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The Lies of Neoliberalism; Governments Don’t Create Jobs or Economic Growth by NY Brit Expat

4:06 pm in Uncategorized by Anti-Capitalist Meetup

It may be my masochism, but I actually watched the Presidential debates. I also regularly watch the news over here in the UK. Cameron and his cronies constantly spout this argument that governments cannot create economic growth. During the Presidential debates, Mitt Romney even went a step further; he argued that governments cannot create employment. The Tory argument is a bit more sophisticated, but both arguments have their roots in the fantasies of neoliberal economics of which both the Tories and the Republicans have adopted in its most fundamental form; their arguments also tie into the perspective of reduction of the central government budgets along the lines demanded by the IMF and the introduction of austerity measures to ensure these results. Except, and this is a big exception, neither of these governments have been forced to do so by the IMF.

Given that these statements are not only historically inaccurate, but bordering on the patently absurd, it never ceases to amaze me that challenge from the mainstream media is not forthcoming. Even more so, during the debate, President Obama did not respond to the absurd statement by Romney; in fact, he also raised budget deficit reduction which essentially means cutting state employment and social services. The Labour Party does not disagree with the Tories; they only say that austerity must be done more slowly and Ed Balls (the shadow Chancellor of the Exchequer) has said at the Labour Party conference that, if elected, they had no intension of reversing the austerity measures forced upon the British populace by the Con-Dem government. Essentially, all of the mainstream parties are singing the same tune; honestly, different tonalities of the same argument do not change the fact that the underlying tune is the same.
sheepsfightingwhowilleatthem
To someone that is living in the real world, in other words, someone that actually heard about the New Deal, that knows the role of government in ensuring economic growth during the post-war period in Europe, who knows damn well that state (or public) sector workers exist and that the government’s purchase of goods and services from the private sector and investment in the private sector help to ensure economic growth it makes me wonder if they think that we are extremely stupid.

I. Can Government create Employment?

John Harvey, a post-Keynesian economist has written an excellent piece in, of all places, Forbes Magazine which raise some of the points that I will raise here, but I will actually go a bit beyond what he has said and try to address exactly what is underlying the arguments of mainstream politicians and what is lying beneath the bizarre arguments that we are hearing these days.

Harvey correct asserts that those who claim that government cannot create employment are re-defining the meaning of the word “jobs” to suit their own private profit margins:

“But, those who say that the government cannot create employment are adding another element to the definition. To them, a job is any routine activity for which we earn income paid by an entity required to earn a profit. There is no compelling reason for this addendum and it arbitrarily excludes people like James Galbraith, who is an economist just like me, but at the University of Texas, and Jeffrey Halstead, Chief of Police in Fort Worth, Texas. By the qualified definition, they don’t have “jobs” because their income is derived from tax revenue and not private-sector sales. Ditto every single fireman, public school teacher, Marine, sailor, airman, soldier, national park ranger, defense industry employee, NASA scientist, social worker, librarian, etc., etc. None of them has a job.

Why would someone embrace such a questionable characterization? Because their true goal isn’t to generate a scientific understanding of the manner in which the macroeconomy operates, but to make a moral statement. Specifically, their contention is that only those routine activities financed by profit are truly of value. Everything the government does is unnecessary because if people really wanted it, they would have bought it in the private sector: that which is useful is profitable. Furthermore, they say, were it not for my taxes, those in the public sector would not have a job. Firemen earn a salary only because some of mine was taken away (under threat of imprisonment) (http://www.forbes.com/sites/johntharvey/2012/10/22/government-creates-jobs/).”

John Harvey makes some excellent points. This is the reason that I have cited his article. However, I would say that he is doing those advocating this perspective quite a favour in terms of saying that the view that the government cannot creates employment is a moral one. I would demur; instead, I would argue that this is an ideological position with little, or no, link to reality, much less morality. They are outright liars, not moralists. I would argue that the resurgence of this argument is not based on the idea that only things produced for profits are things of value, they know that fire services are of value; but rather that these things should be produced and provided on the basis of profitability; that is, they should be produced under the control of the private sector. In other words, why should something be produced and provided if they cannot make a profit on it?!

In fact, looking at history quite easily disproves this position; this argument is a dangerous fantasy with the lives of the majority in the advanced capitalist world at stake. Reprivatisation arguments are central planks in the neoliberal agenda and after being forced on people in the capitalist periphery and emergent economies (see, e.g., Chile and Argentina), these are now being forced on the majority in the advanced capitalist world. For example, a cursory examination of the situation before generalised nationalised fire services existed in the UK, where insurance companies provided fire services turned out to be not only too expensive but incapable of providing provision; in fact it was the insurance companies themselves that asked for national funding and provision of fire services and this was in the height of free-market ideological arguments in the nineteenth century (London Fire Brigade). Yet, if you look at right-wing arguments in the US and in the UK, there is an attempt to privatise fire services; already in the UK, parts of an holistic service are being forced to be contracted out to private companies to “cut costs” in the face of government cutbacks.

Another example that I have written about previously is water privatisation, not only are costs not reduced, but access to water is limited to those that can afford to pay for it; so something that people require in order to survive is now no longer available to them due to privatisation, some forced by the IMF and World Bank, others done in the erroneous attempt to cut costs (http://www.dailykos.com/story/2011/08/28/1011343/-Anti-Capitalist-Meet-up-Water-Privatisation); we are seeing resocialistion of water services in France and in other countries to regain control of water away from firms as it is an essential component of survival for human beings.
Halliburton
The problem with private provision of services is that it is your ability to pay is what is important not the quality of the service; profitability considerations means cost cutting and that does not necessarily provide quality and guaranteed service. This is why a number of things became public goods rather than be left to markets to provide. The insistence of reprivatisation of services is not based on whether historically these can provide the most effective service; it is done so that they can literally find a new area of capitalist investment which they think has a guaranteed market. However, rather than acknowledge an obvious point that not everyone can afford to get these services if they have to purchase them directly rather than paying for them through taxation and subsidising those that cannot pay, we are seeing an argument that is based on an assumption which has been proven to be erroneous, that if something is produced there will be demand to sustain it.

In fact, this is a revival of an old argument whose demonstrable failure is what I would say is what exactly led to Great Depression and to the subsequent creation of the social welfare state and public sector back in the 1930s in the US and in the post-war period in the UK. I want to stress that the only reason that I think that this earlier argument was defeated was not due to the Great Depression on its own, but arises from the existence of a strong left and powerful union movement which led the Capitalist class to try and ameliorate the crises that are a normal part of the capitalist economic system not only to protect their own interests, but also to remove some of the threats of the left and a strong union movement.

Essentially, the argument endorsed by the right-wing of the mainstreams in the US, UK and EU is based upon a perspective that refuses to acknowledge that the private sector cannot create sufficient levels of employment to ensure that their own products are capable of being sold in the market at a price which ensures that they can earn a profit upon them. In the absence of the ability to earn a profit, these goods will not be produced. Moreover, in the absence of incomes to pay for these things, production and provision will simply not exist.
humansacrifice
The laws of motion of the capitalist economic system in which profitability (or expected profitability) determine the techniques of production in use (how much labour, how much and what type of machinery are used to produce output), how much output (goods and services) are produced and what type of goods and services are produced are essentially what produce economic crises. That is, crises derive from the system itself, and are not an aberration, but are a normal part of the system.

What Keynesian economic policies did was not to eliminate crises, but rather to ameliorate them; that is why people began talking about recessions rather than economic crises. But in the absence of coherent regulation and attempts to stimulate and cool down the economy when needed (as advocated by Keynes) what we are seeing is prolonged crises and smaller and shorter recoveries. Moreover, recoveries (if you have not noticed) make no dent in the substantial amount of structural unemployment that now characterises advanced capitalist economies.

