Our Greek Tragedy

The news from Athens and Brussels is dispiriting. Prime Minister Tsipras is surrendering before the latest ultimatum from the Troika. He is doing so in the teeth of last Sunday's ultimatum in which more than 60 percent of Greek voters gave a resounding "No" to the demands for a new bout of austerity that amounts to a sentence of debt-servitude for the life of the nation. That is not an opinion but a fact of arithmetic. The absurdity of current policies is evinced by history and confirmed in the judgment of distinguished economists around the word.

The disturbing truth is that Tsipras lacks two essential qualities to meet the challenge thrown at him by the financial powers who rule the global economy. One is a contingency plan for salvaging the Greek economy in the aftermath of an exit from the Eurozone. The other is the courage to brave those turbulent, uncharted waters. Tsipras and the "moderate" members of his Syriza Party are creatures of their times. Educated elites in the Western world live comfortable lives that place few demands on their deep character and emotional strength. Their mettle is untested. To take on the arduous and protracted struggle that exiting promised requires a steely will forged in outrage and adversity. Tsipras, a decent man and skilled politician, is not that man.

So concession was foreseeable. The tip off was Tsipras's impulsive appeal to the Troika last Tuesday, two days after the referendum had been announced, whereby he offered a new set of concessions (ultimately rejected). His desire to avoid an exit from the eurozone at almost any cost was confirmed when his first act after the surprising referendum vote was to meet with leaders of the disgraced opposition parties to secure a consensus on the proposition to present a façade of unity as the ground was prepared for the final act of concession. The absence of any concrete plan cemented the conviction that Greece had no choice but to barter away its independence. The capstone was the departure of Finance Minister Yanis Varoufakis.

Varoufakis is a very different commodity. He is made of much sterner stuff -- intellectually, emotionally and morally. He has a powerful personality and is utterly fearless. That was why he so thoroughly alienated the Troika and the German leaders: Merkel and Schauble. He frightened them. His economic logic was irrefutable; he stuck the numbers under their noses; he exposed the larger scheme -- the neoliberal crusade -- that underlay the unbridled attack on all the debtor countries; he has no overriding desire for the trappings of authority; and has a strong moralist streak. Smarter and tougher than Greece's adversaries, he had to be gotten rid of. Tsipras acquiesced.

Varoufakis is very direct but not rude. By contrast, he was treated with great rudeness by Schauble, the insufferably patronizing and wooden Dutch Chair of the Eurozone Finance Committee Jeroen Dijsselbloem and others. We know little of what went on in those numerous meetings (an all too typical MSM performance) with the exception of the climactic meeting where Varoufakis asked Lagarde pointedly whether the IMF believed that the Greek debt was sustainable. When she began to mumble an answer, the Dutchman interrupted her and pronounced: "Don't answer; this is a take it or leave it proposition." Don Corleone as the face of plutocratic Europe.

The answer is "No" according to the IMF's own experts whose analysis was leaked last Thursday. The back story is that the IMF staff has come to recognize the illogicality of the EU's austerity strategy but has been muffled by the leadership. Lagarde is a corporate lawyer who never studied economics. In the early 2000s she threaded her way into conservative political circles in France and held a couple of low level ministerial jobs. Sarkozy, the embodiment of American style neoliberalism, chose her to be Minister of Finance. When Strauss-Kahn, the alleged sex offender, lost control in a Manhattan hotel room, the French claimed the position as their own.

As for Tsipras and Varoufakis, my understanding is that the two men have great mutual respect for each other.* In effect, even before the referendum results, Mario Draghi as head of the ECB told the former that he would pull the plug on Greek banks unless Tsipras got rid of Varoufakis. Pure blackmail. Since coping with the short-term crisis becomes near impossible if the Greek banking system collapses, Tsipras felt that he had to yield and Varoufakis -- in his characteristic way -- realized this and stepped aside. Tsipras' faint lingering hope that the Troika would see the light and negotiate a deal was proving wrong. So he bowed to the Troika's diktat. He knew that Varoufakis would do the gentlemanly thing and not mobilize those within the party who are less inclined to seek a deal.

