Citizens of Europe: You Are the Problem

Project Syndicate has always rubbed me the wrong way, though I admittedly drink heavily from its run-of-the-mill liberalism. In its way, this megaphone for (to borrow a Krugmanism) Very Serious People is rather edifying: It’s a one-stop-shop repository of the Davos crowd’s enunciations.

Sometimes the silliness is too much, even for a battle-hardened consumer of modern media. Take this morning’s column by Pavlos Eleftheriadis, an Oxford law professor, entitled, ‘The Dark Side of Syriza.’ I took exception to Eleftheriadis’ blatant partisanship on Twitter:

In fairness to him, the good professor’s partisanship is to be expected from a member of the national executive of To Potami, a marginal* centrist-liberal party in the new Greek Parliament, polling but six-tenths of a percentage point higher than the unreconstructed Leninist KKE. To Potami are (with a touch of exaggeration) worse than useless: They’re a throwback to a 1990s-style Third Way, Sensible Liberalism that needs to die a harrowing death. In a sense, my criticism is a bit more neutered than I should have liked: Of course this is a hatchet job–saying so is just banally true. Nevetherless, Professor Pangloss took a bit of exception to my faint criticism:

Partisanship can of course go hand in hand with selective citation. In fact, I would expect nothing less of a man with his CV. Throwing in a few quotes by one’s political enemies is hardly convincing evidence of fair representation or interpretation. Professor Eleftheriadis is a politician of sorts (and a lawyer!) after all–selective memory, tendentiousness and a heavy dose of ideologically-inflected, agenda-setting rhetoric are all par for the course.

With that in mind, I do not think it terribly unfair to engage in a bit of Fisking. Professor Eleftheriadis takes a few liberties and makes some heady assumptions to advance his lazy piece. Let’s take these one by one.


Professor Eleftheriadis starts ominously, saying the Greek electorate’s choice was a leap into the ‘dark.’ Apparently, an irresponsible and destructive programme that has thrown Greece into chaos–contracting the economy for 42 straight months–is not dark enough. We are then told Syriza’s ideas are nothing new and, indeed, are ‘far from ideal for Greece or Europe.’ Presumably, he means to contrast this to the novel economic strategy pursued by the Troika, founded on an ideological programme first put into practice after a right-wing coup a mere 42 years ago. Perhaps the good professor still has the phrase ‘There Is No Alternative’ ringing in his ears decades after it was uttered by Margaret Thatcher. In the event, what is old is not necessarily better than what is new, though in the case of the five-year old bailout programme, something new might be a good idea after…this:

Quarterly GDP for G7 and Eurocrisis Countries, 2007-2014

Quarterly GDP for G7 and Eurocrisis Countries, 2007-2014

Austerity and Increases in Debt-to-GDP ratios. Paul De Grauwe & Yuemei Ji, 21 February 2013.

Austerity and Increases in Debt-to-GDP ratios. Paul De Grauwe & Yuemei Ji, 21 February 2013.

Austerity and GDP Growth 2011-2012. Paul De Grauwe, Yuemei Ji, 21 February 2013

Austerity and GDP Growth 2011-2012. Paul De Grauwe & Yuemei Ji, 21 February 2013.

The professor says the new Greek Prime Minister, Alexis Tsipras, has ‘antagonized the EU and created a climate of confrontation.’ Does he mean the same EU whose leaders said they would ‘crush’ Greece to teach the country a lesson? The same EU which forced aside democratically-elected leaders in Italy and Greece; whose central bank blackmailed Cyprus and Ireland? (It is doing the same to Greece now.) He studiously ignores the crass, ideologicalanti-democratic arrogance of Europe’s leaders, to say nothing of their blunt obstinacy. No, the bully-boys here are Alex Tsipras, Yanis Varoufakis & co. for refusing to be pliant supplicants.

This myopia is then followed by a logic so convoluted, I refuse to believe Eleftheriadis wasn’t laughing through every key stroke. You see, Syriza is ‘not truly an anti-austerity party’–despite its anti-austerity manifesto and the Troika’s rejection thereof on the same grounds–because it does not attack austerity ‘from a European perspective.’ (Despite Yanis Varoufakis’ continued insistence that there can only be European solutions to a European crisis, but never mind…) On this so-called ‘European perspective,’ the professor is (narrowly) on to something: *This* bureaucratic Union of Fools demands anti-labour ‘reforms’ and continued austerity in the teeth of a humanitarian crisis. If Professor Eleftheriadis means Syriza might not share the European Union’s *neoliberal* perspective, then in this he is surely right. But to say Syriza is not anti-austerity because it doesn’t advocate austerity demanded by Europe is to engage in rather exemplary sophistry.

The hysterics continue on the next paragraph, where the professor laments Tsipras overlooking his little party during coalition talks (can one really blame him?) and, in a true howler, labels the catastrophic bailout by the Troika a ‘well-meant policy error.’ Of course, it was anything but. Timothy Geithner’s revelation of Europe’s intent to ‘crush’ the Greeks is hardly the only example of this. Even the International Monetary Fund, in its own anodyne way, admitted that the real purpose of this ‘well-meant policy error’ was to sacrifice Greece in order to save the entirety of the European project. To quote just one part of the IMF’s mea culpa:

57. In the event, the SBA-supported program served as a holding operation. On the positive side, moving ahead with the Greek program gave the euro area time to build a firewall to protect other vulnerable members and averted potentially severe effects on the global economy. However, not tackling the public debt problem decisively at the outset or early in the program created uncertainty about the euro area’s capacity to resolve the crisis and likely aggravated the contraction in output.18 An upfront debt restructuring would have been better for Greece although this was not acceptable to the euro partners. A delayed debt restructuring also provided a window for private creditors to reduce exposures and shift debt into official hands. As seen earlier, this shift occurred on a significant scale and limited the bail-in of creditors when PSI eventually took place, leaving taxpayers and the official sector on the hook. [My emphasis in red.]

