Pushing back on the push for Grexit

Paul MasonPaul Mason’s post today is a very good take on the problem SYRIZA faces: the push for Grexit is becoming overwhelming:

“The shock in Syriza’s upper echelons, symbolised by the expression on Alexis Tsipras’ face as he addressed the nation on Saturday, was real. It was the shock of realisation that, Germany was stronger than Italy and France combined, and that there really is no space inside the euro for a radical left government.

Since this realisation, many ordinary Greeks, and some previously pro-euro politicians and advisers,  have come to the conclusion that Syriza should prepare Greece for a “controlled exit”. Instead of “we were kicked out”, it would be sold as “we escaped” – and I think however positively today’s deal is spun, the push for Grexit will grow stronger as constraints become obvious.”

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A reply to J: What if the capitalists don’t want to reduce hours of labor?

I received an interesting comment on my last blog post, that asks several important questions about the practical impact of reducing hours of labor:

  1. Is it possible that capitalists will not automatically respond to a reduction in hours of labor by increasing investment in automation?
  2. Does the decision to increase automation in response to a reduction of hours depend on the nature of the industry in Greece?
  3. Won’t there be sectors where productivity cannot be substantially increased through automation?
  4. Might capitalists instead decide to move their capital to places where cheaper labor power can be found?
  5. Might a reduction in hours of labor reduce productivity by causing a labor shortage?
  6. What if capitalist simply decide they cannot improve productivity by investing in machines and decide to move their facilities?

Robots weld the bodyshell of a Toyota Camry Hybrid car on the assembly line at the Toyota plant in MelbourneFirst, my argument on the effect of a reduction of labor on introduction of machinery is a long established observation dating back to the 19th century. This observation has been confirmed in empirical studies even in the period since the 2008 financial crisis. Reducing hours of labor must result in the replacement of labor by machines. I do not believe there is any credible evidence to the contrary.

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Grexit is not a fix for low wages and low labor productivity in Greece

I came across this post on the Lenin’s Tomb blog today. See if you can tell why I am tearing out my hair.

Syriza’s mauling at the EU negotiations:

“Syriza has been defeated in the first round of negotiations.

After a period of enjoyable defiance, during which they won the backing of the overwhelming majority of the Greek people – 80% according to a poll taken before the latest deal, published in today’s Avgi – they have come back with small change.  Pushed to the point where they were at risk of a collapse of the banking system, and unprepared for a Grexit (and thus unable to use it as a bargaining chip), they accepted the most comprehensive drubbing.”

Yes, Grexit — a ridiculous term meant only to show how revolutionary one is. I cannot understand how people see Grexit as a bargaining chip or a threat to use in negotiations. I really don’t get that.

The only people who think Grexit is150105_Open_Europe_Blog_Greece_exit a good idea also think the problem in a crisis is that currency is over-valued. From that point of view — of Krugman and Keynesians generally — the euro as a currency is over-valued in terms of the productivity of labor in Greece.

The solution of these people is to exit from the euro, replace it with a currency the Greece government controls and allow that new currency to depreciate against the euro. If this neo-Drachma were allowed to depreciate in purchasing power by 50%, they argue, Greece goods would become relatively cheaper exports would rise, while imports from the euro-zone would fall as goods produced in the rump eurozone became increasingly expensive in drachma-terms. The net result is the expansion of the export sector at the expense of imports.

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Yes. Yanis Varoufakis is a poor student of Marx, but so is Michael Roberts


Michael Roberts doesn’t think Yanis Varoufakis is a very good Marxist.

1200x-1What makes the finance minister so unacceptable to Roberts is his proposal for resolving the European crisis with a program Varoufakis admits “does not have a whiff of Marxism in it.” Which means, as Marxists go, Varoufakis is indistinguishable from the typical heterodox economist in all but his insistence on calling himself a Marxist.

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If SYRIZA-EU negotiations break down: two views on what Grexit means for Greece

kick-outThings don’t look very promising for those who hoped Germany would give in to pressure and accept a write down or delay of Greece debt obligations. With that in mind I decided to look at the most likely outcome of a collapse of negotiation: Greece’s voluntary or forced exit from the euro and European Union.

Of course this post is highly speculative and not to be taken as a prediction.

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Stop kidding yourself: SYRIZA is an unlikely model for the U.S. Left

Since SYRIZA has won in Greece many activists have wondered whether it offers a model that can be applied to other countries in the EU and even in the United States.

One essay by Laurence Cox and Alf Gunvald Nilsen offered their take on this possibility. The writers suggest that the SYRIZA model can be exported to other countries and that it can offer an alternative to neoliberalism:

“Across the continent, there is quite rightly a huge wave of hope at seeing that there is an alternative to simply taking our neoliberal medicine and watching as work, education, health, democracy and common decency are hacked to pieces by our increasingly-indistinguishable rulers.

David_Cameron_and_Barack_Obama_at_G8_summit,_2013The argument is fascinating, not because people are thinking about what it takes to move the Left beyond its current position on the margins of political life in most countries, but because it is not at all clear to me why the writers believe SYRIZA is an alternative to neoliberalism. (See important note below in the comments.)

