Greece in the 21st Century

The Politics and Economics of a Crisis

Vassilis Fouskas, Constantine Dimoulas, Vassilis K. Fouskas

• Publisher: Routledge
• Year: 2018
• Topic: Politics & International Relations
• eBook ISBN:
  9781351047500
• Subtopic: Political Economy
• Index: Politics & International Relations

For most of the first part of the 21st century Greece has been seen as a critical battlefield for the survival of the powerful and the adjustment or extinction of the weak, as if all the historical contradictions of the global financial crisis and the eurozone crisis were concentrated in that tiny part of the world, with a population of just 11 million people and a GDP of less than 2% of that of the European Union as a whole. While the country has been overpowered by the disciplinarian and deeply authoritarian policy mix of ordoliberal/neoliberal rules, as this book attempts to show, there is hope. Defeat does not end the crisis, and crisis means constant opportunity. In this state of affairs, all types of agencies try to take advantage of the conditions and opportunities in order to advance towards positions of power and provide the best of solutions for the class interests they represent. Thus, harsh conflict is inevitable and if history provides a yardstick, it is that in periods of conflict and crisis, the winner, usually, is the one who manages to strike the right political and social alliances at the right time.

The editors have assembled in this volume a number of interdisciplinary chapters and arguments which, despite their differences, share the strategic aim of a critique of both neoliberalism/ordoliberalism and new authoritarianism. Chapters examine the eurozone crisis from a variety of angles with reference to Greece, and Greek politics and society. With this collection of heterodox and scholarly essays, the authors and editors aim to offer a progressive understanding of current historical circumstances.

Constantine Dimoulas is an Assistant Professor in social administration and evaluation of social programmes at Panteion University, Greece.

Vassilis K. Fouskas is Professor of international politics and economics at the University of East London, UK, and the founding editor of the Journal of Balkan and Near Eastern Studies (Taylor & Francis).

1 Eurozone Authoritarianism and the Neoliberal Project in Greece and Southern Europe

Kees van der Pijl

The Syriza Government of Greece right from its inauguration in early 2015 engaged in skirmishes with the eurozone finance authorities about its election promise to end austerity. At the time movie director Costa-Gavras in Le Monde Diplomatique was quoted as saying that the dark cloud hanging over the left Government’s head was probably not a military intervention like the one that in 1967 ushered in an ugly colonel’s regime lasting seven years. Instead, the maker of Z and other gems of political cinema warned that in the circumstances one should rather expect merciless economic and psychological warfare, pursued to the bitter end. The Greeks would be forced to bite the dust if only to rule out that any other government ever would even consider departing from the eurozone’s austerity dictate.

The first to experience the full brunt of this was the incoming Minister of Finance, Yanis Varoufakis, who was treated to a humiliating welcome by his eurozone colleagues who enjoined the author of The Global Minotaur to stop ‘lecturing them’ on the underlying issues. The media did not fail to label Varoufakis’ arguments ‘other-worldly’ and indeed, to a consensus committed to untenable economic dogma, they were. But this was not a matter of theoretical dispute spilling over into personal abuse. After the referendum of 5 July 2015, which gave the Syriza Government a mandate double the vote that propelled it into office, Varoufakis was sacrificed to the populist fury whipped up in the bloc’s creditor states against the spendthrift ‘PIGS’ (Portugal, Italy, Greece and Spain)—a ploy effectively exculpating speculative finance from responsibility for the austerity and turning it instead into a reality check for the weak.

With southern Europe framed as an object of disdain, Prime Minister Alexis Tsipras bowed to the demand to achieve the impossible goal of repaying the debts the country had incurred after it had surrendered its monetary sovereignty to the eurozone. It is not inappropriate to see the eurozone’s treatment of Greece under the Syriza Government as an aspect of incipient fascism, the phase in which, still under bourgeois legality, sarcasm about the plight of others and scapegoating of the weak take the place of rational argument (cf. ‘Fascismo’ in Dizionario Gramsciano). If today, refugees and migrants are increasingly victimized in this way, the disciplining of Greece was a necessary phase in the hardening of the mood.

In this chapter I will investigate the longer-term process of class formation of which the authoritarian neoliberalism applied to Greece was one outcome. As I will argue below, it was a recipe meant to discipline not just the southern eurozone but European society as a whole. France in this respect occupies a central position. Here we can see the complex interconnections between neoliberal austerity and an authoritarian response to the crisis, in which proto-fascism becomes a legitimate political response to the growing hardships faced by the large mass of the population.

