The "crisis of the Left" and the day after

"If one takes into account that 99% of their transactions have to do with financial derivatives that have no relation to the real economy, then the Leftists are not completely wrong, when they talk about casinos"
- W. Schäuble 12/10/2011

"The problem is not new. Karl Marx oversold socialism, but he was right in claiming that globalization, unfettered financial capitalism, and redistribution of income and wealth from labor to capital could lead capitalism to self-destruct."
- N. Roubini 14/10/2011

Hard Times

Quite a lot of ink (and sometimes tears) has been spilled about the so-called "crisis of the Left" during the last 30 years in Europe, in a few words the shift of social democracy towards liberalism and the confinement of the rest of the Left to the sidelines of the political scene. Many analysts attributed the crisis to bad handling, poor leadership, divisive tendencies, etc, but ignored the fact that the crisis was almost universal (it occurred in pretty much all European countries) and therefore structural. The most pragmatic leftists admited, albeit tentatively, that the type of capitalism, founded by the Right-wing Thatcher and Reagan and completed by the Leftists Blair and Clinton, supported by a comprehensive system of social benefits, seemingly worked: there were poor, there were inequalities and unemployment but to an extent tolerated by most people, who enjoyed a constantly improving standard of living. Some countries even managed something that seems paradoxical: to reduce inequalities while liberalizing their economy.

In politics and public opinion the ideas of the Left were constantly losing ground. Concepts such as "Marxism," "socialism," "socialization of the means of production" were heard as old-fashioned anachronisms. The complete collapse of the Soviet bloc in 1989-91 reinforced these trends. There followed a time when many socialists, some because they wished not to be considered backward and others that did not want to be connected with the ever changing social democracy turned into simply "democrats" or "leftists." One can remember that one of the issues raised in 2004, when Mr Papandreou assumed the leadership of PASOK, was changing the name of the party so that it does not contain any term linked to the concept of socialism. The academic world was dominated by the same trends, with the economic and societal proposals of socialism being met with irony and sarcasm. Some even argued that, with capitalist globalization, humanity was approaching the "end of history" that would bring prosperity to all. The ideology of radical liberalism with minimal regulation reached a point that was almost considered a natural law. Its victory was such that it emerged as virtually the only way, minimizing the programmatic differences between parties in power. The Greek voters from 1996 and forth were asked to vote for the best "management team" rather than political agendas.

The (non-social democratic) Left, what remained of it, was being ideologically "persecuted". These developments forced it to abandon in practice its economic program by simply advocating an even more generous social capitalism, and to focus on issues such as protection of human rights, "the weak", immigrants, minorities, etc (a kind of political charity one might say), but with views that could be adopted even by a liberal center-right party. The coveted "unity of the Left" became a central objective as it was considered key to survival. In the name of this unity alliances were formed that integrated political currents that differed significantly both in their political aspirations, as well as their strategy and methodology. This castrated their political efforts so they could not present a convincing alternative to a system that seemed successful anyway.

Year 1990 for neoliberalism

The ongoing crisis that began in 2008 came to dramatically change this landscape. Suddenly the world discovered that unfettered markets were not only incapable of self-regulation, but operated with exaggeration and panic, exacerbating distortions and problems instead of solving them. This has led many influential economists to recognize the "Instability of Inequality" or the "Ideological Crisis of Western Capitalism", recognizing that the crisis of western economies is systemic and is caused by the overaccumulation of wealth by the few. Even more important perhaps is the fact that even Right-wing politicians in key positions, like Mr. Schäuble, admit that most of the financial transactions are dominated by a gambler's mentality and thus harm rather than help the real economy and consequently society. What was previously regarded as "natural law" is losing ground on a technical, as well as on a moral level.

Of course there are fanatical liberals who insist that liberalism itself did not fail, but was instead badly implemented. This attitude is inevitably reminiscent of communists who refuse to admit that the system they promised had structural problems, blaming its failure to its implementation, and they ignore that political ideologies are judged mainly by their practical results rather than their theoretical basis. Moreover, even in theory, it is easy to observe that if the threefold freedom - equality - fraternity summarizes the principles of a progressive society, the two systems are just partial solutions: liberalism focuses on freedom at the expense of equality while communism has the opposite effect.

The ecological factor

In the decades that followed the 1990, the notion that we live in a "finite planet" has been established in the perception of most Europeans. The ecological factor became important in daily life, politics and the economy. This increased environmental awareness led to the conclusion that continuous and intensive growth is impossible since natural resources are finite or have finite capability of renewal and the challenge now is to seek societies of "Prosperity without Growth". This conclusion undermines a key argument of neoliberalism, which is based on the assumption of continuous development in a society that everyone has the opportunity to profit either more or less. In other words, we realize that the cake has a limited number of pieces, and the problem is how they will be distributed.

