• Greek Wage Earners in the Crisis

  • By Petros Linardos-Rulmond | 09 Nov 10 | Posted under: Greece
  • Introduction

    The realisation of the policies included in the Memorandum that was agreed on between the Greek government and the “troika”, – the International Monetary Fund, the European Central Bank and the European Commission – has grievous effects not only for working people and the popular classes, but also for the productive capacity of the Greek economy. The long-term negative implications involve the capacity to restore equilibrium in income and wealth distribution, public economic and social services, production and employment, and relations of the Greek economy with the rest of the world.

    The issue of public debt is at the centre of discussions concerning an alternative strategy, given that the payment of the debt’s interest currently exceeds 5% of the annual GDP, a rate that will increase to 8% by 2014. Among left analysts, there is no consensus on how to deal with this problem. Opinions favouring an immediate cessation of payments exist alongside views that highlight possibilities for renegotiating the debt, while other analysts approach the issue from the standpoint of the political preconditions required for carrying out either option.

    It is a fact that the dominant policy on the management of public debt in Europe seeks to widen even further the inequalities in income distribution that had already increased during the 30 years of neoliberal omnipotence. The write-off of a part of the public debt and a profound reverse redistribution through taxation are the tools that could form a first step in the direction of finding resources and shaping the political preconditions for the realisation of strategies based on the principle of social solidarity, which can introduce sustainable equilibriums in the productive and environmental sectors.

    The Greek case is, in its own way, revealing as to how the dominance of financial capital and the transfer of resources to profits and upper income groups, and the respective acceleration of this trend with the Memorandum, have led and are now leading to a weakening of potential developmental tools, to a systematic dismantling of the social state and of the institutional framework of labour protection, as well as to a de-articulation of social alliances and webs. The intense individualisation of a large proportion of employees, meaning the loss of interaction with protective organisational or institutional frameworks, the intensification of differentiations within the category of wage earners and the detachment of bureaucracies with special interests and strategies, all are factors that make any response to the aggressiveness of capital extremely unlikely.

    There needs to be a new approach to building a movement of resistance. Both a redefinition of needs and a reconnecting of political schemes to the way society reacts and thinks are necessary. The reconstruction of social movements cannot be based on old structures and methods, and it urgently needs to start from the base of society, to pose collective needs in modern ways, to proceed with new programmatic syntheses that are able to create new social alliances, strong enough to be expressed at a central political level. Such programmatic syntheses will be able to take into account the priorities of tackling climate change and the pursuit of new forms of social solidarity, in order to create a sustainable economic system.

    The policy of the Memorandum and its diversions

    The Economic Policy Program that is applied – following the Memorandum – of cooperation between the Greek government and the “troika”, does not appear only as a programme for the restoration of the public financial balance and the servicing of the debt, but also as a set of policies of a reform character for all sectors of the economy. It appears as the programme that Greece waited for in order to renew its aging institutions and policy tools, and as the culmination of the “modernising” Grand Idea. This perception obviously feeds into the belief of the socialist government in a package of measures that Greek socialists would have unhesitatingly condemned a few months ago.

    However, developments three months after this programme started to be enacted, alongside the painful immediate effects for the world of labour and the predictions of a continued high unemployment rate (officially around 15%) from 2011 until 2013 and make it reasonable to doubt that the programme of public finances will be realised and the recipes for competitiveness and the strengthening of export will yield results. Therefore, there are doubts as to whether the conditions for exiting the recession will be created. Thus it is reasonable to expect that wage reductions in public administration will have negative effects on public administration, especially in the crucial area of tax policy.

    According to the most recent predictions – those included in the 2011 budget – the fallout of this activity will continue for in 2011, but a recovery will begin in 2012 (1.1%) and will continue in 2013 (2.1%). 2012 will be the year in which a primary public surplus will be formed, while the public debt will start to decrease (an IMF estimate) from 2014 onwards. The main characteristic of the predictions for GDP is that they depend heavily on the optimistic scenarios for exports (6.1% in 2011, 5.7% in 2012, and 7.3%), which constitute the motor of the slow recovery, since all other ingredients of demand are unable to lead in that direction.

