Monday, 6 July 2015

Time to listen to the Greeks?

The thing about a crisis is that it’s a great moment to re-examine some fundamental assumptions about what on Earth you’re up to. And when it comes to the European Union and, in particular, the Eurozone such an examination is badly overdue.

No one in authority in the European institutions will see it that way, but what this means is that the Greeks may well have done them a service.

By voting massively to reject the austerity package being forced on them by the Troika of the European Union, European Central Bank and the IMF, the Greek people have sent us all an important message. It is that though the Greeks may be in serious trouble, and the difficulties there have to be addressed, it can’t be done exclusively on the backs of those least able to cope with it.

It is almost unthinkable that a modern economy should shrink by a quarter over five years. 26% of the workforce is out of work, and that figure reaches nearly 50% for the young. Pensioners have seen their pensions cut in half – pensions to which they had loyally contributed throughout their working lives. To behave in that way is to break any kind of covenant there may be between government and people – it is to say that even if you do what we ask you to do, and the law requires of you, we reserve the right to refuse you the reward we’ve promised, even if that plunges you into penury.

To say “no” to that kind of action is practically an obligation.

Guardian photo of young Greeks celebrating the "no" vote
Nor does it matter only to the Greeks. Austerity politics are being pursued in a great many countries, particularly across Europe. And yet we know they fail. Back in the 20s, in the last great crash of the proportions of the current one, the immediate reaction of the Right was to tighten belts and impose austerity – though, as ever, not on themselves, only on the poor.

The result was mass unemployment and back-grinding poverty. In Britain, we had the Jarrow Hunger marches, starving workers converging on London from the North. In the US, we had “buddy, can you spare a dime?”

Fortunately for all of us, the US had the genius to find a man of Franklin Roosevelt’s calibre to replace the austerity incompetent Herbert Hoover. He applied policies of public investment in large projects to stimulate the economy and return it to growth. And at last the problems of the slump began to be solved.

This time round, we’re dominated by people of the Hoover persuasion once more, and they’ve made Greece the test bed of their policies. Where, unsurprisingly, they’ve failed again. Even the IMF has admitted as much, in a report that was leaked last week: they conclude that even if it applies the austerity policies precisely as prescribed, Greece cannot sustain its debt.

What Greece needs is help not austerity. It needs debt relief so that it can start to invest in itself, and get itself back to growth.

And by the way – a lot of economic activity these days is in services, where you’re not manufacturing, you’re not even consuming an intolerable amount of energy, you’re just using people to provide service to other people. Growth, in other words, does not have to be environmentally disastrous.

The irony is that the entire Greek government debt works out at $630 per inhabitant of the Europe Union. If the EU took on half the debt and cleared it over ten years, we’d be talking about just over $30 a year per inhabitant. What’s that? The price of a cheap shirt?

In any case, no one’s asking for that extent of debt relief. The question we should be asking, though, is if we can’t make that level of sacrifice for a member of our own union that is in desperate trouble, then what is our union for?

The Greek referendum result poses that question starkly, to us all.

And we too should be asking it, of our governments. In Britain, for instance, government is about to take £12 billion out of the benefits bill. That may sound like a necessary retrenchment at a time of economic hardship. But what it really means is that £12 billion of demand will go out of the economy: recipients of benefits spend what they receive, so every penny goes into generating demand.

Is Britain really saving anything by making those cuts? Are other European nations or the US doing themselves a favour by seeking austerity solutions? Or are we making things worse?

The Greeks have given their answer. It might be a good idea to listen to them.

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