Video from the one-day public event, Critical Perspectives on Global Governance, University of Helsinki, 7 May 2010; called The Greek Tragedy and the Global Debt Crisis.
This 20-minute talk explains aspects of the Greek financial bailout of may 2010. It argues that we should not witness events such as those in Greece and now happening across Europe in response to austerity measures, e.g. in France as of October 2010, as if we are simply a passive audience in a drama, a “Greek tragedy” as it were, with the citizens of Europe its passive audience experiencing the cathartic emotions of terror and pity for the plight of Greek citizens.
In contrast to the dominant financial orthodoxy that has governed the European response to austerity, the talk calls for creation of a new European economic institution that is more fully democratically controlled and accountable, drawing on the advice of progressive economists.
Questions largely missing from public discussion were (a) what could have been the alternative uses of these gigantic sums of public money? and (b) who will pay to these debts and under what conditions? The answer given to (b) by the International Monetary Fund is “the people” The Fund has said that it will take 10 to 20 years of austerity measures, involving cuts in public sector wages and public services, and increased privatization of public assets to pay for “future” bailouts, and to pay back government debts. In May 2010 the European Union — and specifically the eurozone economies created an initiative, a kind of European Monetary Fund, with new bailout funds of €1 trillion in an attempt to “stabilize the financial markets”.
Indeed the debt crisis in Europe has been a feature of the global South for much longer — at least 30 years. The debt crisis is now migrating to the global North. Many countries have spent trillions of euros on bail outs for private financial institutions since 2007. In the absence of significant pressures from progressive forces, governments have simply responded to the crisis in favour of the interests of financial capitalism — or what I call ‘financial orthodoxy’.
The strategies adopted to bail out the likes of Wall Street and the City of London, and banks in Frankfurt, Paris and other capitals have resulted in very high levels of public debt for a number of countries, e.g. in southern Europe. Here it is important to remember that the costs of the austerity measures in Greece and elsewhere fall disproportionately on the backs of the poor — in the UK case, the Conservative-Liberal government’s announced cuts of about 500,000 public sector jobs to save money over the coming years are justified by the need to pay for the bail outs of City of London firms. These job losses will also affect women the most (350,000 of the jobs lost).
As the Director-General of the International Labour Organisation noted in 2009, the bailout strategies have involved “billions for the banks and pennies for the people”. Now the people are being made to pay for the bailouts with the austerity measures.
Much of the debt of countries such as Greece is owed to private banks in Germany, France and the United States, so the Greek bailout is as much a bailout of these banks as it is for Greece as a country. Greece has been forced to make draconian cuts in social benefits, public sector wages, and pensions, which reverse approximately 30 years of workers’ gains — a continuation of the type of structural adjustment and stabilization policies favoured by the Washington-based international financial institutions.
Of course the Greek fiscal crisis has also been caused by poor tax collection (allowing wealthy people and professionals to evade paying taxes and to get their money out of the country) as well as by previous governments manipulating statistics, in effect cooking the books with the help of big private banks such as Goldman Sachs.
There has been little debate upon the alternative ways in which such resources could be used. A very different kind of (and much larger) European monetary fund could be created, linked to more socially sustainable economic development, to improve education, health and the environment. This fund could be much more democratically governed than the present “independent” European Central Bank, which is responsive mainly to financial interests. What we have learned during the present crisis in Europe is that banking is much too important to be left to either to mainstream politicians or the bankers themselves. Indeed there are many gifted, critical and more democratic economists who could be recruited to help build such an institution and run it effectively.
As a footnote, viewers of the video will note how at one point a videographer in the audience interrupts; in case it is not clear from the narrative what I was referring to was the way that a computer error transposed an automated market “sell” trade of $16 million dollars in shareholdings as $16 billion. This massive sell-off of stocks immediately caused the market value of many shares on the New York Stock Exchange to drop as if the companies were going bankrupt. The example highlights the way that the turnover time of financial capital is accelerated by computerization and 24/7 trading strategies.
For the video see see http://uni-utopia.net/
The powerpoint of the presentation is here [see attached & insert]
Audio podcasts of all the presentations at the Critical Perspectives on Global Governance, were posted on: http://www-hotel1.it.helsinki.fi/~optek/podcast/ (Posted May 2010).
This is a short presentation highlighting issues concerned with the emerging global debt crisis and some of the specifics of the situation in Greece in May of that year. Viewers will note how at one point a videographer interrupts; in case it is not clear from the narrative what I was referring to was the way that a computer error transposed an automated market trade of $16 million dollars as $16 billion, causing the value of many shares on the New York Stock Exchange to drop as if the companies were going bankrupt. The example highlights the way that the turnover time of financial capital is accelerated by computerization and 24/7 trading strategies.
Audio podcasts of all the presentations at the Critical Perspectives on Global Governance were posted on: http://www-hotel1.it.helsinki.fi/~optek/podcast/ (Posted May 2010).