Coming Soon:

Now Available: Volumes I, II, III, and IV of the Collected Published and Unpublished Papers.



Total Pageviews

Monday, July 6, 2015


A quick reply to Wallace Stevens, out of ignorance:  I agree completely with his remarks about the tax evasion of rich Greek citizens, but if Paul Krugman is correct [and I am in no position at  all to form an independent opinion], Greece for some time has been running a budget surplus, if one leaves aside the payments on its debt.  The struggle has been over how big that surplus ought to be and how much ought to be taken out of the hides of ordinary Greeks.

There was a comment on Morning Joe today that, I thought, revealed the actual agenda of those beating up on the Greeks.  To paraphrase, if the Greek left-wing government, as a consequence of the no vote, is able to negotiate a better deal with the IMF, that will encourage left-wing parties in Spain, which has an election coming up.  So it seems this is not about frugal. belt-tightening, responsible Germans trying to rein in the profligate child-like Greeks.  This is about corporate Europe trying to sink a left-wing government before it sets a dangerous example for the rest of Europe's left.

But, as I say, I only know what I read in the papers.


Wallace Stevens said...

I share your ignorance of all of the ins and outs of this very complicated situation. My impression is that there are no real heroes here. But Tsiparas and his party are high-profile standard-bearers for the Left right now and I wish that they could do better.

I object to their attempt to reduce all of the complexities to the cartoonish idea that they are up against "neo-liberal" ideologues who are acting undemocratically and, the implication is, by some kind of sinister force. They seem to relish this characterization of the problem. As if it's the seventies again, the battle lines are clear and simple, US-sponsored coups are overthrowing progressive governments, and so on, and so on. It almost seems like this is the world that they WANT, or WISHED they lived in--a clean struggle with evil banks on one side, and "the people" on the other.

In fact Germany and France--and Finland, another "hard liner"--are all,when measured against real economies, and not some hypothetical ideal, quite progressive. And Greece got into the mess that it is in by exercising the most independent, democratic sovereignty over its economy. The idea of "predatory lending" in this context is patronizing and insulting to the Greeks, you would think. But no, there is this odd illusion of helplessness that some on the Left, inside Greece and out, have embraced. It seems of a piece with the "back to the seventies" struggle I mentioned above: the people at the mercy of blind economic forces beyond their control. They are buying into the very illusion of the economy as a "force of nature" that any serious Left analysis should be trying to explode.

Finally, all of the force that Greece is subject to today stems from the fact that they have huge debts and, if they want to keep the euro and the benefits of EU membership, they are obliged to listen to people that they don't like and don't agree with. This is the reality. You can't simply "vote it out." It is this magical thinking that I object to.(By the way, I'm not saying that I agree with the German medicine. It may well be the wrong approach. I don't know enough to say. I'm just saying that it comes with the "euro" package and the Greeks have to accept that.)

Greece has only two real alternatives: (i)keep the euro and accept whatever medicine the EU and the IMF want to administer, while negotiating as much "sugar" as you can to help it go down; (ii) leave the euro and default on the debt. The second option is the one that should have been on the ballot on Sunday. It is reasonable and realistic, and the one that I would have voted for. It may also be what the Greek people get, in the end, with their "No" vote on Sunday. But Tsiparas has not been honest about what the alternatives are and what they mean. Option two leads to a different kind of austerity--this time due to a massive devaluation of the new currency against the euro, essentially a massive pay cut and loss in purchasing power to pensioners, but a stimulus to the Greek economy.

Tim said...

"In spring 2010, as Athens wrangled with the IMF and the rest of Europe for what would turn out to be a €110bn emergency loan, a revealing, chilling phrase slipped out. When Greece's then-premier, George Papandreou, begged for easier borrowing terms, he was told by Angela Merkel that the deal had to hurt. According to a well-sourced report in the Wall Street Journal, the German chancellor said: "We want to make sure nobody else will want this.""

Ludwig Richter said...
This comment has been removed by the author.
David Auerbach said...

new yorker piece
independent piece

Merkel et al wanted to assert its rule over Greece (and thereby Italy and Portugal). Greece said no. I think that's a good thing. Useful to remember that Europe socialized the debt years ago without the creditors taking a haircut; debt relief wouldn't go to helping Greece rebuild, it would simply cycle back to the central banks while Greece's GNP sank lower. All this an entirely forseeable outcome of decisions Germany et al have made over the last decade. Foreseeable, hence intended (absent good evidence to the contrary). Germany would, no doubt, have preferred that Greece impale itself on the other horn of the dilemma, but the horns are Europe's creation.

Jerry Fresia said...

