2009 Candlelight vigil in Hong Kong commemorating the 20th Anniversary of the Tienanmen Square Democracy Protests of 1989. Neoliberal capitalism wants to destroy democracy.
Hong Kong Vigil on the 20th Anniversary of the Tienanmen Square Democracy Protests (2009).

Elections cannot change anything, because, then, every time there’s an election everything will change.” –German Finance Minister Wolfgang Schäuble, as reported by economist and Greek Finance Minster, Yanis Varoufakis

On July 1, 1997, the sun finally set forever on the British Empire. Occasioned by the expiration of a 99-year lease for the New Territories, sovereign rule of the territories of Hong Kong and Macau was transferred (returned, the Chinese would put it) from the United Kingdom to the People’s Republic of China.

Despite China’s status as an ostensibly ‘communist’ country, it promised that Hong Kong would continue to function as the major capitalist financial center it had become during British imperial rule. This arrangement had already been established in the early 1980s after fierce negotiations between British Prime Minister Margaret Thatcher and Chairman of the Central Advisory Commission of the Communist Party of China Deng Xiaoping. China would adopt a One Country, Two Systems model wherein the mainland would continue to function under a centralized socialist economic system and Hong Kong would exist as a special administrative region governed under a semi-autonomous capitalist-democratic system. This arrangement would exist for a period of 50 years.

This is the first grand gesture of the 21st Century.”

I was fresh out of a PhD program in political philosophy in the summer of 1997, and I recall discussing “the Handover” with my friend and colleague Tedd Siegel. We were trying to unpack the historical and geopolitical significance of this event within the context of the cold war era bifurcation: capitalist democracy v. authoritarian communism. Tedd said something during our conversation that I thought was rather profound at the time. He said, “This is the first grand gesture of the 21st Century.” This grand gesture signaled to the world that in the 21st Century capitalism will have no further need for democracy.

Redrawing Ideological Lines

If, with the benefit of hindsight, this grand gesture no longer seems all that provocative today, it’s largely because what it exclaimed has largely turned out to be true. But in 1997 things hadn’t looked this cynical yet. This was when most of us in America were only just beginning to learn about neoliberalism. We’d already experienced years of Reagan’s trickle down economics, but the WTO riots in Seattle hadn’t happened yet. Nor had the G8 riots in Genoa. We were still struggling to get our heads around NAFTA and Bill Clinton’s plan to End Welfare as We Know It.

In this cultural climate the old cold war ideological battle lines still carried some weight. Capitalism spreads democratic freedom. Communism destroys democratic freedom. Only seven years earlier, in 1989,  the Berlin Wall had come down. Using superior economics and his own special brand of batshit crazy cowboy diplomacy, Ronald Reagan had bankrupted the Soviet Union. East Germany reunited with the democratic West, and Russia became a parliamentary democracy under Boris Yeltsin. Capitalism was winning, and by extension, so was democratic freedom.

In this context it was still possible to view handing Hong Kong back to China with capitalism intact as something of a democratic Trojan horse. Once they got a taste of capitalist prosperity, surely the Chinese would come around to democratic reforms. Nevermind that eight years earlier (the same year the Berlin Wall came down) Deng Xiaoping, the same man who had negotiated Hong Kong’s handover with Margaret Thatcher, had violently put down democratic protests in Tiananmen Square. Perhaps it was simply too soon. These reforms take time.

Greek Austerity and Greek Default

Fast forward to 2015. The People’s Republic of China is in striking distance of surpassing the United States as the largest economy in the world, but democracy hasn’t materialized yet. The Russian Federation’s experiment with democracy is essentially over. It’s now a putative authoritarian kleptocracy ruled by former KGB officer Vladimir Putin. On June 30th, lacking liquidity and suffocating under extreme austerity measures imposed by the European Troika, Greece formally defaulted on a $1.7 Billion debt payment to the International Monetary Fund (IMF). According to Reuters, at the time Greece owed creditors 242.8 Billion euros ($271 Billion), including payments on two previous E.U. bailouts.

