at his massive Rouge complex in Detroit. Ford imported African-American workers from the South to serve as strikebreakers. Socialist militants within the union had, however, championed the rights of black auto workers and insisted on the need to unite across racial and ethnic lines against the common enemy. This was a major factor in the victory of the strike.
The anticommunist purges and witch-hunts of the post-World War II years were bound up with the defense of Jim Crow segregation in the South and racial discrimination in the North. The government at the national, state and local level identified opposition to segregation with communism, and repeatedly attacked activists in the South who advocated integration as communists and agents of the Soviet Union.
This form of political repression, in its own way, reveals the function of racism as a political weapon of the ruling class against the unification of the working class and its conscious struggle for socialism.
Particularly after the 1954 Supreme Court ruling (Brown v. Board of Education) outlawing racially segregated public schools, the anticommunist witch-hunt was expanded in the South, focusing on socialists and leftists who opposed Jim Crow. Show hearings and trials were carried out by Democratic Party officials who controlled the South, with the tacit support of the Republican Eisenhower administration.
According to a 1996 study by Sarah Hart Brown published in the Georgia Historical Quarterly (“Congressional Anti-Communism and the Segregationist South: From New Orleans to Atlanta, 1954-1958,” Vo. 80, No. 4, Winter 1996):
After the Brown decision in 1954, the search for southern subversives intensified. Because the CPUSA (Communist Party USA) had advocated civil rights for black southerners at least since it led the fight for the Scottsboro defendants in the early 1930s, and since many Communists had supported the presidential candidacy of Progressive candidate Henry Wallace, who refused to speak before segregated southern audiences in 1948, identification of integrationists with the Communist Party made sense to many southerners. In addition, most southern politicians found it logical, convincing, and profitable to combine red-baiting with race-baiting…
State and federal grand juries reinstated investigations connecting local Communists to integrationism in Miami and New Orleans just after theBrown decision. In addition, Mississippi, Louisiana, Florida, Virginia, Georgia and Arkansas all established or strengthened anti-radical laws and investigatory committees of the legislatures between 1954 and 1958.
The article notes that the US Senate Internal Security Subcommittee held three hearings in the South and the US House Un-American Activities Committee held four between 1954 and 1958. It quotes a leading member of the Louisiana legislature as saying: “Communism and integration are inseparable and…integration is the southern expression of the communist movement.”
Racism and anticommunism were used to defeat unionizing drives after World War II and keep most of the South relatively union-free. The CIO and then the AFL-CIO played a critical role, subordinating the working class to the same Democratic Party that controlled the South and upheld the Jim Crow system.
On this basis, the South presided over the most brutal levels of exploitation and poverty wages, so as to create the most favorable conditions for corporations to amass profits. George Wallace, the segregationist governor of Alabama in the 1960s, 1970s and 1980s, summed up the underlying agenda, declaring: “Private property and the free enterprise system are under attack by the liberal-socialist-communist crowd. It’s not the business of government to tell a businessman how to run his business.”
Socialists have always fought against racism. But they have done so by exposing its roots in a society grounded in the exploitation of the working class, and on the basis of a revolutionary program to unite all sections of workers against their common capitalist oppressors. This must become the basis for the development of a mass movement in defense of the democratic and social rights of the working class today.
Euphoric reaction to superstar tech businesses is rampant — so much so that the tech industry is in denial about looming threats. The tech industry is in a bubble, and there are sufficient indicators for those willing to open their eyes. Rearing unicorns, however, is a distracting fascination.
Raising funding for tech startups has never been so easy. Some of this flood of money has been because of mutual funds and hedge funds, including Fidelity, T. Rowe Price and Tiger Global Management. This is altering not only the funding landscape for tech startups, but also valuation expectations.
There are many concerns that valuations for businesses are confounding rationale. Entrepreneurs and their investors are deviating from more traditional valuation and performance metrics to more unconventional ones. Another cause cited for increasing valuations is the trend of protections for late investors that cause valuations to inflate further. The combination of a number of these factors has put the sector into a state of artificial valuations.
Meanwhile, the companies themselves are burning through cash like there is no tomorrow. Throwing money at marketing, overheads and, in particular, remuneration has become the accepted investment strategy for startup growth. All this does is perpetuate the vicious cycle of raising more money and spending more money. For the amounts that some of these businesses have raised, the jury is still out on actual profitability.
CB Insights publishes information on unicorns (companies with a valuation above $1 billion), which shows that access to the club has become increasingly less exclusive in the last couple of years. The chart below shows that the number of companies valued at $1 billion or above in 2014 exceeded previous years by quite some margin (47 unicorns joined the club in 2014 vs. 7 and 8 in 2012 and 2013, respectively). In addition, for the first 5 months of 2015, this trend shows no signs of abating (32 new unicorns as of June 1, 2015).
