It is my Friday Lay Day blog and it is going to be relatively quick. There was an article in the Wall Street Journal (December 23, 2015) – Economists Say ‘Bah! Humbug!’ to Christmas Presents – that says a lot about how my profession struggles to appreciate reality in all its dimensions. Every year, it…
Friday lay day – Cave in or Trojan Horse?
Its the Friday lay day blog and I have a day ahead full of meetings with research partners, other parties and related matters. So I am glad I told myself I wouldn’t write much today. But we have to mention the discussions in Brussels yesterday – extraordinary on all sides. Late last night I read the letter the Greek Minister of Finance wrote to his suited confrères on the Eurogroup committee. I had to read it more than once and convince myself that I was reading it correctly rather than being duped by the hour of the evening and the flight I had taken to where I am today. I read it and read it. Each time I concluded cave in! Sure the words were still a bit like those that a proud, independent people might write to international partners. But once you cut through the defence of self-esteem to the substance the conclusion resonated strongly – the Greek government, for all their talk and bluster, have caved in. Then I read the memo from the German Ministry of Finance in all its Teutonic clarity – Fuck off, we want you to get down on your knees when you cave in not stand there without your ties and suits smiling about it. Amazing really, on all sides.
Here is the text of the Greek government’s letter:
Athens, February 18, 2015
Dear President of the Eurogroup,
Over the last five years, the people of Greece have exerted remarkable efforts in economic adjustment. The new government is committed to a broader and deeper reform process aimed at durably improving growth and employment prospects, achieving debt sustainability and financial stability, enhancing social fairness and mitigating the significant social cost of the ongoing crisis.
The Greek authorities recognise that the procedures agreed by the previous governments were interrupted by the recent presidential and general elections and that, as a result, several of the technical arrangements have been invalidated. The Greek authorities honour Greece’s financial obligations to all its creditors as well as state our intention to cooperate with our partners in order to avert technical impediments in the context of the Master Facility Agreement which we recognise as binding vis-a-vis its financial and procedural content.
In this context, the Greek authorities are now applying for the extension of the Master Financial Assistance Facility Agreement for a period of six months from its termination during which period we shall proceed jointly, and making best use of given flexibility in the current arrangement, toward its successful conclusion and review on the basis of the proposals of, on the one hand, the Greek government and, on the other, the institutions.
The purpose of the requested six-month extension of the Agreement’s duration is:
(a) To agree the mutually acceptable financial and administrative terms the implementation of which, in collaboration with the institutions, will stabilise Greece’s fiscal position, attain appropriate primary fiscal surpluses, guarantee debt stability and assist in the attainment of fiscal targets for 2015 that take into account the present economic situation.
(b) To ensure, working closely with our European and international partners, that any new measures be fully funded while refraining from unilateral action that would undermine the fiscal targets, economic recovery and financial stability.
(c) To allow the European Central Bank to re-introduce the waiver in accordance with its procedures and regulations.
(d) To extend the availability of the EFSF bonds held by the HFSF for the duration of the Agreement.
(e) To commence work between the technical teams on a possible new Contract for Recovery and Growth that the Greek authorities envisage between Greece, Europe and the International Monetary Fund which could follow the current Agreement.
(f) To agree on supervision under the EU and ECB framework and, in the same spirit, with the International Monetary Fund for the duration of the extended Agreement.
(G) To discuss means of enacting the November 2012 Eurogroup decision regarding possible further debt measures and assistance for implementation after the completion of the extended Agreement and as part of the follow-up Contract.
With the above in mind, the Greek government expresses its determination to cooperate closely with the European Union’s institutions and with the International Monetary Fund in order: (a) to attain fiscal and financial stability and (b) to enable the Greek government to introduce the substantive, far-reaching reforms that are needed to restore the living standards of millions of Greek citizens through sustainable economic growth, gainful employment and social cohesion.
Sincerely,
Yanis Varoufakis
Minister of Finance
Hellenic Republic
You can download the actual letter from – HERE
And the German Finance Ministry tweeted:
Erste Reaktion auf Brief aus Athen: Kein substantieller Lösungsvorschlag.
“No substantial solution proposed”.
The German newspapers quickly ran headlines such as that from Bild – Deutschland sagt NEIN and the sub-heading says:
Schäuble legt Veto gegen neuen Antrag der Griechen ein …
“Schäuble vetoes new application of the Greeks …”
The questions that we will be explored ad nauseum are:
1. Was the Greek letter a cave in or a trojan horse?
2. What more could Germany want?
I will join the chorus next week but for now this is what I thought the words meant.
1. On the face of it, the letter represents a cave in with the Greek government signalling that it was willing to maintain the harsh austerity that the Troika agreement had demanded in return for some insipid (face-saving) concessions.
