Talk by Nantina Vgontzas
February 6, 2015 Forum
“After the Greek Elections:
The Future of Austerity in Greece, Europe and Beyond”
Reversing Austerity and Disciplining Capital:
The Case for Left Developmentalism in Greece*
*An edited version of this talk can be found in Jacobin.
On the panel thus far we've discussed quite a few of the constraints that Syriza faces in reversing austerity in these next few months. Syriza, of course, is negotiating from a position of weakness, but at the same time, the various reactions we're seeing from European ruling circles the tricky dilemma they face, too. Either they could agree to a debt writedown and risk a domino effect that would create openings for other countries to challenge the terms of their sovereign debt. Or they could play hardball and, if Syriza doesn't back down, kick Greece out of the Eurozone, which would risk a different kind of domino effect where other peripheral economies would consider exit and default options.
The situation, of course, is much too fluid for us to predict the outcome, but I remain somewhat optimistic given that the European and especially German elite would rather have a monetary union with some debt restructuring than no monetary union at all. Herein lies Greece's potential leverage.
We can anticipate the European Union and the European Central Bank to continue to stretch the situation to its limits, resorting to the kind of blackmail we've seen in recent days, but knowing full well that in the final hour, Syriza ultimately might secure a debt writedown or swap or some equivalent. I agree that this is all a big if, but if mobilizations intensify and Syriza stands firm, such an outcome would not only transform the situation in Greece but really shift the balance of power in Europe.
You might be wondering: why would the German elite opt for a Eurozone-lite and not find a way to trigger a Eurozone collapse to their benefit? In other words, why preserve the monetary union if the left manages to tinker with it? I would argue that, though there's room for Greece and potential allies to change certain structures around loans and investment, there's a very important mechanism that can't be changed unless German capital is challenged on its own home turf, namely through an uptick in labor militancy and the rise of the German left. And German elites assume, rightly so in my opinion, that politically this won't be a possibility for quite awhile.
The mechanism in question is wage suppression, which the economist and now Syriza MP Costas Lapavitsas has greatly focused his critique on. German capital has been suppressing wages since the formation of the monetary union, but we have to go back a bit further to really understand its significance.
We should recall that Germany was one of the leading postwar industrial producers, competing largely against the United States and Japan. As we know from the economic historian Robert Brenner, the industrial overcapacity resulting from this competition led to the profit crisis of the 1970s. Since then, each major set of producers has sought to recover from this crisis in different ways. In the United States, we have seen manufacturing greatly phased out and replaced by the rise of dollarization, to which its regional orbit is especially subject. Germany and Japan, on the other hand, retained a greater share of their industrial capacity, and their own regional orbits were primed to be expanded as export markets. The Eurozone has only deepened this dynamic, with wage compression used to keep German exports competitive, the demand for which was maintained by massive levels of lending in the periphery.
The upshot here is that there has to be a coordination of wage adjustment policies to fundamentally break the cycle of trade imbalances. So how does that analysis square with Syriza's longterm strategy?
To briefly summarize their position, the dominant faction leading Syriza views the European Union as a place where the left can consolidate executive power and turn Europe into a progressive project of political cooperation. The now nearly legendary finance minister, Yanis Varoufakis, has extended this logic even further by arguing that the Eurozone itself can be reformed to the benefit of all its members. Varoufakis has articulated what he calls a “modest proposal” that consists largely of quantitative easing and restored investment throughout the Eurozone. The key is that these reforms would be powered by the industrial heart of Europe, that is, Germany. Indeed, Varoufakis has said that Europe “needs a hegemonic Germany” that would push for savings to be shifted to productive activities even in the periphery.
But now we're back to our earlier problem, which is that, even if mechanisms of quantitative easing and investment are introduced, wages won't be adjusted unless German capital is forced to adjust them. And again, that won't happen unless there's a government in Germany representing popular interests. In the meantime, peripheral economies will remain trade deficit economies subjected to the regional orbit of the core. It's a kind of neoliberal straitjacket in which efforts of transitioning to an alternative growth model will be greatly constrained, if not impossible. So, while we must strive for an internationalist left, for a progressive Europe, we have to be cognizant of the limits created by the current political conditions of the core.
Now, at this point in the conversation, I'm usually asked, given what the political situation is, given the humanitarian crisis, given people's concerns about the boat being rocked too far too fast, how much can we ask of the left at this point?
It's a legitimate question. Indeed, there's an appealing political logic on Syriza's part to reclaim some hope for the Greek people while eschewing the fears that might emerge in positing a more radical break at this point, especially when over half the population is in favor of staying in the Eurozone. I do think that, several years ago, Syriza did miss an opportunity to really engage people on this question. But now, after a period of considerable decline in popular mobilization, it seems that the most politically sound option is to attack austerity while ensuring some kind of stability. Part of that strategy for Syriza includes not exiting the Eurozone at a moment where the left would take much of the blame for its immediate aftermath. It's a different situation if they try all that they can to negotiate and then come to a point where they either must capitulate or will be forced out. In that sense, we could view Syriza's strategy as a kind of gradualism necessary for the times.