In the face of these trends, a small group of well-respected and influential individuals are voicing their concern. They are reflecting on what happened in the last dot-com bust and identifying fallacies in the current unsustainable modus operandi. These relatively lonely voices are difficult to ignore. They include established successful entrepreneurs, respected VC and hedge fund investors, economists and CEOs who are riding their very own unicorns.
Mark Cuban is scathing in his personal blog, arguing that this tech bubble is worse than that of 2000, because, he states, that unlike in 2000, this time the “bubble comes from private investors,” including angel investors and crowd funders. The problem for these investors is there is no liquidity in their investments, and we’re currently in a market with “no valuations and no liquidity.” He was one of the fortunate ones who exited his company, Broadcast.com, just before the 2000 boom, netting $5 billion. But he saw others around him not so lucky then, and fears the same this time around.
A number of high-profile investors have come out and said what their peers all secretly must know. Responding to concerns raised by Bill Gurley (Benchmark) and Fred Wilson (Union Square Ventures), Marc Andreessen of Andreessen Horowitz expressed his thoughts in an 18-tweet tirade. Andreessen agrees with Gurley and Wilson in that high cash burn in startups is the cause of spiralling valuations and underperformance; the availability of capital is hampering common sense.
The tech startup space at the moment resembles the story of the emperor with no clothes.
As Wilson emphasizes, “At some point you have to build a real business, generate real profits, sustain the company without the largess of investor’s capital, and start producing value the old fashioned way.” Gurley, a stalwart investor, puts the discussion into context by saying “We’re in a risk bubble … we’re taking on … a level of risk that we’ve never taken on before in the history of Silicon Valley startups.”
The tech bubble has resulted in unconventional investors, such as hedge funds, in privately owned startups. David Einhorn of Greenlight Capital Inc. stated that although he is bullish on the tech sector, he believes he has identified a number of momentum technology stocks that have reached prices beyond any normal sense of valuation, and that they have shorted many of them in what they call the “bubble basket.”
Meanwhile, Noble Prize-winning economist Robert Shiller, who previously warned about both the dot-com and housing bubbles, suspects the recent equity valuation increases are more because of fear than exuberance. Shiller believes that “compared with history, US stocks are overvalued.” He says, “one way to assess this is by looking at the CAPE (cyclically adjusted P/E) ratio … defined as the real stock price (using the S&P Composite Stock Price Index deflated by CPI) divided by the ten-year average of real earnings per share.”
Shiller says this has been a “good predictor of subsequent stock market returns, especially over the long run. The CAPE ratio has recently been around 27, which is quite high by US historical standards. The only other times it is has been that high or higher were in 1929, 2000, and 2007 — all moments before market crashes.”
To shed light on how close we may be to the tech bubble bursting, it is worthwhile trying to understand what determines being in a bubble. Typically, this refers to a situation where the price of an asset exceeds by a large margin its fundamental value.
In his 1986 book Stabilizing an Unstable Economy, economist Hyman Minsky’s theory of financial instability attracted a great deal of attention, and gathered an increasing number of adherents following the crisis of 2008-09. Minsky identified five stages that culminate in a bubble, as described in this Forbes article: displacement, boom, euphoria, profit taking, and panic.
Uber is an enviable company for much of what it has achieved, and the team is to be commended for how they have grown this business, as well as their previous successes. However, it serves as a good example to illustrate the dynamics of the tech bubble.
Displacement:Investors’ excitement with a new paradigm, such as advances in technology or historically low interest rates. The explosion of the “sharing economy” has resulted in companies such as Uber, Lyft and Airbnb growing exponentially in recent years by taking advantage of this new mode of operation.
Boom:Prices rise slowly at first, but then gain momentum as more participants enter the market. Fear of missing out (FOMO) attracts even more participants. Consequently, publicity for the asset class in question increases. Reviewing investment rounds for Uber since 2010 when they completed their seed round shows a large variety of investors wanting a piece of the action, perhaps in part due to a fear of missing out on the golden goose. The introduction of hedge funds and investment banks funding the business can also be seen, which underlines the facelift happening in this sector.
Euphoria:Asset prices increase exponentially; there is little rationale evident in decision making. During this phase, new valuation measures and metrics are touted to justify the unrelenting rise of asset prices. Uber’s increased valuation between funding rounds symbolizes the euphoria around the business. The chart below shows the evolution of Uber’s pre-money valuation over the last number of funding rounds.
Although the pace of revenue growth at Uber is astounding (doubling approximately every 12 months at the moment), profitability is less certain. Profitability margins should increase over time as recognition and saturation are achieved in newer markets, but it is difficult to ignore the regulatory burdens and lawsuits the business is facing, which could steer it off course.
