Greece: No Vote is a Democratic Assertion on Economic Policymaking

Newsclick interviewed well-known economist, Professor Prabhat Patnaik, on the Greek crisis and the recent 'No vote'. According to Prabhat, this is the first time we have had a referendum essentially on an economic issue. Till now, finance capita has managed to confine economic policy to a narrow technocratic exercise and imposed various measures that are against the interests of people. The World Bank and IMF execute such neo-liberal policies through the finance ministries of countries and these policies continue irrespective of who wins the elections. The Greek referendum marks a break, bringing economic policymaking back into popular discourse.

Prabhat says there is a fallacy in the viewpoint propagated by dominant media, "there is something wrong with Greeks: they are profligate, they are lazy", etc. The fight between the troika -- EU, ECB, IMF -- and the Greece government, is a reflection of the larger struggle between people and bloody finance that is taking place around the world. He points out the unforgiving role of German and France in the current crisis and argues that Greece should explore other options such as China and other countries, which have substantial surplus and not rely solely on US and Eurozone.

Prabir Purkayastha (Prabir): Hello and welcome to Newsclick. Today we are going to discuss the Greek  crisis and the conditions that have risen after the no vote in Greece. We have with us Prof. Prabhat Patnaik. Prabhat good to have you with us. 

Prabhat Patnaik (Prabhat): Thank you.

Prabir: What do you think the political implication  of the no vote. Looking at the technicalities of the negotiations is a different issue. But politically, does it mean now there is a feeling that austerity needs to be fought. The kind of financial policies that have been imposed on Europe, particularly the Euro zone. That needs to be now resisted.

Prabhat: Yes I think there are two ways in which no vote is politically very significant. The first, is that the first time that there has been to any country to my knowledge a referendum on an economic policy issue and I think that is very important because it shows a trend towards democratizing economic decision making. Economic decision making no longer confined to a few bureaucrats or technocrats but is something which is actually now should be left to the people and this the Greek referendum clearly demonstrated and so in that sense a very positive development The other thing is of course the specifically no vote because it again brings out for the first time in a very clear manner the conflict between the people at large and the interest at finance. There is this conflict that economy that everybody writes about it but in fact this conflict is now internalized by the people themselves who see that the demands of the finance are really against their interest and who have rejected these demands. So I think it is a tremendous move towards democratization in any country and of course certainly in Greece and it would have clearly very important implications as far as whole of Southern Europe is concerned because all of them are more or less in the same boat as Greece is. This is actually may be a precursor of mass rejection of austerity measures on a number of Southern European countries to get out of the crisis in which they currently find themselves.

Prabir: It is an interesting point you raise regarding the democratic assertion of the people in the economics because the yes vote was couched if the yes vote gets through then they will get rid of the government Greece, Syriza and the Tsipras and put it in a technocratic government that has been articulated by the Foreign Minister of Germany as well as the Europen Central Bank and so on. So do you think that has been sort of now has a set back the technocratic elite running Eurozone which is inherent in the Maastricht treaty and the Eurozone itself.

Prabir: No. It is not only in Eurozone. It is actually a part of Neo-liberal economic regime. Look at any African country. Look at any third world country. What actually tends to happen is that the Ministry of Finance becomes all important than all other ministries. All other ministries have to get clearance from Ministry of Finance. The Ministry of Finance is manned by bureaucrats and technocrats who are from the IMF or the World Bank. As a result what actually happens is that you may have nominally a democratic government fundamentally all economic decision making is left to a bunch of bureaucrats or technocrats recruited from the brettenwood institutions and therefore, the neo-liberal states function in a fundamentally anti-democratic manner namely you can elect anybody, makes no difference because ultimately because the economic policies continued to be the same. I think, this is the first time that you actually find a rejection of that. You know, such a rejection is of course fraught with the danger that there may be capital flight and so on and people know about it. Nonetheless they voted no which is very significant. In other words there is enormous attempted scare mongering. The Greek people resisted that which is quite remarkable. To my mind, it is a democratic assertion against the neo-liberal state which is of great significance for every country in the world.

