Obviously, my analysis of the Greek debt crisis was wrong. My crucial error was the assumption that, having held the referendum and being faced with an unacceptable offer, Tsipras would choose exit from the euro rather than capitulation. Judging by this interview with Varoufakis (H/T Chris), that’s what Tsipras thought too, until, too late, Varoufakis told him it couldn’t be done. Certainly Tsipras’ actions were consistent with that interpretation.
Syriza has clearly been beaten. But I doubt that the outcome will work well for the other side in the long run. (Nearly) everyone understands that the debt can’t ultimately be repaid. But the German voting public hasn’t been told that. A deal that had some kind of quasi-automatic mechanism for writing down the outstanding balance (for example, by multiplying up the proceeds from asset sales) might have got around this problem. As it is, an explicit writedown will be needed at some point, presumably after Syriza has been forced out of office. That will be incredibly unpopular in Germany, while making clear to everyone else the locus of sovereignty in the post-crisis EU.
Update Commenters generally disagree with my take on the Varoufakis interview. I’m not wedded to it. The crucial point is that exit from the euro is extremely difficult, and that this fact will be used to punish any eurozone country that tries to resist the controlling powers.
John Quiggin 
Those Syriza members who voted No ensure that internal income distribution will either not happen or it is so little that ‘austerity’ for the majority of the non-elite will be something very different from lofty discussions among pseudo intellectuals. These dogmatic people can be found on either the so-called ‘racical left’, the ‘radical right’ and the ‘radical idiots’ of whatever denomination. All of them have one thing in common. They only think about themselves.
Tsipras was absolutely right, IMO from the perspective of economics-finance, when he said if we don’t get financial aid, the people (not the elite) will lose their savings and those who had taken out their money (the elite) will come back and buy up the lot.
Those who are seriously interested in the Greek economy and the outcome of last Sunday’s conditional agreement may wish to know what the Greek government has voted on. The document can be found in pdf form on the following web-site
http://www.consilium.europa.eu/en/press/press-releases/2015/07/12-euro-summit-statement-greece/
The document differs in detail from that published by Megan some time ago.
This document had been published in German by the SZ earlier this week. The SZ is not read by everybody. But it is clear there is no attempt on part of the German government to hide the document from the public.
To evaluate the implications of the conditions in this document for both, Greece as well as from the perspective of the 19-Greece national perspectives, a lot more local information is required then the s-fight of words organised and dissiminated by some.
I can’t post links, but Varoufakis has an amusingly annotated version on his blog.
You can’t do much if the numbers are 64 (+/- 6) to 229.
This contagion will likely spread in the next few decades.
@Ernestine Gross
Can you point to the section of the austerity bills just passed (by the ‘Yes’ vote) which will
“…ensure that internal income distribution will
either nothappen…”or, alternatively, any other source from which to draw support for that position?
@Megan
See the decision making structure of the the EUROgroup regarding who is responsible for country internal income and wealth redistribution.
@Ernestine Gross
Where does one find support for the idea that today’s ‘Yes’ vote will “…ensure that internal income distribution will…happen..” in Greece as a result?
> “…ensure that internal income distribution will…happen..”
Well, “all the money flows out of the country” is a kind of distribution…?
@Megan
Where does one find support for the idea that by rearranging words and sentences one discovers anything?
@Ernestine Gross
I don’t think that I materially rearranged the words, but to be safe here is the full sentence:
How did they “ensure” that?
@Ernestine Gross
The Greek Government could leave the Euro and re-issue its own currency. It could guarantee all savings below a certain amount. It could declare that those rich nationals who took their savings out of the country now need to pay 100% taxes on those amounts. They should pursue all legal channels to achieve this. All physical assets left in Greece could be confiscated. All Greek billionaires’ money and physical assets in the country could be confiscated and nationalised. Greece could repudiate up to 100% of its debt with the Troika and all other countries.
There are many historical examples of sovereign default.
“A failure of a nation to meet bond repayments has been seen on many occasions. Philip II of Spain defaulted on debt four times – in 1557, 1560, 1575 and 1596 – becoming the first nation in history to declare sovereign default due to rising military costs and the declining value of gold, as it had become increasingly dependent on the revenues flowing in from its mercantile empire in the Americas.[15][16] This sovereign default threw the German banking houses into chaos and ended the reign of the Fuggers as Spanish financiers. Genoese bankers provided the unwieldy Habsburg system with fluid credit and a dependably regular income. In return the less dependable shipments of American silver were rapidly transferred from Seville to Genoa, to provide capital for further military ventures.
The United Kingdom also defaulted in 1822, 1834, 1888–83 and 1932, the last time as a consequence of the 1929 banking crisis.
In the 1820s, several Latin American countries which had recently entered the bond market in London defaulted. These same countries frequently defaulted during the nineteenth century, but the situation was typically rapidly resolved with a renegotiation of loans, including the writing off of some debts.[17] – Wikipedia.
