Lessons of history

History repeats itself, but never in the same way. I’ve been thinking about this saying (for which I can’t find a definitive source) as the British Labour Party has been tying itself into knots over whether to oppose the government’s welfare cuts. On one side of the argument is the proposition that the cuts are wrong and unnecessary. On the other that Labour lost the last election and should accept the prevailing, or anyway government, view that ‘hard choices’ must be made to balance the budget.

The historical resonance is with the early 1930s and the formation of the National Government or coalition of the Labour leadership, the Tories and the Liberals, which split the Labour Party at the time. For sure, this is not a repeat of that but in recent years very similar notions have swirled around. The formation of a Conservative-Liberal coalition in 2010 in the ‘national interest’ echoed the 1931 National Government, and the current debate has a similar flavour – some idea that a ‘responsible’ Labour Party must accept the terms of the Tories. And, as at that time, the axes of the debate are those of balancing the government budget and the concomitant need for spending, especially welfare cuts. It was the call to cut unemployment benefit by 20% that broke the Labour government in 1931. Moreover, the popular narrative that Labour had been responsible for the 1929 financial crisis (aka the Wall Street Crash) mirrors the narrative that holds Labour responsible for the 2007-08 global financial crisis.

So although not precisely the same, there is a great similarity between British politics now and then. I don’t know whether that is comforting or not. In one way, it is depressing to see the same pre-Keynesian nonsense about balanced budgets being trotted out all these decades after his work in exactly the same way as it was before, and not just in Britain but in relation to Greece and other countries. There are no certainties in economics but we do in broad terms know that Keynes was right, which is why even the IMF have indicated that the EU plan for Greece won’t work (and we might also look to Keynes’ assessment of the 1919 Treaty of Versailles to see why the entire approach to Greece is storing up disaster).

In another way, the parallel is encouraging, at least in the parochial context of the British Labour Party. For it does show that even from a deeply unpopular and unpromising trough it is possible to recover. In 1931, Labour lost 225 seats and was reduced to a rump of 52, a far worse result than in 2015. But 14 years later they won a landslide majority and created the welfare state that, even now, shapes the British polity. Of course I know that in the intervening years there was the small matter of the Second World War but as business leaders and textbooks never tire of telling us, we live in times of unparalleled change – so who knows what the situation may be in 2029.

At the very least what history might teach us, imperfect teacher though it is, is that change happens not through the ‘realistic’ acceptance of the supposedly immutable truths of the present time but through a radical re-imagination of those truths. In Britain, that happened perhaps three times in the twentieth century: the Liberal landslide of 1906, the Labour landslide of 1945 and the Tory landslide of 1979. There was a fourth, botched, possibility in the 1997 Labour landslide of 1997. That possibility remains, pregnant, to be grabbed until it is forced upon us. As will happen not (I hope) because of world war but by the accumulated misery of unfilled roads; moribund emergency services, closed libraries, courts and nurseries; delayed operations or even the suicides engendered by welfare cuts.

The core of this is the democratic politics is about both representation and persuasion. It is not enough for Labour (or any other democratic political party) to represent the views of some or many people; it must also seek to change those views, through persuasion. That means believing in something and fighting for it; and if that belief is rejected then fighting again. In the end, that is how change happens.

Oxi and No

So Greece has voted 'Oxi'. The consequences are unclear, but the reaction so far from Germany, in particular, does not make my hope of a write-off and reconstruction very likely (I heard an interview on BBC radio this morning, that unfortunately I cannot track down to link to, in which a politician from Angela Merkel's party voiced this very forcefully). It is worth just pausing to reflect how extraordinary this is. If a major bank gets into difficulties through imprudent lending then it is deemed ‘too big to fail’ and is bailed out, as we saw several times during the financial crisis, although its sub-prime borrowers are left in debt. But when a state gets into difficulties through imprudent borrowing and its counterpart of imprudent lending, then bailout is deemed impossible. Or, to come at it from a different angle, lenders lend money on the basis that there is always a risk that it won’t be returned, and this is priced into the interest rate. So why, when a borrower cannot repay, is it deemed unacceptable for the debt to be written off? The general rule seems to be that under no circumstances can the lender lose out and under no circumstances can the borrower be let off the hook. So where's the risk, and the justification for the risk being priced in? Actually, the situation as regards Greece is even worse: not only can it not be forgiven but also it must be obliged to follow policies that will make it even less able to repay its loans.

