The Creator is not particularly high on rebellion (although it is entertaining to see a handful of young people defying the American dictatorship of the bourgeoisie on Wall Street — would there were ten million of them) but it may be interesting to our reader to learn exactly what the hell is going on, and why we are all being invited to boycott retsina, ouzo and spanakopita.
As usual, the lies told by the ruling class are aimed at justifying the transfer of money from the poor to the rich. When the 2008 banking crisis reached its climax the following year, it was easy for the ruling class to see that their long campaign to disempower, disenfranchise and generally diss the poor, the downtrodden and the left across the whole global ruling bloc had succeeded so spectacularly that not a single lying, fraudulent “bankster” had so much as been indicted, let alone chased down the street being pelted with stones with his pants around his ankles and ultimately necklaced.
This was immensely reassuring, and so they went on to Phase II of the crisis; taking advantage of it by making money out of it. The affluent world had saved its banks by borrowing immense amounts of money (from the banks) and giving it to the banks; that meant that in addition to the immense donations, the banks were eligible to receive immense amounts of interest on the loans which they had made to governments in order to keep them capable of making loans. If this sounds tipsy, it is. Basically, the banks were getting it coming and going.
The only problem was, would the governments be able to pay that interest? Governments had run up fairly high debts since about 1990; this was because interest rates had been kept low in order to encourage borrowing. Interest rates, in turn, were low because wages had been kept low so as to shift wealth from the poor to the rich — and so, in order to keep the economy turning over, people had to be encouraged to borrow, which meant low interest rates, which naturally encouraged governments to borrow, too. Now on top of that debt, massive debts had been incurred to the banks. But on top of that, the banking bailout meant that there was no money for real economic stimulus, so national economies sagged and tax revenue plummetted, pushing the ongoing deficit higher. Debt soared.
The countries suffering most from this were, obviously, the countries which had the highest deficits — the so-called PIGS countries, Portugal, Ireland, Greece and Spain. Although their debts were not so much bigger than anybody else in Western Europe’s (or rather, everybody had big debts although theirs were the biggest) they were targeted for structural adjustment by the European Central Bank and the International Monetary Fund. They were granted loans, but at much higher rates of interest than the going rate (supposedly because they were bad risks) and on condition that they rendered themselves more able to pay their interest costs, by slashing social spending and increasing taxes.
This was a straight colonial operation. The banks in rich Europe were giving poor Europe money which was immediately given back to them with interest, in return for poor Europe putting itself completely under the control of rich Europe. Naturally there was resistance, but in poor Europe the governments were completely in the hands of the rich and the public was ignored. Both wealth and power were trickling up to the hands of the financial aristocracy.
Of course, the PIGS countries’ economies went into free fall; that was part of the point. If the countries developed too fast, they would be able to pay off their debts and the rich banks would make less of a profit. Keeping the PIGS countries from developing was thus desirable.
The only danger was that these economies would fall too fast for the governments to be able to pay the interest. This didn’t happen in Ireland, partly because of the highly centralised nature of the Irish state and the passivity of the population which made it possible to raise taxes without serious resistance. Spain was considered too big to fail, so problems there were swept under the carpet. Portugal went along with the affair, at least rhetorically, and when the crisis reached danger-point the Portuguese elected a right-wing government to do the bankers’ work for them — showing how docile the population were.
The big problem was Greece, which had a trifecta: a left-wing government which wasn’t going away in the near future, a very high debt and deficit level, a very pissed-off population with strong mobilizing tools, and a strong tradition of the rich not paying their taxes. The left-wing (insofar as any government in Europe can be called left-wing, which is about three millimetres) PASOK government was trying to implement the extreme-right policies which had been imposed on it partly simply in order to make money for the bankers, but also in order to discredit a left-wing government. This succeeded, up to a point, but PASOK, although it crushed popular demonstrations with the best of them, was, first in private and increasingly in public, extremely unhappy about the right-wing austerity policies aimed at damaging the Greek economy. As a result, the demonstrators had a sense, as they did not in places like Spain, that they might get somewhere, which energised them.