Assuming, then, that Syriza does not capitulate, there are two possible outcomes. One, Greece is forced out of the Eurozone. Or two, it stays in the union and gets a debt writedown, but ultimately the fundamental Eurozone dynamic of trade imbalances remains intact. Of course, in the first scenario, Syriza necessarily will need a Plan B. But I hope to have shown why even in the second scenario, it might still need a Plan B. In short, if the left cannot make the economy more productive, the gamechanging gains that might be secured from this current battle might in the next crisis be overturned. And the little hope that people have left, that's been rekindled, will be lost.
There happens to be a sizable force in Syriza that has articulated this position and even offered blueprints for an alternative. I'm referring to the Left Platform, which has over 30 percent support within the party. Some of you might be familiar with the Grexit plan that Lapavitsas has outlined, under which the country would nationalize its banks, impose capital controls and devalue its currency to increase export competitiveness. The most updated version can be found in his latest book with Heiner Flassbeck, Against the Troika: Crisis and Austerity in the Eurozone, released by Verso on the day of the elections. This strategy would give the Greek government much more autonomy for fiscal expansion and moreover for compelling capital to invest in productive activities. It would allow the left, in other words, to pursue an alternative growth model. All of this, of course, would be necessarily undergirded by continued popular support and a deepening of working-class formation.
Now, there are a number of questions and very real fears that this proposal raises. For the sake of time, I won't get into all of them here, but I would be more than happy to continue this conversation in the Q and A. What I'll say for now is that there are, I think, three understated points when this debate happens.
The first is that the Greek state is now more than ever in the position of disciplining capital, and by that I mean compelling capital to become more productive. This is because quite simply there is now a section of Greek capital in whose interest it is not to leave Greece. Greek capital today is not just the Onassisides who could have just taken their ships to other locations, like in the 1950s and 60s. Sure, there are oligarchs, but those oligarchs rely on the airwaves, the stadiums, real estate, metal plants and might even see new investment opportunities in transport, pharmaceuticals, solar energy and other sectors, if the appropriate industrial policy is applied. It's important to note the motivation of Greek elites in entering the Eurozone, which arguably was to exploit the markets in their own regional orbit in the Balkans. This, however, proved to be a bad gamble, as the only sector that ended up benefiting was banking. So these other businesses, again, are bound to Greece at least in the shortterm and can be incentivized to stay in the longterm.
The second point is that longterm industrial policy is actually in the cards now because we have a Greek state that for the first time is committed to attacking bourgeois corruption. Due to a number of structural reasons and political contingencies, the Greek postwar governments pursued a rather bastardized version of planning. And though this was at least rhetorically the project of Pasok when it took power in the 1980s, because of its commitments to the capitalist class, that goal was dropped by the end of the decade in favor of stabilization. But this government has no such commitments, and we can rely on it to actually discipline capital.
The final point is that Europe is not the only trading partner around. And in fact, there are a number of countries that would be happy to counterpose against the Eurozone and that don't have the interest or capacity to subject Greece to their regional orbit. Our friends in the pink tide of Latin America, whose state-society relations Syriza has largely modeled itself after, come to mind here.
Let me put it differently. In the abstract, especially to someone who grew up after the dismantling of the welfare state, a second New Deal in Europe sounds great. But I hope to have shown why that cannot occur under the current political context. Now that the left is in power in Greece, it must take the steps to strengthen the organizational capacities of popular classes in the long run. And the truth is that a working class that is highly fragmented in an economy that is weak and unproductive will have a difficult time organizing against capital in a sustained manner. Again the examples of Venezuela, Bolivia, Ecuador are relevant. Given the weakness of the Greek economy, then, and given its potential fate of stagnation if it remains in the Eurozone, we must seriously consider what the alternatives are for raising its productivity as we begin navigating a path toward socializing it. And I think it's necessary and possible to be having those conversations sooner than later.
I'll conclude on a more personal note. Yesterday I was talking to a fellow researcher in Greece who's my age and who comes out of the youth wing of Syriza. When I told him more or less what I've told you all now, he said, yes, these conversations do need to happen, but where? In what settings? This is precisely the opportunity and challenge that the left now has. In a situation where the population can be mobilized but that remains largely unorganized, Syriza has the opportunity to, for instance, build on its earlier contributions to the network of neighborhood assemblies that emerged after the Syntagma occupation. And this time, instead of just articulating an anti-austerity politics, it can use these fora as places to really discuss what's needed for a sustainable transition out of stagnation and toward socialism. And people can grapple with those ideas, challenge them, perhaps believe in them, or at least be less skeptical of them. What could better embody that bold demand of the aganaktismenoi, of the indignados, for real, direct democracy?
Nantina Vgontzas, a Greek-American PhD student in sociology at NYU focusing on political economy and social movements. She is a member of the UAW Graduate Student Organizing Committee and involved in the nationwide Academic Workers for a Democratic Union reform movement. She grew up in the US but has lived in Greece at different points in her life, most recently during the year after the 2012 elections. This summer she will be in Athens to study developments in the labor movement amid the transformation of the party system.