Dear listeners and friends,
Dear listeners and friends,
Originally published at MintPressNews:
“We had the role of a rubber stamp…” – a former board member of Greece’s national statistical authority has revealed that she and other members were forced to sign off on falsified deficit and debt figures that plunged their country into an ongoing economic depression.
ATHENS (Interview)– On May 18, a new chapter was written in Greece’s economic odyssey, as the Greek parliament, with the votes of the SYRIZA and Independent Greeks coalition government, approved Greece’s fourth memorandum loan package since the onset of the country’s depression. The strings attached to this new deal with the “troika” of Greece’s lenders include 140 new austerity measures, including tax hikes and additional pension cuts.
This comes just weeks after the Greek government triumphantly announced the achievement of a 4.2-percent budget surplus for 2016, exceeding expectations. Greece is in the midst of its eighth full year of economic depression, a crisis that emerged in late 2009 when it was revealed that Greece’s deficit and debt figures were larger than had previously been publicized.
Was this really the case though? Several former board members of the Hellenic Statistical Authority (ELSTAT) have spoken publicly in recent years, revealing evidence that they argue proves that Greece’s debt and deficit figures were indeed falsified in 2009.
But the evidence provided by these whistleblowers shows that the figures were actually falsified in order to appear worse than they were in reality, providing the political impetus to bring Greece under the supervision of the “troika” (consisting of the IMF, European Commission, and European Central Bank) and leading to successive memorandum agreements and the enactment of strict austerity measures.
Further fueling these claims, former IMF chief Dominique Strauss-Kahn has publicly admitted that in April 2009 he met with George Papandreou, who was then campaigning in Greece on a platform of promises of new social services and benefits, claiming on the campaign trail that “we have money” for these programs.
Papandreou, who had not yet been elected, came to power following the Greek elections of Oct. 4, 2009. A few months later, the new government publicly announced that the deficit and debt figures for 2009 were higher than originally claimed by the outgoing government.
One of the whistleblowers involved is University of Macedonia professor of applied econometrics and productivity Zoe Georganta. A former member of the board of ELSTAT and former visiting professor at Harvard University’s National Bureau of Economic Research, Georganta was the first whistleblower to publicly contradict the previous government’s claims.
These accusations have resulted in a succession of judicial cases centered around former president of ELSTAT Andreas Georgiou, who is also a former IMF official. MintPress News recently spoke with Georganta in an interview that was first broadcast on Dialogos Radio in May 2017. In this interview, Georganta discusses the evidence she presented and the status of the legal cases that followed as a result of these accusations, as well as shares her thoughts regarding the economic figures currently being publicized by the Greek government, including the recently announced primary budget surplus.
MintPress News (MPN): Share with us an overview of the information that you revealed against the Hellenic Statistical Authority regarding how the Greek deficit and debt figures for 2009 were falsified and inflated.
Zoe Georganta (ZG): As an econometrician and economic statistician appointed in August 2010 by the Greek Parliament to be a member of the seven-member Hellenic Statistical Authority, I had the responsibility by law to express my scientific opinion – first within the meetings of ELSTAT, in which all seven members, the president (or chairman) included, were supposed to discuss the statistical issues of the agenda and make a decision by majority rule.
What actually happened from the first meeting of ELSTAT on August 3, 2010 was very strange and seemed extremely peculiar to all six of us, since the president, Andreas Georgiou, supposedly an ex-vice president of the Statistics Department of the IMF—this was declared as his position in the IMF—insisted that he had to be the only person who could speak and decide, while the remaining six of us had to agree and sign his proposals without questions.
According to him, we had the role of a rubber stamp. He said that openly to us. He also insisted that we should not keep minutes of the meetings, and when we all threatened to resign and publicize the issue, he agreed to keep minutes but he added that the minutes would report only his opinion and nobody else’s. So as you can imagine, there were minutes [of these meetings] but they were not signed by any of us.
ELSTAT, as a seven-member board, had only four meetings, because the president [maintained] extremely strange attitudes. As the main issue was the measurement of the final estimate of the public, or general government debt and deficit for 2009, Mr. Georgiou kept presenting to us ad hoc numbers and he refused to answer our questions about how he came to those numbers.
Consequently, all six of us then insisted that the director of the national accounts division of ELSTAT, Nick Stroblos, come to our meeting and explain to us those numbers. Mr. Stroblos’ comments were a catapult. He said that those numbers were wrong and they were fixed by violating Eurostat regulations and methodology, which are described in the ESA manual. ESA [refers to the] European System of Accounts, and this is legally constituted under European Commission regulation 2223/1996.
By investigating the issue, we found out that Mr. Stroblos was right. I must report here the fact that Mr. Stroblos was sacked from his position the very next day after he expressed his reservations about the 2009 debt and deficit numbers that were fixed by Mr. Georgiou and by the general director of Eurostat, as we found out later.
After he sacked Mr. Stroblos, Mr. Georgiou went on to neutralize all six members of the ELSTAT board, with the help of the IMF representative in the troika Poul Thomsen, who, according to evidence, asked ECOFIN, the group of the finance ministers of the EU, to force the Greek government to change the statistical law so that ELSTAT would [fall under] Mr. Georgiou’s rule without a board of directors. This was finally done in 2011 and all six of us were sacked without explanation, just [as a result of] a clause within a law of economic austerity measures.
As you said, I was the first one to report in the press evidence of [falsely] augmenting the debt and deficit of 2009. Not mere allegations, but by indicating the exact violation of the Eurostat regulations and by referring to particular sections of the European methodology which were violated. I did that for the first time in October 2010. Then, I tried to inform the parliament and the government, but as they said to me, they had to obey orders by the IMF and the European Commission, who seemed to be covering for Georgiou.
Apparently, as we found out later, [this was] in order to justify their unnecessary loans to Greece according to the memorandums of understanding that they had signed with the Greek government, and also to justify the second memorandum of understanding, after the augmentation of the deficit figure to 15.6 percent of GDP.
My criticisms were subsequently supported by former Vice President of the ELSTAT board Nikos Logothetis, [plus] another member of the board. The whole issue as it became public, was ex officio investigated by the economic prosecutors, who after one year of [investigating] came to the decision to press charges against Mr. Georgiou for two crimes.
[The first charge] regards breach of duty for three instances: first, by lying to the Greek state that he had resigned from the IMF, while the truth was that he continued being an IMF employee. Second, by not inviting meetings of the board according to law, and third, transmitting falsified debt and deficit data to Eurostat without even discussing it with the board, as he should have done according to law. The second [charge refers to] the felony of forging data on the 2009 public debt and deficit.
The economic prosecutors decided that Mr. Georgiou committed all his criminal actions intentionally for personal benefit and for the benefit of others. Mr. Georgiou is [facing] these accusations today, and on May 29, we have a court case in the second degree regarding his breach of duty. We hope that the truth will show, because these are simple and exact accusations.
He lied to the Greek state in order to gain the post of ELSTAT president, and second, he stopped [convening] board meetings because all six members of the board were “bothering” him, as he stated in his letter to the Greek Parliament, and because he transmitted the augmented [debt and deficit] data that was actually dictated to him, as we found later, in correspondence between him and Eurostat’s general director Walter Radermacher.
He [did this] without even discussing this data with the board, even though he had an obligation, under the law, to have a vote on that data, a majority vote. So he transmitted [this data] illegally. These three instances of his breach of duty will be tried in court on May 29.
(Editor’s note: Zoe Georganta describes the evidence she presented in an earlier interview, recorded in December 2012, that aired on Dialogos Radio).
MPN: Who is Andreas Georgiou, and what was his background prior to becoming the president of the Hellenic Statistical Authority?
ZG: After his strange behavior, I started [investigating his background] and I found out that his post at the IMF was not vice chairman of the statistics department, as he declared and as the former minister of finance declared, but [that] he was a simple employee of the IMF in the financial institutions division. His duty was to supervise the implementation of IMF terms by underdeveloped countries receiving IMF financial assistance.
I also found out he was very rarely in Washington, [spending most of his time] in Africa. I know people, real statisticians at the IMF, and I contacted them as part of my job as an applied econometrician, and I also found out that he is not a statistician and his only publication is a book about martial arts!
He has no scientific publications, only a discussion paper [co-authored] by another three people, and he is not the first name, at first. So far, he has no scientific publication in any field, and in particular in the fields of economics, finance and statistics. Obviously, he was imposed on Greece because the IMF and the European Commission knew, in my opinion, that he could be their man, I mean a puppet of his bosses. This is his character, as far as I understood him from his “collaboration” with us.
By my opinion and not only my own opinion, he was the most unsuitable person for the Greek case. He did not even write in Greek, and he had not been in Greece for 25 years after completing high school at the American Community Schools, not even for holidays.
Now, at the age of 53 or 54, as I read in a recent article in The Wall Street Journal, he escaped from Greece [to his Maryland mansion] when he [faced prosecution]. And now, at an early age, he is an IMF pensioner while everyone in Greece and in Europe [receives their] pension at the age of 67 and not before that.
I want to say at this point that the IMF calculated wrong multipliers for Greece, [but this does not come as a surprise] because the statistics were based on incorrect data. It was not only the debt and deficit data that were wrong, but also the data on expenditures and production that Mr. Georgiou manufactured, together with Eurostat.
The result was unnecessary loans to Greece and the deep recession we [have been] experiencing for seven years now. You know, correct economic policies are based on correct data, and this was not the case for Greece.
Was the selection of this particular man an IMF mistake? All Greeks are wondering about that. Or [maybe] it was a plan to save the French and German banks by loading debt upon debt on the Greek people. It is a real Ponzi scheme, what has been done to Greece, and this is a shame on the part of the IMF, the European Commission and the ECB. After so many loans, the Greek debt has tripled between 2009 and 2016. Is this justice [that is being] shown by our supposed partners, with whom we have fought together in world wars?
MPN: Share with us some additional details about the forthcoming court case against Mr. Georgiou, for which from what I understand you and fellow whistleblower Nick Logothetis from ELSTAT will appear as witnesses.
ZG: After so many unacceptable interventions with letters threatening the Greek government from the European Commission, under the guise of the International Statistical Institute or the administrative personnel of the American Statistical Association, asking the Greek government to intervene in the Greek court system and to stop the court cases against Georgiou, there were three proposals by three individual judicial representatives who asked for Georgiou’s exoneration. All three were turned down by the court committees.
He was not exonerated, as some foreign and Greek newspapers wrote. Those “exonerations” were just proposals by three judicial representatives, but they were turned down by the official court committees.
Now, we have the May 29 court case against him for breach of duty. We are also expecting the actionable date for the felony [charges]. I would like to mention that Georgiou has been sentenced twice to one year of imprisonment for libel against the ex-director of the national accounts division of ELSTAT, Nikos Stroblos, who was [fired] when he simply expressed his scientific opinion and reservations about the numbers, which were coming as if they were falling down from the sky, without any explanation.
It is not only me and Logothetis as witnesses against him. We are three out of the six members of the ELSTAT board who were brave enough to be witnesses. The other three members include two representatives of the ex-minister of finance [Giorgos Papakonstantinou] because he committed other crimes, fraud, against Greece, and the other was a representative of the Bank of Greece [and former governor] George Provopoulos.
Those people were afraid to come out, although within the meetings, we were all together against Georgiou, asking questions about the ad hoc numbers that he was bringing to us. There are also other witnesses, other officials from ELSTAT and other statisticians. Regarding the breach of duty, all six members of the board have come out against [Georgiou] as witnesses, not only in court, but in the Greek parliament.
I would like to say at this point that the European Commission keeps accusing Greece’s judicial system of intervening in [Greece’s handling of] financial data. This is ridiculous and outrageous. It is clear that Georgiou broke the law and he has to be brought to court.
He broke the law, it is very simple, and all the rest is to cover up the IMF’s and Eurostat’s responsibility for Greece’s deep recession, because of the unnecessary laws that they gave to Greece due to the wrong and untruly augmented numbers for Greece.
MPN: Georgiou is no longer the president of the Hellenic Statistical Authority, having been replaced by Athanasios Thanopoulos. However, in your estimation, is the Hellenic Statistical Authority today continuing the same practices as before, through the falsification or alteration of Greece’s economic figures?
ZG: Tell me which statistical authority or statistical office in Europe, or [in the rest of the world], is under one person’s rule, as has been imposed on Greece. Thanopoulos was actually appointed not by the Greek parliament, but by the European Commission, and they forced the Greek parliament to sign off on their decision to appoint Thanopoulos as the head of ELSTAT, without a board [of directors]. So ELSTAT today is under one person’s rule. How unbiased and independent can the numbers be? That’s why there are all these arguments between the IMF and the Europeans—not between the IMF and Greece or the Europeans and Greece—because Greece has no say. Eurostat manufactures the data about the debt, and they claim that the debt is viable. But the debt is not viable.
Thanopoulos, in my opinion, has shown…[that] he has to obey the orders of the Eurostat and the European Commission regarding the numbers, and especially numbers regarding Greece’s debt and deficit. And of course, he has to support the deep depression policies for Greece.
Are these policies [implemented] due to the incompetence of the Europeans and Thanopoulos? No. Our German pseudo-partners have said it openly, that Greek people are undisciplined and must be broken. Because of this, I think that the Eurozone is going to be doomed.
Greece’s economic history has been forged, first by Georgiou, and Thanopoulos continues in the same way because they have changed the data. Since 1995, the data has been changed in a completely ad hoc manner. I have all the old data, and they wanted to show a smooth increase in Greece’s indebtedness, which is wrong. I have evidence because I have worked for 42 years as an applied statistician, as an economic researcher, as a professor at the University of Macedonia, and as a visiting professor at Harvard’s National Bureau of Economic Research.
I have not managed [to publish] yet because of my court cases, but very soon my bombshell book will be out in English. However, Thanopoulos’ behavior, I must admit, is not as absurd or stupid or nonsensical as Georgiou’s behavior was towards everybody, even towards the MPs of the parliament, the prime minister and the ministers. Thanopoulos seems smarter but more secretly cunning, so he can survive better than Georgiou.
MPN: The current SYRIZA and Independent Greeks coalition government is claiming to have achieved a primary budget surplus, initially 3.9 percent and now 4.2 percent, well above the targets Greece’s lenders had initially set for 2016. Does this surplus exist in reality or is it a product of creative accounting?
ZG: This is a very good question. It is for sure creative accounting. It’s not the people, the statisticians of ELSTAT who measure the numbers, according to the European methodology. But Thanopoulos employs a lot of Eurostat experts, some Eurostat pensioners and European Commission pensioners who come to Greece, within ELSTAT to manufacture the data, distant from the statisticians of ELSTAT.
