Greek crisis a window to the future

In a Time article on the worrying debt situation in Greece — and the wider implications this has for Europe and the world — Nicole Itano, Lisa Abend and Michael Schuman observe that: “Perhaps the biggest worry of all is the chance that the Greek crisis is a window into the future of the entire Western world. Stephen King, chief economist for HSBC, notes that heavily indebted governments [such as those of Spain, Portugal and Italy] with large fiscal deficits can be found not just through the weak points of the euro zone, but in much of the developed world — the UK and the US included. These countries, says King, have ‘no credible plan to reduce their deficits’ “.

In other words, in the end, they, too, will have no other option but to resort to austerity measures to shrink those deficits, something that would go against the grain of neoliberal capitalism’s indispensable source of sustenance, namely, economic growth, because this will have to be suppressed and curtailed at several levels. Government spending would have to be reined in drastically (something already on the cards in Britain under the new coalition between the Conservatives and the Liberal Democrats) and to add insult to injury, consumer as well as business spending would have to be discouraged, lest the same toxic mix as the present one in Greece arise, namely, colossal state debt that goes hand-in-hand with huge private-sector debt — itself the result of excessive consumer spending through the easy availability of credit.

With the recent financial crisis that originated in the US — largely through irresponsible behaviour on the part of Wall Street and the banking sector — taxpayer money could still be used to rescue the private-sector culprits (to the justified chagrin of taxpayers) in the US and the UK, but in the case of Greece, the European Union had to step into the breach, given the long-term effect of the notorious inefficiency of tax collection in that Mediterranean country. In other words, the Greek state could rescue neither itself nor over-indebted consumers, hence the severe austerity measures announced recently, which resulted in violent protests on the part of Greek citizens. And unless the UK (with a deficit of £156 billion) and the US (with even bigger foreign debt) find ways to bring down these mountains of debt considerably, there will be no public fund equal to the task of redeeming it, nor to that of extending a lifebuoy to private companies deemed indispensable for the country’s economy.

One does not have to be a genius in economics to realise that, should such a nightmare scenario be actualised, it would cause such gargantuan financial reverberations throughout the world that no country would be insulated from it. In a thoroughly globalised world, the US economy is such an important multilayered economic hub that its demise would undoubtedly have a domino effect on the rest of the world.

Already questions of a similar nature are being asked about Spain’s ability to effect a bailout of the private sector, where rising debt levels on the combined part of the state and consumers recently exceeded Greece’s total debt.

One thing seems sure, however, the principle of the centrality of the market — the inherent forces of which are supposedly capable, in the long run, of restoring an “equilibrium” of sorts in the economy — is less and less adhered to in practice. Everywhere “regulation” of some kind or another is being implemented (and has been since the start of the recession in 2008).

This reminds me of an extremely perspicacious keynote address delivered by renowned Yale social theorist Immanuel Wallerstein at a conference on “The Commons” (arranged by the Centre for Civil Society at the University of KwaZulu-Natal late last year). The address dealt with the question of the “end of capitalism” (at least as we know it) and (if my memory serves me right) among other things Wallerstein spoke about the fact that recent events had shown capitalism to have reached its limits, as it were, on several fronts, most notably regarding the availability of certain natural resources, as well as the easy availability of exploitable labour (more or less on capital’s terms).

The net result of this, he argued, meant that the world could go in several directions, including an attempted return to a form of socialism, or a relatively new kind of capitalism — one dictatorially managed by the state: a kind of state capitalism. Perhaps this is what we are already witnessing — states (or in the case of Europe, a union of several states) intervening forcefully in the “management” of their economies, to prevent the centre from crumbling, so to speak.

Is this what we can expect to happen increasingly in the near future? Recent events, as well as ones looming on the horizon, appear to me to be an indication that Wallerstein’s diagnosis of capitalism’s current condition is accurate, and we are already witnessing the convulsions of a transition to a very different global economic dispensation.