05/20/2012 03:47 pm ET Updated Jul 20, 2012

Who Needs a Greek Government?

In Greece, coming in the next days and weeks are actions and decisions that will unleash another fateful phase for Europe. The need for a new government is urgent.

This is not the first time. The country needed a new government in the fall of 2009. Why? To expose the free-for-all free-fall corruption under New Democracy. Then, despite himself, George Papandreou became a whistle-blower on a pan-European confidence game. All the corked-up demons of the Euro zone were called forth.

Once again last November the country needed a new government, for only the truly brave can move forward without coalitions and popular support. The failure of PASOK's leader to rise to this make-or-break moment for Europe bore its inevitable fruit: resignation and the illusion of a technocratic solution to a political problem. Papandreou's one brilliant stroke -- which was to call, as Thomas Jefferson would have, for popular judgment on his devil's pact with the European financial establishment -- was set aside when New Democracy's Antonis Samaras extorted him out of office and handed the reins to, of all things, a banker.

What appeared as cancellation was in fact only postponement of the Papandreou referendum. It was Lucas Papademos who eventually enabled that popular power. Following a second round of hair-raising negotiations with the "troika," that un-elected interim prime minister deemed his "key task" complete and proposed that "a new government, with a fresh popular mandate," should continue "the effort to reconstruct the economy."

What Papademos did not say, but what everyone knew, was that this time the need for a new government was not only in the offices of administration but in the streets of Athens. For better or for worse, the election of May 6 brought the people of Greece once again onto the stage of an increasingly global drama.

Indeed, in failing to produce a government that election again turned the need for one in a new direction. This turn has been largely misunderstood and, for that reason, it is again susceptible to machinations by the main actors. This is both a gift to and risk for the purveyors of austerity like Angela Merkel; it is both nightmare and opportunity for the rising star of Greek politics, Alexis Tsipras.

These essential questions remain unanswered: To whom was the effort of May 6 a response? Who needs Greece to have a new government, and why? How does this need bear on the election now upcoming on June 17?

Certainly the Greek state needs a government. Someone has to open and close the shop and stand behind the counter. Even when democracy becomes a limited liability corporation it needs a CEO.

The European polities, too, are calling forth a new government in Greece. That call is as diverse as the aspirations and the self-understanding of Greece's sixteen national partners. For this reason it is necessary, although difficult, to keep in mind that even "Germany is not Angela Merkel," as one Social Democrat politician put it after their stunning win against her this week in North Rhine-Westphalia.

The loudest demands from Europe, however, continue to issue from the financial establishment. They present a concise and exacting image of what a new Greek government would have to be. The key word for this -- disseminated across the board by major actors, from the "troika" to an astonishingly uncritical press -- is austerity. The authority of austerity, tuned as it is to the politically sterile clichés of an Economics 101 textbook, is sustained by this repeated refrain: "The markets have spoken!"

This is an appeal to false necessity. It favors direct and indirect financial interests. What speaks here is the barely disguised voice of bankers and the most powerful investors. As translated through global capital markets, it is sheer nostalgia to say that what calls to us is the voice of Europe.

The global capital markets, too, need a new government in Greece. A cynic might see only this: The very demand for a government where one is not forthcoming is a strategy to calibrate further speculation -- foreplay for big downside bets. Beyond that, it is clear that markets trafficking in investment-grade public debt need government as insurance and hedge. You can call this "risk management," although it is also, perhaps more precisely, a kind of psychotherapy for bankers.

This demand from the markets for a new government in Greece rests on two foundations. One is the search for efficiency. The other is the desire for legitimacy. We shall see in a moment that in a situation like this both come down to the same thing.

Most people are not actually investors. Nonetheless, we are forced by curiosity or circumstances to think about investors. For us, their search for efficiency evokes a picture of a family farm or store balancing its books each month in an effort to eke out a slightly larger margin. Doesn't it go without saying that this requires the oversight of an authoritative executive? Who else would check spending? Collect revenues? Secure infrastructure? Police agreements?