Prabir: Of course, Greece had no control over its currency, so even it's worse as an issue. But you raise the issue of the Southern European country Spain, Italy and so on. Spain never had a deficit, did not borrow as the Greeks were supposed to be done. So the whole argument that it was debt because of the profligacy of the Greeks does not hold good on the Spanish crisis but has a very similar order.

Prabhat: No in fact actually, it is a complete misconception. You see there are two fallacies in understanding the Greek situation. The first is that because the Greeks are spendthrifts and they profligate and so on this Greek crisis is fundamentally linked to the general world capitalist crisis. Whenever there is a recession in the world economy every country's export tends to go down and of course when exports go down then do you cut down on the domestic level of economic activity because every country if they did that then the recession would be much worsened. Quite apart from the human cost and so on. Now the Greek tends to do that because of the fact that there was a crisis in the world economy nonetheless they try to insulate their people against this crisis which is a very laudable objective. Therefore, this idea that there was spendthrift and therefore there was something wrong with the Greeks is a completely wrong idea. It is actually something wrong with the world capitalism of which Greece is a victim. The second fallacy is that even as things stand there is nothing to be done other than the fact that Greeks has to cut their coat according to their cloth which is complete nonsense. If you take Eurozone as a whole Germany is a surplus country. If you have surplus countries which actually start expanding their economy. Suppose the Germans give substantial wage increase, there is substantial increase in government expenditure then the demand increases not only in the economy but the entire Eurozone economy and that actually gets Greeks out of the crisis as well because their exports are going to increase. So the basic thing is that the surplus countries do not increase which would be actually a much better solution for all. It's not a very zero sum game. It's a very positive sum game if the surplus country is expanded. But they don't do that they ask the deficit countries to contract which is exactly they are doing.

Prabir: And the contraction of course finally the GDP shrinking and the debt becoming even more unsustainable which is what we have seen in the case of Greece. But it is not interesting because it is not the bailing of the Greeks but the German French banks that was really where the debt burden came from. But the entire private debt was made into the national debts as it were. Last question. What do you think is the course of this? Do you think it mean debt relief and some acceptance of austerity or Greek exit? I know it is difficult question to answer. Crystal ball grazing.

Prabhat: You know, finance capital I mean this confrontation between people and finance, let's be very clear that finance is totally heartless. Now in other words, they are bloody minded enough to insist upon same austerity measures which people of Greece has rejected. Now, I think that really leaves the ball in Syriza's court. My own impression is Syriza is probably thinking with help from Americans it might put some pressure on the Germans in order to soften their stand which does not seem to me very likely. Of course depends how far Americans push but you know does not seem to me very likely. The alternative to Syriza which they should have done earlier which they can do even now is to look at other possibilities. They might approach China, they might approach other countries with substantial surplus. I know China currently has had stock market problem but nonetheless China is sitting on top of enormous  amounts of accumulated credits and I think they should start exploring. That may even put pressure on Germans.

Prabir: Syriza has to look at hard options of working towards an exit even if they don't exit right now that at least that option should be on the table. They earlier seem to have taken the option off the table and that led them into a loose loose situation. So I think with no vote this could start talking putting that back on the table.

Prabhat: Yes, absolutely I think given the assertion of Greek people Syriza should actually put back on the table for the people what are all the options. Prepare them for the possibility of an exit and prepare also the Greek economy to meet the kind of challenges that an exit might entail.

Prabir: If nothing else, at least improve their bargaining position.

Prabhat: Absolutely. At the moment, they are putting all their eggs in one basket. The moment they seem to be transferring their egg to some other basket, then you would find there might be a change in the mind sets of the German Banks.

Prabir: Thank you Prabhat. We will continue to watch the Greek crisis and come back to you as it develops.