Over the weekend, the Greek people voted overwhelmingly to reject austerity and have effectively defaulted on their debt to the European Central Bank (ECB) and the International Monetary Fund (IMF). Under overwhelming pressure from German leader Angela Merkal and the Eurozone, the Greek public issued a defiant warning to the global banking system by refusing to accept the dictates of neoliberalism.
Greece's future is deeply uncertain and the default means no new loans for a country that is truly on the brink of collapse. With unemployment over 50% and a disintegrating banking system, a full scale humanitarian crisis looms. The fact that the Greek public understood this danger and refused to bow to Merkel's pressure is truly astonishing, and provides an important lesson for humanity.
Here are 7 reasons why Greece's rejection of austerity was so important for the world that has been living under the dictates of a vicious capitalistic system:
1. Bullies can be stood up to.
There was much talk of the German government refusing to do business with Alexis Tsipras and Syriza party after caving to their demands. They were effectively undermining a democratically elected government because they did not conform to their hardline economic policies. As Economist Paul Krugman wrote in the NY Times:
We have just witnessed Greece stand up to a truly vile campaign of bullying and intimidation, an attempt to scare the Greek public, not just into accepting creditor demands, but into getting rid of their government. It was a shameful moment in modern European history, and would have set a truly ugly precedent if it had succeeded.
The notion that outside forces can determine a country's political future is a well established norm in European and American culture. The Greeks have proven those days may well be over.
2. Neoliberalism isn't inevitable.
Greek defiance has ripped a hole in the inevitability of neoliberalism. People have been so beaten down by the philosophy that free market capitalism is the only way to run human societies that they believe no alternatives can exists. While the Greeks have not built a viable alternative yet, they have shown it is possible to say no to it. That is a big deal.
3. Democracy reigns
The Greeks proved democracy is more important than the particulars of debt structuring and finance. The public voted 'no' on austerity, and the Greek government will enact their wishes. This is what democracy is supposed to be about.
4. It highlights hypocrisy: Banks got bailed out, Greece didn't.
In 2008, western governments threw trillions of dollars at the global banking system in one of the biggest heists in human history. After wrecking the global economy through extreme greed and corruption, banks were rewarded with lavish bailouts with virtually no strings attached. Greece has certainly been reckless with its spending and financial practices, but nothing in comparison to the havoc wreaked on global financial markets by the likes of JP Morgan and Goldman Sachs. While bankers still got their bonuses, the poor in Greece have literally been thrown onto the streets.
5. Capitalists gets a lesson in what risk actually means.
Jim Edwards of Business Insider said it best:
The vote is huge lesson for conservatives and anyone else who thinks this is about a dilettante government of left-wing idealists who think they can flout the law while staging some kind of Che Guevara-esque dream:
This is what capitalism is really about.
From the beginning, Merkel and the EU have operated from the position that because Greece took on debt, Greece now needs to pay it back. That position assumed — bizarrely, in hindsight — that debt works only one way: If you lend someone money, that money is repaid.
But that is NOT how free markets work.
Debt is not a guarantee of future payments in full. Rather, it is a risk that creditors take, in hopes of maybe being paid tomorrow.
The key word there is "risk."
6. Austerity is anti human
On the chart below, the bottom axis measures how much different governments cut spending and raised taxes after 2010, while the left axis measures how employment rates changed:
There is a reason people hate austerity: it is completely anti human. Germany, the ECB and the IMF are not interested in helping the Greek people - they are looking for a hefty return on their investment and control over the Greek economy. They are demanding mass privatization of the Greek economy not because it works for people, but because it works in the interest of finance.
7. It provides a template for the rest of the world on how to stand up to the powerful
If you want to learn how to stand up to the powerful, the Syriza party has provided a pretty good template. While you may not agree with their policies (or lack thereof), their defiance in the face of overwhelming pressure can inspire others to do the same. Hoping that neoliberalism changes from the inside is like hoping Kim Jong Un wakes up one day and dismantles the Democratic People's Republic of Korea. Gifts do not come from above - they come from grassroots movements, political courage, and acts of defiance. And that is exactly what we have just seen with Greece.