II. What is causing structural unemployment?

The answer is the laws of motion of the capitalist economic system itself. Competition exists between and within industries, where money capital (and technology which is privately owned, and sometimes when appropriate to production physical capital itself) is moved between industries in search of the highest profits. The introduction of machinery in the attempt to increase productivity occurs so as to ensure that workers’ wages are produced more quickly and hence that the surplus value is greater in production are what leads to several interrelated phenomena. The reasons underlying colonialism and then imperialism was part of this process, these enabled getting hold of raw materials and cheap labour. In some cases, like the cotton textile industry, the goods could even be sold back to colonies thereby providing part of the market for the goods themselves.

Now, globalisation means that competition occurs on a world level. Lack of restrictions on capital mobility in search of profits has led to outsourcing of industries to the capitalist periphery and emergent economies where labour costs and raw materials are cheaper. The fact that you can produce something for pennies in these countries and sell them for hundreds of times more means that multinational corporations (MNCs) need to lay out far less and will make a far greater profit if the goods are sold (even if they are sold for far less than they expected, they will still be making a far greater profit than if they are produced in a country with higher costs of production). The only advantage (and this is rapidly declining) that the advanced capitalist world has is in technology (and that is the reason that the Chinese are insisting on technology transfer when they allow for foreign direct investment and MNCs into the country).

So let’s go through some of the dynamics of the system in order to understand what is happening due to the internal laws of motion of the system:

1) Introduction of machinery means that less workers are needed relatively to produce the same level of product, that is what productivity means; but the problem is not only one of relatively less workers being needed as whole sectors of production have been destroyed leading to structural unemployment, that is an absolute increase in unemployment in these countries.

2) Introduction of machinery or cheapening of costs of production (e.g., using cheaper raw materials obtained from overseas, or goods produced overseas that are cheaper to produce than in the advanced capitalist world due to both cheaper raw materials and labour costs) in the sectors that produce workers consumption goods, means that the production and reproduction of workers subsistence (the socially determined commodities that workers consume) is lowered; this lowers the value of the wage goods meaning that more time will be spent on goods that go towards the surplus product.

3) Introduction of machinery leads to increased unemployment; unemployment then weakens the bargaining power of workers. The deliberate destruction of the industrial and manufacturing sectors in the advanced capitalist world not only led to increased unemployment, it also destroyed the power of trade unions concentrated in those sectors. In fact, before the sectors themselves were weakened so badly, right to work laws led foreign automobile companies to open factories not in traditional regions but in states in the US where they did not have to deal with the demands of unions.

4) The decrease in wages due to the decline of union power and structural unemployment has led to a break-down in job protections and conditions of work. More and more, part-time and temporary low-paid work has replaced well-paying and secure jobs for life. To avoid, payment of benefits and social security (national insurance), employers have shifted towards sub-contracting jobs which places workers in greater precariousness as contracts are mostly temporary and you have no job protection. General attacks on the social welfare state have undermined the abilities of the poor and working poor to maintain their income. The attempt to stimulate demand by enabling access to easy but expensive credit has blown up in their face; witness the sub-prime crisis and personal bankruptcy as borrowers cannot pay back what they purchased.

5) While increasing the amount of surplus produced, they have seemed to have forgotten an incredibly important point. That in order for profits to exist, someone must buy their product. In the absence of demand backed by income, these potential profits only remain potential and we have what is called a realisation crisis following a point of over-accumulation (the crash in 2008); guess what, Marx was correct in Volume I of Capital.

Structural unemployment is a normal part and parcel of the system and derives from its internal laws of motion. It can be combatted, but it won’t be done if wages are continually eroded in the advanced capitalist world. Not only can we no longer survive on the low wages on offer in the capitalist periphery and emergent economies (which have been deliberately kept low), but also this would eliminate the demand for goods and services that the private sector and capitalists need to enable economic growth. The only thing that may actually keep the system going (and to increase profits in the real economy rather than the financial sectors) would be if China and other emergent economies actually increase wage incomes in their countries. In that case, essentially the workers in the advanced capitalist world become a lot more redundant to the needs of international capital.
Serwotkaonaspiration
Rather than destroy the state sector, what is needed instead as a first step is direct government jobs creation. That is, the government itself needs to hire people at all levels. It also needs to create new sectors for them to work; the creation of a green transport industry and green manufacturing would be an excellent place to start. However, since construction is primarily a male occupation, increasing money spent on education, social services government provision of health care, nurseries (crèches) which are all traditional areas of women’s work would offer women a far better choice than the low-paid part-time and temporary work to which they are being relegated. However, no mainstream politician is advocating the only known and proven thing to get the system out of the crisis, they are all parroting the line of reduce state expenditure, cut public sector employment and cut social services and benefits.

III. The Role of Government and Economic Growth

It may be asked what does the above have to do with this argument advanced by politicians which denies that the government can create jobs and/or economic growth. The answer is quite a lot.

For all the babble about the importance of the private sector, the reality is that the government provides many things that help enable economic growth and profitability for the private sector. From government purchases from the private sector (think about how much the military industrial complex make from various government orders for its products and services); this alone eliminates uncertainty in terms of profitability and provides demand for their goods and hence leads to growth and rising employment in the private sector). Government spending and investment in housing, research and development, road building, etc. winds up in the pockets of the private sector. In fact, your tax dollars and government borrowing has been sustaining the private sector for quite some time and in fact in the post-war period it has enabled economic growth.

To quote John Harvey:

“That leaves investment and government spending as the real engines of growth […]. They are the forces that drive the business cycle rather than follow it. Businesses and the government together determine whether or not we are in rapid expansion or the depths of depression. This chart illustrates the point:
Harveyusgdpandmaindrivers, shrunk
[…] Note that this means that if there were no government sector, then the job of driving economic activity would be left to investment alone. This is similar to the situation we faced before WWII, when the government was tiny compared to the rest of the economy. The problem is, firms can build new capacity (i.e., invest) relatively quickly so that, ironically, at the very moment we have our greatest ability to produce goods and services, investment falls, layoffs occur, and we slip into recession. This is an absolutely critical point (http://www.forbes.com/sites/johntharvey/2011/04/29/why-the-private-sector-needs-the-government-to-spend-money/).”

What Harvey is demonstrating is the role of Government in creating economic growth. He argues that consumer spending follows the state of the economy, rising as the economy grows and falling as it declines. There are two things that drive economic growth, but in a recession, private investment is insufficient; it is government spending and investment that drive economic growth.

But let’s talk how government does drive economic growth. We know that this is due to government spending. But what else the government spending provides? It provides income to state workers which will buy the goods and services of the private sector. Unemployment insurance and pensions and social services (think of food stamps, welfare payments, and disability benefits) also ensure that those that would not have income due to unemployment actually can purchase goods and services. Quite obviously, those are for the most part produced by, yes, the private sector as we live in a capitalist economy.

So, given the situation, the last thing that we want to do when we are in an economic crisis in the advanced capitalist world is to cut the state sector, cut benefits and reduce wages. All you are doing in this situation is creating more unemployment and throwing people into poverty.

“In fact, Matthew Weaver of The Guardian reported, that one in five British workers are being paid less than a living wage, that is 4.82 million workers are not earning enough to survive on. This is because the designated minimum wage (£6.19/hour) is not a living wage (£8.30 in London, £7.20 in the rest of the country) and the Tories are opposing raising the wage due to fears of affecting employment.

“The study, launched in advance of next week’s Living Wage Week, found that Northern Ireland has the highest proportion of people earning below the living wage (24%), followed by Wales at 23%. The lowest proportion of sub-living wage earners are in London and the south-east, both at 16%. It found that at least 70% of cleaners, kitchen staff and waiters and waitresses were paid less than the living wage (http://www.guardian.co.uk/society/2012/oct/29/five-million-britons-living-wage?INTCMP=SRCH).”

