It's a
new kind of barbarism, one that sacks countries with fine print
by Conn
Hallinan
On one
level, the recent financial agreement between the European Union and
Greece makes no sense: Not a single major economist thinks the $96
billion loan will allow Athens to repay its debts, or get the economy
moving anywhere but downwards. It’s what former Greek Finance
Minister Yanis Varoufakis called a “suicide pact,” designed to
humiliate the left-wing Syriza government.
Why
construct a pact that everyone knows will fail?
On the left,
the interpretation is that the agreement is a conscious act of
vengeance by the troika — the European Central Bank, the European
Commission, and the International Monetary Fund — to punish Greece
for daring to challenge the austerity program that has devastated the
economy and impoverished its people.
The evidence
for this explanation is certainly persuasive. The more the Greeks
tried to negotiate a compromise with the EU, the worse the deal got.
The final agreement was the most punitive of all. The message was
clear: Rattle the gates of Heaven at your own peril.
It was
certainly a grim warning to other countries with strong
anti-austerity movements — in particular Portugal, Spain, and
Ireland.
But
austerity as an economic strategy is about more than just throwing a
scare into countries that, exhausted by years of cutbacks and high
unemployment, are thinking of changing course. It’s also about
laying the groundwork for the triumph of multinational corporate
capitalism and undermining the social contract between labor and
capital that’s characterized much of Europe for the past two
generations.
It’s a new
kind of barbarism, one that sacks countries with fine print.
Make way
for capital
Take
Greece’s pharmacy law that the troika has targeted for elimination
in the name of “reform.”
Under the
current rules, drug stores can only be owned by a pharmacist (who
can’t own more than one establishment), over-the-counter drugs can
only be sold in drug stores, and the prices of medications are
capped. Similar laws exist in Spain, Germany, Portugal, France,
Cyprus, Austria, and Bulgaria — and were successfully defended
before the European Court of Justice in 2009.
For obvious
reasons, multinational pharmacy corporations like CVS, Walgreen, and
Rite Aid, plus retail goliaths like Wal-Mart, don’t like these
laws. They restrict the ability of these giant firms to dominate the
market.
But the
pharmacy law is hardly about Greeks being quaint or old-fashioned.
The U.S. state of North Dakota has a similar law, one that Wal-Mart
and Walgreens have been trying to overturn since 2011. Twice thwarted
by the state’s legislature, the two retail giants recruited an
out-of-state signature gathering firm and poured $3 million into an
initiative to repeal it. North Dakotans voted to keep their pharmacy
law 59 percent to 41 percent.
The reason
is straightforward: “North Dakotans have pharmacy care that
outperforms care in other states on every key measure, from cost to
access,” says author David Morris. Drug prices are cheaper in North
Dakota than in most other states, rural areas are better served, and
there is more competition.
The troika
is also demanding that Greece ditch its fresh milk law, which favors
local dairy producers over industrial-sized firms in the Netherlands
and Scandinavia. The EU claims that while quality may be affected,
prices will go down. But as Nobel Laureate economist Joseph Stiglitz
found, “savings” in efficiency are not always passed on to
consumers. And in the aggregate, smaller firms tend to hire more
workers and provide more full time jobs than big corporations.
Tipping
the scales
A key demand
of the troika is for Greece to “reform” its labor market to make
it easier for employers to dismiss workers, establish “two-tier”
wage scales — that is, to pay new hires less than long time
employees — and to end industry-wide collective bargaining. The
latter means that unions — already weakened by layoffs — will
have to bargain unit by unit, an expensive, exhausting, and time
consuming undertaking.
The results
of such “reforms” are already changing the labor market in places
like Spain, France, and Italy.
After years
of rising poverty rates, the Spanish economy has finally begun to
grow. But the growth is largely a consequence of falling energy
prices, and the jobs being created are mostly part-time or temporary,
with considerably lower wages than before the recession. As Daniel
Alastuey, the secretary-general of Aragon’s UGT, one of Spain’s
largest unions, told the New York Times, “A new figure has emerged
in Spain: the employed person who is below the poverty threshold.”