And of course, when there is sunshine, they go to the nearby island of Aegina, where they have good fresh fish and enjoy themselves with their wives. But they do their job and they are paid very generously. Well, in questioning them, Eurostat says that it pays them, but that Greece provides a portion of Eurostat revenues.
Those surpluses are not healthy, if they exist. How can a country whose GDP has shrunk by 28 percent have primary surpluses? If it does, of course those surpluses are not healthy. They do not come from growth, but from squeezing public expenditures for health and education, from stealing the revenues of the research organizations of Greece, changing them into public servants and public corporations so that [the state takes] their revenue that they make out of collaborating with foreign institutions.
Also, those surpluses come, of course, from taxes that are choking any private entrepreneurial initiatives made by Greeks, and of course by giving nothing for growth. The Greek debt has come to a point that it cannot be served anymore, because as I said, the troika, or “institutions,” load Greece with debt in order to pay previous debt. Isn’t it crazy? All of this is creative accounting, unfortunately.
MPN: In 2015, you presented evidence to the Greek Parliamentary Debt Audit Commission, which had been convened at that time. What did the evidence that you presented contain, and what was the outcome of this commission’s proceedings?
ZG: The Greek parliament has actual correspondence between the former European commissioner of economic affairs, the general director of Eurostat, the IMF representative Poul Thomsen, and Georgiou, as well as the former minister of finance of Greece, showing the involvement of the European Commission and Eurostat in untruly augmenting the Greek debt and deficit for 2009.
This correspondence exists because Logothetis pressed charges against Georgiou for wrongly accusing [Logothetis] of “hacking” [Georgiou’s] personal email. I want to say here that all charges against Logothetis have been dropped, although the Wall Street Journal had a recent article by Marcus Walker which completely distorts the facts, showing his outrageous bias in favor of Georgiou. It is a pity, but it has happened. I am saying that to be clear, because Logothetis was not hacking anybody. His [proficiency with] computers is not at that level. How could he break passwords and all this that Georgiou accused him of?
Regarding the parliamentary debt audit commission, its work was interrupted because the prime minister [Alexis Tsipras] sacked Zoe Konstantopoulou as president of the parliament and also as member of the governing party [SYRIZA].
(Editor’s note: Georganta added, in a Greek-language version of this interview, her belief that Konstantopoulou was insincerely adopting a populist pose).
However, although my name is not mentioned in the final report, I gave data to that committee in parliament, but not all of it was publicized. Still, the outcome is that a sizable portion of the Greek debt is illegal and odious. I want to say at this point that the restructuring of the Greek debt that is under discussion now is completely nonsensical because it means a time extension of its repayment schedule, which is unfair for the future generations of Greece. Now, it is in the next 50 years that the Greek debt is to be repaid, but they want to extend it to 80 or 100 years. Actually, [the institutions] have set a number: 99 years.
The Supreme Court of Greece came to the conclusion, in August 2016, that 210 billion euros is the measured damage done to Greece by the false augmentation of the public deficit of 2009. This damage to the Greek state has to be paid back to Greece, because the European Commission and Eurostat are among the partners in Georgiou’s crimes, with evidence which has been kept in parliament and in the Greek justice system.
MPN: Indeed, at the same time that this parliamentary debt audit commission was convening, a number of Greek government ministers of that time, including then-finance minister Yanis Varoufakis and even Prime Minister Alexis Tsipras, were making public statements claiming that Greece’s debt would be repaid in perpetuity.
ZG: Yes, you’re right. Well, the Greek government, we all know, has a gun to its head. I mean, [the institutions say] that you will pay all debt, otherwise we destroy you in the next minute, by completely turning off the taps of your banks. Of course, I think that a patriotic government would have publicized such threats without being afraid, but unfortunately, our government has not done so.
I believe that [the institutions] are aware of fraud committed by [members of the Greek government], and they tell them, if you go on to publicize the threats, we are going to reveal to the Greek people your actual fraudulent behavior, the bribes you receive from German companies like Siemens, which has come out actually, and then a lot of other organizations in Europe.
For example, the Greek government has purchased submarines, spending a huge amount of money for submarines that go down to the bottom of the sea and never come back up. The Greek people have paid all this money, in addition to huge bribes on the side for particular [government] ministers, for “well-working” submarines and a lot of other weapons actually, planes which fall down and all these kinds of things. All of these European governing [authorities] know of this fraud [that has been perpetrated] by Greek politicians, so they actually tell them, “go on, publicize our threats, we’ll reveal everything you’ve done so that you will not be re-elected by the stupid Greek people.”
MPN: Could you share with us your opinion regarding the role of foreign banks and financial firms in the development and outbreak of the Greek economic crisis?
ZG: There is evidence that the German and French banks were bankrupt in 2008, because they had a lot of toxic American debt. Also, they owned a sizable quantity of Greek state bonds. Falsely augmenting the Greek deficit [was done] in order to load us with unnecessary loans which go back to their banks, so that Greece buys back [its] bonds, so that the German and French banks can refinance their debts. This was a very appetizing idea [for the banks]. This has been actually said by people like [Paul] Krugman and a lot of other researchers and scientists, American and European.
MPN: In your estimation, what should be done and what can be done in order for Greece to turn the page and change direction?
ZG: This is a very difficult question. Greece has through the centuries been under [the thumb of] foreign invaders, first military and now economic, but we have always survived. Greece is a rich country in terms of physical and human resources. However, our politicians have systematically been generously bribed by Western foreigners in order to be able to rob Greece’s wealth.
Also, our geopolitical situation is very attractive to world powers in their struggle to govern the world. These days, Germany is trying its last, and I hope unsuccessful, attempt to rule Europe and the world, using our long-suffering little country as a guinea pig to [conquer] the rest of the European countries.
In my opinion, in Greece, a patriotic and caring government has to get out of the Eurozone. We have to have our own monetary policy to control our banks and to have our own currency. This will be difficult, of course, because we have sold such a great portion of our wealth, but a good government can reverse this. We have to have our own monetary policy and our own central bank that we control, in order to go on to growth.
Also, we have to ask the United Nations to implement the human rights clauses of international law, because Greece has a large portion of people who are very hungry. I live in a rich suburb of Athens [and also] in Thessaloniki, and I see, in the night, old people in these suburbs, previously good-standing people who worked until 65 or 67 years of age—and all claims to the contrary are nonsense and lies—and they are searching in the waste bins in the street to find vegetables thrown out by other people.
The supermarkets in Greece ask customers to buy rice and milk for children of families who are in absolute hunger and poverty. I have seen people, families with two and three children in Thessaloniki, who live in their own cars, they don’t live in a house. They come to the university, where there are rooms for the visiting scholars and professors to have a place to stay, and they come there to take a bath. This situation is a shame for Europe.
Also, they have loaded us with lots, with millions of refugees. The Syrian people are suffering and we have to accept them and we are caring for them, but also there are people who are not refugees. They come to Greece from a lot of other places in the world, from Africa, from Asia, from Bangladesh, from India and from a lot of other places. We don’t hate these people, we are actually helping them and we are famously, from antiquity, people with good intentions towards foreigners and visitors.
But you can’t have so many young people in Greece who have no work. The unemployment among young people in Greece, from 25 to 45 years of age [is very high]. We have all these young people who have a lot of energy, and what are they going to do? It’s natural and logical. We have a lot of crime here, by Greeks, they will steal even one euro or ten euros. All this is known to the United States government and the European Commission and the governing parties, the European Parliament, officials who receive such high salaries, 25,000 euros per month with all the privileges. It’s a shame.
At the same time, the Greek people are suffering here. Very few people are those, the politicians and their friends, who are doing well. Also, people who have married [foreigners] and who have some other sources of income, like myself. I have married an Englishman, and he helps me with my 99-year-old mother. I have worked for 42 years, and my salary is not enough to support the medicine and all the care for my mother. There are other people in much worse situations than me.
A patriotic Greek government should go to the United Nations and ask for the implementation of the humanistic clauses of international law [so that it can] stop paying the debt [immediately]. Later, when we start growing we can pay the debt, but [only] debt which is legal, not the odious debt. We have to find out which is the odious debt with a real accounting committee.
[I would like to add] that Greek people can go on with only bread and olives to feed themselves if they have hope that we are going to get our country back and we are going to have some growth. They can suffer some sacrifices and be happy about it, but now they have lost hope and they are desperate, a lot of them commit suicide. We can survive if we get out of the terrible euro, which is a disguised German Deutschmark that serves only German interests and nothing else.
Greece may be small and governed by corrupt and unpatriotic governments, but it [is reluctant to] die. The Germans and whoever else will learn this the hard way, I believe.
Originally published at MintPressNews:
Britain’s departure from the EU, a process that will take about two years, has formally gone into motion. MintPress News had the opportunity to speak with prize-winning economist Roger Bootle about what Brexit will ultimately mean for the country’s economy, as well as the European Union as a whole.
LONDON– The recent triggering of Article 50 of the European Union’s Lisbon Treaty by the United Kingdom has formally set into motion the process of Britain’s departure from the EU, an action that is in line with the result of last June’s referendum, where 52 percent of British voters chose to leave the union.
Europe is now faced with the prospect of a turbulent period ahead, with the upcoming French presidential elections and the possibility of a victory for populist candidate Marine Le Pen, as well as snap parliamentary elections declared in the UK, German elections in September, a rising tide of Euroscepticism across the continent and the process of Brexit now formally put into motion.
Economist Roger Bootle, chairman of Capital Economics in London and specialist adviser to the British House of Commons Treasury Committee, is the lead author of the report “Leaving the euro: a practical guide,” which was awarded the prestigious Wolfson Prize in Economics in 2012. The report presents a comprehensive proposal for how any eurozone member could depart the zone in an orderly fashion. Bootle discussed his findings extensively in a March 2015 interview with Dialogos Radio.
MintPress News recently had the opportunity to speak with Bootle, in an interview that also aired on Dialogos Radio, about the prospects of the British economy following Brexit and the future of the EU and eurozone following Britain’s upcoming departure.
MintPress News (MPN): The British government has recently gone ahead and invoked Article 50, formally triggering the process for Great Britain’s departure from the European Union. Many doom-and-gloom scenarios have been voiced, particularly by media pundits, regarding the adverse impacts of “Brexit” on Great Britain’s economy. In reality, how has the British economy performed since the referendum vote and, more recently, since Article 50 was invoked, and what are its prospects going forward?
Roger Bootle (RB): The British economy has done extremely well since the referendum. In fact, you can’t really see any adverse effects at all. It’s just bowled along much as before. In the immediate weeks and months after the referendum, there was some hesitation and some business sectors undoubtedly felt a bit of a slowdown, but that didn’t last long.
As things are at the moment, they’re looking really very strong. Surveys suggest that economic growth will continue roughly at the level we’ve seen recently. Of course, the pound has dropped quite considerably, and that’s helped British exports. They are looking very strong. Even if there’s a bit of a squeeze on consumers, which there may well be, I think all the signs are that the British economy is going to sail through this period.
MPN: From an economic point of view, what are the next steps in the Brexit process for Great Britain? For instance, do you believe that Great Britain will still maintain access to the European common market, and more so, do you believe that Great Britain should maintain access to the European common market?
RB: Now of course we are in a difficult phase, which could go on for up to two years because the Lisbon Treaty allows for a period of up to two years for negotiations for a country leaving. Of course, there’s been no country apart from Greenland, a long time before, that’s actually left the European Union, so we’re in uncharted territory really.
I think that what we’re going to see, what I hope we’re going to see, is some sort of free trade deal hammered out between Britain and the EU. Now if that doesn’t happen, it’s very important that this word “access” is nobbled, that Britain needs “access.” I think it really is very misleading, this word.
Every country in the world has got access to the single market – the United States, India, China, Japan, all these countries trade with the single market, they’ve got access to it, it’s just that not being part of the single market, not having a free trade deal with the European Union, they have to pay the
European Union common external tariff, and of course they have to meet all the standards and certificates and so on that the EU demands.
Now, if Britain doesn’t reach some sort of free trade agreement with the EU during this two-year negotiating period, then we’re effectively going to be in the same sort of situation that the United States, China, Japan and India are all in. That doesn’t sound to me to be too bad.
MPN: There have been many rumors and many press reports regarding the pound of flesh, if you will, that the European Union will demand from Great Britain as an exit bill for leaving the EU. Do you view this as a distinct possibility, or does Great Britain have bargaining chips of its own to possibly avoid this as it navigates the exit process?
RB: Various figures have suggested bills as high as 60 billion euros that the UK will have to hand over to the EU. I think the chances of the EU being able to secure anything like that are vanishingly small, next to zero. There was a report by the British House of Lords recently which obtained expert legal opinion, and the result of that expert legal opinion was that Britain was obliged to pay nothing at all. That is to say, the common sense interpretation of this would apply, that once you leave the club you’re no longer asked to carry on paying your membership dues.
Now, I suspect that there might be reasons of political and economic self-interest such that Britain might end up paying rather more than zero, but 60 billion euros, well they’ll have to whistle for that. I think there’s plenty of room for some sort of reasonable deal.
MPN: Part of the exit process, from what I understand, would have to do with Great Britain’s share of the European Central Bank’s cash reserves, which amount to 16 percent of the ECB’s total cash reserves. Can these cash reserves be returned to Great Britain as part of the Brexit process?
RB: I don’t see that as being a factor to be taken on its own. As a shareholder in the ECB, we do have a claim on the ECB’s net assets. The ECB’s got liabilities as well, so it isn’t reasonable to just look at the cash the ECB holds, you have to look at the balance sheet as a whole, and then you’ve got to put that into the context of the whole position of the EU. I can’t see the UK walking away with 16 percent of the ECB’s cash holdings. I think there’s going to be some overall totting-up of assets and liabilities and whatever the EU thinks are the UK’s continuing obligations after it’s actually left the club, and that’s something that’s going to be a major argument. These ECB cash reserves will be just one factor among very many that will affect this question of how much the UK has to hand over.
MPN: What are the possibilities that Great Britain has on the table as it prepares to depart the European Union, in terms of new trade deals or other beneficial agreements outside of the European Union?
RB: We’ve heard President [Donald] Trump say that he’s keen on a prospective U.S.-UK trade deal, and he’s made it pretty clear that he thinks that can be accomplished very quickly. There’s a whole series of other countries that are interested, including former members of the British Empire that are now members of the British Commonwealth: Canada, Australia, New Zealand, India. Countries outside, such as Japan and China, I think will be able to secure some sort of agreement pretty soon.
