‘We have faith in our citizens’ – why?

by niamh on November 1, 2011

I was just planning to write about Greek prime minister George Papandreou’s announcement today that he plans to hold a referendum on the most recent EU bail-out agreement, when I read Henry’s post. If the referendum were to go ahead (and we can assume Merkel and Sarkozy will try to talk him out of it at the G20 dinner), it would probably be held in January, and who knows what the state of debate might be by then. As Henry notes, this is frightening the markets, as one would have predicted, and France and Germany will want to put this fire out as fast as they can.

But in the meantime, I am particularly struck by Papandreou’s explanation of his decision:

‘We have faith in our citizens, we believe in their judgment and therefore in their decision,’ Mr Papandreou said after rejecting a call for early elections by some socialist politicians. ‘All the country’s political forces should support the [bail-out] agreement. The citizens will do the same once they are fully informed.’

Papandreou has clearly had a pretty awful time of it recently, dealing with Greece’s EU-IMF paymasters against the backdrop of constant strikes and protests. Indeed, while the review group was inspecting the books inside the Finance Ministry recently, the Ministry’s own officials held a noisy protest outside. Papandreou’s parliamentary majority shrank from ten to three in recent months. He faces a leadership challenge from his own party. He clearly hopes to strengthen his own authority by forcing the protesters to back down. But will it work? And if it does, what does it tell us about democracy now?

If a general election were to be held anytime soon, the socialist party, PASOK, would be trounced. But polls indicate that while nine out of ten voters express discontent with the government, the same proportion also expresses dissatisfaction with the largest opposition party, the conservative New Democracy. Only two in five voters think an election is necessary.

I don’t think people in Greece thought last week’s EU deal was going to make anything materially better for them, since would take their debt from 170% GDP to ‘only’ 120%. The deal may have bought some time for other European leaders. But it is likely to ramp up the pain for Greek citizens in the short to medium term. As an exercise in blame-shifting, a referendum could prove counter-productive. ‘Blackmail’ seems to be a common reaction. Fringe left-wing groups are doing well in the polls. I don’t think anyone would be too surprised if voters used the opportunity to register a loud vote of protest.

Presumably Papandreou hopes to use the referendum as an educational device to show that only one answer, what we might think of as the technocratic one, is in fact possible – why else would he do it? But it’s a pretty high-risk strategy.

Papandreou’s latest dilemma therefore seems to me to present a really stark example of the late Peter Mair’s poignant analysis of the paradox of contemporary democracy (which applies a fortiori to transnational democratic processes, as Dani Rodrik reminds us):

Although it is generally seen as desirable that parties in government are both representative and responsible, these two characteristics are now becoming increasingly incompatible. Prudence and consistency in government, as well as accountability, require conformity to external constraints and legacies… Public opinion, in its turn, has become harder and harder for governments to read. Parties are no longer in a position to bridge or ‘manage’ this gap, or even to persuade voters to accept it as a necessary element in political life. This growing incompatibility is one of the principal sources of the democratic malaise that confronts many Western democracies today.

{ 123 comments }

1

norbizness 11.01.11 at 5:04 pm

Mary Bailey: My worthy opponent thinks that the voters of this state are gullible fools. I, however, prefer to rely on their intelligence and good judgement.

Reporter: Interesting strategy.

2

William Timberman 11.01.11 at 5:39 pm

A great beast they may well be, but in my opinion, it’s about time somebody asked the people what they think. As an American, I have The Federalist Papers to console me, which is not to say that I’m ignorant of all the water that’s passed under the bridge between then and now, nor of the fact that the subject of those papers is now as much or more in the grip of madness as any of the other countries which weren’t thought at the time to be equal harbingers of the novus ordo seclorum.

Still, I’m heartily sick of the well-meaning who never have to suffer the consequences of their own well-meaning machinations. If that makes me a populist, so be it. When one can only be a scoundrel, it’s just as well to be one with no illusions.

3

Shelley 11.01.11 at 6:39 pm

Anybody interested in this stuff will enjoy (maybe the wrong word) taking a look at Ron Suskind’s Confidence Men.

How can we oppose the bankers when the bankers are the only ones who understand the crazy system they’re running?

Go Elizabeth Warren.

4

Barry Freed 11.01.11 at 7:10 pm

Picked this up from Alex Harrowell’s twitter feed I think but the Defense Minister is sacking all the top brass: http://www.athensnews.gr/portal/8/49916
he speculates whether this could be a preventative measure against coups.

[Apologies if this has been linked in comments here or in the post below (doubly so if it’s in the body of either post) but I’m pressed for time, skimmed both and didn’t see it so…]

5

Barry Freed 11.01.11 at 7:12 pm

So that’s no faith in their Generals then.

(yet another missed opportunity for obv line…/grumbles)

6

Lemuel Pitkin 11.01.11 at 7:21 pm

Peter Mair’s stuff is excellent. I didn’t know he had passed away — that’s too bad.

On the substance, the only quibble I have is with the implicit assumption that there was some golden age when “responsibility” and representation coincided. There has always been a tension between democratic accountability and liberal governments’ various commitments to the protection of property. And for most governments, commitments to property have always been substantially enforced from the outside.

There isn’t a simple before and after story. In some parts of the world, like Europe, the liberal commitment to property has been strengthening relative to democratic representation. But in other parts of the world, like much of East Asia and Latin America, the trend has been in the other direction. For every Greece, there’s an Argentina.

7

Xerographica 11.01.11 at 8:25 pm

“Public opinion, in its turn, has become harder and harder for governments to read.”

There’s nothing difficult about it. Nearly 75% of Americans support Obama’s plan to provide funding for more teachers while 65% of Americans want to pay less taxes. Our current level of debt clearly reflects that politicians fully appreciate that “representing” is in their best interests because it helps guarantee reelection.

Voters want to have their cake and eat it too. Politicians irresponsibly try and give voters exactly what they want.

The simple solution is clearly to allow each and every taxpayer to decide for themselves whether they want to spend their taxes on having their cake OR on eating their cake. In other words…we need taxpayers to consider the opportunity costs of their individual tax allocation decisions. This will force them to prioritize which public goods they value most.

Whether a consumer purchases a new TV or makes a donation to UNICEF…they implicitly understand that the money that they spend cannot be used to pay for other goods that they value. The cumulative result of each and every consumer considering the opportunity costs of their spending decision ensures the best possible use of private resources. Why would anybody argue against the best possible use of public resources?

Even if congress wanted to be responsible…given that they have NO idea how much we truly value the various public goods…every single tax allocation they make can be considered a misallocation of public funds.

It’s just like the blind men each touching a different part of the elephant and arguing over what it is that they are touching. The only way we can accurately know what the scope of government should be is if we ADD all the limited perspectives of each and every taxpayer together. The blind men would never come to the correct conclusion if they averaged their perspectives and we’ll never come to the correct perspective if we try and average the perspectives of taxpayers.

It’s absurd that we’re all forced to purchase the exact same public goods just like it would be absurd if we were all forced to purchase the exact same private goods.

On the very rare chance that you appreciate how limited your perspective truly is then please see my latest blog entry on the value of political tolerance.

8

bert 11.01.11 at 8:26 pm

Thanks for the Mair link, Niamh.
Henry is always worth paying attention to, but I prefer your take on this.
I agree with the abstract proposition that it’s best to underpin a technocratic programme with a democratic mandate – who wouldn’t?
But I struggle to see how a Greek referendum moves us substantially forward.
And I seriously doubt that in today’s Europe an attempt to produce a single democratic mandate would be at all straightforward. Look at the problems that came from pretending a single interest rate was a straightforward thing.

This may be the difference between a UCD and a Georgetown vantage point.
Not saying you necessarily get a clearer view from one rather than the other. But it may affect what looms largest.

9

Colin Reid 11.01.11 at 8:40 pm

It’ll be ‘interesting’ to see how the political landscape shifts if there are elections. New Democracy rule wouldn’t be much different to PASOK as far as I can see, except that they might be less squeamish about austerity. Maybe the next election will lead to a grand coalition. But what about the more Eurosceptic (and more extreme) minor parties? Neither the KKE nor LAOS is going to lead a government any time soon (and various forces would conspire against a Communist government even if democratically elected), but they’re not joke parties either, and the longer Greece flounders under the rule of ‘good European’ centrists, the greater the appeal of parties offering something clearly different.

10

ScentOfViolets 11.01.11 at 8:58 pm

Still, I’m heartily sick of the well-meaning who never have to suffer the consequences of their own well-meaning machinations. If that makes me a populist, so be it.

Exactly so. And while I’m not exactly a liberal, I’ve got no problem with copping to being a populist. No apologies for it either.

And while we’re on the topic of “technocratic solutions”, no, using gibberish arguments larded up with technical-sounding jargon to protect the interests of the usual suspects (even if – or especially if – they’re the source of all the problems) at the expense of the 99% who seem to keep paying and paying and paying for the folly of others is not employing “technocratic solutions”.[1] A technocratic solution would be something like increasing government spending and increasing taxes on the wealthy to pay for it while nationalizing any and all zombie financial institutions.

If that approach fails, then – and only then – can you say that “technocratic solutions” have failed. Until then, all you’ve got is the usual name-calling by, alas, the usual suspects and their courtiers.

[1]What’s that line Humpty Dumpty has in Alice in Wonderland ;-)

11

Bloix 11.01.11 at 9:08 pm

Does “responsible” mean “beholden to international finance capital”? When voters are given the choice between two or perhaps three parties that say all sorts of things in campaigns and then, once in power, give taxpayer money to bankers while cutting all other social spending in order to do so, is it surprising that they become frustrated and “irrational”? We’ve seen it in Ireland, the US, and the UK, and now we see it in Greece.

12

Abiye Teklemariam 11.01.11 at 10:21 pm

It is somehow bizarre to claim that responsibility and accountability require being accountable to unaccountable financial institutions. The “contemporary democratic malaise” is not a democratic malaise at all. It is rather a lack of democracy.

13

Bruce Wilder 11.01.11 at 11:15 pm

Does everyone recognize that the Euro was a bad design, by technocratic standards?

The increasingly extreme ignorance and incompetence of technocratic cadre might have something to do with the inability of politicians and the public to identify “responsible” policy.

