Wayne O'Leary

Are We Greece?

We are Greece, or we are about to become Greece, or we may become Greece in the near future. That’s the constant refrain of conservative commentators and politicians (and many centrists as well) when discussing US economic and budgetary policy. It’s the sound of the deficit hawk in full cry.

The line is supposed to scare Americans and convince them, by dint of sheer repetition, to accept the need for the identical response to hard times emanating from European capitals, especially Brussels, Belgium, governing seat of the European Union, and Berlin, Germany, which really calls the EU’s tune. The response can be summed up in one word, austerity. And not just routine austerity, but austerity to the max, to the nth degree, austerity über alles as German Chancellor Angela Merkel might say.

In Europe, this policy regime is either voluntarily self-imposed by conservative governments like Germany’s and Great Britain’s, or involuntarily imposed by the Euro Zone’s “troika” (the European Commission, the European Central Bank, and the International Monetary Fund) on distressed bailout recipients, such as Spain, Portugal, Ireland, and, of course, Greece, with the goal of disciplining supposedly spendthrift and profligate EU laggards, putting them on the fiscal straight and narrow. A carrot-and-stick approach is used: apply domestic austerity in exchange for requested monetary help (to pay down sovereign debt owed to bondholders), or lose EU membership and default.

For the poorer affiliated countries, located mostly on the Continent’s southern fringe bordering the Mediterranean, EU membership has become increasingly problematic as the organization has strayed from its original postwar mission to promote European unity, democracy and a common market. Since the adoption of the Euro Zone’s Maastricht Treaty of 1992 and subsequent agreements, which together established a single currency, a unified (or “flexible”) labor market, and fiscal constraints on member nations, the EU has evolved into a mechanism by which the strong northern contingent, led by Germany, dominates the weak.

More importantly, it is the instrument by which Europe’s globalized corporations are allowed to enforce their economic will through limitations on the sovereignty of individual EU nation-states; the multinationals operate under a neoliberal umbrella that virtually outlaws Keynesianism by limiting annual national deficits to 3% of GDP, not only crippling stimulative spending, but encouraging privatizations and weakening government oversight by means of budget cutbacks. In addition, EU members can’t unilaterally devalue their common currency (the euro), and capital controls are illegal.

The upshot is that countries like Greece and Spain are unable to respond to economic disaster the way Roosevelt did in the US during the Great Depression or Obama did (to a lesser extent) during the Great Recession. Which begs the question, are we actually becoming Greece? (or Spain or Portugal or Ireland?) In the sense of being a nation lacking true sovereignty, unable to react independently to emergencies, the answer is obviously not; we control our own destiny, which much of Europe no longer does. In the sense of being a potentially failed state living on the economic precipice, the answer is the same.

There are measurable differences in resources and development that belie the fallacious Hellenistic comparison. The US has 27 times Greece’s population, 71 times its land mass, 55 times its gross domestic product (more than all of Europe’s combined), and 59 times its level of exports. The notion that the world’s largest and most diversified economy is about to implode Grecian-style is ridiculous on its face.

Only one thing could change that equation: the panicky adoption of European austerity policies based on the absurd belief that temporarily maintaining modest deficits is consigning us to the fate of a tiny nation overwhelmed by the outside forces of globalization. This disregards the beginnings of a domestic recovery from recession, admittedly halting, that has reduced US unemployment to below 8%.

The austerity-afflicted Euro Zone, in contrast, has an overall 11.7% jobless rate along with a negative GDP, and its weakest members have been callously forced into recession to meet stringent EU bailout terms emphasizing brutal cuts to the public sector. One by-product has been selective unemployment rates not seen since the 1930s and reaching in excess of 25% for some countries.

The ruthlessness of Europe’s forced austerity is unprecedented. Greece and Spain are selling off billions in public assets — utilities, railroads, airports, and shipping facilities. Portugal, its right-wing government determined to “reestablish discipline,” is expanding the legal workday, cutting paid holidays, and forcing workers to pay more in social security taxes while reducing employer contributions. Spain is mandating later retirements and lowering unemployment benefits. Greece, already prostrate, is contemplating a cut in the minimum wage.

The average European is, of course, not taking this lying down. Strikes and public demonstrations have become endemic. Millions took to the streets in November across southern Europe to protest the austerity being imposed by the northern-dominated EU troika; trade unions in 23 countries went out in sympathy. Perhaps more meaningful to the Continent’s political class, nine out of 17 national leaders facing EU electorates since the Euro crisis and its associated austerity began in 2010 have received their walking papers.

So is this where the US should go? If we are not exactly Greece, should we take drastic preemptive action anyway to ensure that point is never reached? American conservatives think so; they want to emulate Great Britain, where a center-right coalition elected in 2010 has eagerly embraced austerity. Following the Continental pattern, the UK’s Cameron government has slashed public payrolls by 7.4% since taking office and tightened the screws on all public spending.

The results are now in, and they show the following: low productivity, low investment, low consumption, low wage growth, low exports, low tax receipts, low credit availability, and a shrinking GDP projected to shrink 2.25% more over the next three years. Add in a stagnant employment picture featuring part-time hires, and you have an unpopular government on track to lose the next election.

Austerity buffs miss the big picture; their solution raises unemployment and limits demand, thereby lowering revenues and sustaining the very deficits they want to fix. The looming austerity program called “the sequester” would do exactly that, eliminating upwards of 700,000 American jobs and (according to the Congressional Budget Office) reigniting recession. Then, we might really be Greece.

Wayne O’Leary is a writer in Orono, Maine, specializing in political economy. He is the author of two prizewinning books.

From The Progressive Populist, April 1, 2013