All or most of the above actions are quite possible. Financial operations are nominal not real. To allow the nominal to control the real is to succumb to illusion. The Gordian knot of finance can be cut very easily at the national level. Even Germany has defaulted and had debts forgiven a number of times.
@Megan
You haven’t answered my question.
@Ikonoclast
“The United Kingdom also defaulted in 1822, 1834, 1888–83 and 1932, the last time as a consequence of the 1929 banking crisis.”
Evidence? SFIK the last default by a British government on sovereign debt payments was the “Great Stop” of 1672. Commercial bank defaults don’t count.
@Ernestine Gross
In answer to your question at #57(?): I don’t know where, and I don’t advocate that idea in any case.
I am interested in discovering the strength/quality of criticism of the “No” position (on this morning’s austerity package vote), and specifically the “how” of your first sentenced quoted in full above.
@Megan
I start from the assumption that a ‘left’ party like Syriza has the interest of the less well off members of the Greek society at heart (supported by Tsipra, as stated in an earlier post). The conditional agreement with the Eurogroup (CAJuly 2015) passed the Greek parliament because of support from opposition members. There are reports in the print media according to which opposition members told Tsipras that he can count on their support for the next round but not thereafter. Thereafter is exactly when the allocation of ‘austerity’ within Greece will take place (ie who is called upon to make a contribution). If what is now the opposition had been interested in cleaning up corruption, tax avoidance by the so-called oligarchs and some professions and thereby reducing the need for huge financial aid. then they had time since 1983 or since 2001 (including during the period when Yanis V. was adviser to the Papandreo government) or, at the latest since the first ‘bail out’. Given the No vote by a substantial number of Syriza members, it signals disunity within the party to everybody else and therefore I see the chances of having internal redistribution of income, including the allocation of tax payments, as quite small because the vested interests in the opposition won’t support it.
Of course the creditor countries are watching. How do you think it inspires confidence in Greece being able to reform when the Prime Minister is attacked by members of his own party? It is one thing to hear Tsipras saying I do not agree with the harshness of the financial conditions but this is the best that could be achieved and the alternative is leaving the Eurozone which would cause more pain for the less well off in society and those who managed to get their Euros out of Greece come back and buy up the lot. This is a credably honest assessment of the actual situation in my books. It is another thing to read about tirades of accusations against Tsipras by members of his own party. Wasn’t the tirade of accusations delivered by a Belgium member of the Eurogroup enough?
Tsipras knows his country men and women better than I can guess. Perhaps he just lets them spit the dummy and hopes when it comes to the ‘allocation of austerity’ (ie who pays) they will vote as I assumed in line one above. But who knows. If they don’t then I would say the word ‘ensure’ is appropriate.
If you were to read the official conditional agreement, you would find that debt rescheduling is part of it. This item has again to be negotiated in detail. How much confidence do you think creditor countries will have in a government where a so-called leftwing government is busy tearing itself to pieces with words and action instead of having a go at the opposition. Surely, if any contemporary government can claim it has inherited a mess than it is this one.
Today I read German economists are proposing yet again a solidarity tax, not to hand over to Yanis Varoufakis, but to pluck the expected hole left in the budget in the future due to yet another bail-out.
There is a report of one Greek Syriza member having said words to the effect, there is too much talk, everybody talks to much. A wise man IMO.
I shall follow his advice.
When you say “debt rescheduling is part of it” (the official conditional agreement from 12/7/15), I guess you mean the concluding paragraphs [pg 6-7 of the pdf I linked to in an earlier thread and which is identical to the pdf you link to above]:
I respectfully disagree. Debt rescheduling is not a part of it other than a vague reference to it being considered, in some form, maybe, if deemed necessary (by non-Greeks).
And the document explicitly says: “nominal haircuts on the debt may not be undertaken”.
Other than that, thank you for your reply but I don’t find it compelling. I still feel that the “No” position was morally and democratically required of Syriza – having been specifically elected on an anti-austerity platform and resoundingly confirmed by recent referendum against precisely the deeper austerity they have just imposed.
Pragmatists etc… can argue away such blatant, cowardly and cynical betrayal. But I feel for the Greeks who trusted and supported that party only to be totally sold out for what amounts to a bag of platitudes about possible relief one day in the future if they are good and achieve their “benchmarks”.
In answer to your question at #57(?): I don’t know where, and I don’t advocate that idea in any case.
You should: “rearranging words to discover new things” is a pretty good description of “deductive reasoning”.
+ people’s statements exclude possibilities, often distant from the core thrust of their statements
+ different statements exclude different things
+ with enough statements you can reach the situation where all the possibilities, except for one, have been excluded in some sub-area; the one remaining possibility becomes a certainty
+ but because the link between the statements and the remaining non-excluded possibility isn’t obvious, you need to rearrange the statements to make the deduction — discovery — obvious.
