The Greek Saga - Competing explanations of the Greek crisis

8/13/2019 The Greek Saga - Competing explanations of the Greek crisis

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Stavros D. MavroudeasDept. of Economics

University of Macedoniae-mail: [email protected]

&Visiting ResearcherDept. of Economics

Kingston University

Kingston University,

Staff Seminars

13 November 2013 (4.00 5.00 pm)

Penrhyn Road campus, room PRJG1001
mailto:[email protected]:[email protected]


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AbbreviationsOCA: Optimal Currency AreaTDH: Twin Deficits HypothesisFD: Fiscal DeficitCAD: Current Account DeficitPR: Profit Rate

TRPF: Tendency of the Rate of Profit to FallLTV: Labour Theory of ValuePK: Post-Keynesianism

N-C: Neo-ClassicismN-K: Neo-KeynesianismPE: Political Economy

CMoP: Capitalist Mode of ProductionEAP: Structural Ad ustment Pro ramme troika


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Main groups of explanation

Mainstream

Greek disease

Heterodox Marxist

Non-OCA &rectifiable

Non-OCA &non-rectifiable

Financialexpropriation

Class struggle &financialisation

Minskiandisinflation

Underconsumption& financialisation

TRPF &underconsum

ption

TRPF

TRPF &imperialist

exploitation


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Mainstream: N-C or N-K perspectives Heterodox: PK and Radical PE perspectives Marxist: classical Marxist perspectives

Some overlapping in the margins:

e.g.1: non-OCA & non-rectifiable close to PK financialisatione.g.2: class struggle & financialisation and financial expropriationrefer to Marxism

Distinctions not out of intellectual sectarianism but for

reasons of analytical clarity:Mainstream: emphasis on policy errors, no systemic causes, noconsideration of the productive structure, OCA, TDH, no relation

with global crisis (external influence).Heterodox: emphasis on weak structural problems (EMU,neoliberalism), no consideration of the productive structure, takingone side or other of the TDH, weak relation with global crisis(external influence).Marxist: emphasis on deep structural problems (CMoP), part of

the global crisis, LTV, twin deficits are a result, financialisation not


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Globalcrisis

Causes ofcrisis

Analyticalfocus

PR OCA TDH

Mainstream No,externalimpact

Policy errors,some Greekstructuralproblems

Exchangerelations

no yes yes

Heterodox Mixedanswers

Weak structuralproblems(neoliberalpolicies)

Monetaryrelations

no yes no, FDvs CAD

Marxist Yes,internaldimension

deep structuralproblems(systemic crises)

Productiverelations

yes disproportionality

no, twindeficitsareresults


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MAINSTREAM EXPLANATIONS 3 versions:

1) a special Greek historical accident (Greek disease)(EC(2010), (2012), Gibson, Hall & Tavlas (2012),greekeconomistsforreform.com (Azariadis (2010),

Dellas (2011), Ioannides (2012), Meghir, Vayanos &Vettas (2010))

2) the Greek disease exacerbated by EMUsunrectifiable structural deficiencies(not-OCA)

(Feldstein (2010), Krugman (2012))3) a middle-of-the-road blend: the Greek disease and

EMUs deficiencies are rectifiable(De Grauwe(2010), Lane (2012), Botta (2012 ))


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RADICAL EXPLANATIONS 2+2 versions:

1) Inequalities, latent undeconsumption andfinancialisation (Tsakalotos & Laskos (2013), Varoufakis(2012))

2) Disinflation and financialisation a-la-Minsky (Argitis

(2013))

and

1) Class struggle and financialisation (Milios &Sotiropoulow (2013))

2) Financial expropriation (Lapavitsas (2012))


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MARXIST EXPLANATIONS 3 versions:

1) TRPF (Maniatis & Passas (2013))

2) TRPF and imperialist exploitation (Mavroudeas &Paitaridis (2013))

3) TRPF and underconsumption (Androulakis, Economakis &Markaki (2013))


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MAINSTREAM EXPLANATIONSGreek disease Expressed by: EU, ECB, think-tanks of the euro-core

countries, Greek politico-economic establishment. First version (1st EAP): focus on public sector and FD

(SAPspiecemeal application). Second version (1st EAPs reviews): added focus on

falling competitiveness and private sector measures. 2 major Greek deficiencies: (a) large and persistent FD

financed through borrowing (leading to large externaldebts and CAD) and (b) falling competitivess.