I think it’s very important not to overplay the significance of trade deals. Britain trades all around the world with all sorts of countries with which it does not have a trade deal, the United States being one of them, Britain’s biggest single export market. The UK does not have a trade agreement with the United States, and the reason it doesn’t have one is because at the moment it can’t make its own trade policy! It’s the EU that has to do that, and the EU hasn’t been able to make a trade deal with the United States!
I think very much [that as] a result of “euro-brainwashing,” in the European Union most people seem to think that prosperity emerges at the end of the fountain pens of these wonderful official trade negotiators in Brussels and elsewhere, and that all our futures depend on these people. This is complete hogwash. It’s a fairy tale. Around the world, all sorts of countries do extremely well and trade with each other without having anything to do with these panjandrums in Brussels. Britain could be in exactly the same position.
MPN: How does the City of London and the business community in Great Britain view the prospects of the British economy following Brexit?
RB: In the run-up to the referendum, there was a majority of the leaders of big business in Britain, including in the City of London, the financial interests, in favor of Britain staying in. That hasn’t changed very much, and accordingly there’s a preponderance of voices, although it’s less strident than before, worried about exactly what sort of arrangement Britain is going to put in place.
But even before the referendum vote, this description of the state of business opinion was far from uniform. There were a lot of businesspeople who were in favor of Britain leaving. A lot of people in the City were in favor of Britain leaving. On the whole, it was the more entrepreneurial City firms that were in favor of Britain leaving, as opposed to the big established banks and brokerage houses and so forth, who on balance were in favor of Britain staying.
I think that now the debate has moved on a lot. It’s been helped by some of Mrs. [British Prime Minister Theresa] May’s speeches and by the triggering of Article 50. It’s now pretty clear that we are leaving; accordingly, business opinion has switched from trying to operate as some sort of rear-guard action to realizing that it’s going to happen. Obviously, there’s a difference of opinion.
There are still some business leaders, including some in the City, who are a bit concerned and they want to make sure that we get the softest of soft Brexits. But a lot of business leaders are more optimistic than that. I think the mood, though, has changed. It’s changed towards, as I thought it would and hoped it would, towards making the most of Brexit, getting on with it, getting on with the job, getting the job of leaving the EU done and then making sure that Britain is best placed in the world that follows.
MPN: A recent survey of reserve managers at 80 central banks around the world found that there is a recent tendency for central banks to cut their euro exposure, while viewing British currency as a safer prospect for their banks’ portfolios. Is this a trend that you have observed in the markets and is this likely to continue?
RB: I don’t find it surprising that central bank reserve managers should find the prospect of having substantial amounts of their reserves in euros alarming. I don’t find that surprising at all, because there is a mega-crisis in the European Union. For the last year or so, the media has been obsessing about the so-called “British crisis” triggered by the fact that we voted to leave the European Union.
But fundamentally, putting aside for a moment the possible question of a second Scottish referendum — that is a big worry for the UK — that aside, the UK is a pretty stable place, and I think all the signs are that although there might be a few wobbles over Brexit, it can continue to be both successful and stable in the years ahead. And of course, famously it’s got extremely liquid financial markets. So I can see why international money managers, including central bank reserve managers, would find the UK fairly attractive.
By contrast, you can paint a scenario that’s deeply alarming for the countries of the EU. It’s still, I think, more than possible that another country is going to leave the euro over the next few years. The Italians remain very weak, the Greek economy is in a very, very serious state. Either one or both of those countries can leave. You’ve got a political crisis in France, with the possibility of far-right leader Marine Le Pen becoming president.
Even if that doesn’t happen, there’s no doubt over what way France is going over the next couple of years. So there are really fundamental questions about the integrity of the EU as a political unit, and the euro currency alongside that. Why would you want to expose substantial amounts of your reserves to that?
From a British point of view, there is a danger, I think, in all of this. I happen to think that the lower pound brought on by Brexit is a great boon for the British economy. I wanted the pound to be weaker for a long time. I think we needed it, it’s improved our competitiveness, so the last thing I would want to see is international capital holders becoming really worried about the euro and the EU, moving money into the pound with the result of the pound rising a lot in the exchanges. I think that would be extremely unhelpful for Britain.
MPN: Even though Great Britain was not in the eurozone, many people forget that it had been a part of the European Exchange Rate Mechanism, the ERM, before departing in 1992. This departure had, like Brexit, been accompanied by doom-and-gloom scenarios for what the impact on the British economy would be. In reality, how did exiting the ERM impact the British economy at the time?
RB: It’s very funny, this, because I remember extremely well that before Britain left — ”left” is too dignified a word, it sort of fell out of the ERM. What happened in September 1992, the UK Treasury was telling anyone who wanted to listen, and quite a few who didn’t, that we absolutely had to stay in the ERM, because otherwise inflation would soar, interest rates would soar and the economy would go down the tubes.
Various economists, myself included, said this was rubbish and that the opposite would happen, and dare I say it, after Sept. 16, 1992, the Treasury was proven wrong. That’s to say, the currency fell a long way, and exactly as a few of us had said, interest rates would not have to go up. Indeed they fell, inflation carried on falling too, and the economy recovered. After that, there were five years of very strong growth under the Conservatives before Labour won the election in 1997. So that was an earlier occasion where the Treasury forecasts of doom and gloom were proved comprehensively wrong.
MPN: Looking at economic and political developments in Europe, with an emphasis on the upcoming presidential elections in France and the candidacy of Marine Le Pen, who has delivered her own strong Eurosceptic message to French voters, do you believe we are seeing the beginning process of the breakup of the eurozone or the European Union, and how can Brexit serve as a catalyst for this process?
RB: I think we are seeing probably the beginnings of the breakup of the EU. The beginnings of the breakup of the euro were seen some time ago. Of course it hasn’t happened, but the signs are, I think, pretty clear, of the strains, very clear of course in Greece, but also I think more significantly in Italy. Less dramatic, of course, in Italy, but Italy is a much bigger economy, and I think this is more significant for the EU because Italy, of course, was a founding member of the EU. Greece didn’t join until much later.
If Greece ends up leaving the euro, then that is a hammerblow not just to the euro but, I think, to the institutions of the EU itself. Now, it may well be that one of these events, a country leaving the euro or the election of Marine Le Pen, could happen fairly soon, and that would still be early on in the Brexit process, because it will be almost two years until Britain leaves the EU.
But if Italy doesn’t leave the euro, and/or we don’t get Marine Le Pen as president of France, and both the euro and the EU hold together, then I think Brexit is going to play a major role, because then all eyes are going to be on seeing how the UK does outside the EU. Now of course, it’s going to take quite some time for this to be testable. We’ve got the up to two years of negotiations, and I suspect there will be some wobbles and difficulties and short-term problems associated with the business of exit, so it might be a year or two after exit before we can see how the UK is doing.
But if the UK is doing really pretty well after that period, we’re going to see a lot of pressure within the EU for other countries to leave, because then the UK will have gotten out of the free movement of labor, gotten out of the jurisdiction of the European courts without having to pay Brussels these huge annual subventions, and I think a lot of countries will look at this deal and think “oh gosh, I think I rather like that setup.”
MPN: A few years back, you were awarded the Wolfson Prize in Economics for your analysis that showed that any eurozone member state could safely depart the eurozone in an orderly fashion. Could you recap some of the highlights of this proposal for our listeners, and has anything changed in your analysis since then?
RB: I don’t think the essence of the situation or indeed my recommendations for what a country should do have changed at all, but there is a particular relevance to the French situation. What we said was, first of all, don’t be afraid of the fact that the exchange rate for the new currency falls, that the currency is weak immediately after the exit. That is part of the solution, not the problem. You shouldn’t try to stop it, indeed you should encourage it. It’s how you get the combination of reduced burden of debt and increased competitiveness.
We recommended that preparations for this exit should be conducted in secret. If this is not possible, then you have to impose capital controls. You might have to close the banks, which would be a serious worry. You don’t need to be able to issue new currency in order to leave. It takes quite some time for notes to be printed. You can do it without doing that in these days of electronic money. You could do without notes for a while, and indeed you could carry on using euros in the interim before your new notes are available.
You probably will need, in some sense, to default on some of your debt. The aim should be redenominate your national debt into the new currency, the one that’s depreciated, and depending on whether you can do that, it’s going to depend on the precise legal position of the debt. But insofar as you can, that’s what you should do, and the aim should be, through a combination of a reduced debt burden as a share of GDP, and the increased competitiveness, to get a period of economic growth, and from that of course, all sorts of good things will follow.
The connection with the French election is that Marine Le Pen has talked about having a referendum on ditching the euro and bringing back the franc, which is completely different from what we suggested in our Wolfson Prize-winning study. The significance of this is that Marine Le Pen’s proposal is going to cause an awful lot of financial instability. The financial markets aren’t going to wait for the result of the vote, they’re going to act with their feet straight away!
If Marine Le Pen wins, I think you’re going to see substantial capital flight from France even before she announces the referendum, and a lot of money leaving France. I could see a real banking crisis following from that, as people try to get their money out and to put it in, as it were, safer members of the eurozone, principally Germany. There might have to be some sort of capital controls imposed to stop that capital flight and to stop the French banking system from collapsing.
MPN: Looking at economic conditions in Europe today, and specifically in countries such as Greece that continue to enforce a regime of strict economic austerity as prescribed by its lenders, do you believe that exiting the eurozone is still an option for these countries?
RB: I don’t see how Greece can escape from its current situation without a much-devalued exchange rate. Spain is a country that is now recovering, and I think would probably be able to stay in the euro system, although not if Italy leaves and devalues. Italy, especially, and Greece, I don’t see any chance of emerging from their current economic torpor that doesn’t involve leaving the euro.
MPN: In Greece, there are various arguments that are heard against Grexit, ranging from claims that it’s too late and that it is something Greece should have done seven or eight years ago at the onset of the crisis, to arguments that a catastrophic devaluation of the new currency would follow, or that hyperinflation would result, or that Greece would be unable to import vital necessities. How do you respond to these arguments?
RB: There’s no doubt that it would be possible to do Grexit badly, and in the same vein, it’s possible to do Brexit badly. You could make a complete mess of it. There’s no doubt that’s possible. It’s very important, I think, not to let the perfect be the enemy of the good. Yes, there will be difficulties as a result of Grexit, but the most important thing is, it gives hope.
You have to ask yourself what you’re comparing your option with. A country that’s lost something like 25 percent of its GDP, that has a huge proportion of its workforce unemployed, there doesn’t seem to be much hope under the current situation. So I think it’s a bit extreme to say “oh gosh, if Greece left the euro, there would be hyperinflation.” Well, there wouldn’t be hyperinflation at all. If it’s managed properly, there wouldn’t be an uptick in inflation, and that wouldn’t necessarily be all bad, because it would help to devalue the real value of some of the debt.
You’d have to, though, keep this under control. It would have to be well-managed. You would need the effective management of the Bank of Greece and the Greek government to make sure that this was a fairly benign process. That doesn’t mean to say that you can avoid pain. You can’t avoid pain! You’ve had pain for the last how many years in Greece, and this is a country that’s lost 25 percent of its GDP!
Dear listeners and friends,
This week on Dialogos Radio, the Dialogos Interview Series will feature a timely interview with award-winning British economist Roger Bootle. Bootle is the founder and chairman of Capital Economics in London, a specialist adviser to the British House of Commons Treasury Committee, a columnist for The Daily Telegraph, the author of “The Trouble With Europe,” and the winner of the prestigious Wolfson Prize in Economics for his proposal titled “Leaving the Euro: A Practical Guide,” proposing how any Eurozone member could depart from the Eurozone in an orderly fashion. Bootle will speak to us about Brexit and the process which lies ahead for Britain, the prospects for Great Britain’s economy going forward, how Brexit will impact the European Union and Eurozone, and his award-winning plan for how any country can exit from the Eurozone and why he believes countries like Greece should depart.
In addition, this week’s broadcast will feature a special interview with Leonidas Babanis, organizer of this year’s Greek Panorama exhibition, set to take place in New York City’s Grand Central Station on from May 11-13. Dialogos Radio is an international communication sponsor for this exhibition, and Babanis will talk to us about what visitors and attendees can expect to find at this year’s event.
Tune in for these two exclusive interviews, plus some great Greek music, on this week’s English-language broadcast of Dialogos Radio! For more details and our full broadcast schedule, visit http://dialogosmedia.org/?p=6880.
Interview with Turkish Journalist Gürkan Özturan Published in Mint Press News
Our interview with Turkish journalist Gürkan Özturan of dokuz8news has recently been published in Mint Press News. In this timely interview, Özturan discusses the Turkish constitutional referendum and the political changes transpiring in the country, the vision of Tayip Erdogan for Turkey, the ongoing conflict with the Kurds, and the stripping away of rights for opposition political parties and journalists in the country.
Find this interview online here: http://www.mintpressnews.com/the-turkish-referendum-and-descent-towards-absolute-rule-interview-with-journalist-gurkan-ozturan/227015/.
Dialogos Radio & Media
The transcript of Dialogos Radio’s interview with economist and analyst Dimitris Karousos. This interview aired on our broadcasts for the week of March 22-28, 2017. Find the podcast of this interview here.
MN: Joining us today on Dialogos Radio and the Dialogos Interview Series is economist and economic analyst Dimitris Karousos, who is a member of the political directorate of Greece’s United Popular Front, and who has enjoyed a long career working for financial institutions within and outside of Greece. Mr. Karousos, thank you very much for joining us today.
DK: Thank you for your kind invitation.
MN: Let’s begin by discussing the recent deal that was reached between the Greek government and its European lenders. The Greek government has engaged in a big PR show, portraying this new agreement as one that will not deliver even one euro’s worth of new austerity measures, as a result of the so-called “equivalent measures” that will be adopted. This begs the question, if the net sum of these new measures is zero, then why enact them? And continuing along this line of thinking, what does the new agreement actually entail and mean for Greece?
DK: As we now find ourselves in Oscar season, it is clear that the Oscar for best director should go to the communications team of the Greek government, as their new dogma which claims that 1+1=0 is one of the most absurd things that the Greek people have heard yet. Indeed, “professor” Tsipras, by claiming that 1+1=0, seems to be reinventing the rules of mathematics. In other words, the government is attempting to claim that for every euro of austerity measures and cuts that will be enacted, there will be one euro in equivalent measures to offset those cuts. This, of course, is a blatant lie, because if there indeed will be no impact, these measures would not be needed.
The Greek government is lying, and this can be demonstrated in three ways. First, the troika—meaning the European Commission, the European Central Bank, and the International Monetary Fund—is not discussing the possibility of cuts in the special property tax and the value added tax, and indeed is not even allowing these issues to be brought to the negotiating table.
