As the political drama in Greece brings the European debt crisis into sharp focus, it is clear that the consequences of a Greek default will extend much further than previously thought. Just this week, MF Global, one of the world’s leading stockbrokers, filed for the eighth largest bankruptcy in US history. The company’s demise was due largely to its acquisition of more than six billion dollars of European debt. Bloomberg News reports that concerns over the Eurozone debt crisis “led to credit downgrades, margin calls and demands from regulators to boost capital before the bankruptcy filing.”
From afar it is difficult to tell precisely who should be blamed for the Greek crisis. In his recent book on countries savaged by the latest downturns in global capitalism, the journalist Michael Lewis describes the Greeks as incapable of restraint, overtaken by a sense of entitlement once their economy was shored up by the largesse of the EU. He notes that during “the last twelve years the wage bill of the Greek public sector has doubled … The average government job pays almost three times the average private-sector job [and] national railroad has annual revenues of 100 million euros against an annual wage bill of 400 million, plus 300 million euros in other expenses.”
Lewis concludes that these indulgences have produced a coddled populace: “The retirement age for Greek jobs classified as ‘arduous’ is as early as fifty-five for men and fifty for women. As this is also the moment when the state begins to shovel out generous pensions, more than six hundred Greek professions somehow managed to get themselves classified as arduous: hairdressers, radio announcers, waiters, musicians, and on and on and on.”
However, a closer look at the details of the Greek economy suggests that Lewis’ impressions may have missed the point. In a sharply worded riposte to ‘the myth of Greek profligacy’ two veteran financial analysts writing for the financial blog Naked Capitalism have shown that the real culprit is an antiquated tax code which – thanks to “a corrupt bargain reached during the days of the junta between the military and Greece’s wealthiest plutocrats” – allows the wealthiest 20 per cent of the population to pay ‘virtually no taxes at all.” Compared to the rest of the Eurozone, the authors find Greeks actually have ‘one of the lowest per capita incomes,’ modest expenditures on social protection benefits – €3530 per capita (half the German figure and well below the €6251 average of the original Eurozone 12).
Instead of blaming the Greeks, the Naked Capitalism analysts accuse the ‘Troika’ – the European Commission (EC), the International Monetary Fund (IMF), and the European Central Bank (ECB) – of ‘faith based economics’ little different to that of the Washington Consensus. They make a strong case that the wider project of European economic union is doomed if it continues to be pursued by politicians who allow their wealthiest citizens to “consistently evade their fair share of the cost of [the] state expenditure, expecting the union either to pay the bill itself, or to force the bottom 90% to pay it.”
Beyond the specifics of the Greek crisis, there is a growing sense that the democratic and industrialised West has consistently failed to respond to current crises in global capitalism. Paul Mason, economics editor for the BBC’s Newsnight, recently put it this way: “Europe and the United States, having handed over to China, India and Brazil the baton of industrial leadership, have spent 20 years failing to adjust their economies, or the expectations of their people…” Now the West finds itself consistently unable to foot the bill for its complacency towards these countries, and humiliatingly dependent on financial assistance from states that are generally anti-democratic – China, Russia, Singapore, the Saudis. Mason argues that Europe’s lack of leadership on the debt crisis, particularly its anaemic search for a ‘joint narrative’, could easily derail the entire union. However, stubbornly independent and self-interested electorates in Greece, Italy and elsewhere have made the search for a coherent solution much harder. The European bureaucrats who are reluctant to tackle the hard questions ought to consider what happened in America in the wake of the 2008 financial crisis. Presented with a rare opportunity to restructure the financial system and regulate the ‘casino capitalism’ that had taken root in Wall Street, the Obama administration blinked first. Instead, the surviving investment banks quickly returned to profit – with large infusions of government bailout money – but then did little to assist a wider economic recovery. Should the Europeans handle this crisis as timidly as their US counterparts, its resolution will be equally unsatisfactory, if not worse.
