Tag: imf

Is the U.S heading towards military conflict in the South China Sea?

Famously, Albert Einstein defined common sense  as  “the collection of prejudices acquired by age eighteen.” When viewed from the prism of the perspective of the apologists for capitalism, Einstein’s condescending approach to conventional wisdom belied much of the Western prevailing orthodoxy up to the events in New York on September 11, 2001.

The prevailing view, particularly among a large swath of intellectuals, was one in which capitalism was seen as the bedrock of society underpinned by an economic booster model of globalization that supposedly limited the scope for war and conflict. Intellectual proponents of this worldview understanding of capitalism included Third Way ideologues such as Anthony Giddens and Ulrich Beck. For them, globalization was reshaping liberal democracies into states that transcended the need for “enemies”.

The limitations of this thinking was brought sharply into focus following George W Bush’s proclamation of a global state of war on September 20, 2001: “Americans should not expect one battle”, he said , “but a lengthy campaign, unlike any other we have ever seen.” To accept the notion that the capitalist system is shaped purely by economics that under the guise of globalization ameliorates the pressures among states to go to war with one another, is to grossly misunderstand the nature of the beast and what the main catalyst is that drives the war machine forward.

In truth, the system is underpinned by “competitive processes that involve not merely the economic struggle for markets, but military and diplomatic rivalries among states.” In other words, capitalism embraces geopolitics as well as economics. This was first understood during the early 20th century when the expansion and intensification of capitalism began to make its mark. It was during this period that economic rivalries among firms began to take the form of conflicts which spilled over national borders.

Consequently, combatants called upon the military support of their respective states to protect them. Thus, the close and complex interweaving of economic and security competition became geopolitical in nature which was to develop into the tragic era of inter-imperialist war between 1914 and 1945.

The notion that diplomatic and military conflicts among states reflect the more general process of competition that drives capitalism on, is the basis of the classic theory of imperialism formulated by Nikolai Bukharin during the First World War. It’s a theory that provides the best framework for understanding the contemporary American war drive and, pertinent to this article, its ongoing South China Sea dispute with China which the staging of the Association of Southeast Asian Nations (ASEAN) summit in the U.S a few days ago is implicit.

The main purpose of the summit, from a U.S perspective, is to advance what the Obama administration calls its Rebalance to Asia and the Pacific, popularly known as the Asia Pivot which reflects a shift in U.S policy towards China which intimates more of a belligerent approach as opposed to one based on constructive rationality. This is highlighted by the projected deployment of 60 percent of U.S submarines to the region, the purpose of which is to undermine Chinese economic development by limiting its maritime access to markets.

Much has been made about how the U.S wants to “cooperate” with China and to maintain friendly relations. But at the same time, President Obama proposes to undermine bi-lateral relations in the region while China wants to enhance them on an individual basis in much the same way that it would with any other country outside the region.

Another indication that the U.S is not prepared to cooperate, was the summit agenda’s domination by the Trans-Pacific Partnership (TPP). This was in addition to the dispute regarding contested maritime territorial claims and so called “freedom of movement” issues. What the U.S has sought to do is to stifle the development of the South East Asia region in relation to China and therefore seek to undermine the trade agreements China already has in place with various other S.E Asian countries in the bloc – agreements that were formulated at an international level through the auspices of forums like ASEAN.

The crux of the conflict between the U.S and China essentially revolves around the contenting claims and the influence each player is able to exercise in relation to ASEAN. The U.S is attempting to use economic and political leverage to isolate or economically encircle China as a way of counteracting what they perceive to be the expansion of China’s political influence.

The false impression given in much of the Western corporate media is that sovereign nations in the region are under threat from an expansionist and belligerent China and that these nations are necessarily looking to the United States for assistance. How the U.S would likely respond if China were to build military bases throughout the Gulf of Mexico, the Caribbean or the Pacific coast off California is not a question the Western media seem to want to ask.

