Pushing back on the push for Grexit

by Jehu

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.”

Game Theory or Game Over?

First, there is the political dimension: “Germany was stronger than Italy and France combined”.

In other words, SYRIZA’s strategy of playing one eurozone member state off on another has been an utter failure in the short-run. And with it, this idea of playing off the ECB and the IMF against the EC and eurogroup to establish a counter-cyclical agency for crises.

The idea behind this juggling act is that to survive, the eurozone must correct a defect in the way it was designed: during a crisis there is no fiscal authority within the eurozone that has power to effect countercyclical measures. Eurozone member states are forced to adopt pro-cyclical policies like states in the USA: They must balance their budgets whenever tax revenue falls.

However, unlike the eurozone, Washington can implement a number of “automatic stabilizers” and even undertake a massive series of public works projects to offset falling demand. The eurozone was deliberately designed to prevent this sort of counter-cyclical policy.

Several member states have voiced concerns about this, as well as the IMF, ECB and Washington. SYRIZA had hoped to leverage this concern for its own plans to reverse the staggering austerity crushing Greece — but this strategy failed. Germany, we are told, refused to back down and other countries, like Spain, opposed it as well, allegedly on domestic political concerns.

And SYRIZA never had a plan B in case of failure precisely because the real threat posed by the crisis is that Greece (like all the other member states) cannot defend itself. If there was a plan B — if SYRIZA had any other option but German agreement to let it rewrite its reform program — the confrontation would not have worked as game theory.

Remember, the game in this case was “You can push us off the cliff, but we will take the eurozone with us.” That means Greece is playing to its obvious weaknesses and its inability to resist. For this tactic to be the least bit credible, there really cannot be a Plan B; which is to say, SYRIZA must be in the position where it has to accept whatever the outcome of the negotiations were.

SYRIZA, in other words, had to accept the idea that its banks could be pushed over the edge into collapse by the refusal of the eurogroup to let it rewrite its reform program.

In the end, the EC and the eurogroup backed down, no matter what anyone says. no matter what you read from the spin doctors. SYRIZA was given the chance to redesign the program. The only people who are pissed about this are the people who have always wanted to leave the euro; folks like Lapavitsas and the Greece Communist Party. Lapavitsas has written many scholarly papers about why leaving the euro is the only course Greece has. Others. like the KKE, want to leave the euro and the EU because they think this is the “revolutionary” position.

So, among SYRIZA critics, you have one group who pure and simple wants to go back to the drachma and run Keynesian stimulus; and you have another group that wants to go back, not to the drachma, but the soviet ruble — that is, who propose a soviet solution to the crisis. Both of these groups have always opposed being in the euro and, therefore, have every reason to spin this thing as a SYRIZA failure.

So, it turns out there is no alternative, right?

Second, there is the problem of whether neoliberalism is inevitable: Mason suggests “there really is no space inside the euro for a radical left government.”

I imagine there are a lot of people who agree neither with Lapavitsas nor KKE but who are still disappointed that “This is it? This is all we won? This is our ‘radical change’?” And for good reasons: SYRIZA has a chance to redesign the program, but only at the margins.

No radical Left party gets elected to make marginal changes. By any objective measure, SYRIZA being free to make marginal changes to its program is a failure in terms of what the radical Left promises. Didn’t the radical Left promise “Another world is possible? There is an alternative?”

Well, it seems not so much. It turns out that after a month of conflict SYRIZA has won the right to tax more rich folks and hand out more food stamps. If that is your idea of radical change, go for it. You are home free! But wasn’t there this idea we were going to fundamentally alter existing relations, not just adjust things on the margins?

All that bitching for 35 years and we only get to hand out more food stamps? Really? WTF?

The fact is, in the past 35 years the Left has done nothing more than recycle tired, worn out, soviet and Keynesian solutions to the crisis. However, in the West, the Left have watched the Keynesian solutions get discarded; and, in the East, the Left have watched the former USSR discard decades of planned production. Despite this the Left’s solutions have nevertheless hinged either on a revival of those failed solutions or some hybrid of the two.