Second, the troika, instead of tax cuts, is insisting on the enactment of the so-called Juncker growth package, named after the president of the European Commission Jean-Claude Juncker. This package is essentially the European Union’s Partnership Agreement, known as ESPA, but this is not a true replacement because Greece already qualifies for funds from this agreement regardless. Therefore, somebody needs to explain how low wage earners who are now faced with a lower tax-free threshold and will be forced to pay taxes, or how pensioners who will face further cuts to their pensions, will benefit from the European Union’s Partnership Agreement, which in the first place has nothing to do with this group of people, since it is concerns only entrepreneurs and supposedly offsets these cuts.
Third, whatever “equivalent” measures are agreed upon will only begin to be enforced if and only when Greece has fully and successfully enacted new cuts to wages and pensions, as foreseen in the new austerity package with 3.6 billion euro worth of cuts.
MN: The deal which was recently reached foresees the achievement of a primary budget surplus of at least 3.5% of the Greek GDP in 2019, while we are also hearing that Greece’s primary surplus for the month of January surpassed targets. Is this a good thing, however? Are primary surpluses a positive thing for a country like Greece, with the economy in the state that it is in?
DK: Here, we should first make it clear that no economy which has found itself in a similar condition to that of Greece has been able to recover through the enforcement of strict austerity and the pursuit of surpluses.
The economists Barry Eichengreen and Ugo Panizza, in a study of theirs, examined 235 countries and found that there were only 36 cases of countries which were able to maintain, for a five year period on average, a primary budget surplus of at least 3 percent of GDP, representing 15 percent of the total sample. In the same study, they found that there were only 17 cases of countries which, over an average of eight years, maintained a primary budget surplus of at least 3 percent of GDP, representing just 9 percent of total cases. There were only 12 cases of countries which, over a ten year period, maintained a primary budget surplus of at least 3 percent of GDP. It should be noted that Germany, the strongest economy in Europe, was not one of these countries!
In other words, they are asking Greece to achieve something that not even an economy at the level of Germany’s has been able to ever achieve! It should also be added that Eichengreen and Panizza note that extraordinarily strict fiscal policies—austerity in other words—with the goal of achieving a high primary budget surplus, may in fact achieve the opposite results, leading to recession and to political and social turmoil. These policies, in other words, may lead to the opposite outcome from that which is intended.
MN: With this new agreement which has been reached, do you believe that the risk of a so-called Schauble-style Grexit has been averted, or does it remain a distinct possibility? And continuing on that frame of thought, what would this German-proposed Grexit, which would include the imposition of a dual or parallel currency, mean for Greece?
DK: Not only has the threat of a Schauble-style Grexit and the imposition of a dual or parallel currency not been surpassed, but I believe it remains the plan that will be put into place. I believe that the following will happen: once the Greek government completes the so-called “troika review” of its finances with an agreement for new austerity measures totaling 3.2 to 3.6 billion euros, the troika will break up the next installment of so-called “bailout” funds into sub-installments. Once the German elections have occurred, then a fake “crisis” between Greece and its creditors will be orchestrated, and that is when the Schauble plan, named of course after the German finance minister, will be imposed. This plan would entail Grexit and the imposition of a dual or parallel currency within Greece.
The circulation of a dual or parallel currency will mean an even more rapid internal devaluation and will signify the immediate impoverishment of the Greek populace. There will be one currency used for internal transactions, such as the payment of salaries and pensions, while whatever euros are still in circulation will be collected and used towards the payment of the national debt, which will continue to be denominated in euros.
This would be a terrible development for Greece, as this dual or parallel currency will face constant devaluation versus the euro, as it will not be hard currency and nobody will want it. If you go to the greengrocer or the bakery, for instance, they might accept the dual currency at an exchange rate far lower than the official peg set by the government. The black market for euros will flourish and the economic catastrophe will be total and complete. The introduction of what will essentially be an IOU, or script, will not only completely destroy the Greek economy but it will also discredit the idea of a national, domestic currency in the eyes of the populace.
MN: Something which, of course, is not frequently discussed by analysts, journalists, and by the mass media in general is the difference between a dual or parallel currency on the one hand, and a national domestic currency on the other hand. What is the distinction and why is one better than the other?
DK: The differences are as follows. By definition, a parallel or dual currency means that there is a different currency in use for domestic transactions, from that which is used for external transactions. A national or domestic currency, on the other hand, is a currency that is issued by a nationalized central bank, such as the Bank of Greece, which would be completely state-owned. With a domestic currency, Greece would not be borrowing the currency that it will put into circulation, it will instead mint the currency itself. It is a wealth instrument, not a debt instrument. Furthermore, a national or domestic currency means that the state itself, because it mints its own currency, does not borrow it from any other central bank.
MN: Explain for us the steps which Greece could follow in order to undertake an orderly departure from the Eurozone and return to a true domestic currency. How could the various dangers that we keep hearing about, such as the risk of hyperinflation or a catastrophic devaluation of the new currency or a difficulty in importing goods, be averted?
DK: The political party which I am a part of, the United Popular Front, also known as EPAM, has described, in detail, 15 necessary steps which are required in order for a smooth transition to take place to a new national, domestic currency.
Every step in this process is absolutely necessary, and no steps can be skipped, as it will impact the entire transition to a domestic currency. The most important of these steps are as follows:
First, disputing the legality of the debt and declaring an immediate stoppage of payments.
Second, declaring the immediate cancelation of all of the memorandums and associated legislation which completely altered the legal and political status of the Greek state and imposed the troika-led occupation.
Third, departure from the European Union and the Eurozone.
Fourth, the imposition of a national, domestic currency.
Fifth, the nationalization of the Bank of Greece, the country’s central bank.
Sixth, the imposition of capital controls in order to prevent money from leaving the country.
Seventh, the liquidation of Greece’s four major banks, while these banks remain in operation.
Eighth, enacting measures to ensure that transactions are able to take place smoothly during the period of transition to the new currency.
Ninth, ensuring the adequate supply of goods in the marketplace.
Tenth, protecting consumers and vigorously policing the marketplace and the prices of goods.
Eleventh, immediately restoring wages and pensions to pre-memorandum levels.
Finally, implementation of “seisachtheia,” an ancient Greek precedent which refers to the forgiveness of the debts of households, as well as small- and medium-sized businesses.
MN: Let’s tackle these issues one at a time… How has Greece’s membership in the European Union since 1981 and in the Eurozone since 2002 impacted Greece’s productive and industrial capacity? And, as a second part to this question, is there any possibility of Greece’s agricultural or productive or industrial capacity increasing within the European Union and within the Eurozone?
DK: There is absolutely no chance of recovery for the Greek productive sector and Greek industry as long as the country remains within the European Union and the Eurozone, especially when harsh austerity and the memorandums are being imposed. How can industry recover when taxes and pension fund contributions surpass 60 percent of a corporation’s revenue? How can the Greek economy recover when its biggest industry, tourism, is saddled with the highest tax rate in the Mediterranean region? How can the Greek economy recover when there is so much bureaucracy and political uncertainty?
The end result of all of this is that Greece’s competitiveness has dropped to 86th place worldwide, despite all of the austerity measures, the memorandums, the economic “growth” which repeatedly has been promised, and the constant “fiscal adjustment” policies and “reforms” that have been enacted. Despite all of this, Greece now ranks lower in competitiveness than countries such as Namibia, Tajikistan, Albania, and Guatemala.
MN: You have spoken about the balance of goods and services in Greece and about Greece’s foreign currency reserves. What do these statistics show and what would they mean for Greece in terms of a potential departure from the Eurozone and the EU and return to a domestic currency?
DK: There is no possibility that there will be shortages of imported goods, and this is the case because Greece’s balance of goods and services, after so many years of economic depression and as a result of the internal devaluation that has taken place, is close to being balanced. In very simple terms, this means that Greece, from its exports, tourism, and shipping sectors earns all of the necessary foreign currency which it needs to pay for all of its imports. Therefore, it follows that there will be no shortage of imported goods.
In addition, according to the most recent figures available from the Bank of Greece from the third quarter of 2016, the central bank has in its reserves foreign currency totaling approximately 31.5 billion euros. At the same time, Greece’s banking system has, among its assets, a long-term foreign bond portfolio totaling 55.7 billion euro. Together, this totals almost 87 billion euros, which could be used as foreign currency reserves in the immediate aftermath of the departure from the Eurozone. Therefore, it is easy to understand that there is no chance of there being any shortages in the marketplace and that Greece’s needs would be met for several years to come.
MN: There is, of course, also the Greek public debt to contend with. Is this debt sustainable, to begin with? What would you propose regarding dealing with the debt, and what does international law and international legal precedent have to say, with regards to actions Greece could implement regarding its debt?
DK: Very much on purpose, the Greek people have been led to believe that an “unsustainable” debt is one which is very difficult to repay, but which can, at some point and after the enactment of very strict measures, be repaid. This is absolutely false! We have been led to believe this because, first of all, it has been necessary to maintain the hope that Greece, by enforcing these harsh austerity measures, will be able to repay its debt and will, as a result, accept these difficult measures.
In reality, an unsustainable debt is a debt which, no matter what a country does, cannot ever be repaid or even reduced, no matter how many measures are enforced. With mathematical certainty, such a debt will simply increase over time. This is the case in Greece. When Greece received its first so-called “bailout” the public debt was 122 percent of GDP. From 122 percent it increased to 129 percent, then 148 percent, then 170 percent, it has reached 177 percent, and is projected to increase to 188 percent and later 200 percent of GDP if we continue down this path!
The first loan agreement which Greece signed in 2010 and which, it should be stressed, was not ratified by the Greek Parliament, was a product of fraud and coercion. Articles 48 through 52 of the UN’s Vienna Convention on the Law of Treaties allow for the cancelation of a treaty or agreement when it is a product of deceit or threats. This would permit Greece, with a written statement delivered to the UN General Assembly via the UN’s Secretary General, to announce to the international community that it is denouncing its illegal public debt.
In addition, the official report of the United Nations Commission on Human Rights (UNCHR) which was published on its website on the 7th of March 2014, harshly criticizes the Greek government for its methodical and repeated violations of human rights, and specifically the individual, political, economic, social, and cultural rights of Greece’s people.
MN: In our previous interview, in January 2016, we spoke about the recapitalization of the Greek banking system which had just been completed. In what condition does the Greek banking sector find itself in today? Are we headed to yet another recapitalization, and what would such a development mean?
DK: I would argue that the Greek banking system now finds itself in worse shape than in the beginning of 2016, if we take into consideration something which the mass media and most analysts typically neglect to tell us, namely, that the deferred tax accounts for 40 percent of the equity of Alpha Bank, 71 percent of the equity of the National Bank of Greece, 75 percent of the equity of Eurobank, and 58 percent of the equity of Piraeus Bank. This alone means that a new recapitalization is coming.
Moreover, another negative and indeed tragic aspect is that, from the beginning of this year, 1.5 to 1.7 billion euros’ worth of new high-risk loans have been added to the banking system. These loans include mortgages, consumer loans, and business loans, and 80 percent of these loans have been refinanced.
In addition, 2.7 million loans, totaling almost 100 billion euros, are at the risk of default, as payments towards those loans have not been made in over three months. This is a ticking time bomb for the financial system. While this is happening, the deposits of households and individual depositors in Greece have dipped below 100 billion euro for the first time since 2003!
It is therefore clear to me that we will soon see a new recapitalization of the Greek banking system, totaling 7 to 10 billion euros.
MN: How has the British economy performed ever since the referendum result in favor of Brexit this past summer, and how do you believe the British economy will perform if and when the process of exiting the European Union is completed? Do you believe the widely-held fears of adverse economic impacts will be proven to be correct, or do you believe the opposite will be true?
DK: Even though it is surely too soon to draw a definite conclusion, what we can say from now is that in contrast with the various “Cassandras” who foresaw the total collapse of the economy of Great Britain, what we are seeing is that the British economy grew by 0.6 percent in the final quarter of 2016, exceeding expectations.
In fact, the Bank of England once again revised upward its growth projections for the British economy for 2017, raising its projection from 1.4 percent of GDP, initially forecast in November 2016, to a growth rate of almost 2 percent of GDP. The higher projection is largely a result of increased consumer spending, which has occurred despite the fear mongering that the British public faced as a result of the Brexit vote.
Two additional aspects that are important and which should also be noted is the reduction of the public deficit by 400 million Pounds and the increase in average weekly wages of British workers by 2.8 percent on a year-to-year basis.
MN: The new president of the United States, Donald Trump, seems to have taken a position in favor of Brexit and against the Eurozone, displaying an evident preference for reaching bilateral trade agreements with individual countries, rather than large-scale trade deals with the Eurozone as a whole. On a domestic basis, Trump has promised the return of domestic jobs, of factories and corporations and businesses that have left the country. How do you view the economic policies and promises of the Trump administration and what would they mean for the European and global economies?
DK: The turn inward being undertaken by the United States will gradually lead to the repatriation of U.S. dollars. As a result, it is likely that countries whose national debt is in large part denominated in U.S. dollars, as is the case with Turkey, where 65 percent of its debt as a percentage of GDP is in dollars, as well as developing countries whose major public- and privately-owned industries have outstanding loans in U.S. dollars, will face increased difficulties from the upward pressures on the dollar in the international financial markets.
In addition to all of this, we need to take into consideration the ongoing trade battle between the United States and China, and the efforts of the United States to achieve energy autonomy, and in particular, the elimination of dependence on the OPEC nations. This means the replacement of approximately three million barrels of oil per day which are currently imported, replaced by domestic energy sources. It is easy to understand that this will hurt countries like Saudi Arabia and Venezuela in particular.
As for Trump’s domestic economic policy, the jury is still out. We will just have to wait and see.
MN: Well Mr. Karousos, thank you very much for taking the time to speak with us today here on Dialogos Radio and the Dialogos Interview Series, and for your thoughtful analysis.
DK: Thank you very much for having me.
The votes for Brexit and for Donald Trump are the result of some Russian plot but are a necessary rebellion against a corrupt neoliberal globalist order amongst just of of whose crimes is the economic strangulation of Greece.
This piece though is not meant to be about Greece, but about the United States, the anti-Russian hysteria that has taken hold, and the attacks that the newly inaugurated Trump administration is facing from protesters, the media, and the “deep state.” What does all of this have to do with Greece though? Everything. Crisis-stricken Greece represents a microcosm of what is transpiring in the United States and much of Europe today, and offers a useful lens through which to analyse current developments.
