[Peace-discuss] AFL-CIO on IMF vs. Greece: Economics as Religion

[Robert Naiman]

This just went up on the AFL-CIO blog. Please help spread it around.

http://www.aflcio.org/Blog/Global-Action/Economics-as-Religion

Economics as Religion

06/30/2015

William E. Spriggs
<http://www.aflcio.org/Blog/(author)/William%20E.%20Spriggs>

Yesterday and today, the world watches, slacked jawed at the endgame of the
Greek government’s debt negotiations. The stakes are higher than many
Americans understand. So far, the U.S. financial press has viewed this as
isolated to the Eurozone. That is in large part because, having endured the
Great Recession, there is a view that things are only bad if they threaten
the “too big to fail” American banks that can create systemic risks for the
U.S. financial sector. But, that view of the world that only bank stability
matters is what is so incredulous.

The advanced economies have not recovered from the Great Recession. The
United States has done by far the best, because of a very early and large
stimulus package that stabilized the real economy—the one where people make
things and earn income to buy things, and governments perform basic
services. Europe turned quickly to reducing public debt and shrinking
government, which has left its real economy with high unemployment and slow
growth. And, its reticence to regulate their banking sector has many of its
major banks still in poor condition. This stems from accepting the
neo-liberal model that the universe revolves around the financial sector as
religion. It is a theocracy, but of the most ancient, it is the
transformation of the worship of the golden calf; but now money.

At the time of the 2008 financial crisis, various governments were in
different positions. Spain’s government was running fiscal surpluses, and
was very stable. Greece’s government faced some underlying challenges of
rising debt and weak tax collection. These were two extremes of the
spectrum. Like financial institutions, governments need a growing and
strong real economy. So, both the Spanish and Greek governments ran into
difficulty. But, the economy is a system, and strong real economies need
financial institutions and governments.

The neo-liberal model dictated that everyone must rescue the financial
sector, making what is a system that needs all parts to be healthy, into a
machine that only needs an engine. But, a healthy financial sector without
government or workers and consumers is an engine disconnected from the
wheels and chassis: it will go nowhere. The corollary is that there are
banks too big to fail, but governments are not. And, as we saw in the U.S.
case, there were those willing to say, “and there are industries, like the
American automobile industry, that are not too big to fail.”

The concessions that the International Monetary Fund and the European
Commission are trying to force on Greece are steeped in this set of
beliefs. The IMF and EC have pushed cuts in the Greek government,
threatening its very ability to function, to deliver the basic services
that are the chassis holding the economic vehicle together. Of course these
cuts have not pushed the Greek economy ahead; instead the economy shrank
25% and unemployment is mired above 25%.

But, beyond fiscal austerity, the IMF and the EC insist that Greece cannot
get on the right track unless it institutes “structural” reforms to its
economy. Here, the IMF and EC mean creating an unfettered capitalist state.
Greece must weaken its collective bargaining structures; lower its labor
standards and wages, so that the Greek people must be forced to bow to the
will of the market. This is borne of a view that the Greeks are profligates
who must be taught the value of hard work and repay their debts. More
importantly, this sacrifice of the Greek people is necessary to discourage
people in Spain, Portugal and Ireland from staging similar revolts against
the neo-liberal order demanding a different reconciling with the debt
crisis.

This is religion, because the IMF’s own current research says that
inequality hurts economic growth. And, further, it is the IMF’s own current
research that says that unions, in particular, are vital to combating
inequality. Taking actions based on faith in the unseen and not on
empirical evidence is the definition of religion or superstition.

Similar mean-spirited thoughts guided post-World War I policies in dealing
with Germany and its allies in handling the financial strain of the costs
of that war. Fortunately, at the conclusion of World War II, it was felt
that passions that fueled those decisions were not rational. A new set of
institutions would be created to handle global government finances to
insure the stability of governments, with a realization that at the end, it
is the economy that must serve the people and their governments, not the
other way around. One of those institutions, oddly, was the IMF.

In the U.S. we must take the side of Greece in this fight. It is in our
interest, as the immediate problem of the instability this is causing is a
rising dollar that will hurt U.S. exports and jobs. And, we can never be
sure of the interrelated nature of financial collapses since so much of the
banking sector remains in the shadows; with global derivatives trading at
values greater than global output.

More importantly, we must also revolt against this economic order. It is
the same order that saved JP Morgan Chase, but let Detroit and now Puerto
Rico fail. It is the same religion that would sacrifice the earnings of
American students with rising student debt and de-invest in public higher
education. It is the same religion that would sacrifice American jobs and
labor standards and back the Trans-Pacific Partnership. We must see these
as the same struggle to restore sanity and purpose to role of government
and its servant, the economy.

And, most importantly, we must remember the lesson of World War I. We
cannot predict what the response of people will be to austerity. It is
every bit as likely to bring about hostility that is not rational. It might
inspire little minds to unimaginable evil.

If you are concerned about the situation, please sign the petition
<http://petitions.moveon.org/sign/congress-oppose-imf-assault> opposing the
IMF's assault on Greek democracy.

===

Robert Naiman
Policy Director
Just Foreign Policy
www.justforeignpolicy.org
naiman at justforeignpolicy.org
(202) 448-2898 x1
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