In the initial few days after Syriza took office, there was a sense that this would be a different kind of government since both its words and deeds appeared to be a break from the past. Alexis Tsipras announced that privatization of the Piraeus port would be halted and that the minimum wage would be restored, while Finance Minister Yanis Varoufakis spoke of challenging austerity up and down the line.
But when Syriza sat down with the EU kapos, reality came as a slap in the face as it would appear from its willingness to accede to a continuation of business as usual. Was there going to be any difference between Syriza and PASOK? Its left critics, from the KKE to Antarsya, now seemed vindicated.
Apparently, Yanis Varoufakis has furnished Greece’s overlords with a 5-page “reform” proposal that includes the minimum wage hike, something that will undoubtedly irk the Germans. Varoufakis claims that if the proposal is refused, the deal will be “dead and buried”. We will obviously find out more later on.
In their readiness to characterize Syriza as PASOK redux, the left seems to have suffered a short-term memory loss. When PASOK’s Costas Simitis took office in 1996 with about the same percentage of the vote that Syriza just received, he moved rapidly to implement a “modernization” program that would be crowned by entry into the Eurozone. Marxist economist Stavros Mavroudeas outlined PASOK’s program as follows in “Greece and the EU: capitalist crisis and imperialist rivalries” :
The economic policies of the Simitis governments of PASOK hold a special place in this canvas of neo-liberal restructuring. With its religious adherence to the EMU requirements and rules it expanded and deepened furthermore the neoliberal policies. In order to achieve entrance to the EMU it instituted austerity at the expense of labour as wage costs had lag behind productivity increases. It repeatedly and systematically reformed labour law in the direction of deregulation and flexibility (introduction of part-time, extended part-time ‘arrangements’ of working time, private firms hiring and lending workers, weakening of collective bargaining etc.). It expanded privatisation programmes and also provided even more space within the Greek economy to foreign capitals. It reformed the welfare system curtailing benefits even though it failed – due to strong strike action – to proceed even further. Finally, it facilitated actively two major one-off acts of income redistribution from the working and middle classes to capital. The first was the so-called ‘stock-exchange theft’ in which savings from the popular and middle classes were systematically driven by 12 government’s economic policy to a stock market bubble.
In other words, with no pressure at all applied on PASOK from German bankers, it plunged ahead with an economic program that would eventually turn into the disaster of the past five years at least. PASOK was ideologically disposed to neoliberalism. It, like Tony Blair’s Labour Party, believed that Greece could move forward through an application of free market economics that had been embraced by liberals and conservatives alike. In the mid-90s, both Jeffrey Sachs and Milton Friedman preached the benefits of deregulation, privatization, reduction in government spending, trade agreements such as the WTO, and all the rest.
After these policies led to widespread suffering, the Eurocommunists of Syriza began running election campaigns denouncing these policies but also helped to organize mass protests against the New Democracy/PASOK government that was determined to “stay the course”.
Finally, after the Greeks could no longer put up with the same old shit, they voted Syriza into office with the hope that austerity might be reversed. There was little doubt that if Syriza could have had access to H.G. Wells’s time-machine, it would have gone back to 1996 and put the kibosh on Simitis’s plans, knowing what they would lead to. But instead, given the reality that time-machines do not exist, they have to play with the cards they were dealt. If they had anticipated the ferocity of the German response, as well as the willingness of France’s “Socialist” Party to back the Germans, maybe they would have decided not to run for office. Would the Greeks have been no better off with a party in office like PASOK that saw the world in exactly the same terms as German bankers? I doubt it. At least they now have a party with a readiness to fight even if it is a bantamweight in the ring with a super-heavyweight. We should never forget that Greece’s GDP in 2014 was only a bit more than Volkswagen’s revenues. Maybe the left is looking for a lucky punch. Who knows?
Some on the left have accused me of endorsing TINA because I have cast doubt on the merits of withdrawing from the EU and adopting the drachma, the solution urged by the KKE and Antarsya. Supposedly, this would be the best response to austerity being imposed from the outside even if there would be some initial pain. I suppose the analogy is to having a tooth removed but without Novocain, sort of like Tom Hanks’s self-administered oral surgery with an ice-skate blade in “Cast Away”. Just in case you haven’t thought through such a strategy, this is worth considering:
Argentina scenario: Populism continuously erodes economic foundations
The devaluation of Greece’s new currency, for all its potential positive impacts on cost competitiveness, would have a devastating effect on the living standards of Greece’s poor and middle classes, who would be faced with massive inflation.
Wealthier households have probably already parked and protected their money abroad and could benefit from the devaluation by repatriating part of their funds to buy up assets on the cheap.
