Against the Troika: Crisis and Austerity in the Eurozone, by Heiner Flassbeck and Costas Lapavitsas

Keynesian economics is back, as this digital book published the day after Syriza’s epochal victory in Greece attests. Heiner Flassbeck, former vice-minister of finance in Germany, and Costas Lapavitsas, professor of economics at Soas, University of London and a newly elected Syriza MP, analyse the current eurozone crisis by focusing on Germany and Greece. Neoliberal economics has got it all wrong, they argue, vehemently contesting the notion that Greece and the other countries of the eurozone periphery are the sick men of Europe. It is Germany that is predominantly responsible for the crisis, having caused acute imbalances within the eurozone by persistently suppressing domestic demand and accumulating unhealthy surpluses, they contend. Hence, if the monetary union is to survive, the solution is to persuade Germany to change its current economic recipe, rather than continuing to put pressure on the weakest member states to follow strict austerity policies. If this does not happen, countries such as Greece will be better off leaving the euro, and regaining their economic independence.

This highly readable work proposes an alternative to the neoliberal orthodoxy that has dominated economic debate in recent years, and its major contribution lies in its power to make us reconsider some of the most common assumptions about the causes of the current eurozone crisis and ways to overcome it. A fresh and imaginative look at the crisis, it contributes greatly to the relevant debate, and is especially useful in detailing the theoretical foundations of economic programmes advocated by the radical Left parties that have begun to gain strength across Europe, and in particular Syriza.

Lapavitsas has clearly been in a position to know about, and influence, his party’s economic programme. However, despite the fact that there is wide agreement within Syriza about the causes of the eurozone crisis and about the measures needed to take Greece out of economic stagnation, Syriza has not gone so far as to endorse an exit from the eurozone as a possible solution, as the authors make clear here.

Notwithstanding its many well-argued points, I have two major criticisms of Against the Troika. First, the authors assume that, after leaving behind the strict fiscal rules and the monetary straitjacket of the euro, a country would be free to decide its own financial fate. But could a radical Left government, even outside the eurozone, really hope to apply its economic and social policies with a high degree of independence? One has to be sceptical about the likelihood of success anywhere in an increasingly globalised world, let alone in European Union states, with their very high degree of economic interdependence.

The second criticism is perhaps of even greater importance. Flassbeck and Lapavitsas criticise current economic policies in the eurozone, because, among other problems, they suppress growth. But our planet’s looming environmental crisis surely means that a truly sustainable way of living may be the only economically viable alternative for the future. Our societies need to start developing a new economic model even more radical than the one offered here; one that goes beyond an unquestioned insistence on growth and blind adherence to the anthropocentric views of both Keynesian and neoliberal economics.