The events that followed leading to an eventual ‘resolution’ to this Greek debt default would afford Europe and the United States a horrific glimpse of something not unfamiliar to previous victim states in Latin America and Africa: the full rapacious, hope-crushing, democracy-destroying ambitions of neoliberal capitalism.

No Such Thing as a Debt That Can’t Be Repaid

Before we proceed to the story of how this debt default was ‘resolved’, let’s be very clear about one thing: Greece will never pay back this debt. It’s too big. There is a truism that economist Michael Hudson likes to repeat: A debt that can’t be paid, won’t be. You don’t need a degree in economics to understand this. It’s essentially a tautology.

According to neoliberal policy, however, there is simply no such thing as a debt that can’t be paid. If we were acknowledge that a debt can’t be paid, then the only logical thing to do would be to discuss debt forgiveness (or at least write downs). If we were to do this, then the speculators who finance the debt–the banks–would then have to take a “haircut” (a loss). This is bad for business–at least from the point of view of the banks. Unfortunately for democratic republics like Greece and its suffering citizens, the point of view of the banks is the point of view that’s important.

A debt that can’t be paid, won’t be.

In his book A Brief History of Neoliberalism, David Harvey notes that this point about debt repayment is in fact the key difference between liberal and neoliberal economic policy: “under the former, lenders take the losses that arise from bad investment decisions, while under the latter the borrowers are forced by state and international powers to take on board the cost of debt repayment no matter what the consequences for the livelihood and well being of the local population. If this requires the surrender of assets to foreign companies at fire-sale prices, then so be it.” (p. 29) New York investment banks, backed by the IMF and the Reagan Administration, pioneered this strategy when Mexico defaulted on its debt between 1982-4. To avoid making New York investment banks take a “haircut” Mexico’s debt was rolled over in exchange for neoliberal reforms. Harvey notes that this became neoliberal orthodoxy, enforced by the IMF and the World Bank thereafter.

In the case of Greece, which was already heavily in debt due to years of governmental abuses before it joined the E.U, the Great Recession was especially brutal. In 2010 the European Troika agreed to loan Greece 110 Billion euros. In exchange, and pressured by Germany, Greece agreed to ‘privatize’ 50 Billion euros worth of state assets. It also agreed to attempt to cut its government budget by an additional 30 Billion euros through deep austerity measures (cuts to pensions,  education, social benefits, etc.). Through these cuts, a greater share of GDP could be devoted to debt service. In short, Greece’s debt crisis was exploited as an opportunity to sell the country for parts.

The European Troika, by the way, is not a democratic body. It’s a collection of unelected technocratic elites consisting of 1) The IMF, 2) The European Central Bank (which, unlike the US Federal Reserve, is a bank unattached to a state), and 3) The European Commission (which is not the European Parliament, by the way–that would get messy democracy into the mix). They can demand and enforce neoliberal measures such as this, leaving E.U. member states no recourse short of leaving the E.U. (aka, Grexit, aka Brexit!).

Neoliberal Capitalism: Elections Cannot Change Anything

By the fall of 2014 Greece still hadn’t managed to meet all of the austerity demands of the E.U. At stake was a final 7.2 Billion euro loan installment, which now was in serious jeopardy. Hasty elections were called, and in January of 2015 the left-leaning Syriza party formed a government under Prime Minister Alexis Tsipras. Also, at least for a time, an economics professor from the University of Texas at Austin, Yanis Varoufakis, became Greek Finance Minister. Tsipras and Varoufakis attempted to renegotiate with the E.U. to save some semblance of a future for Greece–to escape a future of grim poverty and endless debt peonage.

The European Troika, by the way, is not a democratic body. It’s a collection of unelected technocratic elites consisting of 1) The IMF, 2) The European Central Bank, and 3) The European Commission.

Soon upon taking office Varoufakis spoke with the Eurogroup, the nineteen finance ministers of the nations using the Euro, including the most powerful finance minister in Europe, Germany’s Dr. Wolfgang Schäuble. In a story related in a New Yorker article  by Ian Parker, Varoufakis stated that he opened the conversation by explaining that while his government enjoyed sizable approval ratings, it needed to maintain the trust of the people. In this regard, Varoufakis continued, “It will simply not be possible for our country to grow if we remain on the growth-sapping austerity path.”