For real investors, however, there is another and more fundamental aspect of the search for efficiency. It is about the maximization of profit. For bond investors, efficiency is a condition for payments on debt obligations. It is a factor in interest rates. In other words, the markets needed a new government because they want to get paid. Viewed this way, the issue of Europe rests on the assignment of political value to this economic fact.

The question again is why do state-bashing free-marketeers need Greece to have a government? The answer takes us into an unusually clear instance of what the brilliant economist Karl Polanyi called (in 1947) "our obsolete market mentality."

Within a single nation, capitalists may push hard to diminish state intervention in their particular zones of operation (and may do this even while free-riding on public investment). In the global economy, those same actors require and seek more stringent intervention by the states of foreign countries they target for investment.

Undoubtedly, weak foreign states can provide huge opportunities for capitalists. And it is easy to see "neo-liberalism" as nothing more than a drive for anomic "de-regulation" and disintegrative "privatization." But the fire-sale appropriation of publicly capitalized enterprises with few protections for labor is only one side of the story.

The conjoined global and local circumstances of investment compel investors to also seek direct exercise of social control. The typical word for this today is austerity. In countries not their home, capitalists can, where it serves their interests, set a much higher threshold for state intervention in both the economy and the society within which that economy is inescapably embedded. This is what is behind the markets' demand for a government in Greece. Investors need the state to shore up their investment.

While a simple change of commodity prices can brutally punish ordinary people, the social control implicated in austerity must be undertaken by natural persons, actors who serve market interests. Firms do some of this, for example by constraining their employees. But to impose austerity measures on a whole population requires a bureaucracy, a legislature, the police, and many other institutions, sometimes even the army. The fact is that only local people and organizations can enforce the day to day controls on society that keep it in line with the imperatives of foreign investment.

At times, benefits for a population and benefits for foreign investors converge and social control is unnecessary. This is certainly not the case with Greece today. There is rather a growing divergence of interests. The Greek political class is being called upon to do things that insure global capital but do not directly benefit the Greek population. This is on its face a divergence from democracy. It appears on the domestic political scene with increasing clarity and has exacerbated its tensions.

Power brokers like German Chancellor Angela Merkel and European Central Bank President Mario Draghi are not exactly bluffing. But they operate to set the European agenda with a narrowly drawn and intimidating bluster. The representatives of austerity are playing a risky game and, as they finally begin to tip their hand, the next gambits now come into sharper view.

In just this last week the representatives of austerity (let's call them austeritites) have started to publicly urge Greece "to remain a member of the Euro zone." This increases a sort of leverage that just weeks ago no one thought Greece could have.

Until now, the whole world has been focused on the negative power of "exit." Everyone except Alexis Tsipras had overlooked the power of "voice" and the generative possibilities of intensified loyalty to Europe. As I wrote in my last post, it may be that refusing to leave the Euro will carry Greece much farther than any other option.

What changed this week is that now opposing voices are converging in the political topos of loyalty to Europe. No one should be surprised that this sharpens the divergence of interests.

When Chancellor Merkel says "remain a member of the Euro zone" she is both inviting Greece to stay and reasserting the austerity measures of the "memorandum." She is directing the public to and with the language of efficiency. But what counts in this historical moment is the intent and eventual effect of those same words. It is to inflect the outcome of the next round of elections that are now set for June 17.

In other words, German Chancellor Merkel has opened a pan-European political campaign to persuade Greek voters. The people of Greece are thus called to recognize as legitimate candidates who support austerity as it is defined by those who will not suffer under it. This is a classic attempt to transfer risk to the weak for the benefit of the powerful.