By reversing the roles, we can begin to understand the situation from the Chinese perspective, particularly given the painful and tragic history it has had over the last two centuries in relation to Western colonial domination of its territory. The contextual reality that underlies the Chinese position is that having emerged from a very dark period in their history, they are looking to assert their sovereignty by creating a regional sphere of influence.

Contrary to Western media propaganda, this doesn’t necessarily involve the domination of their neighbours. The perspective coming from Beijing is an insistence that the U.S respect China’s growing influence as a major political and economic power. This call, however, appears to be largely falling on deaf ears, particularly among the decision makers in Washington that really matter. What  A. J. P Taylor  called “the struggle for mastery” among the Great Powers is understood by Realists within the sphere of international relations in America. However, their views don’t hold significant enough sway within the corridors of power to influence policy.

The signing of the TPP to the exclusion of China, as well as the arm twisting by the U.S administration, appears to be intended to prohibit its European partners from joining the Asian Investment Infrastructure Bank (AIIB) which arguably has the potential to rival the International Monetary Fund (IMF). The dominant force in Washington is one which remains orientated towards greater competition which entails the possibility of greater conflict, not because the U.S wants war with with China, but because they are pushing the envelope which potentially can lead to unintended consequences.

While on the one hand, America pushes for its control of the regional trade and commerce framework through ASEAN, on the other, China is pushing to expand it’s so-called One Belt, One Road policy. This is predicated on growing Chinese economic penetration throughout the entire Eurasian land mass stretching from the Chinese coast on the South China Sea all the way to the Atlantic coast of Europe.

China is increasingly moving towards land-based commerce through Russia and central Asia and into the European space. This must be alarming to many of the strategic planners and paid-for corporate politicians in Washington. Underpinning the conflicts in the China Sea regarding disputed territory and the fomenting of others by the U.S involving China and its neighbours, is the larger geopolitical chess match, what Zbigniew Brzezinski famously referred to as The Grand Chessboard.

In exposing the real motives behind the Clinton administrations stated multilateralist strategy, Brzezinski who was one of the main architects of Nato expansion, presented The Grand Chessboard as one facet of a much broader approach to maintain American dominance over Eurasia through a continent wide policy of divide and rule. Brzezinski openly used the language of imperial power:

“America’s global supremacy is reminiscent in some ways to earlier empires, notwithstanding their confined regional scope. These empires based their power on a hierarchy of vassals, tributaries, protectorates, and colonies, with those on the outside generally viewed as barbarians. To some degree, this anachronistic terminology is not inappropriate for some of the states currently within the American orbit.”

The hosting by the U.S of the latest ASEAN summit, their TPP agenda and their attempts to contain China through the Asian Pivot, represents a worrying trend akin to the clash of imperial interests which led to the conditions from which the carnage of the First and Second World Wars emerged.

 

The Economic Crisis: How Did We Get Here?

An investor watches an electronic board showing stock information at a brokerage office in Beijing, China

The roots of the current crisis go some way back. After the 9/11 attack in New York, instability and fear pervaded financial markets. In order to steer the US and world economy out of a tight corner there was a reduction in interest rates and loosening of credit, encouraging people to borrow to sustain demand.

Banks took advantage of this and started to push mortgages. Initially the banks were lending on fairly good terms but then competition set in and those with money found they could expand their wealth by borrowing at low interest rates in order to lend to those prepared to pay higher interest rates. One of the main groups prepared to pay these higher rates were poorer sections of the population desperate to get somewhere to live. As long as house prices continued rising, they seemed a safe group to lend to, since there was always a profit to be made by repossessing their homes if they failed to pay up on time. This lending became known as the “subprime mortgage market”.

Although on the surface this appeared to be a form of secure lending, in reality it was risky. Why? Because by 2006 the US economy began slowing down and profits in the US started to fall. As profits declined, firms got rid of workers and poor American’s could no longer keep up with their rising mortgage payments. Borrowing at one end of the chain could not be repaid. Repossessions led to falling house prices, and the “collateral” that supposedly guaranteed (provided security) against the loans, fell in value as well. An enormous 400 billion US dollars in lending was suddenly not repayable.