Living in Greece over the past four-plus years, I’ve had the opportunity to view politics and economics from a different lens, one far removed from warm-and-fuzzy claims about the “European dream” or the utopian vision of “open borders” and “freedom of movement.” Greece is a country which has been ravaged by EU and IMF-imposed austerity, its economy and domestic production decimated by EU rules and regulations such as the common agricultural policy, and a country which has been inundated with far more migrants than it could realistically absorb, even during more prosperous economic times.
Indeed, the hypocrisy has been astounding. Greece and the Greek people have been blamed for being “racist” and “xenophobic” to migrants that have entered the country simply due to its geographical location and as a result of wars and conflicts which other countries have fuelled. Greece has been accused of “living beyond its means” when its welfare state was never as well-developed or generous as those of Northern Europe and where average incomes have perpetually lagged behind most countries of Northern and Western Europe. The Greek governments of the post-junta period were accused (correctly) of being corrupt, but the EU openly supports those same political parties (New Democracy, PASOK, and the current governing coalition of SYRIZA and the Independent Greeks, which are home to many ex-PASOK and ex-New Democracy MPs) due to their unabashed pro-EU, pro-Eurozone stance. Greece is accused of not producing anything, when it is during the years of EU and Eurozone membership that Greece’s domestic industry and agricultural production were decimated, as Greece’s market was flooded with German imports and Brussels bureaucrats told Greek farmers what to grow, what not to grow, and where they could or could not export their produce.
On a visit to EU and NATO headquarters in 2013 as part of an official academic program, the contempt with which Brussels technocrats viewed Greece and the other countries of the “European south” could barely be contained. We were told that Mario Monti—Italy’s prime minister at the time, who was not elected but instead appointed at the behest of the EU—was the “best thing that ever happened for Italy.” We were told that Mussolini “got the job done.” We were told, in these exact words, that the reasons for the European financial crisis were “Bad design. Bad luck. Bad decisions. Greece.” Or as EU trade commissioner Cecilia Malmström is alleged to have said she “does not receive her mandate from the European people,” and as Dutch finance minister and Eurogroup head Jeroen Dijsselbloem said more recently, the people of southern Europe blew their cash on women and booze and are therefore not deserving of help. Such is democracy and solidarity in the Nobel Prize-winning EU.
Therefore, when the referendum result in favour of “Brexit” prevailed in Britain, I was overjoyed. The European Union that I had seen, lived, and experienced was undemocratic, authoritarian, and brutal. In Greece, however, a historical inferiority complex vis-à-vis the “west” fostered an attitude of learned helplessness and dependence on the EU, without which Greece could supposedly not survive. Hence, it was refreshing to see voters in another EU member-state stand up to Brussels.
This, however, was not the prevalent view in the European or North American news media, which reacted in contempt, horror, and disgust at the referendum result. In the United States, snarky late-night television comedians, pandering to the supposedly “progressive” and “hipster” crowd, joined the news media’s chorus in describing the Brexit referendum result as the product of racism and xenophobia. No mention about austerity, about incomes and pensions that had been slashed in half in Greece, of previously middle class households unable to heat their homes and burning whatever they could find instead. The EU was, and continues to be, widely described as a “force for peace,” its open borders touted as a sign of “progress.” On her recent visit to Washington, German Chancellor Angela Merkel, one of Europe’s harshest pro-austerity hard liners, was referred to by the pro-Hillary, pro-globalist Politico as “the leader of the free world.” Unabashedly displaying its globalist world view, the popular feminist website Jezebel previously referred to Merkel as the “last pillar of liberal democracy in Europe.”
For those keeping score, websites like Politico and Jezebel are touting the European Union, and the chancellor of Europe’s strongest economy, Germany, as the last bastions of democracy and freedom not just in Europe, but worldwide. The same Germany which has inflexibly insisted on the continued, harsh imposition of inhuman austerity measures in Greece and the other countries of the European South, measures which have been found, repeatedly, to violate the basic human rights of the citizens of Greece and other countries. All the while, Germany has benefited handsomely from an economic point of view—both from the returns it is receiving on the loans it has imposed on Greece and from the brain drain of the European south, with many educated young people from Southern Europe finding their way to Germany. The same Germany whose finance minister Wolfgang Schäuble, who apparently is also the finance minister of Greece and Spain and Portugal and Italy, has said “[e]lections change nothing. There are rules.” This is same Germany that has remained completely inflexible on the issue of Greece’s debt, and this is the same Germany who we are told is the “leader of the free world.”
So Germany has been whitewashed and thrust into the role of world leader of peace, justice, freedom, and democracy by the same global media empire which openly and unabashedly supported Hillary Clinton in the U.S. presidential elections and insisted, ad nauseam, that she would easily defeat Donald Trump. The United States, of course, can no longer fulfil the role of so-called “leader of the free world,” in the eyes of the media, because the “fascist Russian agent” Trump is president instead of the honourable Secretary Clinton, who once cackled on TV, “we came, we saw, he died.” Oh, but I forgot, when it’s your guy or gal fighting wars and killing sovereign leaders overseas, it’s okay. That must explain why the “antiwar” movement went extinct right around the time that Barack “hope and change” Obama became president. That must also explain why George W. Bush, whose administration invaded Afghanistan and Iraq on false pretences, has, just like Merkel, been whitewashed, as evidenced by his recent appearance on “Ellen” which we were told would make us “warm up” to him. After all, he purportedly hates Trump and Putin—therefore he must not be that bad of a guy!
Similarly, when Obama deported record numbers of illegal immigrants from the United States, when he bailed out banks responsible for the economic collapse of 2007-2008 and refused to prosecute even one of banker but instead prosecuted whistleblowers, when he waged seven wars and dropped over 20,000 bombs from drones and failed to shutter the detention camp at Guantanamo Bay, he too was whitewashed. Indeed, he was awarded the Nobel Peace Prize and gets to dine with celebrity social justice warriors such as Bono, whilst receiving star treatment wherever he goes. When he referred to the “57 states” of the U.S., just like when representative Maxine Waters referred to Putin’s invasion of “Korea,” the media gave a free pass—no “Bowling Green” treatment for them!
For those with their eyes open all these years, it is easy to realise that not only were the U.S. and international media subservient and compliant during the eight years of the Obama administration, but they also never hit the Bush administration nearly as hard as they hit Trump. At best, Bush’s “bushisms” served as late night TV comedy fodder, downplaying their seriousness. I clearly remember the same media in lockstep with the Bush administration on the Afghanistan and Iraq war marches, while voices who dared to oppose these invasions were canned in short order, even by the purportedly “liberal” MSNBC. Remember Phil Donahue? Me either.
At that time, not only was there a (supposed) “antiwar movement,” but there were also many activists decrying the media’s hawkish slant and the concentration of media outlets in the hands of a few huge corporations. Just like the “antiwar movement,” those voices of dissent against the “corporate media” have shut up now. With the media attacking Trump 24/7, fearmongering non-stop over the “Russian menace” and the “tyrant” Vladimir Putin—whom we are told rivals only Trump in his resemblance to Hitler—and with anyone who dares to support Brexit or the elimination of “free trade” agreements such as TPP and TTIP which would place multinational corporations above any domestic law denounced as a “fascist” and “racist” and “xenophobe,” the very same ex-activists have become the biggest shills and cheerleaders for the very same corporate media which they once loudly decried.
Take Brexit as a case in point. Those who chose to take back the sovereignty of their country and to speak out against the unelected supranational German-dominated behemoth in Brussels have been branded as “racists” and “nationalists” and “xenophobes.” These are the “scarlet letters” of today’s “progressive” and globalist age. No one cares that many of these voters are not racist, but are very much concerned about the fact that they do not have jobs or are unable to support themselves and their families with their current dead-end employment, that the economy and infrastructure of their country is crumbling, and that there is additional downward pressure being placed on their wages and on the social state through the importation of cheap, “flexible” labor from countries who have been torn apart as a result of western-imposed war and conflict, such as in Syria. Countries that are, in other words, war-torn and impoverished with the support of the very same people who are clamouring for “open borders” and who are, without a hint of irony, branding their opponents as “racists” and “xenophobes.” Because that’s what it’s all about: foster crisis, force people to flee, and use their desperation to pit them against the poorer classes in your society, to drive wages down and profits up. That’s what the whole idea behind “open borders” and “refugees welcome” and creating the conditions which lead to refugees and the brain drain is all about, in case you haven’t realised it.
There are protests, of course. Protests in favour of uprooting populations, creating migrants and refugees, providing them special privileges and decimating the working class and the middle class some more. Protests in favour of the austerity-driven Eurozone and EU. Protests which sprung up like magic the moment Donald Trump became president, when for the past eight years, there was hardly any protest against austerity in Europe, or war and drone strikes in the Middle East, or the record numbers of deportations under Obama’s watch. We’re supposed to believe that tens of thousands of protesters in all corners of the United States, for instance, were able to obtain pink hats in short order and were able to coordinate and to “send a message” to Trump—before he even entered the Oval Office.
Here, it is important to remember that there are three components to every protest: what is being protested against, what is being advocated for as an alternative, and who is organising the protest (and what their ulterior motives may be). It’s no coincidence, therefore, that antiwar protests during the eight years of Obama’s reign barely registered a blip on the radar—and were thoroughly ignored by the mass media—but protests during the two months of Trump’s presidency have enjoyed abundant and positive media coverage. To share an example from Greece, rallies that were organised in the lead up to the country’s July 2015 referendum on accepting an EU-proposed austerity package and which were in favour of a “no” vote drew hundreds of thousands of people, despite having only a few days’ notice of the referendum. Following the referendum, when the “no” vote which prevailed was thoroughly betrayed by the SYRIZA-led coalition government, participation at protests against this betrayal numbered a few hundred people, tops. The reasons should be obvious to anybody with their eyes open. And to add to this, the “leftist” SYRIZA government gets a pass, its betrayal excused away as the result of being “blackmailed” by the EU. In the same breath, SYRIZA’s globalist apologists then tell us that Greece must remain in the EU “at all costs” and what a great, noble thing the EU’s “open borders” and “free movement of peoples” is, and how Greece will collapse and die if it leaves the euro. Political schizophrenia at its finest.
If you’re protesting something because you wish to return to the previous status quo, where you turned a blind eye to everything you now claim to be protesting, then you are disingenuous and hypocritical (at best). One should also never forget to also ask, where’s the money and logistical support and the perfectly crafted slogans and hashtags and the massive amounts of pink hats coming from. Answer that and you also answer what is actually being advocated and who is organising these protests.
Personally, I’ll never forget the disappearance of the “antiwar” movement after Obama was elected, the support of Democrats and many alleged “progressives” for the bombing and destruction of Serbia and the dismantling of the Balkans (under the watch of Bill Clinton), their blind support of the grossly undemocratic EU and the despicable branding of anyone opposed to it as a “racist” and “xenophobe,” and the silence when “hope and change” was bailing out major banks while ordinary people of all colours were losing their homes and 20,000 bombs were being dropped across seven wars that were being waged. All of this while the media and while most “activist” groups remained silent. Now suddenly Trump is the problem?
Anyone who truly is concerned about human rights, instead of blindly parroting the “open borders” and “refugees welcome” agenda, should ask themselves why there are refugees in the first place, and who started and who is perpetuating the conflict that is forcing them to flee. And anyone who is truly concerned about democracy should ask themselves if majorities of people in several countries suddenly became fascists overnight, or if there are other, legitimate reasons why they do not support “free trade” or “open borders” or supranational institutional behemoths such as the EU.
To be clear, this isn’t an endorsement of Donald Trump. But it also is not an endorsement of the McCarthyite witch hunt, the media hysteria and scaremongering against Russia, or their pro-Hillary and pro-Obama and pro-EU propaganda. Moreover, it is not an endorsement of the incumbent establishment. What more evidence is needed to see that there’s no such thing as Democrats and Republicans, for instance? There’s an incumbent neoliberal establishment, defended by the corporate mass media and its “presstitutes,” by the military-industrial complex, and by elite billionaires, and there are those who stand in its way, or who are perceived as standing in its way.
Which side are you on?
This week on Dialogos Radio, we will be featuring, as part of the Dialogos Interview Series, two special interviews!
First, we will have the opportunity to speak with journalist, analyst, and longtime lawyer in the Royal Court of the United Kingdom Alexander Mercouris, co-founder of TheDuran.com. Joining us from London, Mercouris will provide his insights for us on a number of current issues, including the latest actions of the Trump administration, the path towards Brexit in Great Britain, anti-Russia hysteria and the establishment media’s agenda, developments in the Ukraine and Syria, and a view on the Greek government’s latest deal with its creditors and what continued austerity means for Greece.
This interview will be followed up by a special feature with young Greek spoken word artist Dylan Wolfram, who will speak to us about his latest spoken word release, titled “Bellows.” In addition to this interview, we will hear two cuts from Wolfram’s recent spoken word project.
Two great interviews, all this week exclusively on Dialogos Radio and the Dialogos Interview Series!
Originally published at MintPressNews:
If termites ‘start eating away at the foundations on both the left side of the building and the right side of the building, then the building looks fine from the outside but it could go any day,’ Mark Blyth tells MintPress, describing the hollowing out of the right and left in the US and Europe.
PROVIDENCE, Rhode Island — The world is in the midst of a tremendous political and global shift, with the rise of populism in the United States and Europe, largely in response to broader economic and social trends which have been materializing in recent decades.
From the election of Donald Trump in the United States, to the victory of “Brexit” in last summer’s British referendum and the strong position of populist parties in many European countries, including France, Germany, and Holland leading up to domestic electoral contests, voters are increasingly responding to political systems which many believe have failed them.
Mark Blyth, a political scientist and professor of international political economy at Brown University, has done extensive research on growing inequality and one of its possible causes: policies of economic austerity. Blyth is the author of “Austerity: The History of a Dangerous Idea,” and is a frequent contributor to a variety of publications, including The Guardian and Foreign Affairs.
In this interview for MintPress News, which first broadcast on Dialogos Radio in February, Blyth discusses the impacts of economic austerity, the potential outcome of Brexit and the economic policies of the Trump administration, the underlying reasons behind these electoral results, the opposition to “free trade” agreements such as the Trans-Pacific Partnership and the Transatlantic Trade and Investment Partnership, and the possibility of a Greek departure from the eurozone.
MintPress News (MPN): Looking at the past couple of years and at the present in Europe, is there any sign, any indication at all, that the policies of economic austerity that are being pursued have had any sort of positive outcome?
