Some kind of solution...*

This post would fit better as an epilogue of the previous one. However, since there has been an (as usual) long interval between the two posts, it came out seperately.

Many times in the history of a country, especially a small country, come moments when its people do not have their destiny in their own hands. Instead, it is more determined by international conditions and the will of the various regional or global powers. Greece is now in this difficult time, at least for a short term. But it is not alone. Europe's future today depends more than ever in modern history on developments outside Europe.

In the previous post we saw that the main causes of the crisis in Europe are the dramatic changes in the global economy caused by the globalization of trade with the impressive entry of emerging economies in international markets. In other words, Europe is feeling the first shock of, if not just Asian then surely a "global" multipolar century, where its economic supremacy will not be guaranteed, but will be constantly tested.

In the first phase, the crisis hit particularly countries of the South, mainly because their economies were much more vulnerable to new competition, while the North emerged unscathed, if not benefited, from these changes. However, the crisis goes on and is hard to predict the next phase. Perhaps the most important factor for its development is the reaction of emerging economies. If they can cover the ground in the technological-industrial sector, it is likely to see the European powers cross the threshold of the crisis, with trade balances dropping, unemployment rising and wages falling. In Telecommunications and Informatics, for example, Europe has lost its privileged position, with the onslaught of the respective Korean and Chinese industries, which also broke the myth of permanent technological leadership of the West. On the other hand, these economies have a number of major challenges and obstacles before them, such as the fall in demand in the Western World and the stress on material and social infrastructures domestically. It is possible that those countries, in order to create sustainable development based on domestic demand, will be forced to attempt social reforms similar to those achieved in Europe in the last century. And as demonstrated by our history, these reforms are achieved neither quickly nor bloodlessly.

Whatever the developments, however, the question of workers in the West remains: is there "some kind of solution?" Unfortunately, the only permanent solution is to eliminate the most basic cause of the crisis, which is the vicious circle of competitiveness-recession. To achieve this, workers in emerging economies must demand a fairer share of the profits of production. In other words, globalization of capital should be followed by the globalization of working conditions. But that for now seems very difficult. The basic conditions that helped develop the European work model - the industrial mode of production, growth, universal suffrage and an organized labour movement - are not even halfway met in most of the emerging economies. Whether, when and how will they develop are questions that remain unanswered.

So what is left for the economies of the West is to exploit their competitive advantages. Protectionist moves, that would somewhat reverse the globalization of trade, have proven to be extremely dangerous, and while monetary measures can help if they are taken at the right time, but they can not change the situation in relations of production, supply and demand. Within this framework the Europeans are challenged to rediscover the European model that may not offer the same levels of prosperity to the people, but will continue to ensure fairness in the distribution of goods and in general the distribution of happiness opportunities.

*:  from Kostas Kavafis' poem "Waiting for the Barbarians"

A global race...

"We’re in a global race today. And that means an hour of reckoning for countries like ours. Sink or swim. Do or decline."

- D. Cameron 10/10/2012

Broadcast on Euronews: Jean-Claude Trichet, president of the European Central Bank until October 2011 is answering questions from young Europeans on the crisis, its causes and ways out of it. The questions and answers are moving in a well-known, clichéd pattern: if the Eurobond would be the solution, if the bankers should be so much protected, if austerity leads anywhere and that the way out according to Mr. Trichet is, "as in a household to spend as much as winning."

It is impressive: we are now entering the fifth year of the crisis and yet it seems we, in Greece but also at European level, have not come to a clear conclusion about what caused the crisis and especially how will we get out of it. Conservative analysts and economists insist that the causes lie in fiscal easing and that austerity is the solution that will regain the confidence of the panicky markets. The progressive camp, having rediscovered Keynes insists on the "counter-cyclical" action, pumping money into the market to stimulate growth (creating the well-known cliché now, "austerity versus growth" debate). The more sophisticated insist that the problem lies in the imbalances of the euro. Most populists blame bankers and fund managers for "casino capitalism", for irresponsibility and greed. In Greece, much of the blame is attributed to the "lamogia": all sorts of cheating citizens and politicians. All or at least most agree that the problem is due to the sovereign debt of certain countries and that the all-powerful Europe, if it acts collectively, maybe by two-or three financial tricks (eurobond, debt haircut, printing currency, federalizing economic policy etc.) will be enough to untangle the crisis.