2. The letter agreed that the Troika has an authority – something that its pre-election rhetoric fiercely denied and any progressive person should deny. It has no authority – it is unaccountable, unelected and has behaved like a bully. The requirement that the primary fiscal surplus should be 3 per cent this year and rising next year even more is Star Chamber stuff when you think about the unemployment rate, particularly the youth issues.
There is no economic justification for that at all. It means that the Greeks are paying taxes to fund foreign debt holders while their compatriats suffer unemployment and increasing poverty.
We knew that austerity was going to be damaging but the extent of the damage in Greece has been horrific. The Economist Magazine posted this graph on March 1, 2013 in the article – Is opinion shifting?.
Things have got a lot worse since then. The Greek economy is now around 25 per cent smaller than it was before the GFC began.
As it explains:
The vertical axis shows the growth in GDP per capita since the 2009 low; the horizontal axis, the cut in the structural fiscal deficit (ie the impact of deliberate government policy). There is a very strong and negative relationship which will delight Keynesians everywhere (or rather cause them to shake their heads in disgust).
The graph was produced by a private research group (BCA) and the Guardian reported today that the representative from that group has estimated that “for every euro the Greek government has saved through spending cuts or tax increases, the economy has contracted by €1.20” (Source)
3. The Greek letter clearly acknowledged the Troika monitoring – the goons who come in and check their books – would continue. They had rejected this surveillance going into the election.
4. Germany has clearly rejected the Greek government’s request for a 6-month extension of its €172bn bailout loan. It appears that they have been upset by the wording such as “mutually acceptable financial and administrative terms”.
The Financial Times article that followed the German rejection (February 19, 2015) – Germans rebuff Greek ‘Trojan horse’ – claims that German Finance Ministry insiders consider the letter to be a:
“Trojan Horse” designed by Athens to change the conditions it must meet to receive €7.2bn in aid available for finishing the bailout.
Germany has even been arguing about the length of the letter and had prior to the meeting on Thursday demanded that Greece:
… submit no more than a three-sentence letter requesting the extension, promising to complete the programme, and committing to negotiating any changes with bailout monitors.
Bend down low!
5. The Greek response to the German rejection was reported as being:
… accept or reject the Greek request
The words are tough – but the ground that the Greeks have moved back towards Troika control, ongoing austerity with no sign of massive European investment to offset the damage being done by running a primary surplus – is vast. Unless the words mean something different to the usual English interpretation. I am not a diplomat.
6. The options now would appear to be obvious: (a) if the Eurogroup doesn’t stand up to the Germans at today’s meeting, then the Greeks have to become complete surrender monkeys. (b) The other option is that they restore their independence and get out of the dysfunctional Eurozone mess dominated by sociopaths who have not learned the lessons of history well. Bets are on that they will surrender.
7. If they stay in and Germany prevails, how then would Syriza to the Greek people its transition from fighter for Greek dignity and freedom from austerity a month ago to surrender monkey – Troika lackey today? I am not a politician.
On the topic of bending down low – here is some music
Bend down low from the Wailers. This is the original version and released on their own – Wailnsoul/Wail ‘n Soul’m records – label, which was funded by cash that Bob Marley had saved while working in the US earlier in 1966.
It was the first release from this label.
Italy – We got out of the crisis?
This 13-second video was posted on You Tube by an MMT supporter in Italy. Images speak for themselves. For those who do not read Italian, the sign at the beginning of the video says:
Il Sole 24 Ore is “an Italian national daily business newspaper owned by Confindustria, the Italian employers’ federation”.
The billboard sign in the video is advertising a new initiative from Il Sole 24 Ore – Perché preoccuparci della deflazione? Lo spiega «Il giornale della famiglia», giovedì con il Sole 24 Ore – which announces that the newspaper will be launching a new edition each Thursday to inform the readers about all the difficult economic issues that families in Italy have to face up to.
The sign says that “While a recovery began” (“Se è vero che à iniziata la ripresa”) … and the Video heading “Siamo usciti dalla crisis?” says “We got out of the crisis?”.
Saturday Quiz
The Saturday Quiz will be back again tomorrow. It will be of an appropriate order of difficulty (-:
That is enough for today!
(c) Copyright 2015 Bill Mitchell. All Rights Reserved.
“The requirement that the primary fiscal surplus should be 3 per cent this year and rising next year”
The world has gone mad!
Alex Tsipras would now like to be called by his full name: “Alex Obama Tsipras.”
I’m struggling to find a positive that could come out of this.
All I’ve got is that if Syriza stay in power they might be able to share the pain more equitably.
I guess this drama has some way to go but I suspect that in the end it will only be the far right which has the cojones to take Greece out of the EU.
Pity about that.
It’s too early to pronounce a verdict on Syriza yet.