These deficiencies caused by nationally-specific policyerrors, i.e. it is a Greek disease(e.g. Greece is a specialtype of economy prone to fiscal profligacy, clientelism

and relatively high wages. Structural deficiencies are amere conse uence of these errors.


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First version:Greek economy: low productivity, relatively high wagesand big public sector.

High wages: product of the big public sector (clientelist,low productivity, falling tax collection ability (due toclientelism fomenting tax evasion)).Consequently, accumulation of FDFinanced through foreign loans (facilitated by euros lowinterest rates) resulting in a widening external debt(expressed in a deteriorating CAD).

Moreover, Greece forfeited statistics and violated EMUsprovisions.2007-8 crisis: international financial markets scrutinizedFDs and CADs. Consequently, the unsustainability of the

Greek debt was discovered and the Greek crisis erupted.


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Second version:Soon discovered that 1stEAP was failing and austerity hadto be applied to the private sector also.

To justify it the problem of competitiveness was surfaced.It was argued that not only the public but also the privatesector is characterized by low productivity, high wagesand rigid labor market regulation culminating in a fallingcompetitiveness.Consequently, CAD was caused by both public borrowingand diminishing exports and increasing imports. High

relative wages fueled consumption which was directedtowards imports, since domestically produced goods wereuncompetitive. Thus, Greek workers collectively (privateand public sector) are overpaid and inefficiently working.


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The Greek disease suffered a hit when other EMUcountries required bail-out. The initial reaction was toattribute the expansion of the problem to contagion

from Greece. This, rather weak argument, wassupplemented by collectively branding these countriesas EMUs outcasts: economies prone to fiscal andbanking profligacy. Instead of a Greek a South diseasewas discovered.

In analytical terms, the Greek disease explanationhinges upon the TDH which contends that there is a

strong link between the a fiscal deficit will lead to acurrent account deficit. A number of empirical studieshave not verified this hypothesis.


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EMU is not an OCA and cannot be one

expressed mainly by Anglo-Saxon commentators eitherN-C or N-K.

Main argument: EMU is a non-OCA which is prone toasymmetric shocks that exacerbate national diseases.

This view centers only in passim on the Greek case perse. It takes it, as well as those of the other PIGS, as aspringboard to spearhead its main criticism: EMU isinherently faulty.

It does not absolve Greece from being responsible for

the problem. Particularly the neoliberal accountsreiterate the Greek profligacy argument. But the cruxof their argument is against the EMU: Itcanthappen,itsa bad idea, and it cantlast(R.Dornbusch).


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This anti-EMU emphasis has a twofold explanation:(a) geopolitical: lead to increased conflicts within

Europe and between Europe and the United States

(b) academic: theory of Optimal Currency Area (theclosest thing mainstream economics have to the Marxistdisproportionality (or uneven development) thesis).

This mainly Anglo-Saxon explanation of the Greekcrisis while sharing the fiscal profligacy argument ofthe first explanation recognizes a rather weak

structural cause. It concerns mainly the sphere ofcirculation (i.e. how the common currency is related todiverse national economies) and has not much to dowith the sphere of production per se.


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Greek disease cum EMUs rectifiable flaws

Expressed mainly by European analysts in favor ofEuropean unification but with ideological or practical

reservations regarding its actual process (neo-liberaletc.). Predominantly N-K (or mild PK) origins.

Main argument: the Greek crisis has been caused by acombination of national policy errors (high fiscaldeficits and debt) coupled with problems created bythe incomplete economic unification of the EMU. Adeepening of the economic and political unification of

the EU (fiscal and banking union, political union) willsolve these problems.