A whole host of new institutions emerged that began specializing in the same manner as the banks. They would obtain cheap credit in the environment of low interest rates after 2001, use it to make loans, and then ‘securitize’ them. Other financial institutions would also use cheap credit to buy the new securities. Other financial institutions would combine several of these securities to create even more complex forms of debt obligations.

In this baroque and opaque world, fueled by cheap credit, it did not take long before just about all the major financial institutions across the world found themselves holding securities that contained bits of subprime mortgages. What was originally a small sickness within the US economy grew enormously because of the way capitalist credit works. In the end, governments’ were forced to intervene by bailing out vast swathes of the capitalist system as a precursor to saving it:

In spring 2008, Bear Sterns became an early high profile casualty of the crisis on Wall Street. Lehman Brothers followed shortly afterwards and the meltdown in Greece shortly after that. These problems emerged on the back of three decades of sustained low profitability.After World War two profit rates held up at about 15 per cent in the US. By the 1980s it was 10 per cent, and today it is just 5 per cent:

This would appear to indicate that the underlying problems of the global economy are systemic.

What is Marx’s explanation?

Marx’s basic line of argument was simple. Individual capitalists can increase their own competitiveness by increasing the productivity of their workforce. The way to do this is by using a greater quantity of the “means of production”—tools, machinery and so on—for each worker. There is a growth in the ratio of the physical extent of the means of production to the amount of labour power employed, a ratio that Marx called the “technical composition of capital”.

But a growth in the physical extent of the means of production will also be a growth in the investment needed to buy them. So this too will grow faster than the investment in the workforce. To use Marx’s terminology, “constant capital” grows faster than “variable capital”. The growth of this ratio, which he calls the “organic composition of capital”, is a logical corollary of capital accumulation.

Yet the only source of value for the system as a whole is labour. If investment grows more rapidly than the labour force, it must also grow more rapidly than the value created by the workers, which is where profit comes from. In short, capital investment grows more rapidly than the source of profit. As a consequence, there will be a downward pressure on the ratio of profit to investment—the rate of profit.

Each capitalist has to push for greater productivity in order to stay ahead of competitors. But what seems beneficial to the individual capitalist is disastrous for the capitalist class as a whole. Each time productivity rises there is a fall in the average amount of labour in the economy as a whole needed to produce a commodity (what Marx called “socially necessary labour”), and it is this which determines what other people will eventually be prepared to pay for that commodity. So today we can see a continual fall in the price of goods such as computers or DVD players produced in industries where new technologies are causing productivity to rise fastest:

As the rate of return on investment declines in its totality, so it is the weakest companies financially – but not necessarily technologically – that go out of business. In turn, this results in an increase in unemployment. Thus workers are able to purchase fewer goods and services. This inevitably leads to a downward spiral of economic slump and crisis within the system as a whole.

But Marx argued that there were counterveiling factors which mitigated against a total collapse of the system. For example, the diversion of investment from the production of goods and services to the production of arms – a process that is governed by states that are in constant competition with one another – provided a very important role in producing the long boom after the Second World War.

Also, Marx argued that profitability could be restored by crisis itself, through what he called “the annihilation of a great part of the capital”. During a recession some companies fail and are bought up by rivals, and others have to sell off parts of their business or dump their stock on the market to meet their obligations. Those companies that survive can take advantage of this, grabbing assets at a fraction of their real value and putting them to highly profitable use in the recovery that follows. Depressed wages and high unemployment also allow capitalists to squeeze more out of workers. A process of “creative destruction” may lead to a boom following a slump.

But this is not some automatic process that pushes the economy back towards some natural equilibrium. The post-war boom followed only after the prolonged horror of the 1930s slump and the destruction of the Second World War, which also forced states to intervene to reorganise whole national economies.

Could we be heading to a repeat of the Great Depression?