According to
the Financial Times, France has seen a similar development. In 2000,
some 25 percent of all labor contracts were for permanent jobs. That
has fallen to less than 16 percent, and out of 20 million yearly
labor contracts, two-thirds are for less than a month. Employers are
dismissing workers, then re-hiring them under a temporary contract.
In 1995,
temporary workers made up 7.2 percent of the jobs in Italy. Today,
again according to the Financial Times, that figure is 13.2 percent,
and 52.5 percent for Italians aged 15 to 24. It’s extremely
difficult to organize temporary workers, and their growing presence
in the workforce has eroded the power of trade unions to fight for
better wages, working conditions, and benefits.
In spite of
promises that tight money and austerity would re-start economies
devastated by the 2007-2008 financial crisis, growth is pretty much
dead in the water continent-wide. And economies that have shown
growth have yet to approach their pre-meltdown levels. Even the more
prosperous northern parts of the continent are sluggish. Finland and
the Netherlands are in a recession.
A
continental divide
There’s
considerable regional unevenness in Europe’s economic development.
Italy’s
output contracted 0.4 percent in 2014, but the country’s poorer
south fell by 1.3 percent. Income for southern residents is also
plummeting. Some 60 percent of southern Italians live on less than
$13,400 a year, compared to 28.5 percent of the north. “We’re in
an era in which the winners become ever stronger and weakest move
even further behind,” Italian economist Matteo Caroli told the
Financial Times.
That
economic division of the house is also characteristic of Spain. While
the national jobless rate is a horrendous 23.7 percent, the country’s
most populous province in the south, Andalusia, sports an
unemployment rate of 41 percent. Only Spanish youth are worse off.
Their jobless rate is over 50 percent.
Italy and
Spain are microcosms for the rest of Europe. The EU’s own south —
Italy, Portugal, Spain, Greece, Cyprus, and Bulgaria — are
characterized by high unemployment, deeply stressed economies, and
falling standards of living. While the bigger norther economies of
France, the United Kingdom, the Netherlands, and Germany are hardly
booming — the EU growth rate over all is a modest 1.6 percent —
they’re in better shape than their southern neighbors.
Geographically,
Ireland is in the north, but with high unemployment and widespread
poverty brought on by the austerity policies of the EU, it’s in the
same boat as the south. Indeed, Greek Finance Minister Euclid
Tsakalotos told the annual conference of the left-wing,
anti-austerity party Sinn Fein that Greece considered the Irish
“honorary southerners.”
A popular
reckoning
Austerity
has become a Trojan horse for multinational corporations, and a
strategy for weakening trade unions and eroding democracy.
But it’s
not popular. Governments that have adopted it have many times found
themselves driven out of power or nervously watching their polls
numbers fall. Spain’s right-wing People’s Party is on the ropes,
Sinn Fein is the second largest party in Ireland, Portugal’s
right-wing government is running scared, and polls indicate that the
French electorate supports the Greeks in their resistance to
austerity.
The troika
is an unelected body, and yet it has the power to command economies.
National parliaments are being reduced to rubber stamps, endorsing
economic and social programs over which they have little control. If
the troika successfully removes peoples’ right to choose their own
economic policies, then it will have cemented the last bricks into
the fortress that multinational capital is constructing on the
continent.
In 415 BC,
the Athenians told the residents of Milos that they had no choice but
to ally themselves with Athens in the Peloponnesian War. “The
powerful do whatever their power allows and the weak simply give in
and accept it,” Thucydides says the Athenians told the island’s
residents. Milos refused and was utterly destroyed. The ancient
Greeks could out-barbarian the barbarians any day.
But 2015 is
not the 5th century BC. And while the troika has enormous power, it’s
finding it increasingly difficult to rule over Europe’s 500 million
people — a growing number of whom want a say in their lives.
Between now
and next April, four countries, all suffering under the painful
stewardship of the troika, will hold national elections: Portugal,
Greece, Spain and Ireland. The outcomes of those campaigns will go a
long way toward determining whether democracy or autocracy is the
future of the continent.
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