Gambling with the Euro

Freeing Greece from its neoliberal straitjacket will require exiting the euro.

A pro-government rally in Athens last week. Aggeliki Koronaiou / Flickr

After only a few weeks in power, Syriza has already been given a taste of the intransigence of their creditors turned negotiators. Last week, the European Central Bank (ECB) said it would reject Greek sovereign bonds as collateral, making Greek banks dependent on Emergency Liquidity Assistance.

On the one hand, this is blackmail of the nastiest sort. The ELA theoretically could be pulled at any moment, bringing the new government to its knees. But given the larger interests at stake, it’s difficult to envision such a scenario will ever materialize.

Syriza undoubtedly has entered their negotiations with the European Union (EU) and the ECB from a position of weakness. But the dilemma faced in European ruling circles cannot be underestimated. As promises and threats abound in the coming weeks and months, it will be important to understand the endgame for the forces driving this game of chicken.

The EU and the ECB could agree to a write down of Greek debt, but that would potentially create an opening for other countries to challenge the terms of their sovereign debt. Or they could play hardball and kick Greece out of the eurozone, which would risk a different kind of domino effect where other peripheral economies would consider exit and default options.

The situation, of course, is too fluid for anyone to predict its outcome. We can expect the EU and the ECB to continue pushing negotiations to the extreme, wreaking all kinds of economic and political havoc. But ultimately the European and especially German elite would rather have a monetary union with some debt restructuring than no monetary union at all. Herein lies Greece’s potential leverage.

Why would the German elite opt for eurozone-lite and not simply find a way to trigger a eurozone collapse to their benefit? Why preserve the monetary union if the Left manages to tinker with its structures? If they play their hand right, Syriza and emerging allies like Podemos might be able to change a number of eurozone policies, especially around lending and investment.

But there is a key mechanism — wage suppression — that cannot be changed unless German capital is challenged on its home turf, by the Left in general and through labor militancy in particular. German elites assume there’s little chance that would happen before an emerging Southern European left would be forced to capitulate, and Die Linke itself has been quite sober about such prospects.

German capital has been pushing down wages since the formation of the monetary union. But we have to go back a bit farther to really understand its significance.

Germany was one of the leading postwar industrial producers, competing largely with the United States and Japan. The industrial overcapacity resulting from this competition led to the profit crisis of the 1970s. Since then, each major set of producers has sought to recover from the crisis in different ways.

In the United States, we have seen manufacturing greatly phased out and replaced by the rise of dollarization, to which its regional orbit is especially subject. Germany and Japan, on the other hand, retained a greater share of their industrial capacity, and their own regional orbits were primed to be expanded as export markets. The eurozone helped cement this dynamic. Wage suppression was used to keep German exports competitive, the demand for which was maintained by massive lending to the periphery.

The upshot is that there has to be a coordination of wage adjustment policies to fundamentally break the cycle of trade imbalances. And this might ultimately be the sticking point for Syriza’s strategy in the long term.

What is Syriza’s endgame? According to the dominant faction leading the party, the European left should strive to consolidate executive power and transform the EU into a progressive project of political cooperation. The finance minister, Yanis Varoufakis, has extended this logic even further by arguing that the eurozone itself can be reformed to the benefit of all its members. Varoufakis has articulated what he calls a modest proposal that consists largely of quantitative easing and restored investment levels throughout the eurozone.

The key is that these reforms would be powered by Germany since it is, after all, the industrial heart of Europe. Indeed, Varoufakis has suggested that “Europe needs a hegemonic Germany” that would actively push for savings to be shifted to productive activities, including in the periphery.

Which brings us back to our earlier quagmire. Even if mechanisms of quantitative easing and investment were introduced, wages will not be adjusted unless German capital is forced to adjust them. And again, that won’t happen unless there’s a government in Germany representing popular interests. In the meantime, peripheral economies will remain trade-deficit economies, unable to increase their productivity vis-à-vis the core.