It seems to me that OWS, for example, is a protest against technocratic corruption and incompetence and the consequent inability to get good governance from either political Party. If you can’t trust Larry Summers, who can you trust?

14

Josh G. 11.01.11 at 11:45 pm

People might be more inclined to trust technocrats if those same technocrats hadn’t spent the past 30+ years lining their own pockets while the living standards of the middle class went to hell.

15

Bloix 11.02.11 at 2:45 am

Bruce Wilder makes a point that’s worth taking a step further: the Euro was a bad design by technocratic standards because its designers had political objectives that would not have been accepted in democratic elections. Being “responsible voters” now would mean allowing the designers of the Euro to prevail in their effort to rob Europeans of their democracies.

16

Bloix 11.02.11 at 3:27 am

Not to mention that the political parties who Rodrik describes as being devoted to “prudence and consistency in government” are actually filled with greedy, short-sighted incompetents not to mention genuine criminals who allowed themselves to be bought off by the gamblers and grifters who call themselves bankers. Is it really necessary to quote Brecht once again:

Some party hack decreed that the people
had lost the government’s confidence
and could only regain it with redoubled effort.
If that is the case, would it not be be simpler,
If the government simply dissolved the people
And elected another?

17

Lemuel Pitkin 11.02.11 at 3:43 am

I read this post differently than most here. I saw Niamh pointing to a conflict between the demands of “responsibility” and the demands of democracy, but I didn’t see her endorsing the former over the latter. Especially because Rodrik — tho it doesn’t come through in this quote — pretty clearly wants to resolve the conflict on the side of democracy.

But maybe I’m reading what I’d like to see, rather than what’s actually there? Niamh, was it your intention to argue against a referendum?

18

simple mind 11.02.11 at 4:16 am

I head that Papandreou has replaced his chiefs of (military) staff. What’s that about?

19

Grimgrin 11.02.11 at 4:30 am

I suspect that was being asked ironically, but for anyone who doesn’t know, the father and grandfather of the current PM were deposed in a military coup.

I’d imagine that’s the sort of thing that sticks with a guy, particularly if he’s about to do something that’ll piss of a lot of local and foreign elites.

20

Jim Harrison 11.02.11 at 4:46 am

If you define “technocrat” as someone who seeks to implement the obviously correct policy, it will follow automatically that the technocrats are superior characters and ought to treat the majority of people with amused irony. But “technocrat,” like “elite,” is a technical term that simply names a bunch of people with similar ideas, in the current case ideas that landed us in this mess in the first place. They are also a group with similar economic interests, including a major interest in not irritating the people with money who are supposed to pay them handsome salaries.

It’s absurd to think that democratic institutions can be expected to tap some deep well of popular wisdom. On the other hand, the hoi polloi can’t do a great deal worse than the technocrats and, anyhow, doesn’t Greece belong to the Greeks?

21

simple mind 11.02.11 at 4:48 am

Well if the colonels take over, the EU will surely cut any and all bailout funds. I note that Greece has the highest per capita ratio of military to civilians in all the EU. Furthermore the hastry entry of Greece (which some consider a Middle Eastern Country) into the EU may have been a maneuver to undercut the colonels.

22

gordon 11.02.11 at 5:05 am

From the post: “Presumably Papandreou hopes to use the referendum as an educational device…”

The response to a referendum depends on how the question is put. “Would you prefer (A) a financial settlement with foreign banks which implies more austerity or (B) a military Government which will frankly enslave you?”

Effective educational device? I wonder.

23

Lemuel Pitkin 11.02.11 at 5:23 am

an adult,

Thanks for the reference. I had understood Rodrik to be a committed opponent of the military’s role in politics in Turkey, but maybe I was mistaken. Will read more…

24

Tim Wilkinson 11.02.11 at 6:38 am

Technocratic solutions – to recycle a comment from the tail end of another thread:

It’s the supposedly ‘post-ideological’ end of history mythology that has, or had, been very effectively erected around the current consensus. So that in the strange argot of the soi-disant egalitarian ‘left’ (e.g. a certain ex-?CT poster) ‘Thatcherite’ becomes ‘technocrat’, and entirely respectable.

And as JQ says in his interview, of Obama’s ‘incredibly deep commitment to the centrist narrative’:

His idea is you get all the smart guys in one room – and if you’re getting paid a million dollars you’re probably smart – and the smart guys will work out the solution, free of the extremes of both sides.

(Meanwhile, JQ also points out, a Geithner pretty straightforwardly has the job of maintaining the financial system as is.)

I’d take issue with the stuff in Mair etc which claims not just that ‘responsibility’ is increasingly at odds with democratic representation/responsiveness, but that representation is becoming much more difficult because (IIUC and simplified) voter concerns are less clear-cut, form less coherent blocs etc than in the olden days.

To some extent this depends on how one thinks about ideology, hegemony, manufactured consent, but basically I’d say that the neoliberal consensus has removed the main dimension from the stances of mainstream political parties, leaving a situation much like that prevailing in the US in which political fights are dredged up wherever they can be got up, with a hotch-potch of identity politics, ‘social’ issues and various disparate interests and views becoming the sideshow that compensates for the uniformity of the basic economic positions. So of course, given the main issues are ignored, of course what is left seems oddly incoherent and is hard to respond to in a clear and bold way.

(There’s also a strand of argument in Mair:

Fourth, there are signs that the growing gap between responsiveness and responsibility and the declining capacity of parties to bridge or manage that gap is leading to the bifurcation of a number of party systems and to a new form of opposition (Katz/Mair 2008).
In these systems, governing capacity and vocation becomes the property of one more or
less closely bounded group of political parties. These are parties that are clearly within
the mainstream or “core” (Smith 1989) of the party system and that may be able to offer voters a choice of government. If there are alternative teams of leaders presented on election day, it is from this group of parties that they will come. Therefore, these are also the parties that can offer opportunities for instrumental voting. In contrast, representation or expression, or the provision of voice to the people, when it doesn’t move wholly outside the system, becomes the property of a second group of parties, and it is these parties that constitute the new opposition. These latter parties are often characterized by a strong populist rhetoric. They rarely govern and also downplay office-seeking motives.
On the rare occasions when they do govern, they sometimes have severe problems
in squaring their original emphasis on representation and their original role as a voice
of the people with the constraints imposed by governing and by compromising with
coalition partners. Moreover, though not the same as the anti-system parties identified
by Sartori (1976: 138–140), they share with those parties a tendency towards “semiresponsible” or “irresponsible” opposition as well as towards a “politics of outbidding.”
In other words, there is a growing bifurcation in European party systems between parties which claim to represent but don’t govern and those which govern but no longer represent.

This strikes me as a political insider narrative of neo-Hohfeldian stamp which actually just describes the division between the sold out parties that have – for whatever reason – all the power, and the (left wing) marginalised parties which have some genuine connection to eth interests of voters but are kept out of power by a variety of factors.
All the stuff painting the real opposition parties as ‘irresponsible’, unrealistic looks like a bit of a smear with no real basis in fact nor any function in the analysis. I note in particular that they are condemned as often being found incapable of delivering on their unrealistic populist promises when they do occasionally get some power – but this is said to be because they (realistically) compromise when they (not having gained a landslide) enter into coalition.

We might compare, to bring in the US example again, the bogus battle over abortion in which neither sides appears to have any motivation to do anything, leaving the issue a purely symbolic posture which favours the more rt wing party, who are the ones noisily pretending that they will do ‘something’ – exactly what is not clear, and indeed there’s a youtube vid (fwiw) showing anti-abortion campaigners being baffled by the question what penalty to exact on women (the obvious point that doctors are not mentioned is valid but not dispositive). In this case there really does seem to be a case of the voters having incoherent or confused demands – but thsat is the wotrk of the mainstream politicians manipulating them.

I would be less hiosilte to rulers who whinge about the irrational masses with their inconsistent preferences and impossible demands if I thought they had any interest in and made any attempt toward properly explaining the iossues, laying out the options openly, and at the very least not colluding in keeping people ignorant, misinformed and led by prejudice and symbolic thinking.

I note too that the outsider parties are ‘accused’ of downplaying ambitions to office – which sounds like they are advertising themselves as noisy protest parties, but might in fact suggest commitment to programme over career.

25

Tim Wilkinson 11.02.11 at 6:41 am

)

26

Tim Wilkinson 11.02.11 at 6:51 am

(And for the triple – just recalled Aaronovitch Watch anchor links have to be manually edited, so just for completeness and without pretending anyone is or should be terribly interested: http://aaronovitch.blogspot.com/2011/02/there-aint-no-just-journalism-theres.html#c5579036065627572505)

27

glenn 11.02.11 at 7:32 am

Not sure if this is the straw, but Papandreou is doing the right thing: put up or shut up. If they pass it, then there’s very likely fewer and less demonstrations and rioting, and if they don’t pass it, then, well, at least the voters made the decision soberly. What’s clear is the Greeks must choose between two awful options. My personal view is that the EC and Euro experiment has already failed; it’s tried to go against a very long history of self-determination. Do no be surprised if the Greeks vote for self-induced depression rather than a Franco Germanic induced depression. But perhaps the best thing an anti vote would signify, and finally: the Euro is a political manifestation that tries to approach a mythical utopia, but that is also irrational, inefficient, unwieldy and wrong-headed on economic grounds. Just put it out of its misery.

28

Mark Hallerberg 11.02.11 at 8:18 am

Great post. Imagine if there were to be such a referendum in Ireland, or in Germany…

29

niamh 11.02.11 at 8:32 am

Lemuel Pitkin @ 19, my main intention was to try to set out the diverse pressures at work on the Greek government’s decision-making processes. ‘Democracy’ isn’t just one thing, and the options are not simple. I think most Greek voters are in a state of shock at the moment. The majority are immensely frustrated with the harsh and unevenly experienced austerity measures, but I don’t believe the majority have any wish to leave the Euro.

Thanks to an adult @ 3 for the nice link to the Naked Capitalism article.

