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Petros Stavrou: “The European ruling class sees the economic crisis solely as a reproduction crisis of its own social status”

We publish here an interview with Petros Stavrou, from 2013 until 2015 an economist and advisor of the parliamentary group SYRIZA  for development and social cohesion policies of the European Structural Funds . Conducted by George Souvlis, the interview provides an essential overview of the economic and political context which led to SYRIZA’s failure. Coming after the turbulent negations over Greek debt this year, it is also an important reflection on the possibilities of a progressive leftist project within the European context. After leaving SYRIZA, Petros Stavrou is now part  of a small initiative of the radical left called ARK.

 1) Would you like to present yourself by focusing on the formative experiences (academic and political) that strongly influenced you?

A protester clashes with riot police in front of the Greek Parliament in Athens on July 15, 2015 (ANGELOS TZORTZINIS,AFP,Getty Images)
A protester clashes with riot police in front of the Greek Parliament in Athens on July 15, 2015 (ANGELOS TZORTZINIS,AFP,Getty Images)

Without prudery I would prefer not to talk about my personal path towards the left, nor will I address the critical political and theoretical events which influenced my approach to political and economic policy issues. I really believe that such an approach has little to contribute to our interests. Instead I would like to get straight to the point of your question; namely, I would like to draw attention to some ideas that might guide this conversation.

I would like to suggest the reading of three texts which might introduce us to the main problem of our time. So what is the main subject of this conversation? I think it is the specific features of European capitalism, its institutional and historical characteristics in connection to the financial crisis that erupted in 2008 in Westerns economies, and the expression of this relationship in the cutthroat austerity policies implemented onto the Greek economy for six continuing years. So I recommend investigating or further reading on some specific issues that are relevant to this topic. First, it would be useful to understand what money is, how it is produced and how we can determine the money quantity. In our Western economies money is not simply a currency, even when we talk about currency wars between the capitalistic poles of the planet. We should therefore read, again and again, the first part of the first volume of Karl Marx’s Capital, from the point concerning the commodity up to the point concerning the conversion of money into capital. Then I would suggest to focus on Minsky’s logic disclosed in his book with the title Can “It” Happen Again? where he presents the strong institutional scaffolding of western economies pointing towards the possibility of a new financial crisis of a magnitude similar to the crisis of 1929. Finally, Foucault’s The Birth of Biopolitics is the most profound and comprehensive analysis of the organizational philosophy of ordoliberal arguments and mercantile trade policies; philosophical and organizational principles that are behind European institutions such as the ECB, the regulatory EU obsession with competitiveness and the functioning of the EU bureaucracy. These three topics offer a methodology for approaching the modern European version of financial capitalism.

 2) There is a dominant discourse that conceptualizes the Greek economic crisis that started in 2010 as an “exceptional case” considering that the main causes of its outburst have to do with the specific form of the Greek clientelistic state. Which is your take regarding the structural origins and the nature of this crisis? It was simply a failure of the Greek state to deal effectively with the global crisis?

The crisis is systemic because it concerns the capitalist mode of production as a whole and in my view this means that historically Capital has met its growth limits so it has a serious reproduction problem. We call international crisis or crisis of domestic capitalism various manifestations of this general crisis of reproduction, depending on the scale at which this crisis is acting. I will give a simple example of the reproduction crisis at European dimensions. In order to increase the European GDP by 1 euro we need 18.5 euros of a ECB Quantitative Easing program. This ratio is frightening and fully revealing of the real problem. While the ECB is constantly expanding its balance sheet, growth remains zero. This fact however does not lead the EU Member States to take any measures for a generalized fiscal expansion program. Instead they believe that fiscal policy should be restrictive and only certain aspects of monetary policies should be used for the benefit of the private sector (for the rescue of commercial banks and of large capitalist enterprises).

It seems that the European ruling class sees the economic crisis solely as a reproduction crisis of its own social status as a ruling class  par excellence. And that’s why it is not interested so much in consumption or the aggregate demand level but in a redistributive policy solely according to its own interests. Something that should actually be replicated by its opponents (on a political and class level); but they have not done that so far. I would say that the development theory of mainstream economics is a subset of a general theory of redistribution. This is why is very important when talking about economic policies to understand who selects in the end certain policies and why.