This is a difficult question to answer. There are significant differences between the situation that led to the current crisis and the one in 1929. First, state expenditure has for nearly 70 years been central to the system in a way in which it was not in 1929. In that year federal government expenditures represented only 2.5 per cent of GNP but they currently stand at around 20 per cent. And unlike in 1929, the government in 2008 moved quickly to intervene in the economy. The Hoover administration (March 1929-February 1933) did make a few moves aimed at bolstering the economy, so that state spending rose slightly in 1930, and federal money was used to bail out some banks and rail companies through the Reconstruction Finance Corporation in 1932. But the moves were very limited in scope—and the state could still act in ways that could only have exacerbated the crisis in 1931 and 1932.

The Fed increased interest rates to banks and the government raised taxes. It was not until after the inauguration of the Roosevelt administration in March 1933 that there was a decisive increase in government expenditure. But even then the high point for total federal government spending in 1936 was only just over 9 percent of national output—and in 1937 began to decline. There is a base level of demand in the economy of the today that provides a floor below which the economy will not sink that didn’t exist in the early 1930s.

In this way, the growth in military expenditure since the Great Depression, clearly plays a particularly important role guaranteeing markets to giant corporations thereby mitigating the impact of the crisis. But there is an important second difference that operates in the opposite direction. The major financial and industrial corporations operate on a much greater scale than in the inter-war years and therefore the strain on governments of bailing them out is disproportionately larger. The banking crises of the early 1930s in the US was a crisis of a mass of small and medium banks.Very big banks did not often become insolvent and fail, even in periods of widespread bank failures:

This time we have seen a crisis of many of the biggest banks in most major economies. Within a day of Lehman Brothers going bust, banks such as HBOS in Britain, Fortis in the Benelux countries, Hypo Real Estate in Germany and the Icelandic banks were all in trouble. From there the crisis spread to affect other major banks and the “shadow banking system” of hedge funds, derivatives and so on. In October 2008, The Guardian reported the losses to be a staggering $2.8 trillion.

Despite this, global industrial production now shows clear signs of recovering. This is a sharp divergence from experience in the Great Depression, when the decline in industrial production continued fully for three years. Paradoxically, staving off a catastrophic slump has meant that problems have lingered on.

The recovery is also uneven. British growth remains sluggish at just 0.3 percent, the lowest growth rate since the last quarter of 2013. The US is growing faster, and is also faring better than Germany and Japan, which are more export-oriented and have suffered more from the decline in world trade than from the initial financial meltdown. China was also hit by falling demand for its exports but despite its long boom due to a massive state-sponsored domestic investment programme, the crisis has impacted their too.

The weakness of the global recovery means that people will continue to suffer. In some countries this takes the form of high unemployment and attacks on wages, as in the US, Spain and Ireland. In others, such as Germany and Japan, where unemployment has not risen as fast, companies have sought to hold on to workers but have cut pay rates, reduced hours or shifted workers onto part-time contracts. Britain lies somewhere between the two extremes.

Unemployment and underemployment is likely to persist well into any recovery. An IMF report argues that employment falls further and takes longer to recover during recessions that have a significant financial component. The report indicates that it could take a year and a half from the end of the recession for any substantial improvement, assuming that the recession ends.

Finally, any recovery is and will remain uncertain. State interventions replaced private borrowing and investment with mountains of public debt, and falling tax revenues made it difficult to recover the money spent. Now governments everywhere face a dilemma. Do they cut back to pay off their debts, risking a deeper recession or do they continue spending and risk a run on their currencies?

The Lesson Of Greece – Stuff Your Money Under The Mattress.

The manager of one of Britain’s largest bond funds has effectively urged investors to put their money under their mattresses. Ian Spreadbury, who invests more than £4bn of investors’ money across a handful of bond funds, is concerned that what he describes as a “systemic event” could rock markets possibly to the magnitude of the crisis of 2008 (1).

What Spreadbury advises people to do is increase their liquidity by ensuring they have access to physical money. Spreadbury is honest enough to address concerns relating to global debt, particularly mortgage debt. It’s in the interests of banks to increase the value of property. So what they have traditionally done is to lend ever larger amounts of money to individuals. The circulation of increasing amounts of debt-fueled cash for mortgages results in greater competition for property. This in turn, means an increase in prices resulting in banks’ lending even more money, and so on and so forth.