I have already aired some thoughts about the politically as well as socially damaging effects of continuing austerity policies:
http://crookedtimber.org/2011/07/14/protest-and-the-social-contract-in-spain-and-greece/

Mario Draghi, who’s just taken over at the top of the ECB, may well need to oversee a change its direction – not in any rethinking of selective austerity (yet), but in a move toward a clearer role as lender of last resort, as Paul de Grauwe has argued recently: http://www.voxeu.org/index.php?q=node/7158
Moving into this role by stealth has consistently let the markets jump ahead of politics.
Most worryingly, on a day when it is said that the ECB has been heavily involved in buying Italian bonds, this has not brought down their yields.

30

GermanGuy 11.02.11 at 8:51 am

Maybe there is a misunderstanding on my side, but why do you “quote” Dani Rodrik and then post Peter Mair’s abstract?

31

Main Street Muse 11.02.11 at 11:23 am

“Public opinion, in its turn, has become harder and harder for governments to read. Parties are no longer in a position to bridge or ‘manage’ this gap, or even to persuade voters to accept it as a necessary element in political life.”

I suppose this depends on the definition of “public opinion.” Citizens of our nation have rarely spoken with one voice, therefore public opinion reflects the vast differences in belief and political orientation of our citizens., making it difficult for politicians to solve all needs.

But if you define “public opinion” as the opinions of the big contributors to campaigns, that’s a much easier read – and so I think we find politicians look to this form of “public opinion” to guide them. Several years ago, Dick Durbin openly said of bankers: “they frankly own the place” (i.e. Congress). Hard to argue with a senator over who his boss is…. http://bit.ly/vfgO30

32

Salient 11.02.11 at 11:44 am

oh dear god that quote is bewildering.

‘We have faith in our citizens, we believe in their judgment and therefore in their decision,’ Mr Papandreou said after rejecting a call for early elections by some socialist politicians.

So… they have faith in their citizens, with notably rare exceptions?

33

chris 11.02.11 at 12:08 pm

This strikes me as a political insider narrative of neo-Hohfeldian stamp which actually just describes the division between the sold out parties that have – for whatever reason – all the power, and the (left wing) marginalised parties which have some genuine connection to eth interests of voters but are kept out of power by a variety of factors.

It’s interesting that you would say left-wing here, because the first thing that came to my mind reading that description of “irresponsible” parties that don’t really intend to govern is that xenophobic Dutch party that did unexpectedly well in recent elections — it was difficult to form a majority without them but nobody really wanted to form a coalition *with* them because they’re irresponsible and xenophobic. I don’t think that party can sensibly be described as “left-wing”, and furthermore, I believe there are analogs in other European countries.

So ISTM the irresponsible protest party phenomenon isn’t limited to the left (and therefore “irresponsible” may mean something more than just “unacceptable to captains of industry”).

34

Tim Wilkinson 11.02.11 at 12:26 pm

Yes there is that – and I think xenophobes are is meant to be the stereotypical example of ‘irresponsibility’ – just as they were (and still are) the stereotype of the so-called ‘paranoid style’, and ‘conspiracy theorists’ etc. My impression is that southern European countries (Italy, Spain, Greece…) do still have a sizeable left wing (communist, socialist, radical green) element among the second rank of political parties. This kind of analysis catches them in the category of irresponsible, unserious loudmouths too.

35

bert 11.02.11 at 12:54 pm

Salient #35:
He’s been governing by votes of confidence for a while now. This is more of the same, but on a grander scale.
It could play out a bunch of different ways. One thing is guaranteed: Greek voters won’t be lining up in January reach a judgement on how things stand today.
The big fear is uncertainty leading to panic. I find it highly implausible that such a massive uncertainty about the Greek situation can endure for three months without a breaking point being reached. Predictions are tricky, but both Greek politics and the bond markets seem too volatile and fragile for things to go to Papandreou’s plan.
To look out for: the prospects for a default on Greek debt held by other sovereigns and the ECB.

36

Barry 11.02.11 at 12:57 pm

That quote from Dani Rodrick: “Prudence and consistency in government, as well as accountability, require conformity to external constraints and legacies…”

As many have pointed out, for a large number of Western countries over the past 30 years, ‘prudence and consistency in government’ have meant, 100% of the time, to unaccountable and imprudent policies, with the only consistency being to protect the elites, no matter what.

Xerographica:

” There’s nothing difficult about it. Nearly 75% of Americans support Obama’s plan to provide funding for more teachers while 65% of Americans want to pay less taxes. Our current level of debt clearly reflects that politicians fully appreciate that “representing” is in their best interests because it helps guarantee reelection.”

IIRC, a majority of Americans:

a) Support making jobs the number 1 priority of the US government.
b) Support increasing taxes on the rich.
c) Believe that the inequalities of income and wealth are far less than reality, and want those inequalities to be far less than they believe them to be (meaning far, far, far less than reality).
d) Support Social Security and Medicare.
e) Don’t support vast, unending foreign wars.

In the US, the whole point of the elites has been to suppress these core opinions – and not in favor of actual prudent government, but in favor of sociopathic looting.

37

Antonio Conselheiro 11.02.11 at 1:11 pm

This morning Atrios suggested that the word “technocrat” be taken out of circulation. I don’t see how anyone can see the present disaster as a warning against irresponsible majorities, unless they’re pathologically fixated on seeing everything that way.

38

Glen Tomkins 11.02.11 at 1:51 pm

It isn’t really a question of the wisdom of accepting or rejecting the bail-out proposal. The question is one of responsibility for the consequences of that decision.

Unless Greece is remarkably unlike the country whose political culture I am familiar with, the US, there is simply no way that the Greek electorate delegated to their representatives the responsibility for such a momentous decision in the last election. But recent events have provided about as much of a wake-up call as that electorate is ever going to get, so it’s time for some restoration of functioning democracy.

Presumably the bail-out will be voted down. Hopefully all the major parties will be destroyed in that process, and Greece can start over again with new parties that have actual ideological programs that the electorate can vote for or agaisnt with some at least approximate idea of what they’re voting for or against. It’s certainly difficult, for example, to see any hint of socialism in Papandreou, and he seems to be one of their better current p0liticos. Let’s have Socialist parties that are actually socialist. It’s a start. It’s the necessary start if Greece, or any country, is to have a representative democracy that actually functions. Glasnost, then perestroika.

The first democracy was born out of debt crisis. Money was new to Athens, and, rather predictably, the elite early adapters in Athens soon had most of their countrymen locked in a hopeless cycle of debt. Instead of stringing up the oligarchs, the solution that Athens found was a general debt foregiveness, a seisakhtheia, and the replacement of oligarchic government with democratic institutions, to insure that the debt crisis would never recur.

That’s just what Greece needs today. First seisakhtheia, then democracy. With any luck, both will spread uncontrollably far beyond Greece. We could certainly use both in the US as well.

39

William Timberman 11.02.11 at 2:59 pm

Today in the Frankfurter Allgemeine Zeitung there was a similarly pointed article by Frank Schirrmacher about our disdain for letting the vox populi have its say on things that absolutely, positively must be done, or the world will end: Demokratie ist Ramsch (Democracy is Rubbish). I’ve linked to the original, ’cause that’s what I read, but I’m sure the English version of FAZ must also have it.

Anyway, Schirrmacher doesn’t mince words. He calls this universal wincing at Papandreou’s proposed Greek plebiscite as The drama of a degeneration in those values and convictions which once seemed to be embodied in the idea of Europe.

Indeed.

40

praisegod barebones 11.02.11 at 3:19 pm

Barry @ 39

The word ‘legacy’ in the Rodrik quote strikes me as a bit of a dog-whistle for anyone who’s aware of political dynamics in Turkey, as there’s one very important ‘legacy’ in that particular country which is widely seen by an important part of the political and military elite as being both central to responsible government and as being under threat from a democratically elected government with broad popular support.

Lemuel Pitkin @ 26: One thing which is worth knowing, in connection with this, that Rodrik is the son-in-law of a fairly senior Turkish general, who has been accused of (and denies) being involved in attempts to destabilise the AK party government.

http://www.reuters.com/article/2011/07/29/us-turkey-military-idUSTRE76S70M20110729

Rodrik has been fairly vocal in his father-in-law’s defense. Here’s an example:

http://nationalinterest.org/commentary/democracy-turkey-4857

(I think it’s reasonable to say that for anyone who’s not been following Turkish politics for most of their adult life – and doesn’t have a brain the size of, say, Marcy Wheeler, together with high-quality Turkish language skills – when it comes to figuring out the credibility of the claims and counter-claims in the many episodes of the Ergenekon trials, if you’re not confused, you don’t really know what’s going on. )

41

Sebastian 11.02.11 at 3:53 pm

“This morning Atrios suggested that the word “technocrat” be taken out of circulation. I don’t see how anyone can see the present disaster as a warning against irresponsible majorities, unless they’re pathologically fixated on seeing everything that way.”

I agree with the sentiment, but not the prescription. “Technocrat” ought to be in circulation plenty, as a term of derision for the bankers and government officials who have pretended to have everything under control while spinning up into the worst economic disasters since the great depression.

42

soullite 11.02.11 at 4:10 pm

LoL, people like the ones that produce and read this blog are always clutching their pearls, screaming about the horrors of the unwashed horde. They have always been full of shit, and they always will be full of shit.

Democracy will always be feared by men who think themselves so wise and knowledgeable that they alone know the the ‘real’ truth. But both history and science have shown that large groups of people are far better at determining correct solutions than small bands of people who all graduated from the same schools, were indoctrinated in the same ‘truths’, and who all posses the same class interests. That is a recipe for mutual masturbation, not proper governance.

43

SamChevre 11.02.11 at 4:17 pm

our disdain for letting the vox populi have its say on things that absolutely, positively must be done, or the world will end

Isn’t this just a special case of the general issue, which is that liberty, democracy, and stability are not the same. (Recognition of which fact goes back to the Greek word democracy.)

44

William Timberman 11.02.11 at 4:31 pm

Yeah, Sam, it is, right enough. And so…?

45

politicalfootball 11.02.11 at 5:00 pm

Presumably Papandreou hopes to use the referendum as an educational device to show that only one answer, what we might think of as the technocratic one, is in fact possible – why else would he do it?

I think that’s more-or-less it, but it fails to take into account the necessity of public consent to any solution that will work. The bureaucratic tools basically don’t exist for a non-democratic solution. There’s no possible procedure to solve the crisis without the assent of the public in Greece and elsewhere.