Maybe the professor is again right in his own charming way. The Greek bailout was well-intentioned from the perspective of private sector holders of Greek bonds in Europe’s creditor core states. These poor folks–the European banking elite–were allowed to reduce their exposure and dump these toxic bonds onto the continent’s dissolute taxpayers. Not only was Europe able to rescue its stricken banks, it was able to build firewalls against contagion so that, if Grexit comes–thanks to the remorseless logic of the bailout programme and  the country’s eroding debt profile–the average woman in Germany, the Netherlands and Finland can pin the blame on the laziness of Greeks and not the fecklessness of their own leaders.

The real tragedy is not the story of this gigantic sleight of hand, forever incriminating the victims for crimes hatched elsewhere, but Syriza’s gauche ‘language…of resistance to conquest.’ How the faint hearts in Brussels, Frankfurt and Berlin will survive these vicious verbal assaults is beyond the scope of my cloudy lens.


The good ship Eleftheriadis now turns straight into Europe’s gathering storm: The growing xenophobia and nationalism stalking the continent.

The European left has engaged in plenty of earnest hand-wringing about Syriza’s choice of coalition partners, the Independent Greeks (ANEL.) The party’s co-religionists have tackled this thorny issue in the media, and I have already set down my thoughts on the logic of choosing an anti-austerity party to execute an anti-austerity policy programme. The sobering calculations of a parliamentary majority haven’t escaped any of these critics’ notices, still less the tactical considerations driving this decision, but that’s irrelevant to our professor. Instead, he accuses Alexis Tsipras of sharing the same ‘virulent nationalism’ as ANEL, and–worse–as ‘Europe’s enemies’ in Dresden (a barely-coded reference to the xenophobic PEGIDA movement in Germany) and (where else?) Moscow. This is an astonishing, almost admirable feat of distortion on a grand scale. Not only is Alexis Tsipras no better than Putin or Kammenos, his rhetoric is similar to that of the Patriotische Europäer gegen die Islamisierung des Abendlandes, or (in English) the Patriotic Europeans Against the Islamization of the West. Bravo, Herr Professor.

Eleftheriadis goes one further. In calling Europe’s leaders ‘gangsters’ who wish to ‘plunder’ Greek assets, Tsipras–we are told–is no better than Geert Wilders, Marine Le Pen and Viktor Orbán. The language is fiery (if understandable under the circumstances) though, seen from a certain point of view, hardly unfair. What were the European Central Bank’s demands to Ireland if not an ‘offer’ the latter couldn’t refuse?

Lumping Tsipras with xenophobic nationalists is a character assault worthy of a Hollywood blacklist. The rhetoric is underhanded, indirect and dissembling. Despite Syriza’s pro-immigrant rhetoric since the 2012 election, we are to consider its leader no better than a national chauvinist. If Eleftheriadis were halfway charitable, he would recognise that very little unites the political instincts and attitudes of Marine Le Pen and Alexis Tsipras. If the critical rhetoric of Syriza’s partisans sometimes veers into hyperbole, it is not, alas, without reason–or some grain of truth. When Eleftheriadis argues that ‘Official Syriza documents regularly condemn the EU as an organization that undermines democracy and causes poverty and destitution throughout Europe,’ why should his readers not look askance at Europe’s record since 2008 and agree? Multiple reports show a demonstrable increase in poverty and homelessness in Europe. In the pointed words of the Red Cross, ‘Whilst other continents successfully reduce poverty, Europe adds to it.’ The European Union swept away inconvenient political leaders and installed technocrats in governments of ‘national unity’ at the height of the crisis. Given this appalling record, who are we to believe, Eleftheriadis’ protestations or our own lying eyes?

The professor’s contortions continue. Syriza’s platform accepts the necessity of fiscal coordination within monetary union. Indeed, the finance minister’s basis for negotiations includes Greece running a burdensome (if reduced) primary surplus alongside its reform agenda. You would never know that from Eleftheriadis’ writing: ‘Though Tsipras, too, claims to favor the euro, he never mentions the fiscal discipline that it requires…’

Furthermore, he wishes to paint Tsipras as a conspiracist over the cross-party contestation of Greek debt figures in 2009-2010. Eleftheriadis gambles on his audience’s ignorance, leaving aside the inconvenient context. As for that context: There was widespread uproar and public debate on the size of the budget deficit in the immediate aftermath of the first Greek bailout. Part of the scepticism was based on the work of statistician Zoe Georgantana, whose work was cited by the country’s prosecutor for financial crime to investigate claims of malfeasance by the country’s official statistics office. (Another part was the very nature of statistics collection in Greece before the crisis; who can blame the cross-party scepticism?) The head of Greece’s statistical agency even faced prosecution, though not at the behest of Tsipras–then only leader of a small, if growing opposition party. And he was hardly alone in his scepticism; understandably so, given the shock of the crisis to the country’s politics at the time. Per the Financial Times in 2011:

Lawmakers from Greece’s five main political parties, from rightwingers to communists, have also contested the 2009 deficit figure. Elstat’s own trade union has demanded a say in approving figures on the public finances before they are sent to Eurostat, staging strikes and sit-ins in order to press its claim.

Judged by his time and place, Tsipras starts to sound less like a raving conspiracist and more like a politician making sense of a chaotic situation.