The problem all along is that the Greek government consists of integrationists. Europe is covered in them, all in positions of influence within the left. They really, really, really believe in the concept and cannot bring themselves to look upon the EU except through Rose Tinted Spectacles.
They believe in fixed exchange rates.
They believe in open borders.
They believe that appeasement works.
All in direct contradiction to the lessons of history, and the evidence in front of them that the EU has been co-opted by corporate power for its own purposes.
Things will have to get much, much worse in Europe before anything substantial will change on either side.
As expected, Europe have to wait for the “savior” Marine Le Pen, she want out of the Euro and at least talk about restoring French growth. But have awfully lot of bad right wing stuff in the luggage.
Varoufakis have in the past written about that it would be extremely difficult with dire consequences for Greece to leave the euro and reinstate the Drachma.
Syriza really don’t have a mandate to leave the euro, they have all the way reaffirmed that it wasn’t an option. They got 40% in the election. Albeit they now have 75% approval ratings.
It’s an awful lot of responsibility to be head of an entire country, it’s not an easy decision to make to make such a big change, and there is a risk that things get very much worse for a prolonged time before it turns. They are interweaved in the EU system in a way that e.g. Argentina or Island wasn’t.
And as is obvious Germany want to punish those who doesn’t toe the line, if Greece leave there is a risk that they will be punished even more, maybe even kicked out of EU, then Greece will need an EFTA/EEA agreement like Norway and Switzerland. Will they be further punished by Germany in such an agreement?
This European “peace” project have turned so malevolent (under German leadership) now that it have to go and the only hope for that seems to be Marine Le Pen. Evil shall with evil be expelled.
As Thatcher said in her last book:
“Europe is a monument to the vanity of intellectuals, a programme whose inevitable destiny is failure: only the scale of the final damage is in doubt“
The German position is madness pure and simple. Spiteful, sadistic madness. The German leadership wants utter capitulation and it appears, a permanent state of debt-bondage. I cannot fathom it and it doesn’t bode well for combating the prevailing orthodoxy with reasonableness. It’s just too entrenched and there are too many in power who have staked their reputations on it.
Perhaps Germany is attempting to push Greece out of the Eurozone, believing it can contain the fallout? Certainly, since the crisis emerged in 2008, a host of foolish nations, each as economically diminutive as Greece have lined up like lemmings to enter the currency union: the Baltic states for example. Greece has served its purpose and has been bled dry in order to maintain Germany’s surplus. These new Eurozone members given their size and economic strength in relation to Germany will soon become the new grist to the mill.
The left has to cease being reasonable and believing that it can negotiate with sadists and psychopaths. Varoufakis needs to be considering the nuclear option now and I can only hope that despite his rhetoric he has made preparations for the coming long weekend.
http://rt.com/news/233923-germany-poverty-wage-inequality/
“The economic powerhouse of Europe, Germany, is being chocked by wage inequality and “regional disunity”, with over 12.5 million Germans now below the relative poverty line – the highest number on record since the reunification of Germany 25 years ago.
…
But being employed also no longer means a person can make ends meet in Germany, as around 3.1 million workers receive salaries below the country’s poverty threshold. People have been forced to cut back on food and heating in order to survive, German media reported last month.”
Its not the export industry that have low wages, its in the domestic economy the wages and benefits are squeezed all to keep import down to create abnormal export surpluses. I believe the current account for 2014 is estimated to be somewhere between astoundingly 7-8 percent.
The people of entire nation is refused to enjoy the fruits of the country’s enormous productive capacity.
@supermundane
And on Island the socialdemocratic party is fighting to get them in to the Euro. To become a EU member the Euro is compulsory, there will be no more exceptions like UK and Denmark.
Juncker and Draghi are working behind the scenes to neutralize Merkel. If they are successful in doing so, it may be too late for Greece. (http://www.spiegel.de/international/europe/jean-claude-juncker-poses-challenge-to-merkel-and-austerity-policies-a-1017505.html) And, given what Varoufakis has said about his political position in the recent past, if this is really a cave in, then how long will it be before he resigns?
Hi Bill,
The Economist reproduces another graph from the BCA, about ‘Crowding out?’. What do you make of it?
Thanks,
Alex
/L,
Commitment to joining the Euro is compulsory but signing up to the ERM is voluntary. A country can’t be accepted into the single currency without first being part of the ERM. Therefore EU membership and Eurozone membership can be mutually exclusive, even for new member countries.
@/L
I hope that the people of Iceland can resist.
Social Democracy is an abject failure because it is premised on reasonableness – that you can come to an accommodation and demarcation with the lion that is capitalism. The history of Social Democracy is of the Social Democrat with his hand in the lion’s mouth. He says to the lion, ‘You can have my hand if you let me keep my arm.’ The lion bites down on the hand and now has the remaining lower arm in his gaping maw. ‘You can have the lower arm if you leave me my upper arm’.