@Collin Street
Yes, Collin Street, if I understand you correctly, this is a method used by lawyers in cross examination. However, there are rules regarding what evidence is admissable. Let me know if I am wrong and let me know whether you believe this method can be applied as attempted by what I assign to ‘deconstruction of text’ where there seems to be no end to so-called discussions.
It is interesting to consider the economic trajectory of Greece since WW2. Quotes below are from Wikipedia.
“The Greek economic miracle is the period of sustained economic growth in Greece from 1950 to 1973. During this period, the Greek economy grew by an average of 7.7%, second in the world only to Japan.” – Wikipedia
“The rapid recovery of the Greek economy following the Greek Civil War was facilitated by a number of measures, including (in addition to the stimulation, as in other European countries, connected with the Marshall Plan) a drastic devaluation of the drachma, attraction of foreign investments, significant development of the chemical industry, development of tourism and the services sector in general and, last but not least, massive construction activity connected with huge infrastructure projects and rebuilding in the Greek cities.
Greek growth rates were highest during the 1950s, often exceeding 10%, close to those of a modern tiger economy. Industrial production also grew annually by 10% for several years, mostly in the 1960s. Growth initially widened the economic gap between rich and poor, intensifying political divisions.
In total, the Greek GDP grew for 54 of the 60 years following WWII and the Greek civil war. From 1950 until the 2008 economic crisis, with the exception of the relative economic stagnation of the 1980s, Greece consistently outperformed most European nations in terms of annual economic growth.” – Wikipedia.
Let us sift out the basic relevant facts.
(1) Greece was growing from a low base after the damage of WW2 and the Greek Civil War 1946-1949.
(2) Growth was facilitated by the Marshall Plan, devaluation, attraction of foreign investment and massive re-building and infrastructure projects.
(3) Growth was an almost consistent feature until the GFC. (Growth in 54 of the 60 years since the end of the Civil War.)
Let us interpret the basic relevant facts.
Greece was capable of good economic performance and growth when the conditions were right. The right conditions were international assistance, stimulatory spending, infrastructure programs and devaluation. The supposed laziness of the Greek people and corruption in Greece’s political and economic system either was not real in that era or was not significant enough to prevent this performance. I have posted earlier in this thread references to data which suggest that Greeks are not lazy and that contemporary Greek corruption while significant is only about average compared to corruption in all nations. The laziness and corruption thesis does not hold up to objective consideration.
It is arguable that the Greek economy, like many economies in the years immediately before the GFC, was lackluster and turning in a relatively poor employment performance. The precipitation of the real crisis for Greece was in 2008 with the GFC or Global Financial Crisis as we Australians call it. Greece has responded badly to this crisis and has gone into an extended on ongoing great depression. It is most avowedly a great depression as Greece’s numbers (unemployment etc.) are worse than many nations experience in the Great Depression circa 1929-1939.
We have to ask ourselves what has changed and made it seemingly impossible for Greece to deal with this crisis and get out of depression.
(1) Are Greeks lazier and more corrupt than in the 1950s and 1960s? It would be hard to sustain this thesis as a sole causative agent for the current crisis. Current data show Greeks work longer hours than Germans for example (albeit in the public service they might be just sit-down hours) and that Greek corruption is not greater than for example corruption in South Korea.
(2) Have the wrong macroeconomic policies been used this time around? It is clear that this is a much better candidate for a causative explanation. Instead of stimulatory spending in a bad downturn or broken down state, we have austerity (pro-cyclical economic policy). Instead of devaluation, we have essentially a rigid currency tie to the central dynamo of Europe. Instead of infrastructure building and job creating programs we see stagnation and inaction enforced by austerity. Instead of real international assistance we see “bailouts” where the money is taken out the Greek economy (pension cuts, wage depression, unemployment, increased taxes) and given back to the banks which made the bad loans and which should bear the risks and costs for lending without due diligence.
(3) The only other possible explanation is that secular (long-run) stagnation is hitting all Europe and hitting worst in Greece. This is just feasible perhaps. This secular stagnation could be the result of any or all of resource exhaustion, the demographic shifts of aging or the standard (standard in the Marxian sense) movement of capitalist production from high wage areas (like Europe) to low wage areas like China and India. My own feeling now is that resource exhaustion and bioservices disruption (like climate disruption) has not yet impacted directly into economics and is not yet a good explanation and certainly not a good explanation for secular stagnation in the monetarist/neoliberal era. The demographic shift argument is also not compelling as if it were a primary cause we would expect a labour shortage not a labour surplus. The labour arbitrage explanation (manufacturing and jobs going to low wage countries) is a reasonably good explanation overall but does not explain the differentials in economic performance within Europe.
