Yanis Varoufakis Photo: Public domain/Yanis Varoufakis Subversive interview 2013 cropped.jpg
I don’t want to sound patronising here, Yanis Varoufakis certainly has more academic qualifications than me and could undoubtedly teach me a thing or two about economics, but it does seem that his time as a minister has been an education for him in politics, the nature and art of negotiation and the ruthlessness of the establishment.
Understandably, Varoufakis seems to be in a sour mood after his experience of negotiating with the EU, the IMF and Wolfgang Schäuble. He voted against the austerity package accepted by Alexis Tsipras and is now merrily spilling the beans about an alleged Syriza Plan B for handling being squeezed out of the eurozone, the unpleasant odours that haunt the corridors of power and Schäuble’s apparent intention to make Grexit a reality.
“ … there was point blank refusal to engage in economic arguments. Point blank. You put forward an argument that you’ve really worked on, to make sure it’s logically coherent, and you’re just faced with blank stares. It is as if you haven’t spoken. What you say is independent of what they say. You might as well have sung the Swedish national anthem – you’d have got the same reply.”
But why did he imagine it would be any other way?
Forgive me for saying so, Professor, but you were naïve. These people already know the arguments and have decided that they are of no use to them.
Some – Schäuble, Tusk – appear to be ideologically committed to austerity, perhaps due to a sentimental attachment to the idea of the lower orders suffering or perhaps because of their political, personal or family histories.
Others have built careers in the service of an establishment that is becoming increasingly addicted to short-term financial returns, big dividends, not paying taxes and slashing waste, ie what’s left of the welfare state.
They don’t want to listen to the opposing case and explaining that case was not relevant to negotiation over Greece’s debt.
In the long run, austerity means that the EU, and eventually capitalism, will eat itself.
But – and for anyone who’s read previous relevant posts on my blog may find I sound a bit Johnny One Note here – the restraints on their short-termism have gone. These were essentially a powerful labour movement and, even more importantly in my view, a competing social system in the form of the Soviet bloc. They no longer exist, so the capitalist class no longer accepts that the state disciplines its need for higher and higher returns in the briefest delays possible.
Negotiation is not about persuading your opponents of the correctness of your case, it’s about convincing them that they have something to lose by not accepting your demands or at least reaching compromise.
That’s why I was amazed when the Syriza leaders declared that they would not leave the eurozone or accept loans from Russia.
Whether you intend to do it or not, why rule out a course of action that could frighten some of the people on the opposite side of the table (although not Schäuble in the first case, apparently)?
Equally puzzling was the Syriza leadership’s acceptance of France’s “help” in drawing up its final proposals (after Varoufakis’s resignation).
The French government and the civil servants it deployed to look over the Greeks’ shoulders may not want a Grexit but they have enthusiastically applied austerity policies and seem to have had a major role in drafting a swingeing package for Greece.
While the negotiations were going on, someone suggested to me that Schäuble was playing hard cop to allow Angela Merkel to look like the soft cop. Not a good comparison. Angela was quite hard enough. Wolfgang was more like the cop applies electrodes to your genitals.
The French Socialist leaders were the soft cops, with President François Hollande apparently on the phone to the Greeks and the Germans continuously in the run-up to the last deal and, in the end, they managed to thrust their package down the Greeks’ throats.
Oh well! At least the Syriza leaders showed that politicians don’t have to wear ties.
Ties are the sartorial descendants of a scrap of material that knights used to wear to stop their breastplates rubbing against their necks. Whether the big swinging dicks in the boardrooms and ministries like it or not, we don’t wear armour any more, so ties are pointless.
That’s a tiny victory, I suppose.
I’m off to Greece this week. So more on the blog later.
Whether you agree with the result or not, the massive No vote in Sunday’s Greek referendum was a courageous choice. Nobody knows what will happen now – not the Greeks, not the troika … not even Angela Merkel. The majority of Greeks chose to risk more economic hardship rather than willingly undergo further humiliation at the Eurobullies’ hands. A few observations:
The Greeks said no to do-as-I-say-not-as-I-do: Jean-Claude Juncker and Christine Lagarde told them they were naughty not to have paid their taxes. He was finance minister and then prime minister of a tax haven from 1989 to 2013. Being employed by the IMF, she doesn’t pay taxes anywhere (as was, of course, also the case for her predecessor, the delightful DSK). I don’t think that any of us could swear, hand on heart, that we would insist on our contract being rewritten if offered tax exemption but why exactly do international pontificators on fiscal rigour have this status?