    Mid-term planning for public finances is characterised by very limited ambitions to increase revenues, due to a taxation policy that does not seek to redistribute the tax burden toward higher income groups and is also characterised by support for deficit reduction and the creation of primary surplus though cutting expenditures. However, in 2010 developments in this area show that there are problems. During that year public expenditure decreased by 3 GDP units, primarily due to cuts in the salaries of civil servants and pensions, but the revenues did not achieve the goals and as the IMF report states (September 2010), the lag will reach 4 billion Euros for this year, offset by a reduction of current expenditure. This lag is primarily attributed to the low returns from the rise in VAT, due to the recession as well as the inefficiency of tax collection mechanisms. For 2011, taxes will only be raised by 700 million Euros; there will be a special charge for very profitable corporations (1 billion Euros), but the other tax raises (an additional 5 million Euros) will depend on VAT and other indirect taxes, as well as on the payment of fines, that is, on measures that are of doubtful effectiveness, due to the inefficiency of tax control and collection services.

    The optimistic predictions of an accelerated increase in exports from 2011 on are based on a set of assumptions that cannot be considered valid. To begin with, expectation of an acceleration in the recovery of Greece’s export markets is not firmly grounded. Moreover, the logic of domestic depreciation through cuts in salaries in the private sector – which are due to political decisions, the establishment through the Memorandum of a regime of full flexibility in the labour market, and to the insecurity caused by an increase in unemployment – cannot substantially reverse the falling tendency of competitiveness. We are speaking about a country that has lost a part of its productive web and is currently losing markets in products and services where a competitive position was not primarily due to low wages.

    Nevertheless, it is obvious that the Economic Policy Program has no solutions to offer for the problem of non-competitive markets. The persistent effort to “open” closed professions, i.e. professions with entry barriers or set remunerations, cannot deal with the entire problem. For 2010, it is predicted that the consumer’s price index will be increased by 4.6% despite the 4% decrease of the GDP. This is the result of the transfer to the consumer of the tax increase (VAT), which shows that even in a period of recession, monopoly and oligopoly behaviours function effectively, even in sectors with a large number of companies. Moreover, after joining the EMU, profit inflation has been a permanent characteristic of the Greek economic landscape, which is responsible both for high corporate profits and for the decrease in corporate competitiveness.

    According to the last report published by the GSEE / ADEDY Institute of Labour, there is a clear risk of a prolonged recession due to the inability of the economy to reach a phase of progressive debt reduction. Speculation on prolonging the debt payment of the Support Mechanism, followed by the potential restructuring of public debt, is already circulating in the press. The same Institute concludes that in 2011, unemployment will reach 20% and will exceed 1 million people, while the cumulative reduction of average remuneration during 2010-2011 will reach 25%. Nevertheless, the combination of a flexibilised labour market and the abolition of collective agreements, on the one hand, and the massive increase in unemployment, on the other, expand part-time and temporary employment and off-the-books work by both Greek and foreign workers. The world of labour in Greece is passing through a new era, and if today’s trends continue it will lose all connection to “the European social model”.

    The debt debate

    The extreme indebtedness of the economy is a condition that, in the last analysis, requires the destruction of a part of its assets. Some its assets do not correspond to a capacity of the real economy and must therefore be written off. In the case of a national economy in the international environment, as well as that of a public debt owed primarily to foreign banks, this write-off can be realised in several ways that constitute combinations of two extreme options: the write-off of the debt to banks outside the national economy, or the loss of assets within the national economy. Yet, even the loss of wealth within a national economy can concern different classes and different areas of activities.

    Therefore, it is no accident that the debate in Greece within the left (but even more broadly) about how to deal with the public debt, has resulted in two opposing camps: those who prioritise the write-off of the debt, and those who advocate redistribution of income away from capital and the upper classes. When one looks at what this debate means for the field of politics, it becomes clear that this is not a merely technical discussion. The unilateral write-off of part of the debt, or even the unilateral pursuit of its renegotiation, places a small economy such as Greece’s in discredit, unless there is a favourable configuration of power at an international level. The extensive redistribution of income, on the other hand, requires radical reversals within the domestic class configuration of power that can only be the consequence of militant social struggles.

    The unilateral writing-off of debt has been supported by certain left-wing groups in Greece, as well as by authoritative analysts, and has been presented as the radical solution, the cutting of the Gordian knot. This position underestimates the effects that countermeasures and the isolation of the economy and the domestic banking system will entail, and does not provide an answer to two crucial questions: what government will take such a decision, and how the ensuing worsening of the economic and social condition will lead to the repositioning and effective intervention of social movements. Of course, it is totally understandable – considering the culture of the left – that in today’s circumstances there is a quest for a fundamental “liberation” – if not “national-liberation” – slogan, which would allow minor political forces to play a central role.