But almost everyone seems to ignore the dramatic changes that have occurred in the global economy over the last decade. In January 2001, China joined the World Trade Organization, 6 years after its founding in 1995. This marked a sharp rise in the Chinese economy that pulled along the entire Southeast Asia region and almost completely reversed the international financial balances. European businesses and their employees, having enjoyed a decade of unprecedented economic boom and prosperity, suddenly found themselves under the unbearable pressure of their new competitors in the global chessboard of international trade. The 2008 financial crisis that started in America simply revealed how weak, unprepared and vulnerable were most European economies towards the new global economic reality.

The first clouds: the end of cheap fuel

The diagram below captures the trade balance of 27 in Europe (source: Eurostat, processing with GNU Octave). The first observation to make is that, after 2002, when the EU had a roughly even trade balance (black line), followed by a rapid decline until the financial crisis of 2008, after which there was a short halt, to reach today the negative of about 160 billion. This means that the EU in 2011 had a 160 billion capital outflow towards its trading partners.

What is striking, however, is that this negative balance is not due to a decrease in any of the traditional export sectors of Europe, namely chemical and heavy industry, as one would expect, but a dramatic deterioration in the balance of fossil fuels (oil, natural gas, etc., green line) from 2002 onward.  The EU currently pays more than three times the amount compared to 2002 to meet its fuel needs. As shown in the chart below (source: OPEC), the increase in these expenses was not due to an increase in consumption, but to an increase in fuel prices. The price of oil in dollars more than quadrupled in 10 years, with an annual weighted average increase of 16%.

The dramatic rise in oil prices is attributed to the sharp increase in demand caused by the emerging economies of Asia and South America. Its consequences put all European economies, which had to find ways to meet the ever-growing deficit, under considerable pressure, and dramatically increased the cost of living of their citizens. It is also characteristic that in times of recession, most economies still show strong inflationary trends. Note that the exact opposite happened in supplier countries (eg Saudi Arabia, Qatar) who saw their growth in the same period to run even with double digits.

Greece and Portugal: easy victims

Greece and Portugal were the Eurozone's most unprepared countries to deal with the new economic reality. Countries with traditionally negative balance in all areas, which were trying to meet through tourism and any capital inflows from foreign investment. Their production profile, mainly based on light industry (clothing, manufactured goods and low-tech manufacturing, building materials, etc.) proved highly vulnerable to competition received from the emerging economies. In Greece we have experienced this phenomenon with the rapid deindustrialization throughout the past decade. The situation worsened considerably due to the rise in fuel prices (green line), as described previously.

Both the Greek and Portuguese governments seem to have been found completely unprepared to deal with the coming danger. Their reaction to the new reality was to increase the state debt, creating the famous "debt growth", a policy that proved fatal. The difference is that in Greece the phenomenon took by far the most explosive proportions, with the known political appointments, wastage of public funds, widespread economic criminality of all kinds, etc. The outflows of borrowed capital of Greece and Portugal at the height of the crisis in 2008 totaled 45 and 25 billion respectively, while in 2011, after two years of austerity, it could only reach its 1999 levels, mainly due to the drop in imports.

Spain: the great sick man

A similar situation is observed in the same period in Spain, mutatis mutandis. A country with traditionally high unemployment and problematic production, had the misfortune to carry extra weight due to the mistakes of its financial system with mortgage loans. The deterioration in the trade balance is a tragedy. The amount of outflow in 2008 reaches 99 billion from 41 billion in 2002. It is worth noting that the cause for this bad performance is blow suffered by the industry's heavy, and light industry, probably because of competition from countries within the European Union, while the effect of the negative balance of fossil fuels is apparent.

France: the next big headache?