By now, Professor Eleftheriadis is fighting a rearguard action against those ‘attacking the EU, “speculators,” and hedge funds’ for Greece’s plight. He is primarily concerned with the apportionment of blame, of which there is enough to go around: From the reckless lending of private actors in creditor states before 2008, to Goldman Sachs (speculators par excellence) helping the government hide the scale of the country’s debt, to Europe’s abysmal diagnosis of the country’s problems, culminating in a corrosive loan package to an insolvent state. Our hapless professor is too incensed at protestors–whether on the streets of Athens or in Syriza party headquarters–to remember Greece’s follies were not the deliberate choice of the average Greek man, woman or child. (Of which, more below.)

Eleftheriadis’ concluding attitude, lamenting European citizens flocking to Eurosceptic parties as the crisis deepens, is par for the course in his flustered defence of an anti-democratic European Union. Instead of recognising the true ‘EU-wide pathology’–the yawning gap between the political and economic expectations of Europe’s citizens and the responses of their policymakers–the professor is most exercised by the symptom, not the disease. That disease is the selfsame neoliberal dogma denounced by Greece’s oligarch-controlled television stations: A telling meeting point for Europe’s critics, left and right. Professor Elftheriadis somberly notes a growing isolationism in Europe, without a matching concern for the immiseration of people on the continent’s southern edge. The problem isn’t Germany’s intransigent Ordoliberalism, deeply embedded in the construction of monetary union, or a flawed European policy framework: You are the problem, cher citoyen.


Pavlos Eleftheriadis sees a ‘dark side’ to Syriza’s challenge to the European consensus. His half-baked critique, however, suggests this so-called ‘dark side’ amounts to nothing more than the party’s principled rejection of the bailouts, and of the attendant conditionality imposed by Greece’s international lenders. He defends an increasingly discredited notion of Europeanism, one which is disintegrating under the weight of the contradictions inherent in its neoliberal character. His critique is founded on an incomplete understanding of the crisis (Greek profligacy before 2009 was matched euro-for-euro by surplus capital from northern European banks), an ill-advised and uncharitable characterisation of Syriza, and–the coup de grâce–moralistic finger-waving about Greece’s responsibility to swallow a destructive, unnecessary medicine.

It is this vacuous moralising which the Left must strenuously confront at every opportunity. These crude arguments, often built atop cultural essentialisms, absolve those in power, inform policies destructive to human well-being, and sidestep the lived experiences of ordinary people. If Professor Eleftheriadis wishes to train his critical eye anywhere, he should do so against those who would claim the cultural superiority of some Europeans over others as an explanation for this crisis.

We must only entertain those arguments which do not lose sight of the material realities of ordinary people. The rest is white noise:

From the worm’s-eye perspective which most of us inhabit, the general feeling about this new turn in the economic crisis is one of bewilderment. I’ve encountered this in Iceland and in Ireland and in the UK: a sense of alienation and incomprehension and done-unto-ness. People feel they have very little economic or political agency, very little control over their own lives; during the boom times, nobody told them this was an unsustainable bubble until it was already too late. The Greek people are furious to be told by their deputy prime minister that ‘we ate the money together’; they just don’t agree with that analysis. In the world of money, people are privately outraged by the general unwillingness of electorates to accept the blame for the state they are in. But the general public, it turns out, had very little understanding of the economic mechanisms which were, without their knowing it, ruling their lives. They didn’t vote for the system, and no one explained the system to them, and in any case the rule is that while things are on the way up, no one votes for Cassandra, so no one in public life plays the Cassandra role. Greece has 800,000 civil servants, of whom 150,000 are on course to lose their jobs. The very existence of those jobs may well be a symptom of the three c’s, ‘corruption, cronyism, clientelism’, but that’s not how it feels to the person in the job, who was supposed to do what? Turn down the job offer, in the absence of alternative employment, because it was somehow bad for Greece to have so many public sector workers earning an OK living? Where is the agency in that person’s life, the meaningful space for political-economic action? She is made the scapegoat, the victim, of decisions made at altitudes far above her daily life – and the same goes for all the people undergoing ‘austerity’, not just in Greece. The austerity is supposed to be a consequence of us all having had it a little bit too easy (this is an attitude which is only very gently implied in public, but it’s there, and in private it is sometimes spelled out). But the thing is, most of us don’t feel we did have it particularly easy. When you combine that with the fact that we have so little real agency in our economic lives, we tend to feel we don’t deserve much of the blame. This feeling, which is strong enough in Ireland and Iceland, and which will grow steadily stronger in the UK, is so strong in Greece that the country is heading for a default whose likeliest outcome, by far, is a decade of misery for ordinary Greeks.

— John Lanchester, ‘Once Greece goes…’ The London Review of Books


* Marginal, though not voiceless. Perhaps as a result of its prominent membership, or (more likely) its ‘pro-European’ (ho ho) centrism, its message has been getting a bit of a hearing in the foreign press. See here for an example.


SYRIZA in Power: Lessons from a French Experiment

The challenges facing the week-old Greek government are becoming sharper by the day. SYRIZA, the most left-wing party of government in Western Europe since the 1930s, faces an uphill struggle to revive a moribund economy. This is no small task. After half a decade of austerity and ‘economic reforms’, the scale of Greece’s de-development is staggering: Its economy has been decimated, more than a quarter of its workforce is unemployed (that figure doubles for those under the age of 25), wages have contracted sharply, the country’s healthcare system has collapsed, infant mortality is up, the country’s fertility rate is down, poverty (and especially childhood poverty, which has nearly doubled) and homelessness have exploded, and hunger is rife.