If you want to see what happens when these policies are implemented in earnest, take a look at Greece and Spain and you are witnessing the deliberate creation of an economic depression in these countries.

“Eurostat figures show that 25.75m people in the whole European Union were unemployed in September 2012 – an increase of 169,000 people on the previous month. Compared with September 2011, unemployment has risen by 2.145m.
Spain and Greece recorded the highest unemployment rates at 25.8% and 25.1% respectively (http://www.guardian.co.uk/news/datablog/2012/oct/31/europe-unemployment-rate-by-country-eurozone).”

In terms of the general state of the economies of Spain and Greece:

“So Spain’s economy has contracted by another 0.3% for the third quarter, whilst inflation in the country continues to rise and demand continues to slump. You could be forgiven for thinking that there is no way out of this hell-hole for Spain: the contraction now means that the country has been in its ‘double-dip’ recession for five consecutive quarters, and unemployment is now running at a fresh high of 25.1%. To add insult to injury, the Spanish government thinks that the economy will shrink a total of 1.5% this year, and another 0.5% in 2013 (http://www.managementtoday.co.uk/news/1157114/Spanish-recession-deepens-Greece-riskier-investment-Syria/).”

“The [latest Greek] draft budget for 2013, which provides for measures of 9.2 billion euros, an economic contraction of 4.5 percent and a primary surplus of 0.5 percent (http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_30/10/2012_468024, my clarification).”

The message is on the wall for the UK irrespective of the blip provided by the Olympics; circuses without bread do not make for economic growth and they also make for very unhappy populations as we see in Greece and Spain.

The fact that these realities are being ignored by politicians is truly disconcerting. On November 1st, it was reported that in the UK, both manufacturing and construction industries are shrinking. In fact, manufacturing has declined for the 6th month in a row; the only thing that grew is consumer spending (http://www.bbc.co.uk/news/business-20167643). That is proof that the small economic growth we saw in the last quarter (which the Tories are claiming is due to their economic policies) is the result of the Olympics and that we can expect the UK, once again, to fall into recession. Moreover, the stress on export-led growth (another plank of neoliberal economics) for manufacturing means that the sector is far more dependent upon conditions in the world economy and hence since world recovery is not happening, export-led sectors are simply not going to grow.

“I was discussing this situation in the UK with Karl Petrick who is an economic historian and he said the following:

“I’m pretty sure that was part of their party programme. The sad thing is that anyone who is paying attention can already see the effects of an austerity budget in the UK, but that has never even registered in the news on this side of the pond. Either that or we are in some sort of odd one-upmanship: You call that a recession? I’ll show you A RECESSION!!!! The situation would be funny, if it was not so dire!”

It does not benefit the private sector either as the loss of income all around means that there are less people now able to buy what they produce. Since the private sector does not see that the possibility for investment as a great idea now due to the fact that there is not sufficient demand for their goods, they will not create new jobs. Waiting for the private sector to invest, even with all the tax breaks that various governments are giving to the corporations and to the wealthiest, is quite simply put, like waiting for climate change to fix itself, in other words, it is just not happening. In fact, the stock markets are the investment of choice, short term speculative investment is what is happening, not investment which creates jobs.

This leaves no choice but for the state sector to once again engage in direct government jobs creation … without that there is no way to combat structural employment. Moreover, given that we need far less labour (due to high productivity), the far more sensible option is also to decrease weekly working hours, but maintain income. That is, raise income of working people, not decrease it which is what we are seeing throughout the advanced capitalist world.
NHSambulanceservices

Conclusion

The re-privatisation of public goods (and it is reprivatisation as many of these services were provided privately before the existence of the state sector) represents a coup for capitalists. From reprivatisation of electrics, water, road services, they are now trying to get their hands on provision of health care in the UK, care homes, nurseries, fire services, education, and police services. The problem is that there was a reason for these public goods to be nationalised in the first place, private provision is always based first and foremost on profitability which means that if you cannot afford to purchase these things, then you will no longer be able to access them. With incomes falling all over the advanced capitalist world, that means that many of these things will no longer be part of workers’ consumption bundles. Moreover, since many of these things cannot be purchased, they will once again fall onto women as part of their household labour for which they receive no recompense.
Capitalismo
The erosion of workers standards of living in the advanced capitalist world is part of a wage squeeze trying to raise profits in a period of low profitability caused by the crisis. In periods of economic growth, wages can be allowed above social subsistence; that is what we saw in the post war period. High productivity and economic growth meant that the surplus product could be shared between workers and capitalists. Over time, the social subsistence level rose. What we are seeing now is the erosion of the social subsistence wage; they are pushing it down (so it is above physical subsistence and reproduction of the working class and they are pushing it downwards). What we are seeing is the combination of normal decreases in the value of labour power (e.g., bringing cheap goods in from overseas that are consumed by the working class) combined with a deliberate lowering of social subsistence wages, the breakdown of “jobs for life” and the rising number of people employed part-time, temporarily and as sub-contracted workers.

The problem with wage squeezes is that essentially it means that fewer and fewer working people and the high number of unemployed people (facing benefit cuts) can afford to buy things and this means that capitalists have no reason to increase production, employment, that is, to create economic growth.

What this means is that cutting the deficit, continuing cuts to the public sector, job cuts, and benefit cuts are exactly the wrong policies to deal with an economic crisis. All they do is deepen the crisis and provide no basis for recovery. Quantitative easing (increasing the money supply) has not stimulated investment which creates jobs, rather the money is being put into the financial markets for short-term speculative investment, which given the lack of regulation only increases the possibility of another financial crisis. But it is not financial crises which are the serious problem for the capitalist system at this point; rising income and wealth inequality will lead to a crisis in the real economy. With the politicians unable and unwilling to deal with the fact that capitalism is an inherently crisis-ridden system and in the absence of determination to ameliorate the problems caused by the system, the majority will be facing continued impoverisation. This represents not only a failure of capitalism which we know is incapable of providing for all, but a failure of bourgeois democracy as there is no mainstream political party that will actually stand up for the majority; all pretence that democracy applies to all is being rapidly eroded in the absence of a political party that actually speaks for and is answerable to the majority.

Anti-Capitalist Meetup: The Lies of Neoliberalism; Governments Don’t Create Jobs or Economic Growth by NY Brit Expat

4:04 pm in Uncategorized by Anti-Capitalist Meetup

It may be my masochism, but I actually watched the Presidential debates. I also regularly watch the news over here in the UK. Cameron and his cronies constantly spout this argument that governments cannot create economic growth. During the Presidential debates, Mitt Romney even went a step further; he argued that governments cannot create employment. The Tory argument is a bit more sophisticated, but both arguments have their roots in the fantasies of neoliberal economics of which both the Tories and the Republicans have adopted in its most fundamental form; their arguments also tie into the perspective of reduction of the central government budgets along the lines demanded by the IMF and the introduction of austerity measures to ensure these results. Except, and this is a big exception, neither of these governments have been forced to do so by the IMF.

Given that these statements are not only historically inaccurate, but bordering on the patently absurd, it never ceases to amaze me that challenge from the mainstream media is not forthcoming. Even more so, during the debate, President Obama did not respond to the absurd statement by Romney; in fact, he also raised budget deficit reduction which essentially means cutting state employment and social services. The Labour Party does not disagree with the Tories; they only say that austerity must be done more slowly and Ed Balls (the shadow Chancellor of the Exchequer) has said at the Labour Party conference that, if elected, they had no intension of reversing the austerity measures forced upon the British populace by the Con-Dem government. Essentially, all of the mainstream parties are singing the same tune; honestly, different tonalities of the same argument do not change the fact that the underlying tune is the same.
sheepsfightingwhowilleatthem
To someone that is living in the real world, in other words, someone that actually heard about the New Deal, that knows the role of government in ensuring economic growth during the post-war period in Europe, who knows damn well that state (or public) sector workers exist and that the government’s purchase of goods and services from the private sector and investment in the private sector help to ensure economic growth it makes me wonder if they think that we are extremely stupid.