European unity is good … but at what price? I have to admit to a sentimental attachment to the European Union and the euro. Being able to travel across most of a continent without showing my passport or changing my money is a pleasing taste of a world without national borders. But how many Greeks should be made unemployed, have their pensions slashed or otherwise reduced to penury to afford me that pleasure?
Europe would look pretty stupid without Greece: Juncker and friends said that the Greeks were voting on whether to stay in the euro and maybe the EU. Grexit would be a big blow to the euro project but they may be ready to accept it for the sake of an example to the other southern European slackers. But what will become of all those speeches about Europe’s heritage and values if the country that gave us the words “democracy”, “philosophy” – not to mention “poliics”, “comedy” and “drama” – is no longer part of our Europe? What has Luxembourg’s contribution to our common culture been, remind me?
Opinion polls are crap: Thank God I resisted the temptation to write a headline about Yes and No being neck and neck on RFI’s website on Saturday following the last poll, which showed the Yes winning with 41.5% against 40.2% for the No. This is not the first time the pollsters have been spectacularly wrong or that partisan media and interested parties have tried to influence the result by seizing on the prediction that serves their purpose. What happened? Were those canny Greeks also plotting their revenge on pollsters, journalists and EU chiefs by lying about their real intentions? Of course, even if the pollsters are genuinely trying to get it right, they can’t avoid the fact that being polled is passive and going to vote is active. They include in their calculations the responses of people who won’t be arsed to go and vote, whose opinion, quite rightly, isn’t taken into account in a real democratic process. But still we write articles based on one poll as if it was a factual account of the public’s mood and politicians allow their results to influence policy. I think we do have enough evidence to say that François Hollande is not very popular in France at the moment but can we really be sure that 51% of French people don’t think very highly of Alexis Tsipras on the basis of one poll?
This is the beginning of an era of austerity, not the end: Austerity doesn’t deliver what’s promised and depresses demand, thus further damaging the economy. But the IMF, the EU and the German leadership have turned down Yanis Varoufakis’s kind offer to save capitalism from itself. Electoral considerations come into this for Merkel, although, as George Papandreou showed when he resigned as Greek PM, an establishment politician is prepared to fall on his sword for the greater bourgeois good if bullied enough. Please read my previous post Austerity the new normal on why I believe that the changes in the structure of the working class and the collapse of the Soviet bloc have lifted the restraints on unbridled capitalist accumulation and are likely to lead to all the social reforms of the 20th century being “reformed” away.
In January 2015 Greek voters rejected the austerity policies imposed on them for their previous governments’ sin of accumulating billions of euros of debts. Democracy, whose defence is so often evoked as the reason for wars and restrictions of civil liberties, did not prove so dear to European leaders’ hearts when it resulted in the election of a left-wing government in the country of its birth.
The Syriza government has proved not quite as far left as some predicted, ready to negotiate, its ministers assuring their counterparts they don’t want to leave the euro, Finance Minister Yanis Varoufakis telling the world that he wants to save Europe from itself.
But Europe’s leaders, the “moderates” of mainstream-media labelling, have insisted it is austerity or nothing.
After Varoufakis visited the European Central Bank in February, the ECB responded to his conciliatory tone by effectively cutting off Greek banks’ access to short-term loans, doing all it could to bring speedy confrontation.
In March the European Commission opposed the government’s “humanitarian crisis bill”, telling it that helping the poor, the aged and the homeless would be “inconsistent with the commitments made”, as would its proposal to facilitate collection of the country’s massive tax arrears by allowing them to be paid in instalments.
Greek tax evasion is estimated to have been worth 20bn euros a year and has been going on for many decades, so pursuing it should provide a tidy sum for the government – France collected 1.8bn euros in 2014 and expects a further 2.2bn euros in 2015 after a number of tax evaders ‘fessed up, motivated both by the fear of exposure thanks to the Swissleaks revelations and a promise of clemency to those who came forward. It could have been far more since tax collectors complained that they did not have enough staff to deal with all the cases in reasonable time.
But collecting tax dodgers’ cash appears to be a low priority for the ECB, the European Commission and the International Monetary Fund.
The creditors’ conditions “are political”, comments Roman Godin in La Tribune, “the acceptance of ‘reforms’ of the labour market and pensions, which are not urgent economically speaking but which politically ‘cancel out’ the essential points of Syriza’s programme and message”.
Who really believes that Greece can clear its debts if government income is slashed by austerity policies that have led to a 26% fall in production, 26% unemployment and a 33% fall in wages, it is obliged to take out more loans with interest rates attached and, on top of that, it is discouraged from chasing up tax income it is already entitled to?