Even if the Greeks OK the “bailout,” that won’t solve the problem, but it would indicate that the Greeks are sufficiently attached to the Euro that they are prepared to knuckle under to the technocrats. Whether or not the Greeks are willing to take that first step, any solution that preserves the Euro is going to involve changing the structure of Europe, and that can’t be done without democratic consent.

Papandreou is pro-Euro and is just trying to pick an advantageous spot to have his reckoning. I think the sales manager here gets it about right: He is trying to blackmail us.

But not just the Greeks. He’s blackmailing Europe, too, and even the U.S. He wants everyone to contemplate what happens if an accommodation with the Greek people can’t be reached.

46

Henry 11.02.11 at 5:37 pm

soullite – a warning that not only can you express your dislike of “people like the ones that produce and read this blog” in less nasty terms, but that you need to start doing so if you wish to continue being tolerated around here. It’s a bonus feature that your claim about these “people” is the precise opposite of the truth, but you can continue being wrong all you like, as long as you don’t behave like an arse while you’re doing it.

47

Doctor Science 11.02.11 at 6:05 pm

Some comments from Greek e-friends:

Can someone, please, explain to me, the rational behind the referendum NOW? And the rational behind the referendum IN GENERAL?

Greek replies:

Nope. Nobody can explain it. I think that the European leaders think WE know, cause hey we are greeks after all, but nope, we have no freaking idea what the fuck he is doing.

The whole country went WTF after his speech last night…

I think he’s doing it so that if the referendum goes against the bailout package, he can say it’s the people who caused the default, not him as PM.

These are what you might call mere “voters”, not people of any particular political insiderness — but I wouldn’t be surprised if they reflect the actual feelings of the population. The third commenter’s theory seems quite plausible to me, not least because it puts Papandreou’s *domestic* political interests to the fore. The Clausewitz-O’Neill Principle applies to international monetary relations, as well as wars.

48

bert 11.02.11 at 6:30 pm

FT is reporting that the referendum question has been decided, and it’ll be an in or out vote on eurozone and EU membership.
That stacks the deck rather.
I’m surprised that the grand talk about ‘consulting the people’ is being swallowed so eagerly, often at the same time as grand talk by technocrats about ‘building Europe’ is contemptuously dismissed. Seems to me there’s very similar elite level politics at work behind each set of claims.
Papandreou has clearly judged that parliamentary support can’t be maintained for the deal he brought back last week. He’s called a national vote of confidence. To ensure he wins it, he’s going to use Greeks’ entirely rational fear of going it alone. Frankly, I think Greeks should be wanting to get to the far side of this crisis in one piece. If that can be done by technocratic means, as originally planned, terrific. If the government genuinely can’t carry its programme, then I prefer an election to a precooked referendum. But my first preference is for the Greeks to knuckle down and swallow the deal, at least until such a time as the collateral damage can be more easily contained. The worst case scenarios here are very bad indeed.

49

niamh 11.02.11 at 6:54 pm

To GermanGuy@33: Apologies, sloppy punctuation – hope it’s clearer now.

To praisegod barebones@43: I’ve nothing to say right now about Rodrik on Turkey – it’s his political trilemma I had in mind, as here –
http://crookedtimber.org/2011/05/03/two-trilemmas-in-eurozone-governance/

To soullite@45: I don’t think you can have read my piece very carefully. Thanks to Henry for sounding this note @49 about polite discourse. But above all, I would ask you to take a little more seriously what I’m actually saying. Always glad to know what people think about the ideas.

In general, I am not keen on anticipating chaos for others in the hope that something better might turn up out of the rubble. It probably won’t… http://www.spiegel.de/international/europe/0,1518,795426,00.html#ref=nlint

50

William Timberman 11.02.11 at 7:10 pm

Bert, Papandreou no doubt has his own reasons, but then so do German bankers, and if he isn’t being candid about his, neither have they been about theirs. The problem with representative government, and with elections rather than referenda — at least in this case — is that we’ve already had more than ample proof that a representative government captured by the usual suspects isn’t much good for anybody, and especially not for anyone below the rank of Modern Major General.

Yes, things will get broken in the events undoubtedly soon to come, lots of them, and maybe some innocent bystanders as well, but you can’t build a system which ignores the needs, let alone the wishes, of the majority of your citizens, and defend it with your money where you can and your hired truncheons when you must, without sharing the consequences both of your misconceptions and your misdeeds. If the Powers That Be wanted a smooth and peaceful resolution to this crisis, they should have taken a bit more care not to have gotten into it in the first place.

More to the point, they should at very least stop spitting on people who want to change the staffing in the wheelhouse and the direction the bow is pointed.

51

alec mcaulay 11.02.11 at 7:11 pm

@ 20 – The Greek Colonels’ coup of 1967:

Georgios Papandreou was arrested after a nightime raid at his villa in Kastri. Andreas Papandreou was arrested at around the same time after seven soldiers with fixed bayonets and one with a machine gun forcibly entered his home. Andreas Papandreou escaped to the roof of his house but surrendered after one of the soldiers held a gun to the head of his then 14-year old son George Papandreou. [Wikipedia]

52

politicalfootball 11.02.11 at 7:13 pm

In general, I am not keen on anticipating chaos for others in the hope that something better might turn up out of the rubble.

Chaos has been baked into this situation for a long time, and either result in the referendum will be a step into the unknown, with a near-guarantee of chaos. Papandreou’s choice to take this to the voters is, in part, a move aimed at reducing the violence that’s going to be associated with the chaos. People are going to be somewhat less pissed off if they don’t see the chaos as having been imposed on them by their government or other governments.

53

P O'Neill 11.02.11 at 7:23 pm

Good luck holding the banking system together while a referendum is mounted on Eurozone membership.

54

politicalfootball 11.02.11 at 7:39 pm

I’m not quite done with this quote, now that I think about it.

In general, I am not keen on anticipating chaos for others in the hope that something better might turn up out of the rubble.

So the Greeks would be wise (and risk-averse) if they heed the Euro technocrats? I’m not sure if the current facts support that view, but it’s certainly not supported by history. Had the Greeks done every foolish thing they’ve done, but not joined they Euro, they wouldn’t be in nearly as bad shape as they are. (Hmm, I suppose that’s a more complicated counterfactual than I make it out to be, but still … I think it’s fair to say that Greece hasn’t been well-served by its surrender of the drachma.)

Anyway, I’d like to see you, or someone, make this case in a more developed fashion. Is a pro-Euro vote in this referendum really the obvious best move from the point of view of the Greek citizenry – so obvious that a “no” vote would demonstrate the irresponsibility of the Greek polity?

55

politicalfootball 11.02.11 at 7:42 pm

55: The 50% haircut would only have kicked the can down the road, even if it had been immediately accepted. Kicking the can down the road has its virtues, but the European banking system is due for a day of reckoning sooner or later, regardless.

56

Josh G. 11.02.11 at 7:43 pm

bert: “But my first preference is for the Greeks to knuckle down and swallow the deal, at least until such a time as the collateral damage can be more easily contained. The worst case scenarios here are very bad indeed.

Why should the Greeks care about “collateral damage” to the Eurozone, when the Eurocrats quite clearly don’t give a damn about them?

57

MPAVictoria 11.02.11 at 7:52 pm

“Anyway, I’d like to see you, or someone, make this case in a more developed fashion. Is a pro-Euro vote in this referendum really the obvious best move from the point of view of the Greek citizenry – so obvious that a “no” vote would demonstrate the irresponsibility of the Greek polity?”

This is a key question. Can anyone here really say with certainty what the “responsible” choice would be at this point? I know I can’t.

58

Tom Bach 11.02.11 at 7:54 pm

This is a key question. Can anyone here really say with certainty what the “responsible” choice would be at this point? I know I can’t.

Surely that’s way a referendum, however it is worded, isn’t bizarro world just plain wrong but rather as sensible a solution to the problem as is available.

59

Latro 11.02.11 at 7:59 pm

I dont know, why it is a requirement of democracy and “the people” to be actually right? They can get it absolutely wrong – but the point is, they will decide what. Not somebody else, not somebody that is not even Greek to start.

60

njorl 11.02.11 at 8:00 pm

I was under the impression that Papendreou asked for the referendum because that is the only possible way the deal can happen. He can’t get his parliamentary coalition to back it. He’s not trying to be tricky. He’s acting in desperation.

61

praisegod barebones 11.02.11 at 8:02 pm

Niamh: my apologies for mentioning matters which you regard as being off-topic. That said, I’d like to note that the issue of Rodrik’s views about Turkey was first raised quite a lot earlier in the thread (@18,21,24). I took myself to be ohttp://www.guardian.co.uk/ffering a little bit of relevant context for those who might have been mystified by that earlier, off-stage scuffle.

Having said that, I think its worth saying that if you live in Turkey (as I do), it’s easy to start getting twitchy when an influential and well-connected Turkish intellectual starts musing on the incompatibility of ‘representative’ and ‘responsible’ governments. It’s hard to avoid wondering how the individual in question would see those phrases as mapping on to actual political forces here over the past 15-30 years.

62

Walt 11.02.11 at 8:05 pm

For Greece, knuckling down and swallowing the deal is the worst case. The best case is if they manage to quit the euro without causing the whole euro-zone to blow up. At this point Greece staying in the euro is pure altruism on the part of Greece towards the rest of Europe. (Or more likely, a simple misunderstanding of self-interest, or perhaps a sentimental attachment to the idea of being European.)

63

MPAVictoria 11.02.11 at 8:13 pm

“but rather as sensible a solution to the problem as is available.”

Wouldn’t you first have to know what a sensible solution to the problem would be? Is there even one?

64

SamChevre 11.02.11 at 9:23 pm

why it is a requirement of democracy and “the people” to be actually right?

It’s not; that’s why I’m only somewhat in favor of democracy. (“They are evil; let’s beat them up and take their stuff” is quite often popular, for some value of “them”, and still wrong.)

65

MPAVictoria 11.02.11 at 9:42 pm

“(“They are evil; let’s beat them up and take their stuff” is quite often popular, for some value of “them”, and still wrong.)”

Oh I don’t know. Having the government Beat up (metaphorically) a few investment bankers and take all their stuff would be good for my moral right about now.

