In the media coverage of the Greek debt crisis, it’s now a truism that Greeks are spendthrifts and Germans frugal. Mention of this dichotomy is now to be found even in sports coverage. In the Times, the Greek national soccer team, known for its strong defense, elicits a comparison to stingy Germany: “One place that German-backed austerity measures are appreciated – lauded, actually – is in Greece, and especially on the soccer field.” It’s a witty lead, of course, which, from my experience, editors tend to value far more than insight.
That Greeks and Germans have been pitted against one another has distracted us from seeing that both peoples are being made to safeguard the profits of a small group of wealthy investors. Ordinary Greeks are seeing their wages and pensions slashed to pay back loans from which a small class of Greeks benefited disproportionally. And German taxpayers are being made to pay away the risk of those investments in the Greek economy.
Noam Chomsky once called the experience with the IMF in creditor and debtor countries different “forms of robbery.” In the excerpted interview below, he was talking about the IMF and Latin America, but he could have just as well been referring to the Greeks and the Germans.
The IMF is a method for paying off investors and transferring the risk to the taxpayers in rich countries. There are two forms of robbery going on: The populations in the debtor countries are being robbed blind by austerity programs, while the taxpayers in rich countries are also being robbed. It’s not as serious for the latter because they’re richer, but they’re still being robbed. The IMF socializes the risk.
This is quite important. People invest in Third World countries because the yields are very high. So gains are high in a market system if the risks are high. They more or less correlate: the greater the risk, the greater the gain. But here it is largely risk-free. Private investors make enormous profits from very risky investments, but then, through the international financial institutions, they essentially have free “risk insurance.” The structure of the system is such that the people who borrowed don’t have to pay — they socialize it by making the population pay, even though the population didn’t borrow the money. The people who invest — they don’t accept the risk, because they transfer it to their own populations. That’s the way market systems work-through the socialization of risk and through the socialization of cost, with the IMF acting as “the credit community’s enforcer,” as Lissakers puts it.
What, then, are the consequences for democracy? Over the last 20 years, power has been transferred to the hands of financial capital, so banks, investors, speculators and financial institutions make policy. The liberalization of financial flows creates what some economists call a “virtual senate”: if private investors don’t like what some country is doing, they can pull their money out. They in effect come to define government policy. That’s the point of liberalization.
(Excerpted from “Debt, Drugs and Democracy.” Noam Chomsky interviewed by Maria Luisa Mendonca. NACLA Report on the Americas, Vol. 33, No. 1 Jul/Aug 1999 [March 12, 1999])