Briefly stated, any serious examination of SYRIZA’s victory will show that victory was a triumph for many of the principles on which neoliberalism is founded.

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The strange case of the missing growth plan in the SYRIZA-EU debt deal

If things go as rumored, tomorrow SYRIZA finance minister Yannis Varoufakis will meet withgermanys-finance-minister-had-a-frightening-plan-to-deal-with-greece Germany’s finance minister, the vile and much hated Wolfgang Schauble. The meeting is widely anticipated by both bourgeois simpletons and Europe’s radical activists alike. On it hinges much of the hope on the part of the radical Left for successfully breaking out of the austerity regime said to responsible for much of the unemployment and slow growth across Europe.

The problem: nothing in the rumored deal explains how Greece will restore growth and end austerity

Folks like the International Committee of a Fourth International are trying to make heads or tails of the rumored SYRIZA-European Union deal on offer by Varoufakis. The outlines of the debt deal look very similar to the one described by James Meadway and carried in the Financial Times of London — the writers are clearly working off the same set of notes.

In the predicted agreement, perhaps to be presented to Germany on Thursday, the current debt package would be replaced by two packages. In the first, with the EU, bonds would be indexed to the growth in GDP; and in the second, the ECB would carry the debt on its books forever. Essentially, the first bond (owed to the EU) would only be paid if Greece’s economy grew; while the second bond would be carried on ECB books until such time as a Greece government chose to pay it. In both cases the repayment of the debt would be pushed back at least until Greece’s economy began growing.

The deal is a thinly disguised agreement to let Greece’s default on its obligations. There is no question that the ratings agencies will treat it as a default, but the package seems to be marketed as a way for Angela Merkel to save face.

To make an analogy, suppose you wanted to buy a house and need help on a down payment. If you are loaned a partial down payment on a house by your parents, they agree never to ask you to pay it back. The debt is still there in theory, but since your parents insist they will never press you for it, it is effectively a gift.

Another source for the down payment on your house might come from a friend. In this case, your friend fully insists on being paid, but he agrees you only need pay him from any raises you get from future employment.

Now, both of these deals have to be approved by the IRS — or, in this case, Ms. Merkel. The IRS can classify the loan from your parents as a gift or a loan, and this decision has tax implications. If the IRS classifies the loan from your parents as a gift, you are going to get socked with a crapload of taxes.

Will Merkel hold her nose and sign off?

In the same way, Ms. Merkel may not buy the face-saving cheat being offered here that the ECB debt is still on the books. She may rightly point out that the ECB has actually agreed to wipe out Greece’s debt — as it has.

On the second bond swap, Ms Merkel has to agree to demand a debt payment from Greece only if Greece’s economy grows; but, who knows when that will happen? (And there are real questions about this as I will show.)

Honestly, what has been crafted here by all accounts is Greece’s default on its debts to the EU and ECB thinly disguised as a new agreement framework. People like the ICFI, who call this a repudiation of SYRIZA’s election plank, are simply being assholes because the term. “default”, never appears on paper. However the ratings agencies will most probably label this a default event.

If the deal has any fault, it is that, as Meadway explained, it is just a little too cute for its own good. No one in their right mind is going to judge this as anything other than what it is: full-blown default. And this means everyone is expecting Ms. Merkel to hold her nose and sign off on a deal she knows grants permission to Greece to default.

Spain, Portugal, Ireland, etc. will also know that Greece was just given permission to default by Ms. Merkel. And, in contrast to Greece, Spain is one of the largest economies in the eurozone. If Podemos goes to its voters and say “See, Merkel, the EU and ECB are a bunch of cowards who back down when we stand up.”, this will have a big political impact in other countries hit hard by the troika’s austerity regime. Even the right parties in Spain will begin talking about renegotiating Spain’s debt.

The unanswered question: Where will the growth come from?

The reports so far assume Merkel will go along with the SYRIZA deal when it is not at all clear, but this is not even the big issue here. The debt is not, as the ICFI and the focus of most media attention would have you believe, the central plank in SYRIZA’s platform; it is more like an obstacle preventing SYRIZA from actually working on its central plank: reversing austerity.

Even if Merkel agrees to this tissue-thin default deal, SYRIZA will still face 27% unemployment, massive poverty and a depression that has shrunk the economy by nearly 30%.

And the deal includes the ultimate neoliberal (even Austrian) talking point: a permanent commitment to budget surpluses. Essentially, SYRIZA has agreed to forever avoid any Keynesian countercyclical deficit spending — even in the middle of a crisis.

In short, if this agreement is signed off on by all parties, the fascist state and Keynesian counter-cyclical policy is dead in Europe and neoliberalism has won on the continent.

The Greece of the future will rely on attracting capital from other countries for its growth like New York and Chile.

