Neoliberalism is our Frankenstein: Greece and Ukraine are the hot spots of a new war for supremacy

We should be considering the Greece and Ukraine crises together. If only the news media would allow that

Published February 12, 2015 11:59PM (EST)

  (Reuters/Alkis Konstantinidis)
(Reuters/Alkis Konstantinidis)

Europe’s confrontation with Greece, the West’s with Russia as the Ukraine crisis runs nearly out of control: Why is it more useful by the week to think of these together?

They are both very large, moments of history. There is this. They both reach critical moments this week, as if in concert. The outcomes in each case will be consequential for all of us.

As noted with alarm last week, most Americans have by now surrendered to a blitz of propaganda wherein Russia and its leadership are cast as Siberian beasts, accepting as truth tales the National Enquirer would be embarrassed to run. In Europe, Greeks and Spaniards show us up, indeed, as a supine, spiritless people incapable of response or any resistance to the onslaught. There is this, too.

At writing, Yanis Varoufakis, Greece’s imaginative new finance minister, has just made his first formal effort to present European counterparts with new ideas to get foreign debts of €240 billion ($271 billion) off the books and the Greek economy back in motion. These ideas can work. Even creditor institutions acknowledge that Greece cannot pay its debts as they are now structured. But at a session in Brussels Wednesday, the European Union’s arms remained folded.

Also at writing, the Poroshenko government in Ukraine appears to have recommitted to a cease-fire signed last September in Minsk and promptly broken. It is not surprising given Kiev’s very evident desperation on all fronts. But neither would it be if Poroshenko once again reneges. There is a sensible solution on the table now, but these are not people who have so far been given to one.

There is something tragically irrational driving both of these crises. The genesis of each, at least nominally, is the question of whether markets serve society or it is the other way around. Economic conflict, then, has been transformed into humanitarian disasters. This is what Greece and Ukraine have most fundamentally in common.

It is in search of a logical explanation of the illogic at work in these two crises that something else, something larger, emerges to bring them into a coherent whole. Washington has so many wars going now, none declared, one can hardly keep the list current. But the most sustained and havoc-wreaking of them is unreported. This is the war for neoliberal supremacy across the planet. Greece and Ukraine are best viewed as two hot fronts in this war, a sort of World War III none of us ever imagined.

Neoliberalism is our Frankenstein. The thought holds for two reasons. At its core it is profoundly undemocratic, never mind that the English and American variants of democracy are the mulch from which it arises. It is also unrelentingly absolutist: Because it is intimately related to the myth of America’s providential exception, neoliberalism can tolerate no alternative. Were another idea of political economy to flourish it would expose premodern myth as premodern myth.

Yes, O.K., definition. Neoliberalism denotes the revival since the 1970s, plus or minus, of English liberalism as expounded by Locke in the 17th century and numerous others in the 18th—Adam Smith and his “invisible hand,” most famously. John Stuart Mill and Jeremy Bentham, the utilitarian, are notable among 19th century apostles.

Without getting tedious, there are a couple of points that need to be understood about this background. Context is all in this case.

The early English liberals stood for liberty, laissez-faire government and free trade—familiar themes today. But when they argued for the primacy of individuals and their right to autonomous economic activity they argued against divine right, the nobility’s inherited privilege, the collusion of the clerics and all else that comprised the ancien régime. Of course, these are no longer the Western world’s problems.

Point One. The 18th century liberals were pre-industrial. Their idea of the market as an expression of “the Natural Order” assumed artisanal production and the craftsman’s right to make and sell what he made freely. Classical liberalism was hugely progressive in this respect. Modern industry, to say nothing of the grotesque power and profits of modern corporations, did not figure in the thinking.

Point Two. Smith’s invisible hand has got to be one of the most misunderstood ideas in all of economics, for the simple reason most people spouting the famous Scot have never read him. They rely on social cues and Wall Street Journal editorials. Not ever did Smith and other liberals lose sight of the commonweal. The famous hand guided the pre-industrial craftsman to serve the greater community as he prospered as best he could on his own behalf. Bettering the polity was the point.

The Cold War decades, my very favorite period in American history, made a hash of all this, as with so much else. Classical liberalism in its neo phase denotes not thought but belief, ideological conviction. It is the ideology of radical deregulation, radical corporatization, radical privatization—prisons? water? kindergartens? human health?—maximal profit without regard to consequences, and the radical devaluation of any serious consciousness of the communities in which all individuals are suspended.

