Greece: why should you care?

This past Sunday, Greek voters resoundingly said ‘No’ to the bailout package that was offered to their government by the so-called Troika, comprising the International Monetary Fund, European Central Bank, and the European Commission.
The Greek Prime Minister Alexis Tsipras bet everything on the line by calling the snap referendum, and the result has handed him a huge victory. This takes both Greece and the European Union into uncharted waters, and no one can predict exactly what will happen next. However, there are several reasons for optimism and hope – and for more people around the world than you would imagine.
First, this event marks a resurgence of progressive political forces of the real Left in the western world. The scourge of neoliberalism that arose in the 1980s (thanks mainly to Thatcher and Reagan), coupled with the fall of the Berlin Wall, gave rise to the ‘end of history’ hypothesis: that the only idea humanity needed for salvation was unfettered capitalism. The political agreement around this idea and reasonable growth (which, however, came to a crashing halt in 2008) across the developed world was cited as evidence that this was indeed the case.
Sure, the pesky Cubans were still holding out and countries like Venezuela and Bolivia dared to chart their own course, but they will all eventually see the light. But Syriza, the socialist party currently governing Greece, has shattered that comfortable illusion. And Spain might be next, where the similarly leftist Podemos has been gaining ground.
More than ideology or the politics of the developed world, the result of the Greek referendum has implications for the whole global South. The Greeks have in effect rejected the ‘Washington Consensus’, which is based on rigid fiscal austerity, privatisation, and financial liberalisation. This one-size-fits-all dogmatic economic approach to development was foisted by global financial institutions like the IMF and the World Bank upon countries across the developing world throughout the 1980s and 1990s with disastrous consequences.
After his stint as the chief economist of the World Bank, which gave him a front-row seat to this sordid show, the Nobel Prize winning economist Joseph Stiglitz had this to say about the IMF in his iconoclastic 2002 book ‘Globalization and its Discontents’: “Decisions were made on the basis of what seemed a curious blend of ideology and bad economics, dogma that sometimes seemed to be thinly veiling special interests.”
Of course, Stiglitz is hardly the only one to have documented the abysmal results of these ‘structural adjustment programmes’; no serious economist takes austerity seriously. In fact, history shows that exactly the opposite is true. For example, it was expansionary fiscal programmes and Keynesian economic policies in general that helped the United States escape from the Great Depression in the 1930s. The post-World War II Marshall Plan for the reconstruction of Europe was based on similar lines.
Despite this overwhelming body of evidence showing the negative consequences of the Washington Consensus policies, in times of economic crisis developing countries have been forced to cut public budgets (particularly affecting their already meagre health and education spending), slash wages, privatise strategic public assets, give tax breaks to the rich, and open up their financial system to foreign speculators. As one poignant example, this policy prescription administered by the IMF further exacerbated the 1997 East Asian financial crisis, leading to both economic and political unrest in Malaysia, South Korea, Philippines, and Indonesia. And due to the infamous ‘shock therapy’ administered to Russia in the 1990s, the country’s GDP contracted by 54 percent during the period 1990-99. One finds more or less the same story being repeated in other Asian, African, and Latin American countries over the last three decades.
Coming back to the relevance of the Greek referendum to this story, it is crucial to note that it is the first time a country has been able to resist the plans of the global financial and development elite so effectively. True, the Greek situation is unique in that its creditors also include the ECB, and the bailout negotiations are implicitly tied to the broader European political project. Nevertheless citizens, and hopefully, governments of developing countries across the globe will take note of this historic moment. We now have proof positive that another way is possible, and a country can in fact negotiate with international financial institutions while keeping both its interests and dignity intact.
The most important final lesson to be derived from this episode is that it is ultimately politics that drives economics. After all, Tsipras will have an advantage in any future negotiations with Greece’s creditors because he chose a democratic method to solve his dilemma, and now has his people’s mandate behind him. The flip side is that he was under immense political pressure from his core base of leftist Syriza supporters to follow through on his campaign promise of finding a way out of the austerity measures agreed to by the previous government.
This is the most crucial point that citizens of all countries, but especially of developing ones like Pakistan, should take heed of. We need to demand more accountability from our political elites, so that vital decisions of economic sovereignty are not taken behind closed doors but in the political arena where they can be debated. It is a long road leading to this goal, and one that will require many sacrifices. But for now, let us all rejoice in a momentous victory of popular will over the forces of dogma and control.
The writer is a public policy analyst.
Email: waqasaslam.rana@gmail.com