In Greece the myth of the patronage state comes to explain, in a politically biased manner, the dominant causes for the catastrophic crisis of fiscal finances that erupted in the country after 2008. And it is a myth not because there is no patronage or ineffective state institutions, but because it conceives of the bourgeois class as the naturally dominant faction, with the failure of economic policies attributed solely to the permeability of the State by the popular classes.

27 percent of Greek families cannot afford to cover their basic needs. More and more people end up in soup kitchens organised by the Church, NGOs or citizens initiatives.
27 percent of Greek families cannot afford to cover their basic needs. More and more people end up in soup kitchens organised by the Church, NGOs or citizens initiatives.

But this fictional narrative does not apply to the real historical circumstances. The Greek economy, for more than half of the 20th century, was determined by failed attempts of the bourgeois classes to modernize in an authoritarian fashion, and to achieve a middle rank in the international division of labor. “Failed states” are those states whose capitalist economies try to evade international competition through a policy based on non-tradable sectors with high yields, abundant funding and negative trade balance. Greek economy, in particular, meets all the characteristics of this capitalist developmental shorterminism; such as the focus on non-tradable sectors, protected high returns for capital, overpricing in public works, complete disregard of all negative externalities (corruption, environmental burden, etc.), scandalous tax breaks etc. However, all these are planned or spontaneous results of the class options of the domestic bourgeois forces. The patronage state is primarily the result of the special position the Greek economy took in the international division of labor and the forced transformation of the political system, from the traditional form of historical factions (left – right), which are confrontational – divergent relationship, to the form of neoliberal converging bipolarity of bourgeois parties. SYRIZA is a new kind of neoliberal party and it functions inside this bipolarity.

3) Since 2010, the Greek economy has found itself in a state of permanent recession. What are the main causes of this phenomenon? What were the main mistakes, coming both from the various Greek governments and the European Union, in dealing successfully with the issue?

The Greek economy is not only in recession but also in negative reproduction, which means that its production base is constantly diminishing . The investments expenditures do not even cover this depreciation. Additionally, beyond the quantitative changes, due to the very high and long-term unemployment, working skills evaporate. Each new economic year finds the Greek economy with less physical capital, with lower labor skills and nonexistent growth expectations.

The cause of this condition is of course the MoU policies institutionalizing a triple deleveraging process. First, public sector deleveraging the economy through high taxes to keep a rate of debt repayment going. Second, the private business has been deleveraged by the private debt owed to the banking sector. Third, the social cost of this deleveraging is transferred to employees, either through dismissal or by wage cuts within the enterprise, or by delaying any salary payments for several months.

The pseudo radical government SYRIZA – ANEL knows very well that the future of its stay in power depends almost solely on the appearance of some relative strong development trends. The invocation of a wave of foreign direct investments, the constantly delayed ECB’s quantitative easing program, and the constantly postponed debt restructuring program have made the programmatic announcements of the government executives something like a shamanic dance invoking rain. The reliability of the government is continuously falling.

In reality the mid – long term development has been suppressed for years due to three major- institutional interventions – or “switches”: a) An automatic ‘stabilizer’, limiting expenditure, which prevents deviations from any strict target of primary surplus, b) the reduction of non-performing loans by 40% which means pressure to increase the collectability of given loans and negative credit growth for years, c) the freeze of any kind of increase in salaries until unemployment rate falls below 10%. Except for the third ‘switch,’ associated with the first two memoranda (MoU) of the country, the first two “switches” were set in place due to developments coming in the aftermath of the third memorandum struck by the SYRIZA – ANEL government with the Troika. The government has fallen into a vicious circle as it hasn’t any theoretical or programmatic competence, or self-confidence to face the creditors’ liquidity threats. It promised to establish a national development bank, without any success. It can’t motivate the economy with resources from the structural EU funds (known as NSRF). All “engines” of the economy are off, all development institutions are dysfunctional and the entire stock of public property is organized by the new organization, the Superfund, whose main purpose is depreciation and resale. We need to understand something very important: austerity and MoU, along with their rigorous framework are not a strategy boosting development, not even within a neoliberal mindset. It is rather a political radical redistribution of income, capital and funds in favor of the bourgeoisie and European finance capital interests.