I. Can Government create Employment?

John Harvey, a post-Keynesian economist has written an excellent piece in, of all places, Forbes Magazine which raise some of the points that I will raise here, but I will actually go a bit beyond what he has said and try to address exactly what is underlying the arguments of mainstream politicians and what is lying beneath the bizarre arguments that we are hearing these days.

Harvey correct asserts that those who claim that government cannot create employment are re-defining the meaning of the word "jobs" to suit their own private profit margins:

“But, those who say that the government cannot create employment are adding another element to the definition. To them, a job is any routine activity for which we earn income paid by an entity required to earn a profit. There is no compelling reason for this addendum and it arbitrarily excludes people like James Galbraith, who is an economist just like me, but at the University of Texas, and Jeffrey Halstead, Chief of Police in Fort Worth, Texas. By the qualified definition, they don’t have “jobs” because their income is derived from tax revenue and not private-sector sales. Ditto every single fireman, public school teacher, Marine, sailor, airman, soldier, national park ranger, defense industry employee, NASA scientist, social worker, librarian, etc., etc. None of them has a job.

Why would someone embrace such a questionable characterization? Because their true goal isn’t to generate a scientific understanding of the manner in which the macroeconomy operates, but to make a moral statement. Specifically, their contention is that only those routine activities financed by profit are truly of value. Everything the government does is unnecessary because if people really wanted it, they would have bought it in the private sector: that which is useful is profitable. Furthermore, they say, were it not for my taxes, those in the public sector would not have a job. Firemen earn a salary only because some of mine was taken away (under threat of imprisonment) (http://www.forbes.com/sites/johntharvey/2012/10/22/government-creates-jobs/).”

John Harvey makes some excellent points. This is the reason that I have cited his article. However, I would say that he is doing those advocating this perspective quite a favour in terms of saying that the view that the government cannot creates employment is a moral one. I would demur; instead, I would argue that this is an ideological position with little, or no, link to reality, much less morality. They are outright liars, not moralists. I would argue that the resurgence of this argument is not based on the idea that only things produced for profits are things of value, they know that fire services are of value; but rather that these things should be produced and provided on the basis of profitability; that is, they should be produced under the control of the private sector. In other words, why should something be produced and provided if they cannot make a profit on it?!

In fact, looking at history quite easily disproves this position; this argument is a dangerous fantasy with the lives of the majority in the advanced capitalist world at stake. Reprivatisation arguments are central planks in the neoliberal agenda and after being forced on people in the capitalist periphery and emergent economies (see, e.g., Chile and Argentina), these are now being forced on the majority in the advanced capitalist world. For example, a cursory examination of the situation before generalised nationalised fire services existed in the UK, where insurance companies provided fire services turned out to be not only too expensive but incapable of providing provision; in fact it was the insurance companies themselves that asked for national funding and provision of fire services and this was in the height of free-market ideological arguments in the nineteenth century (London Fire Brigade). Yet, if you look at right-wing arguments in the US and in the UK, there is an attempt to privatise fire services; already in the UK, parts of an holistic service are being forced to be contracted out to private companies to “cut costs” in the face of government cutbacks.

Another example that I have written about previously is water privatisation, not only are costs not reduced, but access to water is limited to those that can afford to pay for it; so something that people require in order to survive is now no longer available to them due to privatisation, some forced by the IMF and World Bank, others done in the erroneous attempt to cut costs (http://www.dailykos.com/story/2011/08/28/1011343/-Anti-Capitalist-Meet-up-Water-Privatisation); we are seeing resocialistion of water services in France and in other countries to regain control of water away from firms as it is an essential component of survival for human beings.
Halliburton
The problem with private provision of services is that it is your ability to pay is what is important not the quality of the service; profitability considerations means cost cutting and that does not necessarily provide quality and guaranteed service. This is why a number of things became public goods rather than be left to markets to provide. The insistence of reprivatisation of services is not based on whether historically these can provide the most effective service; it is done so that they can literally find a new area of capitalist investment which they think has a guaranteed market. However, rather than acknowledge an obvious point that not everyone can afford to get these services if they have to purchase them directly rather than paying for them through taxation and subsidising those that cannot pay, we are seeing an argument that is based on an assumption which has been proven to be erroneous, that if something is produced there will be demand to sustain it.

In fact, this is a revival of an old argument whose demonstrable failure is what I would say is what exactly led to Great Depression and to the subsequent creation of the social welfare state and public sector back in the 1930s in the US and in the post-war period in the UK. I want to stress that the only reason that I think that this earlier argument was defeated was not due to the Great Depression on its own, but arises from the existence of a strong left and powerful union movement which led the Capitalist class to try and ameliorate the crises that are a normal part of the capitalist economic system not only to protect their own interests, but also to remove some of the threats of the left and a strong union movement.

Essentially, the argument endorsed by the right-wing of the mainstreams in the US, UK and EU is based upon a perspective that refuses to acknowledge that the private sector cannot create sufficient levels of employment to ensure that their own products are capable of being sold in the market at a price which ensures that they can earn a profit upon them. In the absence of the ability to earn a profit, these goods will not be produced. Moreover, in the absence of incomes to pay for these things, production and provision will simply not exist.
humansacrifice
The laws of motion of the capitalist economic system in which profitability (or expected profitability) determine the techniques of production in use (how much labour, how much and what type of machinery are used to produce output), how much output (goods and services) are produced and what type of goods and services are produced are essentially what produce economic crises. That is, crises derive from the system itself, and are not an aberration, but are a normal part of the system.

What Keynesian economic policies did was not to eliminate crises, but rather to ameliorate them; that is why people began talking about recessions rather than economic crises. But in the absence of coherent regulation and attempts to stimulate and cool down the economy when needed (as advocated by Keynes) what we are seeing is prolonged crises and smaller and shorter recoveries. Moreover, recoveries (if you have not noticed) make no dent in the substantial amount of structural unemployment that now characterises advanced capitalist economies.

II. What is causing structural unemployment?

The answer is the laws of motion of the capitalist economic system itself. Competition exists between and within industries, where money capital (and technology which is privately owned, and sometimes when appropriate to production physical capital itself) is moved between industries in search of the highest profits. The introduction of machinery in the attempt to increase productivity occurs so as to ensure that workers’ wages are produced more quickly and hence that the surplus value is greater in production are what leads to several interrelated phenomena. The reasons underlying colonialism and then imperialism was part of this process, these enabled getting hold of raw materials and cheap labour. In some cases, like the cotton textile industry, the goods could even be sold back to colonies thereby providing part of the market for the goods themselves.

Now, globalisation means that competition occurs on a world level. Lack of restrictions on capital mobility in search of profits has led to outsourcing of industries to the capitalist periphery and emergent economies where labour costs and raw materials are cheaper. The fact that you can produce something for pennies in these countries and sell them for hundreds of times more means that multinational corporations (MNCs) need to lay out far less and will make a far greater profit if the goods are sold (even if they are sold for far less than they expected, they will still be making a far greater profit than if they are produced in a country with higher costs of production). The only advantage (and this is rapidly declining) that the advanced capitalist world has is in technology (and that is the reason that the Chinese are insisting on technology transfer when they allow for foreign direct investment and MNCs into the country).

So let’s go through some of the dynamics of the system in order to understand what is happening due to the internal laws of motion of the system:

1) Introduction of machinery means that less workers are needed relatively to produce the same level of product, that is what productivity means; but the problem is not only one of relatively less workers being needed as whole sectors of production have been destroyed leading to structural unemployment, that is an absolute increase in unemployment in these countries.