Select Macroeconomic Data for Greece


Real GDP since 2000


Total Adult and Youth Unemployment Rates

Public Debt

Public Sector Debt


Inflation, Headline & Core

The responsibility for this ongoing humanitarian crisis must be placed at the doorstep of Europe’s leaders. Since 2010, they have misunderstood the nature of the crisis, ignored the compounding effects of their failures, and substituted hectoring moralism about the sanctity of debt for realism and human dignity. The international bailout so often described as Greece’s salvation was motivated by the need to prop-up exposed banks in creditor European states and to insulate the rest of the Eurozone from contagion. As it has done time and again, IMF-style conditionality–liberalisation and austerity for bailout loans–has reduced Greece to penury. This was not the result of unforeseen hazard or bad luck. As far back as February 2010, then-US Treasury Secretary Timothy Geithner noted the disquieting air of vengeance among Europe’s leaders: ‘…the Europeans came into that meeting basically saying: We’re going to teach the Greeks a lesson…they were profligate and took advantage of the whole basic thing and we’re going to crush them.

Ignoring vociferous criticisms of the programme, the Troika of Greek lenders (the European Commission, the European Central Bank and the International Monetary Fund) grossly miscalculated the knock-on affects of their demands. The unscrupulous, pompous manner with which their officials have handled these failures underlines an already miserable record. In turn, the Greek establishment’s ruthless execution of the Troika’s demands have made them the subject of withering contempt in the country they once plundered.

The elections on 25 January decisively smashed the duopoly upon which Greek governance has rested for 40 years and signalled a rejection of the bailouts. The two establishment parties combined polled less than the radical left at the latest elections, with the once-mighty social democrats disintegrating almost entirely. (‘Pasokification’ should focus minds among social democrats across Europe: In 2009, PASOK was the largest party in Greece with 43.9% of votes cast at that year’s election. They attained 4.7% of the vote this year.) The election is a wholesale rejection of the failures of the past 5 years, and of the characters and institutions who have demanded ever more sacrifice from an increasingly desperate population.

History provides few salutary lessons. What comes next will not be a re-run of previous crises–not the European monetary crisis of the early 1990s nor the upheaval after the disintegration of the managed exchange rates of the post-war era. The future will be determined by the actions of neophyte ministers in Athens and recalcitrant ideologues in Brussels and Berlin. Nevertheless, SYRIZA must learn from the lessons of governments that have attempted to defy international pressure and pursue an alternative economic path. Whether strangled at birth (as in the case of the UK in 1976) or defiantly pursued in the teeth of international opprobrium (Latin America since the turn of the century)–or somewhere in between (Iceland since 2008)–these alternatives should serve as cautionary tales for the task ahead.

Here, I want to revisit an inchoate alternative: The two-year socialist attempt to reflate the French economy between 1981-1983–a period of sustained disinflation and recession across the developed world. Of course, no two historical events are exactly the same; the differences between the French experience in the 1980s and the Greek crisis today are admittedly legion. Yet I would argue that the distinctions between the course of the ‘French experiment’ then and the situation facing SYRIZA today are as edifying as the similarities.


On 10 May 1981, François Mitterrand was elected president of France—the first socialist president of the Fifth Republic. The Parti socialiste (PS) would claim a commanding majority in the National Assembly the following month, buttressed by a coalition with the communists (PCF) and assorted centre-left MPs. The scale of the socialist victory cannot be overstated: the PS won 269 seats against the PCF’s 44 and the centre-right’s 144 in the June 1981 election, giving the French socialists the largest majority enjoyed by any left government in Western Europe since 1945.

The PS came to power at a time of crisis. The long postwar boom, the trentes glorieuses, was a distant memory in the aftermath of the oil shocks and the collapse of Bretton Woods. The failure of successive centre-right governments to return France to steady growth, full employment and steady prices all but ensured l’alternance.

In the face of the greatest crisis of capitalism since the 1930s, Mitterrand and the socialists offered change the contours of which the government struggled to articulate concretely. The party’s response was both rhetorical and political, if incoherent: On the one hand, their avowedly socialist profile suggested the PS was prepared to engineer a decisive break with capitalism. On the other, the president’s platform–the 101 Propositions, inspired by the earlier Programme commune between the PCF and PS–called for Keynesian economic management. To a general programme of reflation, the socialists grafted on a left-sounding program of nationalisation of the commanding heights of the economy.

Select Macroeconomic Data for France in the 1980s

Real GDP for Select G7 Countries, 1980-1986

Real GDP Growth

Unemployment in the G7, 1980-1985


Share Price Indices for the G7, 1981-1983

Share Price Indices

CPI in the G7, 1980-1985

Consumer Price Inflation

G7 Currencies Relative to the USD, 1981-1985

Currencies Relative to the US Dollar

10-Year Bond Yields

10-Year Bond Yields

The socialists’ reflation strategy faced both structural and cyclical headwinds. Structurally, the collapse of the Bretton Woods system a decade earlier reduced the scope for nation-states to respond to international crises with national policy tools alone. As Michel Rocard (later prime minister during Mitterrand’s second administration) argued, you could not be a Keynesian in a post-Keynesian world¹. The British Labour Left had learnt this lesson during the sterling crisis of 1976. Faced with the unpalatable choice of IMF conditionality–policies that were ‘deflationary when unemployment is high and rising, investment is slow and sluggish, interest rates are high already, and living standards are falling and due to fall more sharply’–the Labour Left under Tony Benn put forward a stark ‘alternative economic strategy’ (AES):

‘The alternative strategy is based upon the belief that the price we must pay for borrowing to finance a free trade policy is too high because it involves unacceptable levels of unemployment, unacceptably low levels of investment and a progressive deterioration of our manufacturing capacity.

