Greece at the Cross-Roads: A Test Case of Austerity

Austerity entails sacrifice. It suggests an ascetic mental cast and, perhaps secondarily, enforced or extreme economy (Webster’s). Speaking personally, I have always favored an ascetic cast of mind as the ultimate negation of conspicuous consumption, and beyond, a dependence on consumerism as a principal mode of class identity, and a gut-addiction to luxury, as diversion from the real world of living. The ascetic cast is absolutely essential to a gracious view of Nature and respect for the environment. And it also rules out militarism as incompatible with a nation’s servicing of the basic needs of its people. Asceticism promotes sharing and conserving of scarce resources and, be it said, a spiritual cleanliness not cluttered with status needs and consideration. So much on the positive side. But what happens when what I take to be a moral category of human belief and conduct has become politicized to favor exactly the opposite societal results? For austerity has been the tool of upper groups to fasten poverty on the remainder, a bone-dry social system devoid of everything from progressive taxation and enforced business regulation to a vibrant social safety net—all in the vacuous name of balanced budgets.

Austerity is the battering ram of plutocracy to enhance its own wealth and subjugate working people and the poor to unfulfilled lives often coming down to human social misery. It is a class weapon of power, a means, thoroughly respectable at that, of promoting class differentiation and wealth concentration. Not unexpectedly, it is the method of choice of the IMF, World Bank, EU, and, standing behind all three, the US (though meant to apply to others more than to itself). It is legitimation in its nastiest form, meant to seal a hierarchical order in place at the expense of its most deprived members. Within the EU, Greece became the designated victim, 1.e., sacrificial lamb, to justify a malicious economic policy-construct pointing the way to where capitalist development was heading: greater inequality through enforced strict ground rules that favor corporatist goals of financial-business hegemony over governments and peoples.

These thoughts are occasioned by Yanis Varoufakis’s op.-ed. article in the New York Times, How Europe Crushed Greece, (Sept. 9), in which an acknowledged Left voice, anti-austerity critic bar none, who nonetheless may be sending a mixed signal about a solution to Greece’s debt problem. He writes, “Since the beginning of Greece’s financial crisis in 2010, two prime ministers have been swept from office after they were forced to adopt an unfeasible package of austerity measures in exchange for a bailout from the troika…. It pains me to watch the same fate befall a third prime minister, my friend and comrade Alexis Tsipras.” Actually he had been quite critical of Tsipras when he capitulated to the demands, here however calling it “forced,” while still acknowledging that this “caused a split in our party, Syriza, [my CP article at the time coming down hard on Tsipras as a compromiser], between those who reluctantly agreed to implement the program and the rest of us (approximately 40 Syriza members of Parliament, out of a total of 149) who did not.” A new general election is scheduled for Sept. 20.

Varoufakis has clean hands; he resigned as finance minister “over the troika’s ruthless, humiliating imposition,” and will not stand for Parliament this time, seeing it as incapable “of endorsing a realistic reform agenda for Greece.” Nor will he “support the adoption of a troika program that everyone knows is destined to fail.” So far so good. Yet he de-fangs the tiger, a significant strategic easing of the threat: “I will not, however, join those who think that exiting the Eurozone, to bring about a major devaluation with a reintroduced drachma, is in itself a program for Greece’s recovery.” Hard to know what he most objects to, the exit or the major devaluation of the drachma—which in exiting the EU may not require a drastic devaluation. Sovereign control over the nation’s currency alone, I surmise, would work to Greece’s advantage and oppose unwanted austerity measures imposed from without. It is one thing to be part of a currency union, another to accept dictation from a supra-authority prejudicial to the nation’s internal needs (especially in light of globalization, multinationals, mega-financial operations).

Varoufakis, referring to “the eurozone’s existential crisis,” a rather high-flown characterization of a fairly straightforward policy choice, that between modeling the euro “on the international gold standard of the interwar period or on a sovereign currency, like the dollar,” alternatively, as represented by Germany and by France, establishes the context for the plight in which Greece finds itself. He explains the difference, implying the presumed quandary in which the EU finds itself. On one hand, “The gold standard relied on strict rules that were unenforceable during a crisis. In a severe downturn, these imposed the greatest burden on the worst-hit economies and thus made exit the only alternative to a humanitarian crisis. [Varoufakis is opposed to this alternative, yet rejects the logical response—exit.] This is the reason that President Franklin D. Roosevelt took the United States off the gold standard in 1933, expanded the money supply and helped pull America out of the Depression.” On the other hand, more briefly, “A sovereign currency, or state money, demands a different, more flexible set of responses based on political union, as the French government and others have recently proposed. The great questions that Europe must answer are: What kind of political union do we want? And are we prepared to act quickly enough to prevent the fragmentation of the eurozone?”

