What can we learn from “savage austerity measures” being imposed on Greeks? Michael Hudson explains

Posted on February 15, 2012 by fjwhite

Neoliberal bankers are pushing Greeks to the breaking point

No 409 Posted by fw, February 15, 2012

“Well we should be learning, what the European bankers are learning, and that is — What is the result of a great experiment that’s going on? For the last five years in Latvia, the neoliberals have lowered wages by about thirty percent. The basic premise of today’s model builders is you don’t know how far you can lower wages and pensions until people begin to press back. Well in Latvia they still haven’t begun to press back when they’ve lowered to thirty percent. Now they’re moving towards Greece — on the way to Spain and Portugal and Italy — and they’re trying to figure out how much can we lower wages, how much can we drain an economy until there is pressure to come back?” —Michael Hudson

So says Michael Hudson in his response to Paul Jay’s opening question: “What should we [the US and Canada] be learning from what’s going on in Greece?” To find out Hudson’s answer, watch the 11-minute video below. My transcript, with minor revisions, follows. Subheadings, reflecting my own personal inferences from Hudson’s commentary, and text highlighting have been added.

The Greek Experiment, uploaded by The Real News, Feb 14, 2012

TRANSCRIPT

Europe’s financial elites imposing “savage austerity measures” in Greece. What can we learn?

Paul Jay – In Greece, the financial elites in Europe have gotten agreement from the Greek government to another round of what some are calling “savage austerity measures”. For example, lowering the minimum wage by twenty-two percent, a new round of privatizations and cuts to pensions and many other social programs. This is, I guess, an example of banks and a banking technocrat — that now leads the Greek government directly intervening — calling government policy. So what does this tell us here in the US, Canada and other countries that are watching this? Now joining us to discuss all this, Michael Hudson is a former Wall Street financial analyst, a distinguished research professor of economics at the University of Missouri, Kansas City. So, Michael, what should we be learning from what’s going on in Greece?

It will be to our own peril if we fail to learn important lessons from “the great experiment” now going on in Greece

Michael Hudson – Well we should be learning, what the European bankers are learning, and that is — What is the result of a great experiment that’s going on? For the last five years in Latvia, the neoliberals have lowered wages by about thirty percent. The basic premise of today’s model builders is you don’t know how far you can lower wages and pensions until people begin to press back. Well in Latvia they still haven’t begun to press back when they’ve lowered to thirty percent. Now they’re moving towards Greece — on the way to Spain and Portugal and Italy — and they’re trying to figure out how much can we lower wages, how much can we drain an economy until there is pressure to come back?

Lesson one – Start getting organized now because the neoliberal squeeze is already in progress here

And the right-wing who’ve essentially appointed a bank lobbyist – which is called a technocrat – in charge of Greece is let’s not try the experiment to just see how much we can squeeze out because they realize that the left in Europe is completely fragmented. They don’t have a defence available. They don’t have a body of concepts available to say wait a minute. This is crazy. When you’re lowering wages you’re actually sinking an economy. When you’re cutting the budget deficit you’re reducing the amount of money that comes into the economy to promote demand. So, in effect, what Europe is doing is bleeding economies very much like a medieval doctor would bleed blood on the grounds that this is going to make economies more productive. The only response that the Greek people have, not simply the left but the right and the Greek people is, look if you think you’re going to increase the surplus, increase taxes by lowering our wages and cutting our pensions and cutting out health care, we’re going to do what the Egyptians are doing and what the Arab Spring is doing, we’re going to tear the economy apart and there won’t be anything for you.

Lesson two – Neoliberals are putting our democratic institutions at risk

And PASOK, the socialist party that inaugurated this whole austerity program, now has an eight percent approval rating in Greece. That’s even lower than Mr Obama has for cutting wages here. So what the Greeks are saying, look when the premier said that they were going to have a referendum for whether we want to cut back the wages to pay the bankers, the first thing Angela Merkel said was you can’t have a referendum. We’re going to suspend democracy. We’re going to impose a dictator on you. And we’re going to tell you what to do. Well, under modern international law, if there’s no democratic commitment to pay then the debt taken on is null and void. Well, the European Common Market has had its lawyers say okay we’re going to get the agreement of congress. Well the Greek people can say look you can come down with bags of money and you can buy all the parliament members that you want to approve the deal but as soon as there’s an election we’re going to throw them out. They’re not acting on our behalf.