Although it may come too late to weigh in the balance, the tone even in Germany is changing. Interviewed by Justin Webb of the BBC World Service, Social Democrat politician Jürgen Acht (sp?) laid things out in these terms:

"I think that many people in our country think that it is not really very intelligent for the Greeks to sell all the infrastructure, it's not really intelligent to forget the policy of growing the economy, so we have to help the Greek people -- by the way, they have to save money, there's no question -- but just saving money is not the way we can go in the future of Europe."

Now, here is my main point in this long post. Contrary to what this shifting German opinion seems to imply, and contrary to what most politicians and pundits brazenly declare, the whole struggle being waged with Greece at its center pivots around the question of legitimacy and its sources. For, just as the political conflict over austerity is increasing, the global markets' demand for a new government in Greece cuts two ways. It involves a heightened need for legitimacy so that the state can insure global capital. At the same time, as the people of Greece are faced with declining incomes and the possibility of catastrophic economic collapse, the markets' need for a new government undercuts the legitimacy of, and to an as-of-yet-unknown extent the capacity of, the political actors willing to offer that insurance.

To see this as merely a trade-off between efficiency and legitimacy would be a huge mistake. Efficiency in all its modes is a process embedded in the social relationships. It, too, is contingent upon the legitimacy that allows social resources to be directed towards one end or another. Admittedly, the option here is not between austerity and growth, but between visions and versions of austerity. One is held by the corrupt and dishonored old guard of Greek politics -- New Democracy and Pasok. The other is being advanced by Tsipras and Syriza. For the people of Greece this is the difference between hope and despair.

Two facts control this entire scene: One is that markets cannot survive without states, the other is that capitalists and democrats will not always see eye to eye. It is at this crossroad that all the barbarians' demand for a new government collide with Greece's own need to govern itself.

When Papandreou's referendum was first announced in November, it was his intention to ask nothing more than this: "Do we want to adopt the new agreement? Or do we want to reject it?" Of course, he had his own reasons for putting it this way. In that strange winter it was easy to read this just one way: Greeks must decide to stay or go. Perhaps that is why it failed to come before the people. Perhaps that is why, when on May 6 the election was played out in a way that minimized the literal and more important question -- "Do you want to adopt the new agreement?" -- it failed again.

On May 6, New Democracy and Pasok foundered on their years of insult to legitimate government and Syriza sailed passed the capsized vessels of the traditional political elites. Before that, it was almost impossible to see that the issue confronting Europe today, the issue that continues to pester Europe because it is a condition for the survival of Europe, is not whether Greece should stay or go but a new struggle over the terms of agreements for mutual aid inside the union.

Alexis Tsipras was the first to state correctly this dilemma. This is what faces Greece today and it points towards the future of Europe. It was that insight that brought him forward in the first round of elections. That is how he has defined the stakes for June 17. That is why he is now gaining in the polls.

It has been said that Angela Merkel the austeritite created Tsipras. What we are seeing now is the chicken become the egg. To win in this critical moment Merkel has been compelled to follow the lead of her ardent adversary. Her strategy is to secure new legitimacy for the austerity package through intimidation. The first step in that direction is to strip the upcoming election of its broader significance. To do this, she has attempted to adopt the word referendum to her own purposes. By this she hopes to garner the residual authority of Papandreou's earlier proposition. As a consequence, she would have his referendum be remembered as what her referendum proposes: nothing more than an either/or decision on membership in the Euro.

No matter what Merkel does, however, it is the democratic election that is the true referendum. Only the election will provide, if anything can, a supportable mandate from which to go forward. It is still -- indeed, all the more -- the election that connects everyone to the dilemma actually facing the country. The leading edge of that dilemma is, on its face, and in the spirit of European loyalty, whether or not to renegotiate the "memorandum."

For, however this works out for Greece, revisiting the "memorandum" will entail nothing less than a renegotiation of what Europe -- all seventeen members and the spirit that joins them -- must mean if it is to survive. To this point, only Tsipras has had the courage to call a spade a spade, and to offer for serious debate in the expanded European agora a path between capitulation and collective suicide.