Thursday, 12 March 2015

Analysis: Syriza's challenge


Andrew Fisher, author of The Failed Experiment ... and how to build an economy that works, reflects on the challenges facing the Syriza government

Only a few weeks have passed since the Greek people rejected the austerity consensus and a Syriza-led government was formed. It seems as though much more time has gone by.

It was the famous assessment of Chinese Premier Zhou Enlai of the French revolution that it was "too early to tell". He may have been a little over-cautious, but it's certainly too early to for any final analysis of Syriza - and this post won't attempt it.

I've paused a long time to write this - knowing that the issue isn't going away, and allowing for the dust to settle on the more excitable reactions to Syriza's election and first confrontations. So this is about a sober analysis of the realpolitik facing the first government since the end of the Cold War to be elected in Europe on a genuinely social democratic platform - and in the worst of circumstances.

No one should be under any illusion about the challenge facing the Greek people and their government. The new Greek government elected in late January faced the legacy of years of austerity that have collapsed the economy to only three-quarters of its pre-crisis size, unemployment around 25% with youth unemployment nearer 50%, and then there are the fundamental issues of building an economic strategy and tax collection system from very weak foundations, that were weak even before the crisis.

They immediately implemented some of their key pre-election pledges, including: raising the minimum wage, re-employing sacked government cleaners, restoring collective bargaining, restoring electricity to around 300,000 homes that had been cut off, and reversing a scheduled increase in VAT.

But these significant (to those affected by them) yet economically relatively minor issues were merely hors d'ouevres for the big showdown with the 'Troika' - the name given to Greece's creditors, the European Commission, ECB and IMF.

The European Union vs Syriza showdown

The media has framed this as a macho confrontation between Alexis Tsipras and the leather jacket-clad Yanis Varoufakis on the one hand against Eurogroup President Jeroen Dijsselbloem and Angela Merkel on the other.

Most of the post-match analysis has focused on Syriza's retreat - with right wing commentators cheering the left wing upstarts being put in their place, while critics on the left have wheeled out the hackneyed cry of betrayal, and the overlap between the two cynically telling us all 'I told you so'.

However, such post-match analysis betrays a lack of pre-match analysis. The Greek economy is fucked. Its banks are bankrupt. The government is borrowing from external creditors to stay afloat. It is in a state of debt peonage, as David Graeber might describe it. It is in absolutely no position to impose a programme and survive the resultant reaction from its creditors.

Domestic democratic mandates count for little in the international arena - military and economic might (individually or as part of alliances) count for far more and Greece has little of either. That is the realpolitik, and Greece has no allies in European governments - quite the opposite, at least for now.

Nevertheless, what the Greek government gained was a little relief, some flexibility and breathing space. This - combined with its modest reforms - is far more than New Democracy and Pasok governments had achieved, and this is why the Greek electorate continues to reward Syriza with 60%+ approval ratings.

"Kicking the can down the road" as Newsnight's Duncan Weldon described it, is not necessarily a bad thing. It buys time for a new government to build the institutions it needs (most notably of tax collection, which is dysfunctional), to make some domestic reforms to kickstart the economy, and to hope for political changes elsewhere in Europe to bring them some allies.

The EU's rigid monetarist rules contained in the stability and growth pact - and the inevitably common and collectively enforced rules that logically flow from monetary union - are not helping Greece's new government or giving it the flexibility with policy that it could do with.

This poses a big question in Greece and within Syriza. Those such as Costas Lapasvitsas (a professor of economics and newly-elected Syriza MP) have argued that Greece must pull out of the EU if it is to implement the programme on which it was elected (read more of Lapasvitsas' view here).

But pulling out of the single currency and almost certainly the EU in so doing would not be simple or painless. Democratically, Syriza was also elected on the basis of remaining within the EU, and such a stance was supported by around 80% of the Greek electorate at the time of the election.

Grexit

However, if the Troika does not relent and give Syriza the space to implement its programme - then calls for a Greek exit (Grexit) are likely to intensify.

But Grexit would be no panacea. A new currency would cost money to implement, and the insolvent Greek banks would still be insolvent and nationalised, with capital controls introduced.

It is also unclear what the response of the EU would be - would Greece immediately be able to negotiate the sort of agreements that non-EU states like Norway and Switzerland have achieved, or would the Greek government be punished - especially following a debt-repudiation.

A new currency would be devalued and the economy would still be in ruins. Imports would be expensive (with rationing for some goods probably necessary) and exports would still be weak. At some point Grexit, however brutal and painful, may be the lesser of the evils but such a point has not been reached - not by a long way in either the minds of Syriza or of the Greek people.

Democracy vs capitalism

But what Syriza's election highlights is the way in which the question of the economy has been removed from the democratic sphere - to the extent that even a national elected government cannot implement changes that interfere with the economic system.

The structure of the euro enhances these tensions - but they exist outside of it too - as they have in many nations in debt peonage to the IMF and World Bank in past decades under Structural Adjustment Programmes or the acutely euphemistic and misnamed Poverty Reduction Strategy Plans.

Ancient Greece was the crucible of democracy; what Syriza-led modern Greece could be is the crucible of bringing the economy into the democratic sphere. In the material circumstances of modern Greece that is a challenge under which even Heracles in Greek mythology would have laboured.

For those of us who want a democratic economy, Greece deserves our solidarity.

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