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Emphasis on EMUsimbalances and particularly thoseassociated with the balance of payments (hence thecurrent account). As such it points out to a structural

characteristic of the EMU which sometimes it has beenbranded as neo-mercantilism: the Eurozone isstructured in such a manner as to merit the tradesurpluses of the Northern countries against the trade

deficits of the Southern countries. This argument isclose to the more radical PK financializationexplanations. On the other hand, the current account

imbalances argument has been taken up by moreconservative theorists that do not ascribe to thefinancialization thesis but aim for a more unifiedEuropean integration.


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It offers a weak structural explanation: structuralproblems derive from the sphere of circulation but notthe sphere of production. It agrees with the 2nd

mainstream explanation with regarding OCA theory.But it believes that a more unified economically andpolitically EU can overcome them. In this belief itdeparts from the harder versions of the 2ndexplanation

which argue that an economic and political unificationof the EU similar to that of the US is impossible. Thisis the second major problem of this perspective: Its

political and economic voluntarist faith in Europeanintegration goes against historical wisdom. Europeannational political and economic identities are deeplyentrenched and the crisis emphasized them.


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Mainstream explanations: A Critique

Mainstream explanations of the Greek crisis evolvedfrom monistic to a more eclectic mix. The more

articulate discern two sets of causes:(a) internal causes: exorbitant public expenditure, weaktax collecting mechanism, corruption and clientelism(even cronyism), over-regulated labor and productmarkets, high wages, non-market friendly institutionalenvironment, deteriorating competitiveness etc.(b) external causes: EMUs deficiencies, repercussions of

the 2007-8 crisis etc.Behind this eclecticism hide versions (or combinations)of the three previously delineated explanations.

Th l i l b kb f h i


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The analytical backbone of the mainstreamexplanations is the TDH: Keynesian argument (as opposed to the N-C Ricardian

Equivalence Theorem). Mainstreamers surpassed, withsome grudges, this point. TDH pressuposes some analysis of the productive

structure of the economy. Rarely being done. Usually,

substituted by stylised facts(perceived truths). Greek TDH empirical studies do not verify it or at least

offer mixed and inconclusive results:Vamvoukas (1997): confirms

Katrakilidis & Trachanas (2011), Nikiforos et al. (2013):confirm for the pre-accession to the EMU period (1960-80), reject for the post-accession period (1981-2007), wherethe opposite is confirmed: trade (and thus currentaccount) deficit has caused increasin bud et deficit.


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Wages are posited as the factor triggering both FD andCAD. The typical argument is that Greek (nominal)unit labor costs (ULC) increased faster than those of

the other European countries. Thus they worsenedboth FD and CAD. They could be other analyticalchoices: the deterioration of the fiscal deficit can berightfully attributed to upper-class notorious tax

evasion and cronyism. The former depresses publicrevenues and the latter augments public expenditure;thus, in conjunction, derailing the fiscal deficit.However, the mainstream explanations stick, forobvious reasons to the supposedly high wages as themain cause of the big and persistent fiscal deficits.


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Well-established critiques of this argument:(1) (nominal) ULC is not a convincing measure ofcompetitiveness.

(2) The Kaldor paradox argues that competitivenessdepends not only on low wages (costs competitiveness)but also on qualitative factors (structuralcompetitiveness).

(3) Greek wages have been constantly lagging behindproductivity (which increased faster than that ofGermany). Thus, real ULC (i.e. the wage share) have beenfalling continuously for several decades.(4) A decrease in wages aiming to restore competitivenesspresupposes that rival economies will maintain theirwages stable or, at least, will reduce them less.


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Mainstream explanations have also wider problems:(a) They totally underestimate the role of the 2007-8capitalist crisis. This is unanimously considered as a mere

financial crisis without origins and causes in the sphere ofreal accumulation. However, if this crisis is so significantand lengthy as it appears to be, it must surely have somebasis on the main sphere of economic activities (the

sphere of production).(b) They consider the Greek crisis as independent of the2007-8 crisis. The 2007-8 crisis has only an exogenousimpact on the Greek economy by worsening theinternational economic environment and setting off greyexpectations about sovereign debts.