Class Compromise and Social Cohesion

All societies rely for their durability on a central class compromise that provides the grid on which further compromises are grafted and through which crises and dislocations are absorbed and overcome. This compromise originates in what David Harvey calls the ‘human resource complex’ in which production is embedded (Harvey 2006: 399). Over time, societies become ‘national’ and acquire what may conveniently be called a distinct ‘national character’ because of cumulative class compromises. These shape the collective reception of their own past and mould expectations, whilst inspiring the confidence needed to deal with future emergencies.

Before production was recognised as the bedrock of class compromise, liberal philosophers speculated on its role in various directions. David Hume in the mid-18th century argued that all societies rest on compromise, the English being the sole exception because of their individual liberty and religious diversity (Hume 1875, I: 248, 252). His younger contemporary, Edmund Burke, considered British exceptionalism from the opposite angle. Unlike societies liable to revolutionary convulsions like France, the Anglophone legacy of liberty and diversity instead fostered a political style that turns ‘all change into a subject of compromise, which naturally begets moderation; they produce temperaments, preventing the sore evil of harsh, crude, unqualified reformations, and [render] all the headlong exertions of arbitrary power … for ever impracticable’ (Burke 1790, III: 277).

Liberal ideologues would continue to ignore the anchorage in production of this largely mythological, but as a powerful myth, central characteristic of Anglophone society—the idea of a quasi-natural, pragmatic adjustment to changing circumstances. This may be traced to the fact that even when the United Kingdom was the workshop of the world, the imperial worldview of the commercializing aristocracy that took hold across the Lockean heartland was not discarded. Of course the society of agriculture and early manufacture in which it crystallized did not endure, and when it metamorphosed into mass industrial society, for which the principles of gentlemanly compromise and moderation proved ill-suited as a formula of social cohesion, epochal tensions threatened to dislodge it altogether.

Thus, in the run-up to World War One it was widely felt that European society was no longer able to contain the pressures for change and socio-cultural innovation emanating notably from the socialist labour movement and that a ‘conflict between the two social orders—of privilege and the masses’ was heading for a violent dénouement (Schmitt and Vedeler 1984: 20). Yet the epoch of mounting tensions and even the cataclysmic struggle that followed are best understood as deepening compromise in production, enlarged by social security arrangements and other, more intangible forces supporting national cohesion. Hence when the crunch came, the majority of socialists across Europe rallied to the defence of the fatherland, as long as the enemy could be depicted in terms ‘beyond compromise’. Only in Russia the war led to the collapse of an autocracy ruling a pre-bourgeois society that was fundamentally unable to accommodate its working class. In Germany, north Italy and Hungary, revolutionary outbreaks remained sporadic in the face of social cohesion underpinned by past compromises and bonds welded in the factories and the trenches.

Indeed, in the main belligerent countries the war had demonstrated the viability of an economy organized entirely around large-scale production. This is the bedrock of class compromise, to the point where Lenin thought that the change from bureaucracy to democracy would suffice to shift the ground from state-monopoly capitalism to socialism (Lenin 1917, XXV: 337, 341). Certainly the depth of national economic integration around large-scale industrial complexes made any attempt to resurrect 19th-century-style liberal internationalism premised on the gold standard and speculative financial flows an illusion, as the 1929 stock market crisis and the Depression would reveal. Instead the locus of class compromise shifted in a radically different direction with the establishment of a corporate liberal capitalism pioneered by F.D. Roosevelt’s New Deal in the USA.

This compromise was centrally anchored in the ascendant mass production industries of the Fordist complex, with automobile and other durable consumer goods production subordinating the coal and steel bloc of the previous era. In the end, another round of world war was necessary, not only to defeat the contender states led by Nazi Germany (which remained in the grip of a bankrupt heavy industry bloc that proved ‘too big to fail’), but also to actually release the full potential of a demand-led mass production economy. Just as, in both cases, the war effort mobilized the mass psychological forces required to weld a new class compromise. For even fascism is a form of compromise—an agreement to draw together around a stock of common convictions and experiences in the face of forces considered entirely alien to that agreement. In the case of Germany, Versailles provided the common ground that would not otherwise have existed to permit the ascent of a criminal regime.

Given that the 1929 Wall Street Crash had been caused by the excesses of internationally active money-dealing capital (Geldhandelskapital), in the USA the bank crisis and the Depression were followed, after two years of economic collapse that ruined the heavy-industry-centred capitalist bloc, by the 1933 Glass-Steagall Act, a centre-piece of the New Deal. Glass-Steagall subjected money-dealing capital, its institutional presence in the economy as investment banks and brokerage firms, and the class fraction it catered to (the rentiers), to repression. Thus, money capital proper (the deposit banking business, insurance, and the finance departments of large corporations) would be able to perform its systemic function as the pivot of the cycle of industrial capital, undisturbed by the risks involved in speculative international operations of a fundamentally commercial form of capital, that is, capital in commodity form, trade; in contemporary terms, trade in services and more particularly, trade in financial services.