Profit taking:The few that have identified what’s going on are making their profit by selling their positions. This is the right time to exit, but is not seen by the majority. This is the next indicator on the horizon that will underline that we are in a tech bubble, and that it is about to burst. The catalyst for profit taking could be regulatory strains or excessive cash consumption that isn’t reflected by profitability gains in startups. Savvy investors will take the opportunity to exit while valuations are still high. The exits may well be too late for investors who are further behind on the FOMO curve or new types of investors who don’t appreciate that the market has moved.
Panic:By now it’s too late and asset prices collapse as rapidly as they once increased. With everyone trying to cash in realizing the situation, supply outstrips demand and many face big losses. Watch this space for the unfortunately impending examples.
The fact that we are in a tech bubble is in no doubt. The fact that the bubble is about to burst, however, is not something the sector wants to wake up to. The good times the sector is enjoying are becoming increasingly artificial. The tech startup space at the moment resembles the story of the emperor with no clothes. It remains for a few established, reasoned voices to persist with their concerns so the majority will finally listen.
The decision of European financial authorities to terminate the European Union (EU) bailout of Greece and limit the flow of credit to Greek banks has brought the country to the brink of an economic and financial meltdown. It is the latest stage in a ruthless five-year assault that has imposed draconian austerity measures which have shattered the country’s economy.
After the EU announced the end of the bailout program, the European Central Bank (ECB) declared that it would maintain but not raise the €89 billion cap in emergency liquidity to Greek banks, most of which has already been used. In the face of a potential banking collapse, Athens has imposed capital controls and declared a week-long bank holiday.
The program presented by the EU, the ECB and the International Monetary Fund “troika” amounts to a plan for Greece, already bled white, to commit economic and social suicide.
It calls for deep new pension cuts, regressive Value Added Tax increases that will slash workers’ buying power, and the privatization of energy, port and transport infrastructure. Financial Times columnist Wolfgang Münchau called it “an economic version of Dante’s hell,” adding, “It would have brought about the total economic destruction of Greece.”
In imposing this hell the European financial and political elites have made clear they will stop at nothing as they tear up all democratic norms and principles to impose a dictatorship of capital. The working class must draw a political balance sheet of the bitter experiences of the past five months and advance its own independent struggle in this life-and-death struggle.
The assertion by Syriza that any struggle for socialism and the taking of political power by the working class must be rejected as unrealistic has been refuted by events. It is the politics pursued by Syriza that have proven to be completely bankrupt.
For five months, Syriza has done nothing to defend the Greek working class from the assault waged by the ruling class. It even refused to impose capital controls as billions were withdrawn by the Greek oligarchs and salted away in overseas bank accounts—with the money to do so provided through the imposition of the vast bulk of austerity measures demanded by Greece’s tormentors.
Only now has Syriza imposed controls that only prevent Greek workers from accessing their own money in order to feed their families.
Syriza foresaw nothing.
Its politics are based on the social interests of sections of the upper middle class. Its entire strategy has been based upon the forlorn hope that some section of the bourgeoisie could be persuaded to come to Greece’s rescue and accept a modified austerity program.
Above all, Syriza is opposed to an independent mobilization of the working class on a socialist and revolutionary program. To the demands for the mass impoverishment of the Greek working class, it has responded with hopes for palliatives that it can use to sell austerity to the population.
Those politics are continued in the calling of a referendum for July 5 on whether to accept the EU’s latest measures. The Syriza-led government is engaged in a cynical political exercise. Its main purpose is to foist political responsibility for accepting the new round of brutal austerity onto the Greek people.
Politically, the Greek government already has a clear mandate to reject the austerity demands. It was elected on the basis of an appeal to the deep popular anger over the dictates of the European banks. From the beginning, however, Syriza has insisted on its commitment to the bailout and its desire to reach an agreement with the European institutions.
At this point, it is not even clear what the referendum would decide. The European institutions have indicated that if Greece defaults on its scheduled loan payments due on Tuesday, the entire agreement will be scrapped. Syriza, moreover, has made no attempt to explain what it will do if there is a “no” vote, or given any indication of how it will change its policy of seeking to remain in the euro zone and reach an agreement with Greece’s creditors.
Even now, Syriza is holding out for some accommodation. As Sunday progressed, with growing concern over the impact of Germany’s hardline on European markets, there have been calls for a way out of the impasse to be found. Concerned about both the financial and geopolitical implications of the Greek crisis, Obama called German Chancellor Angela Merkel yesterday to discuss the need for “Greece to resume reforms and growth within the euro zone.”