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(c) They fail to appreciate the fundamental structuraldimensionsof the problem and relegate it either topolicy errors and/or to weak structural origins. The 1st

perspective, faithful to the typical neoclassical approachto economic crises, considers the Greek case a nationalspecificity created by bad policies. The 2ndperspectiverecognizes a weak structural cause concerning the sphere

of circulation (i.e. how the common currency is related todiverse national economies). Concomitantly, Greek andthe Eurozone crises have to do mainly with EMUsarchitecture. The 3rdperspective also attributes thestructural problems to the sphere of circulation (with theadditional argument that, contrary to the secondperspective, these problems can be surpassed) and

neglects the sphere of production.

RADICAL EXPLANATIONS


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RADICAL EXPLANATIONS The main points that differentiate them from the

mainstream explanations are the following:

(a) They emphasize the crisis-prone nature of capitalism,thus focusing on its world structure and the 2007-8 crisis.(b) They are critical of neoliberalism.(c)They criticize EMUs neoliberal architecture and argue

either for its dissolution or for its radical overhauling.

Overall, radical explanations are shy of recognizing thegeneral deficiencies of the capitalist system; althoughseveral of them do mention them but in a rather implicitof disguised manner. They do not think that theimmediate problem is capitalism as such but rather its

forms of management.


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The more popular Radical explanations are based onthe financialization thesis, which argues that inmodern capitalism finance (i.e. the operation of money

capital) assumes an increasing primacy in relation toother capitalist activities.

Other versions exist: e.g. as a fiscal crisis caused by thetax-evading and crony nature of Greek capitalists

and/or adding the EMU trade imbalances (3rdvariant ofmainstream explanations). The more traditionalunderconsumptionist explanations of crises (either ofthe Marxist Monthly Review (MR) or the Keynesianvariant) are not popular as they do not fit to empiricaldata (the period preceding the crisis onset wascharacterized by a spectacular growth of consumption).

In the end they usually add a financialisationaspect.


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financialization: a problematic theory Capitalism returned to a pre-capitalist stage: banking in

feudalism was based on unequal exchange. Once

primary accumulation of capital took place themonopolistic feudal rules were abolished and capitalistcompetition ruled. financializationargues that there isa return to the pre-capitalist modes of operation.

Interest ceases to be a part of surplus-value andacquires an independent existence. Concomitantly,money capital is autonomised from productivecapitalbut also dominates the latter. If the latter is the sourceof wealth, this entails a stifling of productiveinvestment and thus of the accumulation of capital.How is it possible in the long-run such a deformed

capitalism to exist?


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Regarding the 2007-8 crisis, financialization arguesthat it is not an a-la-Marx crisis but a financial crisis (acrisis of financialised capitalism). They agree with

mainstream theories. If the current crisis is so deep andprolonged as the financializationtheories accept thenhow it cannot be based on the fundamental economicsphere (the sphere of production)?

3 financializationexplanations of the Greek crisis:(a) Minskian inflation-disinflation, e.g. Argitis(b) financialization in the context of the North South

divide (imbalances that caused the Greek crisis stemfrom the EMU), e.g. Lapavitsas.

(c) financialization in the national context; the North -South divide is an erroneous dependency argument,

e.g. Milios & Sotiropoulos.


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Empirical problems of the financialisation thesisIts main conduits (or channels) are very weak and short-lived in Greece:1stproblem: Greek relatively low household debtNew phenomenon (from 2004 and onwards)Lower than in most western economiesThe crisis ended it (banks do not offer private loans, households cannot pay)

nd bl G l fi i l l


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2ndproblem: Greeces low financial leverageBanking sector: relatively low leverageNon-financial corporate debt: relatively low

k d fl


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Argitis: Minskian disinflation

Greek capitalism:technological weakStructurally uncompetitive, creating chronic CADs(because of imports)cronyism

Greek capitalisms viability depended on strong state(and central bank): they managed debt inflation-deflation process by using FD (not mainly as anti-cyclicaltools but as redistributional).

EMU kept the strongstatebut without strong bank (thedebt management function unfunctional) andfinancialisation of the economy (growth based onleverage)

The 2007-8 crisis broke this circuit.

A critique of the Minskian view


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A critique of the Minskian viewIt is rather phenomenological: The crucial factor is the break up of the strong state

strong central bank duo and the subsequent inability tomanage functionally the debt inflation-disinflation process.Presumably because ECBs monetary policy followed theeuro-cores prerogatives and failed to accommodate Greek

specificities. But that is a reason to argue for leaving theEMU that Argitis rejects. Moreover, why Greek capitalismdid not got accustomed to the new functions?

