“Democracy cannot be blackmailed.” – Alexis Tsipras
“Germany is really the single best example of a country that, throughout its history, has never repaid its external debt… However, it has frequently made other nations pay up, such as after the Franco-Prussian War of 1870, when it demanded massive reparations from France and indeed received them. The French state suffered for decades under this debt. The history of public debt is full of irony. It rarely follows our ideas of order and justice.” – Thomas Piketty
The people of Greece have voted ‘no’ on a referendum on the proposed “rescue package” that, if approved, “would have imposed more austerity measures on an already ravaged economy.”
The ‘no’ vote was met with celebration by some, and bitter resentment by others; the latter felt mostly by the creditor nations and institutions, namely Germany and the IMF.
There has been copious analysis of this issue from every perspective, so it would be redundant to go into the details of what will happen to Greece’s economy going forward, what will become of the euro-zone, and so on.
But I think that there have been some really important points made not about the specifics of Greece’s situation, but about how the “Grisis” has worked to underline some foundational principles of the world economy, and the role of certain countries within it. Other important points have also been lost in the chaos and detailed analyses, and I think they are worth highlighting.
One of them was expressed by economist Thomas Piketty in a recent interview with German newspaper Die Zeit.
When I hear the Germans say that they maintain a very moral stance about debt and strongly believe that debts must be repaid, then I think: what a huge joke! Germany is the country that has never repaid its debts. It has no standing to lecture other nations. – Thomas Piketty
…after the war ended in 1945, Germany’s debt amounted to over 200% of its GDP. Ten years later, little of that remained: public debt was less than 20% of GDP. Around the same time, France managed a similarly artful turnaround. We never would have managed this unbelievably fast reduction in debt through the fiscal discipline that we today recommend to Greece… Think about the London Debt Agreement of 1953, where 60% of German foreign debt was cancelled and its internal debts were restructured.
The principle at work here is a fundamental one utilized by the strong against the weak: We, today’s powerful, can forget history, because we are currently on the “right” side.
“History,” as Winston Churchill’s famous saying goes, “is written by the victors.” We, today’s economic “victors,” can disregard our economic history, because we rest at the top of the heap at the present moment.
This allows Germany to “maintain a very moral stance about debt” without any feelings of discomfort or hypocrisy.
The winners get to selectively forget the relevant aspects of history, which, if considered honestly, would suggest a different approach than the one Germany is currently taking with regard to Greece.
The current approach can be called “kicking away the ladder,” a phrase used often by economist Ha-Joon Chang — originally coined, ironically, by German economist Friedrich List — to describe how today’s rich nations bully weaker nations into submission.
[I]t is a very common clever device that when anyone has attained the summit of greatness, he kicks away the ladder by which he has climbed up, in order to deprive others of the means of climbing up after him.
Germany is, in effect, kicking away the ladder by urging strict austerity measures in order to work toward relieving Greece’s crisis.
Now, one can argue, with some plausibility, that the two cases — Germany’s past debt crisis and Greece’s current crisis — are not alike, but I think going deep into the specifics misses the point.
Each situation is unique, thus each situation requires unique and creative solutions. But Germany’s insistence that Greece adopt what Piketty calls “strict budgetary discipline,” and their unconditional rejection of more lenient debt relief, is hypocritical in a more general, but quite blatant, sense.
A simple question should be asked: If Germany was in a similar situation today, would they accept the measures they are currently attempting to impose upon the people of Greece, while suggesting that there is no alternative? It’s a question worth asking.
Another point, often lost (or ignored) in the mainstream, is that this is a historic victory for democracy, and against austerity. Greece remains in a terrible spot, there can be no doubt, and its future is uncertain.
But what is the solution to the problems they face? Is the solution to impose upon the masses of the population policies which will punish them for a problem they had little role in creating?
Richard Wolff describes the situation of the people:
Workers must suffer the capitalists’ use of the state to bail themselves out of their crisis and then, via austerity policies, to shift that bailout’s costs onto the general public. This, the Greeks were told, is what must be…
From 2008 to 2012 the Greeks followed their conventional leaders in accepting this dictated decline. They were told the austerity would be temporary, bitter medicine needed for recuperation. But the decline only got worse, and promises of recuperation came to be exposed as empty.
The people of Greece, by voting ‘no’, have said, loud and clear, that the answer is not more strict austerity.
Paul Krugman, writing before the vote on the referendum, predicted the consequences of a ‘yes’ versus a ‘no’ vote, which expresses the uncertainty that the Greeks, and “Europe’s elites,” are left with today:
What if Greece votes no? This will lead to scary, unknown terrain. Greece might well leave the euro, which would be hugely disruptive in the short run. But it will also offer Greece itself a chance for real recovery. And it will serve as a salutary shock to the complacency of Europe’s elites.
Or to put it a bit differently, it’s reasonable to fear the consequences of a “no” vote, because nobody knows what would come next. But you should be even more afraid of the consequences of a “yes,” because in that case we do know what comes next — more austerity, more disasters and eventually a crisis much worse than anything we’ve seen so far.