The Left of the day after

The first concern of the governments of the Eurozone is to prevent violent and uncontrollable developments because they will seriously undermine social cohesion within countries and the solidarity between them. The general direction is towards a wider fiscal homogenization, with the technical details (the level of permissible deficit, the role of the ECB, the European Commission, etc) being a major issue of negotiation of the current months.

It is clear however that a technical solution would be temporary. The crisis experienced by European economies is related to their post-war creation, social capitalism, which is under very strong pressure from factors such as the ageing population, the ecological crisis and the competition from Asian economies. Consequently, the controversy of the next day will (and has to) deal with how to reform the capitalist system in Europe (and the Western world in general) in order to adapt to the new realities. Filings of such reform proposals have already been expressed, such as the abolition of naked CDS, or the taxation of financial transactions. The crisis, however, is such that these technical arrangements may be proven inadequate. It is also obvious that it is not possible to return to the Europe of late 1990 or 2000 since the global environment has changed dramatically. The debate is likely to reach a much greater depth, revising key organizational elements of European society, such as the welfare state as it was developed primarily after the war.

The Socialist Left should not only be ready, but to take the initiative in this debate. Continued defense of a generous social capitalism may prove to be a lost battle. It is therefore time for it to recall its economic programs and boldly assert a range of topics such as:

- European citizens should be assured that whatever change is made, the game of the next day will be fair. Any austerity imposed by the new conditions, should be beneficial and not at the expense of social equality. The example is given by the successful recipes of some European countries during the crisis. Most of these are countries are characterized by low inequality.

- Progressive equality and failures of neoliberalism impose a revision of how the right both to property and possession and management of capital is perceived. Abolishment of unreasonable financial products, targeted taxation of wealth, control of capital mobility and socialization of its management through state or cooperative banks are potential solutions. Healthy competition should be strengthened to combat all types of monopolies. The European economies must be transformed from capital-intensive economies to economies of intensive production and creation.

- Treatment of unfair competition on the part of Asian countries, caused by reduced labor costs and unacceptable working conditions. We all know that apart from Asian companies, the situation greatly benefits Western multinational companies, which European governments must negotiate with.

The historical circumstances make the responsibility of the Socialist Left for the day after extremely great. If there are any who can offer substantial and clear solutions to the impasses of the current situation then these are the Socialists, not the until recently preachers of liberalism.

Social equality: the socialist contract

I will be honest: I treat with caution (if not suspicion) anyone who introduces himself as a leftist, without giving  a more specific definition: communist, environmentalist, democratic socialist, anarchist, social democrat, and so on. I also treat with caution anyone who describes to me what he is not with various "anti" and "against": anti-capitalist, anti-neoliberal, against globalization, stalinism, etc.

Why such reticence? In the first case my (yet dear) interlocutor suffers from the "disease" of ideological vagueness, intentional or not. He wants to be leftist in general, to be in good terms with everyone and above all with his conscience, which would not stand him being called a centrist (not to say liberal), even if in fact he is not. This ideological vagueness also causes political castration:  without ideological direction, the proposed reforms, even if they sound "generally left-wing" can easily prove contradictory, conflicting and therefore ineffective. In the second case, the various by-contrast determinations, in addition to being incomplete, they may also become a little dangerous: an orthodox neo-Nazi would rather embrace all "anti" and "against" ideas mentioned above.

The Democratic Left, from its cradle about a year ago, attempted to clear its ideological profile, putting up democratic socialism (i.e. the promotion of socialism through successive reforms, using democratic means and with a broad acceptance by society) as its fundamental principle. It is worth to note that the main founder of this ideological current in Greece was Leonidas Kirkos who was with us until a few days ago. All well so far, the only thing left is to agree on what is socialism without having to wade in Marx or Kautsky.

In my view, socialism is the pursuit of  the Good Society through social equality. Social equality is to ensure equal conditions of living (income, environment, services, etc.) for everyone. With a little more modern (and unfortunately more complicated) terms, social equality is to ensure equal conditions of happiness for every citizen. Consequently, a socialist party is basically a movement for social equality. Most of the other concepts that one encounters in the various socialist programs, such as the socialization of the means of production or the dictatorship of the working class are actually methods, democratic or not, of realizing this central objective. The commitment to social equality is the main difference with other political currents (modern social democracy, social liberalism) whose ideological framework based on mere legal equality and the use of the welfare state to mitigate inequalities or, to be more suspicious, to ensure the necessary discipline of the lower working classes. Therefore, instead of protecting the weak, a socialist should struggle so that they do not exist.

Economic Equality

Naturally, a key component of social equality is economic equality. It is not fair that we all have the same income regardless of how much we work or how much we offer, but it is fair to be rewarded based on the value of what we produce through our work. Does this not happen today? Unfortunately not, and not just because employers are not willing to share profits with employees (in our country have a large percentage of self-employed anyway), but because of the way the market is shaped like today, possessed of all kinds of privileges. A privilege is anything that produces wealth without being related to a productive process (e.g. exploiting real estate property or capital), monopolies of any kind (exclusive provision of products and services) and generally any distortion that benefits certain interest groups. Economic equality demands the removal of such privileges.