As a form of commercial capital, money-dealing capital does not add value but chases rewards from price differentials through the profit distribution process. These differences (value-adding production, P; money capital invested with an eye to keeping real accumulation going, M; and commercial, money-dealing capital, let us say, C^M as a specific form of C) are intrinsically connected to different forms of class compromise determining whether and to which degree a capitalist society allows forms of political democracy to take hold. Whereas class compromise in production works to enfranchise organized labour, the relocation of production to zones outside that compromise obviously undermines democracy; what remains is at best an Ersatz compromise between money capital and middle classes able to profit from its operations. However, once money-dealing capital encroaches on the operations of investment capital beyond a certain point, the basis for any social compromise becomes narrow indeed, and this is what is happening today.

Anglophone liberals from the early 18th century had theorized how politics should mobilize a following for the alternation of ‘party’ positions aligned with fractions of capital (landed property plus the money interest versus manufacture and trade). Whilst they ascribed the faculty of reason exclusively to the property-owning classes, they also believed that ‘even if all men cannot reason, all men can feel’, and that therefore it should be possible to sway the broader public with emotive themes such as patriotism (van der Pijl 2014: 8–10). The founders of modern political science at the turn of the 20th century, Mosca, Pareto, Michels, and others, were still confident that mass society, then pressing forward to obtain the right to vote, could be held in check by élites manipulating powerful emotive symbols and ‘superstitions’.

This certainly inspired the aestheticization of politics by fascism, but the New Deal was a different matter. The ‘rationality’ of the North American class structure, famously highlighted by Gramsci, and unburdened by the social weight of what he calls the ‘pensioners of economic history’ as in Europe (or Japan), enabled the organized working class to press its interests directly, ‘rationally’. Certainly the Fordist format of the relations of production worked to commodify any demand of organized labour into an economic one, thus deepening its insertion into the capitalist economy, its ‘real subsumption’ to capital. Collective bargaining from the start was only allowed to deal with wages in relation to productivity. Even so, political democracy critically depends on the organized working class, not on the bourgeoisie, which historically has been ambivalent on the issue and at best an ally of the workers clamouring for it (Rueschemeyer et al. 1992: 270–71 & passim).

In that light the restatement by Joseph Schumpeter of the original elitist understanding of democracy, which restricts the voting public to a passive role is best seen as an element in the panoply of ruling class power that was being assembled to deal with possible further democratic demands after the war (Schumpeter 1942). From the induced recession of 1937 through which the Roosevelt Administration sought to tame the workers after the New Deal had unleashed dangerous forces for change, to Joseph McCarthy’s anti-communist witch hunt after the war, runs a political business cycle that allows capital accumulation to be adjusted to the requirements of class power whenever full employment threatens to break out of the production-consumption format of Fordism (Kalecki 1972). The vote, and what could be voted on, was always secondary to this fundamental equation; otherwise the presence of organized labour at the heart of the class compromise with capital nevertheless underpinned ‘the best democracy money can buy’.

Let me now bring in Varoufakis’ analysis of the global political economy in which class compromise was embedded.

The ‘Global Plan’ and its Limits

The New Deal compromise, extrapolated from the USA to Western Europe under the Marshall Plan, was premised on what Varoufakis labels ‘the Global Plan’ to use US surpluses to resurrect its wartime foes as bastions against the new contender, the Union of Soviet Socialist Republics (USSR) and its client state socialisms. The US project was a second-best to what was the truly visionary scheme to establish a functioning ‘surplus recycling mechanism’, the Keynes Plan placed before the Bretton Woods conference in New Hampshire in 1944. Here the British economist, an iconoclast and eccentric but otherwise dedicated to the long-term survival of capitalism, proposed an International Currency Union with the bancor as a universal currency. The plan envisaged giving each country an overdraft facility at 50% of its trade volume in bancors, at zero interest. More could be borrowed, at a fixed rate. A surplus country would be penalized if its surplus exceeded a given level, thus forcing it to revalue, and this would in turn finance the loans to deficit countries.