Anyone would think that for the EU and IMF leaders balancing budgets was less important than destroying what’s left of the welfare state!
French-bashing – the hidden agenda
In France we hear an awful lot about the need to reduce the debt – in fact, it has dictated the Socialist government’s economic policy since its election.
Following the French media is like having a friend who is given to self-flagellating criticism but takes violent exception if you agree with them. On the one hand French commentators get prickly about “French-bashing” (yes, that’s a real Franglais word now), on the other editorialists, analysts, politicians and business leaders insist that the country is locked in a spiral of decline with the working and middle classes frolicking in the sun of unaffordable privilege while employers, big and small, are weighed down by the twin burdens of bureaucracy and taxation. Adding its voice to the chorus of cutters, the European Commission has ordered the government to slash a budget deficit of 4.3 per cent of GDP in 2014 to 3.0 per cent in 2017, although France has gained no less than three extensions, unlike the poor Greeks.
The Socialist government has obeyed orders, drawing up plans to cut 50 billion euros from public spending over the next three years, on top of previous cuts and rises in VAT.
First among France’s autoflagellants is the main bosses’ organisation, the Medef. Of course, it is not really indulging in self-criticism as much as criticism of the state insofar as it is perceived to be indulging the lower orders. The Medef and its cothinkers latch onto what the French annoyingly call “Anglo-Saxon” critiques of the French economy, defending France from the French-basheurs with about as little enthusiasm as their forerunners defended la patrie at the end of the 1930s. But then patriotism, like taxes, is for the little people.
International comparisons don’t always bear out the image of the French being especially idle or particularly privileged, especially when one takes into account productivity, which in some sectors was actually boosted by bosses compensating for the 35-hour week by investing or changing working practices.
But the really puzzling question, for me at least, is how it is that France can’t afford to pay for improvements in social conditions conceded since the end of World War II when GDP, despite declining in the post-2008 crisis, has not just risen but soared in the past 100 years.
GDP per capita:
French total GDP in 1950 was 15.5bn euros. In 1990 it was 1 058.6bn and in 2013 it was 2 113.7bn.
Inflation has taken a chunk out of that, of course, but, if I’ve worked the online calculator correctly, 1950’s GDP was 284bn and 1990’s was 1,566bn in 2013 prices. http://france-inflation.com/calculateur_inflation.php. So we are more productive and vastly wealthier than we were 50 years ago, especially if you bear in mind that wealth has not only been created but also accumulated over the years.
True, public spending has risen – from 40% of GDP in 1947 to 56% in 2011. But, although the current crisis has cut government income and increased expenditure by raising unemployment, this is not a result of the government throwing money at the disadvantaged, in fact, according to social campaigners le Collectif pour un audit citoyen de la dette publique (CAC), government spending has actually fallen two points of GDP over the last 30 years.
Where does the deficit come from?
CAC finds three main causes:
Tax cuts – tax breaks, mainly for businesses and top income brackets, have cost the state 488bn euros, reducing its income by five points of GDP, over 30 years;
Interest payments – borrowing on financial markets, whose rates have fluctuated violently, has proved 589bn euros more expensive than borrowing from households or banks at a 2.0% interest rate;
Tax evasion – if wealthy tax dodgers with secret accounts in tax havens had paid their share the debt would have been 424bn euros lower in 2012, CAC estimates.
A symptom of France’s unbearable tax burden, perhaps?
Not really, in the tax avoidance stakes the country comes behind Switzerland, the UK, Venezuela and the US, none of whom have higher income tax levels than France – Bolivarist Venezuela actually having the lowest at 34%.
In the space of a few months a total of 180.6bn euros went through HSBC’s Geneva branch to be salted away in tax havens. The money came from all over the world with no apparent correlation between the top rate of income tax and rich people’s inclination to tell the truth to the taxman. The blunt truth is that no matter how much you cut tax, the rich – whether they’re arms traffickers, comedians, politicians, surgeons or heirs to family fortunes – will never be satisfied.
On top of which, they’re good negotiators – it’s a lot of what bosses do for a living – so they’re unlikely to say “Thanks, guys, that’s enough!”
“As long as you’re winning, keep playing,” comments Luc Peillon in Libération newspaper, when reviewing yet another set of demands put forward by the Medef last year.
Having already won “a historic reduction in labour costs” of 40 billion euros during the life of François Hollande’s government, the bosses’ union drew up a new shopping list that included cutting two public holidays, more exemptions for businesses on taxes and social security contributions, creating a loophole in the minimum wage, extending Sunday working and that old chestnut ending the 35-hour week, all under the pretence that it wants to create jobs.
