Friday, June 24, 2011

Bankers Gear Up for the Rape of Greece

Michael Hudson
The need for a popular referendum

Every government has the right and indeed the political obligation to protect its prosperity and livelihood so as to keep its population at home rather than drive them abroad or drive them into a position of financial dependency on rentiers. At the heart of economic democracy is the principle that no sovereign nation is committed to relinquish its public domain or its taxing, and hence its economic prosperity and future livelihood, to foreigners or for that matter to a domestic financial class. This is why Iceland voted “No” in the debt referendum. Its economy is recovering.

Ireland voted “Yes” and now faces a new Great Emigration to rival that which followed the poverty and starvation driven emigrations of the mid-19th century. If Greece does not draw a line here, it will be a victory for financial and fiscal aggression imposing debt peonage.

Finance has become the 21st century’s preferred mode of warfare. Its aim is to appropriate the land and public infrastructure for its own power elites. Achieving this end financially, by imposing debt peonage on subject populations, avoids the sacrifice of life by the aggressor power – but only as long as subject debtor countries accept their burden voluntarily. If there is no referendum, the national economy cannot be held liable to pay the debts owed even to “senior” creditors: the IMF and ECB. Assets that are privatized at foreign bank insistence can be renationalized. And just as nations under military attack can sue, so Greece can sue for the devastation caused by austerity – the lost employment, lost output, lost population, capital flight.

The Greek economy will not end up with the proceeds of any ECB “bailout.” The banks will get the money. They would like to turn around and lend it out afresh to the buyers of the land, monopolies and other properties that Greece is being told to privatize. The user fees they collect (no doubt raising charges in the process, to cover the interest and pay themselves the usual salary jumps on privatized property) will be paid out as interest. Is this not like military tribute?

Margaret Thatcher used to say “There is no alternative.” But of course there is. Greece can simply opt out of this giveaway of assets and economic privilege to creditors.

What do Papandreou’s Socialist International colleagues have to say about current events in Greece? I suppose it is clear that the old Socialist International is dead, given the fact that Papandreou is its head, after all. What passes for socialism today is the diametric opposite of the reforms promoted under its name a century ago, in the era prior to World War I. Europe’s Social Democratic and Labour parties today have led the way in privatization, financializing their economies under conditions that have blocked the growth in living standards. The result promises to be an international political realignment.

Economic austerity cannot secure creditor claims in the end

On Thursday afternoon the Dow, having been down 230 points, leapt up at the close to lose “only” 60 points, on rumors that Greece had agreed to the IMF’s austerity plan. But what is “Greece”? Is it the cabinet alone? Certainly not yet the entire Parliament. Will there be a Parliamentary vote in opposition to the public interest, accepting austerity and privatization?

Only a referendum can commit the Greek government to repay new debts imposed under austerity. Only a referendum can prevent property that is privatized from being re-nationalized. Such a transfer is not legitimate under commonly accepted ideas of political and economic democracy. And in any event, a rent-tax can recapture for the Greek economy what the financial aggressors are trying to seize.

History is rife with instructive examples. Local oligarchies in the region invited Rome to attack Sparta, and it overthrew the kings and their successor Nabis (who may himself have been royal). The sequel is that Rome headed an oligarchic empire, using violence at home to murder democratic reformers such as the Gracchi brothers after 133 BC, plunging the republic into a century of civil war. The creditor interests ended up fully in control, and their own banal self-seeking plunged the Western half of the Roman Empire into an economic and social Dark Age.

Let’s hope the outcome is better this time around. There will indeed be fighting, but more in the financial and fiscal sphere than the overtly military one. The fight ultimately can be won only by understanding the corrosive dynamics of the “magic of compound interest” and the social need to subordinate creditor interests to those of the overall “real” economy. But to achieve this, economic theory itself needs to be brought out of its current post-classical “neoliberal” banality.

Michael Hudson is a former Wall Street economist. A Distinguished Research Professor at University of Missouri, Kansas City (UMKC), he is the author of many books, including Super Imperialism: The Economic Strategy of American Empire (new ed., Pluto Press, 2002) and Trade, Development and Foreign Debt: A History of Theories of Polarization v. Convergence in the World Economy. He can be reached via his website,

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