Everyone 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.
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.
Thanks Paul,
That was the one document of Varoufakis’ on his blog that I’ve not read. Not much into blow by blow bickering about matters on which people differ heatedly and at least one of the two parties is engaging in political ‘business-as-usual’ ie say whatever you think sounds good and minimises trouble for your side.
It’s also a very long and complex document with lots of details. So if you think there’s benefit in discussing something specific in it, I’d be happy to consider your invitation, but as it is, I won’t bother reading it at this stage. I have continued to be impressed by all of V’s other output.
You haven’t really risen to the challenge I put to you, which is to explain to me what’s wrong with the Greeks emptying their bank balances and getting into cash. You’ve described this as a huge transfer from the EU – yet another bailout of Greece on a grand scale. I understand why you can say that. There’s some logic to it. But shouldn’t Greeks be able to get Euros out of their banks? Euros they put in there? And if it was more ‘stimulus’ why can’t we see it’s effects?
I think you’re not properly delineating between two perspectives – you’ve got some good anti-Greek shtick going. It makes sense. But it’s only half the story and you haven’t addressed the other side.
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).
btw, I resent the words ‘anti-Greek’.
Apologies on ‘anti-Greek’. I intended it as a neutral expression – “anti-Greek position” but I can see you could read it as an attempt to imply something that was offensive and I unreservedly apologise for any suggestion otherwise. I wouldn’t accuse you of that kind of thing I assure you.
On the substance, it’s not that I think you’ve missed any facts. But the suggestion that there hasn’t been ‘austerity’ with 25% unemployment and 50% youth unemployment seems silly to me. It’s pretty clear the banks have been leaking euros to people who are taking their money out of the country. I don’t call that a ‘stimulus’ and it doesn’t countermand ‘austerity’. It’s an additional issue which I’m glad you’ve raised.
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.
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
Errr, or perhaps he should just ‘read’ it.
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.
No – it wasn’t offered for the delectation of Brussels bureaucrats. As you’ll see in the post, I proposed it as ‘activism’ which is not something I’d expect from the smokeless corridors of Brussels.
Here’s Simon Wren-Lewis arguing that the great obstacle to decent fiscal policy (ie that’s expansionist in a zero lower bound depression) is educating the public that budget deficits are a Good Thing in such circumstances.
Sounds like a job for deliberative democracy to me. Can’t see how it can be done through the din of the Alan Jones of the world otherwise.