The playbook SYRIZA is likely working off of now was written with two fascists, James Galbraith and Stuart Holland. One thing that will be noted is that the Varoufakis-Holland-Galbraith plan concentrates even more power in the hands of the ECB. Essentially, the ECB is the critical institution for mobilizing global capital for investment in the various member states. And all economic growth in the EU will be forced to rely on four unelected bureaucracies:

  • The European Central Bank – ECB
  • The European Investment Bank – EIB
  • The European Investment Fund – EIF
  • The European Stability Mechanism – ESM

This implies a lot of new jobs for technocrats with economics backgrounds, but a whole lot less democracy in Europe. It is not even a little bit clear whether these folks gave any thought to democracy at all, except as an impediment. For instance, at one point they write:

“At the political level, the four policies of the Modest Proposal constitute a process of decentralised europeanisation, to be juxtaposed against an authoritarian federation that has not been put to European electorates, is unlikely to be endorsed by them, and, critically, offers them no assurance of higher levels of employment and welfare.”

This misses the point that their own plan, no less than “authoritarian federation”, will never be put to the European electorate either. Pot meets Kettle.

Grexit … Stage Left?

However, if the SYRIZA plan is agreed to, there will still be little room for addressing the severe impact of five years of austerity. The plan will partially solve the immediate problem of the crushing debt, however SYRIZA will lock itself into a commitment to avoid running deficits. Much like Massachusetts or California, SYRIZA will be locked in a balanced budget regime where, during downturns, it must reduce spending.

This pro-cyclical fiscal policy will mean Greece cannot get out of a recession on its own through Keynesian stimulus, but will be utterly dependent on EU policy. The problem for Greece will be that there is no Washington to run trillion dollar deficits when a crisis erupts. Certainly Massachusetts balanced its budget in 2008, but Obama stepped in with billions in “infrastructure investment”. In every state all those signs suddenly blossomed by the side of the road proclaiming the Obama stimulus was funding road construction. There will be no road signs in Greece.

Thus, even with Merkel’s acquiescence, SYRIZA will still face the possibility of a Grexit. This is because, within the limits of strict assumptions of bourgeois political-economy, each new job created in the economy must now produce an average rate of profit. Jobs will not be created simply because the capitalists like bossing workers but because they believe they can accumulate still more capital.

The easiest way to create jobs rapidly in an advanced economy is still the tried and true Keynesian method of cutting wages through currency devaluation. Just off the top of my head — i.e., pure speculation — what is missing in the discussion of Greece debt and future plans for a eurozone-wide investment plan is the announcement of a temporary Greece exit from the euro to allow a sharp devaluation to occur. And, not surprising, this idea was already floated by Germany in 2012:

“It all comes down to the fact that Greece will need a third loan. Even if everyone denies it, we all know it’s unavoidable,” this official said. But because of rising political pressure in Germany and other core Eurozone countries, “this decision will be delayed as much as possible.”

He added that, “the hawkish team of the German finance ministry believes that since Greece will need more money, it would be better given as a bridge loan to facilitate a temporary exit.”

The official noted: “It would be better received politically within Germany, the Netherlands, Finland and other countries like Slovakia and Estonia if the new loan were sold as the final one and tied to a Greek exit from the Eurozone, which would be regarded as punishment.”

So, KKE and the rest of the dumb Marxists may get their fascist fantasy of a return to the drachma, but the result will be nothing like what they imagine. If SYRIZA is allowed to leave the euro, even temporarily, wages in Greece will be crushed on a scale not even seen in the depression so far.

Is the working class now neoliberal too?

According to Spyros Dapergolas, (“Syriza at the gates”), here is the moral of SYRIZA’s victory in the Greece election:

“As before with PASOK, once again with SYRIZA…”

In other words, SYRIZA is doomed to follow in PASOK’s footsteps and end up as just another neoliberal social democrat party.

The writer wraps up his article with the big question:

“What should happen?”

by-tiago-hoiselWhich is to say, he ends by describing his anarchistic fantasy of, “a new militant and horizontal syndicalism, through self-organization in neighborhoods and a radical political engagement in libertarian/anarchist ideas and practices.”

This fantasy is, of course, the purest ideology, a recipe for new society jumping full blown from his head and, therefore, not covered in the shit and muck of countless political compromises. In the fantasy world Dapergolas inhabits, there are no insolvent banks, no NATO bases, no foreign trade and no capital flows. Since all of this filthy real world stuff has been cleared from the scene, we are now free to dream as if no such considerations press on our radical agenda for society.

Of course, it has taken Greece five years of brutal austerity just to get Greece voters to the point where they will even consider a radical government that basically promises no more than to be the next PASOK. Yet, in Dapergolas’s head, we can already dream of “a new militant and horizontal syndicalism”; Because, obviously, the 36% of voters who, after a half decade of austerity, bothered to vote for SYRIZA, really wished “a new militant and horizontal syndicalism” was on the ballot.

But here’s the problem: If the working class of Greece wanted “a new militant and horizontal syndicalism”; they did not need an election. Clearly the working class of Greece still wanted the illusion that, the writer argues, SYRIZA constitutes.

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