Lesson three – There’s probably no political party in the US or Canada that you can trust to reverse the neoliberal tide

Paul Jay – But it’s not clear by polling that the next election would actually elect a government that wouldn’t go along with this. Most of the parties that seem capable of winning elections in Greece have signed on to this deal. But can I go back to something earlier you said. Is not one of the big objectives more about privatization? That if you can create so much chaos and dependency on the Greek government, on the European financial elites, they’re going to sell everything off. And apparently they’re talking now about selling airports, and seaports, like a whole other level of privatization.

Privatization of public assets will be the bankers’ spoils for manufacturing this crisis. We’re at war!

Michael Hudson – Not only that but also the water systems, the sewer systems, real estate, the islands. You’re right. They think that if they create a crisis it becomes a grab-bag. And bankers and people who have a plan usually do much better in a crisis than people who don’t have a plan. So this indeed seems to be it. Finance today achieves what military invasion used to do in times past. So the new mode of warfare is financial not military. It’s much cheaper and it’s much safer for the country doing the attack. So you’re quite right. Privatization is a big role. And that’s why yesterday the European Union said wait a minute. We’re not even going to give you the money to pay us, namely, for us to pay our own banks that have bought your bonds, unless you spell out exactly what you’re going to privatize and commit to it now. And this is the sticking point. In the past, the Greeks have made promises, and thank heavens they haven’t privatized. Because once they begin to sell things off then there’s going to be a real squeeze and even more of an opposition. This looks pretty grim.

Europeans are committed to “savage austerity”, US not so much. Why the difference?

Paul Jay – There actually does seem to be some kind of different approach between Wall Street and the Europeans. You can hear interviews with Wall Street representatives who actually say no, you do have to have short-term stimulus before you have these kinds of austerity measures. You can’t force the world into a global depression. You hear that kind of language out of New York and out of President Obama. The Europeans seem so committed to severe austerity.

Michael Hudson – There are two reasons for that. Number one: from the very beginning of the last century America has already had, in the private sector, what was in the public domain in Europe. Europe had its power companies, electric and gas systems in the public domain. America privatized them but as regulated public utilities. The public utilities were regulated as to how much bond and equity they could get, what their rate of return would be. Europe has no body of law to regulate the prices or rent extraction that public utilities can charge because they had always had these in the public domain just like Russia, the Soviet Union, had no system like this. The objective of privatizing in Europe — first of all there’s much more property and public assets to grab in Europe than there were in the United States. And secondly, there’s no regulatory body in Europe because of the fact in the past power and sewer and water public utilities were supplied either at cost or at subsidized rates to make the economy more competitive.

Cut wages and workers will vote with their feet in mass emigration

So the idea in Europe is not only that you cut wages by thirty percent but you’re now going to raise the price of what you just mentioned – the access to water, sewers, transportation, everything else – you’re going to raise the price to put the real squeeze on wages. And the result in Greece will probably be the same as it was in Iceland, Latvia and other countries – there’s going to be a large emigration of working age labour and the result will of course be to make the economy much less competitive.

Greece’s GDP just fell 7% annual rate, a sure sign of an economy in steep decline

In this morning’s newspaper when it turned out that Greece’s GDP fell at a seven percent annual rate, not the five percent expected, as usual the newspaper said, to everyone’s surprise, the situation is worse than projected. Well of course it really wasn’t to our surprise because we know that when you’re strangling an economy, of course it can’t cope very well. And they’re strangling the Greek economy. They’re using it, I think, as a laboratory experiment to see what’s going to happen when we really just squeeze labour and squeeze labour. It’s like trying to feed a horse less and less to see whether it’s really going to be more efficient until it keels over dead.

Paul Jay – And I guess it’s always the way large-scale unemployment is always a good threat against the employed within a country. The more you can beat up Greece, Spain, and Portugal, the more you can threaten the working classes of France and Germany where I guess the big targets eventually will be.

Can the European Union survive a class-based economic war?

Michael Hudson – Well if that happens there’s going to be a renewed nationalism that’s going to cut the common market apart. And you’re going to have all of a sudden a realization that — when Europe united, the whole idea if it’s united was that it would never go to war again. Military war. But now that it’s united under neoliberal bank rules, they think, wait a minute we’re united and we are going to war. But it’s a class war. It’s an economic war. And this isn’t what we wanted. If the idea of uniting in Europe is for a class war under rules where we’re guaranteed to lose then we’re saying no to Europe, just as the Icelanders voted not to join Europe. Just as other countries that had planned to join Europe – all the way to Turkey at the other end — are saying wait a minute, if that’s the Europe that’s coming, an oligarchic Europe, whose program is austerity and shrinkage, why on earth would we want to join?

