Greece: Same Tragedy, Different Scripts
By Walden Bello
July 14, 2010
Walden Bello is a member of the House of Representatives of the Philippines.
Governments, from the United States to China and Greece, had resorted to massive stimulus programs to keep the real economy from collapsing during the first phase of the financial crisis. By promoting a narrative that moves the spotlight from lack of financial regulation to this massive government spending as the key problem of the global economy, the banks seek to forestall the imposition of a tough regulatory regime.
But this is playing with fire. Nobel Prize laureate Paul Krugman and others have warned that if this narrative is successful, the lack of new stimulus programs and tough banking regulations will result in a double-dip recession, if not a full-blown depression. Unfortunately, as the recent G-20 meeting in Toronto suggests, governments in Europe and the United States are caving in to the short-sighted agenda of the banks, who have the backing of unreconstructed neoliberal ideologues that continue to see the activist, interventionist state as the fundamental problem. These ideologues believe that a deep recession and even a depression is the natural process by which an economy stabilizes itself, and that Keynesian spending to avert a collapse will only delay the inevitable.
Faced with the program’s savage consequences, an increasing number of Greeks are talking about adopting a strategy of threatening default or a radical unilateral reduction of debt. Such an approach could be coordinated, says Tsipras, with Europe’s other debt-burdened countries, like Portugal and Spain. Here Argentina may provide a model: it gave its creditors a memorable haircut in 2003 by paying only 25 cents for every dollar it owed. Not only did Argentina get away with it, but the resources that would otherwise have left the country as debt service was channeled into the domestic economy, triggering an average annual economic growth rate of 10 percent between 2003 and 2008.
The “Argentine Solution” is certainly fraught with risk. But the consequences of surrender are painfully clear, if we examine the records of countries that submitted to IMF adjustment. Forking over 25 to 30 percent of the government budget yearly to foreign creditors, the Philippines in the mid-1980s entered a decade of stagnation from which it has never recovered and which condemned it to a permanent poverty rate of over 30 percent. Squeezed by draconian adjustment measures, Mexico was sucked into two decades of continuing economic crisis, with consequences such as the pervasive narcotics traffic that has brought it to the brink of being a failed state. The current state of virtual class war in Thailand can be traced partly to the political fallout of the economic sufferings of the IMF austerity program imposed on that country a decade ago.
Read the full article at:
http://www.fpif.org/articles/greece_same_tragedy_different_scripts