Here comes the second problem. Although Argitis gives acharacterisation of Greek capitalism as inherentlytechnologically backward, uncompetitive etc. (reminiscentof Dependency th.) he does not show why it remained so

within the EU and the EMU. This requires a more thoroughstudy of its productive structure that is missing.

Lapavitsas: imported financialization?


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he argues that the Greek is a debt crisis (agreeing with

the mainstream) but he adds that its roots lay in:

(a) financialised capitalism (that caused the 2007-8 purelyfinancial crisis in which PR has no role)(b) the neo-mercantilist character of EMU, which is not an

OCA and is based on three pillars:

(1) the ECB which follows euro-cores prerogatives(2) fiscal austerity(3) relentless pressure on wages to ensurecompetitiveness

Point 3 agrees with the mainstream arguments oncompetitiveness. Indeed from here (the CAD) beginsLapavitsas explanation.

Lapavitsas: imported financialization ?

Euro core pressurized wages more and got a permanent


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Euro-core pressurized wages more and got a permanentcompetitive advantage against the euro-periphery. Thisis the mainstream argument in reverse: not the lazy

South but the over-prudent North caused the problem.

Eurozone was polarized in a North with trade surplusesand a South with debts: the North gave loans to the

South in order for the latter to buy its products.

The 2007-8 crisis disrupted this structure asinternational financial markets questioned the

creditworthiness of Southssovereign debts.

Eurozonescrisis began as EMU transmitted the worldcrisis in Europe because of the imbalances that werelatent within it.

Essentially Lapavitsass analysis is identical to PK analyses


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Essentially, Lapavitsas sanalysis is identical to PK analyseswhich accept a North South divide argument.His main differentiation are the marxisant overtones

about financialexpropriation.

Lapavitsas policy proposals:

EMU cannot be rectified. Greecesonly solution is Grexit. Regarding the relationship with the EU (i.e. in

economic terms basically the Common Market) heremains agnostic.

Lapavitsas explanation suffers from the general


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Lapavitsas explanation suffers from the generalweaknesses of the financializationthesis:

No reference to the production structure of the

Greek and the other EMU economies. Unable to see the existence of relations of economic

(imperialist) exploitation between the North and theSouth (or else relations of broad unequal exchange)

and he understands only a reversed and problematicversion of the narrowunequal exchange.

Uncritically accepts the mainstream argumentsabout Greek relatively high wages being the cause of

Greecesdeteriorating competitiveness. Analytically, he remains within the problematic

mainstream framework of TDH. He posits its one side(CAD) as the cause of the other (FD) and the crisis.

A marxisant rather than Marxist explanation.

Lapavitsas financialization suffers empirically:


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Lapavitsas financialization suffers empirically:The Greek financial system was significantly less

leveraged than the Western ones.

Greek workers high debts: a new phenomenon(began with EMU), short-lived and smaller than in theWest.

Thus financialization cannot be discovered inside

Greece and has to be imported (through EMUs neo-mercantilist structure).

Also problematic policy suggestions:

If this is a debt crisis, it can be solved not by exitingEMU but making it a full OCA. If is deeper (grounded tothe sphere of production) then exiting the EMU andremaining within the Common Market want suffice. A fullexit from the EU is required.

Milios & Sotiropoulos: strong Greece?


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Contra to Lapavitsas, it was not the loss of

competitiveness that gave rise to high indebtedness,but the other way around. Thus, analytically, theyremain within the bounds of TDH: it is the FD thatcaused the problems. But FD is attributed not to wages

but to capitalsnotorious tax evasion and cronyism.EMU (bringing together countries with very

different rates of growth and profitability) gives rise tohigh levels of borrowing for the euro-periphery (because it

has higher PR which attract euro-core capital).This was facilitated by euros low interest rates.

Foreign loans boosted euro-peripherysdomestic demand,therefore giving rise to increasing inflation and thedeterioration of competitiveness.