Mark Blyth (MB): Quite the contrary, because what’s happened in the past couple of years is that everyone’s pretending to do a good game on austerity, but, in fact, they’re actually not. Budget deficits in Spain are around 5 percent of GDP. Italy’s is getting larger as well. So the so-called “automatic stabilizers,” in effect, kick in when an economy’s in a recession — taxes go down and transfers go up — is actually being allowed to operate. This means that the fiscal stance for the EU as a whole for the past couple of years has been positive instead of contractionary.
Now, is this because of some great revolution that people have had, that everyone tightening at once when you’re in a common currency union is simply zero sum against itself? Not really. It’s essentially a quid pro quo, and the quid pro quo is, the Germans will continue to allow the ECB [European Central Bank] to do whatever it takes to save the euro, basically the massive program of bond buying that has been going on and suppressing interest rates and adding liquidity to the banking system. And in return, the Germans will turn a blind eye to what’s going on in Spain and France, and we won’t even mention Portugal. The one place of course where it has continued is the troika program in Greece, and as you know it’s not going very well, still.
MPN: In recent months, we’ve been seeing a pronounced political shift, with the Brexit referendum result and with the election of Donald Trump in the United States. Detractors argue that the reasons Trump was elected and the reasons why Brexit prevailed have to do exclusively with racism and xenophobia. Do you agree with this view, or do you believe there are other reasons why we have been seeing this shift?
MB: If you’ve seen the stuff that I’ve been doing on “Global Trumpism,” if it’s racism that’s driving this exclusively, then the world has generated an abnormally large number of racists all at one time, which would be a hard thing to explain. So, yes, is there racism? Yes. Is there xenophobia? Yes. One of of my colleagues at Cornell, Jonathan Kirshner, in an essay on the L.A. Review of Books, I think put it best, saying that while it’s absolutely true that not everyone who voted for Trump is racist, it is absolutely true that every racist who bothered to vote, voted for Trump.
Now, what does this mean in terms of how we understand Trump and Brexit? The “blue wall,” the five states in the middle of the country that were solidly democrat, so solidly democrat that the Democrats forgot to visit four of them during the campaign, they were the ones that tipped the election. They were the ones that went for Trump. On a county-by-county level, the majority of those counties voted for Obama not once but twice. So you’ve got to explain to me why a bunch of people who voted twice for a black president suddenly voted for racism, if that’s what was driving it. Or, is it more likely that it was the message that Trump was sending, which was essentially, “You voted for hope and change with Obama. What changed? Nothing. What was your hope? Not very good. So you might as well try something with me.” And I think that’s what was driving it.
Same thing with Brexit. Xenophobia, anti-immigration, all that sort of stuff is definitely in the cards. Well, think about the conjunction of events. You’ve got a migrants crisis brewing in Europe. You’ve got terrorist incidents which the right are all too keen to play upon. So of course there’s a rise and of course this is part of the story. But at the end of the day what was driving this, and we’ve seen this in the statistics and in the more careful analyses on Brexit that have been done, is that it’s not so much areas where you have a high degree of immigration that are the most pro-Brexit. It’s the combination of that also with stagnant or declining incomes over a long period of time.
There’s a very simple public policy reason. If everyone is suddenly racist and that drives everything, what do you do with that? Do we send them off to re-education camps? Because if it’s economics, there’s something you can do about that, but if it’s racism and it’s pure cultural hatred, then I don’t know where we go from here. So I don’t actually buy that argument, I don’t think it’s a useful argument. The last thing I’ll say about it is, when you say this, you’re giving [an excuse to] the center-left in particular, who have authored these things such as trade agreements and presided over declining or stagnant incomes for the majority of people while the top 20 percent, the top 1 percent boomed. They’re the ones who have said everything’s fine, they were the ones running the campaign in the United States saying everything’s great, why would you possibly want to vote against us? And for many people’s experience, things are not great. So basically they’re being lied to.
Now, if the center-left or the center parties in the United States and Britain simply write these people off as racists, then there’s nothing they have to do in terms of examining their own actions, their own policies, or even think that what they’ve done is wrong in any sense, giving them some inclination as to why people dislike them so much. So it’s very dangerous to use the racism diagnosis, not because it’s empirically wrong but because it leads us to a dead end politically.
MPN: Looking at Brexit, how has the British economy performed since the referendum and how do you believe that the British economy will perform once the Brexit process has been completed?
MB: This is really interesting. There’s a famous line from one of the British politicians who, when all the experts lined up and said, before the Brexit vote, don’t do this, it’ll be the end of the world. The IMF, the ECB, the British Treasury, the Bank of England — all the experts agreed it would be terrible. And then for the next 12 months or so, the economy booms. What that guy, Michael Gove, said is that the British public have had enough of experts. In a sense he’s right, because of course they were wrong.
Why were they wrong? A lot of economics of the past decade and a half has been thoroughly wrong, so there’s nothing new in that. But what the fact is, people are calling people on their claims. I think what’s going on is this, and I know this from personal experience, as I was in London in January. London’s now super cheap if you have dollars or euros. Since Brexit, the pound has devalued quite a lot, and what that basically means is there’s a giant shopping spree going on which is boosting the economy, because imports are down while exports are rocketing ahead, they are getting a boost. But essentially, Europe, which is a free movement of peoples zone, is essentially going to London to shop and is driving up prices and has given the economy a real consumption kick. Now that won’t continue, it’ll adjust over the longer term, and then what happens is, those devalued pounds have to buy more and more imports, and those imports are going to get more and more expensive. So that’s going to lead to both an actual step function increase in the cost of living in Britain and also going to push some inflation into the system.
Now, is this deadly? Is Britain going to fall off a cliff? That’s what I’m going to be skeptical about with the experts. Will the British economy cease to function? Absolutely not. So it’s very much a mixed bag on that one.
MPN: You have argued recently that Donald Trump is, in a sense, a Marxist. This is certainly a comment that will provoke some reaction… Explain this to us, how does Donald Trump resemble a Marxist?
MB: This is a provocation, and I even wrote a piece for the Washington Post, but they decided to sit on it. Can’t think why. Here’s the story: Back in the 1970s, there was a debate between a guy called Ralph Miliband, who is the father of the two Milibands who went on to run the British Labour Party, David and Ed. He was a good Marxist. And there was another good Marxist in Paris, a Greek guy named Nikos Poulantzas. So you had the Miliband-Poulantzas debate about the state and capitalist society, and on the Miliband view, it was a sociological view that it’s these elites that go to the same schools, that talk the same way, they get all the top jobs, and that’s why the state does what the capitalists want and vice versa.
Poulantzas gave a much more structural reading, which basically goes along the following lines: There’s a collective action problem at the bottom of capitalism, and here’s what I mean by this — while it’s individually rational for a firm to offshore its labor or to replace its workers with robots, if everybody does it, it’s collectively suicidal. So, what the state has to do is get above the short-term interest of profits and take the long-term view of the health of the economy.
In that sense, Trump and the people around Trump kind of are drawing on that kind of Marxist thinking. They’re not really Marxist, they’re not reading Poulantzas, but they’re coming to the same conclusion. Essentially, if you have unbridled competition — and [Steve] Bannon, his adviser, has been quite explicit on this — if you basically turn everything into commodities with a price and turn everything into a balance sheet and make everything into assets, then you create a system that is incredibly volatile and has a huge race to the bottom component. Seen against that, the whole thing about border taxes and exhorting businesses to invest at home and buy American, is kind of drawing on those similar threads. Now, does that mean that Donald Trump is a Marxist? Absolutely not. But are they both getting at that endogenous weakness in capitalist power structures? They are. In that sense, Donald Trump’s a Marxist.
MPN: What is your outlook for the U.S. economy going forward? Do you believe that “Trumponomics” will be allowed to prevail and that his administration will succeed with the stated goal of bringing back jobs and industry which were lost?
MB: There’s two stories in this, and I honestly don’t know how which one to believe, because they’re equally probable. Let’s assume that we don’t end up in a war with Iran and China and markets fall off a cliff, and all those things which are sadly possible under this administration. And let’s assume that we sort of backpedal a little bit, that he tries to do what he says he’s going to do. Now here’s the story as to why it won’t work: Look at Germany. Germany’s the most efficient exporter in the world, it’s got a large manufacturing sector. It’s short 300,000 skilled engineers. So there’s plenty of room for manufacturers in this world, that’s true. But the size of the German manufacturing sector, in terms of the number of workers they employ in total, has been shrinking for the past 20 years. And it’s shrinking in China. Because ultimately in capital, machines do substitute for labor very efficiently, and unless you’re going to make a political commitment to build 1980s-style cars with 1980s-style production techniques, it’s just not clear how you’re going to provide that volume of jobs, because most of those jobs can and should be automated, because they’re dirty and unhealthy and probably better done by robots. So there’s that story.
Now here’s the other one: If you look at the total volume of manufacturing and total output of manufacturing across the planet, output is up but the number of workers is down, and that seems to go with that story. But there’s another way of telling that story, which is that a lot of firms just moved to China and moved to globalized locations, where it’s so cheap that you can substitute labor for capital. In a sense what you’ve done then is artificially depressed the number of workers that you can have in manufacturing. We could still have a bigger manufacturing sector if those processes were reversed.
Now, I think the second one is interesting. I’m not sure it contradicts the first one, but they do push in different directions. If the second one is true, Trump can do a lot of what he says he’s going to do. If the first one, the effect of the first one overrides the effect of the second one, he’s not going to be able to do that. But more importantly and more immediately, have a look at what he’s doing. The first thing is, we’re basically going to create trouble with every Muslim country that we’ve either bombed or been in or have bad relationships with. We won’t do anything to the Saudis despite all their links to God knows what.
That’s one thing, and the next thing is, we’re going to start talking trash with China, etc.
The third thing is we’re going to roll back the Wall Street playbook to 2006 and we’re going to have big tax cuts. So what does that actually look like? It looks like a Trumped-up version of Reaganomics. Giving me another tax cut is not going to produce jobs in the Midwest, irrespective of trade policy. It’s heading in several contradictory directions at once, but we’ll see where it goes. As to exactly how it’s going to play out, I have as much of a clue as anybody else, which is to say, we don’t know.
MPN: President Trump recently announced the formal withdrawal of the United States from the Trans-Pacific Partnership (TPP). It also looks like the Transatlantic Trade and Investment Partnership (TTIP) is also dead in the water, while the North American Free Trade Agreement (NAFTA) may be up for renegotiation. Free trade, of course, and these agreements are presented by some as this really great thing. What was the real economic impact of free trade agreements such as NAFTA, and what would TPP and TTIP have actually meant, in economic terms?
MB: I’m not a trade economist, so these are comments about what I think about this stuff without having the benefit of really deeply studying it. My basic story goes like this: NAFTA is qualitatively different from TTIP and these other agreements. NAFTA was about trade in real goods and services between countries that abut each other and were already heavily integrated, particularly in the Canadian case, into the American economy and supply chains. In a sense, what the American auto industry got was slightly cheaper, more flexible production of auto parts by the Canadians, and then what they got from the Mexicans was cheap labor to offshore a bunch of stuff. It’s the jobs effect in the Mexican side that people have paid the most attention to.
Ross Perot was right when he said there will be a giant sucking sound as all those jobs leave America and go to Mexico. That happened. But we also have to remember that prior to that — take Wisconsin, for example. Wisconsin lost one-third of its manufacturing jobs before NAFTA, when they moved from Wisconsin to places like Texas. There was a huge drain to the south to get away from organized labor, to make labor cheaper. So in a longer-term view, you can see NAFTA as the continuation of a process of getting out of the heartland which began in the 1960s, in fact. So that’s that one.
Now what about the other [trade agreements]? The other ones are totally different. If you think about their economic effects, they were all estimates because they didn’t do them. People talked about how they would boost GDP 0.5 percent or 1 percent. That’s nothing, that’s a rounding error. One percent on a $70 trillion economy is nothing to be sneezed at, but it’s not like it’s going to give us 10 percent or a huge boost to growth, and this is over a very long time period.
So why was the left, in particular, incensed by these agreements? Because of things called investor protection clauses, which essentially locked in the rights of firms to sue governments for policies they didn’t like. An example of this was the company which was suing the U.S., I think it was over the Keystone pipeline decision of Obama, for lost profits, because they would have made a profit had that decision not come down. The decision has now been reversed, of course, but I’m using it to illustrate the problem. Or imagine you’re in Denmark, and Denmark decides it’s going to do even more against climate change, and it pushes regulations on firms that cost them money. Under these agreements, they can go to a shadowy court where no minutes are kept, the public doesn’t get invited, and an independent tribunal of trade lawyers and lobbyists will decide if the Danish taxpayer has to compensate a firm for voting for things that they would like.
That’s why the left got really nervous about this stuff, and I think justifiably so. But they were missing the trick, because those agreements really weren’t about trade, they were about security. They were essentially cementing in the 21st century, with a rising China and a shift to Asia in terms of general economic activity on the planet, the Americans’ special position in the world. The TPP didn’t contain China but it contained everyone else. It was a way of keeping the Chinese out and keeping the economy locked down in terms of American rules and order. By walking away from that, we’ve in a sense shorted American rule and American hegemony in that area, and this is why the Chinese were absolutely delighted at first, when Trump got elected, because that meant no TPP, which meant their influence was going to grow. Of course, what’s happened since then has been a doubling of that effect, because the sum of the random shocks that appear to be generated almost every day by the Trump administration is effectively driving more and more countries across the world into the arms of China, because suddenly they look pretty reasonable. So there’s some, let’s say, some interesting politics going on because of these agreements.
MPN: How do you gauge the backlash to Brexit and to Trump’s presidency thus far, and all of the reactions that both have generated?
MB: What’s the Brexit reaction, the backlash against Brexit? Even when they had a free vote in Parliament, the vast majority of MPs endorsed it. The Brexit backlash, to the extent that it exists, is people like me and people of my class sitting in London and fretting about their rather exalted position in society and how it’s going to change because you’ve got this populist move which the Conservative Party, under [British Prime Minister Theresa] May, has embraced. Imagine the economy working for ordinary working people and not just the banksters and the elites. Goodness me! So there’s that.
In terms of the backlash against Trump, if you put a bull in a china shop, people who buy china will get nervous. That’s exactly what’s happened, and there’s a certain kind of shock that still hasn’t receded in the U.S., that the election actually happened and that this guy and the people around him are now in charge. I’d like to think it was what Wynton or Branford Marsalis, the musicians, one of them I believe was critiqued on social media for not showing up at a rally against Trump. He said how about we actually wait until he does stuff and then we’ll find out what we can protest. Well, given the way things have gone with the immigration orders and the way that security tends to be trending and what’s going to happen with financial regulation, I think there’s plenty to get upset about at this juncture, and I think that’s going to continue. But even though the drivers behind Brexit and Trump were dissatisfaction with elites and declining wages and everything going to the top and the top getting bailed out but nobody else is, they’re the same but they’re playing out in different ways because they are in very different political systems.