2) Introduction of machinery or cheapening of costs of production (e.g., using cheaper raw materials obtained from overseas, or goods produced overseas that are cheaper to produce than in the advanced capitalist world due to both cheaper raw materials and labour costs) in the sectors that produce workers consumption goods, means that the production and reproduction of workers subsistence (the socially determined commodities that workers consume) is lowered; this lowers the value of the wage goods meaning that more time will be spent on goods that go towards the surplus product.

3) Introduction of machinery leads to increased unemployment; unemployment then weakens the bargaining power of workers. The deliberate destruction of the industrial and manufacturing sectors in the advanced capitalist world not only led to increased unemployment, it also destroyed the power of trade unions concentrated in those sectors. In fact, before the sectors themselves were weakened so badly, right to work laws led foreign automobile companies to open factories not in traditional regions but in states in the US where they did not have to deal with the demands of unions.

4) The decrease in wages due to the decline of union power and structural unemployment has led to a break-down in job protections and conditions of work. More and more, part-time and temporary low-paid work has replaced well-paying and secure jobs for life. To avoid, payment of benefits and social security (national insurance), employers have shifted towards sub-contracting jobs which places workers in greater precariousness as contracts are mostly temporary and you have no job protection. General attacks on the social welfare state have undermined the abilities of the poor and working poor to maintain their income. The attempt to stimulate demand by enabling access to easy but expensive credit has blown up in their face; witness the sub-prime crisis and personal bankruptcy as borrowers cannot pay back what they purchased.

5) While increasing the amount of surplus produced, they have seemed to have forgotten an incredibly important point. That in order for profits to exist, someone must buy their product. In the absence of demand backed by income, these potential profits only remain potential and we have what is called a realisation crisis following a point of over-accumulation (the crash in 2008); guess what, Marx was correct in Volume I of Capital.

Structural unemployment is a normal part and parcel of the system and derives from its internal laws of motion. It can be combatted, but it won’t be done if wages are continually eroded in the advanced capitalist world. Not only can we no longer survive on the low wages on offer in the capitalist periphery and emergent economies (which have been deliberately kept low), but also this would eliminate the demand for goods and services that the private sector and capitalists need to enable economic growth. The only thing that may actually keep the system going (and to increase profits in the real economy rather than the financial sectors) would be if China and other emergent economies actually increase wage incomes in their countries. In that case, essentially the workers in the advanced capitalist world become a lot more redundant to the needs of international capital.
Serwotkaonaspiration
Rather than destroy the state sector, what is needed instead as a first step is direct government jobs creation. That is, the government itself needs to hire people at all levels. It also needs to create new sectors for them to work; the creation of a green transport industry and green manufacturing would be an excellent place to start. However, since construction is primarily a male occupation, increasing money spent on education, social services government provision of health care, nurseries (crèches) which are all traditional areas of women’s work would offer women a far better choice than the low-paid part-time and temporary work to which they are being relegated. However, no mainstream politician is advocating the only known and proven thing to get the system out of the crisis, they are all parroting the line of reduce state expenditure, cut public sector employment and cut social services and benefits.

III. The Role of Government and Economic Growth

It may be asked what does the above have to do with this argument advanced by politicians which denies that the government can create jobs and/or economic growth. The answer is quite a lot.

For all the babble about the importance of the private sector, the reality is that the government provides many things that help enable economic growth and profitability for the private sector. From government purchases from the private sector (think about how much the military industrial complex make from various government orders for its products and services); this alone eliminates uncertainty in terms of profitability and provides demand for their goods and hence leads to growth and rising employment in the private sector). Government spending and investment in housing, research and development, road building, etc. winds up in the pockets of the private sector. In fact, your tax dollars and government borrowing has been sustaining the private sector for quite some time and in fact in the post-war period it has enabled economic growth.

To quote John Harvey:

“That leaves investment and government spending as the real engines of growth […]. They are the forces that drive the business cycle rather than follow it. Businesses and the government together determine whether or not we are in rapid expansion or the depths of depression. This chart illustrates the point:
Harveyusgdpandmaindrivers, shrunk
[…] Note that this means that if there were no government sector, then the job of driving economic activity would be left to investment alone. This is similar to the situation we faced before WWII, when the government was tiny compared to the rest of the economy. The problem is, firms can build new capacity (i.e., invest) relatively quickly so that, ironically, at the very moment we have our greatest ability to produce goods and services, investment falls, layoffs occur, and we slip into recession. This is an absolutely critical point (http://www.forbes.com/sites/johntharvey/2011/04/29/why-the-private-sector-needs-the-government-to-spend-money/).”

What Harvey is demonstrating is the role of Government in creating economic growth. He argues that consumer spending follows the state of the economy, rising as the economy grows and falling as it declines. There are two things that drive economic growth, but in a recession, private investment is insufficient; it is government spending and investment that drive economic growth.

But let’s talk how government does drive economic growth. We know that this is due to government spending. But what else the government spending provides? It provides income to state workers which will buy the goods and services of the private sector. Unemployment insurance and pensions and social services (think of food stamps, welfare payments, and disability benefits) also ensure that those that would not have income due to unemployment actually can purchase goods and services. Quite obviously, those are for the most part produced by, yes, the private sector as we live in a capitalist economy.

So, given the situation, the last thing that we want to do when we are in an economic crisis in the advanced capitalist world is to cut the state sector, cut benefits and reduce wages. All you are doing in this situation is creating more unemployment and throwing people into poverty.

“In fact, Matthew Weaver of The Guardian reported, that one in five British workers are being paid less than a living wage, that is 4.82 million workers are not earning enough to survive on. This is because the designated minimum wage (£6.19/hour) is not a living wage (£8.30 in London, £7.20 in the rest of the country) and the Tories are opposing raising the wage due to fears of affecting employment.

“The study, launched in advance of next week's Living Wage Week, found that Northern Ireland has the highest proportion of people earning below the living wage (24%), followed by Wales at 23%. The lowest proportion of sub-living wage earners are in London and the south-east, both at 16%. It found that at least 70% of cleaners, kitchen staff and waiters and waitresses were paid less than the living wage (http://www.guardian.co.uk/society/2012/oct/29/five-million-britons-living-wage?INTCMP=SRCH).”

If you want to see what happens when these policies are implemented in earnest, take a look at Greece and Spain and you are witnessing the deliberate creation of an economic depression in these countries.

“Eurostat figures show that 25.75m people in the whole European Union were unemployed in September 2012 – an increase of 169,000 people on the previous month. Compared with September 2011, unemployment has risen by 2.145m.
Spain and Greece recorded the highest unemployment rates at 25.8% and 25.1% respectively (http://www.guardian.co.uk/news/datablog/2012/oct/31/europe-unemployment-rate-by-country-eurozone).”

In terms of the general state of the economies of Spain and Greece:

“So Spain’s economy has contracted by another 0.3% for the third quarter, whilst inflation in the country continues to rise and demand continues to slump. You could be forgiven for thinking that there is no way out of this hell-hole for Spain: the contraction now means that the country has been in its ‘double-dip’ recession for five consecutive quarters, and unemployment is now running at a fresh high of 25.1%. To add insult to injury, the Spanish government thinks that the economy will shrink a total of 1.5% this year, and another 0.5% in 2013 (http://www.managementtoday.co.uk/news/1157114/Spanish-recession-deepens-Greece-riskier-investment-Syria/).”

“The [latest Greek] draft budget for 2013, which provides for measures of 9.2 billion euros, an economic contraction of 4.5 percent and a primary surplus of 0.5 percent (http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_30/10/2012_468024, my clarification).”

The message is on the wall for the UK irrespective of the blip provided by the Olympics; circuses without bread do not make for economic growth and they also make for very unhappy populations as we see in Greece and Spain.

