The pressure on Greece to cut back its budget in order to receive another bailout package continues. The country is asked to implement 325m euros of further spending cuts before payment is made. But Greek people can take no more. With unemployment figures above 20 per cent and shortages in all areas of the public sector, people reach breaking point. Unsurprisingly, in order to enforce the draconian cuts there has been a shift from democratic government to authoritarian rule. Initially, this was done through establishing a technocratic, unelected government in November 2011. Now, the EU demands direct oversight over Greek budget spending in order to ensure that promised cuts are actually implemented (BBC News, 16 February 2012).
When analysing the dynamics of capitalist outward expansion in the early 20th century, Rosa Luxemburg had already identified this gradual shift to ever more direct intervention into a country’s economic affairs to secure the transfer of profits.
In The Accumulation of Capital (1913), Rosa Luxemburg stresses that capitalism depends on the constant possibility of outward expansions in order to ensure the continuation of surplus accumulation. One key way of securing new markets abroad are international loans, first because these loans are an investment opportunity for accumulated surpluses in the capitalist core. Second, they provide the finance for the periphery, with which additional products can be bought from the core. Luxemburg mentions the example of British loans to the newly independent countries in Latin America in the early 19th century. ‘However big the demand afforded by free America, yet it would not have been enough to absorb all the goods England had produced over and above the needs of consumption, had not their means for buying English merchandise been suddenly increased beyond all bounds by the loans to the new republics’ (Luxemburg 1913/2003: 403). German loans to Turkey fulfilled a similar function. ‘German capital investments in Turkey gave rise to an increased export of German goods to that country’ (Luxemburg 1913/2003: 407).
Inevitably, of course, peripheral countries run into problems of servicing these debts. Egypt’s turn to cotton and sugar production for export in the 19th century is provided as an example by Luxemburg. ‘One loan followed hard on the other, the interest on old loans was defrayed by new loans, and capital borrowed from the British and French paid for the large orders placed with British and French industrial capital’ (Luxemburg 1913/2003: 414). Over time, the situation grew worse with every new re-scheduling of debts and extension of new credit. Eventually, foreign powers moved into Egypt to take charge of the country’s public finances. ‘October 1878 saw the representative of the European creditors landing in Alexandria. British and French capital established dual control of finances and devised new taxes; the peasant were beaten and oppressed, to that payment of interest, temporarily suspended in 1876, could be resumed in 1877’ (Luxemburg 1913/2003: 416-17). Four years later the British military occupied Egypt. ‘This was the ultimate and final step in the process of liquidating peasant economy in Egypt by and for European capital’ (Luxemburg 1913/2003: 417). The result of these dynamics is not development in the periphery, but the transformation of the periphery into capitalist social relations of production to ensure the transfer of income from peasants in the periphery, subsumed under capitalism, to capital in the core countries.
The situation is very similar to Greece’s current situation in the Eurozone. The fact that Greece is highly indebted, while Germany has got its finances under control is not due to prudence in the latter and reckless spending in the former. Rather it relates to a clear unevenness underlying the European economy. At the core of this unevenness is Germany’s export-led accumulation strategy. Germany has got an enormous trade surplus, of which 60 per cent are with the other Eurozone countries, and 85 per cent including all EU members. This surplus is based on high productivity rates as well as lower wage increases than elsewhere in Europe (The Economist; 31 March 2010). This trade surplus has led to super profits, which in turn looked for new investment opportunities. State bonds of peripheral EU member states including Greece seemed to provide an ideal investment opportunity for many years. Unsurprisingly, after Greek banks it is German banks together with French banks, which are exposed most to Greek debt (The Guardian; 16 June 2011). In turn, these loans were then used to continue buying German products. In other words, very similar to Luxemburg’s observations in the 19th century, the Eurozone crisis too provides an example, in which international lending is used to ensure that exports of core countries can be absorbed by countries in the periphery.
Now as then, this situation of constantly larger international loans is unsustainable. To avoid a Greek default, new loans are made conditional on severe austerity budgets and general cut-backs. While it was Egyptian peasants, who paid for the profits of British and French capital in the 19th century, it is now especially Greek public sector workers but also Greek society more widely, who have to provide the finance to satisfy the demands of foreign capital. The results are dramatic. ‘A year of wage and pension cuts, benefit losses and tax increases has taken its toll: almost a quarter of the population now live below the poverty line, unemployment is at a record 16% and, as the economy contracts for a third year, economists estimate that about 100,000 businesses have closed’ (The Guardian; 19 June 2011). ‘Hospitals in Greece are running out of basic medicines, nearly half of all young people are unemployed, workers in some sectors have not been paid for months, and many are forced to resort to soup kitchens or scavenge from rubbish dumps’ (Coalition of Resistance; 13 February 2012).
'Now the Troika demands a cut of 23% to the minimum wage, the sacking of tens of thousands of public sector workers and the decimation of pensions which have already lost nearly 50% of their value. International capital is asset stripping an entire country and ripping apart its social fabric' (Coalition of Resistance; 13 February 2012).In order to ensure the enforcement of the cuts against increasing unrest amongst the Greek population, capital has pushed for a shift from democratic to non-elected technocratic government in November 2011. Very similar to Luxemburg’s understanding about the situation in Egypt, however, this now does no longer seem to be enough. Instead, the finance ministers of the Eurozone have requested a tighter control of Greek spending and especially the implementation of budget cuts (BBC News; 16 February 2012). This is combined with a direct attack on Greek democracy. All major Greek parties were requested to promise in writing to implement the cuts, regardless of who wins a general election scheduled for April. Control of Greek finances has moved outside the country. While a military takeover of Greece is not on the agenda, the foreign control of the exploitation of Greek workers is strongly asserted.
Nevertheless, resistance on the streets of Athens has steadily increased. Greek people are not prepared to accept further cuts without a fight. Solidarity with Greek workers combined with resistance against restructuring and cuts of the public sector at home is required to counter the onslaught by capital on the social achievements in Europe.
Prof. Andreas Bieler
Professor of Political Economy
University of Nottingham/UK
Personal website: http://www.andreasbieler.net
16 February 2012