66

Glen Tomkins 11.02.11 at 9:46 pm

“But my first preference is for the Greeks to knuckle down and swallow the deal, at least until such a time as the collateral damage can be more easily contained. The worst case scenarios here are very bad indeed.”

When do you imagine that the collateral damage will be more easily contained? When we’re through this Lesser Depression?

Even if you accept the conventional wisdom about this event, nobody very credible is predicting that it will end any time soon. Is further austerity going to make it end sooner? Or is further austerity such as Greece would have to accept in the interim while we all wait for such time as collateral damage can be more easily contained not likely rather to extend and deepen the Depression? How will Greece meet even the most generous repayment terms if its tax revenues plunge because the country has been pauperized by the austerity plan?

Every day that passes reinforces the impression that this Lesser Depression isn’t the usual business downturn we’re used to. It seems every day more likely to be a secular rather than cyclical event, the beginning of a great deleveraging of the demand/consumer societies that led to such economic growth in the developed world. But we seem to have stopped believing that demand has anything to do with growth. We believe instead now that labor has been too extravagantly rewarded. We are shocked and outraged at the profligacy involved in the idea of the working poor being able to afford refrigerators, or that Greeks should get to retire while they can still walk. The absence of that belief that working people will always enjoy rising purchasing power means that those animal spirits will never return, we’re never going to reach that upward inflection point at the bottom of the business cycle when the smart money stops hoarding money and pulls out its wallet to start bargain hunting in anticipation of the return of demand. Instead we will see a never-ending contraction that will reach bottom only when working people are reduced to bare subsistence. Enterprises whose business model relies on being able to sell any products beyond subsistence goods to a wider base than the top 500 families in any country will be SOL.

I think the most plausible outlook on the present crisis is that the downward spiral will only be arrested insofar as the Greeks, and the rest of us, stop knuckling under. The sheep better look up, and soon, or the collateral damage will encompass a Hobbesian state of nature.

Of course I don’t have any crystal ball, special wisdom, nor, least of all, any technocratic credentials. But I think the water is getting deep enough fast enough around us that we should all at least concede the possibility that we are in the middle of the Big Muddy, and perhaps pressing on isn’t the obvious best idea. We are long past the point at which anyone should rely on something turning up that will make the collateral damage easier to contain at some indefinite point in the future. We need to stop assuming that everything will right itself as it has in prior business cycle downturns, and start assuming that we have to do something to make that happen. We need to start dealing with this today, not kick the can down the road, because that road is starting to look more and more like something out of a Cormac McCarthy novel.

67

William Timberman 11.02.11 at 9:50 pm

Yes, it is sometimes better to be robbed with a fountain pen than a six-gun. Not always, though, and especially not when there’s nothing left and nowhere to go after the miscreants have made off with the loot, and you suddenly find yourself in that old I-might-as-well-be-dead neighborhood which far more people inhabit these days, even in the developed world, than anyone better off ever feels comfortable admitting.

68

dbk 11.02.11 at 11:44 pm

This thread might be a bit premature, given that GP has called for a vote of confidence at midnight (Gk time) on Friday, and as of midnight tonite (Wed) had 152 votes, not all of which are secure. Should his party fail to win the vote, Greece would be forced to hold elections (iirc, within 40 days of dissolution). Elections would presumably precede the referendum (whose language has yet to be determined – a small working committee has just been appointed – today- for this purpose). Election options are not good; perhaps PASOK would win, though possibly it would be compelled to assemble a coalition govt with some of the left-leaning fringe parties, all of whom are hostile to continued debt servitude that will, at current estimates, continue for 30-40 years.

A referendum, should it fail on a straight-up “yes” or “no” to continued EMU membership (remember, tho: language tbd), would be terrible, terrible news not just for Greece (for Greece, all options are now terrible) but for German/French/Swiss banks, which would be facing a certain 100% default on Greek sovereigns. One may hypothesize that (a) there’s a lively CDS market in Gk sovereigns, with (b) untold CDOs purchased by global hedge funds that would turn toxic overnight, and that these are coupled with (c ) leveraging at -well, who knows? – between 20:1 and 40:1 (the rumor re: MFGlobal). A massive Euro-TARP would be required, instantly, and even that might not rescue the Euro/global system.

#1 rule when analyzing global capitalism: follow the (potential) money. Above and beyond the troika-required firesale offerings of all Greek public goods and services (water/electricity-power/highways/airports/ports/railway system) are the natural resources which remain essentially unexploited here: an enormous seam of natural gas lying below Cyprus-Greece, an est. 40$billion of non-metallic critical ores in northern Greece, and wind and solar possibilities that could make Greece the major EU supplier of non petroleum-based energy for the next century.

It’s pretty complicated. “There are more things in heaven and earth … Than are dreamt of in your philosophy” pretty much sums it up, I think.

69

Lemuel Pitkin 11.03.11 at 12:13 am

On reflection, I think Timberman, SoV, Bloix, etc. are right: Calls for “responsibility” are what’s really irresponsible at this point. I think Niamh is wrong to characterize the anti-bailout position as a kind of the-worse-the-better-ism. It’s like the ultimatum game from game theory: In order to have any power at all, the weak have to be willing to accept a worse outcome rather than a better one, if the better one is not good enough. otherwise, the guys who write the payoff matrix (or at least tell you what it is) have all the power.

“I am not keen on anticipating chaos for others in the hope that something better might turn up out of the rubble” is an argument against gathering in Tahrir Square too…

70

Tangurena 11.03.11 at 12:20 am

Can anyone here really say with certainty what the “responsible” choice would be at this point?

That is a philosophical and political question. There is no single answer to that question.

71

SamChevre 11.03.11 at 12:28 am

One thing is definite: the responsible action on the part of the EU would be to make absolutely clear that the current debts are Euro-denominated, and will be collected and adjudicated as such whatever currency Greece chooses to use for it’s domestic purposes.

72

Bruce Wilder 11.03.11 at 12:38 am

One thing is definite: better that the German banks fail than that Greece fails.

The Greek government is responsible, properly, to the Greeks, and default is to be preferred by Greeks to decades of impoverishment under debt peonage.

73

William Timberman 11.03.11 at 12:43 am

Lemuel Pitkin @ 73

Exactly. The weak having nothing to risk but themselves. Anyone with mouths to feed who’s ever participated in a strike vote against an employer who can muster all sorts of credible threats understands this instinctively.

I should also say that being judicious is not always a matter of being safe. If it were otherwise, the slave masters would govern all matters, spiritual as well as temporal. I remember the story of a man trapped and slowly dying in the rubble of Caen after an Allied bombing raid in 1944. He managed somehow to write a note saying essentially that, while he didn’t care much for dying in the dark, and knowing that his supposed friends had put him in that position, he thought that on the whole it was worth it, and wanted to posterity to understand why he felt that way.

An apocryphal story, perhaps, but that sort of logic is sometimes our only consolation.

74

bert 11.03.11 at 12:44 am

I’d like to get to a situation where bond markets price in a realistic default risk premium, and get accustomed to the idea that sovereigns inside the eurozone may default. It would require creditors to be accurate judges of risk. In doing so, they’d differentiate effective interest rates between borrowers according to creditworthiness. If individual states wanted to mitigate the consequences of default for their banking system, they’d bail out the creditors, and nationalise them if they became insolvent. If this was done wastefully or corruptly, voters could impose punishment in the usual way. All this makes more sense to me than subsidising the ongoing borrowing of insolvent sovereign debtors, as has been done with Greece up to now.

Of course, that raises the question of how to get to the sort of stability where that kind of lending can be done at a price that makes sense to both sides. All the answers seem to involve cost, pain and can-kicking. But it seems clear that to negotiate complex deals which involve a degree of default, and then have one party to the deal put the result to a referendum, is to head directly away from clarity and stability. CT seems like a reasonable place to ask which of the various Irish referendums on Nice and Lisbon was the authentic expression of the democratic will.

Dissatisfaction with the technocratic model of integration is entirely reasonable. But I question whether now is the time and Greece is the place to attempt to improvise a more populist approach. It’s a context where the results are likely to disappoint, and the risks of highly unpleasant consequences are unacceptably high. I understand and support the principle of democratic legitimacy. I just don’t trust the motive for this referendum, and I don’t believe the outcome – however it turns out – will help in the way others appear to believe it will.

75

john c. halasz 11.03.11 at 12:45 am

@75:

What part of the concept of “default” don’t you understand? (Analogously to @ 8, what partof the concept of “public goods” do you not understand?)

76

Glen Tomkins 11.03.11 at 1:20 am

dbk,
I don’t think anyone doubts the potentially dire consequences of Greek sovereign debt default. But what makes me sanguine about the prospects of the Greeks just going ahead and defaulting now, is that I don’t see how the Greeks avoid default within a year or so, no matter how cooperative they are with the most extreme austerity plan. What they’re already doing in the way of austerity is just wingeing down their tax base. Further austerity would seem to mean further decrement in the ability of their government to raise revenue, or do I have that wrong?

I guess they could limp along a bit further down the road, at the cost of further damage to their economy. But what goal a bit further down that road are they aiming for? How does limping along a bit further save anyone’s bacon? Oh, I guess it gives the smart money more time to make its arrangements to get out as unscathed as possible. Not that I’m a conspiracy theorist who gives that explanation much credence. I stopped believing there was any appreciable smart money in this game about the time we learned about Arthur Andersen’s relationship to Enron, and there didn’t seem to be much money around smart enough to demand decisive action in response. I find it more credible to imagine that the folks ensconced on the commanding heights persist in their belief in kicking the can down the road for no more ulterior a reason than that they just can’t face the prospect that their belief system has failed, and they just aren’t very competent as Masters of the Universe. Allied WWI generals and politicians seem the closest parallel. Do we give their spiritual heirs four years to, in Wilfred Owen’s words, sacrifice “half the seed of Europe, one by one.”?

No doubt that default now could have any number of dire consequences that we can’t even visualize before the fact. The world economy is complicated. Can you say that default in a year, or in four years, after the Greek economy has had more austerity, won’t have even worse consequences than default now?

77

mclaren 11.03.11 at 2:01 am

Whenever a leader tells you how great and noble and trustworthy the citizens are, it’s time to run.