Fair Use Notice: This blog, Citizen Action Monitor, may contain copyrighted material that may not have been specifically authorized by the copyright owner. Such material, published without profit, is made available for educational purposes, to advance understanding of human rights, democracy, scientific, moral, ethical, and social justice issues. It is published in accordance with the provisions of the 2004 Supreme Court of Canada ruling and its six principle criteria for evaluating fair dealing.

Obama to Europe “We’ll wreck your economy if you don’t wreck Greece’s economy” —Michael Hudson

Posted on November 4, 2011 by fjwhite

No 326 Posted by fw, November 4, 2011

“The Greek debt scandal has also pitted U.S. banking interests against France, Germany and other European powers. The Americans are putting immense pressure on Europe saying, ‘We will wreck your economy if you don’t wreck Greece’s economy.’ . . . So, what’s at stake is whether Europe — Greece and other countries — are going to be democratic or whether they’re going to be run by a financial oligarchy, run by the E.U. bureaucracy, basically the European Central Bank, that’s neoliberal, anti-labor, anti-government, and totally in the pockets of the most predatory banks.” Michael Hudson

So spoke Michael Hudson in an interview yesterday on Democracy Now. Watch the embedded 11-minute video below or go here to the Democracy Now website where you can also download a full transcript of the broadcast. My edited version of the transcript with added subheadings and text highlighting follows the video.

Wall Street v Greece: G20 Opens as Greek PM Pushes For Referendum on EU Bailout Plan aired on Democracy Now, November 3, 2011

TRANSCRIPT

Michael Hudson, president of the Institute for the Study of Long-Term Economic Trends, distinguished research professor of economics at the University of Missouri, Kansas City, and author of Super Imperialism: The Economic Strategy of American Empire. His website is Michael-Hudson.com.

Amy Goodman — Welcome to Democracy Now!, Michael Hudson. What is happening right now? The significance of Obama being in the south of France at the G20 meeting, and the possibility of the Greek prime minister being thrown out?

Wall Street to Europe — “We will wreck your economy, if you don’t wreck Greece’s economy.”

Obama is here to represent the interests of the American banks. And the Europeans are very angry that a few weeks ago Tim Geithner, the bank lobbyist, came over and insisted that Europe not forgive Greece’s bank loans, not let Greece write down the loans, and indeed that it not even claim that Greece should do what Argentina is and write down the loans as a premise, because Mr. Geithner explained to the Europeans that the largest insurers of the Greek debt are American money market funds and hedge funds. And he said American hedge funds and banks would lose money and actually would crash the U.S. economy, if Europe made a concession to Greece to bring debts down to the ability to pay. So, instead of a debt write-down or a haircut, the banks said, “OK, we will agree with what the Americans are insisting on, and we will ask for a voluntary write-down by the banks on the Greek debt they hold.” Obviously, European banks who are not part of the credit default swaps have disagreed with this. So the Americans are putting immense pressure on Europe, saying, “We will wreck your economy, if you don’t wreck Greece’s economy.”

Papandreou opts for referendum but then . . .

Now, because of the problem in Greece, you have had the riots in the street, you have had the demonstrations. All of these demonstrations in Athens are very much like the Occupy Wall Street demonstrations here, and the similar demonstrations in Iceland. They were to show that the Greek people were not behind the bailout and to let the international banks know that if the so-called rescue operation — that is, the German and European rescue of the French banks and the German banks and the American banks that hold the Greek bonds, not the rescue of Greece — were to go through, that the fact that this was unpopular, under international law, meant that the Greeks could repudiate the debt. So, you heard two days ago, or on Monday, indeed, Mr. Papandreou said, “We’re going to have a referendum on whether to pay the—go along with the austerity plan or not.” The principle is the same that the president of Iceland said earlier this year: if you’re going to plunge an economy into a decade of depression and force much of its population to leave to find jobs, the workers have to have a vote — the population has to have a vote.

. . . he meets with Merkel and Sarkozy who pressure him to ‘beguile’ Greeks by rephrasing the question

Well, just a few minutes ago, the clip that you played at the beginning of the program was something quite different. Yesterday, when Mr. Papandreou met with Angela Merkel and Sarkozy in France, they said, “Look, all the opinion polls show that the Greeks are going to vote against the referendum, so let’s think of something nice. Would they rather be human beings or monkeys? What would they rather do?” And they came up with another question: do the Greeks want to be part of Europe or not? Well, obviously, the Greeks—66 percent of the Greeks do want to stay in the eurozone. They want to stay in the euro. So, by trying to rephrase the question in a way that will get a “yes” vote, they avoid asking the really important question: do you Greeks want to push yourself into a decade of depression and impose austerity and sell off the public domains, sell off the Athenian water supply, sell off your islands, sell off, yeah, your mineral rights in the sea, sell off even the Parthenon—do you want to do that so that the American banks will not lose money? Well, obviously, that would get a “no” vote. So there is some kind of trickery here going on.

