Syriza, an Opportunity for Greece ánd Europe
It might be historic, the victory of Syriza in the Greek elections of 25 January 2015. It offers Greece and Europe the chance to break the trend of ineffective neoliberal policies, as advocated by the Trojka (EU, ECB, IMF).
The most important barrier to renewed full employment and growth of well-being is of a psychic-social nature, which is the cognitive capture of the Germans and the Dutch (Keizer 2015). This short essay discusses the role of Greece as the scape-goat of the euro zone (section 2), a realistic alternative in case the Germans and the Dutch open their minds (section 3), and the way the euro zone can deal with the claims put on the table by Syriza (section 4).
- Greece as the Scape-goat
When the global financial crisis began, Greece showed the worst economic performance of the euro zone. So, in terms of competitiveness they had a problem. Macroeconomic crises always work out unequally: irrespective the level of the economic performance, the lowest ranked countries are hurt most. So, when in 2008 the very fragile Western banking system crashed, and had to be saved by their respective governments, the Greeks were the true victims. The financial world was captured by the neoliberal ideology for some time already. So, they saw the Greeks as the cause of all evil rather than themselves. Greek interest rates increased very strongly – when paying these rates the Greeks should have paid off their loans within about 6 years. Not any economy should have been able to bear such a burden. Moreover, the eurozone decided to react upon a typical Keynesian depression by cuts in government expenditures and by deregulation and trimming of systems of social protection – a reaction, which is completely wrong, when viewed from a more realistic economic and social point of view. Northern European economic and political leaders, supported by most of their media, operated in a very irresponsible way. They constantly offered biased cost accounts: we, Northern tax payers are forced to pay billions of dollars to Greece, while they refuse to reorganize their economy. (Dutch NRC, 24 January 2015: The Greeks force the Dutch to pay 1000 euros per tax payer).
- The neoliberal ideology and its more realistic opponents
According to the neoliberal ideology free markets are competitive, irrespective the context in which they operate. Competition means that markets tend to equilibrium, which implies that all participants are best off in the end. This is an ideology, not a body of scientific knowledge, because it is based on unrealistic axioms (Keizer 2015). In the Western world most Economics Faculties are captured by this ideology, at least with respect to the textbooks, which are used in the first years. These books frame the minds of economists, in most cases forever.
There are, however, a whole series of more realistic alternative frames on the market. With respect to macro-problems, such as the crisis in the EU, radical economics and post-Keynesian economics are good examples. Moreover, disciplines as behavioural economics and economic sociology offer rich sources of ideas, analyses, and emprical research, which can help economists to become more realistic.
The euro zone policies are typical for the closed-mindedness of neoliberal economists and politicians. Some problems can be solved effectively by using neoliberal analysis; others, however, definitely not. This cognitive flexibility is completely absent because of the lack of pluralism at universities.
The budget cuts in the EU are dramatic. Every cut in whatever government programme might be sound from a micro-point of view. But the crisis needs an increase in the total of government expenditures. The policy by the ECB is dramatic as well. Typical neoliberal in its attempt to prevent a crisis and depression. But the euro zone is in a depression, and quantitive easing (QE) is just good for the ailing European banking system, but not for the economy now. The Troika offers the Greeks a big loan in exchange for a package of reforms. However, the reforms required are not derived from a realistic analysis of the Greek and European situation. It is applied neoliberal ideology: deregulation, privatization and a lower level of taxes. In other words, smaller government and larger private sector (one size fits all). In Greece ( and a couple of other euro economies) suffer from something different: they have never solved the class struggle). In a conflict society the government is not accepted as an institution that serves the general interest. The unions do not accept the employers’ organizations, and vice versa.
So, if Greece needs help, we need to memorize that their problems are for a big part created by the euro-zone policies. The Greeks must use a large part of the loans to pay interests to the Western banks and other financial organisations, thereby reducing their fragility. Second, the decline of the Greek economy as a result of the enforced expenditure cuts, made it extremely difficult for them to pay off their loans. Thirdly, the application of the neoliberal dogma to all economies of the euro zone, even to Germany and the Netherlands, made it extremely difficult for the poorer euro economies to recover from the Western crisis.
Also from a social point of view the application of neoliberal ideology appears a drama. The mass of the people in Greece, (and in other Southern countries) feel treated unfairly. They have become very angry, and react in a primitive way on the primitive Northern actions. Increasing radicalization might be the result. Now the left-orientated Syriza has won the elections, it offers the EU the possibility to shift from economic-political paradigm.
- Political Alternatives
Syriza wants to reduce the Greek debt by partial remittance, a lower level of budgettary cuts, and an investment impulse for the economy. If necessary they like to extend the loan-debt relationship with the Trojka. Partial remittance is justified, as we argued in a previous section. The institutional reforms should not be focussed on deregulation and privatization only. The most important poblem in Greece is the labour relations. As long as there is a serious lack of trust between the different classes, including government institutions, corruption and fraud are difficult to reduce. Scandinavian experts could do a great job in advising and guiding the Greeks in a slow process of transformation from a conflict to a consensus society. It might take 20 years, but a quick start might create a positive climate already. The investment programmes are a necessary condition for sustainable growth in employment and well-being. The EU can only accept a deal with the Greeks, if they also apply the more realistic economic and social principles to the euro zone as a whole. If the EU-politicans have the guts to recognize the serious mistakes they have made, and still make, recovery might begin quite soon. As a surprise for neoclassical ideologists, the masses of the people, in the South as well as in the North might increasingly accept necessary reforms in the world of pensions and social protection.
Dr. Piet Keizer
Associate Professor Economic Methodology
Utrecht University School of Economics