Saturday, January 24, 2015

Election Eve: Greece

We'll let Tariq Ali (a long time British Leftist who at least orbits Trotskism) be our guide to tomorrow's Greek elections. An interview with him appears in Counterpunch.

Let's stipulate that Syriza, the radical Leftist party headed by Alex Tsipras, will probably win the election. That's not in too much doubt. The interesting question is what happens after that. Mr. Ali's lede indicates.
If SYRIZA wins it will mark the beginnings of a fightback against austerity and neo-liberalism in Europe. Two concurrent processes will be in motion from the beginning of the victory. There will be a strong attempt by the EU elite led by Germany to try and tame SYRIZA via a combination of threats and concessions. The aim of this operation is simple. To try and split SYRIZA at a very early stage.
Let's leave aside the term neo-liberalism for the moment--that ill-defined boogeyman. Mr. Ali predicts that the EU (specifically Germany) cares enough about Greece to engage in ornate political machinations, eventually reaching some compromise accord with the new Syriza government.

I don't think that's likely. I think Germany wants to expel Greece from the Eurozone. They have no interest in any compromise.

In 2010 Greece signed an agreement with the EU, the IMF, and the ECB (the Troika) in exchange for a bailout. This prevented a default on Greek debts. In return, Greece agreed to austerity measures, including structural reforms and privatization of government assets. Austerity has been especially difficult.

Greece hugely over-regulates large swathes of its economy, as this article about drug stores indicates. One needs a government license to sell products such as Tylenol or Advil. Thus Greece is plagued with an overpaid, inefficient workforce, along with under-served, needlessly poor consumers. Regulations prevent people from buying products they want and need, much as the taxi medallion system prevents consumers from procuring taxi services conveniently and cheaply.

Syriza represents the protected workers, who despite their inefficiency nevertheless feel entitled. This is the conservative movement in Greece, doing everything possible to maintain the status quo. They want to stay in the Eurozone, because their standard of living depends on cheap credit from Germany. But they don't like structural change, because that will open up the market to the benefit of consumers.

Accordingly, Syriza wants to ditch "austerity," and replace it with a free lunch, i.e., more cheap loans from abroad. It won't work. The Germans won't lend the money. Further, I think Germany believes they can expel Greece relatively painlessly now, i.e., it won't result in a Euro-wide financial crisis.

So contrary to Mr. Ali's prediction of a tense negotiation, I predict an early Grexit. The Troika will yield only on the most superficial, cosmetic points. Syriza can't give that much away--they campaigned on their ability to renegotiate. But they won't be able to deliver. So unless Syriza completely caves, Greece will default on its debt.

Default means that the ECB will cut off the Greek banks. Euros within Greece will flee the country as fast as they can. The Greeks will be forced to print up Drachmas in order to pay their employees. Greeks, who don't yet know the meaning of poverty, will soon find out.

Neo-liberalism is a dysphemism for efficiency and globalization. Contrary to what Mr. Ali maintains, efficiency benefits consumers first and foremost. Walmart, for example, assures always low prices because of the efficiency of their supply chain. Globalization gives consumers more choices in what to buy. They can purchase the best possible product and the cheapest possible price from anywhere in the world.

So neo-liberalism, properly understood, is good for human beings. It has pulled 400,000,000 Chinese out of poverty. But I take Mr. Ali's point--it's bad for the workers in highly protected, over-regulated, uncompetitive industries. Those, unfortunately, are Syriza's constituents.

Countries that have rejected neo-liberalism are either poor, very poor, or total basket cases. Argentina is perhaps the best off of the bunch. Because of an earlier default, they haven't been able to access foreign capital markets for a couple of decades now. But they're still able to buy products on the global market.

Venezuela, while not yet in default, has destroyed its own economy. Its trade with the rest of the world is in terminal decline. The oil industry lies in ruins because of stunningly bad management and lack of foreign investment. Shoppers Beggars now wait in line for things like milk and toilet paper.

Cuba has long since renounced trade. Recent TV clips filmed on Havana's seaside boulevard show as much--the dilapidated buildings, the ancient cars, the small-town traffic, etc. Like Venezuela, even common consumer goods are tightly rationed. Nobody is allowed to buy anything. This is the socialism of poverty.

We need not speak of North Korea, the current socialist utopia.

There is much in Mr. Ali's article that I agree with. He says,
[The European Union is] in a very bad state. It subordinated politics to economics and was undemocratic from the very beginning. Blaming ‘lazy Southerners’ for the crisis is grotesque. Its not just the Left which argues this (in fact the Left has been with some exception very weak on the EU), but hedge-fund kings like George Soros who recently said: “My worst fears are confirmed…This is what I was afraid of, that the Euro would be preserved. …pervert the venture, and destroy the European Union. Instead of the solidarity (the EU) was supposed to have embodied, it became every country for itself.” And Pope Francis in the Vatican, to the left of every EU govt today proclaimed that: “The great ideas that inspired Europe seem to have lost their attraction, only to be replaced by the bureaucratic technicalities of its institutions.” The single-formula approach on the currency union is dead in the waters of the Mediterrenean. An alternative needs to be developed. It would be better if this were done by common agreement, but that is unlikely so new radical governments might have to take unilateral decisions.
This is mostly correct. And the first step to dismantling the euro is a Grexit. A more graceful way will be found to facilitate a further breakup. The euro was always a very bad idea.

Just to be clear, this post predicts that:

  • Syriza will win tomorrow's election.
  • Greece will be out of the Eurozone before the end of 2015.
Tell me if I'm wrong.

Further Reading:

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