Greece’s (un) Competitive Capitalism and the Economic Crisis

The 2008 global crisis was a result of the fact that since the previous crisis of 1973 and its aftermath it has not been possible to return to the previous levels of profitability; however, many different methods have been tried (salary reduction, adoption of new norms in labour relations, utilization of new technologies and financialization of economies). The bubble that was generated by financialization has had very great consequences, which indeed started with the United States but quickly spread to the EU and the European Monetary Union, imposing oppressive limits on the functioning of the European economy and exerting even greater pressure on less developed capitalist countries such as Greece.

The basic problem of the Greek economy was not either the public sector being too large or salaries too high or working hours too short, given that none of this corresponds to reality. On the contrary, the Greek crisis results from a convergence of two factors. On the one hand, the growth model that had been in application up to that point (relatively low wages, strong ship-owning capital, a developed banking sector, tourism, European subsidies) had reached its limits. The reason for this was that productivity differentials due to the absence of production of high-tech products had become much more marked since the country’s accession to the European Monetary Union and the consequent loss of the capacity to resort to currency depreciation. High deficits arose because the downturn in the economy induced governments to reduce taxes on the most affluent social strata. On the other hand, there was the particularly brutal irruption of the global crisis into the country, with the result that the weakened Greek economy was unable to withstand the speculative attacks on it so that finally, faced with the danger of suspension of payments, the Papandreou government asked for help from the European Union, the European Central Bank and the International Monetary Fund.

Greek borrowing was implemented through the adoption of three memoranda and eight packages of measures. These packages included actions such as lowering the minimum wage, decreasing pensions and public sector wages, abolition of the 13th and 14th salaries and the 13th and 14th pensions, increases in value-added tax (VAT), higher indirect taxation, the addition of real estate tax, shifting of the emphasis in employment contracts from the sectoral and national level to the enterprise level, drastic cuts in the number of public sector workers, a sharp increase in the sale of public property to foreign and raising retirement age.

Implementation of the memorandum policies has increased social inequalities, imposed material deprivation on a large proportion of the population, greatly reduced wages and pensions, worsened employment conditions, spurred unemployment, downgraded healthcare conditions, reduced population and increased immigration. But, there was also a category of very wealthy people who have seen their wealth increase.

Implementation of the memorandum policies has increased social inequalities, imposed material deprivation on a large proportion of the population, greatly reduced wages and pensions, worsened employment conditions, spurred unemployment, downgraded healthcare conditions, reduced population and increased immigration. But there was also a category of very wealthy people who have seen their wealth increase.

The economic crisis brought about significant changes in the country’s social stratification. Sections of the bourgeoisie either disappeared altogether due to bankruptcy of their businesses or were relegated to petty bourgeois status given the contraction of their economic activities, a fact which had led to the growth of the traditional petty bourgeois class. In contrast, some other sections of the bourgeoisie became more prosperous. The new petty bourgeoisie went into decline and, changing employment, former petty bourgeois joined the working class, whose proportional presence in the workforce as a whole increased significantly. The rural sector saw overall contraction in all three social categories (rich, medium and poor rural strata), a development which is judged to have contributed to greater concentration in land ownership.

The institutional transformations in the Greek state should be seen in the light of wider—indeed global—changes in the nature of the state. It is a process that was initiated many years ago: Poulantzas called it authoritarian statism. It has to do with limiting the remit of representative institutions. The beginning of the new century was marked by the advent of a special kind of authoritarian statism, the regime of exceptional regulation. The assumption is that the “normal” operation of the state creates pathogens (e.g. economic crises and terrorism) justifying its suspension through even greater restrictions on relations of representation and reinforcement of institutions inaccessible to popular control. In Europe the most significant element in this process has been the latest European Union (EU) and Economic Monetary Union (EMU) agreements. Greece is the most representative example, given that a number of internal government functions have passed into the jurisdiction of lenders. It is this that has led to Greece being described as a quasi-protectorate.

Social responses to the policy of the memoranda comprise on the one hand social mobilizations (those that have developed include demonstrations, strikes, the squares movements, occupation of buildings housing public institutions) and the forms of social solidarity that have emerged (trade without intermediaries, time banks, social solidarity clinics, co-operative ventures). All of these practices took place mainly during the 2010–2012 period, a time of anticipation in expectation of the coming to power of the SYRIZA government. After the capitulation of the summer of 2015, there was a period of social downturn.

As a side effect of the crisis, there was a radical transformation of the party system. It did not make itself felt in the local government elections of autumn 2010 because up until that time people thought the situation would not worsen. After the passage of the second Memorandum, however, there was a rapid change in the relations between parties. The decades-long bipartisanship of New Democracy (ND) and PASOK collapsed and a new bipartisanship, more limited in range, emerged, involving ND and SYRIZA. With the shrinkage of PASOK, new parties emerged in the parliament in different phases (Independent Greeks, the River, Democratic Left), along with an explosion in support for the Union of Centrists and the neo-Nazi Golden Dawn. The continuing deterioration in the lives of Greeks would bring to power a party of the Radical Left, who formed a government together with the Independent Greeks, ANEL. There were high hopes around this government that it would put an end to the policy of the Memoranda, both inside and outside Greece. But it soon became clear that faith in rational discourse and the negotiation process would not be enough to change the policy mix in the country. Unwilling to break with the lenders, the Tsipras government was forced to sign yet another Memorandum.

SYRIZA’s retreat was justified through its having formed the view that through a line of compromise developed in the course of the negotiations it would induce the lenders to adopt a “milder” handling of the memorandum policy and a restructuring of the debt. But, this would not become feasible because the international economic elite did not wish to signal that it had compromised with a leftist government and because the Tsipras government did not utilize any powerful means of pressuring lenders (such as cessation of payments). Given that, the prospect that opened for the country was one of a sluggish return to low growth rates, with a continuation of austerity policies and significant consensus between the main political parties on this point. On the part of the Greek ruling class no elaboration of a strategy is visible that might contribute to averting a reappearance of the pathogens of the past.

The profound economic crisis which has convulsed Greek society since 2009 is linked to the global crisis of the international economy, starting with the collapse of Lehman Brothers in the United States in 2008. The global crisis is related to the fact that despite the various plans opted for (initially a continuation of Keynesianism, then the adoption of permanent wage restraint, an increase in public debt, introduction of flexible forms of employment, financialization), it did not become feasible for the—genuine—rise in profitability to be returned to the levels of the global crisis of 1973. On the contrary, the resort to financialization generated a series of bubbles which began to explode after the bankruptcy of Lehman Brothers, projecting crisis phenomena across a wide range of national and international transactions. The way the crisis was managed in the United States was more straightforward, given that it is a single state, so that they were able to purchase toxic bonds and proceed with provision of low interest loans to the banks by virtue of the liquidity made available to them through their ability to print new money. On the contrary, in the European Union (EU) and the Economic and Monetary Union, of which Greece is a member, things were more difficult. It is not a single state, so that it was not possible to pursue exactly the same policy. The solution that was chosen was to provide liquidity to the banks enabling them to ger rid of the toxic bonds. But some of the money received by the banks, and this is what is different from the United States, was used to purchase collateralized debt obligations (CDOs), while at the same time limits were imposed on the ability of the countries of the European periphery to secure loans. This led to a rise in the profitability of state bonds and an explosive proliferation of CDOs. Greece, which faced the greatest problem with its current account balance, suffered the heaviest damage because of the difficulty it faced in borrowing to service its debt, with the result that it was obliged to seek the required sums through special agreements with the EU, the European Central Bank and the International Monetary Fund.