And so it goes.
Dijsselbloem is a Social Democrat, which tells you everything you need to know about Social Democracy.
@/L
‘But being employed also no longer means a person can make ends meet in Germany, as around 3.1 million workers receive salaries below the country’s poverty threshold. People have been forced to cut back on food and heating in order to survive, German media reported last month.”‘
And the German leadership will the the German people that it’s the fault of the feckless Greeks. Though this manifests as a battle between nations, this is a battle of capitalism raw tooth-and-claw against German, Greek, French and Slovakian workers. Profits at the top in Germany are at the expense of the workers of the Eurozone, not least the German workforce. Hartz mandated wage suppression and government surpluses at the expense of investment in the nations necessarily leads to a stagnated domestic economy with subdued consumer spending, a diminished level of social mobility and decaying infrastructure. Germany is effectively burning its decaying infrastructure (much of built with foreign loans and cancelled debts) on a bonfire. The lack of new investment in the nation has, given those figures, already begun to unravel.
German pig-headedness and spitefulness will be its own undoing given the flawed design of the euro.
@supermundane
“Neglected, decaying Kiel Canal wreaks havoc with Baltic box schedules”
Seanews com
German road, railway infrastructure is decaying
“The once-soaring bridges are sagging. Some railroad switching equipment, once top-of-the-line, has not been updated since the time of the kaisers. Well-engineered canal locks are succumbing to silt and neglect. …
Even maintaining the status quo will require nearly doubling current spending levels, according to a recent report issued by a government commission. …
Peter Osse, a shipper in the port of Hamburg, said he increasingly reaches not for a timetable but a prayer book when he makes transportation plans. …”
Washingtonpost com
And now they have made balanced/surplus budgets law.
Meanwhile the Chinese is planning to build modern railroad from Thessaloniki and Piraeus to Budapest via Belgrade, that is if they get the contract on the Greek ports. China with their pockets stuffed with American deficit dollars created out of thin air. This while Europe and Germany have “run out of money” in their fictional gold standard. Europe have to be saved from itself somehow.
Dear Bill and Neil Wilson,
Before judging the actions of Syriza I think it is worth looking at the specific situation that Greece is in. Varoufakis has written quite a detailed argument about why exiting from the Euro is as bad if not worse than staying with it. It is possible that what he sees as ‘roadblocks’ to Greek exit could be overcome from an MMT perspective.
It is also interesting to read his personal take on the situation and the dilemma he finds himself.
Yanis on Greek exit – http://yanisvaroufakis.eu/2012/05/16/weisbrot-and-krugman-are-wrong-greece-cannot-pull-off-an-argentina/
Yanis on personal dilemma – http://www.theguardian.com/news/2015/feb/18/yanis-varoufakis-how-i-became-an-erratic-marxist
Both long reads.
@/L Interesting quotes and information. Thanks. Evidently the chickens hatched from their surplus fetish and their insistence that the euro should effectively operate as an extended deutchmark on the gold standard are coming home to roost sooner rather than later.
The German leadership are attempting to pin their sins and their failures in domestic policy on the Greeks in the eyes of the German people. It clearly serves their interests to maintain Greece in a state of perpetual debt-bondage and I fear it will get far uglier in Greece and in Germany yet.
@Nell
Grexit would be sharp, sudden and painful, and understandably no right-minded person wants to be responsible for inflicting pain upon others, however I wouldn’t be surprised that Syriza, were they to take it to the people and given how much they have attempted to reasonably accommodate Germany, would achieve a mandate for a withdrawal from the Euro. ‘We’ve done all we can to reasonably negotiate with parties that have no wish to be reasonable. What do you, the Greek people, want us to do?’
The euro in is current configuration is doomed (and there is no sign that it will be reformed and no appetite for it) and the pain, suffering and wastage that will arise from its demise will be long and protracted. Better surely, given the choice between to painful choices to take the shorter, sharper pain with the prospect of recovery over the longer, more protracted pain without any prospect of recovery in sight? Varoufakis is evidently an intelligent and thoughtful man but reasonableness is no longer tenable in the face of outright sadism and intransigence.
I believe that a Greek exit will be immensely painful and may destroy Syriza as a political force (it will be destroyed if it caves) however there are solutions afforded by an understanding of MMT. I can only hope that Jamie Galbraith in assisting Varoufakis is tasked with planning for an return to a sovereign currency.
Its not Germany , its the banks behind Germany and the people behind the banks..
The state is not as we know it – it is in fact a corporate body.
Mmters accept this , they just wish we would be better managed by our owners.
In that sense they are no different from social democrats.
The history of europe is the true elite using the Jews to concentrate wealth , when the costs of concentration are too great we get expulsions.
Its like a friggin clockwork toy.
Germany is doing humanity a favour by exposing the brutal reality of the situation.