For the bankers this process amounts to an apparent never ending cycle of growth. But for the vast majority of the rest of us, its an increasing burden of debt. Mortgage debt is being pumped up to record levels. What Chancellor Gideon Osborne is relying on for future demand is an ever-expanding household debt which is already tipping £2 trillion a year. The financial crisis in 2008 largely resulted from the fact that many people acquired houses and goods with money they didn’t have. Since then, more people have acquired even more houses and goods at greater expense with money they don’t have.

Seemingly, the only thing people learn from history is that nobody learns anything from history. Given the fact that our mistakes are part of a continuum, one might reasonably argue it’s not even an historical thing but rather akin to placing ones left hand into a fire to retrieve a coin, getting burned and then using the right hand to do the same in the false hope that the result will be different. The current record level of debt is predicated on historically low levels of interest. Problems will inevitably arise further down the line when interest rates begin to climb.

One might think that putting savings into a bank would be a more secure option than taking on a potentially precarious mortgage debt. But I wouldn’t count on it. The Financial Services Compensation Scheme (FSCS) is supposedly intended to cover depositors for a limited amount invested per bank in the event of any collapse (2).

But under such circumstances, depositors’ would likely panic and demand all of their cash back at the same time. Inevitably there would be shortfall of available cash since the banks who in theory hold it would be unable to release it on mass given that it would almost certainly be tied up in high risk off shore investments.

Will the government be in a position to underwrite each individual depositor? Not so according to Spreadbury who says that such a suggestion is unfunded (3).

Following the 2008 crisis, the line pumped out by the leading figures within the establishment, was that governments’ could not allow banks to collapse because as institutions they were too big to fail. It was this rationale that underpinned their bailing out by taxpayers’. The government have since made assurances that tax payers’ money will no longer bail out failing banks (4).

But here’s the problem. The reach of these banks is greater now than previously because other smaller banks that were teetering on the edge have been swallowed up by the larger ones. So the banks who in 2008 were regarded as being too big to fail are even bigger in 2015. Contrary to government claims, taxpayers will continue to underwrite the inevitable future collapse of these larger banks at a far greater cost to the tax payer at least until 2019 (5). This is be predicated on the notion that in doing so the government will be protecting the savings accounts of depositors to the value of £75,000 (downgraded from the supposed FSCS limit of £85,000) (6).

The priority of government is to protect the bankers from their own incompetence, as opposed to protecting depositors in the event of a run on banks. As far as the banking racket is concerned, losses are ‘socialized’ and profits ‘privatized’. So for them, it’s ‘win-win’ situation.

Due to the close knit ‘revolving door’ culture that exists between leading parliamentarians’ taking their places on the boards of financial companies’ following their “retirement”, and the fact that the irresponsible actions of bankers continue to be underwritten by the tax payer, there is no incentive for either the politicians or the the bankers to change their destructive course. The continued suffering of the Greek people resulting from austerity in which their government is implicated, cannot be divorced from this kind of close knit relationship.

It was, for example, no accident that Greece didn’t do the rational thing by defaulting on its debt but has instead decided to continue with the ‘negotiation process’ predicated on further bail-outs. As Craig Murray succinctly put it, “the ‘Troika’ [of creditors comprising the EU, ECB and IMF] is very keen that there will be another bail-out because of course the money goes to the bankers to whom the political elite are beholden” (7).

In Britain we can see how this insane system has played out in terms of the so called relationship between house price and stock market inflation and what we have been told has been a growth in living standards. House prices in Britain have risen by 26% since 2009. In London during the same period they have risen by a massive 68%. Meanwhile the footsie 100 increased by 75%. And yet the economy is no better then it was in 2009. “Green shoots” have been talked about for years but never materialized. Stock markets and particularly house prices – which some forecasters assert could double within the next five years (8), has no bearing on reality (9).