10. A national recovery plan of this kind should be based on the following:

a . A decision now to introduce overall import quotas for manufactured goods to be set at levels that permitted us to survive without the loan if we had to do so.
b . The immediate introduction of import deposits to cover
the interim period between the enforcement of the import quotas and their full implementation.
c . The immediate enforcement of exchange controls to check speculative outflows…

f. Strengthen our industrial legislation by taking reserve powers to introduce planning agreements and by providing more funds for the National Enterprise Board and the Scottish and Welsh Development Agencies.

The AES started from the realisation that the British economy could not face up to the competitive pressures of the second wave of globalisation; that policies of full employment underpinning the social contract between organised labour and capital might now only work in a closed economy; and that planning (especially directing the flow of investments) was impossible with open capital markets. Unlike their colleagues across the Channel, the French socialists in 1981 appeared peculiarly unable to grasp this new reality.

The ongoing restructuring of capital in the 1970s still left states with policy options. ‘There is no alternative’ was the simplistic response of ideologues on the right,  resigned purists on the left and (later) intellectual dilettantes on the centre-left. The Bennites recognised (as did the liberal wing of the French PS, if with different sympathies) that these alternatives pitted one set of heavy costs against another.

The cyclical headwinds facing the PS–which would crystallise in later years under the Single European Act and Maastricht–stemmed from the capitalist core’s response to stagflation, supply-side shocks, spiralling unemployment and social breakdown. In 1979, the United States Federal Reserve set-off on an unprecedented monetary tightening cycle: The Fed Funds Rate was increased from 11.2% to an eye-watering 20% between August 1979 and June 1981. To forestall capital flight and the destabilisation of their banking systems, central banks across the developed world responded with deflationary tightening of their own. France initially bucked the trend as it undertook its reflationary programme. The French exception came to an abrupt end with the socialists’ tournant de la rigueur–the turn to austerity. The u-turn was presaged in the summer of 1982 and became government policy by March 1983. It was France’s capitulation to the inevitable, narrowly construed.

Economists and political scientists on the left continue to argue whether France could have done otherwise given a more auspicious international context.  One might argue that reflation could only ever have worked had the French economy shielded itself from the pressures of globalisation–and, specifically Europeanisation. The French Prime Minister Pierre Mauroy was all too aware of these international constraints: ‘If the French resign themselves to living with an inflation of twelve percent, then they should know that because of our economic interdependence with Germany, we will be led into a situation of imbalance.’²

There was to be no alternative: François Mitterrand chose liberalisation and European unification–with concomitant mass unemployment–to the pursuit of autarky. In later years, the Parti socialiste would be just as eager to reconcile with capital’s priorities as the British Labour Party were after 1983, to the bitterness of the PS’s left-wing and the sneering of the communists.  The socialist ‘modernisers’ were not just adept cheerleaders: They played a vital role in the construction of a liberal European Union.


SYRIZA entered the 2015 election on a programme rejecting austerity and neoliberal ‘reforms.’ They have captured power: What will they do with it?

At minimum, the French experience teaches political parties of the left to work from a position of strength. This is a lesson SYRIZA seem to have absorbed: Witness their unexpectedly quick choice of Independent Greeks as coalition partners. Leftists across Europe are rightly dismayed–after all, Independent Greeks are an unsavoury grouping of nationalists. The composition of the cabinet, however, suggests SYRIZA have chosen their partners without illusions. Though controversial, this choice ensures the government has wide latitude for negotiation with Berlin, Frankfurt and Brussels, without the fear of snap elections. SYRIZA have arguably demonstrated a considerable amount of tactical nous. A coalition with any of the ‘moderate’ parties would have narrowed the party’s scope of action in dealing with the debt, the issue upon which the government’s record will be determined.

Strategically, the Greek left must account for the material conditions in Europe at the present conjuncture. Europe’s disinflationary bias in 1981 was the result of a coordinated battle against the stagflation of the 1970s; in such a context, Reflation in One Country was impossible within the confines of the system. Today, the situation is different. Europe is once again suffering from deflation, but it is not simply the deliberate choice of policymakers combating inflation and organised labour. It is the result of a failure of policy on a grand scale. Despite the hard money tendencies of particular segments of the European policy elite, there is creeping recognition that asymmetrical ‘Japanification’ will destroy what is still but a grouping of nation-states. There is no hard European demos or identity; how can you mimic the social cohesion necessary to inflict so much pain across an entire continent for decades? For how long can a Greek, Italian or Portuguese government justify endless deflation that isn’t matched by inflation and fiscal solidarity in Germany?

If they are to succeed, SYRIZA will have to play on the increasingly divergent needs of various European capitals. Locked within monetary union, the (competitive) German enterprise looks upon a ‘hard’ euro with a relative indifference unappreciated by (uncompetitive) firms in a stagnant Italy. It is to this brutal (and brutalising) truth that SYRIZA must speak if they are to convince Europe to change course.

Recession without end is the enemy of capital accumulation in Europe today. Insofar as perpetual austerity endangers the entirety of the European project itself, SYRIZA might find itself with surprisingly ample room to mount a challenge to the consensus.

¹ Donald Sassoon, One Hundred Years of Socialism: The West European Left in the Twentieth Century, (London: I.B. Tauris, 2010) 557.

² Ibid., 558.

Quentin Matsys, ' Money Changer and His Wife'

The Rates of Power

Three Rates for the Wall Street-boys under the sky,

Seven for the Bund-lords in their halls of stone,

Nine for Bear Stearns traders doomed to die,

One for the Lord Mayor on his dark throne

In the Land of Mammon where the Usurers lie.

