Greece, Austerity, and Capitalism

[galas]

Your interpretation of the slump in terms of reduction of profit and business investment is pretty sound, I think but I would disagree about the option of "printing money".  This causes devaluation which, contrary to what you claim, reduces the cost of labour and therefore makes exports cheaper and more competitive relative to imports.  At least a "less bad" option, as long as there are opportunities available to export or replace imports.  But this option is not on the table for Greece because of their Euro membership. 

[PJShannon]

Following is a discussion on the page titled: Greece, Austerity, and Capitalism.
Below is the discussion so far. Feel free to add your own comments!

[ALB]

Printing more money (than the economy requires) doesn't cause devaluation (of a currency in relation to others). What it does is raise the internal price level in the country concerned making its price higher than the world level. As the article says this makes exports more expensive and imports cheaper:

Quote:

Printing more money might give a temporary boost to production, but would eventually lead to a rise in prices, creating other economic problems such as making exports more expensive and so less competitive; imports would be cheaper so threatening the jobs too of workers employed by businesses producing for the home market.

The traditional way out of this is to devalue the currency which, as you say, then makes exports cheaper (and imports dearer). This option was resorted to by reformist governments in Britain in the 1960s and the Mitterrand government in France in the early 80s after their attempts to spend their way out of  a crisis failed, but, as you also say, is not open to the Greek government today as its currency is the euro.It's not certain, though, that devaluation would help Greek workers any more than the option chosen the option the Greek government, if only because Greece doesn't have that much to export and depends a lot on imports. Devaluation would lead to a rise in the cost of living for them which wages would be unlikely to catch up. In any event, it's a choice of two evils as far as workers are concerned. They lose out whichever the government opts for.You say devaluation "reduces the cost of labour" but how, and is that a good thing for workers? It doesn't sound like it.

[galas]

I don't understand why you're saying they would print "more than the economy requires".  The idea here is that the new money is created to replace the missing tax revenues so that social spending and so on can be maintained. It would certainly result in devaluation over time because new this money would inevitably be exchanged to pay for foreign imports, creating an excess of the national currency in the market.  In reality, the effect of currency speculation would make the adjustment very rapid.  Yes of course it would cause local inflation and would reduce the living standards of Greek workers but I think it's universally agreed that part is inevitable.  Pretty much agree with the rest.  If it's a choice between two evils I'd want to keep the country's sovereignty but I don't blame them for backing down in the end as the risks were immense.

[ALB]

galas wrote:

would reduce the living standards of Greek workers but I think it's universally agreed that part is inevitable.  Pretty much agree with the rest.

Yes, unfortunately and that's the point. Whatever option was chosen the workers would suffer.

galas wrote:

If it's a choice between two evils I'd want to keep the country's sovereignty but I don't blame them for backing down in the end as the risks were immense.

I don't think the "sovereignity" of their rulers is all that important to workers. As Marx put it in an article published in 1847 on "The Protectionists, the Free Traders and the Working Class" (http://hiaw.org/defcon6/works/1847/09/23.html) which is still apt today:

Quote:

Let us return to the protectionists proper, who do not share the illusions of Herr v. Gülich.If they speak consciously and openly to the working class, then they summarise their philanthropy in the following words: It is better to be exploited by one’s fellow-countrymen than by foreigners.I do not think the working class will be for ever satisfied with this solution, which, it must be confessed, is indeed very patriotic, but nonetheless a little too ascetic and spiritual for people whose only occupation consists in the production of riches, of material wealth.But the protectionists will say: “So when all is said and done we at least preserve the present state of society. Good or bad, we guarantee the labourer work for his hands, and prevent his being thrown on to the street by foreign competition.” I shall not dispute this statement, I accept it. The preservation, the conservation of the present state of affairs is accordingly the best result the protectionists can achieve in the most favourable circumstances. Good, but the problem for the working class is not to preserve the present state of affairs, but to transform it into its opposite.The protectionists have one last refuge. They say that their system makes no claim to be a means of social reform, but that it is nonetheless necessary to begin with social reforms in one’s own country, before one embarks on economic reforms internationally. After the protective system has been at first reactionary, then conservative, it finally becomes conservative-progressive. It will suffice to point out the contradiction lurking in this theory, which at first sight appears to have something seductive, practical and rational to it. A strange contradiction! The system of protective tariffs places in the hands of the capital of one country the weapons which enable it to defy the capital of other countries; it increases the strength of this capital in opposition to foreign capital, and at the same time it deludes itself that the very same means will make that same capital small and weak in opposition to the working class. In the last analysis that would mean appealing to the philanthropy of capital, as though capital as such could be a philanthropist. In general, social reforms can never be brought about by the weakness of the strong; they must and will be called to life by the strength of the weak.

[galas]

It isn't a question of protectionism but whether it is better to abdicate all power to transform the economy to a supra-national bureaucracy or instead to try to mitigate the effects of the crisis locally, within the confines of the capitalist system. Essentially the article is arguing that there is no point in the latter, because there is no point in engaging with any struggles except to end the capitalist system. A familiar argument and by no means particular to the Greek situation.

[ALB]

galas wrote:

Essentially the article is arguing that (…) there is no point in engaging with any struggles except to end the capitalist system. A familiar argument and by no means particular to the Greek situation.

This is not what the article was saying. As long as capitalism lasts workers should struggle to get the best deal they can but they should do this through trade unions, etc, not by relying on reformist parties and governments which, when in office, are inevitably forced to apply the economic laws of capitalism. It is true, though, that the most effective struggle would be one to end the capitalist system.

[alanjjohnstone]

Greece's parliament has narrowly approved the 2016 budget that includes sharp spending cuts and some tax increases amid economic recession. The budget was passed with a majority of only eight votes – 153 to 145…Prime Minister Alexis Tsipras agreed to a batch of economic reforms in August to secure a euro zone bailout of up to €86bn ($93bn; £62bn)The budget makes €5.7bn in public spending cuts including €1.8bn from pensions and €500m from defence. It also includes tax increases of just over €2bn.http://www.bbc.com/news/world-europe-35018854

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