However, the less well-off have little to park and repatriate. Instead, their drachma incomes would be insufficient to pay for imported food and energy.
For example, Greek food imports account for 12% of total imports, compared to only 7% in Germany. Much of that could probably be substituted with domestic produce, but that might not alleviate price pressures much as Greek farmers would prefer to sell their produce abroad at higher prices, too.
To alleviate the pain, the government might be tempted to try to restore political capital by using its newfound monetary independence to print the money it needs for a lavish social assistance program and public sector job creation. The central bank would lend directly to the government, thus creating permanent inflation.
Price controls for food and other goods may artificially contain official inflation rates, but may outsource the problem to the black market. Greece’s inflation would likely remain in double-digit territory, while the government would try to ensure its survival by blaming the rich for the failures and for keeping their money abroad.
Many in Syriza have such leanings, not least the party’s chief economist, John Milios, who advocates the monetization of government debt in the Eurozone as a whole.
This is the Argentina or Venezuela scenario. However, those countries can rely on their natural resources to bring in hard currency.
While I find this presentation of the consequences of an exit from the Eurozone useful, it fails to consider the shortcomings of the “Argentina or Venezuela scenario”. I know a bit more about Argentina than most on the left after having edited my wife’s article on Kirchner’s economic policies, maybe even some of Syriza’s leaders who were at one time considering it as an example.
It so happens, first of all, that Argentina’s economic growth was probably not related to a commodities export boom as Mark Weisbrot explained. Although, it certainly helped that it had soybeans and cattle for sale, while Greece’s agricultural has collapsed, largely as a result of New Democracy and PASOK’s willingness to sacrifice the nation’s agriculture at the altar of neoliberalism.
What is clear is that Argentina’s economy has been shrinking. The Economist reported on June 27, 2014:
Many of Argentina’s problems are familiar. Inflation has plagued Argentina for much of the past decade; it still grew by an average of 5.6% from 2005-2013. Exchange and trade controls have long made it hard to get hold of primary materials, stifling production. But whereas in the past Argentina could maintain growth by propping up the peso and consumers’ purchasing power, falling foreign-exchange reserves mean it can no longer afford to do so.
If you think that Argentina has problems with inflation and falling foreign-exchange reserves, then wait until what you see if Greece is forced to leave the EU.
I don’t think there’s much to be said about Venezuela except that its welfare state guarantees are being undermined by the falling price of oil. This has led to a political crisis that even some of its most committed supporters worry about. For example, there’s an article on Venezuela Analysis that decries the rise in gasoline prices (http://venezuelanalysis.com/analysis/11220). Perhaps the government has no alternative to this. Oh, my gosh. Did I say there is no alternative? There I go again echoing Margaret Thatcher.
I am probably more sensitive to the question of how difficult it is for radical governments to move forward presiding over capitalist or mixed economies after spending a good five years or so on the board of Tecnica, a solidarity organization that had close relations to Paul Oquist, Daniel Ortega’s Yanis Varoufakis, and Alejandro Bendaña, the FSLN’s Secretary General of the Foreign Ministry and our organization’s responsable.
In 1990, the FSLN was voted out of office because the Reagan administration had finally succeeded in making the Nicaraguans “cry uncle”, just as the filthy German bankers and finance ministers are trying to do to the Greeks. Some on the left denounced the Sandinistas for not “going all the way” like the Cubans. Why didn’t the FSLN seize all the farms and ranches and divided up the land and given it to the peasants? Of course, it didn’t matter if supporters of the FSLN owned half of these farms and ranches and that this would turn them against the revolution.
In reality, the FSLN was confronted by intractable problems, mostly the result of outside imperial forces having much more economic power and little respect for another nation’s sovereignty, especially when the smaller and weaker nation was serving the same role as fresh bodies to a vampire.
At the time, I gave a lot of thought to the quandary that the FSLN faced. With all proportions guarded, I recommend thinking about this the next time leftists propose eazy peazy solutions to the Greeks. Here is what I wrote a while back reflecting on the conundrums the Sandinistas faced:
In the article “Historic Opportunity being lost” that appears in the book “The Rise and Fall of the Nicaraguan Revolution”, SWP leader Larry Seigle renders his verdict on the Sandinista revolution: “The opportunity to extend the socialist revolution, the opportunity to join with Cuba in constructing socialism, is being lost. Unless there is a fundamental reversal of the course–unless the anticapitalist direction and actions of the early years of the revolution are reasserted–the government will be restructured and consolidated on the basis of the capitalist property relations that exist.”
