“Good” Austerity Chiefs, “Bad” Austerity Chiefs

As Greek governments continue to set new records in the realm of economic policy brutality, Greece’s status is beginning to change. No longer the black sheep of profligate spending, Greece is now turning into the golden standard of havoc-producing austerity and, thus, into the yardstick against which the performance of other austerity dispensing governments is to be measured. This becomes clear in “Greek-Spanish Pension Split Illustrates Europe’s Dilemma,” a piece of “news analysis” by Landon Thomas Jr. of the New York Times. (i)

The dilemma that Thomas claims to have discovered is one between the economically “necessary” butchering of pensions in Europe and the political counterpressures against such butchering by growing protest movements which make it hard for politicians to do what has to be done. As far as the reference to the Greek-Spanish pension split is concerned, Thomas contrasts Greece’s brave determination to undertake “some of the most severe cuts in public pensions ever imposed in a developed country” to Spain’s decision to “enhance” public pensions at a time when it should be doing the opposite. Spain’s “enhancement” consists of 1% increases at a time when Spain’s inflation rate stands at 3.50%. Thomas’ elementary mistake of not seeing that underneath the nominal “enhancement” of the Spanish pensions lies a decline in their real value exemplifies the quality of the “news analysis” he has to offer.

In any case, Spain is not the only sinner according to Thomas. “Portugal, under pressure from a fresh wave of street protests, is likely to rescind a bold plan that would have required workers to increase their personal contributions to pension plans.” What Thomas doesn’t mention is that the “bold” plan in question sought to redistribute income upwards by increasing worker contributions in order to reduce the contributions of employers. The case of Portugal is especially interesting, it should be added, since the New York Times itself less than four months ago was reporting that, while “[i]n Greece, austerity [had] unleashed chaos and rage in the streets of Athens,” in Portugal people showed remarkable acquiescence and little inclination to protest in the face of “budget cuts, tax increases and loosened labor laws demanded by its international creditors”. (ii) What better proof of the special unpredictability characteristic of times of deep economic and social crisis than the fact that the first, admittedly small, victory against the austerity juggernaut in Europe came not from the obstreperous Greeks but from the supposedly more stoic and docile Portuguese?

And what about Thomas’ treatment of the Greek pension system? In cluelessness on that subject Thomas proves the equal of the various New York Times journalists who have in recent years reported on Greek politics. In particular, Thomas’ praise for Greece rests on the false premise implicit in his claim that “[o]nly Greece, under duress and at a point where the move may be coming too late to salvage the government’s finances, seems prepared to risk the consequences of severe pension cuts.” Thomas’ statement suggests to the reader that Greek pensions have been a drag on the fiscal health of the Greek state. Greece’s pension system, we are told, was exceptionally generous, so much so that “[i]n the years before the crisis hit, pension payments in Greece totaled as much as 14 percent of gross domestic product.” Given Thomas’ claims about the Greek pension system’s generosity as well as his assumptions regarding the contribution of generous pension payments to fiscal trouble, one would expect that this 14 percent figure is some kind of unprecedented world record. Well, not quite, since Thomas himself reports that France, a country with a “budget outlook … not as dire as that of Spain” (or, I would add, Greece) devotes to pension expenditures no less than 15 percent of its gross domestic product.

Moreover, Thomas seems to be blissfully unaware of the fact that, far from being the reason for the Greek fiscal crisis, Greek pension funds are currently in trouble in part because they were mismanaged by the Greek government. Indeed, rather than treating workers’ pension and social security payments as investments that had to receive a reasonable return, Greek governments for decades used pension funds for their own purposes, including for the purchase of scandalously toxic bonds from figures in the Greek financial world who were connected to the conservative party responsible for the policies that Thomas’ ‘news analysis’ is so fond of.

Similarly, Thomas has nothing to say about the devastating impact that the restructuring of the Greek debt has had on Greek workers’ pension funds. While the Greek government has agreed to add to its mountain of debt in order to secure the loans necessary for the recapitalization of Greek banks hit by the haircut of Greek bonds, it has not taken equivalent measures to soften the blow on workers’ pension funds. Meanwhile, the Greek austerity program is also devastating Greek pension funds through its impact on unemployment and wages. With almost 25% of Greek workers unemployed and many more either underemployed or only paid a fraction of what they used to make just a few years ago, workers’ contributions have collapsed, thus further undermining the stability of Greek workers’ pension funds and prefiguring further pension cuts in the future. And as they find themselves hit again and again by successive pension cuts that are enthusiastically endorsed by the likes of Mr. Thomas, more and more retirees have to go through garbage to find food or, unable to accept the indignities of their newfound state of destitution, blow their brains out in front of the Greek parliament.

There is a social war going on in Europe. On one side are the capitalist elites hoping to make the intensifying misery befalling ordinary Greeks a norm for countries across the European periphery. On the other side are European workers and ordinary citizens who are fighting back so that Greece’s present state does not become their future. Guess which side Mr. Thomas and the New York Times are rooting for… 

Costas Panayotakis is Associate Professor of Sociology at the New York City College of Technology and author of Remaking Scarcity: From Capitalist Inefficiency to Economic Democracy.


(i) See http://www.nytimes.com/2012/10/01/business/global/pension-dilemma-in-europes-debt-crisis.html .

(ii) See Scott Sayare, “Portuguese Just Shrug and Go On in the Face of Cuts and Job Losses,” The New York Times, June 7, 2012, http://www.nytimes.com/2012/06/08/world/europe/portugal-shrugs-at-austerity.html?ref=portugal&pagewanted=print 

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