The fact that these realities are being ignored by politicians is truly disconcerting. On November 1st, it was reported that in the UK, both manufacturing and construction industries are shrinking. In fact, manufacturing has declined for the 6th month in a row; the only thing that grew is consumer spending (http://www.bbc.co.uk/news/business-20167643). That is proof that the small economic growth we saw in the last quarter (which the Tories are claiming is due to their economic policies) is the result of the Olympics and that we can expect the UK, once again, to fall into recession. Moreover, the stress on export-led growth (another plank of neoliberal economics) for manufacturing means that the sector is far more dependent upon conditions in the world economy and hence since world recovery is not happening, export-led sectors are simply not going to grow.

“I was discussing this situation in the UK with Karl Petrick who is an economic historian and he said the following:

“I'm pretty sure that was part of their party programme. The sad thing is that anyone who is paying attention can already see the effects of an austerity budget in the UK, but that has never even registered in the news on this side of the pond. Either that or we are in some sort of odd one-upmanship: You call that a recession? I'll show you A RECESSION!!!! The situation would be funny, if it was not so dire!”

It does not benefit the private sector either as the loss of income all around means that there are less people now able to buy what they produce. Since the private sector does not see that the possibility for investment as a great idea now due to the fact that there is not sufficient demand for their goods, they will not create new jobs. Waiting for the private sector to invest, even with all the tax breaks that various governments are giving to the corporations and to the wealthiest, is quite simply put, like waiting for climate change to fix itself, in other words, it is just not happening. In fact, the stock markets are the investment of choice, short term speculative investment is what is happening, not investment which creates jobs.

This leaves no choice but for the state sector to once again engage in direct government jobs creation … without that there is no way to combat structural employment. Moreover, given that we need far less labour (due to high productivity), the far more sensible option is also to decrease weekly working hours, but maintain income. That is, raise income of working people, not decrease it which is what we are seeing throughout the advanced capitalist world.
NHSambulanceservices

Conclusion

The re-privatisation of public goods (and it is reprivatisation as many of these services were provided privately before the existence of the state sector) represents a coup for capitalists. From reprivatisation of electrics, water, road services, they are now trying to get their hands on provision of health care in the UK, care homes, nurseries, fire services, education, and police services. The problem is that there was a reason for these public goods to be nationalised in the first place, private provision is always based first and foremost on profitability which means that if you cannot afford to purchase these things, then you will no longer be able to access them. With incomes falling all over the advanced capitalist world, that means that many of these things will no longer be part of workers’ consumption bundles. Moreover, since many of these things cannot be purchased, they will once again fall onto women as part of their household labour for which they receive no recompense.
Capitalismo
The erosion of workers standards of living in the advanced capitalist world is part of a wage squeeze trying to raise profits in a period of low profitability caused by the crisis. In periods of economic growth, wages can be allowed above social subsistence; that is what we saw in the post war period. High productivity and economic growth meant that the surplus product could be shared between workers and capitalists. Over time, the social subsistence level rose. What we are seeing now is the erosion of the social subsistence wage; they are pushing it down (so it is above physical subsistence and reproduction of the working class and they are pushing it downwards). What we are seeing is the combination of normal decreases in the value of labour power (e.g., bringing cheap goods in from overseas that are consumed by the working class) combined with a deliberate lowering of social subsistence wages, the breakdown of “jobs for life” and the rising number of people employed part-time, temporarily and as sub-contracted workers.

The problem with wage squeezes is that essentially it means that fewer and fewer working people and the high number of unemployed people (facing benefit cuts) can afford to buy things and this means that capitalists have no reason to increase production, employment, that is, to create economic growth.

What this means is that cutting the deficit, continuing cuts to the public sector, job cuts, and benefit cuts are exactly the wrong policies to deal with an economic crisis. All they do is deepen the crisis and provide no basis for recovery. Quantitative easing (increasing the money supply) has not stimulated investment which creates jobs, rather the money is being put into the financial markets for short-term speculative investment, which given the lack of regulation only increases the possibility of another financial crisis. But it is not financial crises which are the serious problem for the capitalist system at this point; rising income and wealth inequality will lead to a crisis in the real economy. With the politicians unable and unwilling to deal with the fact that capitalism is an inherently crisis-ridden system and in the absence of determination to ameliorate the problems caused by the system, the majority will be facing continued impoverisation. This represents not only a failure of capitalism which we know is incapable of providing for all, but a failure of bourgeois democracy as there is no mainstream political party that will actually stand up for the majority; all pretence that democracy applies to all is being rapidly eroded in the absence of a political party that actually speaks for and is answerable to the majority.

The Mouse that Roared! Greece’s Struggle Against Austerity by New York Brit Expat

6:32 pm in Uncategorized by Anti-Capitalist Meetup

We live in interesting times … Those on the left following the situation in Greece were treated to an interesting spectacle in the last election in Greece on May 6th 2012. As expected, those mainstream parties that supported the EU/IMF/ECB memorandum (http://www.reuters.com/…) imposing even more harsh austerity on the country were punished: New Democracy’s (the conservatives, centre-right) votes from 33%-19%, PASOK’s (the Greek socialist party) share fell from 43%-13%, LAOS fell below the 3% needed for securing seats (right-wing nationalist party) all lost seats in the election (greek election results). This represents in many senses a significant rejection of the mainstream political forces that have been ruling Greece since the end of the rule of the colonels (1967-74, for a history of modern Greece see, History of modern Greece) and particularly of the austerity that they have been imposing on the people of Greece over recent months.

Cheat Sheet (to keep track of the players):SYRIZA: coalition of the radical left, led by Alexis Tsipras
New Democracy: Conservative, centre right neoliberals, led by Samaras
PASOK: Panhellenic Socialist Movement, Socialist party led by Venizelos
KKE: Communist Party of Greece
ANTARSYA: Coalition of Greek Anticapitalist Left, hard left
Golden Dawn: Chrysi Avgi, Greek Fascist Party, neonazis
DIMAR: Democratic Left, centre left to left wing, led by Fotis Kouvelis
LAOS: right wing nationalists
Independent Greeks: Right-wing split off of New Democracy, anti-austerity

 

But the most dramatic thing was the fact that the votes for the left rose significantly, even more so SYRIZA (the Coalition of the Radical Left which is composed of Marxists, Trotskyists, Maoists, Eurocommunists, left and moderate reformists, greens and a number of other tendencies) came in second place (For the 10 demands of SYRIZA which they campaigned on May 6th; see: http://socialistresistance.org/…).

“The vote for the broad left rose from a modest 12% in 2009 to an impressive 35.5% — 17% for SYRIZA (Coalition of the Radical Left), 8.5% for the Communist Party (KKE), 1.2% for the anti-capitalist left party ANTARSYA, 6.1% for the moderate Democratic Left and 2.9% for the Greens. However, the prospect of a left government is doubtful since the KKE, an ultra-Stalinist party, ruled out beforehand any cooperation with “opportunists,” by which it means all other left parties except from itself. Moreover, the Democratic Left and the Greens are moderate centre-left parties that do not differ radically from PASOK. Even so, the collective result of the three radical left parties, SYRIZA, the KKE and ANTARSYA, was an impressive 26.5% (http://socialistresistance.org/…).”

On the other side of the political spectrum, the rise in the vote for the Golden Dawn fascist party which for the first time secured seats in the Greek Parliament (see: http://www.guardian.co.uk/…; moreover, a video surfaced of Athens police and Golden Dawn members brutalising an immigrant: http://observers.france24.com/…).

Untitled

As first New Democracy, then SYRIZA and finally PASOK failed to pull together a government, the Greeks are headed back towards elections on June 17th 2012.

In SYRIZA’s case, the party leader Alexis Tsipras, who has conducted himself in an exemplary manner despite the massive witch hunt he and his party has been subjected to by both the Greek and the international media, put forward a five point plan on which to discuss with other parties (Syriza’s 5 point plan).

