Sat | May 27, 2017

John Rapley: Greek tragedy nears climax

Published:Wednesday | July 8, 2015 | 7:00 AM

Sure, Greece was a disaster waiting to happen. However, as I've been saying for a while now, it's also a harbinger for what lies ahead for the Western world.

Think of money as a promise, or a claim. That banknote in your pocket entitles you to someone else's labour. You're in credit when somebody owes you work, and in debt when you owe them work. The power of government lies in its command over our labour. Governments can, as they have throughout history, make us work for free in order to provide collective goods, which we call tax.

Long ago, governments would tax their subjects directly, making them build roads in the village, work on the lord's farm, or fight for the king. Early on, though, governments realised that if they minted currency, they could control the private economic activities of their subjects by demanding they pay their taxes in government coins - what came to be known as legal tender.

As humans moved ever more deeply into the money economy, the government's bank, what we today call the central bank, issued the currency in which they all wanted to trade. This gave government both a carrot and a stick. It could make us pay our taxes by sending its bullies to shake us down, and it could control our lives by monopolising the one commodity we all sought - its money.

tax contract's evolution

Thus, you can see the history of government as a record of this tax contract's evolution. Over time, subjects evolved into citizens and demanded more say in how their labour was to be used. "No taxation without representation," cried early democrats, as they prodded government increasingly to serve them and not itself.

But as I noted in a column last week, in recent decades, governments in Western countries became so responsive to their citizens, they began committing not only present but future labour to public service. When, for instance, a government promises someone a pension, what it's really saying is that it will make someone not yet born look after you when you stop working.

Of course, nobody puts it this way. Because we operate in a money economy, we say we are stashing wealth for future use. But in effect, what you are doing is taking pay worth less than what you have produced in return for some of those promissory notes which, when someone else wants to get hold of them, they will later work for. But what happens when someone else doesn't want to do the work? Worse, what happens when they don't even want your money?

For decades, Greek governments had been running up debts to support some citizens - powerful businesses, public-sector workers with political ties, pensioners - in a lifestyle their own labour could never support. Instead, they planned to simply pass the bill on to future generations. But sooner or later, when that generation was born, the odds were it would say, "Pay it yourself".

misleading portrayal

On Sunday, Greeks voted in a referendum to reject the terms attached to continued European financial support for their now-insolvent government. The vote's divisions obscure complex fissures in Greek sentiment. Most 'no' voters want to stay in the European Union, and many 'yes' voters repudiate the way their continental partners have treated Greece. So to portray this as a vote to leave the eurozone is misleading.

Nevertheless, the depth of rejection reveals that a significant, and growing, share of the Greek population is prepared to take the risk of a stumble to Grexit. And it appears that this was largely because of the vote of young Greeks, who have suffered the most from five years of austerity. When other European governments told them they could lose the euro and their jobs, they replied, we already have neither. If need be, they'll take their chances in a new economy.

Greek voters who have been loaded with obligations to which they never consented and from which they may never benefit are essentially saying, "You can have your money." The eurozone and the global financial system never imagined anyone would say that. They are just waking up to how seismic this tremor could be, were it to continue rippling through the global system.

- John Rapley is a writer and academic based in London, and author of The Money Cult (Simon and Schuster, 2016). A long-time Gleaner correspondent, you can follow him on twitter @jarapley and at https://brixtonsubversity.wordpress.com/. Email feedback to columns@gleanerjm.com.