78

Glen Tomkins 11.03.11 at 2:16 am

Bert,
Neither history nor economics are my fields, yet even I am generally conversant with the risks of lending to sovereigns. They have sovereign immunity. They can repudiate their just debts without any sort of consequences that you can impose, because their judges define what a “just” debt might be, and they have armies.

Of course there’s a public policy good here. A sovereign is responsible for many things more important than whether the Fuggers do well this year or not. If the world economy is a complex system with outputs impossible to project linearly from inputs, world politics is really a bear. There are always Protestant insurgents to crush, Popes to humiliate, cities to be sacked, the damned French to keep in line, etc., etc, as well as the occasional actual public good, like building roads and keeping widows and orphans from starving. None of that happens without cash. Imperial Electors don’t just bribe themselves. You can never project your expenses very narrowly, and if you come up short, what do you do, starve the widows and orphans or stiff the Fuggers? Wise sovereigns have always chosen the latter.

These days, aside from the occasional country with a huge black ops budget, which I don’t think applies to Greece, you can know your sovereign debtor’s ability to repay with comparative ease. You don’t have to hire detectives. This is almost trivial today compared to the problem of figuring out the ability of Charles V to meet his obligations. A sovereign always has the opportunity to repudiate his obligations, and you can know, these days, about motive, about how short the sovereign is likely to run in his accounts, and therefore how motivated he will be to stiff his creditors.

Failure to have already priced these considerations into the market would seem to this layman a fairly serious failure to perform the due diligence that is your fiduciary duty when you are handling other people’s money. Did these bankers think they were lending to someone’s grandmother? Why aren’t these bankers in someone’s jail? If nothing else, pour encourager les autres. That measure would also ensure the pricing of appropriate risk into this market.

79

bob mcmanus 11.03.11 at 3:14 am

82: Did these bankers think they were lending to someone’s grandmother? Why aren’t these bankers in someone’s jail?

http://www.businessinsider.com/greek-car-sales-vs-interest-rates-the-holy-grail-of-understanding-europe-2011-11

Greek Cars vs Interest Rates

“The fact of the matter is that ONLY Germany has seen its trade balance improve since the introduction of the euro. France and Italy have gone from countries running trade surpluses to countries running trade deficits….

The simple (and correct) story is that the introducing of the euro made borrowing super-cheap, and that fueled a car consumption bonanza in Greece. And, well, you probably don’t have to be a rocket scientist to guess which country made all the cars that the Greeks snapped up like crazy (spoiler alert: Germany).”

80

ScentOfViolets 11.03.11 at 3:17 am

You can never project your expenses very narrowly, and if you come up short, what do you do, starve the widows and orphans or stiff the Fuggers? Wise sovereigns have always chosen the latter.

Which, incidentally, gives us a good motive as to why these transparent attempts to pass the buck are phrased in technocratic bafflegab: it’s not for the consumption of Greek, Irish, Spanish, Italian, or Portuguese peasantry, but rather as soothing codswallop for the German and allied citizenry.

Because you know – so the Merkel government will try at least once to sell to the locals – that the reason for the banskter bailout at your expense is all the fault of those lazy, irresponsible unscientific Greeks.[1]

They probably won’t buy it, of course, your average German being no more eager to bail out this class of “entrepreneur” than any other sane person. But at least this way the enterocrats can righteously hold their hands out and look their paymasters in the eye while telling them they gave it the old college try.

[1]This is just the maxim that the thin starve before the fat suffer. Eventually – eventually! – the banskters will get a haircut. But only after every other possible option has been exhausted.

81

bob mcmanus 11.03.11 at 3:21 am

Guglielmo Carchedi

For Another Europe 2001

82

MPAVictoria 11.03.11 at 3:28 am

Shorter bert: With notably rare exceptions I understand and support the principle of democratic legitimacy.

/ bert rest assured that I say this entirely in jest. I really do not think anyone knows what the “responsible” action/choice is.

83

Andrew F. 11.03.11 at 9:36 am

The estimates I’ve seen for the consequences of a disruptive Greek default have the impact to Greek GDP in a range around -20%, on top of the -10% or so they’ve already lost.

That’s awful. I think austerity is preferable, despite the short-term recession, if it allows Greece to remain on the Euro and with improving prospects for external financing and investment.

As to Papandreou and democracy, I agree with Niamh’s analysis of what Papandreou is attempting to accomplish. For these austerity measures to be sustainable and credible, the Greek populace must visibly buy into them. And if the choice is framed as between the euro and the drachma, then the austerity measures have a decent chance of winning.

But I also think, while the move is high-risk, it is smart politics as well as responsible policy. The New Democracy party leads the Pasok in polls, but advocates policies (tax cuts as stimulus) which the EU/IMF has judged unacceptable. If the government survives the no confidence vote, then it has decent odds of achieving success in the referendum and simultaneously placing the New Democracy party in the awkward position of supporting membership in the eurozone while advocating policies that are incompatible with that membership.

There are two dangers here. First is that the Greeks vote no (unlikely). Second is that the referendum, while confirming Greece’s desire to remain part of the eurozone, is worded in such a way that the vote is not perceived by the Greek populace as legitimizing the terms of the bailout. This second danger is difficult to judge, but seems significant.

84

maidhc 11.03.11 at 9:38 am

There’s a lot of discussion here, but I suppose I will go ahead and add my little contribution anyway.

Papandreou is a politician. The first rule of politicians is to grab power and hang on to it.

He can’t have failed to notice that the austerity measures are extremely unpopular. He is risking his political future pushing them. The elite are all in favor, but the voters are having second thoughts.

By proposing a referendum he is diverting the responsibility away from himself. If it succeeds, he can say that what happens is the people’s will. If it fails, it’s not clear what will happen, but since the people decided, it’s not the fault of Papandreou.

I don’t claim to be able to predict what’s going to happen, but I suspect that the question Papandreou is interested in is not “will Greece survive?”, but “will Papandreou survive?”.

85

roger 11.03.11 at 10:00 am

From 2008 onward, we have seen what happens when governments, instead of running a huge state bank thaat can take over the function of banking in a society – i.e. providing credit for businesses and households from holdinngs of businesses and households – decide to become welfare centers for private banks.

Pretty obviously, what has happened is a vicious circle, in which the state gives money to bankrupt banks, who buy the bonds of states and raise the interest on those bonds in response to state spending on… the banks.

Why hasn’t this system simply been knocked over? The EU, and the US, both have the resources and the infrastructure to easily capitalize a massive bank that can simply take over the Greek debt, or the Italian, etc. And they can let the banks go to the wall. We do live in a time in which the logistics of banking have become incredibly easy. The states have responded by saving the people that the political elites are closest to – and whom, when they aren’t in office, they tend to work for – the financial services sector.

Well, the accumulated de-regulation and financial innovation that emerged first in the seventies, when the Merc convinced Nixon to allow currency trading (as here: http://www.leomelamed.com/articles/09-Silber-HistoricalResearchInventingFutures.htm) has entirely failed. The innovation turns out to be a nice test case of whether markets that are “free” work. The answer is a resounding no. So, that one is settled.

We are apparently going to have the financial sector wrapped around our neck for years because of the crony relationship between it and the governing class, but I’m hoping that popular movements like OWS will eventually create enough conversational space for talking about alternative banking systems – like, simply, creating a government bank that can capitalize itself with loans of 16 trillion dollars, rather than ‘recapitalizing’ the private financial sector with that amount – so that the too big to fail entities can go down. The faster the better.

86

bert 11.03.11 at 11:34 am

Dear MPAVictoria @86, many a true word …
Here in the UK, “now is not the right time” was heard most recently from bank lobbyists as a response to a proposed split between retail and investment banking.
But that was transparently insincere.
Sincerely, bert.

87

politicalfootball 11.03.11 at 12:50 pm

I think austerity is preferable, despite the short-term recession, if it allows Greece to remain on the Euro and with improving prospects for external financing and investment.

That’s ultimately my problem: I don’t think the current deal does anything (for Greece) besides kicking the can down the road, and I don’t think that’s enough. By accepting this deal, the Greeks wouldn’t merely be committing to a smaller welfare state, they’d be committing to an economy that couldn’t support that smaller welfare state.

In exchange, they get to stay in the Euro – a currency union whose monetary policy is designed by and for Germans. Even if the current deal were actually capable of solving the problem in the short term, Greeks can be assured that monetary policy will be made in a fashion that doesn’t take their interests into account, and that can only lead to disaster in the long term.

88

bert 11.03.11 at 1:41 pm

Google Translate fail:

bq. Greece’s position within the euro area is a historic conquest of the country

89

bert 11.03.11 at 1:45 pm

Still much confusion, but the referendum’s off, apparently.
When Venizelos booked into that clinic, he had an unusually lean and hungry look.

90

politicalfootball 11.03.11 at 2:11 pm

The ECB goes against expectations and cuts rates! Can irresponsible technocrats be brought to heel by the threat of action from the sober, responsible Greek people? Stay tuned!

91

ajay 11.03.11 at 2:11 pm

Eventually – eventually! – the banskters will get a haircut. But only after every other possible option has been exhausted.

SOV, did you know that the plan actually includes a 50% haircut on Greek debt?

92

Mrs Tilton 11.03.11 at 2:12 pm

Lemuel @26,

it’s good to want to read more about what has been going on in Turkish politics for the past decade or so, but you’ll want to find better sources than that appalling bit of AKP propaganda by Fevzi Bilgin. That thing really would have been more at home in Zaman than in an academic journal.

In this context (and discounting for any prejudice his family connections might cause, though Rodrik has never been other than forthcoming about them), I’d say that what Rodrik is primarily a committed opponent of is the subversion of Kemalist republican ideals by a theocratic movement that looks to a Mullah living in self-imposed Pennsylvanian exile for its guidance.

The last paragraph of Praisegod’s post @43 is very good advice. My Turkish friends (full but perhaps unsurprising disclosure: all of them are strong secularists and most support CHP, though not unreservedly) all genuinely believe that Gülen and Erdoğan are committed to making Turkey a second (albeit Sunnite) Iran and that the primary allegiance of sizeable elements in the police and judiciary is no longer to the Republic but to Gülenism and the AKP. Me, sometimes I think their fears are exaggerated and that they are too ready to give Erdoğan the, umm, detriment of certainty (if that is what one would call the opposite of benefit of the doubt). They might be wrong (but on the other hand I cannot rule out that they are right).