Meanwhile, the policies failed. The austerity policies damaged social services (although PASOK did not implement them fully, so not as much damage was done as the banksters wanted) and further weakened the feeble Greek economy. The deficit, consequently, soared. The disaffected populace refused to pay higher taxes; the rich squirrelled the money away while the poor pointed to this as a sign that they weren’t bloody well paying on the rich’s behalf (an unheard-of stand in Western Europe for thirty years). The debt expanded. Greece began running out of money. The European Central Bank failed to pay its pledged cash to the Greek government on time, no doubt hoping to up the pressure, but instead providing the Greek government with copper-bottomed pretexts for blaming someone else for their failures. The ratings agencies downgraded the Greek economy, thus justifying further-increased interest rates on future loans.
What was happening was that the system was failing itself. In their vindictiveness, Western financial imperialism was punishing Greece for being odiously Mediterranean, but was forgetting that colonialism only works if you can extract something from the colony. Sucking cash out of a country faster than that country can generate cash is like overfishing; you end up with a cod-free Grand Banks. (That’s the fishing-grounds off Newfoundland, not the international financial community; they have plenty of cod, the fuckers.) Unlike the fish, however, countries have a response; they can blow up the cash pipeline through which the money is being sucked. This was what Greece, eventually, felt compelled to do.
Why is a small country on the fringes of Europe, one of the smallest and poorest states in the richest continent on the planet, but a planet where much if not most of the manufacturing is done far away from where the money is — why should this small country’s financial woes have anything to do with us? South Africa was not flung to the ground when Ivory Coast burned to ashes — why should Canada quail before the possibility of Athens melting into a puddle?
The answer is simple — it has nothing at all to do with Greece itself and everything to do with the system. The gigantic amounts of cash flung into the global financial system to save it, did not save it. Instead, they saved its face; they enabled people to pretend that the global financial system was functional when it was not. It gave a couple of years for the global financial system to repair itself and make itself functional — but in order to do this, the global financial system would have had to lower its profit margins, and it chose, instead, to go on with the same absurd but profitable policies which caused the financial crisis in the first place. One of these absurd policies was lending vast amounts of money to people who couldn’t possibly pay it back — and the most conspicuous example of this ongoing policy was the loans to the PIGS countries.
The global financial system is, very probably, ruined. We don’t know for sure. The global economy is already in a depression, with the only things holding it up being the financial system which is lending people money to buy Chinese goods, and the Chinese economy itself, which appears to be heading for its first recession in thirty years, complete with its own home-grown banking crisis. It is just possible that the rumours of a China crisis are Western propaganda, because the Western bourgeoisie hates China so much that it would slash its own wrists in order to bleed in China’s tea, but it is likely that China has no more found a way to escape crises of capitalism than anyone else has.
Therefore, with everyone relying on what the American economic pundit Paul Krugman calls the “confidence fairy” to save them, it is hardly surprising that things are on a knife-edge. The Greek crisis provides the pretext for this. It is the pin which pricks the balloon of false European financial confidence. The possibility that Greece will stop paying the interest on its debts has been enough to rock the Western European financial system, simply because so many banks leaped into the opportunity to suckle on Greece’s carotid arteries.
The dimmer but still credible possibility that Greece might simply announce that it is never paying back the money it owes (it will never pay that money back anyway, but the pretense that it might is what is keeping some loaners solvent) is what is rocking the global financial economy, because that would be sending the confidence fairy to the gas chamber. And what if other countries followed suit? What if Portugal and Spain began wondering why they should pay if Greece doesn’t? What about Italy, which has belatedly been discovered to be in much the same financial state as Spain? (The banksters have been inclined to let Italy off the hook, because it has an extreme-right-wing government.) What if rioters in the streets of Dublin demand that their government default along with Greece? The answer could be a chain of banking failures in Europe (and, later, America) which could have the same potential effect as the collapse of Lehman Brothers in 2008 — with the difference that in 2008 the West was still solvent enough to prop up the banks with shiploads of cash.
Bloody Greeks! Dontja just hate them? Thank Gawd for living in South Africa, where we are never going to have an economic crisis! I’m off to buy myself a brand-new unnecessary electronic device — on credit, naturally!