When people talk about the Eurozone crisis, France rarely enters the list of problematic economies. From what it seems at least from the trade profile in recent years, this will soon change. The course of French balances as shown below is tragic. From a marginally positive balance of 2002 it reaches -85 billion in 2011 and with a still downward trend. As in Spain, the cause lies to the areas of heavy and light industry and fuel prices. The French production seems to be suffering a very deep crisis, which, in contrast to previous countries presented, has not yet halted.

Italy: not so PIG

With the outbreak of the crisis, Italy became a target mainly because of its large debt, which had been created much earlier. However, its trade profile shows a relatively healthy image, much better than that of France and Spain. Although the trade balance is negative (from positive in 2002), the areas of light and heavy industry do not seem to have been severely affected, and already show signs of recovery. It seems that Italy is perhaps the only country together with Ireland who owe their crisis almost exclusively to a large debt and fuel prices rather than problems in the real economy, which indicates that it has a potential to overcome the crisis. However, apart from debt, it faces major challenges, the most important being the fact that its heavy industry competes with the German one, which is strengthening as the crisis continues.

Germany: riding the dragon

Germany is arguably the most successful economy in the last decade in Europe and possibly in the entire western world. Its trade balance improved continuously, only with a halt during the crisis of 2008, from 133 billion in 2002 to 157 billion in 2011. It is also striking that with the exception of the food sector, all other production sectors show positive balances. German companies seem to have grasped the changes taking place in the global economy early on and turned their interest to emerging economies, turning them into highly profitable markets for themselves, while avoiding the trap of falling demand in the western world. In 2002 the balance of Germany towards other European countries amounted to 72 billion and fell by 2011 to 55 billion. Instead inflows from trade outside Europe grew from 61 billion to 102 billion. In other words, when the Chinese dragon began taking off in the beginning of the previous decade, the German economy made sure it was strapped on its back, supplying the emerging urban strata with modern cars, and new industries with equipment. It is also worth noting that it is a myth that Europe is Germany's most important trading partner. The trade gains are currently mostly outside Europe.

Netherlands: the merchant of Europe

The winners' list of the new era of globalized trade also includes the Netherlands, with a stable rating from the rating agencies being triple-A, and with a score often better than that of Germany. The trade balance has a surplus of 45 billion, or 28% of the surplus of Germany, a significant performance for a country with a population of just 17 million, or 20% of the German population. The Netherlands has surpluses in practically all areas of production other than fossil fuels and is among the few countries that seem to be particularly unaffected by the 2008 crisis. The great advantage for the Dutch economy seems to be the trade between Europe and the rest of the world: with a GDP only 25% of  the German one, the volume of goods traded by the Netherlands is 50% of the volume handled by Germany.

Finland: hanging tightly on that precious AAA

Among the AAA countries of the Euro, Finland is one with strong negative trends of an already negative trade balance (Luxembourg has a constant trade deficit, due to the fact that it is a country of services rather than production). Main responsible for the decline is heavy industry with a turning point in 2008. Rating agencies, however, seem to have confidence in the country of northern Europe, perhaps due to the highly competitive economy (third in the world according to the latest report from the World Economic Forum).

...without winners

Trade balance is certainly not telling the whole truth about the economy of a country. Tourism, for example, an important source of revenue for our country, is not reflected in the trade balance. The overall flow of capital into a country is described by the balance of payments in which the trade balance is typically the most important factor. Trade balance, however, expresses in the most emphatic manner the production profile of a country, its position in the global economy and the state of its real economy.

The global economic map began to change dramatically from about 2002 onward. Many of the European countries, especially the European South, were unprepared to deal with the new economic reality and chose to cover deficits in their balances by increased borrowing. They thus entered an unprecedented crisis since WW2, called the "debt crisis" because the first obvious symptom was the inability to borrow, due to the inflated debt and unmanageable deficit. The basic cause of the crisis, however, is the fact that globalized trade has created a new reality with which these countries were unable to cope.

