Matt Stoller is a fellow at the Roosevelt Institute. You can follow him on twitter at http://www.twitter.com/matthewstoller
Austerity doesn’t just lead to unemployment and misery. If it goes on long enough, it will inevitably lead to the emergence of “swamp thing” extremists into positions of power. Take the situation in Greece, a country which until recently was a wealthy Western democracy with a relatively stable political system. After five years of depression, voters in Greece just fired their equivalent of the Democrats and Republicans, and replaced them with anti-bailout groups, mostly on the left (Syriza and Communists), but also with the neo-Nazi group Golden Dawn on the right.
This should be a wake-up call to political elites globally, because Greece could simply be the start of a trend of collapsing centrist politics and the rise of dangerous political actors. 7% of Greeks, including a substantial number of the police, voted for a fascist anti-immigrant party whose platform is a mixture of economic populism and xenophobic racist lunacy. 21 Golden Dawn members were elected to Parliament. Golden Dawn political machine includes roving gangs of thugs that routinely beat up immigrants, and its political platform includes placing mines on the border between Greece and Turkey to prevent immigrants from coming into the country.
This is what austerity produces – extremism. Fortunately, Golden Dawn only got 7% of the vote, and only 21 seats in Parliament. And mostly, the Greeks voted for parties on the left who reject austerity. Greeks don’t want neo-Nazi groups running the country, they just don’t want corrupt bankers running it either. The man who garnered the most power from the election, leftist Alexis Tsipras of Syriza, has called the situation in Greece a “humanitarian crisis”. That’s just reality. Greece has a large, untouchable patronage system, a big defense sector, wealthy who escape from taxation – and yet international bankers are demanding radical cuts in wages, pensions, and jobs for honest workers.
So people voted for the political parties who rejected the banks. Greek leftist leader Alexis Tsipras is proposing to actually deal with the country’s problems head-on.
By not paying its debts, the country would have enough cash to pay its workers and retirees, he said. He also proposes cuts in defense spending, cracking down on waste and corruption, and tackling tax evasion by the rich.
“Whatever we do, things will be difficult. But it will also be difficult at the same time for all of Europe because the euro will collapse” if Greece’s funding is cut off, said Mr. Tsipras. Both sides should step back “before we reach that point,” he said, and find a “European solution.”
Mr. Tsipras, an engineer by training, recommends a stimulus package to boost the Greek economy and has called for tearing up the country’s existing austerity-for-loans program. He has suggested scrapping plans to lay off 150,000 public-sector workers by 2015, and repealing recent measures to push down private-sector wages. He favors nationalizing the banking system so as to better direct lending policies, and speaks favorably of Franklin Delano Roosevelt’s Depression-era New Deal program and President Barack Obama’s stimulus package—something Mr. Tsipras said is lacking in Europe.
Given the dire situation in the country, this is a sensible, even moderate, set of proposals. And in fact, all of the anti-bailout parties, from Golden Dawn to Independent Greeks (right-wing but not fascist) to Syriza, share the goal of having the Greek state take control of its political order and move on a populist economic platform.
It is telling that Kammenos, despite his origins on the right, praised the economic program of SYRIZA in the run-up to the election—a program which calls for bank nationalization, a repeal of wage and pension cuts and of new, more flexible labor laws undermining collective bargaining. In fact, Golden Dawn’s anti-immigrant venom aside, its economic proposals are often hard to distinguish from those of SYRIZA and Independent Greeks.
The Greeks think that the system is rigged against them, which it is. It was German and French banks who lent Greece huge sums of money, and Goldman Sachs that helped the government lie about its debt load. Bailing out Greece is really just bailing out these German and French banks. Even as Germans demand cuts in social spending, German leader Angela Merkel isn’t calling for the Greeks to cut defense spending, because Germany sells Greece lots of weapons.
That said, a Greek exit of the Euro would be chaotic – devaluations aren’t pleasant, and this one would be worse because there isn’t a currency in place to devalue. But endless austerity is a hopeless path. With the state collapsing (that’s what the rise of Golden Dawn vigilantism is really about), the prospects are pretty frightening either way.
Hopefully, the European elites will decide to give Tsipras a chance to govern. At this point, it looks like Greece will muddle along, inside the Euro, with a better deal than it has right now, in a still unsustainable though less dire situation. In the medium term, a stronger fiscal union or a Eurozone dissolution will happen. But if the European elites do what they can to kneecap a truly non-austerity based governance posture, Golden Dawn is waiting in the wings. Greeks are voting for political parties that are reasonable and anti-bailout, because they think that they are getting a raw deal. But if it becomes clear that the choice is between an endless and hopeless humanitarian crisis, where the rich do fine and everyone else suffers, and roving gangs of neo-Nazis who promise to restore Greece to greatness while giving the finger to bankers, well, we’ve seen that movie before.