This is troubling. Why a political union in the first place, particularly from a Left perspective, when (a) a superior authority is going to define and implement rules, narrowly capitalistic, that weaken the society’s democratic and welfare dimensions—which in Europe’s case, as a practical matter, goes beyond the kind of political union to a recognition of Germany’s own economic ascendancy not shared by, say, Greece, and (b) the shadow of the military alliance hangs over whatever kind of political union is envisioned. In sum, Varoufakis is either evasive or superficial—by rejecting exit out of hand. My sense is that the EU, in the way it has been set up, is inherently unable to achieve democratization of its internal structure given the influences acting upon it. Alternative? This may seem far-fetched, but why should not Greece break its EU dependence and look for assistance in trade and investment to Russia and China! Of course, the roof would fall in, not least because breaking ranks might encourage other EU members similarly situated to do the same, and more basic, start the additional unravelling of NATO as well. So, from this corner, Varoufakis appears timid too a fault, occupying a position somewhere down the middle wracked by “the eurozone’s existential crisis.”

He writes, ascribing to the non-rules-based economy a degree of autonomy (France) greater than that afforded by a rules-based one (Germany), when neither one offers exemption from austerity, which, one suspects, resides in political union where power is not, and would not be, equally distributed: “Europe’s indecision is a result of a deep rift between Berlin and Paris. Berlin has traditionally backed a rules-based Eurozone in which every member state is responsible for its own finances, including bank bailouts, with political union limited to a fiscal overlord’s possessing veto power over national budgets that violate the rules.” [From here “responsible for its own”—this looks like pseudo-sovereignty, with the “fiscal overlord’s” veto power determinative.] By contrast, “Paris and Rome, cognizant that their deficit position would condemn them to a slow-burning recession under such a rules-based political union, see things differently.” Germany would not accept an alternative to the troika plan, here he is correct, because it would weaken its hand in relation to the French. One cannot help but sympathize, however short of expectations the analysis: “Thus little Greece was crushed while the elephants tussled.”

Varoufakis did have a counter plan, but with Jeffrey Sachs, Larry Summers, and Norman Lamont (former British Chancellor of the Exchequer) as advisers, one can be pardoned for not being impressed. Based on debt swaps “to reduce the public debt’s burden on state finances,” in turn “render[ing] Greek sovereign debt eligible for the European Central Bank’s quantitative easing program,” we see the renewal on the same institutions (ECB) which helped bring Greece down in the first place. He also wants—entering the never-never land of privatization—“to generate homegrown investment” through propos[ing] a development bank to take over public assets from the state, collateralize them and so create an income stream for reinvestment.” If Syriza is the Left of the Left, let’s have no further illusions about Greek socialism. Bravely, he calls for the EU to make “the transition from ‘We the states’ to ‘We the European people.’” I would like to see more.

My New York Times Comment to the Varoufakis article, same date, follows:

I find Varoufakis’s citing of FDR going off the gold standard a convincing point for rejecting the German/troika strict-rules-based standard as most discriminatory to Greece and other weaker EU countries and economies. There is obviously something fallacious about the assumptions underpinning the EU. (Yet I’m perplexed that Varoufakis looks to Sachs and Summers for advice, which doesn’t go along with his critique of austerity.) How much is the EU meant to be a true political union, even granting US, IMF, and World Bank influence, and how much merely the political-economic foundation for NATO, a military alliance system positioned to confront and challenge Russia?

That is a serious question, I think, because the EU nations are forced into an austerity framework, against their better interests, in order to support a US-inspired revival of the Cold War. Here foreign-policy goals trump that of rational international-economic organization. Yes, Greece is caught in a squeeze, as Varoufakis suggests, but how nice, I believe, if it left the eurozone (just as FDR acted at the London Economic Conference), and was followed by others–a significant improvement in their economic futures plus an important nod to detente and diminished tensions.

Norman Pollack Ph.D. Harvard, Guggenheim Fellow, early writings on American Populism as a radical movement, prof., activist.. His interests are social theory and the structural analysis of capitalism and fascism. He can be reached at