Europe in the Iron Grip of Neoliberal Fiscal Discipline and Anti-Labor Measures

We live in critical times. Global capitalism has plunged much of the world in a crisis of unprecedented proportions and is causing misery and suffering for millions of people. Economic insecurity, mass unemployment, declining wages, poverty, social marginalization, crime, fear and social decomposition are now defining features of many advanced societies. With growth concentrated largely on speculative financial activities and the suppression of wages, wealth is so unequally distributed in many advanced capitalist societies that the social and historical boundaries between rich and poor nations have completely broken down. Wealth and poverty coexist in close proximity in many cities in advanced societies just as they do in the less developed world.

With the belief that markets on their own terms are the best means for the maximization of growth and development and that societal interests are best served when individuals act more like consumers than citizens, neoliberal dogma may be the most dangerous ideology of our times. Essentially, neoliberalism represents a counterrevolution to the postwar regime in the area of economic and social rights and connects to the interests of the rich, corporations and the needs of the dominant form of capital in contemporary capitalism, that of finance.

Under neoliberalism, politics has surrendered power to the wealthy elite and to the financial markets and institutions. The state, through complex forms of intervention and mediation in the public arena, has sought to balance out the sources of large-scale friction between competing social forces. In an effort to assure the stable reproduction of capitalist economic and social relations, it has been converted into an instrument for carrying out the policies of the global neoliberal project without concern for the cost on human lives.

Neoliberalism has allowed the liberalization of labor rules, privatization of state assets, budget cuts in social programs, public education and public health. It as protected sharp tax cuts for the rich, real estate, banks and financial transactions. It has worked to strengthen the penal state. It has supported the penalization of poverty and criminalization of many social movements resisting the collapse of the public sphere.

Europe is the latest victim of global neoliberal economic policies. The global financial crisis that reached its peak in September-October 2008 has become a global employment crisis. This crisis is quickly engulfing Europe threatening to dismantle the last vestiges of the social market economy and complete the destruction of fundamental social rights of workers.

Since the Maastricht Treaty where Europe fully expressed its intention to embrace and reinforce the global neoliberal project, the erosion of social welfare guarantees has proceeded with only popular resistance standing in the way of the complete dismantling of social democracy. Now, as the global crisis has spread to Europe, bringing to the forefront the flaws of the euro being the single currency throughout the EU, fiscal problems and sovereign debt have emerged as pressing issues. Fiscal discipline and severe austerity measures are being implemented in order to tame the global financial markets and provide stability to the European banking system.

Greece is now under the command of the EU and the IMF because of the unmanageable size of its debt and has thereby become subjected to draconian austerity measures. Portugal, Spain, Italy, France, and England have joined Europe’s austerity club with deep budget cuts. Latvia and Romania are also under EU/IMF supervision and their economies have been subjected to shock-therapy treatments for the bailout loans they received.

The wave of fiscal austerity that has spread across Europe can be seen as a reflection of the worries of European governments over market reactions following the Greek debt crisis and is fundamentally a manifestation of Europe’s strict adherence to the neoliberal dogma and EU leadership’s unwillingness or inability to provide an alternative policy framework to financialization in the context of the global neoliberal economy.

In Greece, Portugal, and Spain, “social democratic” governments are discarding even the pretext of being agents of progressive reform (even though they came to power on precisely such a political platform). These governments are imposing unprecedented cuts and austerity measures significantly reducing the standard of living for working people through the roll back of long established social programs, social entitlements and social rights. Programmatically there is no longer anything that sets apart southern European “social democratic parties” from (neo)conservative or neoliberal parties.

Greece is by far the most striking example of how politically opportunistic social democratic parties have become in the age of global neoliberalism. In its 2009 electoral campaign, Greece’s socialist party, PASOK, led by George Papandreou, offered the model of “participatory democracy” as the foundation of a new politics. It rejected the claims of the centre-right political party, New Democracy (which was in power since 2004), that huge deficits and a lack of state funds made any talk about massive public spending and investment highly irresponsible, and promised a break with rightist policies.

Yet, the first action Papandreou took as new Prime Minister was to prepare the ground for turning Greece over to the IMF. Next he set in place the most austere measures ever undertaken by any European government, let alone a “socialist” government with pay cuts, sharp increases in added value taxes, pension reductions, slashes in social programs, increases in the legal maximum number of people companies could lay off each month, extreme pension reforms, privatization of state assets and tax breaks for the rich and the banks.

Papandreou’s solutions to the sovereign debt crisis of Greece illuminates a symbiotic relationship between the neoliberal project and EU interests. Further, in Machiavellian fashion, his government opted to introduce austerity measures in a gradual fashion in an effort to avoid an explosion of popular frustration and anger. Both at the grass root level and on the parliamentary floor, opposition to Papandreou’s austerity measures has been strong and is growing. Ironically, the only support to the austerity measures (implemented by the “socialist” government) has come from LAOS, a reactionary, notoriously racist, and profoundly xenophobic party.

The laboring population and pensioners have taken their grievances to the streets on a regular basis and the country has been rocked with a series of 24-hour national strikes. At this point trade unions and political parties and organizations on the Left are preparing supporters for a long battle.

Greece, for all practical purposes, is bankrupt. The EU/IMF three-year, 110 billion euro rescue package was approved after Greece had entered the no-confidence zone in the bond markets. The majority of economists believe that Greece is bankrupt and the international markets appear even more inclined to agree. Further, most economists are convinced that the harsh austerity measures being implemented by the PASOK government won’t make the huge sovereign debt problem the country is saddled with (standing at a whopping 130% of GDP) more manageable, although they disagree on alternative ways out of the crisis.

