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Financialization and the Collapse of European Social Democracy

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Costas Lapavitsas says Greece will face the choice between socialism or fascism.


PAUL JAY, SENIOR EDITOR, TRNN: Welcome back to The Real News Network. I’m Paul Jay in Baltimore. And welcome back to Reality Asserts Itself.

We’re talking about finance, the growth of financialization of the economy. Now joining us again in the studio is Costas Lapavitsas, who’s a professor of economics at the School of Oriental and African Studies, University of London. His most recent book is Profiting without Producing: How Finance Exploits Us All.

Thanks for joining us again.

We’re going to get more in the next segment into alternatives to private ownership, and we will put it on the table, but before we do, I just want to do a few minutes on while the situation in the United States for millions of people is terrible, the situation for your homeland, in Greece, is way more terrible, [incompr.] youth unemployment at 65 percent, overall unemployment at 25 percent.

LAPAVITSAS: Twenty-eight, actually.

JAY: Twenty-eight percent. And without getting into all the ins and outs, which we’ve done previously (and I suggest you search for Costas’s name and go look at some of our stories, ’cause we’ve unraveled the Greek crisis quite a bit and, you know, the role of Germany and the role of finance and the banks and so on and so on. So let’s not get into all that right now. I want to talk about the politics.

We’re seeing the 1930s again, in a way, because Greece is facing this two roads here. You have, you know, a party of the left, which is, you know, one way or another, proposing socialist-type solutions, and you have fascism. You have a centrist coalition, which is kind of a mishmash, and who knows if it’s going to last, but you have a growing fascist movement in France—I’m sorry—in Greece. … You have a growing fascist movement in Greece. So talk a bit about the politics.

LAPAVITSAS: Okay. Well, I’m glad you’re asking this question, because it allows us to move straight into politics now, past the state and the sectoral interests.

Now, what have been the political implications of this? The political implications of financialization and the naked class interest that we’ve seen have been dramatic. They’ve been dramatic because essentially what we call social democracy and the social democratic part of the political spectrum, during the last 20 years, this element of the political spectrum accepted the neoliberal message. They truly believe that markets are bad and—markets are good and states are bad.

JAY: It kind of seduced by the bubbles.

LAPAVITSAS: You know, and also that’s what happens to proselytes, you know, to people who used to believe in something else, and then they believe—find something else. The opposite is they think, ah, I was wrong. They really truly believe that—.

JAY: And it’s also extremely seducing when you can start putting a lot of cash in your own pockets.

LAPAVITSAS: It helps with ideological belief, yes, when that happens. And as you know, many people in the United States actually can be named to have clarified their ideas through their bank accounts.

But then politically is that social democracy, which has historically been a very powerful and important part of the political spectrum—.

JAY: Just for—a lot of young people watch us and may not even know the terms, so really quickly: social democracy meaning capitalism with a social safety net, you know, and you can mitigate the excesses of capitalism by having a higher minimum wage and welfare and various kinds of things.

LAPAVITSAS: Yeah, state intervention in the realm of welfare and provision of key things and so on and mitigate the effects of capitalism as you say, a historic aspect of capitalism that we’ve known throughout the 20th century, a very, very important part.

JAY: So higher, you know, decent pensions, which you had in Greece for—.

LAPAVITSAS: But across the world.

JAY: Health care, government health care.

LAPAVITSAS: Greece actually never had a strong welfare system. Although it had one, it never had a strong—compared to other parts of Europe, where social democracy has been much, much more powerful, even in England.

JAY: And some of the countries who are more wealthy.

LAPAVITSAS: Yes, in Germany and so on, different traditions and so on. But nonetheless we find social democracy in many parts of the world. Social democracy has suffered terribly as a result of financialization, particularly the [incompr.] financialization now, because it basically accepted all that stuff about neoliberalism and so on, and it really believed that this was the future and free-market capitalism was a stable, wonderful system that was going to produce good results, and really went for it. And, obviously, now that it has become clear that financialization is a highly unstable, highly unequal, and deeply problematic system, social democracy hasn’t got a message to come up with.