This is class warfare pure and simple. Syriza wanted to tax the rich and cut the military and the Troika said no - that in effect Syriza must gouge the poor and working class. I would urge all to take a look at this 24 minute summary of John Perkins' Confessions of an Economic Hit Man, which explains how the US has been using debt creation to take control of the resources of various nations, much as the Troika is now doing with Greece.

The piece begins with a quote from John Adams: "There are two ways to conquer and enslave a nation. One is by the sword. The other is by debt." The NO vote by the Greeks represents a brave resistance that may well reverberate throughout Europe and the US.

Jerry Fresia said...

FYI: Greece ready to play hardball???

Robert Paul Wolff said...

Jerry, I do not even really understand this, but I just love it. The thought of the Greek government printing Euros is delicious!

Wallace Stevens said...

Simply printing euros does not appear to be a way out of the problem. I have read elsewhere that Greece only has the ability to print 10 euro notes. So you would need a lot of ink and paper to get the country afloat again. The second problem is that the printing of euro notes is shared across the entire euro zone, with all of the serial numbers on notes printed in Greece beginning with "Y." So the ECB could allow a short-term exchange of "Y" for "non-Y" notes in the rest of the zone, and then, from then on, declare any "Y" notes counterfeit and worthless.

But I really hope this is not what they are thinking, even if the practical problems were not there. It just reconfirms the magical thinking I referred to earlier. They seem to believe that you can democratically vote to get people in other countries to do things that, rightly or wrongly,for their own democratic reasons, they don't want to do.

The only real alternative for Greece, if they don't like what the Eurozone has on offer, is to default and set up their own currency. You don't have to like or agree with Merkel's medicine to see this point. It is likely that this is where Greece is in fact headed. But, sadly, this is not what the "No" thought that they were voting for, and polls show that an overwhelming majority of Greeks say they want to remain in the Eurozone. Tsipiras will face severe problems when this reality sinks in. Because make no mistake, defaulting and leaving the euro will also be painful. To cite only one point, since the government won't be able to borrow for some time, it will be forced to run a substantial surplus in order to function--at least has high a surplus as what the EU was demanding.

When Britain faced a very different kind of German threat, Churchill was honest with the British people. He didn't continue to promise a negotiated solution, on terms acceptable to Britain, once all hope of such a solution had broken down, or hold a referendum asking the British people to say "No" to Germany invading other countries. Nor did he boast of an easy victory in the event of war. He very soberly spoke of "blood, sweat and tears." Greece needs this kind of lucid, sober leadership now.

Wallace Stevens said...

I was looking at some international comparisons of income inequality on Wikipedia--specifically, the Gini coefficients calculated by the OECD. (As a reminder, the Gini varies from 0 to 1, with a 0 meaning perfect equality of whatever is being measured, and a 1 meaning that one person has everything and everyone else has nothing.) Pre-taxes and transfers, the Gini for Germany in "Late 2000's" (that is all that is said in terms of year) was 0.504 and that of Greece was 0.436; post-taxes and transfers, which is what really matters, I think, they were, statistically, a dead heat at around 0.30. (The comparable numbers for the US are 0.486 pre-tax/transfer, and 0.378 post.)

Now this is interesting: Germany starts out with distinctly greater inequality than Greece, but matches Greece on a POST tax/transfer basis. This means that the tax/transfer system is doing more "work" in Germany, but, at the same time, we know that it is doing so without generating the chronic, unsustainable deficits that you see in Greece. The Greek outcome, while comparable to Germany's, was not achieved through redistribution, but rather by convincing creditors to lend them money--at times, only being able to do so by lying about the actual level of the existing debt. This is a kind of “ponzi” socialism, where only suckers actually pay taxes, and the balance is made up by borrowing. It is not the real thing.

There is a lot of talk about bad, right-wing Germans forcing harsh, "neo-liberal" medicine down nice, "progressive," Greek throats. But the German levels of inequality—a key measure of “progress” in a society—are comparable to those of Greece. And they have achieved this by taxing people with high incomes and re-distributing what they collect in various ways--in euros, and in kind--to people with lower incomes. It is not that there is no corruption or tax evasion in Germany. But there is much less, apparently, than in Greece, where it seems to be a phenomenon at all levels of society. Based on these statistics, it is the Greeks who come across—de facto—as the right-wing, "tax is theft" crowd, and not the Germans, who seem to demonstrate much more “progressive” levels of social cohesion and solidarity. It's ironic, or it is to me, at least.

Jerry Fresia said...

These two pieces just came out yesterday and each gives the reader an inside view of EU's realpolitik:

The first is by Yannis Varoufakis, the Greek finance minister who was pushed out just after the "no" vote, and the second is by
James Galbraith, who is close to Varoufakis. I think anyone reflecting upon the question "What is to be done?" will appreciate
the Jack-Reed-style of these reports of what it is like to confront raw power from the left.