But the KKE, an ultra-Stalinist party, ruled out beforehand any cooperation with “opportunists,” by which it means all other left parties except from itself. They refused to even consider joining a coalition with SYRIZA; refusing even to meet with them and spoke with them by phone. The smaller far left coalition, ANTARSYA, also refused to consider participation – unless SYRIZA supported all its policies! Thus the mandate passed to PASOK.

A bit of excitement was added when speculation that DIMAR (the democratic left) would throw in with PASOK. DIMAR insisted upon a condition that could not be met to form a national salvation government; that SYRIZA would also join the coalition. So now Greece heads to elections again …

One worry that I have is that while there was no question that the votes of the left would be insufficient to form a government, the fact that the KKE and ANTARSYA refused to participate in a coalition could affect support for both SYRIZA and them at the next election in June as voters wonder whether the Left can overcome its sectarian nature to answer the desperate call of the Greek working class and poor. At the moment, it appears as though SYRIZA is picking up votes from other Left parties and those of the mainstream, hopefully this momentum will continue.

I.    The memorandum:

The mainstream in Greece and in Europe is trying to present these elections as a referendum on the euro; SYRIZA is presenting them as a referendum on austerity (http://www.guardian.co.uk/…). In the hard Left, two groups ran on an anti-euro stance, one was the KKE and the other Antarsya, while SYRIZA chose to run against austerity and specifically the memorandum in February (http://www.reuters.com/…) agreed between the EU, ECB and IMF and the Greek mainstream leaders.

This memorandum called for increased privatisation (both full and partial), reductions of the monthly minimum wage by 22%, 32% for those under age 25, 15,000 state workers being placed in labour reserve getting 60% of their salary and facing dismissal after a year, only 1 in 5 people retiring will be replaced, the civil service workforce is to be reduced by 150,000 by 2015, pensions over 1000 euros/month will be reduced to 1000 euros/month. Homelessness is rising, young people are moving back in with their parents, drug use and prostitution is rising and social welfare benefits, especially health and education are being completely undermined. Women are bearing the brunt of the austerity measures as unemployment has risen, social services are being privatised and too expensive and caring for children, the sick and the elderly is falling on them (http://www.womensviewsonnews.org/…).

 

There has been massive resistance to the austerity measures imposed by the Troika (EU, IMF, ECB) in February. There have been 17 general strikes and one fifth of the population of the country has been on the streets in recent months protesting against occupations. There are a number of workplaces in occupation – hospitals, newspapers, steel works. And on May 6 the population rejected the austerity programme of the Troika at the ballot box.

An obvious question arises, why is SYRIZA not running on leaving the euro? There is an obvious answer; specifically, the majority of Greeks do not want to leave the euro. At the same time, they also do not want to submit to austerity which has decimated the Greek economy and has literally destroyed the social welfare state, incomes (including pensions), benefits, and jobs of the Greek majority.

In this situation SYRIZA has continually made clear that it will not compromise on their programme even if it means expulsion from the Eurozone. This is tactically a much better way of posing the question given the concrete situation they face.

II.    The Powder-keg

The situation in Greece has been fuelling further problems in the Eurozone. Fears of Greece either leaving or being forced out of the Eurozone (which would require changes in the EU constitution as there is no formal mechanism for withdrawing or being forced out) has led to increased worries in Greece and in the stock markets. It is not really so much the problem of Greece leaving as it is a small economy, but the possibility of this being the beginning of the floodgates where other countries (e.g., Spain, Portugal) suffering from the agony of austerity also abandoning the Euro leading to the ship sinking. Given the manner in which the German economy has remained strong which is as an exporter of goods to the peripheries in Europe (enabled by undermining incomes in Germany, see e.g., http://researchonmoneyandfinance.org/…), an obvious question arises: is Germany cutting off its nose to spite its face? Impoverishing those people that actually purchase your goods is somewhat nonsensical and fears of hyperinflation in Germany cannot explain the level of agony being imposed upon the European periphery by Germany’s insistence upon neoliberal economic policies.

To add to the fuel on the fire there have been rumours of runs on Greek banks and the knowledge that the ECB will not lend to some Greek banks (see: http://www.bbc.co.uk/… and http://edition.cnn.com/…):

“The numbers on how much has recently been taken out of Greek banks by depositors have been much disputed – not surprisingly, when the official figures will not be published for weeks.Depending on who you talk to, anything from €700m ($892m; £560m) to €1.2bn was taken out of banks in the days after the election, out of total deposits of around €160bn. That total, in turn, is about a third lower than it was at the end of 2009.
At the same time, the ECB has apparently now said that it won’t directly lend to some Greek banks that it judges to be technically “insolvent”. These are banks that have holes in their balance sheets, because, thanks to the restructuring of Greek sovereign debt, they can’t now expect to get back all of the money that they lent to the government (http://www.bbc.co.uk/…).”

There is a lot of fear-mongering of Greece either leaving or being forced out of the Euro, both on the impact on Greece and on the impact of the Eurozone. Are these being over-rated or is keeping Greece in more important to the stability of the Eurozone? Are these threats empty on the part of the EU or is this a real danger? Here is an analysis from BofA/Merrill Lynch on the impact on the Eurozone which is worth reading (http://www.morningstar.co.uk/…). Certainly, the situation for the Greeks is already extremely difficult; leaving the Euro will enable them to regain control over both their monetary and fiscal policy. The immediate effect of a loss of access to foreign loans to help them recover the economy will make things harder and a default on their loans will mean that exactly. Policies to stimulate exports and increase tourism will help them recover and rebuild. The austerity measures are literally creating a situation where the Greek economy will never recover; moreover the reduction of Greece to poverty is not only unsustainable but unnecessary (see for e.g., http://www.neweconomics.org/…).

III.    The dangers of sectarianism:

The KKE responded to Syriza’s vote on May 6 in the following way:

“Nevertheless a government, irrespective of its composition, must deal with the whole spectrum of the problems. It should not merely denounce the memorandum but return to the people the gains that were abolished before the memorandum – because most of the gains were lost before the memorandum- as well as many others abolished after the memorandum. A government has to manage everything and not merely the unemployment benefit, as was mentioned. It has to manage issues of economy, the stance of the business groups towards the working people, the list of the privatisations adopted in the previous years. It has to handle issues of foreign policy such as the general commitments that arise from the EU, NATO, from the strategic alliance with the USA. There is no government that tears the agreements into pieces, abstracts politics and only promotes the packet of measures of the next day.In order to agree with such a government the KKE needs to make a U-turn, a summersault and not merely a small retreat, a small turn. It must make a root and branch change. And above all it would have to make unacceptable compromises that have nothing to do with the people’s interests. Maybe the people are not interested in the ideological purity of the various parties, but in a party that all these years, from the very first moment of its foundation, has been in the frontline of the struggle does not want to abandon this position in order to gain some ministries. The people do not need this kind of KKE” (from the press office of the CC of the KKE, 06/05/2012, http://inter.kke.gr/…).”

In doing so it showed a complete disregard for the policies on which SYRIZA had stood in the election – and even worse a complete contempt for the thousands of people who had voted for them and their policies. It seems likely that they will be punished by some of their own traditional voters on June 17 and beyond – in subsequent opinion polls they have lost over 1% of their votes in less than two weeks.

To understand the situation among the Left in Greece, it is useful to understand the history of the Greek left. To help, I will present two different pieces discussing the history of the left in Greece and its currents transformations that have attempted to explain the current situation. The pieces are complementary, rather than contradictory, in terms of information and also express some of the fears of the Left with respect to SYRIZA in terms of carrying out its own minimum programme.