It’s a kind of neoliberal straitjacket in which efforts to transition to an alternative growth model will be greatly constrained, if not impossible. So while we must strive for an internationalist left, for a progressive Europe, we also have to be cognizant of the limits created by the current political conditions of the core.

There’s a certain question that tends to surface at this point in the conversation. Given the political landscape, given the humanitarian crisis, given people’s concerns about the boat being rocked too hard too fast, how much can we ask of the Left at this point?

It’s a legitimate question. There’s an appealing logic to focusing on rebuilding hope among the Greek populace instead of automatically proposing a radical break, especially when over half the population is in favor of staying in the eurozone.

Many left critics, however, maintain that Syriza missed an opportunity in the period following the June 2012 election to engage people on these deeper questions. Though it had to first address the humanitarian crisis with concrete proposals, they argue, the party could have also pushed the conversation in a more radical direction.

I agree with this critique to a large extent. But after a period of considerable decline in popular mobilization, the reality on the ground is such that the most politically feasible option at this point is to attack austerity while ensuring some kind of stability. Part of that strategy includes not exiting the eurozone at a moment when the Left would take much of the blame for the immediate aftermath. It will be a different story if Syriza reaches a point where they must capitulate or they will be expelled. We could thus view their strategy as a sort of necessary gradualism.

Assuming that Syriza neither reneges on their promises nor resigns from office altogether, there are two possible outcomes. The first is that Greece is forced out of the eurozone. The second is that it stays in the union and gets a debt write down, but ultimately the fundamental dynamic of trade imbalances remains intact.

In the first scenario, Syriza necessarily will need a Plan B. But even in the second scenario, the preceding logic suggests that it might still need a Plan B. If the Left cannot make the economy more productive, the game-changing gains that might be secured from this current battle might in the next crisis be overturned. And the little hope that people have left, that’s been rekindled, will be lost.

There are, of course, various forces on the left advocating this position. Within Syriza, the Left Platform has tried to cohere an internal opposition on a number of questions, including euro membership.

There is considerable and increasing support for the Left Platform on the party’s central committee, rising from 30 percent at the founding congress to nearly 40 percent. One of its leading members, Stathis Kouvelakis, estimates that the Left Platform, when combined with the left wings of the dominant bloc, actually constitutes a majority in the party.

The Left Platform also has increased its relative weight at the institutional level, with its number of MPs rising from twelve in the previous parliament to thirty in the present one, or roughly 20 percent of the party’s parliamentary composition. In addition, another one of its key figures, Panagiotis Lafazanis, has been appointed minister of productive reconstruction, environment, and energy, and several others are now deputy ministers.

But there are some limitations to opposition within Syriza. The Left Platform thus far has proven unable to affect the party line, both in the previous period and in these early days of governance, with most of its members not yet articulating public declarations of opposition. Especially around economic questions, the economist and now Syriza MP Costas Lapavitsas remains one of the few consistent critics, though he himself has had to toe the party line. And even if his critiques intensify, they will continue to be voiced from a less institutionally powerful position, relative to that afforded to pro-euro stalwarts like Varoufakis.

Above all, given the narrow window that Syriza has to negotiate with the EU and the ECB, it will be quite difficult for these internal disputes to be connected to discussions at the level of popular bases, let alone foment a public dialogue.

There are also opportunities for a left opposition outside Syriza, but these too face a series of constraints. It is well known that the Communist Party has avoided any kind of relationship or serious engagement with Syriza, mainly out of sectarian exhaust. And while Antarsya has an impressive grassroots presence despite their small size, in recent years they have gotten caught up in internal disputes. These contradictions and other challenges have prevented the coalition from popularizing their program in a way that sufficiently convinces a larger audience of the viability of exiting the eurozone.

Nevertheless, with the expected resurgence of mobilizations in this critical period, we might see these various left forces again resume some role in maintaining pressure on the Syriza leadership.

Even so, the euro debate will remain stalled unless the conversation shifts from largely ideological polemics to pragmatic concerns. So how could that happen?

