Associate Professor of Law and Development, MIT
Greece has already left the European Union in a manner of speaking: it is now part of the Third World. Proof: Russia has extended an invitation to Greece to join the BRICS, while Greece’s travails with its troika of creditors including the IMF, resemble one too many Third World debt crisis since the 1980s when sovereign debt crisis arose as a major problem of global affairs. In addition, the Northern European and media analysis of the roots of the Greek crisis which pins the blame for Greece’s economic woes on the nature of Greek culture – that they are lazy, rebellious, not rule-abiding etc – is so reminiscent of the Asian Financial Crisis of the 1990s when Asian economic troubles were attributed by Western creditor nations to the defects of Asian culture, of ‘crony capitalism’ and orientalist ideas about Asian tendencies to be corrupt. This is the once again a story of the arrogant universalizing West with its imagined superior cultural values lecturing the Rest.
Greece should welcome this chance to leave the Euro, and recover its monetary sovereignty, which has been lost. It has been unable to climb out of the hole, tethered as it is to the Euro. Syriza’s victory in the referendum makes it clear that a majority of Greeks would welcome a chance to assert their own autonomy and independence and not continue to be treated as a subject nation and be penalized for years through austerity policies, which have produced sky-high unemployment and social dislocation and threaten further immiseration and poverty. Indeed, Syriza’s election in January on an anti-austerity platform was supposed to offer a new a critical turn away from the economic policies of the past, not just deal with the debt crisis by ejecting Greece from the Euro.
The key question before Greece now is: even if it leaves the Euro, how will it avoid the economic troubles of the past and how will it make Greece a more egalitarian and just society? The experience of other Third World countries, which have gone through their own debt crises, offers some lessons in that regard.
The first lesson is that Greece should indeed get its act together but it should exit the Euro first and not follow the austerity demands, which are dictated to it by the troika. As long as there is a fall back mechanism in the form of the monetary union and the Euro, Greece will find it difficult to carry out any reform, which is too painful. The experience of South Korea with the IMF during the 1980s showed clearly how the Koreans relied on collective sacrifice of the population, compelled by the lack of any back up, to implement several reform measures which ended up reviving the Korean economy and avoided any further recourse to the IMF.
A second lesson is that Greece should keep its dealings with the IMF to the minimum and on its own terms – which is more possible than one thinks. IMF has not proved to be reliable ‘lender of last resort’, tasked with helping countries who are in balance of payments difficulties, in a manner that will «facilitate the expansion and balanced growth of international trade, and to contribute thereby to the promotion and maintenance of high levels of employment and real income» as it is commanded to in its Articles of Agreement. The terrible rise in unemployment in Greece during the last five years is directly contrary to this commitment. Nor has the IMF respected the mandate under the Articles to provide countries, which approach it «with opportunity to correct maladjustments in their balance of payments without resorting to measures destructive of national or international prosperity». The Greek GDP has reduced by a quarter during the last five years due to the austerity program and everyday poverty and homelessness have risen. Some Third World countries have drawn their hard lessons about the IMF over the years: that it is simply the handmaiden of global capital and does not take its own Articles of Agreement seriously. Countries such as Bolivia have therefore created autonomous and buffer mechanisms, drawn from reserve funds resourced through natural resources, which protect them from being compelled to seek IMF bailouts again. They are well worth studying.
A third lesson is that post-reform, economic policy and the strategy of economic development cannot continue as before. Countries make the mistake of avoiding short to medium-term economic crises by taking loans and bailouts, but return to the same economic policies of the past. When they do, they are all but certain to descend into crisis again. A recent example is Ghana. Supposedly elevated as a middle-income country and one of the roaring African economic lions until some years ago, its economy has been on a downhill climb since it entered global capital markets and oil production in the late 2000s. After severe inflationary pressures and rising public debt, it has entered into an ‘extended credit facility’ arrangement with the IMF. In the early 2000s, Ghana was already under the tutelage of the IMF under a ‘Poverty Reduction and Growth Facility’ – a clever rebranding of austerity and neoliberalism. After too many years of being under IMF tutelage, Ghana is essentially lurching from crisis to crisis. Greece should draw its own lessons and realize the seriousness of the challenge it faces – it literally needs to think of alternative economic development strategies and innovate new economic policies, which produce more just outcomes and stability.
A fourth and final lesson comes from the demands of the social movement mobilizations, which led to Syriza’s rise and victory. As Prime Minister Tsipiras said after the ‘no’ vote, it was a victory for democracy. But what exactly does that mean? For those who were part of the ‘Aganaktismeni’ (the Indignant) movement against austerity during the last four years, it means more than saying no to Euro. That movement was catalyzed by a sense that the political class – the entire apparatus of the State, the political parties etc – had become corrupt and unaccountable, and shared too much in common with the creditors who imposed austerity rather than with the ordinary Greeks on the street. The demands of that movement resembled the demands of the Indignados of Spain and the Occupy Movement in the US and elsewhere – that global capital has created a new ruling class which is united across borders while the political class within countries had become corrupt and unaccountable. There are countless movements across the Third World, which have echoed these sentiments over the recent years – from the mobilization against water privatization in Cochabamba in Bolivia to the massive protests in Brazil against neoliberal economic policies. These movements are all united by a common thread – that the rule of capital over humans must end if democracy is to mean anything at all.
Syriza would do well not to forget these sentiments. Here again, one could look at examples of how best to build on and consolidate the gains from successful social movement mobilizations for a renewal of democracy. Greece demands no less. And this democracy is not only a political project but a deeply structural and economic democracy project as well.