The stakes in this drama far exceed the economic fate of the Greeks. At issue is the neoliberal project to replace Europe's (and America's) enlightened social philosophies with a rude plutocracy. The debt crises are the direct consequence of the Great Financial crisis of 2008, which the reckless financial consortia and their political enablers had spawned. Adroitly, they have seized the occasion to go on the offensive and to extend their control. Such an audacious project required a mythic tale to justify it. That tale features the alleged profligacy of the debtor countries, their moral failure and the righteous virtue of their superiors and strict instructors ensconced in the Troika. Syriza, with Varoufakis as the point man, were exposing the myth for the self-serving fiction it is.

For all dogmatic creeds and their promoters, facts are incidental and ultimately irrelevant. Nevertheless, here are a few:

Ireland, Greece, Spain, Portugal and Italy all had lower social expenditure relative to GDP than Germany. Spain, for example, was running budget surpluses until 2008. Its debt to GDP ratio was only slightly higher than Germany's (Ireland too kept its budget in surplus). Between 1999 and 2007, Spain and Portugal on average had substantially lower budget deficits than did Germany. Even Italy's debt to GDP ratio is no greater than that of Great Britain between 1999 and 2007. (The latter has been spared the crisis thanks to its being outside the eurozone and, therefore, able both to control its own money supply and to allow exchange rate fluctuations.)

Greece is the one country that legitimately can be judged as having handled its finances irresponsibly. Perhaps its most egregious action was to cook the books so as to obscure the full budget deficit when preparing its application to join the eurozone. This was done under the conservative government of Prime Minister Kostas Karamanlis, who preceded George Papandreou in office. The private financial firm that devised and promoted the scheme? Goldman Sachs. Goldman then proceeded to short Greek debt. Again, Greece was the exception that disproves the blanket condemnation of the southern European countries. It also is noteworthy that the country where the state expenditures constitute the highest percentage of GDP, and which has the most extensive social programs, is Denmark. Over the past 12 years, its rate of economic growth surpasses that of everyone in the EU and OECD. The highest productivity in the OECD is found in Finland and (unreformed) France -- not Germany. Oh, by the way, Greeks work more hours per year than do Germans. (This is taken from a piece I did for the Huffington Post in March 2013, "Ms. Merkel Builds Her Dream House.")

Further discomforting facts for the myth-makers:

Only a very small fraction of "bailout" money to Greece went to Greeks. It has gone to bail out the creditor banks whose feckless conduct fueled the crisis. Moreover, most of the capital inflow during the preceding period was speculative investment in real estate and other inflated assets rather than durable productive capacity. Those are the people whose own gambles were covered up by Goldman Sachs and who now are being repaid by the IMF and ECB, which serve as their debt collectors. Admittedly, this is hard to follow when the media have taken omerta oaths not to embarrass their corporate owners or to jeopardize the flow of favors that they receive from the financial community.

The Reactionary Neoliberal Project

From a historical perspective, what has been happening in the West is not at all obscure. In effect, a highly successful campaign has been launched to curtail and then roll back the great postwar social compact that occurred under the headings of Social Democracy, Christian Democracy, "One Nation" Toryism, or Gaullism in France (leftist variety). Its rough counterpart in the US was the New Deal. All of those political movements have been co-opted or otherwise neutralized over the past 30 years.

The method is two-pronged. The main tactic has been to buy off or buy out the elites of those parties and movements. That can take the form of an outright takeover, as the Democrats have sold themselves to corporate and mainly financial interests. In Europe, the preferred method was to clandestinely buy either a 51 percent share or a blocking minority share. (Strauss-Kahn was a "Socialist" even as he worked to undercut any proposal for southern European debt relief when head of the IMF and in need of financial help from the endangered French banks to fuel his run for the presidency.) That has occurred in Germany (SPD), France (Socialist), UK (Labour), Spain (Socialist) and the smaller countries as well. Italy is more complicated because of the residual strength of the former Communists in the "Left" formation. In France, the situation is so ludicrous that the Finance Minister of a "leftist" government is former head of MEDEF -- the counterpart to the American Business Roundtable.

The other prong is ideological: a comprehensive assault on the intellectual and philosophical premises underlying the social compact. Market fundamentalism in one form or other has been the proselytizing creed that has sapped the morale and ethical purpose of political elites of the above mentioned. A hybrid blend of Ayn Rand's adolescent doctrine of selfishness, deformed Adam Smith and Social Darwinism, it has been merchandized from academia to the pulp press. It has helped that weak, vacuous leaders could be personally bought off -- Tony Blair, the Clintons, Obama, Hollande, the entire SDP leadership in Germany for a generation. They, in my view, are the greatest sinners.