Events change by the hour if not the minute. Outcomes remain uncertain

Nobody knows exactly what the referendum will be, or right now, whether there even will be a referendum, because, as you also noted earlier, the other politicians in Greece are now jockeying for position and are trying to get rid of Papandreou and to replace him, in a very opportunistic mood, to prevent any kind of a referendum happening at all.

High stake game — Will Greece remain a democracy or will it be run by predatory banks?

Yesterday, the headline in the Frankfurter Zeitung was “Democracy is Crap,” and—or “Democracy is Junk.” And the reason that was the headline was the financial sector was saying democracy is incompatible with collecting debts, and when they can’t pay, with foreclosing on the public domain and privatizing a country. You can’t have democracy, and you can’t have debts grow beyond the ability to pay and impose austerity, like the IMF used to do in the third world countries. So, what’s at stake is whether Europe—Greece and other countries—are going to be democratic or whether they’re going to be run by a financial oligarchy, run by the E.U. bureaucracy, basically the European Central Bank, that’s neoliberal, anti-labor, anti-government, and totally in the pockets of the most predatory banks.

Right now it appears the Greek people and their public assets will be sold down the river to the gangster banksters

[Papandreou’s ouster] could mean a number of things. Either it means that other members of his party—the finance minister, who is against the referendum—will come in and not hold a referendum at all and try to keep Greece on the austerity plan, or there will be a fall in the government, a no-confidence vote, and people will presumably vote for the Conservative Party, which, there, is very much like the Republican Party in the United States.

The reason there have been all of these demonstrations is the same reason that the Occupy Wall Street movement is in New York and the rest of the United States. The frustration is not only at the financial overhead, the debt overhead; it’s at the political fact that there is no choice. Both the Conservative Party and the Socialist Party in Greece, just like the Republicans and Democrats here, are both taking the side of the banks. So people don’t even have a chance to express a democratic alternative to essentially being ground down by debt peonage and letting the economy polarize even further between creditors and debtors.

Obama’s razor – Europe has to cut its own throat to save Wall Street

He’s making the threat that Europe has to cut its own throat in order to save the United States hedge funds and banks from taking a loss on the Greek bonds that they’ve insured. One of the reasons that people have been willing to buy Greek bonds is they bought credit insurance. And the European banks, mostly—maybe not Barclays or Deutsche Bank, but most banks—are not willing to write credit insurance, because everybody at the conference here in Berlin, at the Böckler Foundation conference, every single economist says there is no conceivable way in which Greece can pay its debts. But the Americans, hedge funds and bankers and—have come in and said, “We’ll write a guarantee.” And then they lean on President Obama and Tim Geithner to tell the Europeans, “You have to make Greece pay, so that we win the bets that we’ve made, because if we lose the bets, then we go under, and the stock market crashes, and a lot of people can’t collect on their money market funds.” So, this is just the naked, brute force that Mr. Obama is doing. He’s basically telling Europe, “Don’t go the democratic route. Support Wall Street.”

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FAIR USE NOTICE: This blog, Citizen Action Monitor, may contain copyrighted material that may not have been specifically authorized by the copyright owner. Such material, published without profit, is made available for educational purposes, to advance understanding of human rights, democracy, scientific, moral, ethical, and social justice issues. It is published in accordance with the provisions of the 2004 Supreme Court of Canada ruling and its six principle criteria for evaluating fair dealing

Are eurozone leaders using phony crisis in attempt to sell Greeks and others down the river?

Posted on November 3, 2011 by fjwhite

No 324 Posted by fw, November 3, 2011

Abid Ali

“We had a deal of sorts from the eurozone leader, but it was a terrible deal for Greece. Now it seems the Greek Prime Minister George Papandreou has flown back to Athens, and in the cold light of the day, realized he and his people had been sold down the river. Hence a referendum. . . . The German nation doesn’t want to bailout anyone. By coming forward with an incomplete deal the pressure is on Italy, Spain and France to find more austerity measures. It’s the German way of keeping the house it built in check, let the markets (bond investors) demand more interest of new bonds sold.” —Abid Ali

Abid Ali, business editor for Al Jazeera, alleges that eurozone leaders are strong-arming the Greeks to accept a deal that would effectively sell them down the river. You won’t soon find Ali’s critical analysis of the deal in many mainstream EU or North American media outlets, which is precisely why it has found its way onto this blog. Ali’s article appears below with my minor formatting changes, added subheadings and text highlighting. To read the original piece click on the title below.

