Capitalist Economists Debate ‘Secular Stagnation’ (Pt 3)

Secular stagnation and the Greek crisis

Many on the left have expressed acute disappointment that the Syriza government has agreed to accept more “austerity” in the wake of the No! vote of the Greek people. We must remember that the Syriza government is not a revolutionary socialist government—a dictatorship of the proletariat—and a socialist revolution is not, or rather is not yet, unfolding in Greece or anywhere else in Europe at the moment. The logic of the class struggle does point in the direction of a European socialist revolution, but we are not yet there. This blog will not attempt to lay out strategy and tactics for Greek revolutionaries during the present acute crisis.

Instead, I am interested in another question: Why is the “troika” so unreasonable in its dealings with the Syriza government? The government leaders have made it clear that they are determined to remain within the European Union and the Eurozone. Their program has always been quite modest—an end to the relentless austerity that has led to a depression worse in terms of both the unemployment rate and duration than the early 1930s super-crisis was in the United States or in Germany.

The super-crisis proper of the early 1930s lasted “only” three and a half years in the U.S. and Germany. The Greek crisis has lasted six years. A brief rise in the Greek GDP late last year had already given way to renewed recession before the crisis that shut down the Greek banking system for two weeks. The agreement between Syriza and the troika for still more austerity in exchange for loans that will enable the gradual reopening of the Greek banks threatens to further prolong the Greek slump.

It has been almost 50 years since the May-June 1968 General Strike in France. The French government of the day, headed by General Charles de Gaulle, largely conceded the economic demands of the strikers in order for the ruling class to hold on to power. The French government was prepared to do this through civil war if necessary. De Gaulle’s willingness to wage civil war to uphold capitalist rule combined with a willingness to make concessions in the economic sphere prevented a prolonged social and political crisis in France in 1968 of the type that is now unfolding in Greece. Why isn’t the troika, the de Gaulle of today, following the same policy for Greece that worked so well for de Gaulle and the French capitalists in 1968?

Last week, in a special post on Greece, I explained that behind the hard-line policies pursued by the troika lies the current “tightening” phase of the U.S. Federal Reserve Board monetary policy. This tightening phase is, in turn, rooted in the extraordinary policy of “quantitative easing” that the Fed followed in response to the near collapse of the U.S. banking system in the fall of 2008. But they could not continue this policy indefinitely without incurring a fatal crisis of the dollar system sooner or later.

As the quantity of U.S, dollars has begun to grow relatively more scarce than in the years of quantitative easing, there have been a few shocks—for example, the recent Chinese stock market panic. But for now, the crisis in Greece is the most dramatic. So in order to understand the deep roots of the Greek crisis and the troika response to it, we have to understand the causes of the crisis of 2008 and the quantitative easing it led to. The “Great Recession” itself was embedded in a more chronic problem of prolonged slowing economic growth that economist Larry Summers calls “secular stagnation.”

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