Part 2: We are all Greeks
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By William C. Shelton

(The opinions and views expressed in the commentaries of The Somerville Times belong solely to the authors of those commentaries and do not reflect the views or opinions of The Somerville Times, its staff or publishers)

In the U.S. criminal justice system, we assign more serious punishment to those who sell addictive drugs than to those who use them. This seems intuitively just.

But we rewarded the bankers who knowingly sold addictive debt to borrowers who couldn’t repay it. The captains of finance packaged it as “collateralized debt obligations,” assigned those “CDOs” a Triple-A investment rating, and then bet against the suckers who bought them.

The taxpayers bailed out the banks, the bankers got richer, the investors ate the losses, and the citizenry dealt with years of recession, unemployment, foreclosures, wage stagnation, and the steady disappearance of living wage jobs.

Since this Wall Street/London racket brought the global economy down in 2008, the U. S. has experienced a weak economic recovery. But the European economy has remained close to, or actually in, recession.

A key reason is that European governments have not been so generous toward the big banks with their taxpayers’ money. So the banks have gone on strike, refusing to write down €2 trillion worth of toxic assets, leaving them unwilling or unable to make the loans necessary to sustain economic activity.

While Eurozone governments have, in turn, been unwilling to force the banks to come to terms with their fraud-created bad debt, their forced-austerity response to Greece’s fraud-created debt has produced the incalculable suffering described in my last column.

As in the U.S., the bankers go unpunished. Goldman Sachs, for example, took $800 million in fees for concealing a substantial portion of Greek debt, and ended up doubling that portion in the process.

Two weeks ago the International Monetary Fund’s (IMF’s) Managing Director, Christine Lagarde, stated the obvious: Without debt relief, Greece cannot repay the debt that it has thus far accumulated, much less the additional debt proposed in the current bailout.

Last week, an unnamed source in the IMF said that his organization, which is one third of the “Troika” that is determining Greece’s fate, would not participate in the bailout unless Greece gets debt relief.

The reasons are obvious to any sane observer. The “austerity” conditions imposed by the Troika as part of the previous two bailouts shrank Greek GDP by 25% over five years, making debt service impossible.

Less obvious is why the other two Troika partners won’t acknowledge this. The only explanation that I can conceive of is that they are imposing suffering for suffering’s sake for the same reasons that their loan-sharking brethren in the laissez faire sector make gruesome examples of those who welch on their debts.

Greece is caught in a vice. If it were on its own currency, it could use monetary policy to help cure its economic ills, as the U.S., UK, Canada, Sweden, and Israel did post-2008.

But while the wealthier Eurozone countries and their bankers enjoy the benefits of a unitary currency, they are unwilling to undertake the obligations that a true United States of Europe would require.

In the United States of America, some states—largely those with Democratic majorities—pay more per capita in taxes. Others—usually those with Republican majorities—absorb more per capita in federal spending, while their politicians rail against taxes and spending. Massachusetts for example, receives $0.48 in federal funds for every $1.00 it pays in federal taxes. We do that to “form a more perfect union.”

It’s fair to point out that European states are far more generous in their spending on education, healthcare, childcare, infrastructure and social support programs than is the U.S. But among the wealthier Eurozone states and their bankers, this generosity doesn’t extend across state borders.

In the case of Greece, the bankers are sovereign states, or rather their clients are the wealthy sovereign states. So it is the citizenry in those states who are the investors who will ultimately eat the losses. This, and the ignorance about the financializaition of humanity that the average Eurozone and American citizen shares, explain why many of those citizens support extracting a Shylockian pound of flesh from Greece.

“Financialization” refers to how the finance sector has come to dominate every other economic sector, and production in particular. Or how financial leverage, achieved by mobilizing other people’s money (through CDOs for example) overrides capital invested directly by players in their own sectors.

Financialization’s aim is to reduce the exchange of any human value to a financial instrument, from which profit can be wrung. The more wealth and power those in the financial sector accrue, the more they can buy the public policies that support their aim.

Bank deregulation may lead to a global meltdown, but it produces enormous profits for the largest banks. “Free trade” agreements may kill living-wage jobs in the first world while creating unhealthy, unsafe, dead-end child unemployment in the third world, but the captains of finance know no national loyalty.

Slashing education and social programs may make a mockery of “equality of opportunity,” but doing so justifies lower taxes on the wealthy. And while 35 years worth of evidence proves that lowering taxes on the first-world wealthy does not stimulate sustainable economic growth in their first-world countries, if they keep repeating it, the rubes seem to believe it.

One example of financialization’s consequences with which ‘Villens are familiar is real estate price escalation. Seventeen years ago, two leading economists asked, “In the United States, probably more money has been made through the appreciation of real estate than in any other way. What are the long-term consequences if an increasing percentage of savings and wealth, as it now seems, is used to inflate the prices of already existing assets – real estate and stocks – instead of to create new production and innovation?”

We found out in 2008. But national governments have done little to prevent another global meltdown.

And so thoughtful analysts are repurposing Percy Shelley’s observation that “We are all Greeks.” In 1821, Greece was suffering under the Ottoman Empire’s domination while Western governments remained “neutral.”

Shelley wrote, “The apathy of the rulers of the civilized world to the astonishing circumstances of the descendants of that nation to which they owe their civilization, is something perfectly inexplicable to a mere spectator of the shows of this mortal scene. We are all Greeks. Our laws, our literature, our religion, our arts have their root in Greece.”

In 2015, Greek Prime Minister Alex Tsipras stated, “I’m certain future historians will recognize that little Greece, with its little power, is today fighting a battle beyond its capacity, not just on its own behalf but on behalf of the people of Europe.”

He’s right. Many Americans have already experienced the suffering produced by financialization’s cancer, and many more will. We are all Greeks.