Is austerity the way forward for Greece and other countries that are in the throes of a severe economic crisis? According to much of the world's media, the answer to that is a resounding "yes." Since the outbreak of the economic crisis in Greece in late 2009, many prominent media outlets, including all of Greece's major television networks and newspapers, have enthusiastically led the pro-austerity charge, and continue to do so even as the crisis has worsened. Noam Chomsky, who in six decades of teaching, writing, and activism, has not hesitated to express his opinion on such matters, takes a different view.
"Its policies are destroying Greece," Chomsky argues, referring to the European Union.
Clarifying his position, Chomsky argued that while he does not believe the EU is willingly attempting to wreck the economies of countries like Greece, he does believe that the policies that have been adopted in reaction to the crisis are leading those countries towards that outcome.
"[The austerity measures] certainly haven't been working out in terms of reviving the economy or even in paying off the debt," said Chomsky. "The debt's actually increasing. And it's not that these policies aren't working now. Such policies virtually never work."
According to Chomsky, the measures that have been adopted by the EU to cope with the economic crisis in many of its member-states have not only been counterproductive, but they have contributed to the unraveling of the social safety net which has long been held sacred in Europe. Such policies, in Chomsky's view, originated under the rule of Reagan and Thatcher, and have resulted in a "neoliberal assault" on social welfare.
This assault, as described by Chomsky, has had tangible repercussions. Specifically addressing the situation in Greece, Chomsky stated that the "Greek population is being squeezed beyond the capacity to endure," adding that Greece is "being driven down to living standards of the 1960s." Notably, Chomsky pointed out the irony of this situation, theorizing that Europe may now be falling victim to its "relative humanity," vis-à-vis the United States. He compared the early development of the EU--where poorer countries were admitted only after efforts were made to raise their living standard--with NAFTA, where Mexico was included in a similar economic union with two much wealthier member-states without such safeguards, leading to "severe" repercussions for Mexico and for workers in the United States and Canada. Conversely, the more "humane" policies of the EU, which allowed for the eventual inclusion of member-states that were not as wealthy as their northern counterparts, may now be resulting in similar adverse results in Europe.
In further comparing the United States and Europe, Chomsky observed a key distinction in the respective mandates of the Federal Reserve and the European Central Bank. According to Chomsky:
"There's a difference between the U.S. and the European central banks. The Federal Reserve has an official commitment to two different policies. One is to prevent inflation from getting too high. The second is to maintain high employment...the European Central Bank has only the first. It has no commitment to keep employment up. That's the result of its domination by the Bundesbank...who are inflation hawks."
Furthering this point, Chomsky noted the traditional aversion of banking institutions, and those of northern Europe in particular, to increased inflation. As Chomsky argued:
"In order to stimulate the economy, they are going to have to accept a higher rate of inflation...there's substantial economic literature showing that a higher rate of inflation, if it's more or less stable, is perfectly consistent with long-term growth."
Chomsky then added:
"There's no fear of inflation here...it's kind of interesting, that all these people are supposed to be worshipping markets, but the markets are telling them, loud and clear, that they see no concern about inflation."
It is this aversion to inflation that, in Chomsky's view, accounts for one explanation for why Europe has continued to pursue such harsh austerity policies in Greece and elsewhere, despite their failure of such policies. According to Chomsky, however, there may be further factors at play:
"There's a less benign interpretation [for the austerity measures] and that is...that it really comes down to class war. It's an effort to destroy the social contract, the European welfare state, the much weaker U.S. welfare state."
While Chomsky vehemently argues that the austerity-only path chosen by the EU has been a failure for countries like Greece, he did point out that prior governments in Greece did not help matters. "There are plenty of internal problems in Greece," said Chomsky. "You can't attribute everything to the troika, though I think their policies have been bad enough. Greece has been, in many ways, a partially dysfunctional society. For example, the wealthy barely pay taxes...to an extent, that's true elsewhere, including the United States, but it's been pretty extreme in Greece." Chomsky also addressed the "unnecessary and...harmful" bureaucracy of Greece as another contributing factor in the crisis. However, Chomsky was also quick to defend Greece against the barrage of stereotyping it has received in the international press:
"It's been claimed in the northern countries that Greeks don't work hard enough, but that's just not true, [Greeks] have higher working hours than northern Europe."
When asked what policy initiatives could help lift Greece and other Eurozone countries out of the crisis, Chomsky's response was immediate. He called for a "stimulative policy in the Eurozone," arguing that the Eurozone's extensive resources could be used to stimulate economic growth.
"What we're seeing is a real indictment of the socioeconomic system in which we live...There are a huge number of people who want to work," said Chomsky. "Plenty of resources to put them to work, and a lot of work that needs to be done to satisfy people's needs and wants, but the system can't get them together."
While Chomsky believes that promoting growth instead of austerity will be beneficial to, his outlook was much more grim in the event that the present austerity policies continue:
"Many human lives are being lost, and forever, and for young people particularly, if they are driven off the job market, the chances of recovering are not high, that means their lives."
The podcast of the Dialogos Radio interview with Noam Chomsky can be heard here.