We can see the ultimate expression of capitalism in the eurozone – Dr. Frankenstein has created his perfect monster.
Costas Lapavitsas
professor of economics at the School of Oriental and African Studies, University of London, and was elected as a MP for Syriza 2015.
It says he have moderate his tone since becoming an MP for Syriza. Natural if you are part of the ruling party in general a united front backing the gov. is necessary.
Here is what I reject about Keynesian expansionary logic.
What has GDP ever done for me ?
Most of the production is wasted.
Its not about canal locks , roads etc – this is now aiding state wealth concentration only.
Its at least should be about the person.
Of restoring individual rather then corporate purchasing power.
I’ve tried to remain optimistic that the Syriza led Greek government isn’t caving in but I’ve just read the following quote from you-know-who.
“The Greek government has not just gone the extra mile, but the extra 10 miles, and now we are expecting our partners not to meet us halfway, but a fifth of the way… Hopefully at the end of this, we come out with some white smoke”
So there we have it. In his own words too. Some white smoke maybe, but there’s a big white flag too.
I am prepared to predict that Syriza will fall from grace as fast as they rose to prominence. The only issue to be resolved now is whether they will be succeeded by the far right or by a military coup and dictatorship (or some combination of the two).
What people don’t get about History.
Edward the first was a republican king in so far as there can be no special people.
In Europe the capitalists in control rather ownership are the special people.
This will lead to a fall of any nation or confederacy
I’m sure that I had recently read somewhere (possibly on this site!) that the German Finance Minister, Wolfgang Schauble, proposed a while ago that the Eurozone moves to a system wherein a Member State which has failed economically cedes its budgetary sovereignty to the EU’s institutions, and the budget for that Member State is then run by the EU (or perhaps the Eurozone’s finance ministers).
Whilst that system has not been formally constructed – because it would require Treaty change, and they don’t want the UK or other Member States to think that Treaty change is available to them – it looks like it is the de facto system that they are now working to, i.e. their reasoning is that Greece has failed economically, therefore no matter who it elects, by failing within the Eurozone it has ceded its right to govern its own economy to the Eurozone Member States.
[first lines] SUNSHINE FILM 2007
Capa: Our sun is dying. Mankind faces extinction. Seven years ago the Icarus project sent a mission to restart the sun but that mission was lost before it reached the star. Sixteen months ago, I, Robert Capa, and a crew of seven left earth frozen in a solar winter. Our payload a stellar bomb with a mass equivalent to Manhattan Island. Our purpose to create a star within a star.
[long pause]
Capa: Eight astronauts strapped to the back of a bomb. My bomb. Welcome to the Icarus Two.?……
DORK :
Its looking increasingly like Europe (Icarus 1) is being used as a plot device for the globalists reality movie.
Its not that far fetched.
We can be certain that a central force has control over all capital ( Who needs ownership ?)
So why not ?
If you have such power you can do anything that takes your fancy.
The Irishman ( current finance minister) who gave a letter of comfort to the banks (the ultimate form of treachery ) has just said
“Greece should follow the Irish example”
The purpose of capitalism is not to produce usable goods.
To keep producing but to not satisfy real human demand.
.
I think much of this is capitulation. But Syriza has only been in government for how long now? And there is a very real possibility of the ECB pulling funding, and I doubt they\’re prepared for that at this juncture, and they really don\’t have a mandate for pulling out of the Euro. So we\’ll see what happens in 4 months, but it might give them more time to be better prepared for what may well come, and prepare the electorate as well. But I think the real threat is that the ECB pull funding and you get a full on bank run that would be disasterous, and doubt that are prepared for that at this time.
This is pure tragedy – in front of our very eyes!! To what era – decade – century – is greek ordinary people forcefully tried to cast?
“ad nauseum”
I’ve been told it’s “ad nauseam” with an “a”.
But apart from that, agreed. Syriza ought to simply refuse to bail out their own banks for a start. That’s the real frontline here – it’s not Greece vs Eurogroup, it is citizens vs banks.
Short version: I MIGHT BE TOTALLY WRONG but he rolled over. Disappointing but not entirely unexpected. R.I.P. another hope that the world can be transformed by well-wishers.
Long version: The only reasonable thing a decent independently thinking person can do as an individual is not to directly touch the so-called politics at all. I have a strong suspicion that Yanis Varoufakis appears to be a 167853-th victim of magical thinking than an individual can change the political process because he/she is right.
Unfortunately the majority of politicians have been promoted to a sociopath and/or psychopath status and a normal person will almost always be moulded becoming another Tony Blair or being forced out at an early stage. I cannot prove my point but this is based on my personal observations of group dynamics made in Poland in 1988/1989 when I was a student organiser.
