Choosing austerity? The national debtors of the eurozone

by Joseph Markus

2011 Greek anti-austerity protests

Austerity economics—a concept full to the brim with worrying overtones—has taken hold across Europe as the proper, demonstrably and scientifically appropriate response to the various debt crises that have multiplied and metastasised throughout the summer and winter of last year.

It means different things to different people. Assessed from one angle—that of the notional everyman on the street—it is unfair, tough and difficult. Assessed from others—the (coldly) rational technocrat—austerity is an effective reaction to an economic understanding of the macro-woes of the eurozone.

I’ve been thinking about this idea for some time.

Over the summer we saw huge resistance from the Greek public to economic measures imposed on the country by the European Union-IMF cabal. It should be obvious why that was. There is a keen injustice in having one’s socio-economic livelihood regulated and restrained by distant and largely non-democratic organisations.

To the governing classes of Europe the administrators of the IMF were benevolent overseers of a national economy gone horribly wrong. Their intent was only to support and to stabilise—to do what was in the economic best interests of Greece.

The odd thing is the number of times the word ‘economic’ occurs in the preceding paragraphs.

Economic knowledge and economic argument is the kind of thing that gets listened to. It is a discourse of considerable power and it has been ruling the debate in Europe.

By speaking exclusively in economic terms we make the eurozone’s problems—the problems of Greece, Portugal and Italy—problems to which there is a single, quasi-scientific answer. We get to the proposition that EU-IMF technocratic wisdom will save the day.

By speaking in these terms, we tend to overlook other viewpoints and angles on the problem. We miss that austerity was viciously opposed by massive public protests in Athens and that the ill-effects of austerity fall almost exclusively on those least able to afford them.

In centring economic-talk, we de-centre and de-legitimise other concerns and other approaches and we destroy our ability to win the argument on our own (potentially non-economic) terms. The human cost of austerity is dismissed as a necessary evil and the idea that a group of people—a nation—could democratically choose to oppose it is seen as fanciful.

In fact, the lure of economics for policy-makers is precisely that it is seen as a neutral and objective form of knowledge. It aims to present a totalising vision of human life and (co-)existence; in doing this, and by implication, it denies other forms of knowledge a voice. This would not be such a bad thing except for the fact that economics can be easily skewed to fit ideological agendas. The way that ideology is expressed through this language reifies what is said and makes it gradually incontestable. The fact that the spread of austerity was assisted by the IMF suggests just this form of ‘technocracy’.

Now the IMF has changed tack. The leaders of the IMF, World Bank and WTO, on Friday, issued a warning highlighting the economic and social risks of austerity programmes. The joint statement made reference, for what was one of the first occasions in this saga, to the concept of the social.

Austerity is still widespread. But finally the international financial institutions have hit on the right thing: that the social, as well as the economic (or ‘financial’), matters. (Although chances are, and their statement suggests, that the only reason they have changed their mind is that austerity has been shown, and is widely believed, to be bad economics.)

My point is this: economics is not some catch-all, and it cannot provide a magic formula for successful and harmonious community living—whether that community be defined locally or globally.

The right response to any given, ultimately social, problem will not be divined through a priori economic ‘knowledge’. It will be uncovered through political discourse, mediated and perfected through argument and debate, and in the end a choice will be made.

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5 comments
  1. Antoine said:

    Interesting take on the Greek crisis. However, there are two criticisms I would like to make.

    First, your definition of “economics” is too narrow in my view. In fact, you use the same definition as the IMF and like-minded institutions, namely neoliberal or neoclassical economics. But economic science is not just about austerity and privatisation. A number of well-known economists hold very different views; Nobel prize winner Paul Krugman even denounced European austerity as a “failure” in a recent article (http://www.huffingtonpost.com/2012/01/30/paul-krugman-austerity-doctrine_n_1241201.html). Moreover, standard economic indicators can be crucial critical tools: the Greek debt is still sky-high, GDP is contracting, unemployment has risen to almost 20% after massive public sector layoffs, long-term growth prospects aren’t too good… In sum, leaving economic science to technocrats and neoliberals is not the right strategy to adopt.

