Greece: A Case Against Austerity

How to ruin an economy that is already in trouble and needs help not abuse

Stickers call for people to vote “No” en masse to austerity in the referendum July 5.

The international economic crisis struck in 2008. Led by U.S. imperialism, the big powers immediately took measures to protect their most powerful monopolies. In Europe, the monopolies centred in Germany, Britain and France began to pass the consequences of the crisis onto the people and weaker countries over which they hold power, including Greece, Ireland, Cyprus, Portugal and Spain. The big powers targeted those countries with severe austerity measures using their established economic control, the institutional weapons within the European Union of the Monopolies and their local political apologists as executioners.

The big powers forced Greece to apply seven different austerity packages between 2010 and 2013 to uphold monopoly right, subvert public right and divert social wealth from the people to pay the rich. Their anti-social measures amongst other things have cut investments in social programs and public services, sold off public assets, fired workers, attacked pensions and the most vulnerable and greatly increased taxes on individuals such as the sales tax. The economy roiled negatively in response to the attacks of monopoly right, accelerating the decline precipitated by the global economic crisis.

Austerity in Greece

Unemployment in Greece jumped from 6.6 per cent in 2008 to 24.8 per cent in 2014. Amongst youth under 25, the unemployment rate has climbed to an unconscionable 55 per cent.

From concessions imposed during austerity, wages have fallen to levels not seen since the 1980s. Suicides have increased 40 per cent.

Gross domestic product fell 26 per cent from 2008 to 2014. By comparison, Germany’s GDP grew 14 per cent during the same period.

Government spending on programs in Greece fell 28 per cent by 2014 from 2008 while demand for social programs escalated. Government revenue fell 17 per cent. German government spending increased 15 per cent between 2008 and 2014 while its revenue increased 16 per cent.

The big powers imposed austerity despite earlier warnings from their own economists of its negative impact on economies. Wikipedia writes, “In a 2003 study that analysed 133 IMF austerity programmes, the IMF’s independent evaluation office found that policy makers consistently underestimated the disastrous effects of rigid spending cuts on economic growth.”

In February 2012, the Guardian newspaper reiterated the earlier warnings of the IMF, writing, “Last week the Greek parliament passed its fifth austerity package in just two years. Greek austerity is especially harsh. Although Greece is in its fourth year of a severe recession with real output down by 12 per cent since 2007, the fiscal deficit as a proportion of GDP has been reduced by seven percentage points, a historically almost-unique achievement. But those policies were self-defeating. The debt-to-GDP ratio has exploded, government bond yields have stayed sky-high and both measures of business and consumer confidence are in freefall. The unemployment rate now stands at 21 per cent. Young people are especially hard hit: unemployment among those aged younger than 25, already high before the crisis, stood at 40 per cent in 2011. Consequently, company bankruptcies, suicide rates and crime have risen.

“Heavily influenced by the German finance ministry, the solution of the troika (the EU Commission, the IMF and the ECB) to austerity’s failure is even more austerity. Together with the EU Commission and the ECB, German finance minister Wolfgang Schäuble still strongly believes in the confidence-creating power of fiscal austerity, although they have been proved wrong. Those beliefs underlay all of the troika’s growth forecasts upon which the goals for deficit reduction were based. Since there was no upswing in confidence, growth fell precipitously and the government systematically missed the agreed goals.

“All this was predictable — and actually predicted. In a 2003 study that analysed 133 IMF austerity programmes, the IMF’s independent evaluation office found exactly the same scheme of self-defeating austerity caused by the underestimation of its disastrous effects on economic growth.”

A Eurostat News release 21/2012 says, “The [Greek] population living at risk of poverty or social exclusion … was measured at 27.6% in 2009 and 27.7% in 2010 (and only slightly worse than the EU27-average at 23.4%), but for 2011 the estimated figure rose sharply above 33%.”

Reflecting on this reality, the 2012 Guardian article “I fear for a social explosion: Greeks can’t take any more punishment” reports, “The truth — as unpalatable as it may be for the IMF, EU and European Central Bank, Greece’s ‘troika’ of creditors — is that, far from plugging the country’s budget black holes, the harsh austerity pursued in the name of deficit-reducing goals has pushed it towards economic and social collapse. Relentless wage and pension cuts, tax rises and cost-cutting reforms have left the country a shadow of itself. In its fifth successive year of recession, Greece is a hollowed-out version of what it once was, coming apart at the seams a little more with each day. Men and women forage through rubbish bins late at night. More sleep on the streets. Last week as Eurostat, the European statistic agency, announced that poverty had engulfed more than a third of the nation, it was revealed that unemployment had also exceeded one million people, from a record 19 per cent to 20.9 per cent in one month.

“‘Nothing functions. Nobody pays anybody any more and the state is not just crumbling but in complete stasis,’ said Giorgos Kyrtsos, a prominent political commentator. ‘These guys,’ he said of officials in the troika of European agencies negotiating the bailout, ‘should really lose their jobs. They’ve miscalculated everything. I understand … the police trade union called for their arrests’.”

As early as 2011, the United Nations independent expert on foreign debt and human rights warned, “The austerity measures and structural reforms proposed to solve Greece’s debt crisis may result in violations of the basic human rights of the country’s people…. The implementation of the second package of austerity measures and structural reforms, which includes a wholesale privatization of state-owned enterprises and assets, is likely to have a serious impact on basic social services and therefore the enjoyment of human rights by the Greek people, particularly the most vulnerable sectors of the population such as the poor, elderly, unemployed and persons with disabilities, said Cephas Lumina, who reports to the UN Human Rights Council in Geneva.