If the Sandinistas abandoned their original revolutionary project, the question then becomes one of what caused their retreat? Was this shift to the right attributable primarily to factors within Nicaragua or was it caused by external pressure? If it is a combination of the two factors, how much weight should we attribute to each? The FLN in Algeria caved in to pressures from the Algerian bourgeoisie. Should we group the FSLN with the FLN? Did the Sandinistas succumb to pressures from COSEP, the coalition that represented the wealthy Nicaraguan industrialists and farmers?
(In examining the question of whether counterrevolution took place in Nicaragua, perhaps it would be more correct to say that only a partial counterrevolution took place. There are, after all, some conquests of the revolution that remain intact. Many peasants still farm land that they won in 1980. Students do not have to worry about being dragged from their bed in the middle of the night by the cops, taken to the outskirts of town, and shot. All this is true. However, Nicaragua today is a place where social and economic misery reign. The global capitalist marketplace limits what Nicaragua can do. It will not be able to achieve genuine progress whether Ortega or his opponent wins the next election. This certainly is not what Carlos Fonseca founded the FSLN to accomplish.)
In a very real sense, the gains of the Nicaraguan revolution were partially responsible for their undoing. The Agrarian Reform, in particular, caused traditional class relations in the countryside to fracture. Agricultural workers and poor campesinos no longer had to sell their labor at the cheapest price to the wealthy landowner. This, in turn, led to lower production of agricultural commodities.
George Vickers pointed these contradictions out in an article in the June 1990 “NACLA Report on the Americas” entitled “A Spider’s Web.” He noted that the Agrarian Reform provided a reduction in rents, greater access to credit and improved prices for basic grains. This meant that small peasants had no economic pressure on them to do the backbreaking work of harvesting export crops on large farms. Even when wages increased on these large farms, the campesino avoided picking cotton on the large farms. Who could blame them?
This meant that the 1980-1981 cotton harvest, which usually lasts from December through March, remained uncompleted until May. Each of the three subsequent coffee and cotton harvests suffered as well. The labor shortage became even more acute as the Contra war stepped up and rural workers were drafted into the Sandinista army.
In addition, Nicaragua faced the same type of contradictions between town and countryside that existed in the Soviet Union in the 1920s. It was difficult to keep both urban proletariat and peasant satisfied due to conflicting class interests of each sector. While both classes fought to overthrow Czarism or Somoza, their interests tended to diverge after the revolution stabilized.
In 1985, the Agrarian Reform distributed 235,000 acres of land to the peasantry. This represented about 75% of all the land distributed to peasants since 1980. The purpose of this land distribution was twofold. It served to undercut the appeal of the Contras to some campesinos, since land hunger would no longer act as an irritant against the government in Managua. Daniel Ortega would simultaneously give a peasant title to the land and a rifle to defend it in ceremonies in the countryside all through 1985.
The second purpose of this land grant was to guarantee ample food delivery into the cities. This would allow the government to end food subsidies. The urban population had enjoyed a minimum of basic foodstuffs at highly subsidized prices. These price subsidies fueled budget deficits and, consequently, caused inflation.
The hope of the Sandinistas was that increases from new farm production from the countryside would compensate for the ending of food subsidies. However, what did occur was a sharp convergence between the price of subsidized food and food for sale in the retail markets. A pound of beans at the subsidized price was 300 cordobas, while retail market prices reached 8,000 cordobas. The subsidized breadbasket became a fiction while marketplace food became the harsh reality. Managua housewives became outraged as hunger and malnutrition among the poorest city-dwellers grew rapidly. The underlying cause of the high price of food was the shortage of supply. Contra attacks on food- producers, large and small exacerbated the shortage.
What was the solution to Nicaraguan hunger? Was the solution to shift to the left and attack the rural bourgeoisie? Should the Sandinistas have expropriated the cattle ranchers, cotton farmers and coffee plantations and turned the land into small farms for bean and corn production? This would have meant that foreign exchange would no longer be available for purchase of imported manufactured goods, including medicine, machinery and guns. Nicaraguan coffee is marketable overseas, while beans are not.
The simple reality was that the Sandinistas could not find a solution to Nicaragua’s economic problems within Nicaragua itself. Facing a US trade embargo, it grew to depend heavily on outside assistance. The story of outside assistance was not one to bolster revolutionary morale. From July 1979 through December 1987, the nation received almost $6 billion in credits and outright donations. The US pressured other Western nations to cut back aid, but Soviet aid increased steadily from 1979 to 1987 until it amounted to $3.3 billion. Soviet aid was at a high point in 1985 when it gave Nicaragua $1 billion in assistance, but it dropped by 60% from 1985 to 1986, and declined further in 1987.