But in this post I want to focus on the response on this end of the continent to events in Greece. They have been profoundly depressing. First, it has been seen as validating ‘austerity’* policies: 'look what happens if you don’t balance the books!'. The fact that it has been the pursuit of such policies in Greece since 2010 that has turned a crisis into a drama is completely forgotten. For that matter, the significant differences between Greece and Britain (principally, that Britain can print its own money and that its debt is completely differently structured) are never mentioned. By the way, we see today just how extreme austerity policies in the UK have now become, with it being reported that terminally ill benefits claimants are being questioned by welfare officials as to when they expect to die.

Second, and far more bizarre, is the spectacle of the anti-EU political Right lining up to cheer far-Left Syrizia, as in articles by veteran Tory Europhobe John Redwood and UKIP leader Nigel Farage, presumably on the usually dubious principle that ‘my enemy’s enemy is my friend’. What they miss (or presumably don’t care about) is that Syrizia, and the Greeks who voted 'oxi’ in yesterday’s referendum, are rejecting the rule of global financial elites and the ideology of neo-liberalism. Yet what the British Europhobes have in mind in exiting the EU is an even more intensive embrace of these.

Redwood and Farage make as their prime argument that the Greek crisis reveals the gap between democratic nation-states and an undemocratic and overbearing EU and Eurozone (EZ). What this neglects is that the lack of EU democracy (which is indeed a serious problem) is a consequence of the fact that Europhobes like them in the UK and elsewhere have always refused to countenance a democratic European polity, deriding it as a federal ‘super-state’. The consequence is precisely the lack of democracy they now bemoan and, moreover, the fact that the entire basis of the Eurozone crisis is (as both Right and Left agree) that it is a monetary union without a fiscal union. And why is there no fiscal union? Because that, too, would require the European polity to which Europhobes are implacably imposed.

I expect that the attempt to tie together the Greek crisis with the case for Brexit will intensify, especially if Greece were to end up leaving the EZ or even the EU. For some voters it will be as simple as feeling that given the turmoil in Greece, Brits should pull up the drawbridge (as if, somehow, the rest of the world would then disappear). But for political leaders to encourage that by making false connections is deplorable. There are precedents, of course, such as the way that the French vote against the EU Constitution in 2005 was hailed by British Europhobes as supporting their view when, in fact, it was in large part a vote against a more neo-liberal EU.

The present case is even more clear. The Greek ‘Oxi’ in their referendum was a rejection of neo-liberalism and a vote for a more fraternal, collective EU project. A British ‘No’ in the forthcoming referendum would be a rejection of a fraternal, collective EU project for a more intensive neo-liberalism. 'Oxi' and 'No' do not mean the same thing.


A minor footnote. Yanis Varoufakis, who resigned today as Greece’s Finance Minister, is, so far as I know, the only politician of any note to have an academic publication in the organization studies literature:

Varoufakis, Y. (2008), ‘Game Theory: Can it Unify the Social Sciences?’, Organization Studies 29, (8-9): 1255-1277.

For an analysis of the role that Varoufakis’ knowledge of game theory may have played in the negotiations, see this article by the always interesting journalist and blogger Neil Clark. The answer, by the way, to the question in the title of Varoufakis' article is both 'oxi' and 'no' (and 'nein' and 'non') - but that is another story.

* I put 'austerity' in scare quotes because it is not just a euphemism but an objectionable one, invoking as it does the collective sacrifices of the post-war austerity that laid the basis for the NHS and the welfare state in support of a drive to erase the last vestiges of the post-war collective project.

Greek tragedy

A large number of organization studies academics – not including me, as it happens – are currently gathering for their main European conference, the European Group for Organization Studies (EGOS) Colloquium. This year it is being held in Athens, and at a time when Greece is in turmoil. Following lengthy negotiations with the EU and IMF, Greece’s Syriza government has called a referendum to be held this coming Sunday. In the run up, the banking system has all but closed down, with Greeks being restricted to withdrawing 60 Euros a day from ATMs, queues building up at banks and further misery being experienced by an already immiserated population.

Organization studies academics should think about Greece, which I wrote about at several points in the current edition of my book in the context of the financial crisis and its effects. Since then, Greece has become the place, par excellence, where these have been played out. There is not much point in accrediting blame, but were we to do so there would be plenty to go around. As I pointed out in the book (p.112) Greece joined the Euro on a false prospectus, having falsified its accounts with the help of the global investment bank Goldman Sachs. Yet the EU accepted its entry, presumably having at least some knowledge of this, and was happy to continue to lend to it. Equally, there can be little doubt that decades of a failed and corrupted tax-gathering system have contributed to Greece’s woes. But, again, this proved no bar to Euro membership.