Reagan and Margaret “There Is No Society” Thatcher, two of the most impoverished minds to hold prominent office in the last century, gave this version of neoliberalism its global ambition. In the triumphalist 1990s, Francis Fukuyama (who still survives in the think tank set, remarkably) gave it a charlatan-scholar’s gloss: Free markets won the long war, there is no further to go in history, what we have is it.

It is very awful to watch neoliberalism spread. I say this for five reasons, if you can bear with me:

• Up close, it is ugly as it disrupts lives, dims expectations and concentrates wealth.

• So far as I have seen it unfold, not least but not only in America, it requires either that democracy is steadily diminished until it remains in form only or an elite variant of democracy is entrenched. In the best outcomes it is Hamiltonian as against Jeffersonian, fair to say.

• Ever-worsening income inequality is baked into the cake, chiefly because neoliberalism perverts ideas intended to take society in the opposite direction. This is why Thomas Piketty’s celebrated “Capital in the Twenty-First Century” comes in for so much argument, all of it flaccid: A scholar ruins the story when he demonstrates that deprivation does not turn out to be good for people at some distant time. Deprivation is what it looks like. The rest is mystification.

• Given all of the above, the neoliberal regime never arrives anywhere new without one or more of these: force, intimidation (the IMF’s function) or exponential increases in corruption. I can think of no exception to this.

• Last, I was astonished many times as a correspondent to see how readily foreign leaders and their finance ministries drank the Anglo-American Kool-Aid. Here I single out Continental Europe as especially disappointing. A long social-democratic tradition notwithstanding, almost all European leaders—and every last technocrat in Brussels—went down like sticks of butter when neoliberals at State, Treasury and in the think tanks launched the post-Berlin Wall campaign.

This is the framework within which I view the crisis over Greece’s debt and the crisis over Ukraine’s political and economic future.

* * *

Greeks are now attempting to negotiate a compromise solution to a seven-year economic and financial crisis that will restore democratic process and relieve them of the need to search for supper in dumpsters. And for weeks EU officials have threatened Athens with expulsion unless Alexis Tsipras, elected last month with the promise of ending the plainly inhumane austerity measures Europe insists upon, relents in his resistance to the EU and the IMF.

Yanis Varoufakis, the finance minister, took on a roomful of unsympathetic counterparts at an emergency meeting in Brussels Wednesday, where he pencil-sketched proposals for a deal that will, under one set of terms or another, stretch out Greece’s debt. We now have to wait until another session next week to get anything approaching definitive, but so far it remains an uphill fight for Athens.

It is preposterous. Greek debt can be efficiently restructured so that losses are minimized and properly shared. This is a European crisis in the final analysis, not Greece’s alone; behind every incautious borrower is an incautious lender. Yet there is no hint of open minds among Europe’s leaders, notably the Germans. What, we have to ask, is this all about?

It is not about a logical way out of the euro-crisis, which is perfectly possible. It is about the neoliberal war against alternative thought and the elevation of the market above all other values, including democratic process and ordinary decency. The commanding generals in this case are headquartered in Brussels, Frankfurt and Berlin.

Among the more rigorous conditions required by the EU and the IMF is the privatization of numerous state-held assets, including airports, rails and the entire port of Piraeus. Naturally (or otherwise), Athens is supposed to divest of the most profitable of these first. Tsipras and Varoufakis refuse. They have already begun dismantling the program.

Consider this for a sec. What is Europe’s obstinate quarrel on this question? Private or public ownership of productive assets is the issue only for the ideologues. Efficiency is the issue, always. There are numerous examples of efficient state-held companies around the world—and as many or more of inefficient private corporations.

Answer to the above, Part A: Europe insists on privatizations because they are written in the catechism. They are for the benefit of multinational corporations eager to bottom-fish underpriced assets, employ Greeks after wage cuts of roughly a third and repatriate revenue.

Part B is this: Greece today is in the same position as Cuba, Arbenz’s Guatemala and any number of other nations during the Cold War. America’s true enemy then and Europe’s now is authentic social democracy—this for the simple reason that it works when it is allowed to.

This is the Tsipras government’s most formidable challenge. Debt, fiscal policy, budget caps: In the end these are the battlefields in a war of politics and ideology as professed in the rest of the EU. Tsipras and Varoufakis are far smarter than most of the people they now negotiate with, but the true nature of the EU’s intent does not auger well for Athens. Optimism of the will, pessimism of the intellect, as Gramsci put it.