4) The government of SYRIZA/ ANEL went against its initial declarations that it will reverse austerity by implementing moderate social democratic policies. In contrast, what we are observing is the continuation of the same- if not harsher- neoliberal policies that centrist parties implemented after 2010. Were there any possibilities of implementing progressive policies despite the hard restrictions of the Eurozone? If yes, what went wrong? Do you believe that SYRIZA had an alternative path of managing the negotiations after its election (January 2015) or Tsirpas was right by stating that there was actually no alternative and the new memorandum that they signed was an unavoidable fact?

Greek Prime Minister Alexis Tsipras (R) welcomes the President of the European Commission Jean-Claude Juncker before their meeting in Athens on June 21, 2016. ( AFP ARIS)
Greek Prime Minister Alexis Tsipras (R) welcomes the President of the European Commission Jean-Claude Juncker before their meeting in Athens on June 21, 2016. ( AFP ARIS)

First, we need to recall what were the strategic movements originally planned by the SYRIZA party since 2013, when it was in opposition. The expressed strategy had three parts: a) Removing the Memorandum policies institutionally and politically without the creditors’ consent, b) negotiating the loan agreement and c) developing a public banking pillar to support the economy while changing the production model.

What SYRIZA/ANEL government really did was just the second point and in such adverse and unfavorable conditions that the whole economy came out much worse than it was during the Samaras government. The initial strategy had any prospects of success only if the first and third points had been imposed, creating more negotiating power to obtain the second objective, a favorable change in the loan agreement. The implementation of the first and the third condition required an autonomous policy, a unilateral position and not negotiations with the creditors.

Contrary to its initial declarations, by accepting the creditors’ requirements, the Greek government rejected any concept of unilateral action. Everything had to be agreed on by both parties and because the two parties were unequal from the start, and had accumulated very different bargaining powers, the final result of the negotiations were immediately determined by this original balance of power. So yes, a different or alternative management of the negotiation process was possible. From the beginning, the Greek government had the option to govern and not to play the role of a negotiator. It had to govern in accordance with its stated intention, without involving its entire political staff in an endless negotiating process. This was the first and decisive step, and it was not made. Governing and not negotiation is the answer to your question about the possibility of another way of handling the negotiations. But the consequences of this conversion of a triple strategy of governance into a one-dimensional negotiation process, had two other effects which are up to political history to study in depth. Just a few notes on this aspect.

A) Because of the negotiations the state apparatus was left completely autonomous. The government instinctively does not trust it. But without any reform intervention, the government and the state apparatus function in parallel in an unhealthy dissolution environment. The recent refugees’ torture by police forces shows how government, public administration and repressive mechanisms tolerate each other’s existence. The government does not give orders but it also does not penalize these autonomous social mechanisms, nor does it proceed towards a deep democratization effort to upgrade public services.

B) The negotiation process formed a new political crew with different values, entrapped in a symbolic universe of a metonymic character. It thinks that it can change things, but all it does is simply playing with their own communicative codes, giving names to things that already have a name; onomasiology and a powerful inertia, in every possible way. The government and the new political staff have a single care: to cultivate the feeling that it is better with SYRIZA in power despite the New Democracy Party. All its skills and ingenuity are spent on advertising methods and chicanery and not on political practice as such. New and old members of the left movement, with good CVs and combative mood, turned into a narcissistic group because of the power positions they occupied.

Already in February 2015 the government wanted to strike a compromise. Appreciate that a fundamentally rational approach would result in a mini memorandum, a memorandum clearly better than the previous two. Also appreciate that opposition parties like New Democracy were dissolved and that the power vacuum could convince creditors to support a government that could perform some of their demands; but they would also have been willing to show some degree of flexibility. The government refused [to take this path]; and not just that. At the same time, it refused to see that its historical role was that of achieving a rupture with the EU. By staying in power after it backed off, it destroyed every political representation of working class interests not only for the present but also for the next several years.

5) Can we still believe Varoufakis’ claims that the Europe Union can change from within? Is a soft social-democratic regulative approach still possible at a trans-European level? What should be the stance of the left towards the EU after SYRIZA’s defeat?

I am sure that nowadays we might talk about many prerequisites for change: in the operating mode, the institutional framework or the structure of the EU itself. The potential for change is bigger than that for the preservation of the European status quo. There are many doubts, however, whether these changes would be of a leftist, radical kind; or even whether they might contain a modicum of progressive character.

The EU is run by a cruel bureaucracy, structured along ordoliberal lines: the doctrine that considers that markets in order to function and perform need strong administrative regulation and government intervention to protect them from other types of interventions by organized interests. Obviously, due to this bureaucracy no dynamic change can easily occur, much less a dynamic leftist rollover.

