By Martin Thomas
On Monday 31 October, a New Political Economy Network (NPEN) seminar for academics, journalists, and political figures, at the offices of the Guardian, discussed the eurozone crisis.
Larry Elliott, economics editor of the Guardian, introduced, arguing that the eurozone project has come to the end of its road and that the answer is “to rip this up and start again”.
Costas Lapavitsas from the School of Oriental and African Studies put it more sharply: the left must campaign for debtor-led default (Greece stopping payment on its debts) and exit from the eurozone. Greece will then be followed by Portugal and others, and the eurozone (though not necessarily the EU) will break up.
Engelbert Stockhammer from Kingston University was the other invited speaker. Speaking from an avowedly left Keynesian point of view, he advocated a campaign for a transformation of the EU — a big European budget, a Europe-wide welfare state, etc. — rather than for exit.
Some speaking from a Marxist background argued for a transformation of Europe rather than default and exit: for example John Palmer, a former leader of the IS/SWP and also a former Guardian journalist, and Ozlem Onaran from Middlesex University, who said that we should not underestimate the ability of working-class movements in the “periphery” to force concessions on a European scale.
Others backed default and exit. The Alliance for Workers’ Liberty (AWL) was cited in this high-level conclave as a bogeyman, with one speaker quoting “an AWL member” as declaring that euro-exit would lead to a nationalist “carnival of reaction” in the country exiting. He retorted that this would be so only if the left failed to lead the exit, and instead let the right shape it.
After the meeting I debated further with Costas Lapavitsas. Here, in counterpoint, are two sides of the argument as I understand it so far.
The Greek government is no longer able to govern. That’s why the referendum has been called. We need an immediate answer: default and exit. That will allow for Greece to restructure its economy, regain competitiveness, and shift the social balance within the country in a way that is impossible while it is trapped in eurozone constraints. And it addresses the real issues of national independence which now arise from the Troika’s impositions on Greece.
A workers’ government in Greece would have little option but to default on debt payments. It would probably have to restore a separate Greek currency because it could not get enough euros to run the economy. It would probably be expelled from the eurozone and the EU.
Default and exit coming that way, as the result of victories by the left, would be accompanied by social measures benefiting Greece’s workers and poor at the expense of the country’s rich and its bloated military establishment.
That would be because default and exit resulted from victories by the left, not because victories for the left would result from default and exit. They wouldn’t.
We know what to do following default and exit. Nationalise the banks. Impose exchange controls. Introduce an industrial policy. If that means that people can’t travel abroad, or that fuel must be rationed, or that you have war-economy measures, so be it. That is better than the Troika (EU-ECB-IMF) plan.
A workers’ government in Greece would have to impose many emergency measures. It could not bring immediate prosperity. It would uphold Greece’s national rights, but it would also understand that confined in one country it would be doomed, and it would focus on campaigning for similar struggles elsewhere in Europe.
The Greek left, in striving for a workers’ government, should campaign for such measures as refusal to pay the debt, expropriation of banks and big enterprises, taxation of the rich, cuts in military spending, and so on, as a programme to be fought for both in Greece and across Europe, and explain default and exit as a likely consequence — rather than campaigning for default and exit as its frontline demands and then hope to nurture socialist cuckoo-eggs in that “default-and-exit” nest.
As regards immediately-winnable concessions, probably Greek workers — by refusing to comply with the Troika plan — have a better chance of forcing some concessions from the EU and the ECB (relaxing the plan, giving ECB credit to Greece) than they have from a “default-and-exit” bourgeois Greek government, if only because the EU and the ECB are much richer and so can more easily afford concessions.
Lindsay Thomas, a former director of the Financial Services Authority, asked a shrewd question in the meeting: if Greece goes out from the eurozone, where is it going to? The capitalist world market is not a soft refuge from the harsh eurozone. Greece is highly trade-dependent, with exports amounting to 23.5% of output (2008).
In the eurozone, Greece is trapped.
Hungary and Latvia have suffered worse economic collapse since 2008 than Greece. Neither is in the eurozone. Both are free to let their currencies decline relative to the euro, or to print more money.
In fact Hungary and Latvia have kept their exchange rates with the euro more or less stable. That suggests that euro-exit is not an easy recipe for recovery. Governments who have the extra levers which would be made available by euro-exit have chosen not to use them.
A defaulting-and-exiting Greek government would not have the option of keeping its exchange rate with the euro fixed. A new drachma would lose value fast, while rich Greeks holding euros would whisk them out of the country and benefit relative to Greek workers forced to accept drachmas for wages. Probably Greece would have a two-currency economy, with some things available only to those who could pay in euros. That won’t help, or leave Greece less “trapped”.
