What if Greece were in the 'Third World'?

What if Greece were in the 'Third World'?
Comment: It is only because the crisis-hit nation is an EU member that it is being given a choice in the imposition of the neo-liberal economic agenda, says Vijay Prashad.
4 min read
01 Jul, 2015
Greece is the word: The country's economy is facing ruin [Getty]

If Greece were in what was known, rightly or wrongly, as "the Third World" during the 1980s, officials from the International Monetary Fund would fly silently into Athens, meet the finance minister and head of government and deliver an ultimatum.

It would be a simple choice. Either the country agreed to cut its budgetary spending for social services and economic subsidies, thereby freeing up money to pay its external creditors, or else it would be shunned by the financial world.

The budget cuts demanded would not merely affect a year's expenditure. They would be designed to structurally transform the relationship of the state with its people.

That is why the IMF call this the Structural Adjustment Programme.

No choice

No 1980s "Third World state" could call for a referendum so as to ascertain the will of the people. The demands came in the dark of night. The deadline to accept the deal was hours - not days or weeks.

Lines of credit began to dry up. Ratings agencies lined up to downgrade the state. Aircraft carriers powered along the coastline. Heads of government hastily signed the dotted line. The signatures seemed wobbly, the paper damp with sweat. There was no real choice.

At a 1983 summit of the Non-Aligned Movement - nations not officially allied with any of the world's major power blocs - Cuba's Fidel Castro urged the indebted states of the Global South to go on a planetary debt strike.

     The larder of Northern arrogance always has within it a cupboard full of stale racist ideas.

No country of the Third World should pay the Northern bankers and do secret deals with the IMF, he said.

He had few allies in the room. They had been exhausted by the struggle to create a more oxygenated world order. Castro received a standing ovation. His proposal was ignored.

Dominating the narrative

Why was the Third World in debt? Was it because of profligate spending? That was the racist narrative that came from the North. It is a similar argument made about Greece. The larder of Northern arrogance always has within it a cupboard full of stale racist ideas.

The real reason for the debt was elsewhere.

The newly post-colonial states had little choice, since the 1950s, than to use the dollar for international trade. The dollar became the central inter-state trading currency.

Such states were rich in raw materials and human labour but depleted of capital. So they borrowed from commercial banks (in dollars) and received aid to build up their capital reserves in order to harness their raw materials and human labour.

"Development" experts urged these countries to export their raw materials as the basis for growth and to disregard calls for diversification and industrialisation.

It meant that the countries of the Third World were reliant upon the dollar and had to import expensive capital and consumer goods from the North. The "terms of trade" penalised the Third World.

When the US Federal Reserve hiked up its interest rates in the Volcker Shock of 1979, it threw a spanner into the short-term finances of the Third World states.

It was that monetary decision that brought on the debt crisis. The Third World states continue to pay for the "development" architecture of the 1950s, dollar hegemony and the Volcker Shock. Northern banks, like vultures, feasted on the carcass of the Southern states. It is what we call neo-liberalism.

Greece is the latest victim of predatory neo-liberalism.

     Northern banks, like vultures, feasted on the carcass of the Southern states. It is what we call neo-liberalism.

Economic violence

Only because it is part of the Eurozone is there a major concern for its political decisions. Greece's population is a mere ten million - the same size as Haiti or the Dominican Republic.

The economic plundering of Haiti and the DR are comparable to the kind of economic violence visited upon Greece. Egypt, with its 89 million people, was victim as well to the IMF. The role of the IMF in cutting the Arab Spring to its knees in Egypt is a history yet to be written.

The Global South, which well knows the vulturine behaviour of the Northern bankers and their policy experts, should stand in solidarity with the Greek people.

What they do in their referendum is their business. But what they are going through is not dissimilar to the Great Debt Crisis of the 1980s, which flushed the dreams of the Third World deep into the sewers of history.

Vijay Prashad is a columnist at Frontline and a Senior Research Fellow at AUB's Issam Fares Institute of Public Policy and International Affairs. His latest book is The Poorer Nations: A Possible History of the Global South (Verso, 2014 paperback).

Opinions expressed in this article remain those of the author and do not necessarily represent those of al-Araby al-Jadeed, its editorial board or staff.