In January 2014, farmers demonstrated in response to the wild taxation, new cuts in subsidies, a spike in oil stream prices and a large increase in production costs, compared to the gradual but huge drop of their products price.
In January 2014, farmers demonstrated in response to the wild taxation, new cuts in subsidies, a spike in oil stream prices and a large increase in production costs, compared to the gradual but huge drop of their products price.

Let’s see how EU political structure runs at the level of governance (political consolidation does not exist yet, but a single political governance is present in the EU). EU’s political governance relies on a competiveness-based doctrine, recommending that each member state and every region of the EU should cope alone, without strong financial transfers from the rich to the less wealthy nations. Within a competitively organized economy (i.e. an exacerbated mercantilism) European nations are forced to drastically reduce any expansionary fiscal policy. Therefore, no change is going to come from this kind of management of EU’s economic priorities. These two conditions, a strong bureaucracy and a mode of governance based on austerity and competitiveness, will supress even light social democratic proposals for the relaxation of the fiscal straitjacket or other minimal institutional changes.

But we could indeed say that we are witnessing a moment when all those conditions that prepare a large-scale change in the way the EU functions are present; something we experience in the very existence within the EU of two or three distinct speeds of development, either in the economic or in the political field. In short, the current EU structure is unstable and unsustainable: the crisis of the economies of southern Europe, particularly the Greek economy, the refugee crisis, the dreaded situation of Italy and the country’s position within the European project, the relative autonomy of politics in Visegrad countries, Brexit and the way it progresses, the solvency collapse of the German banking system and, last but not least ,the peculiar currency war that has broken out between the US and the European north, all of them together pose large scale threats.

But there are two problems with the accumulation of all these factors and conditions for large change and the overturning of EU’s integration model: a) Any type of crisis and almost every agent of change almost immediately convert into an opportunity for redistribution policies in favor of the social and political elite of Europe. There is a historical path, with specific power dynamics between the political forces in Europe, which does not allow the use of these crises in order to formulate alternative models of fair redistribution. b) The only political force that seems to threaten EU’s operation model, after the destruction of the left alternative caused by the neoliberal transformation of SYRIZA, is the extreme right-wing parties. Roughly speaking, the European far right promises protection from globalization, wrapped up in a xenophobic national discourse and with a new form of racism – a cultural one.

So the EU can be changed through a combination of internal and external causes, but this change, most likely, will be a hyperconservative one. In my opinion the EU will not immediately dissolve but will develop rapidly towards a far-right direction. The left cannot do many things against this trend and cannot establish a reliable political party or sociopolitical front within the states – members. The tragedy of SYRIZA shows that the left cannot escape the force of a center-right political logic, or of developing into a pseudo left as any top-down organized political party. Therefore, it cannot provide a reliable argument out of or against the economic crisis.

German Finance Minister Wolfgang Schaeuble arrives for the weekly cabinet meeting at the Chancellery in Berlin, Germany, November 9, 2016. REUTERS/Axel Schmidt
German Finance Minister Wolfgang Schaeuble arrives for the weekly cabinet meeting at the Chancellery in Berlin, Germany, November 9, 2016. REUTERS/Axel Schmidt

6) Is Grexit a solution nowadays? What would it imply? Could the Greek economy survive after such a step?

In my opinion concepts like Grexit or Brexit should refer to agreed exit procedures from the Eurozone or the European Union respectively. I think the coming years will see many versions of this policy if Germany and a number of other Nordic countries appreciate that the common currency project is no longer advantageous because its offers more liabilities than advantages. Obviously you don’t mean this neoliberal political strategy when you refer to Grexit. I guess you mean a political rupture with the Eurozone and what would such a situation mean for the country’s economy and its survival. In my view the concept of Grexit does not imply a radical – left political way out of the fiscal straitjacket of the Eurozone, but a different type of compromise. In the case of the Greek economy, where there is no negotiating power and the debt is huge and continually expanding, Grexit would simply be a different type of hardline MoU with perhaps some monetary flexibility.