Talk of theocracy, a restored caliphate etc. to one side, what is incontrovertible is that Erdoğan and the AKP government are grossly violating civil liberties and the rule of law, and that this is getting worse as Erdoğan grows ever more arrogant and monomaniacal. If Erdoğan really is trying to become a second Ahmedinejad, that is of course a very bad thing. But just as bad, and much less open to debate, is his apparent desire to become a second Putin.

93

politicalfootball 11.03.11 at 2:21 pm

SOV, did you know that the plan actually includes a 50% haircut on Greek debt?

That’s imprecise. The haircut applies to a portion of Greek debt, and it’s only as deep as it needed to be to be plausibly enactable – not deep enough to solve the underlying problem.

I predict the underlying problem will be addressed with additional haircuts, but only – as SOV says – after everything else has been tried.

94

ajay 11.03.11 at 2:35 pm

98: still a haircut though. Which shows that the “of course teh banksters will only get a haircut after the poor have starved” view is wrong.

95

Andrew F. 11.03.11 at 5:49 pm

politicalfootball @92: That’s ultimately my problem: I don’t think the current deal does anything (for Greece) besides kicking the can down the road, and I don’t think that’s enough. By accepting this deal, the Greeks wouldn’t merely be committing to a smaller welfare state, they’d be committing to an economy that couldn’t support that smaller welfare state. In exchange, they get to stay in the Euro – a currency union whose monetary policy is designed by and for Germans.

Yeah, that’s the good pushback, and I have the same doubts.

What tips me to the side of Greece staying in the Euro are two ideas. First with economic and political reforms their economy can grow in a sustainable way, and as this occurs the advantages of the Euro will increase while the disadvantages will decrease.

Second, my understanding is that the costs to Greece, moreover, of an exit from the Euro would be enormous. If the estimates of the cost are credible, then the benefits of the exit would also have to be enormously great to justify the move.

To bring it back to the post, if these two points are sound, I think the Greek populace will (or would, I suppose, if the referendum were to be held) vote appropriately.

96

Mrs Tilton 11.03.11 at 6:01 pm

@an adult,

the Republic to which the Turkish armed forces are committed might not be a republic you much like. But it is a republic and they are committed to it. I invite your attention here; scroll on down to art. 35 (“Silahlı Kuvvetlerin vazifesi; Türk yurdunu ve Anayasa ile tayin edilmiş olan Türkiye Cumhuriyetini kollamak ve korumaktır“.) This statutory obligation to safeguard the Republic is the armed forces’ justification for the coups they have mounted since 1960 (and it is following that coup that they had this statute enacted); they would safeguard the ideals of the Republic Atatürk founded even if this meant overturning its government (and, on one occasion, hanging a PM).

Now, one might question whether the Turkish armed forces have not been somewhat too fervent in their republican ideals. One might also question whether Atatürk would have recognized the republican ideals the armed forces saw themselves as safeguarding as identical in all ways with his own. (How often I have wondered how things might have been had Mustafa Kemal been a little less fond of his rakı and managed to stay alive and in the saddle for another 15 or 20 years. Perhaps Turkey would have been spared both Demokrat Partisi and its progeny, and an army too keen on tutelage.)

Now, if you want to claim the the Turkish armed forces are not known for being majoritarian populists, you’d be right. But that’s something else.

Thx for the article, which I had read before. (I’m pretty certain I’ve eaten in the restaurant it mentions, assuming the author is referring to the Kanyun shopping mall.) I should note that I personally am strongly secularist, but not laïcist in the French or Kemalist mode. Religion must be alien to the state, but the state should not require its citizens to take the same stance. It is stupid and offensive to forbid the headscarf to a cleaning lady, and just as stupid and offensive to forbid it to a judge (so long as she takes it off when she puts on her robe and mounts the bench). And it is certainly a good thing that people who in the past would have been consigned to lives as benighted superstitious peasants are now attaining high education and material prosperity. (And in the long run, it is these and not headscarf-bans etc. which offer the best hope they will eventually free themselves of those superstitions.)

97

Bruce Baugh 11.03.11 at 6:07 pm

Andrew F: But what if there’s no reason to believe that political and economic reforms of the sort you’re talking about will happen? And I don’t mean this hypothetically. If you say “wait, because X would be better”, you have to have some grounds for expecting X to happen, and I simply don’t see it. Where, anywhere in the First World, do we see governments and financial sectors doing the kinds of things that would provide substantial relief for current pain and changes that make future pain of the same sort less likely?

We’ve got the example of Iceland, of course. Unless I’m missing something, we’ve got no sign of anyone else in power wanting to follow their lead. As it is, this strikes me as a counsel to continue living in a high-crime area and to keep doing things that attract muggers in the hopes that eventually they’ll get bored or their kids will turn out nicer.

I think it’s at least unwise and often much worse than that to tell people to act in the hope of X if there is no hope of X.

98

Steve LaBonne 11.03.11 at 6:18 pm

Let’s cut to the chase about austerity. It CANNOT accomplish what is claimed for it because it is self-defeating- it stifles economic growth and therefore worsens deficits and debt ratios. So anyone plumping for it is either ill-informed or dishonest.

The current Franco-German course of action toward Greece will not avoid default, only postpone it while digging the hole deeper. I don’t see how the Greek economy can ever get back on a path to growth while it is shackled to the Euro. It was the ability to devalue their own currrencies that allowed Argentina, and now Iceland, to begin to recover. Serious pain can’t be avoided, but inflicting worse-than-useless pain that actually moves the patient further from the path to recovery is just plain evil.

99

SamChevre 11.03.11 at 7:37 pm

Neoliberalism is antidemocratic

So is liberalism.

Basically, ANY school of thought that values individual rights will say that 51% of the popualtion can be wrong.

100

Lemuel Pitkin 11.03.11 at 8:00 pm

The ECB goes against expectations and cuts rates! Can irresponsible technocrats be brought to heel by the threat of action from the sober, responsible Greek people?

This should be our new Official Line, I think.

101

Mrs Tilton 11.03.11 at 9:16 pm

an adult @105,

you rest your case, and I move to dismiss.

You grow a little tiresome. I have told you what the Turkish armed forces think, not what I think. I leave it to others to judge whether you are correct that this way of thinking equals defending Geithner and the banksters but, if so, it is the Turkish generals defending them (a notion they might find interesting), not I.

And republicanism, which is what is what you started talking about, is not democracy, which you switched to. They need not be opposing things, not at all; they are simply not the same thing. (I have always found the claim that “The US is not a democracy, it’s a republic” enormously useful, as it tells the listener at once that the speaker is an irredeemably stupid bag of rightwing gas. Perhaps its usefulness is of even broader scope than I’d thought.)

Sure, the wise men haven’t shown themselves to be especially wise on this occasion, and Geithner is a trusty and well-beloved servant of his masters. But your conclusions are, I’m afraid, a bit pat. It’s easy and fun to be a populist, when populism is demanding things that one likes. But that won’t always be the banksters’ heads. And when the last wise man is down, and the populists turned round on you, criminalizing abortion and homosexuality and introducing a 5% flat tax on wage (but no other) form of income and putting Christian prayer and creationism back in state schools and mandating the death penalty for all sorts of things*, where will you hide, adult, the wise men all being flat?

* I’m assuming here that you’re in America, given that you cite American sources. But if you’re somewhere else, I’ve no doubt we could fill in the blanks appropriately.

102

SamChevre 11.04.11 at 12:11 am

Between a state run according to the preferences of a minority, and for their benefit, and one which serves the majority I choose the latter.

That’s fair.

I very very strongly disagree; I rather like being able to worship in peace, even as a member of a religious minority.

103

Mrs Tilton 11.04.11 at 12:56 am

an adult,

yours is, I will concede, a coherent view. It’s merely a rather disgusting one. Under your principles, for example, the Roman Catholic minority in Northern Ireland had no grounds for complaint during the Stormont era.

That you regard AKP as having created opportunities for Turks, especially women, who did not have these opportunities before is amusing, but it really doesn’t help show that you know very much about Turkey.

104

Mrs Tilton 11.04.11 at 8:28 am

adult,

yes, we’re done, but only because you are not very good at thinking and have nothing interesting to bring to a debate.

Your insinuation that I am a racist is duly noted. It wasn’t necessary, though. You had already amply revealed your character, there was no need for you to gild the lily by aping GOPers and Likudniks.

105

niamh 11.04.11 at 9:08 am

To ‘Mrs. Tilton’ and ‘an adult’, I am not happy that you have taken over this discussion to pursue a completely different argument about Turkey. And I am not happy that you have taken what I consider to be an inappropriately personal line of attack against each other. Please consider carefully before you post here again.

106

Mrs Tilton 11.04.11 at 9:34 am

Niamh,

the discussion on Turkey did seem to me to flow naturally out of the discussion of the Greek situation (in both cases, elites vs. populism), but point taken and apologies for my part in the threadjack, though that’s not what I’d intended.

As for my closing remarks to an adult, I do not take kindly to insinuations that I am a racist.

And with that, I’ll get me coat.

107

niamh 11.04.11 at 9:56 am

Grand so, but I’m not trying to eject people, just to remind you all that, consistent with CT norms, I value civility and open-mindedness in exchanges posted here.

108

niamh 11.04.11 at 10:20 am

BTW the FT ran this graph before, but they’re running it again today:
http://www.ft.com/intl/cms/s/0/0a35504a-0615-11e1-a079-00144feabdc0.html#axzz1cg29ZSfM

I think the downside of an unplanned default and precipitous exit from the Euro makes most Greek people extremely nervous. It’s their lives and livelihoods that are on the line. They are at a crossroads whatever way you look at it. The old domestic social contracts have been torn up by the loan programme. But the European social contract has also under extreme pressure, as Sarkozy speculates openly not about how to modify EU policy to provide long-term sustainable support for Greece, but how the Euro might work better if Greece was (regrettably of course) outside the fold.
(His eyes are firmly on Italy, where Berlusconi’s antics are no longer looked on indulgently).

