“Growth model” or strategy for social disaster?

Panagiotis Sotiris

An important aspect of the workings of hegemony is the ability to present a convincing narrative regarding the future of a society. Evoking the crisis and the imminent danger of collapse can only be a temporary solution, even in a period of “permanent economic emergency”. That is why in the case of Greece we are beginning to see the first attempts of such a narrative from the part of the forces of Capital. This is another proof that the main aim of the austerity packages is not to tackle the problem of sovereign debt or to reinstate fiscal prudence, but to fundamentally alter the social paradigm in an aggressively neoliberal direction.

The Greece 10 years ahead report prepared by the Athens Office of McKinsey & Company for the Association of Greek Industries, is such an example. It begins by presenting the Greek growth model before the crisis as being excessively dependent upon domestic demand and laments the supposedly over-sized public sector and the inflexibility of the labor market, exemplified in low labor turnover. It then proceeds to offer an alternative “growth model”. What is surprising is that despite the rhetoric of change, it still focuses on those sectors traditionally associated with Greece, such as tourism, food processing, energy (with a special emphasis on renewable energy), plus references to potential “rising stars” such as generic pharmaceuticals. It is obvious that it is not an alternative strategy but the simple projection of current trends plus the effects of austerity, reduced labor cost and the lifting of environmental restrictions to investment.

In a similar manner, the economic analysts of Alpha Bank have presented their vision of an Ambitious Greece. They insist that what Greece has to sell in order to become competitive again is mainly sea, sun and wind in the sense of new investment in high-end tourism, attracting cruise ships through lowering of regulations regarding employment conditions of seamen, taking advantage of the ability to reduce labor costs, expanding the ability to build summer houses (in areas traditionally protected for environmental reasons) and by attracting investors for renewable energy.

In both cases the neoliberal rhetoric about over-regulated labor markets is used to justify the attack on worker’s rights. This is most evident in how they treat low labour participation rate in Greece. Instead of seeing in this a form of hidden unemployment and as proof that people who searched for employment for too long have given up searching, they present it as evidence of potential employees being discouraged by a rigid labor market!

The same attempt to present Greece as a potential investor’s paradise is evident in how endeavors such as the Helios project are presented. A big project to install solar planes to generate electricity to be exported towards Central Europe and Germany, it is presented as a unique opportunity and as example of the determination to do away with all zoning, environmental, archaeological barriers to investment.

Moreover, all these are going to be implemented through the various mechanisms of supervision in place in Greece. On such example is the Task force for Greece set by the European Union with the responsibility to offer ‘technical assistance’. In reality it is a mechanism for coordinating policy in an almost neo-colonial way, beginning with the “evaluation of civil servants”, a euphemism for the mass lay-off of public sector employees. Pool Thomsen, the IMF’s man in Athens and the leading figure of the Troika mechanism, does not mince his words. Greek labor costs lag behind productivity; Greek wages are too high; secured employment in the public sector is outmoded.

It is obvious that a new narrative is emerging. It has less to do with promises of modernization and European integration as the paths to growth, but more with a vision of country transforming collective guilt for its supposed “excesses of the past” into diminished social protection, acceptance of whatever investors require and effort towards export-oriented growth. It is the ideal of turning Greece into a business friendly ‘Special Economic Zone’ aiming at increased exports based on foreign direct investment and low labor cost.

Missing from this image are important aspects of the conjuncture. First of all, the continuing recession of the Greek economy and the fall in total demand, are already beginning to erode the productive base of Greece. The rise of exports in 2011 is not sure that is going to last, especially if the Eurozone enters a recession. Betting on low labor costs as comparative advantage, can only lead to a race to the bottom and there is always going to be some other cheaper country. No matter how low Greek wages get, Bulgaria, to give one example, will always be cheaper. Contrary to the prevailing myths Greek private sector had de facto flexible labor relations and current dramatic rises in the unemployment rate have nothing to do with labor market “rigidities” but are the result of the recession and aggressive attempts by employers to reduce costs. And even if Greece manages to see an increase in exports, with exports reaching in 2011 10,4% of GDP, it is obvious that they are far from becoming the main motor for growth. Moreover, even if Greece managed to achieve – at huge social cost – some form of labor cost competitiveness – the so-called internal devaluation strategy – this will not compensate for the constant erosion of competitiveness because of Greece participation the Eurozone. Making it easier to form a company in Greece also means that it will be easier to close down a company, thus leading to the vicious cycle of business volatility and the possible temptation to form companies simply in order to take advantage of various subsidies available.

What is also missing from this narrative is the social and economic cost of the transition towards this new vision of growth. Prolonged unemployment leads not only to social crisis but also to a degradation of skills. A brain-drain is under way since there are no employment prospects for especially for over-qualified youths. The new poverty emerging can only lead to a chronic lack of effective demand. The abandonment of environmental and cultural heritage barriers to investors in the long run will create more problems, both environmental and social. The refusal to transform the former Hellinicon Airport, the biggest open space in the seafront of Athens, into a public open park, as local communities demand, and the decision to offer it to private developers, through the Hellenic Republic Asset Development Fund, the main privatization agency, in order to create giant shopping malls and office buildings is an example of this disastrous strategy.

If we are to think of an alternative growth model for Greece we must look outside the solutions offered in neoliberal textbooks. An alternative road must be based on starting points such as the annulment of the debt, the exit of the euro, imposition of capital controls and nationalizations. It can take advantage of public ownership and forms of self-management. It can also experiment with alternative non commercial distribution networks. Instead of consumerist fantasies it must set new priorities such as food sufficiency, improved public infrastructure, health and education, new quality of life, environmental protection, important aspects of any attempt to reformulate a socialist strategy.

At least we can be sure about one thing. Things will never be the same for Greece. Turning back to the economic and consumption patterns of 2009 is not possible. Either we will face the “waste land” of neoliberal social engineering or we will at least make an effort at creating our own alternative future.