And across Europe what we see is actually the collapse of social democracy. In Greece that collapse has been astounding. The main party of social democracy, the PASOK Party in Greece, which was the party of government in 2009, has vaporized. I mean, it’s incredible. It’s just—it’s slammed right down to nothing almost. And in the coming elections, what they will make electorally is highly debatable, whether they will manage to—maybe it will be single figures. That is an indication of the political changes that we see as a result of the financialization and its crisis. It’s made social democracy disappear or lose its message and so on. That has created all kinds of—that has had all kinds of knock-on effects. As the social situation has become worse and worse, with rising unemployment, poverty, and so on, which—in Greece, these things have reached the stage of social catastrophe now, much worse than the United States—you can see that the ends of the political spectrum have become more powerful. As social democracy vanishes, the ends of the political spectrum have become stronger.

Now the strongest party is the left. Greece has always had a left presence, political presence, away from social democracy. And as the social democratic core has collapsed, then the voters of that party or government have migrated to parties of the left, which is why we have SYRIZA, the main party of the left now, you know, bidding for power. So we’ve had a complex movement whereby a large part of the electorate has gone to the left. But also a significant part of the electorate, mostly from the right, now has gone to the extreme right, because obviously the voters of the right have been disillusioned in governments of the right applying the neoliberal programs so viciously too. So we’ve had a polarization. We observe a polarization in Greece pretty naturally as part of this financialization [crosstalk]

JAY: And am I correct that the fascist party, which is called—

LAPAVITSAS: Golden Dawn.

JAY: —Golden Dawn, picks up some of the rhetoric against neoliberalism?

LAPAVITSAS: That’s exactly it. It picks up a rhetoric against neoliberalism and picks up the rhetoric against the European Union and the European Monetary Union. It talks about policies to protect employment, to protect living standards, but, of course, for the Greeks, not for the foreigners.

JAY: Not for immigrants.

LAPAVITSAS: Yeah, foreigners or immigrants or whatever it is. So they take these ideas, which at core are actually ideas that fit with people’s experience, because—

JAY: Well, they’re popular, yeah.

LAPAVITSAS: —unemployment is huge, poverty has increased. They take these ideas, they promise solutions. They often put their finger in people’s wounded pride. And they promise to solve them through violence and by attacking foreigners or immigrants or whoever else in a typical sort of extreme-right and fascist way.

The promise, though, is on the left. That’s where most Greek people are looking towards. And for the first time in the history of Greece, certainly in the postwar history of Greece, we might have the prospect of a radical left-wing government emerging because of the social disaster and because of these political changes that I mentioned. This to me indicates what might happen elsewhere in Europe, and potentially what might happen in places even like the United States. And as social inequality becomes deeper as the economy malfunctions—obviously, we’re nowhere near what happened in Greece, but nonetheless some of the trends and tendencies are—there’s a similarity.

The real question, then, is what the left will do. The left has got an opportunity in Greece, a tremendous opportunity, to take the economy and society out of the crisis, to move it in a progressive direction, and to change the balance of class forces in favor of labor and against capital. You cannot have socialism in Greece this year. That’s not the issue, obviously. But you can change the structure of the economy. You can rescue the crisis—you can rescue the country and get it out of the crisis. And you can strengthen working people and begin a process of healing society and empowering working people against capital. That is perfectly feasible.

JAY: Okay. I know, ’cause I’ve read parts of your book, that that has a lot to do with developing public banking and strengthening the public sector in many ways. And that’s, I think you would say, true for Greece, as it is for the United States or Canada or Great Britain or anywhere. And in the next segment of our interview, we’re going to talk about what does an alternative look like. What are some possible solutions short-term and perhaps a little longer-term?

Please join us for the final segment of our interview with Costas Lapavitsas on Reality Asserts Itself on The Real News Network.

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