After examining the Medef’s claim that their proposals would create up to 600,000 jobs, Peillon found that the real figure would be about 30,000. Except it wouldn’t. That last proposal would probably destroy jobs by expanding overtime working rather than creating new employment.
This medicine doesn’t work … have some more!
Given that right-wing parties the world over continually advocate “reducing the tax burden” and supposedly left-wing parties habitually cave in to the demand, you’d think that bribing the bosses to invest has a proven track record of job creation.
Except it hasn’t, has it?
Despite all those billions of give-backs, France now has record unemployment and it has risen even as Hollande’s government signed deal after deal that swapped real tax cuts for hypothetical new jobs.
But in France, as in the rest of the world, the pressure for more tax cuts goes on. The wealthy are cancelling their subscription to the state, while still calling on its services when they prove useful.
So where has the money gone?
Into investors’ pockets. Dividends have risen from 12-13% of French companies’ operating income in 1980 to 30% in 2013, according to state statistics unit Insee.
And whoops! There goes investment (it’s the grey line at the bottom of the graph below profit margins and self-financing rates from 1984 onwards):
Sums paid in dividends in France were half those invested in 1980. They are 2.5 times more today.
And it’s not just in France. All over the rich world companies are stuffing their shareholders’ pockets as if there were no tomorrow.
“Global dividends soared 10.5% to $1.167 trillion in 2014, a new record,” the Henderson Global Dividend Index (HGDI) reports with considerable satisfaction. “Underlying dividend growth – which adjusts for currency movements, special dividends, the timing of big payments and index changes – was still robust at 8.8%.”
Commenting on the international trend, investment fund boss Larry Fink is shown in Perrin’s documentary, Cash Investigation, warning of a threat to companies’ long-term survival if they carry on as they are now.
Here’s how investments has fared in the US and the UK:
The pressure to pay out not only means cutting investment in plant but also in training, one of French industry’s real weaknesses. While right-wing economists compare France unfavourably to Germany on many economic fronts, they rarely mention one crucial difference – in 2012 Germany spent 90bn euros on research and development while France could only rustle up 51bn euros.
Maybe French employers should be getting tax breaks for research. Well, actually, they already are. It’s CIR, the purple line in the graph, produced by the campaign Sciences en marche and it shows that they have pocketed nearly six billion euros this year. The blue line shows the number of jobs created in research. Yes, it’s actually falling as the payouts rise. What a scam!
And, as Cash Investigation shows with stories of employee suicides, boot-camp-style training programmes and factory closures, human capital is squeezed to boost the bottom line.
This search for immediate financial gratification is all part of the tendency to growing inequality, noted by Occupy campaigners, Russell Brand, Oxfam, Thomas Piketty (I’m on page 183 – apparently better than most ebook readers who don’t seem to have got much past page 26 – how far have you got?) … anyone with eyes to see, really.
According to Piketty, the trend in Europe and America is a reversal of a trend that lasted from 1770 to 1990.
The ideological justification for this, the self-serving greed-is-good rhetoric of the political right, has, as can be seen in the ex-troika’s dealings with Greece, become the dogma of the global elite, whether represented by the “Socialist” Dominique Strauss-Kahn or the Sarkozy-worshipper Christine Lagarde.
Today we see the same tendency to the reduction of public spending, stigmatisation of the poor and their increased impoverishment, rising inequality and a rise in the share taken by profit all over Europe and the US.
All this is accompanied by an ideological war on taxation – coopting the middle and working classes into the destruction of social solidarity – and social engineering – privatisation of social housing and the encouragement of home ownership, employee-shareholder schemes and other forms of non-salary pay, hierarchies in the workplace and career structures that pit workers against each other, all of which have the effect of undermining the concept of the collective.
But an ideology only becomes dominant if it suits those who call the world’s political tune.
The rich are reverting to type because they no longer fear revolution
The limited income redistribution that took place in the 19th and 20th centuries was no more an ideological decision than is its current reversal.
Nor were today’s “democratic values”, living standards and social welfare systems handed down by an enlightened elite, reared on a benign Western cultural tradition, as claimed by the political successors of the men who ordered the troops out at Peterloo, had union organisers murdered in the US, butchered the Paris communards and Lyon’s Canut insurrectionists and embarked on the “civilising mission” of colonialism.
Every social and political advance was bitterly resisted, usually with the same brutality that reappeared in the Thatcher government’s showdown with the British miners in 1984.