MPN: Is the very existence of the eurozone or even the EU itself now in danger, in your view?
MB: It is, and that’s the line that I used to say. I used to worry about the euro so I wrote about it, and it decided it was going to stay. But what I wasn’t paying attention to is the thing that lies under the euro, which is the support of mainstream parties for the European project itself. What happens if those parties become very weak or fragile and are replaced by insurgents from the left and the right? Well, the left kind of likes the EU as a project, they like the cosmopolitanism of it, they’re not so xenophobic in that sense. But they are nationalists in economics, in the sense that they want economics to, as Theresa May — no left winger, but we’ll use her words — make it work for ordinary people. And that’s about re-nationalizing control of markets, and the Brexit, and taking back control comes from that control.
On the right it’s much more pronounced now. It used to just be the left parties that were having their lunch eaten. Think about what has happened to the British Labour Party in particular and the German SPD [Social Democratic Party], who now poll regularly around 22-25 percent. They’ll never form another government. Back then it seemed that the center-right was the impregnable force, and while May and [German Chancellor Angela] Merkel have definitely shored up their vote, you actually see with the Brexit decision, with the rise of AfD [Alternative for Germany] in Germany and with a host of other things coming up, for example, the French election, the right-wing center bloc is having its vote eaten away by insurgents as well.
Think of termites in a house. If they start eating away at the foundations on both the left side of the building and the right side of the building, then the building looks fine from the outside but it could go any day. The French election is going to be absolutely crucial, and then there’s German elections coming up and that’s going to be very important as well. I think one of the things that might have happened is that the Europeans are now having a kind of timeout, because they’re not squeezing their economies mindlessly at the moment, things are actually getting better. Unemployment dipped below 10 percent for the average of the EU for the first time since, I think, 2008, even though youth unemployment is catastrophically high and there’s still very low growth. Things have stabilized over the past two years. Whether you can keep them stable through central bank intervention forever is a different question, but that’s where we are at the moment.
I think that one of the weird things that’s happened with the election of Trump, you think about protests in cities all over the world, only America can provoke such a reaction. They’re so important that people protest the election of someone who doesn’t govern your country. But with those protests and then with the Trump administration’s behavior as soon as they got into power, I think it may be the case that a lot of the European public are looking around saying that we were thinking about going down that road with these populists, maybe that’s not such a good idea. So there could be a negative demonstration effect from the Trump effect, and that could mobilize more people, particularly on the left, to go out and vote against the National Front, etc.
But unless mainstream parties change their message and actually embrace some of the concerns that have animated and thrown the populists into power, then there’s a big problem ahead. Because if everyone shows up to block the National Front, the legitimate question from the Front supporters is, “What are you for?” All you are doing is blocking forces that want to make a change. You become kind of like the defensive tackle in American football, all you’re doing is there to block, you’re not there to create anything. And that, itself, is its own form of fragility.
MPN: Greece once again finds itself popping up in the news. Despite the government’s claims of an economic recovery and the achievement of a primary budget surplus, the future of the IMF’s participation in the Greek so-called “bailout” program is in question, Greece is facing another huge debt bill, revenues are shrinking, while there is increasing talk of “Grexit,” one that would be imposed by the EU itself. What do Greece’s economic indicators actually show and do you believe that Greece is on its way out of the eurozone? Indeed, do you believe that Greece itself should leave now, on its terms?
MB: Your question is a bit of a shocker to me, because I didn’t actually realize that there was new talk of Grexit. I didn’t actually hear that, I have been focused on other things, as they say, since November, given everything in the United States. But in Greece it’s not going well, you’ve got a real problem, those who have skills, those who are young have left. They tend to be your future taxpayers. You’re left with the public sector and the old essentially, to be very crude about it. They don’t generate much in the way of tax revenues, particularly when the economy is chronically depressed and is constantly trying to drive a budget surplus, which in the context of a debt overhang means less and less employment. It’s in a terrible place. But given the way the troika [the European Commission, the European Central Bank, and the International Monetary Fund] have structured this and the way the European Stability Mechanism works, which has taken most of the private sector risk from the banks that lent Greece the money and put it into the public sector, Greece is in a kind of tutelage state, where it lives off the drip feed of the troika.
Would Greece be better off outside? Probably. Would Greece be better off with its own currency? Probably. But then you’ve got a question of how you get there. There’s been discussions of parallel currencies, etc., but whichever way you go it’s already bad, and that transition is going to hurt even more. Think of it this way: You still have euros, and you have assets in a Greek bank and you get wind of the fact that there’s going to be a parallel currency. You’re going to try to do everything you can to move those assets into an Italian bank, because that way you’ve still got real euros when ultimately you’re handed new drachmas. If there’s a huge devaluation because of that, then those euros will buy lots more new drachmas than whatever parity sets on the day there’s going to be a swap. So this is the problem of the euro as a whole, it’s a “Hotel California” problem — you can check in but you can’t check out. That’s why I’m surprised by the new talk about this, because it’s not clear to me how you affect this. We can imagine various scenarios, but at this point in time they are all scenarios.
MPN: You mentioned the parallel currency as a possibility, and there has been talk about a so-called parallel currency being imposed. What has the history of dual or parallel currencies been in other situations where they have existed, and would this be a harmful prospect for Greece and its economy?
MB: The Greek economy is already on life support, so if you start playing around with the electricity to the life support machine, that can be kind of damaging. But ultimately if you’re laying in a ward and slowly dying, you might as well try something.
In terms of parallel currencies, they’re not great. The history of them is checkered, there’s not very many around. One of the ways that has been talked about most recently has been in the context of France and the National Front. The National Front want to get out of the euro, so in a sense what they’ve proposed is kind of reverse-engineering the euro. You had national currencies, now you have this thing called the EQ, which is kind of like, if we all had a currency, how much would it be worth and this is what it looks like, which was a prelude to going into the euro full blast. They’re saying, why don’t we basically take time to renegotiate all of our contracts, we’ll back out of it into the EQ as a kind of parallel currency, and from there we’ll go back.
The problem is the speed and reaction time of financial markets. Gone are the days where you could lock up the banks on a Friday on a bank holiday, stuff them with a brand new currency, and everybody opens up on a Monday and says, “Look at the new money,” and business goes on. In a global, interconnected, hyperlinked world run by algorithmic trading platforms and dominated by hedge funds and big banks that make bets on trades, if you’re trying to do this stuff, the currency markets will kick the hell out of you. It’s not about beating up Greece, it’s a bigger target. If I know that Greece is going to try this, I know there’s going to be a lot of volatility with the euro, I can basically take out options and bet on both directions in which way the euro moves, and then that creates amplifications in the system as everybody else tries to do it. So it’s just a very, very hard thing to do in the modern world, to back out of this. People talk about these things, but I have absolutely no way of weighing what the reality of it is.
MPN: What might the difference be between a parallel currency system and a cleaner break and a return to a national domestic currency?
MB: I find these conversations to be sort of, many angels dance on the head of a pin. If you just declare new drachmas tomorrow and start issuing script, anybody who’s got euro will recognize that as real money and will want to preserve their euros, so you’re going to be fighting an uphill battle immediately. If you try to do it more gradually through a parallel currency and hope that people adjust and you then legislate that payments should be done digitally rather than through cash and it’s always going to use the new unit of account, yes, in principle you can get there, but it’s not easy, and it’s not easy to foresee how it works out. I don’t really have any strong opinions on which one is better, because I do think these are philosophical more than practical exercises at this point.
MPN: Would you argue that the neoliberal world order, or even capitalism itself, are in crisis?
MB: I did a Foreign Affairs essay reviewing some recent work called “Capitalism in Crisis: Who’s To Blame and How We Got Here.” I think there really are big problems, and the big problems are pretty simple. One is inequality on a massive scale, simply because when 88 percent of the population doesn’t feel they are sharing in the prosperity they will want to redistribute one way or another, and if the mainstream parties are tone deaf to these needs or the movements that drive them, then they will be replaced, so that’s a problem.
In terms of capitalism itself as a social system, as an economic system, I think some of the stuff that’s out there, like robots replacing jobs, is a bunch of tech-speak from California, so I would short it. The fastest-growing job in the United States by volume is elder care nurse, and I have yet to meet an elder care nurse robot. But you do end up with a big service sector with low wages, in part because capital controls all the money, all the power, and all the advantages. That’s not going away anywhere soon, so that creates a lot of political tensions and frictions.
I think there are real deep structural problems. Can they be overcome? Yes, we can if we think smartly about them. It is easy to do something about inequality. Pick a tax system, the one from the 50s, the 60s, or the 70s. Any one, I don’t care which one. You’ll generate way more revenue, and you’ll actually create better patterns of consumption in the middle, because basically the top has all the money and they don’t pay taxes, the bottom isn’t earning any money and it pays most of the taxes, and then the very poor don’t pay any taxes and they have no money. That’s patently unsustainable. So you can imagine progressive tax reforms which would do a great deal to restore middle class consumption.
People have got to stop accumulating debt as a surrogate for wage growth. It’s great for banks, but it’s terrible for everybody who is actually taking on that debt. When you have an environment with low inflation there’s no way to eat away the value of the debt and your wages aren’t growing. You create kind of creditor-debtor standoffs. What’s happening at the level of Greece and Germany is in a sense also happening within countries, between borrowers and lenders, between generations, between the old — who have most of the assets, 75 percent of all financial assets are held by baby boomers — and the young — who are increasingly expected to pay for everything with wages that simply aren’t growing. There’s lots of problems and lots of tensions and the populism we see around the world is a reaction to that. Hopefully it’s not the only one.
Michael Nevradakis is a PhD candidate in media studies at the University of Texas at Austin and a US Fulbright Scholar presently based in Athens, Greece.
Dear friends and listeners,
Here’s the latest print pieces from Dialogos:
Our Article on Political Developments in Brazil and Similarities with the European South
Our latest article, taking a look at political developments in Brazil preceding and following the ouster of democratically-elected president Dilma Rousseff, and the many similarities and parallels which exist between Brazil and the European South, including Greece, has been published in Mint Press News. This article focuses on the politics of the previous Workers’ Party governments in Brazil and whether they were truly progressive, the harsh austerity which has been implemented by the non-elected president Michel Temer, and the many similarities of Brazil’s situation with countries like Greece.
Our Interview with Geopolitical Analyst Alex Christoforou Featured in Mint Press News
Our recent interviews, in English and Greek, with journalist and geopolitical analyst Alex Christoforou, co-founder of TheDuran.com, has been featured in Mint Press News! This is a combination of two recent Dialogos Radio interviews featuring Christodoulou, which aired on our radio broadcast in January and February.
In this interview, Christoforou discusses hot-button political and geopolitical issues, including Trump and the foreign policy he may follow, Russia and its response to developments along its border and in the Middle East, Syria, the Cyprus reunification talks, Brexit and Grexit, and much more.
Find this published interview, in English, here: http://www.mintpressnews.com/durans-alex-christoforou-treating-russia-bogeyman-failed/225175/.
Dialogos Radio & Media
Originally published at MintPressNews:
The Global South is growing unintelligible from the European South amid harsh austerity measures and other maneuverings that suit the rich and powerful at the expense of the poor and working class.
BRASILIA, Brazil — Harsh austerity. A 20-year public spending freeze. A non-elected government. A coup backed by the United States and corporate world.
This is the new reality that Brazil has faced following the impeachment and ouster of the democratically-elected Dilma Rousseff in August of 2016 on charges of corruption and her replacement by vice-president Michel Temer, a favorite of Washington.
This is also a new reality that has been met by widespread disapproval, occasional large-scale protests, and a new economic uncertainty for a country which, just a few years ago, was seen as an up-and-coming economic powerhouse, along with the rest of the BRICS, the bloc composed of emerging economies of Brazil, Russia, India, China and South Africa. This optimism has been quickly supplanted by an increasingly volatile social situation in Brazil and great pessimism for the future.
Much has been made in the media about the progressive credentials of the Rousseff government and that of her predecessor, Luiz Inácio Lula da Silva, both of whom represented the Workers’ Party (PT) of Brazil. Much has also been made of the mass protests which led to Rousseff’s outster, which bore similarities to protests seen in countries such as Venezuela against the Maduro regime, and the relative lack of protest that the Temer government has faced since ascending to power.
What is actually happening, though? As is often the case in such situations, reality is far more multifaceted and complex than frequently presented, while parallels can be drawn with other austerity-ravaged countries such as Greece.
A radical break or austerity lite?: The Rousseff and da Silva governments
The governments of da Silva and Rousseff were often compared to those of Hugo Chávez and Nicolás Maduro in Venezuela, Rafael Correa in Ecuador, Evo Morales in Bolivia, and Cristina Fernández de Kirchner in Argentina, in representing a break with the doctrines of neoliberalism, economic austerity, and privatization that much of Latin America experienced during the 1980s and 1990s.
This claim is borne out by some policies and certain economic indicators. In a 2014 article, well-known commentator Pepe Escobar, who frequently focuses on the BRICS nations in his writing, pointed out the tripling of the minimum wage between 2002 and 2014, a decline in unemployment, increased GDP per capita, the repayment of Brazil’s debts to the International Monetary Fund, higher purchasing power, plus social programs which benefited almost 50 million Brazilians.
Similarly, in a 2014 interview with me for Dialogos Radio, investigative journalist Greg Palast cited da Silva’s refusal to privatize state banks and the national oil company, while creating the “Bolsa Familia,” or a minimum income offered to many Brazilians, in an effort to lift them out of poverty. According to Palast, these policies — the opposite of the privatizations and austerity dictated by the International Monetary Fund — fueled Brazil’s phenomenal growth during this time, reaching 7 to 9 percent annually at its peak.
But did da Silva and Rousseff go far enough? Numerous commentators have expressed doubts.
For instance, the Rousseff government appointed Joaquim Levy, known as a pro-austerity “fiscal hawk,” as finance minister (this, it should be noted, was when Temer was Rousseff’s vice president). Scholar and author James Petras, an expert on Latin America, pointed out in November that da Silva implemented IMF-mandated austerity programs soon after being elected, and he appointed neoliberal economists to his cabinet whilst supporting the interests of agribusiness and major oil and mining concerns — all while overseeing policies which left numerous peasant families landless.