For its part, the European institutions are holding in reserve the possibility of regime change. The Financial Times, in an editorial denouncing Syriza on Sunday, warned of this possibility. “George Papandreou attempted a similar [referendum] maneuver in 2011 when he was prime minister. The harsh bailout deal survived; Mr. Papandreou lost his job.” To deal with mass opposition in the working class, there can be no doubt that top generals are at this moment conspiring behind closed doors, considering the possibility of using the military to intervene directly and meet protests with violence and repression. Syriza has paved the way for such an outcome, through its own efforts to secure the support of the police and the armed forces against the working class.
The situation confronting the working class is dire. At stake is not only the future of workers in Greece, but in all of Europe. By seeking to humiliate Syriza, the European banks want to send a signal that popular elections, such as the January anti-austerity vote that brought Syriza to power, have no bearing on the actual policies that are carried out. It is making of Greece an example that no opposition to austerity will be tolerated.
The World Socialist Web Site calls on workers in Greece to vote “no” to accepting the EU’s demands for yet more austerity. But such a no vote must be understood for all that it implies.
Economic war has been declared on Greece by the troika—the voice of international capital. In response the working class must advance its own program, based on a revolutionary struggle against the capitalist system.
The working class cannot defend itself without taking immediate action to thwart the conspiracy of the Greek and international ruling class and to take power into its own hands by forming a workers’ government. The banks and strategic industries such as shipping must be taken over and the accounts and assets of the oligarchs who control Greece seized.
Above all, workers in Greece must appeal for support and protest action to mobilize the deep opposition to austerity in the European working class as a whole. If the EU succeeds in making an example of Greece, it will soon turn to imposing the savage measures carried out in Greece on the entire European working class.
It has been obvious for some time that the creation of the euro was a terrible mistake. Europe never had the preconditions for a successful single currency — above all, the kind of fiscal and banking union that, for example, ensures that when a housing bubble in Florida bursts, Washington automatically protects seniors against any threat to their medical care or their bank deposits.
Leaving a currency union is, however, a much harder and more frightening decision than never entering in the first place, and until now even the Continent’s most troubled economies have repeatedly stepped back from the brink. Again and again, governments have submitted to creditors’ demands for harsh austerity, while the European Central Bank has managed to contain market panic.
Greece should vote “no,” and the Greek government should be ready, if necessary, to leave the euro.
To understand why I say this, you need to realize that most — not all, but most — of what you’ve heard about Greek profligacy and irresponsibility is false. Yes, the Greek government was spending beyond its means in the late 2000s. But since then it has repeatedly slashed spending and raised taxes.Government employment has fallen more than 25 percent, and pensions (which were indeed much too generous) have been cut sharply. If you add up all the austerity measures, they have been more than enough to eliminate the original deficit and turn it into a large surplus.
So why didn’t this happen? Because the Greek economy collapsed, largely as a result of those very austerity measures, dragging revenues down with it.
And this collapse, in turn, had a lot to do with the euro, which trapped Greece in an economic straitjacket. Cases of successful austerity, in which countries rein in deficits without bringing on a depression, typically involve large currency devaluations that make their exports more competitive. This is what happened, for example, in Canada in the 1990s, and to an important extent it’s what happened in Iceland more recently. But Greece, without its own currency, didn’t have that option.
So have I just made the case for “Grexit” — Greek exit from the euro? Not necessarily. The problem with Grexit has always been the risk of financial chaos, of a banking system disrupted by panicked withdrawals and of business hobbled both by banking troubles and by uncertainty over the legal status of debts. That’s why successive Greek governments have acceded to austerity demands, and why even Syriza, the ruling leftist coalition, was willing to accept the austerity that has already been imposed. All it asked for was, in effect, a standstill on further austerity.
But the troika was having none of it. It’s easy to get lost in the details, but the essential point now is that Greece has been presented with a take-it-or-leave-it offer that is effectively indistinguishable from the policies of the past five years.
This is, and presumably was intended to be, an offer Alexis Tsipras, the Greek prime minister, can’t accept, because it would destroy his political reason for being. The purpose must therefore be to drive him from office, which will probably happen if Greek voters fear confrontation with the troika enough to vote yes next week.
But they shouldn’t, for three reasons. First, we now know that ever-harsher austerity is a dead end: after five years Greece is in worse shape than ever. Second, much and perhaps most of the feared chaos from Grexit has already happened. With banks closed and capital controls imposed, there’s not that much more damage to be done.
Finally, acceding to the troika’s ultimatum would represent the final abandonment of any pretense of Greek independence. Don’t be taken in by claims that troika officials are just technocrats explaining to the ignorant Greeks what must be done. These supposed technocrats are in fact fantasists who have disregarded everything we know about macroeconomics, and have been wrong every step of the way. This isn’t about analysis, it’s about power — the power of the creditors to pull the plug on the Greek economy, which persists as long as euro exit is considered unthinkable.
So it’s time to put an end to this unthinkability. Otherwise Greece will face endless austerity, and a depression with no hint of an end.