One Rate to rule them all, One Rate to find them,

One Rate to bring them all and in the darkness bind them

In the Land of Mammon where the Usurers lie.

'Austerity: That's Enough'

Austerity in Europe: The End of the Affair?

‘We must stay the course of reform and avoid any loss of momentum, which could undermine the turnaround in confidence that is underway, delaying the needed upswing in growth and job creation.’ [My emphasis]

In so many words Olli Rehn–European Commissioner for Economic & Monetary Affairs and the Euro–proved that the reigning cult of self-flagellation is alive and well in Europe.

I don’t wish to knock Mr. Rehn alone for the increasing disconnect between official statements and the facts on the ground. Some, such as the Bundesbank’s Jens Weidmann and the ECB’s ex-president Jean-Claude Trichet, deserve to go down in history as arch-villains in a story resplendent with smug witch doctors and other petty peddlers of bunkum. Trichet’s particular brand of delusions holds that the plan–a double-whammy of austerity & competitiveness ‘reforms’–will work any day now, that the confidence fairy is real. Mr. Weidmann’s odious stance is that a multi-year record of misery (of which more below) won’t just work, but that it is morally right to pursue on its own terms. (A Spectre is Haunting Europe–Moral Hazard.) The self-denial of all, ‘the denial of life and of all human needs,’ might result in the impoverishment of all, but as Marx realised in the Economic and Philosophical Manuscripts of 1844, it is easy to dress misery in ethical clothes.

What makes Mr. Rehn’s interventions rather more galling, however, is his insistence that the plan not only will work and is morally correct to pursue, but rather that it is, somehow, already working.

For a moment, financial markets found cause to believe him. On 26 July 2012, the new president of the European Central Bank, Mario Draghi, promised the bank would do ‘everything it takes’ to save the euro. A week later, on 2 August, the ECB announced the creation of Outright Monetary Transactions–direct central bank interventions on secondary-markets to pacify distressed markets, provided recipient countries accepted strict conditionality under EU diktat. Spanish & Italian bond yields–the implied price at which governments can borrow on the open market–duly tumbled in response, as the markets dared to hope Europe might exit the crisis intact.

By Europe, of course, one means the financial markets themselves. For the peoples of Europe, however, the last six months have seen the continual evolution of a social catastrophe.


The Eurozone economy has been contracting since the last quarter of 2011–5 consecutive quarters (15 months) of recession–despite heroic efforts from Europe’s ‘locomotive’, Germany.

Real GDP Growth in 10 Largest West European Economies since the Great Recession

Real GDP Growth in 10 Largest West European Economies since the Great Recession

If this spectacular failure were at least mitigated by the promise of better economic performance in the near-future, then perhaps Mr. Rehn’s enthusiasm for disaster economics might make sense. But as Markit’s latest Purchasing Managers Index for the Eurozone makes plain, such optimism is misplaced–unless, of course, your only concern is the continued rude health of the German economy. For the rest, the double-dip recession goes on without end.

Markit Eurozone Output PMI, March 2013 Release

Markit Eurozone Output PMI, March 2013 Release

Whilst German and Irish PMIs signal expansion of activity in the first quarter, Spain, Italy and (dismayingly) France continue to contract:

Worryingly, the divergence between Germany and France so far this year is the widest in the 15-year survey history. Germany is on course to see the strongest quarterly growth since the spring of 2011, but France is contracting at the fastest rate for four years.
The deteriorating picture in the periphery is also a concern. Rates of decline picked up in Italy and Spain, with further weakness likely in Italy especially in coming months due to the uncertainty caused by the elections.

Much has been made of the totemic strength of the German economy–representing over a quarter of the Eurozone’s nominal output. German GDP is almost 9% higher than it was at the deepest point in its recession 4 years ago, but that mighty rebound came hot on the heels of one of the deepest recessions in the G7; its output is still but 1.4% higher than it was a full five years ago. The continued relative strength of her job market is commendable, but even that shouldn’t be overemphasised. Too much of that job growth comes from low-paid and/or precarious employment, as is becoming increasingly clear in Germany itself.

The continued weakness of France, Italy and Spain suggests that not even mighty Germany–but a relative strong swimmer in a sea of dashed recoveries–will be strong enough to pull all sinking boats. Germany’s strength continues to be outweighed by contraction in the monetary union’s next three largest economies, representing half the Eurozone’s GDP.

Policy-makers are struggling mightily to convert Europe into a Bizarro Greater Germany–a continent where Hartz-style reforms and perpetual austerity are complemented by technocratic control of fiscal policy. But to do so requires enormous political will–at the institutional, electoral and street level. And recent events suggest Europe’s élites might be losing grip of the situation.


The Financial Times recently reported on tensions in the Netherlands as the government there attempts to enact yet more austerity:

A €4bn package of additional austerity measures aimed at enabling the Netherlands to hit EU deficit targets in 2014 has set up a bitter clash with trade unions, after the largest labour federation attacked the cuts as “stupid and ill-advised” and the government pleaded for negotiations…Following this weekend’s mass demonstrations in Portugal and the results of Italy’s elections, the impasse in the Netherlands reflects the tensions over austerity measures that are testing the limits of European governments.