First, we must take stock of the most developed blueprint for exiting the eurozone, which is that offered by Lapavitsas and various associates. Under this plan, the country would nationalize its banks, impose capital controls, and devalue its currency in a controlled manner to increase export competitiveness. Lapavitsas has also explicated how to deal with more immediate problems like liquidity and the availability of food, medicine, and fuel.

Second, we must emphasize why an alternative to the neoliberal growth model is not only necessary but possible in this conjuncture. We must, in other words, make the case for left-developmentalism in Greece.

The Greek state is now more than ever in a position to discipline capital, or to compel it to invest in more productive activities. This is because there is a section of Greek capital that isn’t particularly mobile.

Greek capital today is not like the shipowners of the postwar period, who could just take their ships to other locations. Sure, wealth is concentrated in a handful of largely parasitic oligarchs, but those oligarchs rely on airwaves, real estate, stadiums, metal plants, and might even see new investment opportunities in transport, pharmaceuticals, solar energy, and other sectors if the appropriate industrial policy is presented.[1]

Industrial policy is in the cards now because for the first time, the Greek state is committed to attacking bourgeois corruption instead of handing out leases and permits left and right.

Due to a number of structural reasons and political contingencies, the Greek postwar governments pursued a rather bastardized version of planning compared to other developing countries. And though this was at least rhetorically the project of Pasok when it took power in the 1980s, that goal was dropped by the end of the decade in favor of stabilization because of the party’s commitments to the capitalist class. Syriza has no such commitments. It can build the state capacity needed to actually discipline capital.

Moreover, at the global level, Northern Europe is not the only trading partner around. In fact, there are a number of powers that would be happy to stand against the eurozone and that have neither the interest nor the capacity to subordinate Greece.

There are the pink tide governments in Latin America, whose state-society relations have served as a model for Syriza. There’s also the riskier option of Russia, to which Syriza has shown itself open. While at the moment Syriza is most likely using Russia as a bargaining chip in EU talks, that relationship could be expanded. It would have to reckon, of course, with the fact that, like their coalition partner, the Independent Greeks, Russia would be an ideologically dissonant partner. But this kind of realpolitik shouldn’t ruffle our feathers.

Realpolitik? Alliances with capital? Isn’t that bourgeois collaboration? It is true that this has been largely the historical experience of developmentalism. But what makes this proposition one of left-developmentalism is that these would be strategic alliances where the Left would have the upper hand. This claim, of course, rests on the assumption that Syriza will continue to cultivate and deepen popular support and organization, which, after all, is one of the biggest gambles in any attempt at left governance.

But betting on popular power is different from gambling with it. And a gamble with the euro is ultimately of the latter sort.

It comes down to this: a highly fragmented working class in an unproductive economy will have a difficult time organizing against capital in a sustained manner. Again, the examples of Venezuela, Bolivia, and Ecuador are relevant. Given the current weakness of the Greek economy — and given its continued stagnation if it remains in the eurozone — the Left must seriously think about how to raise productivity so we can start devising a way to socialize it.

In a situation where the population can be mobilized but remains largely unorganized, Syriza could engage popular classes on these questions in a number of ways.

One would be to build on their earlier contributions to the network of neighborhood assemblies that emerged after the Syntagma occupation. This time, instead of just articulating an anti-austerity politics, they could use these fora as places to discuss what’s needed for a sustainable transition out of stagnation and toward socialism.

In such a context, people could grapple with those ideas, challenge them, perhaps take to them, or at least be less skeptical of them. What would better embody that bold demand of the aganaktismenoi, of the indignados, for real, direct democracy?

There’s only one thing that a left government can and should bet on, which is that people will take to a credible program if they are given the space and time to debate it. All other bets, as Tsipras himself declared, should be called off.

[1] It’s important here to note the motivation of Greek elites in entering the eurozone, which was to exploit the markets in its own regional orbit in the Balkans. The companies that have really benefited from this venture, however, have been largely limited to the financial sector. Especially since the onset of the crisis, other sections of Greek capital have disinvested from the Balkans. These sections are bound to Greece at least in the short term and can be incentivized to stay in the long term.

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