Conclusion: In summary, we find on balance that the best explanation for Greece’s current woes is poor macro-economic policy in the Euro zone exacerbated by Greece’s tie to a currency which, for it, is overvalued. The empirical evidence all points this way. Only ideologues would deny that this is the best explanation. These ideologues want to to deny clear macroeconomic principles which have stood the test of time and empirical analysis. They want to advance various myths: the myth of the laziness and corruption of the Greek people and their national system, the myth that national debt must always be repaid, the myth that large commercial banks must be bailed out when they make ill-judged loans, the myth that the ordinary people must suffer for the odious debt incurred in the course of international financial chicanery, the myth that austerity (pro-cyclical economic policy) will get a nation out of a depression.
The plain fact is that activity, human activity and economic activity, gets a nation out of depression (and not inactivity). The clear way to generate more activity is stimulatory spending. Where there is underutilised capacity (labour, plant and resources) stimulatory spending sets this capacity in motion again. The way to correct Greece’s problems is clear. It could even be done within the Euro with the right fiscal transfers. The obstacle to helping Greece is international finance. They want their money back no matter what it does to 11 million people. Our democratically elected governments need to stand up to international financial capital. If they don’t we are all lost in the long run. It’s not ISIS who are coming after us, it’s international financial capital.
@Megan
If you continue along this line you may end up agreeing with Schaeuble and Merkel, who have signalled for a long time the nature of the financial problem as well as their preparedness to assist Greece with a Plan B (which Y. V. failed to develop) for an ordered (non-catastrophic) exit of Greece from the EUROzone without closing the door for re-entry and promissing humanitatian aid.
By the way, what is the present value of $1 to be paid now and what is the present value of $1 to be paid in 10 years time, considering two discount rates, one ‘low’ (close to zero) and one ‘high’ (say above 10%)?
You don’t think agent A financing $x for say 10 years at the low interest rate on behalf of agent B (who would have to pay the high interest rate) makes not difference to the welfare of B throughout the entire period?
The betrayal of the Greek people has not happened yesterday in Parliament. It has happened much earlier and this is part of why I don’t trust Yanis V. and respect Tsipras for having said “mistakes have been made”.
I don’t trust Yanis either – who would trust a man with his intellectual ability to be able to honest with himself about his motivations – but I think it depends what one ‘thinks’ his values are that determines whether or not one can support his stated intentions and accept his explanations of his behaviour.
There is no sandpit so I’m going off topic to introduce one I like, has anybody seen this:
“We are experiencing what physicists would call a ‘phases change’ in our economic environment, where previously held assumptions about causal factors and relationships no longer seem to hold,” Ms Livingstone said.
http://www.smh.com.au/federal-politics/political-news/business-council-president-catherine-livingstone-fires-warning-shot-to-australias-leaders-20150429-1mvrk0.html#ixzz3g6ZyTXVX
I heard Ms Livingstone on RN this morning and she was talking about complexity so I looked her up and found this article from April and that she is the president of the business council of Australia.
@Ernestine Gross
This is one of those stock economist dogmas that may be worth deconstructing. Surely, ceteris paribus, a product today is worth the same as a product in a years time provided the need today is the same as the need will be in a year’s time.
If I need food today – then I will need the same food later. Would I really prefer to have all my food today?
If I need to travel today, then if nothing changes, presumably I will need to travel the same amount in a years time. Both consumptions of travel have the same cost.
This text-book discounting proposition only makes sense if either, there is economic growth or the supplier of money has a degree of monopoly. Time by itself is irrelevant.
Capitalists apply interest charges over time because they expect there will be surplus value every hour, day, week or year. Capitalists will want all their ill gotten gains today if possible and would therefore want to add on a surcharge if they have to wait and can get away with it.
But we cannot let capitalist relationships cloud our understanding of economic relationships.
@Ivor
Not if you are dead.
That is one reason to discount the future. There are others.
@Ernestine Gross
When and where did Schaeuble and Merkel offer orderly exit etc.? Not saying I disbelieve you but cites and links please. More importantly, what terms did they offer for this course of action? I can offer another person choices but if they are all bad choices am I really offering anything?
All your Eurozone analysis seems based on the proposition that Germany is right but “neoliberalism”, so far you accept such a tag, is wrong and austerity in the current manner is wrong. But you cannot have it both ways. The most powerful country in Europe cannot be in the right when it is pushing wrong policies (neoliberalism and austerity). This is the fundamental flaw in your analysis. If the policies are wrong, then Germany is wrong. It is as simple as that.
Any pretence that Germany is an equal among equals in the Eurozone is exactly that, a pretence. Germany is first among “unequals”. The Eurozone and ECB are more technocratic, monetarist and financial constructs than they are the results of any genuine democratic process. In that context, the greatest economic power wields the greatest power overall.