The latter points to growing concern across the continent that the social fabric of the hardest hit states is fraying. It should not be so difficult to understand how the deteriorating economic fortunes of millions–e.g. youth unemployment rates at (Spain & Greece) or approaching (Italy & Portugal) half the population, increasing poverty, growing income inequality, etc.–translates into a new Irish diaspora, or protests & violence on the streets. As David Begg, General Secretary of the Irish Congress of Trade Unions, has argued:

European integration has proceeded on the basis of a ‘Permissive Consensus’. European citizens thought it was a good thing, or at least did no harm. I doubt that view is still current. From what I hear in the circles in which I move, today’s labour movement is disaffected from the European project,” he said. “What will happen when people eventually realise that they are trapped in a spiral of deflation and debt. We may reach the tipping point.

Unsurprisingly, perhaps, this is not what European & governing national officials see. They argue austerity is working because, well, surely it must be. But of course, this is an élite admirably tolerant of its own failures.


Austerity and GDP growth 2011-2012 (Click for Source)

It doesn’t matter that austerity’s knock-on effects on growth–implicitly admitted to by the IMF–are exacerbating the crisis, or that by policy-makers’ own foolish metrics (an obsession with debt-to-GDP ratios) the situation is hardly getting better for distressed sovereigns.

(Click for Source)

Austerity and increases in debt-to-GDP ratios (Click for Source)

Meanwhile, unemployment is already at depression levels & climbing in Portugal, Spain and (worst of all) Greece, while Irish unemployment is mercifully stuck there. (Unemployment has hovered around 15% in Ireland for more than 3 years; this presumably is what José Manuel Barroso, European Commission president, meant when he claimed the Irish economy was ‘turning the corner.’) Italy’s unemployment rate has decoupled from the core EU states and is taking off into the stratosphere, in the midst of political chaos. Unemployment continues to inch up in Austria, Sweden, Netherlands, France; remains stable around levels of mass unemployment in Belgium and Denmark; and is falling below its pre-crisis peak in only one European country: Germany.

Latest Unemployment and Percent-Point Change since Peak

Unemployment and Percent-Point Change since Peak

The repercussions of continued stagnation and high (and in many countries, growing) unemployment can be seen in capitals across the continent. In Athens, the radical left party SYRIZA has replaced PASOK as the primary party of political opposition, as demonstrated at both of last year’s elections and recent polls putting it neck-and-neck with the governing conservatives. This is in the context of far-right thuggery, ongoing protests and violent street clashes. In Italy, the political earthquake unleashed by the rise of a populist anti-establishment party as the largest political faction in the new Chamber of Deputies means the third-largest Eurozone country is now without government, shouldering a massive debt, and with gross domestic product at year 2000 levels (and falling.) Portugal and Spain have seen increasingly epic protests against austerity, the government and injustice more broadly–with the latter even contending with an emboldened separatist movement in Catalonia.

Even the largest European states are suffering under the strain of austerity. Britain’s ruling Conservative Party is being outflanked to its right by the anti-EU, nationalist & anti-immigrant UK Independence Party, while its coalition partner, the Liberal Democrats, have been struggling to remain the third force in British politics. There is little growth and real wages are falling, while gently declining unemployment signals a productivity reversal–storing economic problems for the future. Meanwhile, the French government’s policy u-turns (such as on the proposed 75% marginal income tax rate) in the context of rising unemployment has seen the president’s approval ratings tumble precipitously in less than a year in power.

The window of opportunity to avoid a truly radical backlash is closing. As history professor Mark Mazower puts it:

The response from Brussels and the creditor north to all this has been robotically unimaginative – to insist that the debtors, like the little fish in Finding Nemo, must just keep on going. And so they may – for a while…A moment of truth is surely approaching…Those preaching austerity probably do not see themselves as contributing to a crisis of democracy, but they are. The Italian elections should remind eurozone leaders to pay attention to their voters. Economic fixes have failed to staunch a political crisis that has the capacity to harm not only EU integration, but the legitimacy of the continent’s democratic order itself.

Only a few voices at the top (e.g. László Andor, François Hollande?) seem alert to the possibility they might have unleashed a process they might soon not be able to control. Many more, perhaps the majority, have finally succumbed to fear–the fear of straying from a determined path. Fearful, finally, of the unknown. And some–like Olli Rehn and Jens Weidmann–seem blissfully unaware that with each auto-da-fé they bring Europe closer to rupture.

History is unforgiving. Either Europe breaks austerity soon, or austerity will break Europe.


Labour’s ‘One Nation’ Dead-End

The British Labour Party is approaching a natural, if in any case farcical point in its 30-year turn to the right. Impelled towards the liberal-left on largely symbolic social matters in a vain effort to stake a claim to progressivism, the party remains hemmed to its right on matters economic. These narrowed ideological bounds continue to find spirited defence in the mainstream media, and largely go unchallenged either by ineffective unions or the members of the parliamentary party.

In the 15 years after the global recession of the 1990s–a period marked by an unprecedented, unsustainable credit-fuelled boom in the OECD, and in particular in Britain–the collective delusions of the pensée unique at least made temporary, fitful sense. These ideological blinders persist even now, in the fifth year of an apparently intractable economic crisis, the longest depression in perhaps a century.

Both the Leader of the Opposition and his Shadow Chancellor have argued that Labour would have to make ‘tough economic choices’–a euphemism for public sector/welfare cuts–in order to capture and harness political power in 2015. Austerity is condemned and co-opted in the same breath. Labour still believes in the mirage of market confidence, that dimming lodestar of neoliberalism. The accumulated confusion of a 40-year counter-revolution hasn’t been swept away despite the greatest economic crisis in the capitalist core in over 80 years.

