Austerity has failed in Europe - but there is a bright side

The negative effects and misguided logic of austerity have been discussed in depth, and continue to be evident in the continued stagnation and volatility plaguing Spain, Greece, Italy and France. Yet the collapse of these countries’ welfare systems and public scepticism towards governments more responsive to Brussels than the general will have resulted in a proliferation of grassroots movements that touch interestingly upon the RSA’s own work on public services & communities and the Power to Create.

It is almost a truism nowadays to say that austerity has been a failure in the crisis stricken countries where it has been most vigorously applied, most of all in the Southern European states Spain and Greece. Anaemic growth, high unemployment, falling wages and a lack of investment have been treated with the standard Troika administered medicine of dramatic cuts in government spending and the dismantlement of essential public services.

Such programs, while supposedly necessary in order to pacify investor angst and hold the Euro together, have starved economies lacking in private sector dynamism of the public investment that could get such forces flowing again, and they have compounded the suffering of those who in an environment of 25% adult and 50% youth unemployment are more dependent on state services than ever. Even worse, the programs have failed to decrease governments’ debt to GDP ratios, in some cases even worsening them, as a recent McKinsey study on global debt concluded.

In the case of Greece, widespread joblessness and a collapse of spending power caused by severe economic contraction have left many unable to cover basic expenses such as food, electricity, heating, and rent/mortgage payments. The austerity ravaged welfare system (healthcare, pensions, unemployment and disability benefits), which would have had difficulty meeting such a spike in demand in any case, has proved unable to cope, leading to what has been described as a ‘humanitarian crisis’ in Greece. There have widely reported cases of people suffocating while trying to heat their apartments themselves, suicide rates have jumped, while the loss for many of access to healthcare has resulted in soaring infant mortality, HIV infections, and even the return of malaria.

While these developments are shocking, it is possible to take positives from the situation while still acknowledging the terrible human cost of austerity. These positives are the emergence, documented in depth by this article in the Guardian, of an informal ‘solidarity movement’ in Greece, where over 400 ‘citizen-run health clinics, food centres, kitchens and legal aid hubs have sprung up to fill the gaps left by austerity’. In healthcare, with over 33% of the population lacking insurance, civil society has rallied to meet these needs: 40 clinics have sprung up since 2011. Relying on donated supplies, and run by volunteer medical professionals, they have helped large numbers of people make it through the worst: the 16 clinics in the Greater Athens area alone treat over 30,000 patients per month.

The growing ranks of the cash-strapped and hungry are being fed by ventures like ‘cooperative social groceries’, collective food donations and local ‘without middlemen’ markets (over 30 in Athens), where ‘farmers sell their produce for 25% more than they would get from the supermarkets and consumers pay 25% less’. Greece has also seen a spike in home repossessions and evictions of residents unable to keep up with their mortgage payments and tax bills. In response, groups of lawyers have banded together to form informal hubs that offer free legal advice to those who need it. While these cooperative, informal, citizen-led services have only come about because of the dissolution of the public sector, they highlight an intrinsic human capacity to recognise urgent social needs and come up with creative and efficient ways of addressing them.

While Spain has faced different challenges – the crisis there was caused by a private sector driven speculation bubble, rather than a fiscally irresponsible government – the human consequences of austerity have been similar. A major symbol of the crisis’ devastation of Spanish society is the spate of evictions of struggling owners and tenants, in some cases leading to suicide, in which owners are forced to continue paying their loans even after repossession (due to draconian Spanish laws). This has triggered the emergence of several protest and civil society movements, most notably Plataforma de Afectados por la Hipoteca (Mortgage Victims’ Platform in English), which has gained mass societal support through its civil disobedience activities and assistance of eviction victims.

More constructively, grassroots forms of political and economic organisation have flourished in Spain in recent years that highlight the resilience of local communities and their ability to develop and implement new ideas when presented with an opportunity to do so. Time banks, a form of barter exchange where people swap their time and effort for the services of others, have doubled in number in the past two years and have helped keep Spain’s unemployed both occupied and (reasonably well) supplied. These organisations operate similarly to regular banks, with accounts and IOUs, but credit people with time rather than money. And unlike more traditional financial institutions, these ventures are bottom up affairs, started by locals in cities both big and small, which aim to re-empower those disempowered by their rejection from the formal economy and help them regain their material and psychological dignity.

