Euro Austerity: Capitalist Contempt for Democracy

This month, sixty per cent of voters in Greece voted for parties that opposed draconian austerity measures imposed on their country. A majority in France’s election for president voted for Francois Hollande, the anti-austerity Socialist Party candidate.  Voters in North Rhine-Westphalia, Germany’s largest state, voted against Angela Merkel’s austerity policies, giving the Social Democrats 39 per cent of the vote and the Greens 12 per cent, an absolute majority for their coalition. The Pirate Party, which also opposes austerity, got nearly 8 per cent of the vote, gaining representation in its fourth German state election this year. It campaigns for direct democracy, more access to intellectual property, protection of whistle blowers, and tighter personal privacy rules.  Merkel’s Christian Democrats got only 26 per cent of the vote.

Despite these election results, parties representing financial interests and the corporate media insist that austerity measures must go ahead.  At a time when real wages are steadily declining and unemployment has reached levels not seen for more than fifty years, the supporters of finance capital insist that the problem is public debt. They demand cuts to social services, public employment and wages and salaries.

For majorities who depend on income from labour—not on profits from capital—austerity is not a solution.  It is the problem. The one per cent, or 0.1 per cent, who depend on income from capital, insist the people are wrong. The interests of capital, regardless of the costs to others, must come first.

Austerity has led to steadily rising unemployment and declining markets in most European countries. Its most devastating effects are in Greece.  Public employment, pensions and other social services have been gutted. The country’s assets are being plundered.  Public utilities are being sold off to corporations from other countries. A quarter of the population—half of people under thirty—are unemployed. Still the supporters of capitalist interests claim that Greece has been living beyond its means.  The only way that the country can expect to get any new money is if it cuts back its profligate spending.

In fact, Greece is one of the poorer countries in Europe.  Its social services do not come close to matching the coverage, quality or cost of the social services of more prosperous countries like Germany and France. The funds that Greece gets if it agrees to austerity measures do not go to Greece, but to the banks that hold the credits that were used to pay for past government expenditures—including the Olympics. The banks that hold these debts are mainly in Germany and France and but also in the U.K., U.S., Switzerland, and elsewhere.

Faced with a 60 per cent vote against austerity in Greece, the capitalist strategy is to hope that the lure of power can induce enough of the elected representatives to switch sides and support the proposed cuts.  What the people of Greece are being pushed to do is to accept rising unemployment and worsening poverty to sustain global financial interests.  Past Greek governments can be blamed for allowing the country to descend into a state of debt peonage, but the primary blame is with the global financial institutions.  Due diligence would have made it clear that Greece could not realistically pay back the money loaned, even at the original low interest rates. As these loans were renegotiated at predictably higher rates it should have been obvious that paying back the loans was impossible.

Greece is a repeat of the U.S. sub-prime mortgage debacle. Low income, often unemployed people were enticed to purchase homes with little or no down payment at interest rates which for the first year or so were attractively low. The borrowers may or may not have been told that these rates would shortly rise dramatically, making it nearly impossible for these loans to ever be repaid. U.S. financial institutions who engaged in these irresponsible lending practices have not been held to account. European financial interests, backed by the European Central Bank, the International Monetary Fund, and transnational capital generally, continue on, pursuing their interests at the expense of public employees, social services, union conditions, and consumer income.

Allan Engler is a Vancouver trade unionist and social and environmental activist. His Economic Democracy, the working-class alternative to capitalism was published earlier this year by Fernwood Books. Read other articles by Al.