Foreign assistance could simply not overcome the ravages of inflation within the country. In 1988, the crisis reached its deepest intensity. The Sandinistas introduced an IMF-styled austerity program in February 1988 and repeated with more cruelty in June. It hit the working- class and peasantry hardest. The bourgeoisie did not feel the impact of these anti-inflationary measures. The government gave them preferential treatment in the hope that Nicaraguan agribusiness would step up production. The austerity program, as harsh as it was, did not work. In December of that year, inflation was up to 33,000%, exacerbated by the effects of a powerful Hurricane. The end result was a bankrupt “informal” sector of the economy and widespread resentment toward the government. Meanwhile, the pampered bourgeoisie continued its attack on the “Communist” Sandinistas, no matter how inappropriate this epithet had become.
What could have led the Sandinistas to embrace an IMF-inspired austerity program? For those of us who had visited Nicaragua and spoken to and become friends with Sandinistas, this came as something of a shock, but not one that should have been totally unexpected.
In September of 1988, Carlos Chamorro, the editor of the Sandinista newspaper “Barricada” tried to justify the new economic orientation. He wrote, “the new economic policy has invalidated a series of concepts that for years represented…a road map towards…the Revolution’s economic agenda…’Social control,’ ‘secure channels,’ ‘price controls,’ ‘government subsidy,’ ‘preferential prices for the peasantry,’ etc., are banners of a bygone era that has been left behind by reality.” While he worried that the sectors of the society most hurt by the changes, namely those who don’t own or run businesses, would turn against the revolution, they agreed that the “change was unassailable and necessary.”
Sandinista embrace of the marketplace does not take place in a political vacuum. It takes place within the context of Perestroika. In October 1988 Andrei Kozyrev, a Soviet Foreign Ministry official, wrote that the USSR no longer had any reason to be in “a state of class confrontation with the United States or any other country,” and, with respect to the Third World, “the myth that the class interests of socialist and developing countries coincide in resisting imperialism does not hold up to criticism at all, first of all because the majority of developing countries already adhere or tend toward the Western model of development, and second, because they suffer not so much from capitalism as from lack of it.” It is safe to assume that high-level Soviet officials must have been talking up these reactionary ideas to the Sandinista leadership long before Kozyrev’s article appeared. Roger Chamorro of Barricada undoubtedly was privy to these discussions..
These new ideas benefited US foreign policy needs in a dramatic way. In early 1989, a high- level meeting took place between Undersecretary of State Elliot Abrams and his Soviet counterpart, Yuri Pavlov. Abrams made the case that relations between the US and the USSR would improve if the Nicaragua problem somehow disappeared. Pavlov was noncommital but gave Abrams a copy of Kozyrev’s article. This telling gesture convinced the Reagan administration that the USSR would now be willing to sell out Nicaragua. (This meeting is described in Robert Kagan’s recently published “A Twilight Struggle: American Power and Nicaragua 1977-1990.” Kagan was a member of the State Department’s Policy Planning Staff in the Reagan years and helped to draft key foreign policy statements, including the document that contained what has become know as the “Reagan Doctrine”.)
When the Contra war ended, the USSR began to cut aid to Nicaragua dramatically. It thought that Nicaragua could go it alone and urged it to rely more on Latin American countries like Venezuela and Mexico. It also made these suggestions at the same time a new foreign policy statement came out of the Kremlin that considered all governments in Latin America as legitimate, regardless of regime type. Nicaragua and Peru, in this light, had equal legitimacy.
These intense political and economic pressures had their desired effect. The Sandinista leadership adopted a political outlook that was in line with “new thinking” in the USSR. After years of revolution and civil war, they had become exhausted and isolated. They had seen their nation brutalized by endless “low intensity warfare,” which to this tiny nation was of very high intensity. The vast changes that took place in the entire Soviet bloc had to have an impact on Nicaragua. It is utopian to think that it could not. It was just another victim in the powerful imperialist campaign to eradicate any non-capitalist economy. Only Cuba, Vietnam and China have remained socialist, but each country exhibits the same kind of deformations that Nicaragua began to exhibit in 1989. Initiatives in private enterprise in each country have begun to create an elite that lives extremely well, while workers and peasants suffer.
The accusation that the Nicaragua revolutionaries betrayed the possibility to move toward socialism is absurd. We can certainly say that the Sandinistas abandoned a revolutionary perspective, but the pressures on them to do so were extremely powerful. They did not forsake revolution because of common class interests with the Nicaraguan bourgeoisie, but because world capitalism and a rightward moving Soviet bureaucracy beat it into submission. The Nicaraguan revolution failed for the same reason that strikes sometimes fail: The boss is much stronger.