These bottom up, spontaneous economic structures are mirrored on the political front in the rise of the ‘15M’ or ‘Indignados’ movement, Spain’s furious public response to austerity, and in its more organised successor, the Podemos (Yes We Can) party. In Spain, Greece, and other crisis hit countries such as Portugal (and even here in the UK), public sentiment has turned against what it sees as the ‘establishment’, represented by the mainstream political parties on both the left and the right (whose policies are in practice not so different from each other). It is widely felt that these traditional political actors no longer represent the interests of the public in any meaningful way, but rather those of their powerful benefactors, be they supranational (the EU) or multinational (international capital).

15M arose as a protest against the austerity policies discussed above, but its uniqueness came from its strategy of assembling ad hoc citizen coalitions to challenge specific government actions, such as foreclosures and evictions, and the use of social media platforms as part of a highly networked approach (think Occupy, Arab Spring). The legacy of 15M is Podemos, who similarly rely on a nationwide network of ‘circles’ that hold debates and send delegates to Podemos national assemblies; the party’s funding is largely crowdsourced, and its policies and priorities are partly shaped through online voting. The party have become a major political force in record time, topping Spanish popularity polls and winning an impressive five seats in European elections, but it is yet to be seen whether they can maintain such a high level of direct participation if they get hold of formal political power. 

Here at the RSA, much of our research involves studying how to deliver essential public services to communities and individuals in ways that give them a greater voice and stake in determining what they receive. Instead of a centralised distribution apparatus managed by distant technocrats, we prefer putting power in the hands of service users by giving local governments and councils the capacity to shape tailor made responses to local needs and by connecting them more closely with their citizens.

The rise of the ‘solidarity’ economy in Greece and of grassroots political and economic structures in Spain, while the result of misguided economic policies, show how capable ‘regular’ people are of coming up with innovative social ideas, forming effective networks, and collaborating with each other to ensure that local needs are addressed outside of centralised, hierarchical bureaucracies. Our own work on connected communities and social networks focuses on mapping out the informal networks that link and support people, in order to understand their effects on wellbeing and the potential of local projects to harness their potential.

This widespread desire for greater participation is echoed in the words of an influential member of the Greek solidarity movement, Christos Giovanopoulos, who suggests that:

‘It is fostering a different sense of what politics should be – a politics from the bottom up, that starts with real people’s needs. It’s a practical critique of the empty, top-down, representational politics our traditional parties practise. It’s kind of a whole new model, actually. And it’s working.’

The empowerment of ordinary individuals in their relationship to public services, welfare, and democratic deliberation relates to a broader theme that is key to all of the RSA’s work – that of the ‘Power to Create’, in other words the ability to turn one’s ideas and aspirations into reality. This creative power clearly underlies all of the grassroots initiatives discussed in this post, all of which are the spontaneous initiatives of citizens recognising a gap needing to be filled – whether this be the ‘comuns’ virtual currency and time bank started by a British carpenter in Malaga, the ‘without middlemen’ markets and groceries run by an unemployed Athens architect, or the local assemblies and circles founded by Spanish activists tired of the unresponsiveness of their government and eager to pioneer new forms of political organisation.

Yet while there are undoubtedly positive lessons to be learned from the rise of citizen-led social initiatives, this should not hide the fact that they are the product of extremely dire circumstances. At the same time, although sadistic austerity has shown itself to be a blunder, the world’s developed economies are not going to be able to maintain the spending patterns of the post-war era: disadvantageous demographic trends, technological slowdown and meagre economic growth prospects mean that governments are going to have to be wiser about how they use their finances and why.

This does not call for the total dismantlement of the public sector and the welfare system as recommended by austerity hawks, but it does mean that central governments everywhere should pay more attention to the evidence that approaches to public service provision that are cooperative, local and inclusive are better for well-being, more efficient and cheaper.

This means that government should focus on gradually nourishing and liberating the creative potential of citizens via devolution, while continuing to provide the support, structures, resources and know-how that remain essential to their wellbeing and success. Establishing a balance between efficient restructuring and cost-cutting one the one hand, and avoiding punishing those most vulnerable in society on the other, is by no means an easy task, as the UK example of the recent spike in the use of food banks due to benefit sanctioning painfully illustrates.