Why was I able to make these observations – and other people are often not? Because I easily pass all the tests for a non-existing Aspergers syndrome (or I have been born a libertarian) so I have never enjoyed belonging to groups. I don’t get a sugar hit. I don’t give it a s.
The leaders’ “values transformation” problem is all based on group dynamics. First – it is driven by a strong feeling of belonging to a group and playing for a team. It is the identification with a team what suppresses any doubts. Then – people in politics know more than ordinary citizens. “You would have made exactly the same decision knowing what I have heard from Jack Lew. Oh and they all have promised me a secret deal just don’t say anything, don’t even blink, everything will be good my little baby.” This leads to not seeing the forest for the trees. The access to secret information crowds out common sense. Also – you feel that level of responsibility for these little kittens. Millions of them. Then you also feel group solidarity with the other members of the upper caste. Mr Varoufakis has just performed a Stanford Prison Experiment on himself. He claimed he was an individualist, a libertarian. Well – not on this occasion I am afraid.
Sometimes slightly corrupt and openly selfish politicians deliver better outcome for their country than “idealists” and visionaries. I dare to day that the fate of Belarussians under Lukashenka is a hundred times better than the Ukrainians under their democratically elected leadership. Maybe the Greeks need another Lukashenka? Maybe he would fit better there? Maybe a bit of Berlusconi would also help? Maybe a dim person who will cook the books and then ask for political asylum in Donetsk People Republic would be their ideal finance minister? Because it is the System, the Euro System which has to be pulled down – or rather allowed to collapse on its own(with a little help), like communism. It can hardly be reformed.
People like Tony Blair are not born evil. They are born idealists trying to fix the world. They simply become a part of the system. I have a strong suspicion that the members of the new Greek government have already crosses the line and became “normal” by accepting the fiscal framework and joining the mental Euro System. Maybe it is better for Greece if Yanis Varoufakis instead of desperately trying to reduce the unemployment by 0.1% within the fiscal framework agreed with the Eurogroup, simply walks off and lets the whole thing collapse into a pile of ashes. The world doesn’t need these little helpers of Santa. It will take care of itself. Trying to prolong suffering of a terminal patient may not make sense at all – knowing that the patient (Greece) will be resurrected anyway (in one form or another) in our case. Trying to be positive all the time simply doesn’t work. Why do the Germans need any smart post-Keynesian collaborators in implementation of their evil plans to create a rational “homo germanicus” a new and improved version of “homo sovieticus”? Just leave the people in Southern Europe alone, let them be lazy irrational and slightly corrupt, this doesn’t do any harm to anyone. They will never belong to the “homo germanicus” species. They don’t need to be liberated from themselves.
Sadly what I wrote above is also linked to an unscientific proof that socialism will never work among humans. Maybe it’s good for meerkats but not for cats or humans. I have never been a socialist because I saw a so-called real socialism in action. I am not an errant Marxist like Varoufakis. I don’t need to apologise for being inconsistent. Marx was a great thinker in providing an in-depth critique of capitalism but virtually none of his or his disciples positive proposals are working. Marx was plainly wrong. Why? Again – because of the social dynamics in micro scale. Once a cooperative group is formed the processes of decay kick in. The problem is in the existence of a so-called collective. It is true that it is not just a sum of individuals – for the good and for the bad. Larger collectives can only be made stable by coercion not by more democracy like perestroyka. Otherwise free riders take them over or people simply lose interest and go they own way. This is the explanation why private enterprises are almost always more efficient than cooperatives and public sector. Yes – they are better in extracting and capturing surplus value because surplus value is not socialised. There is a role of monetary tokens in mediating flow of labour and goods. Personally I prefer to deal with budgetary constraints embedded in my wallet rather than with a network of well-wishing people trying to coerce me.
People need to be slightly isolated, alienated. Common property rights worked quite well only at a tribal level in the past. They worked in Australia before 1788. They won’t work again. This is how it is. I am not against public sector in general, it has a role in delivering public goods (including employment). I also think that private property rights are not absolute, they must be limited or else the world will be taken over by the 0.1%. Not just abolish them just “slightly” trim them and introduce some annoyance such as environmental responsibility for land owners. You only own things to some extent – like in China. This is the way forward not just silly confrontation.
I am just saying that from my personal and unscientific observation there is always more stupidity in the behaviour of public sector managers than in the behaviour of private sector managers. Because this is how bureaucracy works – and grows according to Parkinson’s law.
Obviously big monopolist corporations can approach the same level of bloatedness as public administration when the owner of the means of production loses the power to sack managers. This is the sad feature of the current neoliberal era – the presence of bloated corporations not only greedy but inefficient, destroying the society, the environment and not allowing genuine capitalism based on competition to emerge.