On the one hand, here is a piece from Socialist Resistance calling for a United Front of the Left and criticising the failure to form it in a period of intense need:

“In other words, in this situation – a “Year Zero” situation for the literally hungry masses – these masses handed their votes to SYRIZA, and secondarily to the KKE, with the mandate for them to take power, reject the memorandum, reject austerity, restore their livelihoods and do so by turning the tables on the Greek plutocracy, those who actually still have their bucket loads of cash despite the “crisis”, while telling the German-French plutocracy to shove off.
Yet it is in such a context that the Greek left now seems unable to form a united front for the salvation of the people. The responsibility for this lies mostly, if not entirely, with the spectacular sectarianism of the KKE, which has point blank refused to join a united front with SYRIZA. More than that – criminally – the KKE has refused to even talk about it.
In a quasi-reenactment of Stalin’s Third Period disaster in Germany – when the German Communist Party was ordered to refuse any joint work with the German Social Democrats against Nazism, indeed the Social Democrats were declared “social fascists”, allowing the Nazis to walk into power unimpeded – the KKE claims it will not work with SYRIZA who it denounces as social democrats who will inevitably sell out.
But if history repeats itself first as tragedy and then as farce, then the tragedy being prepared by the KKE is based entirely on farce. For anyone aware of modern Greek history, the idea of the KKE having some principled left position opposed to collaborating with social democrats or even neoliberals and right-wing nationalists is a fantastic joke.
While there is much to validly criticise about the program of SYRIZA’s leadership group, as a whole the SYRIZA coalition is light years to the left of the German Social Democrats of the 1930s, let alone the neoliberal “social democrats” today, and the only actual revolutionary policy in such a dire situation is to “take the bull by its horns” and form a united front with SYRIZA around the most immediate needs of the working class, and work with the more radical left components of SYRIZA in a non-sectarian fashion to challenge its leadership to keep left and to move further left as the ensuing crisis will inevitably demand (http://socialistresistance.org/…).”

Paul Mason also has written an excellent piece discussing some history of the Greek left and the formation of SYRIZA which is very useful for those not well-versed in intricacies of the Left of Greece and also raises the fear of SYRIZA collapsing into social democracy rather than pursuing a more radical agenda. The following is a description of some of the history of the Greek Left (http://paulmasonnews.tumblr.com/…):

“Greek communism, like most of western communism after the 1970s, was split into two hostile parties: the KKE of the “interior” and that of the “exterior” – the latter denoting a Moscow-oriented party, the former denoting a Euro-communist, more parliamentary and socially liberal agenda. Initially Synaspismos was the electoral alliance between the two KKEs. But in the early 1990s the main Moscow-oriented KKE quit the alliance, purging about 45% of its members, who then stayed inside Synaspismos with the Eurocommunists. These included Tsipras.
Synaspismos then evolved in an interesting direction. Reacting to the rise of the anti-globalisation movement, first of all the party itself became a highly diverse left umbrella group: of Eurocommunists, left-social Democrats, far leftists, and ecologists. It played a significant role in mobilizations against summits, beginning in Genoa 2001 and beyond. Meanwhile the main KKE remained a traditional Communist party, rooted in public sector and manual trade unions. Then, in the 2004 election, Synaspismos came together with other small parties to form SYRIZA. These included a split-off from the British SWP, a split off from the main Communist Party and another group of eco-leftists.
Under Tsipras’ leadership, and invigorated by now including the entire left except the traditionalist KKE, SYRIZA grew the far left’s vote from 3.3% to 5.6% in the 2007 election – giving it 14 MPs. The crisis which broke out in December 2008, after the police shooting of a 15 year old schoolboy led to two weeks of rioting by the youth and poor of Athens, further strengthened SYRIZA as a left pole of attraction. Though the parties inside SYRIZA remained in the low thousands of members, many young people began to identify with them – above all in a country where Marxism has massive prestige due to its role in both the anti-fascist resistance and in the 1946-49 Civil War. In addition, those migrants with the right to vote, hearing a rising chorus of anti-migrant rhetoric from the centre as well as the right, have flocked to vote SYRIZA (http://paulmasonnews.tumblr.com/…).”

IV.    What is to be done?

From SYRIZA’s election manifesto we have the following:

“The incumbent economic and social system has failed and we must overthrow it!
The economic crisis rocking global capitalism has shattered the illusions. All the more people witness that capitalist speculation is an inhuman organizational principle for the modern society. It is also unanimously shared that that private banks function only for the benefit of the bankers harming the rest of the people. Industrialists and bankers absorb billions from Health, Education and Pensions.
The exit from the crisis entails bold measures that will obstruct those who create it from continuing their destructive work. We are endorsing a new model of production and distribution of wealth, one that would include society in its totality. In this respect the large capitalist property is to be made public and managed democratically along social and ecologic criteria. Our strategic aim is socialism with democracy, a system in which all will be entitled to participate in the decision-making process (http://socialistresistance.org/…).”

So given the election results in May, what can we expect in June? The situation in Greece is very dynamic; the ability of the mainstream to rally people to view this election as a referendum on the Euro rather than as a referendum on Austerity will probably be a prime determining factor.

The question remains whether the Left can overcome its sectarianism to do what needs to be done. No one is honestly suggesting  a true revolutionary programme can be carried out using only elections. But if the Left can not present the masses with a viable alternative, a serious danger exists of a shift to the hard-right.  If people vote for the mainstream because they think the Left cannot unite, and austerity continues under a mainstream government, voters may switch to the hard right.

Even if the Left wins, it is uncertain how long they will govern. Another subversion of the will of the people in Greece is definitely possible; Election fraud to outright coup d’etat could be employed to subvert the will of the Greek people. The rise in the fascist right presents a serious danger of the descent into barbarism. If the Greek left cannot unite, that danger increases.

In a move reeking of irony, Angela Merkel (http://www.bbc.co.uk/…) has suggested holding a referendum in Greece on whether or not they want to stay in the Eurozone; given that this brought down the elected government of Greece headed by Papandreou and resulted in a “technocratic” government headed by a former executive of Goldman-Sachs, Papademos, this is rather interesting. Separating remaining in the Eurozone from the elections may actually further undercut the mainstream parties, which somehow I do not think is in her interests.

Recent polls suggest that SYRIZA will win the election, but it is uncertain whether they will win a majority (e.g., http://en.wikipedia.org/…, http://news.sky.com/…).  They are moving to transform themselves from their current status as a coalition into a political party. This move is motivated by the recognition that many new people are flocking to join – and to join SYRIZA itself rather than one of its constituent organisations. This will mean that if they are the biggest party they will benefit from one of the most undemocratic pieces of electoral legislation which is that the largest party gets an extra 50 seats!

It seems that people are shifting from other Left parties towards SYRIZA. If they cannot win a majority, that means a coalition government and given the failure in May to rally around SYRIZA could mean a catastrophe. The most likely situation is that we will be back in a situation where a coalition is needed – with even more pressure on SYRIZA to compromise its principles.

What is needed is two-fold in many senses: 1) unity among the Greek Left and 2) a continuing movement to both continue building mass support and to keep pressure on SYRIZA to hold the course. The programme advocated by SYRIZA is a good minimum programme (http://socialistresistance.org/…). But it is throwing off the shackles of the capitalist system that has caused this crisis that is the goal.

That is why it is essential for the whole left internationally to demand the Greek left break with its sectarianism and do what needs to be done. If the Left cannot unite in coalition, this will be a catastrophic loss of opportunity for the left-wing anti-austerity forces in Greece – but also in Europe as a whole – which would be a serious defeat for the left internationally as well as one which would probably strengthen support for the far right in Greece.

At the same time the need for solidarity with the struggle of the Greek people against austerity has never been more acute. Calls from the May 15 movement in Spain and elsewhere for a day of action against austerity on June 16, with solidarity with Greece as a focal point should be supported extensively.