The modern social welfare state was the product of class struggle, its precursors created primarily by trade unions and other working-class organisations and adapted to capitalism’s needs when it proved necessary to take the edge of the class struggle.
But, according to Piketty’s graph, all this went into reverse in 1990. Why would that be?
To start with, and I know I’m not the first to say this, the labour movement in Europe and the US isn’t what it used to be.
I live in what used to be known as the ceinture rouge, the red belt around Paris, a bastion of the French Communist Party, whose political and trade union base was to be found in big factories like Renault Billancourt, now closed, its site now apparently destined to become an “isle of all the arts”. The factories are no more, the Communist Party has about 70,000 paid-up members, compared to 800,000 in 1946, and the unions, while still pretty shouty in that famous French way, are divided and weakened.
The British unions are similarly weakened and the Labour Party has had its class content surgically removed – no longer one half of a two-party system that reflected the struggle between capital and labour but a competitor in a political game show with an ever-expanding number of players.
Both in Europe and the US the unions have seen their power greatly diminished. The nature of employment in the most advanced economies has deprived them of the means to inflict serious financial damage on major employers with a few exceptions. The conditions that Marx said made the proletariat the gravediggers of capitalism – the collectivism that arose from the industrial process – have been substantially changed in these countries both by accident and design.
In the US today, according to Piketty, 18% of the workforce is employed in manufacturing and 80% in services, while in France the figures are 21% and 76%. Even if the big shift has been the decline in agricultural employment, manufacturing employment stood at 33% in both the US and France in 1950 and services at 50% and 35% respectively.
Of course, the working class has not been abolished. The “knowledge economy” is a fantasy dreamt up by people who apparently haven’t noticed that they are sitting in glass, concrete and steel offices, typing on computers manufactured from steel, plastic and rare earths. But the proletariat does to a large extent seem to have moved east and, even there, is more dispersed and more at the mercy of the movement of globalised capital than its predecessor of a century ago.
Here’s the trends on a world scale, according to MSS Research:
And more and more labour is going to be replaced by computerised technology, as John Lanchester indicates in The London Review of Books. He cites an Oxford University study that estimates that 47% of US jobs are “potentially automatable” . So it’s bye-bye telemarketers, insurance underwriters, mathematical technicians, sewers (hand) and title examiners, abstractors and searchers. It will be mainly low-wage, low-skilled jobs that will go, the study finds.
“So the poor will be hurt, the middle will do slightly better than it has been doing, and the rich – surprise! – will be fine,” comments Lanchester.
Given that Le Monde newspaper recently used a computer programme to produce some of its coverage of departmental election results and that Lanchester himself reproduces an article written entirely by computer, I find his prognosis a trifle optimistic so far as my own trade is concerned and the list of skills that are likely to vanish indicates that the middle is likely to be increasingly squeezed worldwide.
Of course, the replacement of human labour by machines, the squeezing of wages and the destruction of the welfare state will all vastly reduce markets and be against the long-term interests of capitalism as a system. But those markets were for the most part created by processes that the capitalists themselves resisted, both individually and collectively, and are being destroyed by the immediate concern for the bottom line that is the motor force of private enterprise.
Piketty attributes some of the 20th century’s redistribution of wealth to the effects of two world wars and the 1918 flu epidemic but I doubt if any of us are hoping for similar cataclysms to create labour shortages and disperse inherited wealth.
In my view the key constraint on capital’s unrestrained greed in the 20th century – the principal reason why the welfare state and the social-democratic compromise was conceded – is overlooked or understated by most commentators.
It was fear of revolution.
And, although its full implications are taking time to filter into the bourgeois brain, that fear is no more.
From 1918 to 1989 an alternative economic system to capitalism existed. It turned out not to lead to the liberation of humanity, to put it mildly, but, ironically, it did oblige capitalism to render itself more acceptable. The US’s propagandists even enrolled abstract expressionism and avant-garde theatre in their efforts to portray the West as the home of freedom but, above all, some of the massive wealth that was being created was invested in providing the mass of the people in the rich, metropolitan democracies with higher living standards than their Russian, east European or Chinese counterparts.
Those days are over. With the collapse of the Soviet bloc and China’s conversion to capitalism there’s no need to do that any more – hence austerity as dogma.
Although the 2008 crash brought an end to the post-1989 ideological euphoria, it has not stopped the austerity onslaught.
And why should it?
Consciously or unconsciously, the ruling elite does not feel that its hold on power is under threat, either ideologically or materially.
So maybe Marx’s theory of increasing misery – of all his predictions the one that seemed to be most definitively disproved by the reality of the 20th century – was not so daft after all.