The assumption that the majority of the people can be moulded and made cooperative and predominately selfless is as irrational as the assumption that they are strictly monogamic (what is being preached by Catholic church). The outcome of harbouring these delusions for Catholic church is the emergence of paedo-priests. The outcome for socialists is the decaying economy of Cuba – or frozen North Korea (a variant with coercion).
This also explains why China has so efficient economy when they combined public sector as a form of Job Guarantee and private sector on steroids of greed and exploitation. Not to mention the macroeconomic management entirely not neoliberal – still in the hands of the so-called Communist Party – and a healthy dose of mercantilism. Yes this mix doesn’t look good, doesn’t smell good – but it works.
We need to accept that we are not ideal creatures. We will never live in an ideal world and building idealised models leads to creating delusions. Mr Varoufakis may be in denial but he is an idealist. What he has just done is very typical to idealists confronted with the reality, trying to “reform” the world. He made a few small steps and … he embraced the reality with all his three hands.
Sadly, it is the original set of liberal or libertarian values what forms the basis of any viable alternative to a so-called neoliberalism. More Switzerland less Brussels. The acceptance of imperfection. In my opinion Mr Varoufakis should simply allow the bankruptcy processes to take their natural course because this is the only way a renewal can take place – rather than numbing the pain. Do more by not doing anything. Only then a proper fiscal framework with a local currency can be introduced.
How he can take personal moral responsibility for being an extension of Mr Schauble’s lash is difficult to comprehend having read some of his writings. “I am here to help like KRudd”. He thinks that he can outsmart the Germans. “Viel glück”. He should just resign on Monday, take a plane back to Texas and keep writing more texts about his personal errand Marxism. He seems to be a nice guy but one who would not pass an Asperger syndrome test so he will not be able to make any real impact because he is mentally limited in the independence of his thoughts and deeds from the processes he is taking part in.
One thing is to be a smart analyst and slick public speaker another is to be a leader.
Beware – the only politician with that non-existing syndrome is apparently Vladimir Putin. He can say “I don’t give it a s.” and send more troops to slaughter Ukrainian nationalists. He is not a part of the System.
Again – I might be totally wrong. Sometimes I wish I was…. maybe Mr Varoufakis is going to cook the books. Good on him then…
@Mark
Events prove that the concept of a state citizen is a illusion.
It all goes back to the destruction of merry old England.
Better to be a peasant then a serf – alas even large owners of capital are serfs if outside the loop.
The power that these people wield is enormous as almost all of us are dependent on the industrial surplus rather then the land.
Also, sorry for being rude, what’s the point of having the Finance Ministry in Greece in the first place if they cannot make any real impact? It will be much more efficient to get rid of this facade and simply hire Serco to run the Ministry. At least people will have someone to take to court if the things are screwed up further. The Serco are doing an outstanding job in running concentration camps for illegal asylum seekers here in Australia. Poor people of Greece should be liberated from the delusion of the so-called “democracy”. Instead of organising elections it is far cheaper to give everyone a bottle of vodka – like in Russia. The fiscal rules won’t be breached by this single act of generosity.
Mr Varoufakis should pack up his bags and go back to Texas. He can’t help Greece at the current stage, I am sorry about this. They don’t need an extension of a leash. They need old-fashioned sovereignty from the Euro CCCP – a rather non-Marxist idea. The only good thing from this short experiment in immersion in “Groupthink” might be if he publishes on the Internet all the secret transcripts from the so-called “negotiations”. Only then I can still believe that his values transformation hasn’t been completed.
They are all dealing with Greek prime minister (Alexis) not the finance minister because it is easier to cut a deal and he has no clue how the system works now.
It takes a very erratic Marxist to want to save capitalism.
A letter from someone in Greece:
https://www.wsws.org/en/articles/2015/02/21/corr-f21.html
Agree 100% with Neil Wilson.
Is it possible that Troika interference, EU Banking System control of financing mechanics and EU intrusion into the mechanics of funding a national budget, namely Greece’s national budget, mean that the Greek government and officials do not know how to independently run their Treasury? Is it a case of learned or acquired institutional inability? That they actually and literally don’t know HOW to do anything else other obey the Troika? That they no longer have the expertise to run their own Treasury. That don’t know how to take indeoendent decisions, how to exit the Euro and how to issue their own currency, float it etc.? I am really beginning to wonder.
It is either the above or else the Greek Generals in concert with US Embassy and CIA in Athens have told Syriza that if they leave the EU then there will be a military coup. I wonder if Wikileaks has any recent leaks which would indicate this is the way the wind is blowing?
Ikonoklast, SYRIZA’s bargaining position is weak because they are trying desperately to stay on the Euro. Varoufakis has given two main reasons why they are not looking for an exit from the Eurozone:
1) Greeks would be worse off, for the forseeable future
2) The Greek public do not want it, and SYRIZA is following their mandate
You may argue that 1) is a misjudgment, but from what I have read, Greek popular opinion truly is against leaving the Euro. Of course, SYRIZA could be arguing 2) to cloak, other, less palatable reasons.