This proposal was referred to in a British Broadcasting Company interview in January 2011 by the then-director of the International Monetary Fund (IMF), Dominique Strauss-Kahn. Strauss-Kahn boldly declared that ‘Keynes, sixty years ago, already foresaw what was needed; but it was too early. Now is the time to do it. And I think we are ready to do it!’ A few weeks after the interview he was seen being driven off handcuffed in a New York Police Department car, suspected of sexual impropriety, and dismissed from the IMF before a magistrate had even indicted him (Varoufakis 2013: 254–55). Whilst Varoufakis does not address whether this was a deliberate honey trap or a lucky break for Strauss-Kahn’s detractors, there is no doubt that today even less than in 1944, the USA is not inclined to allow anyone to meddle with the prerogatives it derives from the ability to print the world’s reserve currency.

The Global Plan as the alternative to the original Keynes Plan aimed at securing a European market for West German industry while incorporating it into the Atlantic line-up against the Soviet bloc, and providing markets for Japan’s output too. The latter was achieved by recruiting its industrial base for the Korean War and subsequently, the Vietnam War, and by actually opening the North American home market to Japanese products. In hindsight, we may see in this generosity also a paradoxical reward for the ability of both German and Japanese capital to press down wages and impose maximum discipline on their work forces, which short-lived labour militancy right after the war was not able to reverse. Even at the time of the establishment of the original European Economic Community, the differential between French wage costs bolstered by workers’ gains in the Popular Front and West German wages and conditions still remained a major bone of contention.

The Atlantic class compromise, within the aforementioned limitations, was no less real. It worked, in Europe even more than in North America, to create the one period in the history of capitalism in which the wage share in society enjoyed modest rises, even briefly jumping in the inflationary early 1970s (when wage indexation still held)—before entering the long-term decline that is continuing today (Bengtsson and Ryner 2015). Yet the real net beneficiaries of corporate liberal capitalism were the middle classes, whose relative enrichment ‘was the principal structural transformation of the distribution of wealth in the developed countries in the twentieth century’, even if the gains for this 40% of the population remained confined to one-third of wealth in Europe and one-quarter in the USA; the rest remaining in the hands of the top 10%. Otherwise, the benefits of class compromise in production consisted of the consolidation of one-quarter to one-third of all wealth as public property (Piketty 2014: 137, 184, 260–61).

In the meantime, what Keynes had foreseen happened in the course of the 1960s. There was no sustainable surplus recycling mechanism in place once the US, which wanted to remain in control, became a deficit country on account of the huge expenditures for the Vietnam War. These by 1965 began pushing down corporate profits and living standards alike, and as a result the gold cover of the US dollar agreed at Bretton Woods became untenable. By early 1971 US liabilities stood at more than US $70,000m., backed up by $12,000m. in gold. And that was after Washington, DC, had already been compelled to throw 20% of its gold stock into the breach when the UK devalued in 1967 (by 14%, well beyond the 1% limit of the Bretton Woods rules). Varoufakis recounts how French President Georges Pompidou in August 1971 sent a French destroyer to New Jersey, USA, to redeem US dollars for gold from Fort Knox; a few days later Prime Minister Edward Heath made a polite request for the same on behalf of the UK. Nixon was livid and on 15 August announced the end of gold convertibility.

This was step one in a dramatic turn around of the postwar surplus recycling mechanism, the setting up of the Global Minotaur structure Varoufakis sees as having remained until the crisis of 2008. Named after the Cretan monster to which Athens had to supply annual human sacrifices until Theseus ended the tribute, the US Minotaur henceforth was fed with the surpluses of the rest of the capitalist world, industrial as well as financial.

Architects of the Minotaur’s Labyrinth

The abrogation of the New Deal/post-war class compromise in production and the concomitant restrictions of political democracy transpired during the 1970s. It culminated in the ‘revolutions’ of Margaret Thatcher and Ronald Reagan and came about through a process of class formation in which strategic élites abandoned the corporate liberal principles of Fordism and Keynesianism (the ‘Warfare/Welfare state’) and...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• List of illustrations
• List of contributors
• Abbreviations
• Introduction and Acknowledgments: What’s in the Greek Cauldron?
• 1. Eurozone Authoritarianism and the Neoliberal Project in Greece and Southern Europe
• 2. Sovereign Debt or Balance-of-Payments Crisis?: Exploring the Structural Logic of Adjustment in the Eurozone
• 3. Greece and the Crisis of the Eurozone: A Structural Analysis
• 4. Is There Really a Eurozone Crisis?
• 5. Competing Explanations and Strategies for the Greek Crisis and the Question of the Productive Model
• 6. Internal Devaluation and Hegemonic Crisis (2010–16)
• 7. The ‘Politics of Fulfilment’ as Preliminary for the Making of a Precarious State in Greece
• 8. The Political Effects of the Greek Economic Crisis: The Collapse of the Old Two-Party System
• 9. Blaming the Other: An Enquiry into the Cultural and Political Preconditions of the Greek Crisis
• Index