@Uncle Milton
On a strict interpretation, Ivor is correct. “If I need food today, I will need food later.”
While the “I” exists (lives) it needs food. When the person formerly know as Ivor is deceased, the “I” of Ivor no longer exists, no longer lives. His proposition is technically correct. The “I” reiterated presupposes his living existence at all times dealt with by the statement. While Ivor lives he requires food today, tomorrow and in to the future.
I don’t know how Merkel does it, but the rich and powerful are different from us, they say.
There is this video
http://thinkprogress.org/world/2015/07/16/3681583/german-chancellor-makes-palestinian-asylum-seeker-cry/
In the video, the young girl (a Palestinian girl named Reem addressed Merkel with the news that her family was soon to be deported after fleeing from a refugee camp in Lebanon four years earlier) tells Merkel in fluent German: “I have goals like anyone else. I want to study like them … it’s very unpleasant to see how others can enjoy life, and I can’t myself.”
“Merkel’s response was an attempt at offering sympathy but still left the young girl in tears.
“Politics is sometimes hard,” Merkel said. “You’re right in front of me now and you’re an extremely sympathetic person. But you also know in the Palestinian refugee camps in Lebanon are thousands and thousands and if we were to say you can all come … we just can’t manage it.”
Merkel and Germany can’t manage it but….. ” Turkey has a population slightly smaller than Germany at around 75 million inhabitants and hosts more than 1.5 million refugees. Jordan, with a population at over 6.5 million, hosts over 650,000 refugees.
“And there is Lebanon. This tiny country wedged between Syria, Israel and the Mediterranean with a population of around 4.4 million people hosts over 1.15 million refugees, according to UNHCR, and that doesn’t include the unregistered refugees who amount to more than 300,000.”
Germans and Australians are too rich to be able to share?
@Ikonoclast
@Ikonoclast
Continuing the semantic game, one might argue that the “I” only exists in the present. Therefore, the only need for food that the “I” has that is real is its present need. The “I” that exists in the future, and its need for food, are both imaginary. To argue that both needs have equal value is to argue that a real need has the same value as an imaginary one.
Somewhat less obtusely, the need for food in 12 month’s time is predicated on the availability of food today. i.e. if I don’t obtain food ‘today’*, I am unlikely to survive long enough to worry about whether or not I will have food in 1 year’s time. So the availability of food now will always be a higher priority (and therefore more valuable) than its availability at some future date.
*Obviously it is possible to go more than one day without food, but the feasible survival time without eating is considerably less than one year.
@Ikonoclast
Continuing the semantic game, one might argue that the “I” only exists in the present. Therefore, the only need for food that the “I” has that is real is its present need. The “I” that exists in the future, and its need for food, are both imaginary. To argue that both needs have equal value is to argue that a real need has the same value as an imaginary one.
Somewhat less obtusely, the need for food in 12 month’s time is predicated on the availability of food today. i.e. if I don’t obtain food ‘today’*, I am unlikely to survive long enough to worry about whether or not I will have food in 1 year’s time. So the availability of food now will always be a higher priority (and therefore more valuable) than its availability at some future date.
*Obviously it is possible to go more than one day without food, but the feasible survival time without eating is considerably less than one year.
(BTW Prof Q, could you kindly delete the automoderated version of this comment?)
@Uncle Milton
Your comment was not in context.
Ceteris paribus means that the population is unchanged.
Vague references to “There are others” do not asist.
@Tim Macknay
Fair enough. However I don’t think these bourgeois economic games about opportunity cost and future discounting really get us very far in genuine political economy. It’s mostly a useless economic shell game. They (the bourgeois economists along with their neoliberal masters) enlist these concepts when it suits them and ignore them when it suits them. They are not genuine about such concepts. When has any one of them ever mentioned the opportunity cost to society and poor people of unemployment? They (bourgeois economists) don’t give a damn about such matters. Yet they are always worried about the cost of inflation to people who have already amassed a fortune. They are completely dishonest in their use of such concepts.
@Ikonoclast
That seems like a bit of an incoherent rant to me, Ikon. Who are the ‘bourgeois economists’ of whom you speak? IANAE, but it seems to me there’s plenty of economic literature on the costs (opportunity and otherwise) of unemployment, and a pretty broad consensus that the costs of it are high (to individuals and society).
Concepts like opportunity cost and future discounting are attempts to make sense of aspects of economic behaviour. Future discounting, at least, is an empirical reality, however it’s used theoretically by economists. No doubt some economists, ‘bourgeois’ or otherwise, use these and other concepts dishonestly, but to damn ‘them’ all with a flounce, a pout and a Marxian barb strikes me as a tad petulant. Just sayin’.