In response to your charge of incompetence or a lack of imagination, Varoufakis’ writings show that he has considered all sorts of complicated fiscal manoeuvers to respond to Greece and Europe’s woes. But he has consistently argued in favour of amelioration rather than rupture, saying that the evidence so far shows that more woe will strengthen the hand of fascists and not the left.
I don’t think it’s necessary to see the threat of a coup behind Greece’s weakness. The political and economic threats are real and overwhelming. Everyone agrees that a break with the Eurozone would cause serious pain to all in Greece, at least in the short-term, and the coalition government would be unlikely to endure.
Malcolm, I take your points and you may well be correct. However, I was not arguing that Varoufakis is incompetent. I was arguing that the insitutional apparatus and institutional knowledge, expertise and experience for Greece to issue, manage and folat its own currency might no longer exist. This apparatus could have been dismantled under the years of EU control and also EU officials and apparatchiks may well have been insinuated into Greece’s Treasury apparatus.
Losing or surrendering currency sovereignty as Greece did could mean dismantling, downsizing and obsoleting part of the governance apparatus surrounding and comprising the Treasury. The Treasury could remain competent enough as a lackey of the EU but not competent to refloat and run a sovereign currency.
Practical matters obtrude too. How can Greece mint/print a drachma now? Does it have a mint? Does it have a contract with a foreign mint? How can the Greek government deficit finance in current parxis without issuing bonds and taking on debt? I mean in the sense that the current national account protocols and controlling computer systems of the Greek treasury might not allow such operations as laws, procedures and computer programs might have been expressly written to prevent such operations.
When you dismantle a Government function (like the Iraq army after GW2 or Greece’s ability to run a sovereign currency) it actually takes time to rebuild that functionality again.
Basically, we have a Europe run by the bankers now. It will take a lot to break their power in the short term. In the long term, the EU is un-runnable and unsustainable unless it becomes a true Federation which allows both vertical and horizontal fiscal transfers like the USA or Australia. Since the bankers probably won’t allow that the EU will collapse. Another interesting point is that the EU is well over its sustainable footprint. Limits to growth and lack of sustainability are hitting it hard even now.
‘Another interesting point is that the EU is well over its sustainable footprint. Limits to growth and lack of sustainability are hitting it hard even now.’
It’s usually referred to as the ‘limits to growth fallacy’ these days.
Humans have a limited ability to consume but machines used to concentrate wealth in a usury based system can exhaust raw materials in a blink of a cosmic eye.
You should come live in Irlande.
Euro drones have been bleeping about limits to growth / green issues for decades while dumping 2 million cars on our heads.
It started in agriculture during the 60s and 70s ( Ireland’s first euro credit boom and bust)
European agricultural policy destroyed the old framework of farming and then had the Gaul to lecture us on green issues.
The structure of Ireland’s energy balance is some sort of sick insiders joke.
A capital goods dumping ground.
What the euro boys wanted to achieve in the Ukraine.
To sell millions of efficient machines of little utility to the population and call it a increase in living standards,……
dork, digesting, not ignoring :0)
Syriza look to have fallen at the first fence. I hope I’m wrong in saying that, but their failure is due to their making it clear, much too clear, that they weren’t prepared to leave the euro.
Once the Germans knew that the Greeks weren’t going to play their ace, they were able to just toy with Syriza’s negotiating team and in the end have humiliated them. Their war hero anti-fascist MEP, Manolis Glezos has denounced the Greek loan “agreement” as an ‘illusion’ . Incidentally, I’ve only just heard of his remarkably life story! He, together with another comrade during the occupation, tore down the Nazi flag from the heights of the Acropolis and replaced in with the Greek flag. That’s not the end of it. He’s well worth looking up, and looking up to!
The present day German flag (figuratively if not literally) needs to be torn down from above the Bank of Greece. Unlike Manolis Glezos, the Syriza leadership won’t face the death penalty for that. It has to be done now, otherwise there will be one humiliation after another for Syriza and the Greek people.
SteveK9, I assume your comment on the “limits to growth fallacy” means that you think growth can continue forever in a finite system. You think growth can continue for ever in a biosphere with finite stocks of non-renewable resources and finite flows of renewable resources. If this is so then clearly you have not even a basic understanding of thermoeconomics, thermodynamics, physics or ecology. If you had such an understanding you would realise that endless growth in a finite system (the biosphere in this case) contradicts all the known laws of physics, ecology and biology. I can only assume you think economics (probably capitalist economics) is magical and can defy the known laws of the universe. I can only assume that you think the economy is freestanding and has no dependence on the real world environment. I know it’s fun to make believe that magic is real but such willing suspension of disbelief is best kept to storybooks.