Athens, October 20, 2011, one of many anti-austerity demonstrations.

“The rights to food, water, adequate housing and work under fair and equitable conditions should not be compromised by the implementation of austerity measures, he said, urging the Government to take into account the primacy of States’ human rights obligations. Mr. Lumina also called upon the authorities to maintain some fiscal leeway to meet its people’s basic human rights, particularly economic, social and cultural rights….

“A shrinking economy cannot generate any revenue and contributes to a reduced capacity to repay the debt…. He called on the International Monetary Fund (IMF), the European Union (EU) and the European Central Bank (ECB) to remain aware of the human rights impact of the policies they design in attempting to resolve the sovereign debt crises in Greece and other countries. There will be no lasting solution to the sovereign debt problem if the human rights of the people are not taken into account, said Mr. Lumina, who serves in an unpaid capacity.” (UN News Centre, 2011)

UK economist Roger Bootle said in February 2012: “A 25 per cent drop [in GDP] is roughly what was experienced in the U.S. in the Great Depression of the 1930s. The scale of the austerity measures already enacted [in Greece] makes you wince. In 2010 and 2011, Greece implemented fiscal cutbacks worth almost 17 per cent of GDP. But because this caused GDP to wilt, each euro of fiscal tightening reduced the deficit by only 50 cents…. Attempts to cut back on the debt by austerity alone will deliver misery alone.[1]

John Milios, Professor of Political Economy, National Technical University of Athens writes in Global Research, June 1, 2015, “The Class Logic behind Austerity Policies in the Euro-Area” — Excerpts:

“After the outbreak of the 2008 global economic crisis, extreme austerity policies prevailed in many parts of the developed capitalist world, especially in the European Union (EU) and the Euro-area (EA). Austerity constitutes the cornerstone of neoliberal policies.”

“[Austerity] is complemented by institutional changes that, on the one hand, enhance capital mobility and competition and, on the other, strengthen the power of managers in the enterprise and share and bondholders in society. As regards fiscal consolidation, austerity gives priority to budget cuts over public revenue, reducing taxes on capital and high incomes, and downsizing the welfare state.”

“[Austerity] constantly promotes the interests of capital against those of the workers, professionals, pensioners, unemployed and economically vulnerable groups. In the long run, it aims at creating a model of labour with fewer rights and less social protection, with low and flexible wages and the absence of any substantial bargaining power for wage earners.”

Milios writes that austerity increases the rate of exploitation of the working class, the absolute added-value employers extract during working time by lowering the reproduced-value workers claim as wages, benefits and pensions, the value of their capacity to work, their potential use-value. These measures are in part attempts taken by the most powerful global monopolies to counter the law of a falling rate of profit and the recurring economic crises experienced within the capitalist system. The measures to defend monopoly right and deprive people of their rights are disastrous for the people and destructive for the economy.

“[Capitalists] try to consolidate [their] profit margins through wage cuts, intensification of the labour process, infringement of labour regulations and workers’ rights, massive redundancies, etc. From the perspective of big capitals’ interests, recession gives thus birth to a ‘process of creative destruction.’ There is a redistribution of income and power to the benefit of capital, and concentration of wealth in fewer hands as small and medium enterprises, especially in retail trade, are being ‘cleared up’ by big enterprises and shopping malls. This strategy has its own rationality, which is not completely obvious at a first glance. It perceives the [economic] crisis as an opportunity for a historic shift in the correlations of forces to the benefit of the capitalist power, subjecting European societies to the conditions of the unfettered functioning of financial markets, attempting to place all consequences of the systemic capitalist crisis on the shoulders of the working people.

“When a big company is dependent on financial markets for its funding, every suspicion of inadequate valorization increases the cost of funding, reduces the capability that funding will be available and depresses share and bond prices. Confronted with such a climate, the forces of labour within the politicized environment of the enterprise face the dilemma of deciding whether to accept the employers’ unfavourable terms [anti-worker concessions], implying loss of their own bargaining position, or face the possibility to lose their job: accept the ‘laws of capital’ or live with insecurity and unemployment. This pressure affects the whole organization of the production process. It therefore presupposes not only increasing ‘despotism’ of managers over workers but also flexibility in the labour market and high unemployment. Hence, ‘market discipline’ must be conceived as synonymous with ‘capital discipline’.”

Restrict Monopoly Right! Monopoly Right No! Public Right Yes!

Milios crystallizes the struggle against austerity as one to mobilize the people to deprive the forces of monopoly right of their power to impose their anti-social dictate on the people, which further wrecks the economy.

“The working majority in practically every capitalist country will always be opposed to shrinking wages and precarious employment, to degeneration and cut-backs of public services, raising the cost of education and healthcare, weakening of democratic institutions, strengthening of repression. They will always conceive the ‘crisis of labour’ (i.e. unemployment, precarious and underpaid work etc.) as a social illness that shall be tackled by itself, not as a side effect of the recovery of profits.

“The continuation of austerity is therefore a matter of the social relation of forces. As Karl Marx commented on the limits of the working-day: ‘The capitalist maintains his rights as a purchaser when he tries to make the working-day as long as possible…. On the other hand… the labourer maintains his right as seller when he wishes to reduce the working-day to one of definite normal duration. There is here therefore an antinomy, of right against right, both equally bearing the seal of the law of exchange. Between equal rights, force decides.'”


1. From: “It may well turn out that we are watching not a Greek but a euro tragedy.” The Sunday Telegraph, London.

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