Wednesday, 15 July 2015

The Crisis in Greece - Part II

As the Greek parliament nears its vote, we should all be well aware of how painful, in the short term, an exit from the Eurozone would be for the Greek people - should all be ready, if they decide to leave, to support the provision of the humanitarian aid which will be much needed. An exit would in all likelihood - again, in the short term - be even more painful than the results of accepting this third bailout. Were Greece to leave, a recovery in the medium-to-long-term - through a restoration of currency sovereignty, devaluation, a return to competitiveness, progress on the trade deficit, and eventually a recovery of the means to pursue productive investment and put the country back into a virtuous circle of economic development - is a very tall order, and by no means certain. But it seems very difficult, to me, to justify the position that the short-term pain and the burden of this uncertainty outweighs (a) the almost as painful experience of continuing in the Eurozone given the refusal of the German government to countenance serious debt write-offs and, much more fundamentally, to recognize the absolute need for a European surplus-recycling mechanism (see Varoufakis' fine book for much more on this point); and (b) the practical certainty that Greece's economy will never recover under these conditions, and that its debt level will not budge.

This is why the current vote is such an extraordinary circumstance, calling for such extraordinary courage. The thing that politicians are worst at is accepting short term pain for an uncertain chance at long term gain. This is precisely why the German government wanted to, and was able to, make the terms of this bailout so pointlessly destructive. From Germany's point of view, it hardly matters what Greece decides to do - Greece doesn't really matter to Germany at all. If the Greeks decide to stay tonight, they'll be forced out soon enough - in a year, 3 years, 5 years - because there is no chance for recovery under these terms. But the next time around, the Germans will be able to say the Greeks squandered yet another chance, and face less opposition, expend less political capital, in cutting them loose. If the Greeks leave, Germany has made sure it has nothing to fear even from a spectacular Greek recovery in the long term, precisely because, going all the way back to 2010, it has been engineering a situation in which a Greek exit would be maximally painful in the short term. To repeat: choosing short-term pain for long-term gain is the thing that politicians are worst at. Even if a non-Eurozone Greece is doing splendidly in 30 years, and Italy, Spain, Ireland and Portugal are still struggling, the torment which would immediately follow a Eurozone exit would still be seared into peoples' memories. The odds of losing a country with a large economy, the odds of a lose which could actually disrupt German economic hegemony in Europe, will still be quite low.

My hope for the Greek people is that their government has the courage to take this chance, that the rest of the world has the compassion to come to their aid, and that the rest of Europe wakes up to its need to begin correcting the fundamental design flaws in the currency union, however much capital may be opposed to those reforms.

Monday, 13 July 2015

The Crisis in Greece - Part I

What's so great about this piece is that it hints at both of the fundamental lessons the world should be learning right now. But both need to be made more explicit.

The first, which may never before have been taught on such a scale or with such clarity, is that contemporary orthodox economics is indeed a form of brain damage. The answer of the "experts", the "technocrats", the "serious men", is that the way to jump start the Greek economy is through a more intense version of the policies which Greece has, rigorously, implemented over the past several years, policies which have, undeniably, led to a major contraction of the Greek economy with no hope of a way out. Economics in the neo-classical tradition is the single greatest intellectual failure of the past 150 years. The entire discipline needs an urgent and dramatic overhaul.

The second, more important lesson, is that the German conservatives, the ones who are actually running the show, don't believe the "expert" judgment - they are engaged in an exercise of domination, something which now seems to be clear to all but the brain-damaged economists. Germany has become, under Merkel, another Neo-liberal State. This is not an ideology that believes in the virtues of the market place. It is an ideology that believes in promoting the interests of capital and subtly undermining (if possible) or openly crushing (if necessary) what threatens those interests. That is the story of the 2010-2012 bailout, which is what got us here - the fact that an orderly default, which was clearly the best (as well as the right) option, in addition to being what was demanded by the logic of an open and competitive marketplace, could not be seriously countenanced, because it was not in the interests of capital.

Why are people calling this a coup?

Because the European institutions have demanded an unprecedented surrender of fiscal sovereignty.

Because the European institutions want to approve "relevant draft legislation" for Greece before it appears in front of the Greek parliament.

Because the European institutions are giving the Greek parliament 48 hours to debate, deliberate over, and vote on this.

Having saved the creditors, the time has come to ensure that they aren't threatened again - to squeeze Greece, humiliate Greece, possibly destroy Greece, so that Portugal, Italy, Ireland and Spain don't get any ideas about someday refusing a 2012-style bail-out and upsetting the bond markets.

It is telling just how stupid and infantile one has to be to try to dodge all this. See, for a sterling example, here. Notice the complete lack of engagement with any of the three ways in which Europe is openly working to subvert Greek democracy. Notice the strawman which the argument has to center on, the absurd pretense that those worrying about the current place of democratic governance in the Eurozone are actually claiming that what democracy requires is that all of Europe go along with the recent Greek plebiscite. Finally, notice that, in the penultimate paragraph, the entire piece turns out to be nothing more than an attempt to make the utterly hopeless argument which, in the second paragraph, we are promised is not being made. But most importantly, notice the admonitions to "grow up" and "join the real world". This is the language of silencing legitimate dissent. This is the language of the very worst of the "serious men" - the ones who knowingly clothe a brute struggle for power in the shroud of an economic theory that only the brain-damaged believe, but which is too obscure for the average citizen to see through.

Don't listen to them anymore. The German government destroyed the idea of Europe this morning. The EU isn't worth saving at this price. The Greek parliament should vote this down and leave. Portugal should leave. Ireland should leave. Italy should leave. Spain should leave. Let Germany lose it's captive European market, let it's currency appreciate, let those two pillars of the German economy fall away while Southern Europe restores it's international competitiveness, and then let's see what happens to all this rhetoric of hard work and responsibility, let's see what happens to Merkel and Schaeuble.