@Ivor
You confuse intertemporal preferences defined on a commodity space (food, travel….) with a kind of arbitrage possibilities in the market for bonds. The former relates to consumption, the latter to financing, including A financing a consumption or investment plan of B for a specified period. B would benefit.
Example on a small scale: Some stores offer x days, months or lately even years interest free. If both the seller and the buyer face the same borrowing rate, then the store can do this only by increasing the sales price to recoup the full financing cost. But, if the seller has a lower borrowing cost than the buyer then it is a mutually satisfactory deal, particularly if the buyer prefers to have the item now rather than later.
Suely I don’t have to say much more except to remind of the subject of this thread and in particular my exchange with Megan.
(merely mentioning ‘capitalism’ doesn’t work always, indeed hardly ever).
@rog
Sorrry rog, I overlooked your comment. It surely is a black and white example of the general problem. (Oddly, if the UK population would decide to leave the EU, the tall man might have a giggle in his grave for this is what he wanted in the first place.)
@Tim Macknay
“Bourgois economists” were described by Paul A Samuelson as:
Adam Smith, David Ricardo, Leon Walras and Wassily Leontief.
Presumably these were just examples.
The phrase was coined by Karl Marx and underpins a lot of analysis of economic issues.
Bourgeois generally refers to any social strata that accumulates surplus value from others (slaves, serfs, workers etc). All capitalist economists base themselves on such flows and then pretend they cannot see why the rich grow richer why the poor grow poorer.
At worst they even deny this is even happening.
@Ernestine Gross
Only capitalists separate financial relations from real relations.
Bond prices, borrowing costs, interest rates – the presumed basis of discounting – torn from real economic relations still suffer from the same problems.
They only make sense if there is surplus value to be accumulated over time.
@Ivor
Thank you for that information, Ivor. It’s not clear to me, however, that that’s what Ikon meant by term “bourgeois economists”. For all I know, Samuelson (whom I understand to have been a Keynesian and a member of the US technocratic elite) could be a “bourgeois economist” in Ikon’s usage. I do understand what the term “bourgeois” means, though.
Taking Ernestine’s point, I acknowledge that the discussion of future discounting is a derail, as is the discussion of the meaning of “bourgeois”, so I will make no more comments about them.
@Ikonoclast
“When and where did Schaeuble and Merkel offer orderly exit etc.? Not saying I disbelieve you but cites and links please. More importantly, what terms did they offer for this course of action? I can offer another person choices but if they are all bad choices am I really offering anything?”
In a sense your question again reflects a total misunderstanding as to the legal framework of the Eurozone, embedded in the EU. You are not the only one, even a Nobel Prize winning economist from the USA ignored the institutional framework. Implicitly, so did JQ by considering an exist would be the only alternative given the referendum. So did almost everybody on this blogsite. Most importantly, Yanis Varoufakis had no plan B (exit).
Everything has to be negotiated (like in your worker organised corporation) between the member countries and the heads of the Eurogroup, the EZB and, in this case the IMF. Nobody can come up with ‘an offer’. Finance Ministers and heads of governments of various countries may signal information in interviews. After meetings there are reports which may say a real lot to insiders who know about diplomatic language. At times some people may conclude the reports they nothing very eloquently.
Against the background of the actual institutional environment, it is impossible for ‘Germany’ to make an offer.
We are talking about signals. Schaeuble, implicitly and explicitly did do what Varoufakis failed to do, namely consider plan B, an exit of Greece from the Eurozone, which is the logical alternative given the referendum. (See JQ’s post).
Schaeuble reportedly said a long time ago words to the effect ‘they can’t ever repay that’. Merkel talked about humanitarian aid. There was much heated discussion in the press about a position paper by the Finance Minister, Schaeuble (CDU), regarding the a ‘Grexit’, which was discovered before last Sunday’s meeting of Heads of Governments. The social democrat, Gabriel (I can’t remember his position in the government but I know he has one; coalition governments between ‘blue’ and ‘red’, ‘blue and yellow’, ‘red and green’, happen) first denied having seen the paper but later had to admit that it was available to the committe of which he is a member. (Same sort of political fight as we see in Australia almost daily.)
Old references can be retrieved from the Sueddeutsche Zeitung. Fran Barlow is fluent in German. She may have read them too.
The most recent one by Schaeuble is of today (I learned about it after having been out for about 4 hours). He is reported to have said an exist from the Eurozone may be better for Greece. The head of the Eurogroup, Jeroen Dijsselbloem, immediately objected and demanded that there is no more talk about Greece leaving the Eurozone. It was reported on ABC24.
I spent at least 2 days reading up a bit on the structue of the EU in which the Eurozone is embedded. I did this because the discussions on this blog seemed to me to be based on assumptions about the institutional environment which does not correspond to the actual. Looking back at my very first post, I wasn’t all that much better. My husband is fluent in French and I am fluent in German. So we followed newspapers in these languages. These papers have sections on what other foreign papers say. We found reports on what the Finish, the Dutch, the Austrian, ….. papers say about their representatives. Perhaps not surprisingly, the English press did not devout as much time to the subject since the UK is not a Eurozone member. The smh was strictly news reporting, IMO, which is o.k. for those who already know the institutional setting.