Milios & Sotiropoulos: strong Greece ?

Reject the North - South (as problematic dependency


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Reject the North South (as problematic dependencytheory):

Foreign loans boosted growth (agree with the pre-

crisis mainstream argument that CADs were goodimbalances because euro-periphery countries withrelatively low levels of real GDP per capita were catchingup with richer north European economies).

This is problematic: Sustained CADs did not financeproductive investment but imports from euro-core.Greecesproductive structure instead of being developed itwas actually eroded.

Thus, Milios & Sotiropoulos implicitly accept themainstream convergence thesis which has been fullydisproved.

Milios & Sotiropoulos replicate the mainstream success


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Milios & Sotiropoulos replicate the mainstream successstory (the strong Greece) presented before the crisis.Then they add financialization:

Modern capitalism is financialised (extremeleveraging and financial bubbles). With the 2007-8financial crisis the till then malevolent euro-peripherysCADs were blown apart. In order to sustain them FDs were

augmented and this led to the euro-peripheryscollapse.EMU played only a peripheral role in this affair

(although they accept that it not an OCA and it is aneoliberal project). The crisis exposed its weaknesses and

its class nature. However, the solution is not the exit fromthe EMU but the progressive restructuring of the EU.

Milios & Sotiropoulos financialization explanation


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Milios & Sotiropoulos financialization explanationsuffers from the general deficiencies of this approachalready mentioned above. They share also the

particular errors characterizing Lapavitsasanalysis andcriticized above. On the points that they differ they erron the other side. For example, instead of Lapavitsasreversed version of narrow unequal exchange they

throw out any theory of unequal exchange. Theiranalysis of the EMU and the EU cannot see therelations of economic (imperialist) exploitation thatexist within them (being afraid of ending up with a

dependency argument). In toto, financialization explanations have a weak

structural emphasisby not considering the problemsin the sphere of production. For this reason they fail toaccount adequately for the Greek case.

MARXIST EXPLANATIONS


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MARXIST EXPLANATIONS 3 versions:1) TRPF (Maniatis & Passas (2013)): the 1973 crisis

(profitability crisis) led to a period of silent depression/financialisation artificially prolonged it/ overaccumulationreappeared in 2007-8 as PR started falling again and thecrisis erupted/ productive-unproductive labour

2) TRPF and imperialist exploitation (Mavroudeas &Paitaridis (2013)): similar plus imperialist exploitation bythe euro-core countries (broad unequal exchange becauseof the difference in OCC)/ productive-unproductive labour

3) TRPF and underconsumption (Androulakis, Economakis &Markaki (2013)): falling profitability andunderconsumption alternate as causes of crisis/ in any caseeither OCC or underconsumption affect PR (which is thecrucial variable)/ no productiv-unproductive labour

distinction

Mavroudeas & Paitaridis:


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Mavroudeas & Paitaridis:A MARXIST STRUCTURAL EXPLANATION

A strong structural explanationof the Greek crisis:the fundamental causes in the sphere of production.

2 structural components:(a) internal: the 2007-8 economic crisis is an a-la-Marxcrisis (tendency of the profit rate to fall) which rockedthe Greek economy (and the other developed

ecconomies),(b) external: imperialist exploitation (i.e. broad unequal

exchange) within the EU (between North and South)worsened the position of Greece and aggravated the

crisis

The internal cause: a falling rate of profit


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A strong structural explanationof the Greek crisis:the fundamental causes in the sphere of production.

The crisis is a consequence of the imperfect resolutionof the 1975 structural crisis. 2 structural components:(a) internal: the 2007-8 economic crisis is an a-la-Marx

crisis (tendency of the profit rate to fall) which rockedthe Greek economy (and the other developedeconomies): crisis of overaccumulation caused byfalling profitability due to the increase of the OCC.

Financialization: a consequence not a cause(b) external: imperialist exploitation (i.e. broad unequal

exchange) within the EU worsened the position ofGreece and aggravated the crisis

The internal cause: a falling rate of profit

1973-5 crisis:


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1973 5 crisis: 3rd global crisis crisis of overaccumulation of capital caused by a falling

profit rate due to the increase of the OCC structural crisis: requires a restructuring of the internal

and external (international) systemic architecture

global waves of capitalist restructuring :(1) conservative Keynesian policies(2) monetarism (national economy)(3) open-economy neoliberalism (globalisation)

However, there are national differences and variations tothe global trends.