The strategy has worked beautifully. It even overcame the 2008 Great Financial Crisis created by financial greed and crime. It did so in part because the semblance of social democracy that remained deceived enough of the discontented into believing that there was a real alternative there, e.g. Barack Obama, Francoise Hollande. That illusion has been punctured by the plutocracy's overreaching in moving from a tactic of 51 percent control or blocking minority ownership of those parties to a complete takeover. So, come the next (likely) crisis, we will see the sudden rise of radical parties -- either responsible ones of the left a la Syriza, or fascistic ones of the right. There is the big miscalculation of the plutocrats.

We already saw that phenomenon across Europe in the 1920s and 1930s -- social rebellion taking a fascist turn. The first signs are visible in Romania, Bulgaria and Hungary and, of course, Greece. Want Golden Dawn to make an appearance on the European stage? Force Tsipras to surrender (as he appears to be doing) and then just sit back.

In this broad perspective, this is at once good news and bad news. We are witnessing how a stupid plutocracy works. If you are smart, you don't so recklessly expose your purposes and strategy. You also leave a few coins in the pockets of those you're fleecing. This is the same over-confidence that we have been seeing in the US since 2008. Of course, a country such as the US is so uncongenial to rebellion (we instinctively react to hard times by assuming personal responsibility for some kind of failure of will, moral fiber and competence) that you can get away with it pretty easily. In Europe, the breaking point will come sooner if gradually -- Greece is just the beginning.

This plutocracy is dense in not realizing that an overt plutocracy that extracts every last cent depends ultimately on political repression. You can't do that these days -- even though you can try to block a popular referendum. So we're fortunate that the short-sightedness that infects every Western polity does not spare those who presume to be our masters in the economic realm.

The drama that played out in Greece this week is of historic importance. What is at stake goes well beyond the future of the eurozone. It is the very essence of the great postwar civilizational compact that brought unprecedented prosperity and political stability to Europe. For it is the repeal of the understandings, principles and sense of comity associated with that project that is the clear target of the financial forces that control the continent's economic affairs. The current Greek government headed by Prime Minister Alexis Tsipras dared to reject an ultimatum whereby his country would be relegated to a permanent condition of debt servitude or thrown to the wolves of the untamed financial markets. The game is an unsavory one whereby the Troika of the IMF, the European Central Bank and the European Union extract anything of value and transfer it to the banks and hedge fund speculators who made spectacularly reckless loans to previous, compromised government leaders. The resistance to that fate by a government that has received a mandate from the electorate is deemed illegitimate.

The myth makers have shown one stroke of creativity in casting the entire Mediterranean (plus Ireland) debt crisis as a morality play. On one side are the profligate, lazy, sybaritic southerners. On the other are the diligent, industrious and virtuous northerners. The only error of the latter is that for too long they spared the rod and spoiled the child. The characters and the plot are cast in strong moralistic terms. Especially in Germany, the tale's telling resembles a Passion Play -- a Lutheran rendering of an uplifting Victorian novel. The sinners are depicted as the freeloading indolent citizens of Jerusalem. Greece has been nabbed to play Barabbas -- the undeserving object of mercy -- and an unrepentant one. The audience whines over his ingratitude and indulge in simpering bouts of self-pity when a few express other sentiments. The oligarchs? The French/German/Dutch bankers? They find their personal amusement in more trendy places than Oberammergau. Like Greek Islands in the envied sun bought at fire sale prices.

*Disclosure: I happen to know Varoufakis personally. He is a man of integrity and intellectual honesty who, in a lunch conversation a few weeks before taking office, told me that he was dedicated to seeking terms of resolution that at once spared Greeks further economic punishment and placed the country on a sound monetary footing. He was optimistic that a Syriza government could persuade the Troika that their plan was mutually beneficial. Varoufakis also is a superb monetary economist whose credentials outshine those who have bewitched European governmental elites with their Hoover era nostrums. Instead he has been vilified by Mario Draghi (ECB) from Goldman Sachs, which played the primary role in cooking the financial books as advisers to the corrupt former government, Jean Claude Juncker (President of EU Commission), who as prime minister of Luxembourg was the impresario of a global tax avoidance scheme whose beneficiaries included Greek oligarchs, Christine Lagarde (IMF), who made her career at the Chicago-based international law firm of Baker & McKenzie, and the clueless Angela Merkel from the former East Germany, whose understanding of European postwar transformations seems nil.