Your next paragraph gets a separate post.
devote not devout. Sorry about type and others I haven’t seen.
This paper argues there is not a so-called “democratic deficit” in the EU.
Click to access deficit.pdf
More links to come.
This monograph argues the thesis of its title.
“Monetary Union in Crisis The European Union as a Neo-liberal Construction”
http://www.academia.edu/5785432/Monetary_Union_in_Crisis_The_European_Union_as_a_Neo-liberal_Construction
Some early quotes:
“In the 1990s neo-liberalism became the explicit doctrine, inscribed in theMaastricht treaty, of the EU and its member-states. Maastricht made “theallocation of resources through the competitive market” (art. 103) the guid-ing principle. The aim of the EU according to the draft constitution of 2003was “a competitive single market without [state interventionist] distortions.”Neo-liberalism differed from nineteenth century liberalism to the extentthat it required strong EC action through its laws, institutions and principlesto dismantle the aids, regulations and controls of the encrusted welfare state.It dictated tight money with low inflation, reduced social and public spend-ing, deregulation, free trade and the commercialization and privatization of public concerns and services even as its economic and social consequencesin slower growth and productivity and mass unemployment and job inse-curity produced a growing popular backlash and disaffection from bothnational institutions and the EU.”
“In the 1970s Prime Minister Olaf Palme, paraphrasing a former German Socialist leader, warned the Swedes of the perils of the four Cs contained in the EC. The EC, he said, was conservative, capitalist because competitive markets across borders were bad for labor, clerical because it was dominated by Christian Democracy, which was anti-statist and anti-collectivist, and colonialist because it helped restore French and Belgian control in Africa. Because he was a social democrat Palme forgot a fifth C that was highly motivating – the EC was anti-Communist.”
“Monetarism was not a foreign graft on the EC merely introduced to deal with growing trade interdependence, capital mobility or the crisis of profitability, but was contained in the neo-liberal logic and terms of the Rome treaty. Maastricht made this logic explicit by creating a central bank, the ECB, devoted to price stability that was independent of national or democratic control and by embracing the market allocation of resources as its guiding philosophy. The Maastricht criteria on debt and deficit aimed to compress wages and benefits and maintain sufficient unemployment, what was known technically as NAIRU, to keep wages within the bounds of productivity, prevent inflation and weaken the force of organized labor. To maintain long-term market credibility the ECB had to be insulated from popular or governmental pressures to lower interest rates and expand the money supply for the sake of growth and employment. Since governments still controlled budgetary and fiscal policies, the stability pact imposed an enforceable deficit limit of three percent per annum to be offset over the medium term to prevent them from diluting the currency and reflating through borrowing. EMU contained in vitro the essence of monetarism and the neo-liberal assault against the social or public regulation of the market (cf. Arestis, 2003).
Monetarism was the policy of making a currency harder, scarcer and more valuable by raising interest rates and limiting money supply in order to:(1) increase purchasing power over foreign goods and assets and leverage over governments with budgetary, trade, or payments deficits; (2) obtain the rental premium or seignorage that comes from possessing currency that is used as a reserve by other countries; (3) secure the value of loans, usually held by the wealthiest rentier class, against debtors; (4) reduce the margin for working-class action, organization, and the real wage gains that price inflation affords; and (5) to prevent the redistribution of incomes and power to labor that usually comes from long-term and rapid growth. Monetarism was already enshrined in the national banks and treasuries of most major countries. While the major powers, France, Britain, and Germany, initially focused on the first two objectives, they along with the others became increasingly concerned with the last two in response to the labor mobilization and wage price spiral that exploded after 1968.”
That is a quick review of a few themes. It is interesting that a number of points above were made (copyright is 2005) well before Piketty published his work “Capital in the 21st C” published in 2013. Note that points (4) and (5) especially are directly backed up by Piketty’s work.
The EU and especially the ECB and Eurozone are most explicitly neoliberal constructs. To say that it’s “all institutional” is no justification of any kind for its actions. This is so whether the argument being implied is that the process is morally right because it is institutional or that the process is unavoidable because it is institutional. These positions, separately or combined, amount to taking a technocratic and legalistic stance devoid of moral judgement. The simple answer is that if the institutions are wrong and have wrong outcomes (which they clearly do both morally and empirically) then the institutions must be corrected or abolished.