Those countries that have managed to adapt to the new situation, thanks to the foresight and readiness of  their enterprises and their political leadership, were and are the winners of the new situation. Their benefits  even increased as their competitors in Europe collapsed. The example of car manufacturers is representative of this situation, where at a time in which the German VW, BMW, and Mercedes-Benz have elevated their profits in recent years conquering the Chinese market, their competitors Renault, Citroën and FIAT, which either did not foresee the collapse of the European market or could not open successfully to the new, more dynamic markets, they see their sales decline and their factories forced to close. The quarrel that broke out in the European Automobile Manufacturers Association, where the president and CEO of FIAT blamed VW of contributing to a "bloodbath" in Europe, highlighted the gap that separates the winners from the losers of the new situation in this field. The losers of the crisis therefore include those industrialized countries of Europe that failed to understand, anticipate and react properly in the face of the new reality, falling "victims" to their competitors in Europe.

The problem is not only in the European South. These countries may be in much greater trouble, but the specter of deficits is gradually spreading across most of Europe, with austerity being applied as the only solution. The dynamism of emerging economies is based among other things on cheap labor (which is often child labor) and the lack of labor rights. In other words, the emerging economies run a the pace and the ways of European Industrial Revolution of the past centuries. This is an advantage that even advanced European economies will find difficult to confront. Until recently, European policy makers insisted that European countries must invest in high technology and innovation to offset their disadvantage in competitiveness. This argument is declining more and more, first and foremost because emerging economies are slowly closing their technological gap but also because innovation and high technology are not by themselves sufficient to sustain a substantial number of jobs when the most "traditional" sectors are collapsing. A striking example is the conflict between European Commission and China on Chinese-made solar panels that flooded the European market and seriously affected the German manufacturers. In other areas, such as the mobile phone industry Europe has lost its primacy in less than 3 years against Chinese and Korean competitors.

Mr Cameron is certainly right: the globalization of trade put all Europeans (and not just the British) competing in a global race. To win this race, they have to "run" faster, in order to tackle the problem of competitiveness, including, among others, cutting wages, labor rights and government spending because taxing is  "counter-competitive". Mr. Cameron does not explain however that the race he describes has no winners. Austerity in Europe, apart from poverty, is leading to a drop in domestic demand, which in turn will lead to a crisis of overproduction and unemployment in emerging economies and therefore a further drop in demand for European businesses operating in those countries while it is questionable whether liquidity injections attempted by their governments can create a sustainable financial situation. The recession-competitiveness spiral which now tends to dominate the global economy can be much more powerful than such superficial measures. Neither the "counter-cyclical" policies proposed by the "left" economists will have any effect. There is no point in injecting liquidity in national economies or economic sectors with a competitiveness, and hence viability, problem. Even the various tricks of Eurobonds or inflationary Euros may have only temporary results at best (at worst they can lead to new fuel price increase making a bad situation worse).

On the other hand protectionism, which is proposed together with nationalists by some "genuine leftists", is the worst and most dangerous solution: when a trading partner is transformed into a mere competitor in  the international natural resources hunt, war against them becomes much more attractive. But if poverty advances, it is certain that the isolationist camp will win, threatening world peace. We have seen the same story unfolding during WW2.

A race with rules

The globalization of trade over the last decade clearly had many positive results. Despite major social problems in emerging economies (lack of civil liberties, inequality, poor working conditions),  it is fortunate that many millions of workers in these countries now have the income to buy a car that until now could be enjoyed only by the European and North American workers, or to travel half the globe to Greece to see the Acropolis and make their holidays enjoying the Aegean Sea. However, the international regulation set by the World Trade Organization has proved inadequate because it can not prevent unfair competition caused by artificially lowering domestic demand by reducing wages or cutting core labor rights such as age limits, hours  of labor (increased working hours means less time spent on consumption and therefore an indirect artificial demand drop). It also failed to prevent global recession caused by the competitiveness hunt. The question ultimately is primarily humanitarian. Do we want to live in a world where our otherwise ultramodern mobile phone is made by the hands of a small child? Do we want it to be our child tomorrow?

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.