‘We have faith in our citizens’ – why?

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.

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…]

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.

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.

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 ;-)

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.

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.

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?

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

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?

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.

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.

(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)

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

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

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?

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.

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.

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.

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. )

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.

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

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.

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.

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.

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.

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?

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?

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.

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.

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.)

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.)

“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.

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.

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.

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.

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.

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?

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.

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.

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.

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?”.

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.

Google Translate fail:

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

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!

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 ErdoÄŸan 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 ErdoÄŸan 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 ErdoÄŸan and the AKP government are grossly violating civil liberties and the rule of law, and that this is getting worse as ErdoÄŸan grows ever more arrogant and monomaniacal. If ErdoÄŸan 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.

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.

@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 edilmiÅŸ 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.)

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.

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.

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.

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.

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.

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

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.

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.

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.

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.

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.

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…)

@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.