THIS IS GOING TO GET UGLY
When it comes to the economics of the Greek crisis, I defer to those who know better what they are talking about than a sociologist. The source I use most is Paul Krugman’s Blog at the New York Times. I’ve been reading Krugman for many years and his blog, as a source, has four things going for the lay reader. First, he explains the complex economics well. Secondly, he’s been pretty consistently right in his predictions. When he’s wrong he self corrects. Finally, he points to other sound sources of information to expand the analysis. Can’t ask for more than that, and I can’t offer more than that. So if you want the economics, go to Krugman and friends.
On the other hand, there is an interesting sociological story going on that is consistent with my own theoretical work. I’ve been looking into the interactions and conflicts existing between the vast majority of working people and elite groups. Interestingly, the category I use for describing working people is “Demos”. I’m interested in democratic forces within society, which does not necessarily mean democratic governance, but rather democratic demands from those at the ground floor of society toward those in the executive suites. So, yes, I have made some analysis of the Greek crisis. Now, it could be said, there’s is a living experiment under way to help inform my research.
With the now infamous Greek “no vote” we have a clear picture of the will of the nation’s Demos. The last few years of intense austerity policies are a clear example of how the elite is willing to bail itself out at the expense of the Demos, regardless of the costs. The Greek economy was a patchwork of creative accounting largely quilted together fifteen years ago by Goldman Sachs, to hide the nation’s debt and gain entrance to the Euro. This was, it turned out, a bad derivatives investment–and we all know how those work out.
Of course, the corporate elite, in this case multinational finance companies, simply do not make bad bets, at least none that they are not willing to pass off to the Demos as necessity dictates. Greek debt became a major liability after 9/11 and then fell off a cliff as a result of the finance induced Great Recession of 2009. Regardless, those creditors wanted their money and they were willing to inflict any measure of suffering on working people to get it. So the European Central Bank offered a couple of bailouts to Greece, bailouts that went mostly to pay off the investors rather than to stabilizing the Greek economy.
For the Greek Demos, however, there would be no bailout. Strict austerity policies were put into place accompanied by large tax increases as stipulations for extending the loans. Cutting spending and raising taxes are exactly the opposite of what is needed during an economic contraction as Krugman has so valiantly argued time and again. No surprise that the Greek economy collapsed. But the policy of the European Central Bank, the International Monetary Fund and the European Commission, known as The Troika, remained constant. The beatings would continue until confidence was restored. Krugman likened this to medieval physicians bleeding their patients. As the Greek Demos bled, more leaches were applied.
Yesterday, the Greek people decided that they were no longer willing to submit to increased economic flogging demanded by Germany and the creditors. Two thirds of them stood up to the finance and banking elite and declared that enough was enough. This despite the scare tactics and threats heaped on the Demos should they actually stand up for their basic human dignity in the face of elite power. According to Krugman, “the campaign of bullying — the attempt to terrify Greeks by cutting off bank financing and threatening general chaos, all with the almost open goal of pushing the current leftist government out of office — was a shameful moment in a Europe that claims to believe in democratic principles.”
Well, the financial elite may claim to believe in democratic principles, but as a practical matter they don’t. They believe in accumulating power. The very existence of organizations like the Troika is contradictory to democracy. Democracy is exercised from the streets. In Greece, democracy was exercised in electing Tsipras and his Syriza Party to represent them. Tsipras, deriving his power from democratic movements turned to the streets in a gamble to re-establish the legitimacy as an agent of the people in the face of intense pressure from the creditors. Two thirds of Greeks decided that they would rather stand with Tsipras in the face of an uncertain future than face any more punishment for sins that were not their own.
And this future will not be easy. The Troika cannot allow the Demos to gain power at its expense. It must reassert itself in the face a democratic upsurge. It’s not about economics at this stage of the game. It’s very likely that it never was about economics. The IMF has concluded that the Greek Debt cannot be paid off. So it is clear that economics is a secondary factor to good-ol’ sociological power games. As Krugman pointed out, a “yes” vote on the part of the Greeks would have been devastating for European democracy as it would have set the standard by which the Troika gained legitimate veto power over national governance throughout the Euro Zone. A “no” vote, however, disempowered the Troika. Institutions like the Troika and its associated organizations are conveyors of social power. Empowerment is central to the motivations of any institution.
The Troika will not allow this slight to go without answer. They have already admitted as such. The economic catastrophe that they predicted should the Greeks choose “no” is not a natural result of economic forces at play. Rather it is a man made catastrophe the likes of which is decided upon by those who sit in the board rooms of the ECB, IMF and the EC. it is a human decision to refuse further loans to Greek banks. A more proper description of the coming economic catastrophe is “vendetta.”
It is probably safe to say that fear of this Troika Vendetta motivated one third of Greeks to vote yes to further floggings. The overwhelming majority, however, said no. To a certain extent this is a result of the Troika overplaying its hand. After all, economic catastrophe has already befallen the Greeks. Threatening further punishment has little resonance for a population already smarting from the lash. On the other hand, this “no” vote is the culmination of democratic movements in Greece unwilling to submit to further assaults on their national dignity. If catastrophe is to fall upon me let it be at my own hand.
There are really only a few options ahead for the Greek Demos. The Troika can come together and open legitimate negotiations with Greece in which enough of the debt is forgiven and austerity lifted to spread the costs more equitably. This would be optimal, resulting in the least social instability and, presumably, faster economic recovery (I’ll defer this latter point to the economists). On the other hand, the Troika could double down forcing the dreaded “Grexit,” in which case Greece will have to develop its own legitimized economic institutions by which to rebuild, cutting the Troika out of Greek affairs. It serves the Troika and the Greeks to negotiate in earnest.
This may be one of those historic moments in which the Demos is able to push concessions from the Elite by simply saying “NO!” Saying no is, quite often, the most powerful democratic statement. Or it may be a moment in which we witness the brutal extents to which the finance/banking elite is willing to go to further empower itself.