    On the other hand, writing off a large part of the public and private debt in today’s debt-ridden capitalism constitutes a choice of strategic importance. We may say that this process has already started, since, according to newspaper reports, the European Central Bank values the Greek state bonds that it accepts from commercial banks at a much lower level than their nominal value. Still, the write-off will lead to different outcomes according to the political conditions under which it is carried out. Even if the prevailing mood in Europe points to the necessity of decreasing the amount of debt of the heavily indebted countries of the “South”, this does not mean that the whole neoliberal framework will change; the latter is expected to be strengthened by the revised version of the Stability Pact. Social movements in these countries will have to demand something more than merely softening the measures adopted in the context of policies of managing public debts.

    The difficulty posed by the internal redistribution of income is due to the fact that, while technically it is simply a transfer of resources from upper-class incomes and profits to public funds, the political preconditions of this development cannot be only those associated with the goal of serving the debt. The capacity of such a demand to create something that acquires the quality of a movement depends on the mobilisations calling for the allocation of additional resources to social spending and investments that serve sustainable development. It depends, in other words, on a multi-dimensional process of resource redistribution in the entire economy, in connection with the capacity of social struggles to acquire programmatic characteristics, which correspond to the social and developmental needs of the current period.

    There is evidence that the inequality of income distribution in Greece is a structural feature responsible for driving the economy to rapid increase in public deficits. As the report by the GSEE / ADEDY Institute of Labour states, according to the latest available data of the European Commission, the actual tax burden for corporate profits and capital income in Greece was 15.9% in 2006, which is half of the European average, while the actual tax burden for labour in the same year was 35.1%, which corresponds to the European average. Moreover, the ratio of net operating surplus to labour remuneration for the entire economy in 2009 was 0.43 in Greece as opposed to 0.25 in the Eurozone. The ratio of net operating surplus to labour remuneration in the corporate sector for the same year was 1.29 in Greece (the highest in the Eurozone) as opposed to 0.62 in Germany and 0.45 in France.

    As a set of policies for confronting excessive indebtedness, the Economic Policy Program is not simply a choice of international organisations or the government, since it also expresses the way in which the political and economic elite and the social groups that have allied with it view the issue of sacrifices for the servicing and the reduction of debt. Despite pronouncements against tax evasion, the measures taken are very limited (accounting for 10% of all tax hikes in 2011) at a time when the income of wage earners is collapsing in both the public and the private sector, since they are going to pay for the crisis through income reduction and unemployment. Overturning this inexorable configuration of power is a prerequisite for confronting the effects of extreme indebtedness. This constellation of forces is not going to be altered just because Greece is able, in one way or another, to reduce its public debt.

    The disconnect between politics and the expression of social needs

    The ease with which such a harsh programme of burdening wage earners and the popular classes was imposed in Greece is obviously due to the extremely fragile context in which social policies were formulated. The adoption of a social contract of a Fordist type, which seemed to be strengthened through the accession of the country to the European Union and to be completed by the triumph of a “modernising” ideology among the political elite, led, on the contrary, to an awkward degeneration which marginalised those whom it was supposed primarily to benefit. The great mass of employees had to confront the crisis without the capacity to exploit mechanisms of pressure and negotiation.

    The economic policy applied during the last 15 years was in reality the combination of a “Europeanising” vision, in the sense of establishing institutional functions that characterised European economic and social development of the “golden” 30-year period, and the progressive application of the logic of the market: deregulation and redistribution of income to the benefit of middle and higher income groups. The outcome was not only the deterioration of the relative position of the majority of wage earners, but also the strengthening of a corporate middle class through redistributive or clientele mechanisms, the strengthening of the position of special categories of salaried civil servants, and the intense trend towards an autonomisation of trade-union bureaucracies.

    The Economic Policy Program continues and completes the deregulation of the labour market, while at the same time imposing a radical policy shift vis-à-vis the categories of privileged salaried employees who maintained close and profitable relations with the different forms of state power. Faced with such developments, the institutional trade-union movement has been locked into a difficult situation, since within a very short period of time it has begun to represent the great mass of salaried private sector employees. It has also lost the privileged relations it formerly had with political power and is undermined by the exit strategies of individual bureaucracies. Needless to say, as in other countries, it finds it difficult to formulate alternative policies. Moreover, it has lost its strike force, as demonstrated by the limited capacity to organise mass mobilisations when compared to the public gatherings in 2001 that defeated the effort by a socialist government to question social security rights.

    The realisation of the program of the Memorandum entails a radical repositioning of social alliances, the central axis of which is the rallying of all business categories behind a programme of deregulating the labour market, privatisation of social services and infrastructure, and strengthening of profitability. Since the realisation of this programme will take place under conditions of stagnation or recession for the foreseeable future, unconditional support of corporate action in these circumstances will imply (as is already the case) the rapid de facto weakening of the legal framework that still exists for the protection of labour, social protection, and the protection of the public interest.