* * *

Optimism of any kind has been scarce in the Ukraine case, but suddenly there are grounds for a little, given the second cease-fire pact signed in Minsk after all-night negotiations that ran into Thursday’s early hours.

In my analysis we witness neoliberalism’s arrival on Russia’s doorstep with all three of the above-noted accompaniments—force, intimidation and multiplied corruption. What democratic process Ukrainians once had is all but completely disrupted. American backing for the Poroshenko government is decisive now, and there is no sign Washington intends to swerve from its insistence that Ukraine must be reshaped in the neoliberal mold regardless of the costs.

These costs have been nonsensical for some time, and it may be that Poroshenko has finally concluded that Kiev can no longer afford them. The war is going very badly. Deserters and draft-dodgers are now common. Increasing numbers of Ukrainians have lost all stomach for shooting their countrymen, and an antiwar movement is beginning to develop momentum. There is talk in Kiev, my sources tell me, that martial law may not be far off.

On the economic side, Ukraine is close to tipping over. Arseniy Yatsenyuk, the comprador prime minister, has been eager since late last year to impose the IMF’s neoliberal regime, but the evident danger here is that it will prompt further unrest once the deprivations begin. European officials watching Ukraine closely, my Continental sources tell me, worry that this could provide an opening for the far-right extremists—a bigger force in Kiev than the New York Times ever tells us—to take power.

The summit just ended in Minsk holds promise, although no one is going to the bank with it just yet. Apart from various terms outlining cease-fire arrangements, the agreement includes provision for constitutional reforms by the end of this year to incorporate some measure of decentralization. This could be very big indeed—maybe too big to realize, in the end.

In my read, Poroshenko wanted no part of this and was carrot-and-sticked into signing on. With an economy that barely twitches, he may have concluded he has no more ground to stand on. And in a move that reeks of concert, the IMF instantly announced that it will now let loose the $17.5 billion bailout it structured last year but has since withheld.

In effect, Poroshenko was bullied and bribed in Minsk this week, and this suggests he may not cooperate as a lasting national plan is developed. The Kiev leadership is accomplished when it comes to bribes, OK, but is not otherwise very consistent.

There is one running conversation that could prove more important than the many-sided exchange in Minsk, and this is a second source of worry. What is Secretary of State Kerry telling Poroshenko as to what he can count on by way of support—military, covert ops and otherwise? We cannot know. Depending on what it is, Poroshenko—whose grip on power grows tenuous, please note—will participate or not as a full-dress settlement is developed.

The agony of the Ukraine crisis is that a logical, workable deal lies dead in front of the nation. Russia has been urging a federated Ukraine for more than a year (as has this column). It will keep Ukraine whole and address its internal tensions. The only thing objectionable about the idea has been that Russia likes it.

This has now changed. Chancellor Merkel has advocated a federal solution since last spring. Now French President François Hollande does, too. “Federalization” being unsayable when Ukrainian officials are in the room, the term now is “a high degree of autonomy” for the Russian-speaking regions, or “decentralization,” the word in Minsk this week. At this point it is essential —the only way out, given that the war has so thoroughly worsened the eastern regions’ long-standing animosities toward condescending Kiev.

One problem remains, or so it appears as of now, and it will be interesting to see how it is resolved (or not). A federation will spoil Washington’s neoliberal project in Ukraine. Easterners seem to see straight through Yatsenyuk’s hocus-pocus about the virtues of radical austerity. Again, what will Kerry mumble in Poroshenko’s ear in the next little while?

Final thought: It is common to say Vladimir Putin's intent is to create a permanently destabilized Ukraine. The notion is ridiculous. How much would Washington ever want Mexico to remain in such a state? This is mere word play, with no logic to it. Moscow wants a neutral Ukraine, suspended between East and West, as everything about the nation suggests it should be.

But you cannot stand against neutrality as you can against instability. Not out in the open, in any case.

By Patrick L. Smith

Patrick Smith is Salon’s foreign affairs columnist. A longtime correspondent abroad, chiefly for the International Herald Tribune and The New Yorker, he is also an essayist, critic and editor. His most recent books are “Time No Longer: Americans After the American Century” (Yale, 2013) and Somebody Else’s Century: East and West in a Post-Western World (Pantheon, 2010). Follow him @thefloutist. His web site is

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