A European Solution to the Crisis?


«Any strategy of the Left must incorporate supra-national solutions to supra-national
problems», says the economic spokesman for Syriza, in the Hellenic parliament


Euclid Tsakalotos


In 1976 the Labour government faced a financial crisis and turned to the IMF, with Jim Callaghan announcing the end of the keynesian era. Of course it is true that the Alternative Economic Strategy, which had signposted a shift to the Left as a response to the first post-war crisis of capitalism, was never really implemented. But it is equally true that the 1976 debacle was registered as a defeat of the Left. Seven years later, the Common Programme of the Left in France suffered a similar fate. The 1983 financial crisis in France led to Mitterrand’s shift to more orthodox economic policies. Two years later there was a financial crisis in PASOK’s first term in government in Greece (1981-1985) and, although PASOK won the subsequent election in 1985, once more the more radical phase was replaced by orthodox stabilization policies.

These three defeats paved the way for the hegemony of neo-liberal ideas that have dominated ever since, with the result that the era of globalization, and economic integration within the EU, was immune to leftist influences. In our book Crucible of Resistance: Greece, the Eurozone and the World Economic Crisis (Pluto Books), Christos Laskos and I argue that the Left cannot ignore this experience, and in particular the inability of leftist national strategies to take on the might of financial markets and MNCs. Any strategy of the Left must incorporate supra-national solutions to supra-national problems. Only through the taming of financial markets can we create the space for democratic decision-making and social experimentation that challenge the productive and consumption prototypes of the neo-liberal era.

The reference to democracy is not secondary. As Doreen Massey, and the late, and much missed, Stuart Hall, have persistently argued, the crisis of 2008 was one of many moments, in which the economic and financial is merely one. The hollowing out of democracy was central to all neo-liberal strategies. The same could be said with respect to the increase in social and regional inequalities. Both before and after the crisis, all those struggling against the inequalities and discrimination, which are endemic to the market were likely to be labeled as populist as if a concern with jobs and pensions, a sense of belonging to a community, and a desire for voice with respect to the direction of society and the economy were all things which could be dispensed with in the era of modernization and globalization. The hope of neo-liberals was that the system would be legitimized ex post by results: liberalization, privatization and de-regulation would set those economies, which took the project seriously, on a higher growth trajectory which would feed unending private wealth and consumption.

It is now clear that this project failed well before the crisis of 2008. As not only Joseph Stiglitz, but also Larry Summers – the voice of the thinking man’s establishment – have pointed out the existence of a savings’ glut indicated the lack of profitable opportunities. Thus the investment of immense funds in the financial system, and the subsequent financial crisis cannot be deemed exogenous to the workings of the neo-liberal economy. Moreover, lending to the poorer sections of society, what Colin Crouch has termed “privatized keynesianism”, not only shored up demand but helped to placate those sections of society that faced stagnant wages and reduced benefits. In Greece, and more generally in the South of Europe where “sophisticated” financial systems were absent, such legitimacy was provided by state employment, turning a blind eye to tax evasion and other forms of clientelistic politics. It is true that Greece faced greater fiscal imbalances than elsewhere, but these imbalances can be seen as a functional equivalent to the response to the problem of legitimacy faced in more liberal economies. And contrary to the dominant narrative within the EU, Greece had its own Blair, Kostas Simitis prime minister between 1996 and 2004, who carried out significant neo-liberal reforms such as privatizations and deregulation of labour markets. The Greek tragedy represents a crisis of a particular form of a neo-liberal economy, not that of a failed statist state.

As a result of the structural reform programme imposed by our creditors and the Troika, Greece has suffered the biggest fall in incomes, the sharpest increase in unemployment and the greatest increase in the debt/GDP ratio of any advanced economy in peace time. The failure is not just economic – talk of a humanitarian crisis is no exaggeration. But at the same time, it is important to point out that what is happening in Greece is a difference in degree, not kind, to what is going on elsewhere. The UK may not be in the euro, it may not have a structural adjustment programme, but the policies being implemented by the Cameron government come from the same policy stable.

Greece needs to quickly change direction. It needs to address the humanitarian crisis, to promote a new model of the economy that challenges the productive and consumption prototypes of the neo-liberal era, and to democratize the state. This is the approach of Syriza, which is hoping to ruffle feathers in Sundays’ European elections. But Syriza cannot go it alone. In our book we argue that if Syriza is to negotiate a new deal within Europe it needs a massive wave of solidarity to begin to shift the balance of forces within Europe. For any alternative strategy needs to create space for its democratic programme of economic and social reform. Exiting the euro, and returning to a national strategy, would isolate us from those experiencing the same neo-liberal policies elsewhere, lead to a return to the competitive devaluations of the 1930s, and cede the ideological ground to those nationalists who want to turn the struggle of working people in the whole of Europe for a new kind of politics into one of Greece versus Germany (or the South versus the North). Moreover as the experience of the 1970s and 1980s has shown such an approach is likely to fail in any battle with financial markets. Changing Europe may seem, at times, to constitute a herculean task, but it is not clear that a national strategy is any easier. Social transformation needs to begin at the local and national level but we need to “act locally but think globally” if we are to seriously challenge the forces of neo-liberalism.




  ΧΡΟΝΟΣ 13 (05.2014)