    The willingness with which PASOK adopted and supported the programme of the Memorandum should not come as a surprise, given that its cadres have become used to fulfilling of the demands of the corporate world and accepting policies that weaken the world of labour, while loosening the bonds of the party with population groups that do not hold any administrative posts or do not practice any business function. Thus PASOK is losing the last traces of its social-democratic features, turning into a power party based on the inertia of the social forces that it once expressed. The decision of the new party leader of New Democracy to condemn the Memorandum and then appear as the most militant supporter of the corporate world constitutes a wise mix of responses to the demands of capital and business people in general combined with an effort to capitalise on popular discontent, while nurturing the nationalist visions that are always exploitable in Greece.

    In such circumstances, characterised by the crisis of the trade-union movement and the self-refutation of social democracy, it is not paradoxical that the left faces tremendous difficulties in highlighting alternative policy directions. The culture of the left is still heavily marked by the developmental approach to social issues, by the belief that there is a royal road that will be opened up by the pressures of social struggles or by revolutionary overthrows. Being trapped within this culture leads to the repetition of political proposals or methods of struggle that belong to the past. Moreover, it may lead to taking refuge in the expectation of mass radical mobilisations leading to government or regime changes, which will achieve – but how? – the capacity to respond to the needs and the demands of society. The unilateral refusal to serve the debt belongs to that logic.

    Prospects for the regroupment of social movements

    Throughout the whole recent period before the Memorandum, already characterised by the weakening of the trade-union movement, the left was unable to form a unified and effective pole for the reconstruction of social struggles. It remained continuously defined by majoritarian leaderships, did not manage to find a synthesis on a new basis and benefited little by original, isolated attempts to create new trade-union organisations, primarily due to the organisational fragmentation transferred from relations between political organisations to relations between new trade unions. Furthermore, the organisations of the left in the wider public sector were not able to overcome a defensive stance vis-à-vis the aggressive economic policy on wage and employment issues. In their positions, they did not take into account the demands of society, primarily of the majority of salaried employees, concerning the efficiency of public services and public enterprises and their relations with the citizens, as well as the need to re-examine issues of income distribution among different categories of salaried employees.

    The danger of left forces remaining at the margins of political life is due to the special difficulties they face in understanding the numerous and original dimensions of the current crisis, at a time when the dominant policies of the last decades and today’s sweeping attack against labour and the social state have significantly weakened social resistance. We are facing a complete crisis of capitalist reproduction that necessitates the changing of basic past assumptions regarding welfare, solidarity and the sustainability of production systems. Such changes do not primarily concern political leadership, but rather the renewal of the way of thinking of millions of people, through new social practices that must largely be built from the beginning.

    Developed capitalism has been enmeshed in a crisis of ultra-indebtedness at a time when the entire system of international economic relations is passing through a transitory period, with inequality intensified within the developed or developing zones, as well as between large areas of the planet. The dynamics of climate change amount to this crisis of reproduction of globalised capitalism, placing limitations on the sustainability of economic activities and broadening the content of social needs as well as the viewpoint from which they are approached. At the same time, the dismantling of the national regulatory frameworks due to the dominance of neoliberalism coexists with the urgent need for international and intergovernmental institutions intervening in the financial system, the mitigation of climate change, the provision of public goods, food sufficiency, and providing an adequate monitoring and assessment of political decisions at the international level.

    The necessary changes of approach primarily concern the limitations imposed on development by policies of climate change, as well as the highlighting of the issue of solidarity as a precondition of the economic system, rather than as a social outcome of its growth. Such admissions presuppose the radical overthrow and the complete renewal of the methods for the formation of social consensus, through the deepening of democracy and the adoption of planning methods for the options for society and the economy. Such a reshaping will be based on a system of public education for all, on a developed public system of research foundations, and on social initiatives in the field of research and programmatic elaboration. These should favour the participation of workers and citizens in democratic processes, as well as the flourishing of proposals for innovations in the scientific, technological, institutional and social sectors.

    There seems to be no way to realise such an ambitious project other than the transfer of policy-making to the grassroots of the society and the respective recomposition of political proposals, so that the latter get to play a role in the central political scene. Obviously, this entails a change in political culture that will go beyond the presenting of defensive demands and be able to offer aggressive demands with programmatic characteristics, renewing the institutional context of solidarity and building new social alliances able to overcome the hierarchies of the past and the fragmentation imposed by neoliberal management.


    Translated by Iraklis Economou


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