But I do believe, even in the current context, that there is a realistic radical claim for economic change. Such a policy would aim to put in function a different type of capital and income redistribution. Such an economic strategy, which of course depends on government power, would intervene in three ways: a unilateral stop of debt servicing, political control of the Bank of Greece and an exit from the Eurosystem, detailed and enforced policy of capital controls for the monitoring and control of payments and receipts in the trade circuit. If there is a consistent and disciplined action in these three fields, then you can make the Euro currency yours. You don’t need a national currency. You can go against EU policy but you don’t have to change the currency before gaining control of the central institutions of the economic circuit. In this way the Euro can be transformed into a new currency. You should not immediately resort to issuing a new currency because you cannot control its value even if there is a quantity control. Unfortunately, monetary sovereignty does not simply mean control over the amount of a currency. A currency is characterized not just by quantity, but also by its value. It is possible to acquire the rights to issue a new currency but you cannot buy anything with it. Alternatively, by controlling the quantity and flow of credit (the basic form of money) you can have a monetary policy while reconstituting the production base.

7) Many commentators believe that current European elites- especially the German ones – have no future plan for Europe and, by acting irresponsible, they are undermining the project of the European Union as such. Do you believe that they have any long-term plan in their mind or they are behaving totally irrationally?

I think they are fully rational and they have some concrete plans for a Europe with a more flexible geometry; at least in the long – run. The monetarist counterrevolution of harsh austerity policies failed to fulfill the Maastricht criteria. It is time, for some powerful political centers, to test a new architecture of the Maastricht criteria, although probably only in those areas of the EU core and among countries with fiscal and economic similarities. Around this core there are the Baltic countries and the eastern countries that enjoy a special relationship with the Euro and with German hegemony while maintaining a monetary flexibility. And the big question is that of the Southern countries. What relationship will they have with the Euro? Will they be transferred into a different category?

The explosion of public debt aggravated things and amplified the differences between member states. Cohesion policy has drastically changed by pursuing common European objectives (a common agenda on innovation, energy efficiency, public investment framework, etc.) and not economic convergence. These common European objectives benefit the already developed economies of the North. This tendency has always existed since the Eurozone has been based on absolute advantage, and not on any Ricardian comparative advantages. This type of economic policy led to highly polarized regional inequalities. Sooner or later Germany will be forced to respond to this challenge that derives from the internal rules of the Euro area. That situation is only worsened by the financial crisis. More and more countries do not meet the criteria of monetary integration. The 2015 Schäuble proposal for a Greek agreed exit was immature but not random. In the very next years, it will probably be further developed and will involve larger areas.

8) Which is your take on Brexit? Could it be a progressive development?

Cameron’s official policy didn’t expect a Brexit. The aim was a change in the relationship between Great Britain and the rest of the EU: a special treatment and numerous exceptions from the common rules. But Cameron lost control of the political game, because the referendum came to express all the fears and aspirations of the British people. The European crisis, the continuing austerity policies of European states pushing their labor forces to migrate to Great Britain, and the general feeling of the British people that they are victims of the globalization process, gave a strong lead to the Brexit option.

But today in the United Kingdom there is no political formula for a national form of light Keynesianism. Brexit cannot be accomplished by any political force in the UK and remains suspended. If Brexit cannot acquire any left or left radical features in Britain how can it lead to progressive consequences for the rest of the EU? My estimate is that Brexit contributed to the European crisis by diluting the position of European structures without providing any opening for progressive social reconstruction. First, Brexit must by high-jacked towards a progressive direction within the UK and then for the rest of the EU. The lack of a political party or front that supports a modern policy for social liberation and equality is more than obvious and leads to multiple deadlocks in all European societies.

9) Is USA still the global indisputable economic hegemon or it is in a process of decline, as many commentators suggest?

The US remains the capitalist pole that issues the global reserve currency and the main medium of exchange for over 65% of world trade. Undoubtedly, it will remain the leading economic power of the entire planet. The other capitalist poles continue to be the powerful Asian producers and mercantilist Europe. And where are we today? The major central banks, the FED, the ECB, the Bank of Japan are at loggerheads and exert a peculiar currency war. The dollar is being overevaluated continuously while the EURO and the Yen are printed in large quantities and go in the opposite direction. There are random and aggressive moves of American authorities against the German banking system, but also against other business sectors. The US emerged stronger from the global crisis that erupted in 2008 and its distance from the other economic powers grew. The use of the dollar as a currency magnet for foreign capital (US’s main policy) strategically outweighs competitiveness policies (in EU and Asia economies) relying on exports .