The Brazilian “economic miracle,” according to Petras, was a mirage fueled by high export commodity prices which the Brazilian economy temporarily benefited from, enabling programs such as the “Bolsa Familia.”
This was echoed by Palast, who in a 2016 follow-up interview with Dialogos Radio cited the sharp decline of oil prices and collapse of its commodities trade with China, as factors in the Brazilian economic slowdown — and increased unrest in the country prior to Rousseff’s ouster. In turn, Escobar also cited Rousseff’s concessions to big banking and agribusiness interests and a swing to the center as mistakes which also led to the emerging middle class increasingly flirting with the right once economic difficulties began.
In an interview with MintPress, Kat Moreno, a Ph.D. candidate in Political Science and visiting scholar for Global Workers’ Rights at the Penn State University, argued that the Rousseff government was quite austere, and that despite a militant, leftist background, the material conditions she faced pressured her to enact austerity policies during her reign.
A recent analysis published by TeleSUR further argues that austerity measures were implemented by the Rousseff government as a defense mechanism of sorts, in an effort to fend off Rousseff’s impeachment by appeasing the right.
In his 2014 interview, Palast cited Rousseff’s return to IMF-sponsored austerity policies and the reduction of pensions as factors which were disastrous for the Brazilian economy, calling the IMF “a society of poisoners,” while in his 2016 interview, he cited Rousseff’s political inexperience and her inability to effectively communicate with the public as factors which made her impeachment possible.
An uprising from below or from above?
2013 could be seen as a hallmark year for Brazil, one in which the tide began to turn against the ruling PT. The “Brazilian Spring” — following in the footsteps of the protests seen in Turkey that year, the Arab Spring, protests of the “indignants” in Spain and Greece, and the Occupy Wall Street movement of 2011 — emerged out of protests against public transportation fare increases and perceived government corruption. These protests could be seen as having served as a “dress rehearsal” of sorts for those which followed in 2015 and 2016, when fed-up Brazilians took to the streets en masse, including an estimated 7 million citizens during a March 2016 protest, to rally against worsening economic conditions and continued government corruption.
Or did they?
It has been pointed out that the protests of 2015-2016, leading up to the impeachment of Rousseff were not led by the impoverished or the working class, but by such groups as the Free Brazil Movement (MBL) and Students of Liberty (EPL).
Who are these groups?
Largely consisting of well-to-do, white academic circles, it has been revealed that they were financed by the decidedly right-wing Atlas Economic Research Foundation, itself funded by the notorious Koch brothers.Pepe Escobar has described the events of 2015-2016 as a “white coup,” fueled by the country’s major media outlets, who were “salivating” for regime change.
This scenario closely mirrors the protests seen recently in Venezuela against the increasingly embattled Maduro regime. Venezuela, like Brazil, has been battered by falling commodities prices — especially the sharp decline in the price of oil. This has brought to the forefront protests, led by right-wing elements seeking regime change and sensing an opportunity to make it happen.
Such protests are also not confined to Latin America. Greece, itself embattled by years of economic depression and austerity, has begun to see occasional (but, for the time being, relatively small-scale) protests led by supporters of the center-right parties such as New Democracy.
Prior to the country’s July 2015 referendum on approving or rejecting an austerity package demanded by Greece’s European “partners,” these elements organized fairly large protests in favor of “yes” (accepting austerity in order to “remain in the European Union”). In turn, smaller protests in 2016, organized with such social media hashtags as ftanei pia (“enough already”) ironically protested the austerity measures imposed by the purportedly left-wing Syriza-led government whilst supporting closer EU ties and the New Democracy party.
Similar to Brazil, Greece’s major media groups — all owned by oligarchic interests with a huge stake in the country’s major economic sectors — have vehemently supported austerity and supported the “yes” vote in the 2015 referendum.
Speaking to MintPress, Guilherme Giuliano, at Ph.D. candidate in Political Science at the University of São Paulo and member of the “Catso” social workers’ autonomous collective, described the 2016 protests as not having been solely against Rousseff or her government. Nevertheless, the protests were co-opted by certain parties and movements and used as a catalyst for the coup against Rousseff.
Kat Moreno described the MBL as one of the movements which freely took to the streets, while other protest movements not organized by formal actors and representing poorer strata of society were met with police repression.
Petras classifies the capitulation and eventual fall of the PT governments, led by da Silva and Rousseff, as another in a long string of failures of the left. These “failures” have also been evident in countries such as Greece, where Syriza was, in January 2015, elected on promises to “tear up” Greece’s memorandum agreements with its lenders and to put an end to austerity but has instead faithfully continued enforcing such policies and signed further austerity agreements with the country’s lenders, implementing further cuts and reneging on all of its pre-election pledges.
The ‘shock doctrine’ returns to Latin America
In her 2007 book “The Shock Doctrine,” Naomi Klein highlights how the global capitalist class uses crises and disaster situations — both real and invented — as an opportunity to pounce upon suffering countries when they are at their weakest, imposing harsh austerity christened as “free market” policies and imposed, when necessary, by force, including police violence and brutality.
This has been characteristic of Brazil following Rousseff’s impeachment and Temer’s takeover.
It has also been characteristic of the crisis-hit countries of the European South, where protesters in Greece have been dispersed and stunned into submission by tear gas and police violence which invariably goes unpunished, while riot police enforcing home foreclosures is a common sight in Spain.
Klein traces the origins of the “shock doctrine” to the neoliberal doctrine first espoused by economists such as Milton Friedman, the father of the “Chicago School” of economics, which Latin American countries such as Chile became intimately familiar with under autocratic regimes such as that of Augusto Pinochet.
It is ironic, therefore, that Klein openly and vocally supported the Syriza government prior to the January 2015 elections in Greece which first brought it to power. But she has remained conspicuously silent since then, while Syriza has continued the policies of its predecessors. Nevertheless, the “shock doctrine” serves as a useful guide to explain what is happening in such countries today, including Brazil.
In another one of his analyses on the Brazil situation, Escobar classified Brazil as a victim of a “hybrid war” launched by the world’s neoliberal elite one which is also targeting other BRICS nations such as Russia.
How has the “shock doctrine” unfolded in Brazil?
With a lot of shock, and a lot of awe, to say the least.
A 20-year federal freeze on public spending was almost immediately imposed by the Temer regime, placing caps on spending for health care, education, and social expenditures and shrinking a welfare state which, according to Moreno, was already much more limited than its European counterparts. This was followed up by the announcement of job cuts in the public sector (despite rising unemployment which has more than doubled since the country’s recent economic peak), and a special “Christmas gift” for Brazilian workers: the expansion of the workday from 8 to 12 hours, complete with a reduction in the lunch hour.
This closely resembles the sharp reduction in pay, dismantling of collective bargaining rights, and massive layoffs which have been seen in countries like Greece. (There, pensioners were treated to a “Christmas gift” of their own by the Syriza-led government: a paltry “Christmas bonus” used by the government as a ludicrous PR stunt after it had already slashed most pensions by approximately 50 percent in 2016 and announced further tax increases for 2017.) In Brazil, environmental regulations have also been scrapped or relaxed, posing a particular threat to the country’s indigenous peoples.
In a rare moment of frankness, Temer told an audience of business and foreign policy elite assembled in New York in September that Rousseff — who was no radical while in office — did not go “far enough” in implementing the harsh economic reforms demanded by Temer’s party.
The new Temer government does not feel itself constrained in any way in terms of going “far enough.” Corruption charges are now being faced by da Silva, who currently leads overwhelmingly in opinion polls for Brazil’s next presidential elections, and members of his family.
Not even bothering to keep up appearances, Temer’s appointed cabinet consists exclusively of wealthy white men, while his government attempted to legislate self-amnesty for itself in September — a privilege already enjoyed by members of the Greek parliament and Greek government ministers, who are immune from prosecution for any crimes committed while in office and who regularly “write off” internal parliamentary investigations into previous governments’ wrongdoings.
This comes as the Temer government, which led the ouster of Rousseff on corruption charges, is itself facing corruption scandals.
In such a climate, it is inevitable that corruption will “trickle down” to other sectors of society. Brazil is currently said to be experiencing a far-right resurgence, shattering the common image of the country as one of racial inclusiveness and harmony.
Tourists to Brazil now have the unique opportunity to visit a real-life plantation and be served by black “slaves.” Police violence, already a major problem under the Rousseff administration, continued to grow in 2016 and 2017. There’s also the increasing prison riot crisis, which has been encouraged by elements within Temer’s government who view it as an effective means of culling the population in the country’s overcrowded prisons.
How have Brazilians responded?
The spotlight of the international media was thrust upon Brazil in 2013 and again prior to Rousseff’s impeachment in 2016, when protests sprung up in the streets—which may have been fueled, at least in part, by Koch-funded and wealthy elements in Brazilian society.
With a regime in place which may not be supported by the majority of Brazil’s population but is very much supported by the global banking and business elite and by Washington, protests against Temer’s government have not been afforded the same level of coverage, perhaps giving the impression that the Brazilian populace has resigned itself to a tacit acceptance of the new regime. Reality, however, seems to be a bit more nuanced.
There have been both strikes and protests on a fairly wide scale in Brazil since Temer’s takeover, including protests which erupted following the enactment of the 20-year public spending freeze, further significant protests against the Temer government on Brazil’s Independence Day, and a strike of workers at oil refineries all across the country at the end of the year.
These movements are accompanied by abysmal approval ratings for the new government in multiple public opinion surveys, even if approval ratings and poll numbers are often meaningless or inaccurate. Just look at the low approval ratings and exceptionally high re-election ratings for members of the U.S. Congress, for instance, or the multiple polls which all but assured a Hillary Clinton victory in the U.S. presidential elections, or the public opinion polls in Greece which have repeatedly been not just grossly inaccurate but always in a pro-austerity direction. For instance, Greek polling firms predicted a neck-and-neck referendum result in July 2015, when in fact, the “no” vote rejecting the European Union’s proposed austerity package received an overwhelming 62 percent of the vote.
Despite the protests that have taken place ever since Temer took over in Brazil, Kat Moreno points out the factors that have prevented them from being more widespread or long-lived.
According to Moreno, some strata of society do not feel safe in taking to the streets, and Moreno cites fear as a “strong variable” to consider when examining responses to the political situation in the country, as a result of the high degree of police repression and brutality, which has been especially evident during protests of left-wing groups and protesters who are not affiliated with any major organization or party.
Such a situation could also be said to foster “protest fatigue,” which is often seen as a factor in the lack of wide-scale protest in Greece and other crisis-stricken countries of the European South in recent years. Following large-scale protests seen in the 2010-2012 period, which peaked with the movement of the “Indignants” in Spain and Greece in the spring and summer of 2011 and which were eventually met by a violent and heavy-handed police response, protests have largely disappeared or been confined to ephemeral and single-issue efforts without longevity.
In Greece, a common response to questions as to why Greeks no longer take to the streets is that protesters will simply get tear gassed again and sent back home. The “shock doctrine” described by Naomi Klein may also serve as another psychological factor: When protests turn out to be fruitless and unpopular policies are rammed through despite opposition, feelings of discouragement and despair become more prevalent and serve as obstacles to further action.
To some extent, Brazilian society may be experiencing some of these symptoms.
Escobar refers to the “toolbox” of tactics employed in Brazil leading up to Rousseff’s ouster. This set of strategies included the creation of manufactured consent amongst the populace, for the impeachment and the new regime.
This bears a great similarity to the cases of countries such as Greece, where public opinion polls conducted by polling firms which are not independent of the state and which are commissioned by pro-austerity media outlets have repeatedly shown vast majorities purportedly in favor of EU and eurozone membership at all costs, while the very few independent surveys conducted in Greece, such as those by Gallup International, have actually found such majorities to be slim or nonexistent.
Manufactured consent is used to legitimize the austerity policies which then follow, and to characterize any dissent as belonging to a small, marginal minority.
Indeed, similarities between the case of Brazil and the case of countries of the European South such as Greece abound. Just as the Temer government has not been elected and overthrew a government which apparently did not go “far enough” in its austerity regime, the EU imposed a non-elected technocrat prime minister, Lucas Papademos, a former banker, on Greece in late 2011 to ensure that a new package of austerity measures and “reforms” would be railroaded through parliament.
At around the same time, a non-elected prime minister, Mario Monti, was also installed in Italy, with the blessings of the EU — technocrats from which described this unelected government as “the best thing that ever happened to Italy” during a visit of mine to the EU in 2013 as part of a week-long academic program. Italy is now being governed by no less than its third consecutive non-elected prime minister.
The Greek referendum overwhelmingly rejecting EU-proposed austerity was shot down in short order, replaced by an austerity package even harsher than that which had originally been proposed, and even more onerous than the two prior memorandum agreements signed by Syriza’s predecessors, the New Democracy and PASOK (“socialist”) political parties.
The manufactured consent and “shock doctrine” which imposed the “bitter medicine” of austerity on Greece could be viewed as a pre-emptive strike against any thoughts of “Grexit,” a Greek exodus from the Eurozone or even the EU, much like the “hybrid war” against countries like Brazil and Russia described earlier by Escobar.
Kat Moreno identifies certain parallels between the Global South, of which Brazil is part, and the European South, which has in recent years experienced much of the same IMF-supported austerity which Latin America is all too familiar with. She highlights the “clear relationship” between being a part of the Global South and being dependent on and the hostage of the international financial system.
And in looking to the future, it is difficult to say who can lead these countries, whether it is Brazil or Greece or Spain or Italy, out of their current death spiral unscathed. Guilherme Giuliano points out that what has been happening in Brazil, as in Greece, Argentina (where the Kirchner government was replaced by one much friendlier to Washington and to global capital), or even the United States, are symptoms of a global crisis — a crisis which, according to Giuliano, “nobody has a progressive way out.”
Indeed, many progressives and much of the global left seem to be focused more strongly on identity politics and a notion of a world without nations or states. In doing so, they have supported such undemocratic, austerity-driven institutions as the EU, while demonizing phenomena such as the “Brexit” as the exclusive realm of racists and xenophobes, widening their chasm with vast sections of the poor and working classes in the process.
Meanwhile, a blind eye has been turned to the actions of former President Barack Obama and former Secretary of State Hillary Clinton, who in conjunction with Wall Street, supported right-wing coups and electoral takeovers all across Latin America, from Brazil to Venezuela to the Honduras. In this vein, James Petras chastises “left politicians who speak to the workers and work for the bankers.”
As for Brazil, Moreno describes the country as finding itself at a crossroads.
“People are seeking autonomy over their destinies, but where it is going we are not sure,” she said. “It can lead to neo-fascism, or it could go towards leftist positions.”