We have reached a stage in human development whereby an elite backed by governments’ are able to gamble the money of other people with impunity. Even if by some quirk of nature, we as humans make it into the next century which on current trends seems increasingly doubtful (10), future generations’ will surely be amazed at how we have allowed the actions of a small parasitic minority to effectively asset strip the public realm owned collectively by the vast majority whose well-being and, in some cases, very existence depends. Craig Murray put it well when, in relation to Greece, he stated that “It will seem strange to future generations that a system developed whereby middlemen who facilitated real economic transactions by handling currency, came to dominate the world by creating a mathematical nexus of currency that bore no meaningful relationship to real movements of commodities” (11).

The price of nearly all assets – shares, bonds, property, land etc – have been rising for years. One of the reasons why this is so is because the money we have used to prop up the banks has not been to make them more secure in the long-term. The bankers are not interested in long-term stability but, on the contrary, are motivated by short-term gain. The way to ensure short term gain is to encourage people to buy assets. If, for instance, a lot of people invest their money into the same company by buying shares, then naturally the value of those shares will increase and so will their return on their initial investment. It can appear, therefore, that it’s of mutual interest to pump up these assets like a body-builder on steroids. Of course, rather like an over inflated balloon, these assets will at some point explode.

Writing in the Daily Telegraph, Jeremy Warner, states, “The trigger for an inevitable “correction” [financial armaggedon] could come from a clear blue sky – a completely unanticipated event” (12).

A systemic event could, in other words, rock markets thus precipitating another financial crisis akin to 2008 – a “recovery” which we haven’t yet recovered from. The last thing leading investment brokers – who advise investors as to where and what to invest in want to do, is to advise people to hold on to their actual money. Obviously, this is because in so doing, it doesn’t profit them personally. But that’s precisely what many of them ARE doing.

Have we escaped the worst of the crisis that began in 2008 or is the worst yet to come? The unresolved crisis in Greece, as well as the advice of people like Ian Spreadbury, would suggest we may be merely delaying the inevitable.

References:

1. http://www.telegraph.co.uk/finance/personalfinance/investing/11686199/Its-time-to-hold-physical-cash-says-one-of-Britains-most-senior-fund-managers.html

2. http://www.fscs.org.uk/

3. http://www.telegraph.co.uk/finance/personalfinance/investing/11686199/Its-time-to-hold-physical-cash-says-one-of-Britains-most-senior-fund-managers.html

4. http://rt.com/business/204155-taxpayer-bank-bailouts-rules/

5. http://www.bbc.co.uk/news/business-29982181

6. http://www.telegraph.co.uk/finance/bank-of-england/11715807/Banks-to-cut-protection-on-deposits-to-75000-from-January.html

7. https://www.craigmurray.org.uk/archives/2015/07/bail-out-or-sell-out/#comments

8. http://www.telegraph.co.uk/finance/property/house-prices/10216786/House-prices-Why-prime-London-property-could-double-by-2020.html

9. http://econlog.econlib.org/archives/2015/02/the_housing_bub.html

10. http://www.informationclearinghouse.info/article42281.htm

11. https://www.craigmurray.org.uk/archives/2015/07/bail-out-or-sell-out/#comments

12. http://www.telegraph.co.uk/finance/economics/11679761/Are-overvalued-stock-markets-heading-for-another-crash.html

Greece: Exposing The Media Myths

April 21 is a notorious day in Greek history. It was on this day in 1967 that a US-led authoritarian military coup overthrew socialist democracy in the country. It was US support for this authoritarianism, predicated on the illusion that socialism undermined democracy, that was said to be the cause of rising anti-American sentiment in Greece during and following the junta’s rule (http://www.time.com/time/magazine/article/0,9171,903399,00.html).