    Second, you ignore issues which are crucial to the Greek crisis, namely corruption and tax evation. The former was apparent when Goldman Sachs helped the Greek government mask its debt from European regulators through derivatives transactions (the power and influence of Goldman Sachs and other financial institutions should also be subject to debate). The latter has been largely ignored in European media, which often referred to Greece’s so-called “bloated” welfare state, or even to the Greeks’ alleged laziness – when Greece is in fact one of the hardest-working European country according to OECD statistics (http://www.forbes.com/2008/05/21/labor-market-workforce-lead-citizen-cx_po_0521countries.html). Nonetheless, tax evasion has cost in excess of 15 billion euros a year to the Greek state in the past decade; incidentally, 15 billion is roughly the annual According to a Tax Justice Network report, rich Greeks hold over 20 billion euros in Swiss banks. Lower corporate tax, which has been halved from 40 to 20% in the last decade, also contributed to the Greek debt.

  2. Antoine said:

    Just realised my previous comment had a few typing mistakes; here it is again:

    Interesting take on the Greek crisis. However, there are two criticisms I would like to make.

    First, your definition of “economics” is too narrow in my view. In fact, you use the same definition as the IMF and like-minded institutions, namely neoliberal or neoclassical economics. But economic science is not just about austerity and privatisation. A number of well-known economists hold very different views; Nobel prize winner Paul Krugman even denounced European austerity as a “failure” in a recent article (http://www.huffingtonpost.com/2012/01/30/paul-krugman-austerity-doctrine_n_1241201.html). Moreover, standard economic indicators can be crucial critical tools: the Greek debt is still sky-high, GDP is contracting, unemployment has risen to almost 20% after massive public sector layoffs, long-term growth prospects aren’t too good… In sum, leaving economic science to technocrats and neoliberals is not the right strategy to adopt.

    Second, you ignore issues which are crucial to the Greek crisis, namely corruption and tax evation. The former was apparent when Goldman Sachs helped the Greek government mask its debt from European regulators through derivatives transactions (the power and influence of Goldman Sachs and other financial institutions should also be subject to debate). The latter has been largely ignored in European media, which often referred to Greece’s so-called “bloated” welfare state, or even to the Greeks’ alleged laziness – when Greece is in fact one of the hardest-working European countries according to official OECD statistics (http://www.forbes.com/2008/05/21/labor-market-workforce-lead-citizen-cx_po_0521countries.html). Nonetheless, tax evasion has cost in excess of 15 billion euros a year to the Greek state in the past decade. According to a Tax Justice Network report, rich Greeks hold over 20 billion euros in Swiss banks. Lower corporate tax, which has been halved from 40 to 20% in the last decade, also contributed to the Greek debt.
    Reply ↓

    • josephmarkus said:

      Hi Antoine.

      First, thanks for the comment!

      I do understand economics is a broad concept and, in fact, I believe that I cited an article by Paul Krugman, if not, perhaps, the one that you mention. In any event, I tend to subscribe to his view—I think the one he’s expressed on a relatively regular basis in the New York Times—that austerity is simply bad economics.

      I can take that point and, if I failed to make myself clear, I think I probably agree with you.

      My point was less about the definition of economics as such, and more about the idea of economics as a technical-scientific vocabulary. It is one that while on occasion helpful can often be—and indeed, in this context, is—used to skew the terms of any debate. I’m also generally against the supposition that economics can be expanded to provide a nifty worldview of how things work—I think there are significant risks in that approach, and, this leads to the second point, that if we are to allow economists (broadly defined) to set the terms of our response, we might fail to consider other relevant factors. I don’t advocate leaving the economic debate to the neoliberals (as Krugman so usefully demonstrates), but there is more to the argument than just economics and there is value in trying to shift the locus of the debate.

      While corruption and tax evasion are certainly important factors, the Greek crisis is not simply a calculation or sum with a single specific answer. Inevitably (as a leftist—something for which I make no apology) I have a focus on how ordinary people experience austerity (not the rich who seem to have been quietly siphoning away public money over the past few decades). My view is that, usually, it is monstrously unfair.

      You could probably reduce my article to this: all economic recommendations should be taken with a (large) pinch of salt (and an open mind).

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