Neoliberal economists claim that current austerity measures are not enough. They call for deeper cuts in public services, in wages and in social security entitlements. They urge the adoption of measures to further increase labor flexibility, insist on wholesale privatization of state assets, and hint at the need for hard-line stands against strikes and demonstrations. Still, they admit that even with these a measures, Greece’s debt crisis will be worse two years from now and that debt restructuring may become inevitable.

To the middle of the spectrum Keynesian economists wholeheartedly oppose current austerity measures arguing that such actions will make the economy sink deeper into a recession as overall consumption declines, businesses fold and unemployment skyrockets. With declining state revenues, the debt crisis will get worse eliminating any prospect of a recovery. Instead they call for massive public spending through a combination of borrowing and higher taxes on the rich and the banks. Even with these measures they think that cuts in the debt will be necessary.

The anti-labor austerity measures being enfored by the “socialist” government in Greece will not provide a way out of the crisis and will subject the Greek economy to a prolonged recession. Even with the human and social cost of the austerity spending cuts, and the adoption of harsher measures as proposed by the neoliberals, the debt will rise from the current 130 percent of the GDP to approximately 150 percent of the GDP in 2011.

Greece’s sovereign debt has already increased by an additional 20 billion euro from the end of 2009 to March 2010. Austerity spending cuts and anti-labor measures in the midst of a severe economic crisis will serve to hasten the nation’s impending economic catastrophe. With the austerity measures, the GDP will contract by six percent in 2010 and by an additional three percent in 2011 in anticipation that the budget deficit will be dropped from 13.6% in 2009 to 7.6% in 2011. In the meantime, unemployment is expected to rise to as high as 20%, according to some forecasts.

The massive public spending scheme that Keynesian economists propose is simply not an option for any Greek government because EU rules enforce greater fiscal discipline among eurozone member states. For such a Keynesian scheme to work, the EU would need to abandon its current neoliberal orientation and convert to pro-growth and full employment strategies. That is not likely to happen.

Then there is the radical political economy solution that calls for an immediate halt to debt payments, a sovereign debt default, exit from the eurozone, nationalization of the banks, greater social organization of power over the allocation of resources and control of production and distribution. This strategy should not be confused with a defense of autarchy or even a complete transcendence of the market itself. Most radical economists today would opt for some sort of “market socialism” rather than the complete abolition of private property relations. The radical political economy solution to Greece’s debt crisis is a challenge of the first order to the political imagination. It requires wide support among the population and would probably result in the complete collapse of the existing socio-political order.

The Left in Greece is far more popular and influential than anywhere else in Europe but it faces the perennial problems facing all parties and movements of the Left (infighting and factionalism and the inability to make significant inroads among broad sections of the population). Indicative of the frustrating situation that prevails within the ranks of the Greek Left can be seen in its two main political parties (the Communist Party and the Coalition of Radical Left). For example, they organize separate marches and demonstrations and the part of the syndicalist movement controlled by the Communist Party is at a propaganda war and ideological battle with the leadership of the General Confederation of Workers of Greece.

The social and historical conditions for a radical re-orientation of the Greek political economy are hardly ripe, but the contradictions of the current crisis are thrusting themselves ever more forcefully into Greece’s social and political landscape making the need for a radical alternative pressing.

The EU has proven to be a disastrous economic experiment largely because of its single-minded commitment to the neoliberal economic dogma and because it has made a mockery of democratic values and institutions. It has spread general disillusionment among the European citizenry. Poverty, unemployment, inequality, stagnant wages and deteriorating living standards are becoming the hallmark of the policies generated in Brussels. In the midst of the worse crisis in postwar Europe, the European Central Bank regards the fight against inflation as its exclusive legal task and the purchases of bonds by Greece and a couple of other eurozone countries was nothing more than a move meant to stabilize the European banking system. In Europe, growth, prosperity, full employment and social rights have been sacrificed in order to secure the financial system’s primary interests.

Neoliberal global capitalism, which Europe has fully embraced, represents a highly destructive socio-economic order. Millions of people in scores of communities around the world have been ravaged by the functions and operations of global casino economics. British philosopher John Gray argued in his book, False Dawn, that free-market capitalism produces social dislocation, economic instability, and human suffering on a grand scale – and he was writing at least a decade before the eruption of the global financial and economic crisis of September-October 2008. (1)

As for Greece, a country bankrupted because of a combination of factors. First and foremost, its own kleptocraric political and economic elites did not even hesitate to make an alliance with global financial institutions like Goldman Sachs in order to conceal for years the actual size of the deficits debt from the EU and the Greek citizens. Second, the result of the predatory behavior of the global financial markets and the credit rating institutions. Third, because of its dependence on the euro.

Now, as the “weak link” in the eurozone economy, Greece is in a fight for its economic and possibly national survival. It is a crisis of profound severity. This crisis may have even greater implications. As Antonio Gramsci once said, “The old is dead, but the new not yet born.” In due time, we may see similar developments in other eurozone countries. While Europe has become the last bastion of global neoliberalism putting in place the conditions for radical social change – a revolt against the existing order, where competitiveness on international markets demands the pauperization of work, and an attempt to create a more decent one.

NOTES

1. John Gray, False Dawn: The Delusions of Global Capitalism (London: Granta Books, 1998).