Sunday, February 12, 2012

Greece: Low Hanging Fruit

updated at 16:15 MST

"Riots" in the streets of Athens. Spoiled Greek workers who refuse to accept "austerity measures" and youth too lazy to work, are destroying that beautiful vacation destination they are lucky enough to live in, if you listen to the BBC or the Washington Post or any other of the corporate owned media outlets.

Liu Rui illustrations
Not so fast. Greek workers are already near the bottom in wages in the Eurozone. Greek unemployment is 20 percent overall and 45 percent among its youth. The Greek consumers' buying power is already feeble, and weakening it further will ensure the Greek economy continues its now five-year downward recessionary spiral.

So what's going on? 

Neoliberalism is what's going on. The economic paradigm launched by Reagan and Thatcher, quickly adopted by the International Monetary Fund, the World Bank, and eventually by the governments of all the global powers, including the US under Republican or Democratic leadership, is what's going on.

That scheme cooked up by the super wealthy who hold the reigns of power and who were seeing their profits decline in the post WWII years as Labor gained a more just share of the wealth its labor creates, the scheme passed off as an economic theory, designed to slash wages and benefits (austerity measures,) lower standards of living (austerity measures,), and slash government social programs (austerity measures) -- that's what's going on.

After reducing our wages and benefits as much as they could the political processes, the power elite, through their handmaidens the western Capitalist democracies, are now using sovereign debt -- what a nation owes -- and budget deficits created by lowering taxes on the wealthy, to bring workers and the few remaining unions to heel.

The recent series of bank bailouts are part of that plan. Governments have gone further into debt to hand money over to the big banks, and we are now required to pay back the resulting deficits in our respective national treasuries, with our taxes, of course, because the rich pay virtually no taxes any more. We have no say in the terms of these bailouts. The billions are simply handed over, with no conditions. The banks could be forced to ease credit to get the economy moving. They could be forced to halt foreclosures. Instead they sit on the money, use it to make more money by buying bonds from the government, for which we the people pay the interest. Foreclosures are sped up, are done illegally. No banker has been held accountable for anything.

Greece's debt problems are blamed on workers' salaries and pensions and both have been slashed several times, but like in the US, it was bank bailouts that caused Greece's deficits. It's all been part of a scheme of massive redistribution of wealth upward. Greece, which now spends 70 percent of its annual budget on debt repayment, with more debt to come, is overflowing with millionaires, almost none of whom pay taxes or have any intention of helping Greece get out of its current crisis. But that's how the wealthy have been acting all over. Greece is simply where the class warfare from the top down is being focused at the moment.

Earlier, it was Italy. Remember how Berlusconni was forced out and an IMF-installed technocrat took over? (Greece's new IMF-installed president is a banker). Before Italy it was Spain. Remember the mass protests? Before that, Ireland, and Iceland, and Portugal, and so on.

The screws were being tightened in the US, before the Occupy Movement reared its head. Recall how the president and congress were outdoing each other in how much they could slash from the budget, and Social Security and Medicare were in their gun sights. Occupy changed the national debate, and put a different cast on the presidential elections. Now, we're in re-election mode, for the time being, but you can count on the innate Neoliberalism of Barak Obama or whoever takes his place to reassert itself after the votes are counted.

Stephan Steinberg, writing in Global Research, goes into the particulars; how it's playing out now in Greece, and in an earlier piece written with Barry Grey, laying out in broader outlines how it's being done.

More on the subject here, including this late update.

Megan Greene, an economist at the investment advisory firm Roubini Global Economics specializing in Europe, told the BBC this morning that she expects Greece to eventually default on its debt, leave the Eurozone and reissue its currency, the drachma. Others have pointed out that this would allow Greece to devalue its currency, thereby increasing its exports, and pull itself out of its recessionary slide, which the austerity measures being imposed on it by the IMF and the Eurozone are only making worse. Greene thinks the ongoing round of "bailout: loans are intended to be temporary and that Greece will be "cut loose," i.e., allowed to leave the Eurozone and reissue its currency. That step is being postponed until Europe's banks can be propped up enough the withstand the shock to financial markets of Greece dropping the Euro, she said, and until after German Chancellor Angela Merkle stands in upcoming  elections in Germany.



  1. Greece is a disaster. 20% of the nation's employment is in the public sector. The bureaucracy needed to support this many jobs chokes private business and entrepreneurs with red tape resulting in a significant underground economy - cash businesses (or cash only transactions) which sidestep the public tax revenue system. What's more, as you've pointed out already, there is widespread cultural acceptance for tax fraud. Under-reporting of income is not limited to the well off, nor does the taxing authority even bother to enforce many of its laws. For this reason alone, Greece is doomed. Were it currency sovereign and not tied to the Euro, it could inflate its way out of its problem by running the printing presses and incur much less pain than it is enduring now and for much of the recent future. Italy and Portugal also harbor significant cultural acceptance to defy and ignore the tax collector with little penalty or accountability. The tax pledge/fair tax/tax cuts to solve every problem folks should take notice that their persistence to weaken the tax system masks significant structural dangers.

    1. Thanks for the comment, DD.

      The Greek public sector accounts for 40 percent of GDP, which is less than the US (45 percent) and the UK (50 percent). I think something else is going on, too.

      It seems like an increasing number of people, including der Spiegel, Germany's New York Times/Time Magazine, are advocating the solution you allude to, for Greece to leave the Euro and declare bankruptcy.,1518,813919,00.html

      They and others wonder why the austerity packages the EU/IMF/European Central Bank have already tried (forced upon Greece) have been utter failures, and indeed, have only made things worse. Again, I think something else is going on.

      If you have the time and inclination, the latest austerity package, the one approved last weekend, is gone over in some detail by Mike Whitney at Counterpunch. It reads like a Republican wish list in the things it takes from workers and the perks it gives big business, most of which are either more of the same things that have already failed or have nothing to do with the economy, like forcing Greece to allow the sale of banned baby food, making it easier to register taxi cabs and "streamlining" the civil courts.

      Also, how Vulture Capital is profiting off Greece.

      More articles that put this in the context of the Neoliberal assault on the working class.

      And if you have a free afternoon, an exhaustive analysis of the Greek economy from WWII to the debt crisis