Successes and failures: silent depression


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Successes and failures: silent depression Partial recovery of profitability & accumulation via

increased exploitation

Reinvigoration of absolute surplus-value extraction Globalisation Failure to solve the systemic problem and

overaccumulation/ the flight ahead: financialization

The 1973 crisis and capitalist restructuring in Greece a doubly onerous crisis: overaccumulation crisis plus

post-dictatorship radicalism

Contrary to international trends, the belatedimplementation of progressive Keynesian policies,social-mania and the creation of welfare state/ growthand progressive income redistribution

Failure: a successful prescription at a wrong time

Neoliberal restructuring policies


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Neoliberal restructuring policies

1990 ND government: mixed introduction ofmonetarist and neoliberal measures/ catching up withthe international trends

Restrictive macroeconomic policies and regressiveincome redistribution/ privatizations, opening of theeconomy, deregulation of labour relations, welfare cuts

etc. PASOK Simitis governments: continuation plusreligious adherence to the EMU requirements/ the tworobberies: (a) stock-exchange, (b) post-euro massconsumption goods inflation

The Balkan Edorado and the artificial growth of the2004 Olympics

Conservative Keynesian capitalist restructuring


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Conservative Keynesian capitalist restructuringand the shift to neoliberal directions

2nd

PASOK governements1985 stability programme:decisive conservative turnconservative Keynesianrestructuring reinforced subsequently

EU accession: promises & dangers

From 1985: gradual increase of actual work-time(broader phenomenon reinforced by Southernspecificities)

Ambiguous esults of Greek capitalist restructuringwaves:A partial recovery of profitability (mainly throughincreased exploitation).An insufficient devalorisation of ca ital

Conservative Keynesian capitalist restructuring


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Conservative Keynesian capitalist restructuringand the shift to neoliberal directions

2nd

PASOK governements1985 stability programme:decisive conservative turnconservative Keynesianrestructuring reinforced subsequently

EU accession: promises & dangers

From 1985: gradual increase of actual work-time(broader phenomenon reinforced by Southernspecificities)

Results of Greek capitalist restructuring waves:Ambiguous as elsewhere

The external cause: EU broad unequal exchange


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Greece: from the EEC to EU and the EMU Securing the system after the dictatorship Imperialist upgrading & the vital space Danger of the opening the economy and dismantling a

coherent productive model Accession at a lucky moment: political willingness and

sweeteners (aid packages etc.)

Grey times: faltering of capital accumulation,expansion to the East and the beginning of troubles

EU and the EMU

regional imperialist bloc with pyramidoid structure Competition with the other major imperialist blocs,

internal rivalries and co-operation, exploitation ofother countries

Internal hierarchical pyramid: North and South

e cause: U q g

EUs North-South divide:


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EU sNorth South divide:

Competition on the basis of absolute advantage

broad unequal exchange: capitals from moredeveloped economies (i.e. higher OCC) competingwithin the same market with capitals from lessdeveloped economies (lower OCC) reap extra profits

through unequal exchange with the latter. The commanding heights (EC, ECB etc.) follow the

prerogatives of the dominant Northern economies tothe detriment of the South. Thus, the conduct of

crucial policies (monetary, trade, exchange rate etc.)and the institutional arrangements favor the North.


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1990s - a period of grace: the Balkan Eldorado: the


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99 p gcollapse of the Eastern bloc and the imperialistexpansion to the Balkans and Central and Eastern

Europe

entrance to the EMU (2001): celebrated as the nationalgoal of participation in the top EU league. However,

underneath the euphoric accounts structural problemscontinued to amass and worsen (e.g. trade and currentaccount balances). The strong Euro diminished furtherGreek exports, increased import penetration and

weakened domestic production. These were coveredthrough the cheap credit gained because of the EMU.

the 2007-8 global crisis and the subsequent EU crisisblew this house of cards apart.