On Varoufakis’ telling, a “very cross” Dr. Schäuble responded by saying, “When there’s a program that everybody has agreed to, that’s it. Elections cannot change anything, because, then, every time there’s an election everything will change.” Negotiations subsequent to this conversation wouldn’t fare any better. The austerity measures would remain.

On June 27th, 2015, Prime Minister Tsipras called a referendum–three days before defaulting on the latest debt payment. The referendum asked the Greek citizens if they agreed to the European Troika’s bailout conditions, complete with harsh austerity. Since, to Dr. Schäuble’s point, they were not at liberty to just “vote away” the austerity, the referendum was effectively a “Grexit” vote: should Greece remain in the European Union or go it alone (two terrible options for the Greeks)?

61% of Greek voters voted “No”. They would not accept the Troika’s bailout terms. Grexit was now  inevitable, or so it seemed.

On July 8th, 2015 Greek Prime Minister Alexis Tsipras made one last desperate counter offer to the Eurogroup, which included new austerity measures. As Ian Parker writes, “The Eurogroup responded with a proposal more severe and humiliating than anything discussed in previous months.” Despite the severity of this new proposal–despite the will of the Greek people as expressed in the referendum results– on July 12th Tsipras’ government agreed to these new harsher terms. Greece, the birthplace of democracy, would remain in the E.U. under even more extreme austerity. See? Dr. Schäuble was right. Elections cannot change anything.

Coda

In this opening post we’ve now taken a brief glimpse of two exemplary moments in recent political-economic history, which reveal, at least on the surface, two quite different understandings of the relationship between capitalism and democracy. First, we examined the handover of Hong Kong from the UK to the People’s Republic of China–an agreement struck in the early 1980s, near the finale of the cold war, when capitalism was still understood to be (at least in the West) a democratizing force in the world. Second, we briefly examined the very recent Greek debt crisis and its aftermath in which neoliberal capitalism in full bloom, quite to the contrary of acting as a democratizing force, appears to be openly hostile to democracy. What we have yet to explore is how and why this change of comportment happened, and perhaps most importantly what it means for our future.

In several follow up posts I’ll be exploring these and other questions. In closing, while it’s surely not apparent in what I’ve written above, I want to reiterate the commitment we’ve taken in creating In Dark Times to be anti-fascist, with a practical orientation towards the present. In this regard, it wouldn’t be unreasonable to ask at this point, “Why are you rehashing the story of neoliberal hegemony when fascism is knocking at the door? Donald Trump was elected President of the United States on a wave of angry, nativist, racist, misogynistic, and anti-immigrant sentiment. Neo-nationalist movements are arising all over Europe. The neoliberal era is ending. It’s time to focus on neo-nationalism.”

I think this is a fair question, and for now, in lieu of a straightforward answer, I offer the following provocation for my own thinking as anything else: I think Dr. Schäuble has a point. What good are programs and contractual commitments if you can simply call elections and erase them? Global economics is a delicate game perhaps best left to even-handed technocrats, outside of the capricious whims of what Plato disparagingly described as “the many”. While I value democracy, I’m willing to entertain the proposition. But what if, despite what they hope or think, people like Dr. Schäuble don’t get to decide whether elections change things, or whether people made to suffer simply suck it up with no recourse? What if history doesn’t chose people like Dr. Schäuble? The prospect is simultaneously liberating and terrifying. To wit:

In June of 2016, before Donald Trump was elected President, and before the UK voted on Brexit, Brown University Professor of International Political Economy Mark Blyth used the Greek debt crisis as a means to explain (not without some sympathy) the motivations of a pro-Brexit voter: “This is basically a revolt against technocracy. It’s a revolt against governance by unrepresented, unelected, undemocratic elites. And having had a government where every single district in your country says no chance! 61% says no chance! And then the result is we’re going to do it anyway? You’re basically proving to people that democracy is irrelevant. So this is global Trumpism.”

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by Steve Heikkila