This complicity has now been supplanted, especially in Germany, by a narrative of Greek fecklessness. In the classic neo-liberal trope, Greece is a household that has maxed out its credit card. Allied to this is another neo-liberal trope, usually applied domestically to welfare, of scroungers versus strivers – with Greece being the ‘scrounger’. However, there is an obvious way in which this narrative fails, and it is something which explains much of the EU approach to Greece: the issue of ‘contagion’. The argument goes in two directions. First, that if Greece were to be given substantial debt relief then Italy, Spain and Portugal would ask for the same. Second, that if Greece were to leave the Eurozone, and re-establish the Drachma, then in due course so would those other countries re-instate their national currencies.

What this should tell us is that the issue is a systemic one of, as I argue in chapter 5 of my book, a debt-dependent neo-liberal ‘new capitalism’. As I point out there are numerous local variations – Greece is one, Iceland another, the UK a third – but to try to explain what happened by reference only to the local variations rather than the global system is absurd. An even more absurd variant of this argument is one which has gained traction amongst right-wing commentators to the effect that Greece’s problems are due to having a left-wing government, as if these problems did not date back for years, and had not dogged successive governments. Again, such arguments refuse to understand Greece’s situation in the context of the now 40 year old neo-liberal experiment.

Whilst the hallmark – no, the requirement – of neo-liberalism is debt, whenever it goes wrong the proposed solution is government fiscal balancing, colloquially nowadays known as ‘austerity’. It always fails, for reasons set out by Keynes many decades ago, and Greece has good reason to know this, having seen its economy deteriorate even as austerity was more and more harshly implemented. Which brings us to the referendum which is at one level a vote on whether to accept further austerity or to reject it. But of course the vote is much more complex than that since a ‘yes’ vote could also be a vote to stay with the Euro or even the EU, or could be a vote against Syriza, or a just to get the cash machines working again, quite a much as a vote to accept  the EU’s proposed financial deal (which in any case may no longer exist). Equally, a ‘no’ vote could be a vote against austerity, or a nationalist vote, or a vote for Syriza, or a vote to stay in the Eurozone but re-negotiate. Or many other things.

As an outsider, I struggle to know which way I would vote were I Greek and I certainly would not presume to advise anyone in Greece as to how they should vote. But, again as an outsider, two things stand out to me. One is how extraordinarily punitive the EU have been towards Greece, despite their own complicity in the situation. Angela Merkel is reported to have said in 2010 that the deal then being struck by Greece “had to hurt” and that she wanted to “make sure that no-one else will want this” (this, by the way, was the deal that was meant to lead to Greek economic growth. In fact it led to a 25% shrinkage of the economy 2010-2015). This kind of humiliating, exemplary lesson to be visited on the Greeks seems very much to have informed the recent negotiations, with Wolfgang Schäuble, the German Finance Minister, having been especially hardline, and almost contemptuous in his dismissal of the Greek negotiating team. All this briefing about how the Greek team were ‘amateurs’ was just a way of saying that they wouldn’t play by the rules of a nasty, vindictive, and wholly irresponsible game.

The second thing that strikes me is the most important thing about all this: the horrific degradation of huge swathes of ordinary Greek people (now even worse than described on p. 117 of my book) who have no involvement or responsibility for what has befallen them. Youth unemployment is now running at 60%, pensions have shrunk and may not be paid, there is no investment in the economy and the banks have run out of money. This is about as close to complete economic collapse as can be envisaged, and it is happening to a European Union member. Whatever the Greek people vote in this weekend’s referendum will not make much difference to this, because both outcomes are probably equally bad for ordinary people. That should matter to other Europeans both morally (we should not allow such suffering) and pragmatically (we really don’t want a failed state adjacent to both Russia and Turkey).

Nothing is easy here, nor perfect, but it is clear to me that if the EU is to mean anything as an ideal, and if it is to be effective as a geo-political bloc, then the only available answer is a massive debt write-off allied with a European ‘Marshall Aid’ type reconstruction of the Greek economy. Let’s be clear, this would be a relatively trivial task: the Greek economy is about 2% of the Eurozone. If the only argument against that is supposed ‘Greek profligacy’ then it is a weak one. For not only was that profligacy part and parcel of the global economic system and connived at by the EU, but also however ‘sinful’ it may have been it hardly compares with what brought Germany to its lowest point at which point it was the recipient of very substantial assistance to rebuild.

Europe made some terrible choices about blame and punishment after the First World War, and (with US help) some rather sensible ones after the Second World War. We are now living in a more complicated world, dealing with the fall-out of the failed neo-liberal experiment in economics and the failed neo-conservative experiment in global affairs. Greece is at the forefront of both (massive sovereign debt; dealing with the migrant crisis from Syria and Libya). One small way – but hugely important for the Greeks – that we could put right some of these mistakes would be to re-build Greece. Not as charity, not as a grudging favour, but from self-interest and generosity of spirit.