April 21, 2010 is also a day now embedded in Greek history. It was on this day that a delegation from the IMF, European Union (EU) and the European Central Bank (ECB) arrived in Athens to implement what they term as planned economic ‘stabilization’ measures, characterized by cuts to public services and reductions in living standards.  The Greeks hatred of this modern form of imperialism that stem from the events of April 21 1967, is manifested on the streets of Athens in the form of mass protests against the austerity measures imposed by the bankers. As one Greek activist contrasting the events of 1967 with the present put it: “We suffered from the military then. We suffer from the bankers now” (http://www.socialistreview.org.uk/article.php?articlenumber=11258).

As I illustrated in my last article, the debt crisis presently sweeping Greece and throughout the globe has its roots in the credit boom period in the US a decade ago, the ideological justifications of which have been legitimized as a result of the capitalist logic that underpins it. But one would be hard pressed to arrive at this conclusion by reading the mainstream media, the vast majority of whom have characterized the crisis essentially as a trajedy that is specific to Greece and where the public response to the crisis is unjustifiably deemed to be negative rather than positive. It is hardly surprising then, that Greece is presented not as a beacon for democracy, but as a “junk country” getting its comeuppance for its alleged “bloated public sector” and “culture of cutting corners” (http://www.guardian.co.uk/world/2010/may/09/greece-debt-crisis-euro-imf). 

The reason why the media are attempting to tarnish Greece in this way is because the Greek people have mobilized on mass against the bankers’ attempts to insist the people pay for the so-called “rescue” of their country by way of massive austerity programmes, without a fight. The memories of 1967 allied to the accompanying acts of popular resistance, remain a feature of the collective Greek consciousness in a way that is for example, absent in a country like Britain. Such resistance is anathema to Europe’s central bankers and regarded as an obstruction to German capital’s need to capture markets in the aftermath of Germany’s troubled reunification. In this sense, the Greece of today is a microcosm of a modern class war that is rarely reported as such and is waged with all the urgency of panic among the imperial rich. Ordinary people are not cowed by the corrupt corporatism that dominates the European Union (http://www.johnpilger.com/page.asp?partid=576).

The right-wing government of Kostas Karamanlis, which preceded the present Pasok (Labour) government of George Papandreou, was described by sociologist Jean Ziegler as “a machine for systematic pillaging the country’s resources” (http://socialistworker.org/2010/05/24/the-modern-class-war).

This “machine” whose functionaries included Goldman Sachs and other US hedge fund operators, are currently being investigated by the US Federal reserve Board for their alleged speculating of public asset stripping by the Greek government and the resulting haemorrhaging of capital by way of capital flight which the ECB facilitates. This has prompted some mainstream commentators to question the apparent hitherto God-given logic which insists upon cuts as a means to appease financial markets as an unaviodable feature of system where such markets, instead of being our servants, are our masters (http://www.guardian.co.uk/commentisfree/2010/may/02/greece-default-debt-choice).

The reason why financial markets are perceived as masters in this way is due to the structural weaknesses of monetary union. All countries have the same access to the money markets, but they do not have the same access to credit, which is obtained at a different price by each country (http://researchonmoneyandfinance.org/media/reports/eurocrisis/fullreport.pdf).

The main problem highlighted by the Greek crisis is that the EU is at most a monetary union not a fiscal union. Fiscal policy—dependent on the power to tax and spend—remains, for reasons of self-interest, firmly in the hands of the nation-states. Governments’ only means of saving the capitalist system from itself was to bail out the financial institutions from which they could then borrow as a means to enact the fiscal measures necessary to rescue the market (Callinicos, Alex, 2010, Bonfire of Illusions, Polity).

Governments’ obsession with appeasing the market means that weaker capitalist states like Greece are not given the luxury of being able to choose the timing of their austerity programmes. Greece has been targeted by the financial markets and their facilitators – the unelected and unaccountable ECB – for reasons of speculative profilagcy to the extent that the country has become threatened with bankruptcy. As a response, the financial markets didn’t just force up the interest rates on the bonds of the weaker eurozone economies, they also pushed down the euro. This made the Greek crisis a problem for the entire eurozone (http://www.allbusiness.com/economy-economic-indicators/economic-conditions-deflation/14489907-1.html).