@Ikonoclast
“All your Eurozone analysis seems based on the proposition that Germany is right but “neoliberalism”, so far you accept such a tag, is wrong and austerity in the current manner is wrong. But you cannot have it both ways. The most powerful country in Europe cannot be in the right when it is pushing wrong policies (neoliberalism and austerity). This is the fundamental flaw in your analysis. If the policies are wrong, then Germany is wrong. It is as simple as that.”
Your perceptions have no relationship to what I wrote about. This is quite astonishing. I am sorry to say, you conclusions seem to due to you substituting your model as to the EU and the Eurozone for the actual institutional framework.
See my reply to the first paragraph in your post.
It is up to you whether you wish to re-read all my posts, starting with a predecessor thread. I don’t you whether you noticed that 2 long and 1 short posts of mine were in moderation. They have since been published.
@Ikonoclast
The third paragraph of your post:
“Any pretence that Germany is an equal among equals in the Eurozone is exactly that, a pretence. Germany is first among “unequals”. The Eurozone and ECB are more technocratic, monetarist and financial constructs than they are the results of any genuine democratic process. In that context, the greatest economic power wields the greatest power overall.”
In one of my post I provided a link to an EU web-site which contains the weights of each member country.
I have no further comment and no intension of persuading you. It is up to you to read up on these matters or not.
The German parliament (Bundestag) just voted in favour:
Yes = 439
No = 119
50 members of Merkel’s coalition government voted “No”. It will be interesting to see the relative discussion of that “revolt” to Syriza’s “revolt” the other day.
And what exactly is it that the Bundestag voted “Yes” to?
“Beginning further talks with Greece on a third bail-out”.
Wow! In terms of a framework, going forward, with a view to enabling the broad agreement around the terms of a context within which to discuss a range of possible outcomes – break out the champagne.
But wait, long-suffering people of Greece, the news gets better…the European Council has just agreed to extend a short term (3 month) loan of 7 Billion euros – which is just enough to make good the next payments due to the IMF, ECB and (oligarch owned) Bank of Greece.
If someone can’t see what a total stitch-up/sellout of the Greek people this is, then I don’t know whether to cry or try to sell you a matching set of Sydney Opera Houses.
I mean, seriously, that’s a terrible piece of writing. Have a careful look at the third and fifth sentences and see what they actually say, then compare them against what’s claimed. The problems with the third sentence is most easilly visible if you imagine how the structure described affects outcomes in the presence of a general widespread popular opinion in favour of change. The fifth is a teeny bit more subtle: it describes functions that are delegated in normal democracies… but delegations are revocable, and in the EU the functions described are not delegated by the legislature or genuine representative body but directly [==irrevocably] assigned by the constitutional framework and thus put beyond popular control. “Our structure is OK because this subtly-but-critically-different structure is commonplace” is not a compelling argument. More something you’d see if there were no possibility of a compelling argument.
And that’s just the abstract. I don’t think I’ll read further.
EuroGroup statement just now:
And all over Greece the poor starving pensioners, unemployed youth, crushed small-business owners and all other victims of 2 failed rounds of neo-liberal fascist austerity are rejoicing. “Yay” they are singing (in Greek), and dancing and joyously celebrating.
They are elated that Tsipras stood up to them and, despite their overwhelmingly voting -twice- against more austerity, toughed it out for their own good and has brought this sweet victory so succinctly spelled out that even the silliest person dying from a non-existent health care system can now see the beauty of this EU approach.
I should apologise for ever doubting that this would all work out so well as it has. A big glass-half-full toast to the ‘winners’.
A bit more context, to keep the celebrations going:
Yippee! (in Greek)
@Collin Street
I didn’t say it argued it well. I for one happen to believe there is a huge democratic deficit and governance problem in the EU and Eurozone.
@Ernestine Gross
“In one of my post I provided a link to an EU web-site which contains the weights of each member country.” – E.G.
I have been through your extant posts twice and cannot find this link. Either I have missed it, or the comment in question is still in moderation or you forgot to add the link.
Remember any post with two links is automatically moderated and a link to someone else’s comment counts as one link already.
I agree with you (I think we agree) that understanding EU governance would require retirement from all other endeavours and an extended period of focused study. I don’t know what you think but I think this would be a terrible waste of my time. That’s why an easy link for the question at hand would nice.
Sometimes one does not have to study an horrendous mess to know that it’s a mess but one might have to study it to understand in detail how the mess came about and what all its ramifications are. That’s pretty much how I consider the EU.
It’s like Brisbane’s road system. I know it’s an horrendous spaghetti-like mess from trying to deal with it. I haven’t studied in detail (or even in brief) how this mess came about and why our current road designers can’t improve it. And yet I know it’s a mess.
@Ikon: it would have helped to put some markers into what you wrote to indicate that: something like, “this is the sort of writing that you get in opposition to the idea that the eurozone has a democratic deficit”. Reason being that people generally only say what they think is important, so not distancing yourself from the content of a piece reads as support for that piece.