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Greece - A New Victim of 'Structural Adjustment'. Reviewing the Latest Bailout and Its Traps

14/08/2015 09:44 BST | Updated 13/08/2016 10:59 BST

The third Greek bailout deal has prompted a predictably mixed response in the British media, from positivity and cautious optimism to downright negativity. While a BBC news headline conjectures it might be 'third time lucky' for Greece, and the Independent has its 'fingers crossed', Tuesday's The Guardian editorial insists that any hopes that we might be seeing the end of the Eurozone debt crisis are 'deluded'.

Most of the focus, understandably, is on what this bailout means for the already-limping Eurozone. Many of us are relieved to be avoiding, for the time being at least, a Grexit. And, of course, Eurosceptics have also jumped on the opportunity to declare it outrageous that we - the 'rich' European countries - should be called upon to 'save' Greece. Ben Wright, writing for The Telegraph, insists that 'the rich countries in the currency union should not have to subsidise the poorer countries'. And last month, Kristian Niemietz had already forecast that 'no bailout can save Greece from itself', and rather distastefully affirmed that this 'never-ending Greek tragedy' will continue if Greece remains within the Eurozone.

Many are doubtful that the Syriza government will stick to the formal agreement of the new bailout, which has further austerity at its core (a bitter pill to swallow for a government elected on the grounds of its anti-austerity policies and victorious in its recent referendum). 'The plan is sound,' the aforementioned Independent editorial asserts, 'if it could be made to work.'

But this surely begs some basic questions: Who would it work for? Who would it be sound for? It would certainly suit Europe if Greek were to regain economic stability and self-sufficiency. And it will doubtless work for foreign investors, who will benefit from the €50bn privatisation programme. But what about ordinary Greek people? That is, what about the majority of the Greek population? Will it 'work' for them?

Let's look at some of the measures on which Alexis Tsipras has had to agree in order to secure this bailout: further, ever more punitive spending cuts (including tax credits for the most disadvantaged people), energy market deregulation, a €50bn privatisation programme aiming to attract foreign capital, and a 'review' of the social welfare system. We have already seen unemployment rates soaring to unprecedented heights of 26% since the first Greek bailout in 2010. And things will only get worse with a new wave of austerity.

As a Latin Americanist, I have a profound distrust of bailouts, and of the 'structural adjustment' programmes that go with them. 'Structural adjustment' is a deceptively neutral, bureaucratic term to disguise what has invariably been a deeply political, ideological move from a state-led socio-economic system to one driven by the free market - by private, global, free-flowing capital. Latin America was used as a testing ground for the subsequent wave of neoliberalism that swept Europe and the rest of the world (with very few exceptions).

As Professor David Harvey points out, it was Chile that was subject to the first 'brutal experiment' with neoliberal state formation (p. 9).

After Pinochet's 1973 coup d'état against Salvador Allende's democratic government, a group of economists - 'the Chicago boys' - was called to assist in the reconstruction of the Chilean economy with the support of the IMF (the International Monetary Fund, which incidentally is the main institution running to Greece's supposed 'rescue'). Their reforms were in line with the neoliberal theories of Milton Friedman. As Harvey explained, 'they reversed the nationalizations and privatized public assets, opened up natural resources (fisheries, timber, etc.) to private and unregulated exploitation [...], privatized social security, and facilitated foreign direct investment and freer trade' (p. 8). Selling public assets, privatizing the energy sector, promoting competitiveness in the global market... Does any of this ring a bell?

In Mexico, the 1982 debt crisis led President de la Madrid, under pressure from the IMF, the World Bank and the US Treasury, to agree on a bailout package similarly comprising a series of neoliberal reforms, including austerity programmes, privatization, and - guess what - the opening up of the country to foreign direct investment. As Harvey points out, this had huge social consequences, producing a dramatic fall in workers' real wages, a staggering drop in investment in public services (from health and education to transport and waste collection) and the restructuring of labour contracts. The principal long-term impact has been the well-known phenomenon that prevails in so many countries in the developing (and increasingly in the so-called 'developed') world: an obscene and ever growing gap between rich and poor. Indeed the poorer sectors of the population in the following decades became larger and poorer, their living standards dropping further than before the debt crisis, contrasting starkly with the rise of a very small, but very rich, elite. Indeed as Harvey points out, by 2005, Mexico entered the top-ten list for numbers of billionaires and was home to one of the richest men in the world, Carlos Slim - a business tycoon with a monopoly on telecommunications throughout Latin America.

So is this what Greece has to look forward to?

The aforementioned Independent editorial states that, long before the economic crisis, it was apparent that the Greek economy needed 'radical reform': 'it is simply not productive or internationally competitive enough'. Yet it is precisely brutal, destructive competitiveness that, as Brecher, Costello and Smith argue, have produced a 'race to the bottom' across the world in which 'entire countries are forced to cut labor, social and environmental costs to attract mobile capital.' (5)

We would do well to consider Greece's forerunners, then, in Latin America, Africa and elsewhere, before we - pardon the expression - buy into the discourse of salvation that has prevailed in the press over the last five years: the idea, used so lightly, of 'rescuing Greece', of 'saving' it from defaulting on its debt, of 'securing' its future in the Eurozone. And we should perhaps take seriously the description of the new package by a bloc of dissident Syriza MPs as a 'noose around the neck of the Greek people'.