The dominant continental states, France and Germany, were divided over how to respond: France supporting a coordinated loan to keep Greece afloat, Germany resisting. Greece threatened to humiliate the EU by going to the International Monetary Fund for help, a bluff that was called by Germany. A few weeks ago, European leaders signed up to an unprecedented 750 billion euro ($920 billion) joint rescue package for the euro which has been proven to be inadequate to stabilize it. Instead, the European single currency has continued its dramatic fall, recently hitting a four-year low against the dollar (http://www.spiegel.de/international/europe/0,1518,697098,00.html).

The eventual agreement on the joint IMF-eurozone rescue reflected the fact that a Greek default would not be in the interest of the German banks, which have lent heavily to Greece and the other weaker eurozone economies. But the debate within Angela Merkel’s chronically weak conservative-liberal coalition in Berlin (which was accompanied by ferocious nationalist exchanges between the German and Greek media) tilted towards the hard line taken by Wolfgang Schäuble, the finance minister (http://www.msnbc.msn.com/id/36981501/ns/business/).

He proposed setting up a European Monetary Fund that could come to the rescue of eurozone members in Greece’s plight, in exchange for a tightening up of the Growth and Stability Pact, under which EU states are not supposed to run budget deficits greater than 3 percent of national income. Greece’s budget deficit is currently running at 13 per cent which is close to that of the UK and the US. But ministers want to reduce Greece’s deficit to 3 per cent within the next three years. Moreover, penalty clauses are to be inserted allowing states that broke the rules to be deprived of access to EU cohesion funds or even to have their voting rights temporarily suspended (http://www.ft.com/cms/s/0/c36bf126-2d41-11df-9c5b-00144feabdc0.html).

The message is clear. If Greece fails to implement the required austerity programmes, it will be ditched. The so-called rescue of the country is essentially an effort to rescue the French and German banks. If Greece defaults, it would deal a blow to the banks that are already weakened by the broader crisis (http://www.socialistworker.co.uk/art.php?id=21313).

This explains the nature of the anti-Greek propaganda that is pumped out by the media. This is the same media which claims that the Greek people have artificially high standards of living that must be brought down. But research by investigative journalists expose these lies and distortions. For example, figures show that the cost of living in Greece is one of the highest in Europe with the average shopping basket of food costing 66 per cent more than in Germany. Around 1 in 5 Greeks live on or below the poverty line of 6,648 euros per year. Unemployment stands at around 11 per cent. Public expenditure is equal to 40 per cent of gross domestic product. In Britain it accounts for 45 per cent. There is no “bloated public sector” (http://www.socialistworker.co.uk/art.php?id=21241).

Despite what the media portray, the crisis in Greece is connected to the broader crisis which will lead to increasing pressures on the euro. This will worsen the problems in Portugal, Ireland and Spain – the countries that along with Greece make up the so-called PIGS. According to leading Greek activist Panos Garganos, the intervention of the IMF and EU will not calm this crisis – it will make it worse because the example of Greece shows they have failed there, so they will fail to save Ireland, Portugal and Spain. The markets know this and will move quickly (http://www.socialistreview.org.uk/article.php?articlenumber=11258).

What all this indicates is that the Greek people are clear that it is the system which is responsible for the crisis and are standing up to fight back against the bankers and politicians who insist that they, along with other ordinary folks in countries like the US and UK, repay the debts of the rich and powerful who incurred them. Jobs, pensions and public services are to be slashed and burned, with privateers in charge. For the European Union and the IMF, the opportunity presents to “change the culture” and dismantle the social welfare of Greece, just as the IMF and the World Bank have “structurally adjusted” (impoverished and controlled) countries across the developing world (http://www.johnpilger.com/page.asp?partid=576).

As the illusionary Tweedledee and Tweedledum versions of parliamentary democracy throughout much of the world play to the fiscal tune of ruling class interests, the inspiration for the rest of us are the ordinary folk in Greece.

Copyright: Daniel Margrain