Forging a more encompassing politics: solving the Greek crisis – a thought experiment

greece-v-germanyEveryone is charging into print on the smoking ruin that the Europeans will be leaving Greece after the latest barely believable debacle in which the newly elected government Syriza, after receiving the overwhelming support of its electorate to reject the punitive terms of the payday lending it was being offered went back to Brussels and asked where to sign.

Jeff Sachs makes a good case that the root cause of the problem is insufficiently inclusive institutions. He offers the excellent analogy with the American Articles of Confederation:

The EU today operates something like the US under the Articles of Confederation, which defined the US’s ineffectual governing structure after independence from Britain in 1781 but prior to the adoption of the Constitution in 1787. Like the newly independent US, the EU today lacks an empowered and effective executive branch capable of confronting the current economic crisis. Instead of robust executive leadership tempered by a strong democratic parliament, committees of national politicians run the show in Europe, in practice sidelining (often brazenly) the European Commission. It is precisely because national politicians attend to national politics, rather than Europe’s broader interests, that the truth about Greece’s debt went unspoken for so long.

It’s an excellent article which I recommend to you for your delectation. (Yanis Varoufakis makes similar points perhaps even more trenchantly in his latest contribution as well.)

However it put me in mind of something else which could offer some of the benefits of more encompassing institutions even without them. The case for a more sensible, balanced approach to Greece’s situation is one that takes a little reflection. One might argue that more deliberation – of the kind that occurs in a jury for instance – might lead people to arrive at views which are more sympathetic to Greece given the level of suffering now going on there. I think that’s likely and there’s some evidence that deliberative processes like juries elicit such effects. But one needn’t even go that far. For the case in favour of more moderation towards Greece can be made without any appeal to compassion. Pretty obviously driving its economy into the ground is a lousy way for the creditors to get repaid – a point Varoufakis has made consistently and a point which is constantly reinforced as the Greeks save their way to ever higher relative levels of indebtedness as their economy shrinks.

And one important reason these considerations are not on the table is because Europe’s national politicians are driven to a substantial extent by their own national vox pop democracies in which meaning is conveyed in the familiar media stereotypes in which Greeks are lazy and corrupt and Northern Europeans are the converse. That ,more or less guarantees that negotiations will be scripted from competing nationalistic morality tales, rather than as an exercise in the pragmatic solving of problems and sharing of burdens and benefits.

Here’s a bit of activism that might be attempted if one could find someone to toss a few million Euros in the direction of a good cause. Get 99 people – 44 people chosen at random from the Greek population and  45 people chosen at random from the German population. Put them in the same room for a few weeks with all the resources and access to experts they seek and ask them to come up with a settlement. I think it would have to be better than the settlement we have. But I think it would be a lot better.

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paul frijters
paul frijters
6 years ago

Nick,

what do you make of this: http://yanisvaroufakis.eu/2015/07/15/the-euro-summit-agreement-on-greece-annotated-by-yanis-varoufakis/

? It seems a bit unhinged to me.

FYI: the Dutch government sent a memo around recently arguing the Greek debt is much smaller than the 180% GDP figure because of the low interest rates and the long delays in repayments. Accountants had of course picked up on this much earlier. In NPV terms we are looking at maybe half the nominal value. The ongoing transfer to Greece is thus far larger than commonly realised, and its debts are far lower.

paul frijters
paul frijters
6 years ago
Reply to  Nicholas Gruen

Hi Nick,

V basically sees nefarious intent and Greek victimhood in every sentence of the deal. Even making the statistical agency completely independent – something called for by the Eurozone for over a decade now – is described as an attempt of others to cook the Greek books.

Of course I understand how average Greek mums and dads are emptying their Euro accounts and stuffing the bills in their mattrasses, worried that when the banks fold they wont be able to get their savings back. Nothing ‘bailout’ about that, since the savers are taking out what they previously put in. It is the money creation ability of the banks that makes up another loan of sorts. In that regard, I note that the banks in 2012-2013 needed to be recapitalized to the tune of some 40 billion. Currently, once again such a figure is being touted for the coming years. That’s 40 billion in newly created money of which the value is guaranteed by the whole Eurozone. Quite an additional stimulus.

What do you think it is I dont see, Nick? I have just been the Greece and have seen the unemployed and the frustration. You see the vandalism, you read about the 50% of the police membership to Golden Dawn, etc. I have actually talked to some of the law-enforcers in the adjacent countries about the migration streams now flooding Greece and seeking Northern passage. What more do you want me to notice? I simply truly do think that the Greece saga has f-all to do with supposed austerity and is mainly because of the atrophied political-bureaucratic system that has become oriented towards borrowed outside money (which incidentally is pretty much the conclusion the Greek economists I talked to had also drawn. They don’t blame the Germans, except for their naive generosity).

paul frijters
paul frijters
6 years ago
Reply to  Nicholas Gruen

btw, I resent the words ‘anti-Greek’.

paul frijters
paul frijters
6 years ago
Reply to  paul frijters

ok, no worries.
I see the Greek pain too (though one should not exaggerate. The average Greek is still richer than the average in the surrounding countries. And with a huge grey economy, the unemployment statistics coming from that government-controlled statistical agency are very suspect).

Fundamentally though, being the one with the pain does not mean one owns the truth as to how that pain came about. It is always easier to blame outsiders for that pain than insiders.

GrueBleen
GrueBleen
6 years ago
Reply to  Nicholas Gruen

My word, those “vox pop” democracies are everywhere you look, aren’t they. How did this disease spread so far ?

And I see you’re having some difficulty in reasoning with Paul too. But don’t worry, we all have that. Maybe Paul should also raed this:
http://conversableeconomist.blogspot.com.au/2015/07/who-will-nudge-nudgers.html

GrueBleen
GrueBleen
6 years ago
Reply to  GrueBleen

Errr, or perhaps he should just ‘read’ it.

John walker
6 years ago

Like your idea.
However the EU at the top level is – ‘Brussels ‘- a technocratic expert bureaucracy : likes dealing with other similar corporate structures and is not very interested in the non expert publics views.
The role of the various elected governments of the EU to often seems to be little more than that of implementing ( as best as they can) directives from ‘Brussels ‘ ,regardless.

Can not see Brussels warming to the idea.