This leaves SYRIZA with few options but tinkering at the margins of existing relations. As Paul Mason puts it,

“Many people who voted for Syriza are privately up in arms over the scale of the retreat – but they blame Germany first, Europe second and their own government a long, long third. They will, for now, swallow evisceration of their party’s programme on two conditions: one, that the government goes on delivering on non-fiscal policies.

It costs nothing, for example, to dissolve the detested riot squad DELTA, created after the unrest of 2008. The current plan is to “merge it” with the more established, less fascist infiltrated riot squads of the ordinary police. I would also expect the beefed up tax authorities to go in hard on a few symbolic members of the so called oligarchy.”

It never occurs to these poor deluded people that you labor with the tools you brought to the job; and the Left has no tools but the ones they inherited from the past: a past where the state was sovereign and represented mostly autarkic economic relations.

One thing we can be clear on: SYRIZA has not won the amount of “space” that allows a radical Left program to be carried out on the basis of either soviet or Keynesian policies. While Paul Mason argues the amount of fiscal space SYRIZA has won is open to question, clearly it is not enough to end poverty and unemployment in anything like a reasonable period of time.

Even if SYRIZA gains the whole of 3% budget surplus it is asking for this year and next in terms of running a surplus, 7.2 billion Euros is nowhere near enough to fix the problems of unemployment and poverty in Greece. Moreover, Greece remains under the thumb of the troika, with its every move being second-guessed by bureaucrats and hostile governments.

A Hail Mary play?

To put this in American football terms: SYRIZA desperately needs a Hail Mary pass to win this game. Since SYRIZA needs a miracle play, may I not suggest a way to get out from under the EU bureaucrats and create much more fiscal space this year?

And this is where SYRIZA has a powerful hole card: it is not just the government, it is also the management team of the largest single employer in Greece’s economy.

So how can it create more fiscal space and get out from under the thumb of the EU bureaucrats? The way this is done is simple: go well beyond the targets for state expenditure reductions this year: Simply furlough the bloated public sector for one day a week for the next year. In terms of actual expenditures, this will reduce salaries by 20% in the public sector. This effort could be expanded by making specific targeted cuts in the personnel levels of the military and security apparatus. The proceeds can be directed at much needed programs to protect those hit hardest by the depression.

This, of course, will strike at the salaries of the state sector very hard, but it is the state sector that needs to be reduced the most. For decades, each party, upon coming into power, has added a new layer of sinecures to the existing mass to consolidate its political hold. Imposing a reduction of hours on the state sector first is a convenient way to begin the communist effort to dismantle the state apparatus entirely.

Moreover, the reduction of hours in the state sector can be considered a pilot program for evaluating the impact on the working class a similar reduction of hours across the entire economy. With hours of labor reduced in the state sector, the state can begin to progressively implement a similar reduction for everyone.

According to figures I have found, Greece government expenditure amount to 60% of GDP; this is some 144 billion euros out of a total GDP of about 240 billion. Reducing state expenditures by 20 percent would free up almost 30 billion euros for whatever SYRIZA deemed fit to employ it for. Reducing the public sector workweek by one day would have the effect of freeing 4 times what can be won from the troika under the best possible agreement.

Moreover, state employees would enjoy a three day weekend permanently; to be followed in short order by the rest of the work force. In the United States in the 19th century, the government very often reduced hours of labor in the public sector first.

SYRIZA needs a miracle play to escape the clutches of the troika and to make radical economic changes to the economy. Fortunately, SYRIZA is now also the management team for the largest single employer in the Greece economy. From this position SYRIZA can establish the rules for all other employers in the Greece economy by the policies it follows as well as those it imposes by law.

If it took the lead in reducing the hours of labor for its own employees — giving them greater time for themselves — it could credibly argue this sort of measure will help the working class throughout Greece. Just as Wal-Mart pay increase is expected to have an impact on many other companies in the US, so SYRIZA can do this in Greece.

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