Labour’s increasingly regressive pronouncements in relation to welfare follow over two years of spending cuts gleefully pursued by the Coalition Government. Failing to deliver a credible alternative to these self-defeating policies, Labour’s pantomime internal battles follow the same script they have for decades. The discontent at the lack of direction in the party (or outright capitulation to the right) usually bubbles underneath the surface among party activists until, in a fit of gall, Labour’s union ‘paymasters’ launch blistering attacks on the party they created. The parliamentary party, in turn, take these criticisms in stride before pushing forward towards ever closer union with the Conservative party. The past is prologue.

The UK is therefore set to be governed for most of the rest of this decade by a tripartite consensus, that austerity is ‘necessary’ in the teeth of a stagnant economy which will remain below its pre-crisis economic peak (measured by GDP on a per capita basis) until 2018. This dismal lost decade makes Japan’s crisis in the 1990s look enviable by comparison.

It is in this context that we must understand a document which may come to define Ed Miliband’s stewardship of the party: One Nation Labour – Debating the Future. A desultory attempt at analysis of the party’s future prospects and direction, the pamphlet is part of a wider Policy Review spearheaded by three ominous-sounding committees of the shadow cabinet: One Nation Economy, One Nation Society and One Nation Politics.

The pamphlet is the brainchild of Jon ‘Labour luminary’ Cruddas, whose introduction lays the groundwork for the dead intellectual marshes to come. Witness his fourth principle of a One Nation politics:

‘…it is a politics of being together. The traditional phrases were solidarity and fraternity but neither work well for the changes in our country. Solidarity calls upon an underlying shared identity which no longer has the same broad reach in our post industrial, plural and diverse society. Fraternity in contrast does emphasise a diversity amongst equals but it is a sentiment that excludes the political relationship between men and women and between women. The politics of togetherness is a way of talking about the ‘we’ while holding to the uniqueness of each individual. It emphasises how our individual freedom is secured by the equality of constraint we share. ‘

You’re not alone in thinking that entire paragraph is either muddled or presumptuous; filler, even. It’s most likely all of these things. Is this the sort of brilliant yarn David Skelton praised when he called Cruddas ‘one of the most interesting thinkers in British politics today’?

Most of the rest of the pamphlet reads like the crudest stab at the basest instincts of Home Counties England. Examples abound. Tristram Hunt’s opening salvo is a dreary recap and defence of Disraeli’s One Nation conservative tradition. You’d be excused for mistaking this for an Andrew Tyrie apologia in the Spectator. About half-way through the pamphlet we find Phillip Blond (yes, that one) talking about a ‘capitalism that benefits all’–a pathetic incoherence. (Put flippantly: are we to believe social ‘mobility’ only has one direction; that it did even at the height of the post-war boom?)

Darker musings lurk behind every corner. Mary Creagh’s contribution appeals to the UKIP voter in all of us (‘A green and pleasant land’) while John Denham’s piece, ‘The progressive national state’, talks about a ‘patriotic economy’ (huh?) in which a ‘progressive patriotic welfare state must reflect contribution and earned entitlement.’ (That’s the end of the post-war welfare state as we know it, then, couched in the most ridiculous, nationalist bluster.)

We come to our stride with Lord Maurice Glasman’s truly bizarre twist to the proceedings. Before seemingly dividing the economy into ‘the workforce, along with [the public sector’s?] funders and users’ he indulges himself in an exceptional piece of liberal apologetics (the rich needn’t fear us, we just want ‘recognition’ from you!) which deserves to be quoted at length:

With the emergence of One Nation however, the organising concept has been established. It commits Labour to a politics of the Common Good. In all areas of policy, estranged and divided parts of our Nation: capital and labour, north and south, immigrants and locals, men and women, secular and religious need to be brought together in order to generate greater value. It is different from what went before because no one interest dominates civic, political or economic life but all of these require people to come together and make things better.

Labour was founded in order to demand recognition by those who worked, as part of one nation. There was no wish to dominate but to remind the rich and the powerful that workers were part of the nation, that they had interests and considered themselves a necessary part of the common good. That argument needs to be made again, for one of the things that is different about the One Nation position is its recognition of labour as a source of value, the Labour theory of value

If you find vague echoes of Benito Mussolini’s ‘The Doctrine of Fascism’ in this eerily insistent babble of undefined or appropriated terminology and infantile platitudes, you’re certainly not alone.


So what is going on here? Perry Anderson once famously described Labourism (‘Origins of the Present Crisis’, New Left Review I/23, January-February 1964) as that ‘most stolid and mundane of political movements.’ Much of what he had to say in that withering attack against Britain’s national culture–about its conservatism, its institutional inertia–finds discomforting echoes in Cruddas’ pamphlet. Its analysis is shoddy when not incomplete; its message, ‘radical and conservative,’ bereft of any proposals resembling root-and-branch reform of the British state. (With, if one gives Anderson’s heavily criticised analysis the benefit of the doubt, profoundly arresting effects on the UK’s economic development.)

No indeed; this pamphlet is one of the clearest indications ever of the Labour Party’s increasing inability, or desire to do much at all that might seem radical in a leftist direction. On the contrary, it anchors the party on the conservative right–an odd whiff of Little England imagery here, a touch of the National Common Patriotic Will there. Coherence is an absent friend; for better or worse, Cameron’s smash and grab of the public sector makes a heck of a lot more sense than the atavistic nonsense caked on large swathes of this manifesto.

Instead of proposing a way out of crisis and (sometimes gentle, sometimes not) relative decline, this pamphlet reads like a final, vulgar capitulation to the inevitable. This is no promise of an elegant or dignified decline, mind; quite the opposite. Grasping at totems, cloaked in the shabbiest, dodgiest cultural rags: Is this all that’s left of Britain’s ‘democratic socialist’ party?