Capitalism's rolling crisis

After a protracted high-wire act by Europe's Central Bank, the European Union and international markets, Greece has been granted a second major financial bailout to avoid an otherwise certain default on its sovereign debt. Default would have brought Greece itself to a halt economically, as the government would have lacked the revenues and credit to meet current expenses.

Not all of Greece's European Union partners viewed this prospect with unalloyed concern, given the widespread feeling that Greece had brought its problems on itself. But those problems are similar to those faced by a host of other countries that rode the credit bubble of the last two decades, from Cyprus to New Zealand— and the U.S., which is protected from similar wrath by the bond markets largely due to its status as the world's too-big-to-fail economy.

Thanks to the rapid-fire stock transactions, murky financial packages and phony accounting in which much of the world's debt has become entangled, even a modest national default holds the potential for a ripple effect that could endanger the world's ramshackle credit system. Europe chose not to take that gamble, at least for now.

Another Greek diaspora

This is no good deal for Greece (where I'm spending my summer). Some of its credit payments have been temporarily suspended, and some have been stretched out to as long as 40 years. But Greece must still repay its creditors every euro it owes.

This means that the country will be beholden to its debt till mid-century at least. It means that Greece will still have to accept an austerity package that will make repayment vastly more difficult, more painful and more socially inequitable. It means that the best of Greece's youth will head abroad in a second diaspora that will starve the country of its best and brightest for the foreseeable future.

Greece will become again a charity case, dependent on cash contributions from Greeks who've gone abroad to make their fortunes. Greece lived off such transfer payments before; my Greek-born wife Lili Bita, an author and actress, is one example of an emigrant who made them. This isn't what membership in the European Union was supposed to mean.

What's at stake is not merely economic independence, but political independence as well. Over the past few decades dozens of developing countries have been effectively forced to surrender their sovereignty to virtually unaccountable transnational emporiums like the World Bank and the International Monetary Fund. Greece is now the first Western country to have received the same treatment, in this case at the hands of European banks. Other European Union members may soon find themselves in thrall to banks as well. That precedent, at least, has now been established.

Lesson not learned

The current world financial crisis that began in 2007 holds a lesson not only for small and vulnerable nations but also for the entire world state system. Not only did government stimulus spending fall far short of what was needed to rekindle America's economy, but the same policy was followed even more stringently in Europe as well. The reason for this hesitance was the specter of government deficits, which suddenly took priority over poverty, unemployment, mass foreclosure and everything else.

Much of the so-called stimulus under Bush and Obama was in fact a recapitalization of America's banks. In the shakedown moment of September 2008, the world's most powerful banking and insurance institutions—Citigroup, Goldman Sachs, American International Group—stood on the brink of collapse, masters turned beggars. They came to the state for help, hat in hand. But their very weakness was their strength. They had entwined themselves around the world's vital organs of growth. They couldn't be cut out like a cancer. They demanded to be fed. And they have subsequently sat on the public moneys that were given them.

1931 all over again

In the aftermath of the crisis, many proposals were floated for breaking up too-big-to-fail banks, reinstituting the barriers between commercial and investment banking, and re-regulating the financial order. These ideas were sound and important (even if they didn't address the deeper problems of the worldwide metastasis of finance capital).

They failed without exception— or, where token legislation was permitted, were watered down beyond recognition. The system remained unchanged, and, even as the world economy struggled to recover from the banks' latest binge, the framework for the next crisis was being set.

Much of this litany could have been recited in 1931, when a severe depression was turned into a worldwide crash as banks called the tune and national governments danced over the cliff. But today's global economy is far larger and more integrated than it was then, and its workings if anything even less transparent.

Greece is in some ways the bellwether victim of the current crisis. It is not likely to be the last.