Let me not be misunderstood, I do not propose abolishing the right of property and its exploitation. What could be done by a socialist government is for example the additional taxation of activities not directly related to production processes in order to discourage them and remove any exclusive provision of services or products. Therefore, to address a topical issue, the opening of closed professions not related to critical areas is primarily a matter of equality. The positive impact this may have on an industry is of secondary importance. More generally, the principle of economic equality could stimulate a series of radical reforms to the operation of the market, making it less prone to instabilities and crises.

Is it realistic to struggle for equality under these circumstances? I would say that the crisis makes the need for equality even more urgent: in good times, when there is enough cake so that everyone can get at least one piece (no matter if some get second and third), there is no big a problem and everyone is more or less happy. In difficult times like those we are experiencing, the need for a careful and fair deal is much more important.

Game Theory

In one of his recent television appearances, Mr. Varoufakis, professor of Economic Theory at the University of Athens stated (I can not remember the exact words) that "whoever speaks to you today with certainty of the markets, is lying." And it is certainly true, the behavior of the markets during a crisis, given the uncontrolled way they operate, is as predictable is a chess, or rather a monopoly, game with 100 or more players. Game Theory tells us that selecting a strategy with substantial likelihood of success in these cases is impossible.

Therefore, questions like "Was it right to sign the Memorandum or should we have opted for default in the first place?" Or "Is it beneficial to restructure the debt now?" are unnecessary and hypocritical, because they cannot be answered. This is because at this stage, no one can predict developments in markets, even when it comes to negotiating with them. Exaggeration, panic and the ultimate gambler's mentality that prevail in them (in fact have been established in them) do not make them a credible cooperative for an exit plan, even if a smooth exit would be to their benefit.

The government knows this and in my opinion this is why they have chosen a strategy of a "political exit" from the crisis, relying on our partners in the Eurozone, who in this case are probably more predictable than the markets, even when taking the possible election results and subsequent government changes into account. The government therefore wants Greece to remain the Committee's "good boy" in order to be able to request additional assistance in some form in the future if necessary. For this reason, although it is clear that the numbers do not come out, it believes that this strategy poses less risk, hoping for a future European final solution.

A similar tactic is followed by the other Euro countries. It is true that in March they did little to appease the markets. The question "Would doing A or B calm the markets?" is forwarded along with the rest to well... Game Theory. Instead they did the minimum possible to avoid a Eurozone collapse, leaving the final decisions for later, perhaps at a moment when the markets have calmed down or even be regulated somehow. Until then they will push our country to reduce the debt as much as possible (and here  privatizations come into play), while advertising  the sacrifices of the Greek people as best they can to the taxpayers in order to have their consent when the time comes for crucial decisions. The most important success of the Eurozone at this stage is the fact that bailing out Spain has been avoided, at least for the time being. 

The risks of this strategy are many. Either way we live in an age of uncertainty. Good cooperation of the states of the Eurozone is not given, although disagreements between the Commission, governments and other actors in the Euro area have declined significantly. The confidence in Greece, due to its sinful past is also not given. Finally, and this is the most significant risk, there is the possibility that the anarchy of the market resists the will of the European institutions and governments. 

Growth sure, but when? 


What can Greece do at home to accelerate the exit from the crisis? The easy answer is growth. Unfortunately, as is well known, our country entered the crisis having an eroded economic growth model (interconnected with an equally eroded socio-political model) which was based on domestic consumption at a percentage of 60 - 70%, which was sustained by increasing state debt. Greek industries, including tourism, have focused on the internal market, driving trade balance towards collapse. Companies that inherently can not target markets abroad, such as shops and construction companies, have become unsustainable. The borrowed money (from the state through the salaries of civil servants) who supported them no longer exist. 

This explains why the "rage for padlocks" of mainly right-wing parties is pure populism and hypocrisy. In order to develop our country should, among other things, restructure the tourism sector and to initiate a true revolution in agriculture, and build a green economy  from scratch. These reforms will require several years, especially at a time when the Greek banks, infected by the Greek government bonds and the general atmosphere of uncertainty, are trying to ensure their survival. It is true however, that reforms that are needed in these areas for growth to begin, albeit slowly, suffer from delays and lack of organization.

One area though that could certainly move a lot faster is combating tax evasion, contribution evasion and the underground economy. For the first the government admitted their utter failure with the dismissal of the Revenue Secretary General Mr. Georgakopoulos, while on the contribution evasion front labor inspectors are still facing a tragic situation. Government criticism regarding these matters one and a half year after the elections, is absolutely justified.

Apparently the return to economic stability is a process that will last for years. The least the government can do is to try to keep the society alive by preventing the uncontrolled growth of economic inequality by equal distributing the burden of the crisis. It is indicative that criticism in this area has been expressed by Mr. Strauss-Kahn as well. Ensuring a minimum level of social cohesion is not only fair but also the basic condition for the government strategy to have the slightest chance of success.