Default worked in Argentina. After two years of economic chaos, in December 2001, Argentina defaulted on its debt, and soon after abandoned the fixed exchange rate which made one Argentine peso exchangeable for one US dollar.
Yet the Argentine economy bounced back, growing over 8% per year from 2003 onwards, and Argentina was able to borrow again on international markets from 2006.
Over 2002, the peso slumped to 25 cents, and Argentine workers suffered intensely. In the mid-1990s, the top ten per cent in Argentina averaged 18 times the income of the poorest ten per cent. In 2002, the richest 10% got 43 times as much as the poorest. Unemployment rose to an official figure of 21% in December 2002. Inequality has eased only slightly since then.
Capitalist economies recover from defaults. But only through dolours which any capitalist government will impose disproportionately on the poor.
Socialists want to save working-class rights and standards, not the euro. A workers’ government in Argentina would have had no choice but to cancel the peso’s peg to the dollar, and see the peso slump. But we should not advocate default-and-exit as our answer, rather than seeing default-and-exit as a possible consequence of social struggle.
Moreover, Greece, in the midst of global depression, is unlikely to have the same fortune as Argentina in the relatively booming mid-2000s.
The euro was introduced to serve big banks, big corporations, and core states in Europe. The working class has no stake in it. To defend the euro is as false, for socialists, as would be defending the gold standard or Argentina’s peg of the peso to the dollar.
We do not defend the euro or the gold standard. We do not defend “independent” national currencies either.
So long as we have to deal with money, we need relatively stable money. The Bolsheviks, after the 1917 Russian revolution, refused to pay Tsarist debts, and experimented financially: but, in 1924, had to introduce a currency linked to gold (the chervonets and the “gold ruble”) in order to stabilise their economy.
Even a workers’ government will have to deal with money for a long time, and will need some mechanism, with costs, larger or smaller, to stabilise its currency.
The working class has no stake in the euro. It does have a stake in reducing the barriers between countries in Europe. It is not just bourgeois apologetics to point out that the rivalry of European states across economically-outdated national borders led to to two world wars in the 20th century.
We do not subordinate the working class to the bourgeois plans and factions that work, in their own way and frequently at the expense of the working class, to reduce the barriers between countries in Europe. We pose our opposition to those bourgeois plans and factions in terms of maximum working-class unity across Europe, maximum building on the botched achievements of the bourgeoisie, minimum regression to higher barriers between countries.
The EU is even more neo-liberal than the IMF.
We have no brief for the capitalist EU. But Elliott’s idea of “ripping it up and starting again” is daft. (Fight World War Two again and hope for a better sequel?) We have to start from capitalism as it is. By definition capitalism operates to serve big banks and big corporations. We can’t avoid that. We can and must work on the contradictions within it.
If the claim is that the EU is specially more impervious to working-class pressure, or pressure for equality and democracy, than other capitalist structures, then that is not true.
The introduction of the euro in 1999 was botched and hurried through on a wave of capitalist triumphalism. We did not advocate Britain joining the euro, and when a referendum on British entry looked likely, we advocated not a yes vote but refusal to make a choice and a campaign instead for working-class unity across Europe.
However, between the introduction of the euro in 1999 and the onset of crisis in 2008, Greece’s income per head (on PPS calculations) increased from 68% of Germany’s to 80%. Spain’s increased from 80% to 90%. Ireland’s increased from 105% to 115%. Ireland had already seen a great expansion of capitalist growth, and indeed of such autonomy as it could get as a small state in the world market, since it joined the EU. Staying out of the euro did not give the UK better progress: its income per head increased only at about the same rate as Germany’s.
The argument is for exit from the euro, not for exit from the EU.
The counter-argument is for orientation to a Europe-wide workers’ struggle to force concessions from, and overthrow, Europe’s rich, not for preserving the current structures.
Waffle about Europe-wide transformations is no good to Greek workers who are losing their jobs now. A Europe-wide movement is desirable. But it doesn’t exist, and Greek workers can’t wait for it.
Default and exit is no more an immediate answer to the Greek worker losing her or his job today than any Europe-wide demand is.
The first answer for Greek workers losing their jobs is to resist, fight back, take over workplaces, demand expropriation of the bosses and bankers. The question then is whether they look to an alliance with workers elsewhere in Europe, many of whom already face the same sort of attacks as in Greece and are already fighting back.
Or look to an alliance with a hypothetical section of the Greek bourgeoisie willing and able to carry out a left-Keynesian policy after default and exit.