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The Debt Slavery Must End to Prevent Environmental Catastrophes: Will Greece Kick Start a Paradigm Shift?

Why does every government need to pursue economic growth, at any cost and with no end in sight? The answer to that question hits at the root of both our economic and planetary woes. (Photo: Ewan Bellamy/flickr/cc)

Greeks are used to making history, and they are at it again. What does the recent rise of Syriza, with the appointment of the financial minister Yanis Varoufakis, mean for global environmental change?

A not-so-subtle fil rouge, contingent upon both resource consumption and waste production, exists between economic and ecological debts. Society, blinded by the paradigm of growth, has long lost this connection. This may be the time when a wider public can reconnect the dots.

Global environmental change is not only about climate change — currently a dead-end debate. A well-known study on planetary boundaries from the Stockholm Resilience Centre, which aimed to delineate a safe operating space for human societies, has clearly pointed out that human economies have led human societies to cross several other critical environmental thresholds: for example biodiversity loss and nitrogen pollution. Others, fast approaching, include:

1. Ocean acidification;
2. Land conversion to cropland;
3. Water consumption;
4. Phosphorus pollution.

If dimensions like ozone depletion, thanks to a working international environmental treaty, are under control, others are not yet fully quantified, and do not look good. This is the case of the concentration of aerosols in the atmosphere and of toxic substances (like plastic) in the environment. Any of these boundaries, once crossed, implies abrupt changes in Earth-system processes, changes that could put at risk our civilization as we know it.

Why are human economies crossing these boundaries? In a nutshell, economies need to consume environmental resources to grow. Even though some neoliberal economic research is attempting to prove that growth can be decoupled, through innovation, from natural resource consumption, nobody has proved it with empirical data. The reason is simple: because they can’t. As Joseph Stiglitz famously said, “the invisible hand simply doesn’t exist”; I shall add that if it existed, it would give us the middle finger. We have to face that “green growth” is another fancy buzzword, coined to perpetuate the neoliberal agenda.

Our technology is, indeed, improving in efficiency and thus reducing some key natural resources consumption per single item. However, we are also increasing our absolute consumption. The reasons include:

1. the Jevons’ paradox (increased efficiency accelerates economic growth, further increasing the demand for resources);
2. market-manipulated needs (including "lifestyle" demands and the need to keep track of latest novelties);
3. programmed obsolescence;
4. population growth.

Why does every government need to pursue economic growth, at any cost and with no end in sight? Even in countries where steady state is clearly physiological, strategies were devised to keep the dictatorship of growth alive. For example, European countries like Italy, Spain and UK recently included prostitution and illegal drugs in their national accounts for the first time, in order to meet “international standards” of measuring economic performance. Some might argue they have taken projects like “beyond GDP” too literally.

There reasons why all countries are under the dictatorship of growth are various, but two stand out, and they both relate to public expense. Firstly, growth is a substitute for equality of income. As long as a country’s economy is growing, there is hope for wealth climbing and no need for a fair distribution of resources. Public expense doesn’t need to be high because public services can be supplied by the private sector and high levels of inequality are tolerated by the population. Secondly, growth makes sovereign debt sustainable. As long as a country’s economy is growing, that country shows that it can pay back its creditors. So a country with a strong welfare state, which needs to borrow money to keep the public services functioning, is obliged to keep growing; otherwise the public expenses need to be cut - or it could become a debt slave.

How is debt slavery created? Here is a simplified storyline. First, an economy starts growing too slow. This will eventually happen to any economy according to the laws of thermodynamics, but fluctuations happen due to unpredictable economic or geopolitical factors. At that point the amount of debt the national economy is in, and who owns it, become crucial. If debt is very high compared to the national balance, and mainly owned by international players, the situation gets dangerous: debt, initially created to finance a welfare state, becomes an unbearable burden. Organizations like World Bank (WB) and International Monetary Fund (IMF) start to point fingers at inefficiencies, corruption and unnecessary expenses of government. I’m not saying that corruption does not exist, or that efficiency of public expense should not be improved. I’m saying that this argument is the hook for debt slavery.

At that point a government can play the card of devaluation by injecting money in the market at the cost of inflation, but most probably it will be forced to dismantle the welfare state and sell its pieces to the private sector. Then the financial market, led by globalized investment banks, whose aim is the quest for skyrocketing interest rates, jump on the prey. Now the sovereign debt has a very bad outlook, interest rates have considerably increased and the country’s debt is even more expensive than before. In no event the government can calm down the creditors, because they know that it would be impossible to pay back all the debt, even by selling all public assets. The country is at the mercy of international creditors, fully debt-enslaved. In such a situation any government would sign any agreement with the international financial institutions just to survive.

This short tale may sound familiar to most readers in their fifties. Ask Bruce Cockburn why he wrote this song during the eighties. In those times there were still social movements asking for the debt cancellation of the African countries. Nowadays while western creditors have not yet given up on Africa, most of the continent is basically "land-grabbed" by China.

The novelty is the change of the latitude in the battle field. The European PIGS countries have all been under this sort of financial pressures from the 2008 economic crisis, but Greece is the real guinea pig of the Troika. This Cerberus includes the European Central Bank, an organization acting beyond its political mandate to which most of the EU member states have prematurely surrendered their monetary sovereignty for the sake of creating a stronger Union - a Union of people. Prevented from any possible monetary expansion, the welfare state based economy of Greece and the Greek people have been tested to their limits; under the Samaras government, Greece had to sign a white check to the Troika. The consequences are well known, and include the rise of radical right and left parties. To different extents this has been happening in most of the southern European countries. The resulting parties incarnate the bottom-up expansion of a movement of self-protection of the southern European people, especially from the disappearing middle classes.

At the beginning of 2015 the left wing party Syriza won the Greek election under the mandate of renegotiating the sovereign debt. Similar instances are growing in Spain (Podemos) and Italy (Five Star Movement). Surprising many, the Greek Prime Minister Akexis Tsipras appointed a well-prepared Minister of Finance, Yanis Varoufakis, to implement the economic plan the party ran with. One of his first proposals – swapping the debt held by its euro-zone creditors for bonds with payments linked to economic growth – can be the first move for cracking the debt-enslaving mechanism. Although most neoliberal economic analysts will not agree, if the Greeks continue standing boldly as they are doing, this option could become the only viable way to avoid breaking the European (monetary) Union. This is a cost that nobody – and especially the ECB, as shown by Mario Draghi’s latest actions – is willing to pay. Furthermore, many mainstream economists – such as the eighteen who recently wrote a letter to the Financial Times – are likely to accept the idea, on the basis that it could supply a powerful incentive to pursue pro-growth policies.

On the contrary, any scientist who has understood the work of Nicholas Georgescu-Roegen (at least) knows very well that growth is not anymore the mean through prosperity. Growth is actually responsible for the global environmental change that we are experiencing; the only way to stop it is to escape from the labyrinth of debt. The "Greek job" is truly an elegant way to unveil this perverse mechanism. There is a chance – a small one – that a new Trojan horse will succeed in scratching the surface of a (neoliberal) wall built on the dictatorship of debt, the speculations of financial markets on the nations, the pursuit of growth at all costs and the indiscriminate consumption of natural resources.

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Stefano Balbi

Stefano Balbi, Ph.D. is a Post Doctoral Researcher at the Basque Centre for Climate Change (BC3) in Bilbao, Spain.

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