A bad deal for Greece, a bad deal for China by Abid Ali, Al Jazeera, Nov, 1, 2011

Papandreou eventually realized the eurozone leaders were selling Greece down the river

We had a deal of sorts from the eurozone leaders, but it was a terrible deal for Greece. Now it seems the Greek Prime Minister George Papandreou has flown back to Athens, and in the cold light of the day, realized he and his people had been sold down the river. Hence a referendum.

Merkel’s series of incomplete solutions keeps bond interest rates high and investors happy

You see, German Chancellor Angela Merkel wants to keep kicking the can down the road. There is no legal framework to stop eurozone nations spending beyond their means. And the German nation doesn’t want to bailout anyone. By coming forward with an incomplete deal the pressure is on Italy, Spain and France to find more austerity measures. It’s the German way of keeping the house it built in check, let the markets (bond investors) demand more interest of new bonds sold.

Greece’s overblown debt “crisis” is calculated to make us believe that it could topple global markets

Merkel and French President Nicholas Sarkozy may not want to read this: but can you believe the world’s biggest and richest trading block is begging China for money? Can you believe Greece — a nation that represents less than 2 percent of the eurozone economy, that has less than half the assets Lehman Brothers had when it collapsed, has the ability to trigger a global financial and economic crisis? This is a containable problem. Yet it would appear that Germany, one of the world’s richest nations, hasn’t the political will to say: we want the euro to succeed.

Germany as a nation has benefited from the euro. Its economy would have been dragged into recession if it still had the Deutschemark. It would have felt more pain than Switzerland and Japan are experiencing right now. Both nations have seen their currencies hit record highs against the dollar, both are seen as safe havens in these turbulent times.

The euros don’t add up and Merkel appears to be playing “gotcha” with Greek lives

Germany spent 1.3 trillion euros on reunification. And now it can’t find 150 billion euros to aid Greece, while Berlin is willing to guarantee 220 billion euros in the eurozone bailout funds. Merkel is willing to stand by as Greece faces rising suicide rates, hundreds of thousands losing their jobs, pensioners are being pushed into poverty, and rising homelessness.

Tales are spun while Greece’s simple debt problem remains wilfully unresolved

Meanwhile, countless jobs are on the hook in Switzerland and Japan as their currencies come under pressure. Millions of jobs in Asia could be lost as the global economy slows. All the while we’re being spun more tales as to why this simple problem can’t be resolved. Bottom line — extraordinary times call for extraordinary measures.

Maybe the eurozone should sue Goldman Sachs instead of persecuting ill-fated Greeks

Sarkozy was right – Greece should never have been allowed into the eurozone. Maybe the eurozone should sue Goldman Sachs – which helped hide the nation’s debts – for the cost of the bailout.

Western economies are making a self-serving mountain out of a Greek mole hill

The eurozone should stop perpetuating the idea that this is a global crisis. Sovereign debt is a North Atlantic problem. At least when Dubai realized it had a problem it put its hands up, sat down with its creditors and came up with a solution. Its economy is still in the process of throwing off the froth but the economy hasn’t missed a beat. But Western economies have made a mountain out of a mole hill. The US debt-ceiling was a manufactured crisis. The eurozone is aping that.

The eurozone has dragged in the banks to take 50 per cent of losses. Astonishing, as this barely cuts 50 billion euros of Greece’s 350 billion euro debt. Greece will be in recession for the rest of this decade, and officials at the eurozone believe Athens debt-to-GDP ratio will hit 120 per cent by 2020! Not likely, more like 160 per cent. Athens will default. It has no choice.

It’s telling that the IMF and European Central Bank will be spared while China and others are being blackmailed to ante up or face the consequences

It can only get better for some. The International Monetary Fund and the European Central Bank won’t take losses on their Greek debt. But some institutions are more equal than others. Eurozone leaders didn’t present a solution. Instead they sent an uncompromising message to China and other emerging markets: pay for our troubles of else we’ll bring the global economy to its knees.

The solution to this phony crisis is simple, yet ignored

You want a solution: Berlin takes on 150 billion euros of Greek debt. Italy’s cost of borrowing will fall as it tackles it debt, since Rome’s finances are in a better position than most. France won’t lose its AAA rating if it needs to bailout its banks. And no need for Europe to depend on China to fix its economic mess.

About Abid Ali – He has more than a decade of experience covering global business. Before joining Al Jazeera as business editor in 2008, he edited and copyedited business news at CNN – both on air and online. He has also covered markets and big industry as a reporter for Bloomberg News.