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Figure 1. Surplus value, net operating surplus, and


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g p p g punproductive activities

0

20

40

60

80

100

120

140

1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008

Surplus Value

Net Operating Surplus

Unproductive

Activities

In figure 1 we observe a constant rise on the unproductive activities which is estimated as

the difference between surplus value and net operating surplus (net profits).

Figure 2. Productivity and Wage


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g y g

0

10

20

30

40

50

60

70

80

1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008

Productivity

Real Wage

In figure 2 we observe a vigorous increase in productivity for the period 1960 - 1973 . After1973, the growth of productivity retards whilst during the decade of 1980s remains stagnant.In the beginning of the 1990s productivity rises again till the middle of 2000s when starts to

decline bearing similarities with the 1970s. Turning now to the real wage, we can observethat for the whole period it follows productivit but it never gets higher.

Figure 3. The rate of surplus value


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g p

1

1,2

1,4

1,6

1,8

2

2,2

2,4

1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008

Rate of Surplus Value

In figure 3 we observe an increase in the rate of surplus value during the period 1960 - 2009which is characterized by ups and downs. during the 1960s the rate of surplus valueincreases. At the beginning of 1970s till the early 1980s declines and then it is upturned.

Finally, at the middle of the 2000s, the rate of surplus value reaches its highest peak and thenit sharpl dropsindicating the predicament of capitalists to extract more surplus value.

Figure 4. The value composition of capital


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2

3

4

5

6

7

8

9

10

1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008

Composition of Capital

Figure 4 depicts the evolution of the value composition of capital (C/V) as this is captured bythe ratio of gross fixed capital stock (C) to variable capital (V). As we can see the valuecomposition of capital steadily increases for almost the whole period. But at the beginning of

the 2000s it stagnates; which can possibly be attributed to the deindustrialization of theGreek econom with the massive escape of Greek manufacturing enterprises to the East.

Figure 5. The general PR


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0,15

0,2

0,25

0,3

0,35

0,4

0,45

0,5

1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008

General PR

Figure 5 depicts the evolution of the general PR and from its trajectory we can discriminatethree phases before the onset of current crisis. The first one is the period 1960 - 1973 wherethe general PR is at a high level though with a small decline. The second one is the period ofcrisis (1973 - 1985) when the general PR falls dramatically. The third period is that ofcapitalist restructurings (1985 2009) when the general PR displays a slight recover and thenremains stagnant.

Figure 6. Net PR


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0

0,02

0,04

0,06

0,08

0,1

0,12

1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008

Net PR

Counterfactual Net PR

In figure 6 we can similarly discriminate three phases for the net rate of profit. The first oneis during the GoldenAgewhich is described by a high level of the net rate of profit. Thesecond one is the period of crisis when the net rate of profit declines sharply and the third

period is the one of neoliberalism which presents an anemic recovery of the net rate of profit.This recovery is mainly attributed to the implementation of neoliberal policies which wereintroduced by reforms on the labor market


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Figure 8. Net operating surplus and net investment at


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2005 prices

0

5000

10000

15000

20000

25000

30000

35000

1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008

Net O eratin Sur lus

Net Investment

In figure 8 we can observe that net investment measured at 2005 prices reveals aconsiderable growth at the mid of 90sreaching its highest peak at 2007. At the same time ananalogous growth is exhibited by the net operating surplus measured at 2005 prices.Eventually, net investment falls in 2007 and it is associated with the stagnation on the massof profits. Concluding, a fall in the net rate of profit is not enough to cause crisis but it mustbe combined with a falling general rate of profit.

The external cause:


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external cause: imperialist exploitation (i.e. broad

unequal exchange) within the EU worsened theposition of Greece and aggravated the crisis

Study terms of trade

Comparison of Greece (a euro-periphery economywithin the EMU), Austria (a euro-core economy withinthe EMU) and Sweden (a euro-core economy outsidethe EMU).

broad unequal exchange

Figure 9. Intra EU15 terms of trade


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0,2

0,3

0,4

0,5

0,6

0,7

0,8

0,9

1

1,1

1,2

1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008

Sweden

Austria

Greece


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Documents

The Greek Saga - Competing explanations of the Greek crisis