Rather than having a referendum, it now looks like some form of all-party government might be formed, without Papandreou. But whether having them all ‘inside the tent’ results in the coordination of their aim remains to be seen, and a new election may be inevitable, with renewed uncertainty for the refinancing loan that are essential to pay the public sector bills. Nasty prospects in every direction. http://www.athensnews.gr/portal/8/49965

109

SamChevre 11.04.11 at 2:29 pm

And again my discussion concerned a hypothetical choice between majority and minority rule not broader civil rights.

Right; but civil rights are, always and everywhere, for the benefit of minorities. (Whether Jews, or Christians, or landowners, or storekeepers, or Roma.)

110

Andrew F. 11.04.11 at 2:35 pm

Bruce @103: But what if there’s no reason to believe that political and economic reforms of the sort you’re talking about will happen? And I don’t mean this hypothetically. If you say “wait, because X would be better”, you have to have some grounds for expecting X to happen, and I simply don’t see it. Where, anywhere in the First World, do we see governments and financial sectors doing the kinds of things that would provide substantial relief for current pain and changes that make future pain of the same sort less likely?

Well, if Greece is to stay in the eurozone, then some of the reforms have to happen simply because they’ve become conditions for Greece staying in the eurozone. A choice to not enact any of the reforms is a choice to opt for a eurozone exit.

So for the euro-stay sequence, we should consider the effects of those reforms minimally necessary to the choice of staying in the eurozone.

But I feel like I’ve not fully understood your point Bruce. Are you saying whether Greece stays in the eurozone or not, these reforms are not politically viable, so sooner or later Greece will have to leave, and better that Greece do it sooner?

Steve @104: Let’s cut to the chase about austerity. It CANNOT accomplish what is claimed for it because it is self-defeating- it stifles economic growth and therefore worsens deficits and debt ratios.

I agree that, generally, austerity is a short-term hit to the economy. But I’m not sure I agree that, therefore, austerity is self-defeating when the problem is not simply economic growth, but rather the feasibility of financing.

Niamh @119: That’s a great graphic. Despite the heightened anxiety the crisis is causing, I think that Greece – and the EU – almost had to come to this point for a resolution to be finally grasped.

111

politicalfootball 11.04.11 at 2:39 pm

But whether having them all ‘inside the tent’ results in the coordination of their aim remains to be seen, and a new election may be inevitable, with renewed uncertainty for the refinancing loan that are essential to pay the public sector bills.

Greek political elites are impressively united on the subject of refinancing. Papandreou’s referendum gambit clarified that issue. Greece’s leaders, no matter the party, are clearly going to keep trying to refinance until it becomes apparent that this is impossible – or the public revolts and turns against the Euro.

The problem – and it’s a pan-European problem – is that the technocratic elites aren’t willing to confront what’s necessary to get the Greek economy back on its feet. The negotiated default was a bold move, and it was surprising to see the ECB cut rates, but these actions don’t address the vastness of the problem.

Certainly, default and an exit from the Euro would be a calamity for the Greeks, but so far, nobody has proposed a plan to keep this from happening.

Maybe by putting it all off for a bit, the political elites can drum up the political will to take the necessary steps, but I don’t see any evidence that anyone is actually trying to do this. I suspect the technocrats are betting that the downturn can’t last forever, that the Greek economy will recover eventually, and that the day of reckoning can be delayed until then. Seems like a bad bet to me.

112

Josh G. 11.04.11 at 2:52 pm

SamChevre, I think the best argument against this was provided by Nathan Newman, a liberal union activist who has long opposed judicial override and other undemocratic forms of elitism.

Many people worry that if courts lose plenary power to enforce constitutional rights, raw majoritarianism will mean the end of rights for minority groups. But the reality is that legislatures are not majoritarian, at least on every single issue, since they are subject to political bargaining. Where a minority group cares passionately about an issue and vote in elections on that basis, they can often determine policy since a majority of other voters might disagree with them but, while they’d vote against them in a referendum, that single issue doesn’t effect their vote in legislative elections.

In that sense, it’s always been clearer to me why legislatures are institutionally likely to protect minority rights far more than courts, which have no structural reason to reflect anything other than the elite viewpoints of the pool of people from which judges are drawn.

In this case we are talking about the EU rather than courts, but the underlying principle is the same.

113

Josh G. 11.04.11 at 2:53 pm

Sorry, that second to last paragraph should have been part of the blockquote. Not sure why it wasn’t.

114

politicalfootball 11.04.11 at 3:24 pm

Are you saying whether Greece stays in the eurozone or not, these reforms are not politically viable, so sooner or later Greece will have to leave, and better that Greece do it sooner?

I won’t speak for Bruce, but if you substitute “economically viable” for “politically viable,” you come very close to my opinion. What I think you (and niamh) miss here is that this situation isn’t about the will of the Greek people to endure austerity. Austerity will damage the economy, which will require further austerity, which will damage the economy, etc. Nobody knows where the bottom is, but it’s almost certainly worse than the catastrophe that would follow departure from the Euro.

There’s a variation of Stein’s Law at work here: The current political/economic trajectory can’t go on, so it won’t.

One possibility is that Greece will exit the Euro, but there’s an alternative. The relatively prosperous parts of the Eurozone can pursue an expansionary monetary policy and directly transfer big piles of money to Greece. But it won’t come to that unless the Greeks credibly threaten to leave the Euro, which (see Stein’s law) they will.

So yeah, one way or another, Greece has to go to the brink of departing the Euro. Whether they go over the brink isn’t really up to the Greeks. Germany and the ECB will make that decision.

115

P O'Neill 11.04.11 at 3:26 pm

OK, so how do we feel about the increasingly likely scenarios of Mario Monti as PM of Italy and Lucas Papademos as PM of Greece?

116

Steve LaBonne 11.04.11 at 3:40 pm

Meanwhile German exports, and employment, are shrinking; perhaps this will shake them out of their Weimar hyperinflation psychosis by reminding them that beggaring your trading partners is a really poor strategy if you want to make a living on exports.

117

politicalfootball 11.04.11 at 3:46 pm

That’s true, Steve. In 127, I didn’t consider the possibility that the Germans might allow the EU to pursue Greece-friendly expansionary policies because such policies might become more necessary for Germany. So maybe that’s a benefit of kicking the can down the road.

118

SamChevre 11.04.11 at 5:46 pm

Thanks Josh

I’m familiar with Newman’s theory, and think it works well in some, but not all, circumstances. It won’t work for small, disliked minorities (gays in the mid-70’s, for example; Jews in many historical times and places, for another example), but it does provide another avenue for protecting some minority rights.

119

Glen Tomkins 11.04.11 at 6:30 pm

Well, I think that FT graph is somewhere in between the sort of thing USA Today runs to explain things to its low-attention span readership, and the sort of thing Onion runs as a parody of those USA Today graphics. If one imagined that the FT existed on some sort of higher journalistic plane, one was obviously mistaken.

No doubt all of those horrible things in the graphic are indeed possible to likely consequences of a Greek default. Are any of them not more likely in the event the Greeks don’t default, in the event they try to be good sheep and try to make austerity work? I have yet to hear any comment on the subject that does not acknowledge the truly spectacular downside at risk in a Greek default, so I think that in packing all the alarming consequences into their graphic, the FT is calling up a battering ram to open a door that’s already open. My beef is that I have yet to hear the commentary from the side that paints default as the act that will release the Anti-Christ from the Abyss that acknowledges the equally apocalyptic consequences of Greece going along quietly with austerity. Let the FT go back and make their graphic a bit roomier, large enough to cover the chain reaction of what happens when a country goes into freefall contraction, and maybe I’ll be happy with their work.

120

praisegod barebones 11.04.11 at 7:09 pm

Sam Chevre

At the risk of attractıng Niamh’s ire, I have to say I’m puzzled by the suggestion that the Turkish armed forces see their historic role as being to protect religious minorities, promote the toleration of homosexuality, and that they are a better bet for protecting civil rights of people like those involved in this story

http://www.todayszaman.com/newsDetail_getNewsById.action?load=detay&newsId=261570&link=261570

than the current democratically elected government. (I’d be tempted to ask for some of what you’re smoking, but there’s the whole Midnight Express thing…)

121

SamChevre 11.04.11 at 7:15 pm

Just for clarity: I’m not involved in the Turkey discussion. I know approximately nothing about Turkey, and rather a lot about the Jewish and other religious minority history of the Austro-Hungarian Empire.

122

Glen Tomkins 11.04.11 at 7:24 pm

@130
Well, that dynamic of shrinking its foreign demand base is certainly out there as one constraint on German behavior. But how much demand does Greece generate now on German production? Even if it were larger, I suspect they could convince themselves that they can find other markets for their production to make up for the loss of Greek demand involved in beggaring that country.

What should probably give the average German more pause is the likely path Greece will be compelled to take to recover from its beating with the austerity stick. A Greece that knuckles under and stays in the zone won’t be able to devalue its currency to make its exports more competitive. How else does it do that, how else does it get some employment back in the face of austerity, except by lowering wages? Maybe the EU has rules against being very aggressive on that front, but rules can be changed. What do Germans want, a Greece that never can pay back what it got from Germany, or a Greece that can pay back the Germans, but only by way of relaxed EU labor laws that let it transform itself into a Myanmar on the Aegean? And, of course, German workers would then have to compete with Greek workers on how much those anti-competitive, above -subsistence, wage levels can be beaten down to achieve lower production costs.

If austerity is good for the Greek soul, why wouldn’t it be good for the German soul? Why not Myanmar wages everywhere in Europe? When the only economic sin we can recognize is anything that makes production more expensive, the costs of labor must be beaten down everywhere to subsistence if we are to have universal virtue.

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Mrs Tilton 11.05.11 at 1:16 am

praisegod @135,

I’m not certain why you think anybody here has suggested that TSK see their role as what you wrote. One might nonetheless conclude they would be better (or at any rate, certainly no worse) than the current government for the civil rights of the people you mention, not least because it is the current government, not the generals, that are rounding those people up. I would be happy to discuss this further with you, but in deference to our host’s wishes would suggest we do this, if at all, via email; clicking on my nym will led you on my otherwise long since inactive website, which contains an email address.

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