Galbraith on Greece

[jk]

Re: Hudson on Greece

the classic game-theoretic move in a game of chicken, i believe first proposed by thomas schelling, is to throw your steering wheel out the window, so your opponent knows you cannot change course. has tsipras done this?

[GRG55]

Re: Hudson on Greece

the classic game-theoretic move in a game of chicken, i believe first proposed by thomas schelling, is to throw your steering wheel out the window, so your opponent knows you cannot change course. has tsipras done this?

I suspect throwing the steering wheel out the window telegraphs not that the course cannot be changed, but that the course is no longer able to be controlled and could lead almost anywhere. Including into the nearest ditch.

Greek financial assets continue to be propped up for the balance sheet benefit of its northern Europe lenders, not Greece itself. The moralizing led by Germany is an irrelevant side show and will not change the outcome. Default or debt relief in some form is inevitable; the Greek economy is in recession yet again. If Greece ends up in a ditch Europe will have an essentially failed state on its hands.

[astonas]

Re: Hudson on Greece

I suspect throwing the steering wheel out the window telegraphs not that the course cannot be changed, but that the course is no longer able to be controlled and could lead almost anywhere. Including into the nearest ditch.

Greek financial assets continue to be propped up for the balance sheet benefit of its northern Europe lenders, not Greece itself. The moralizing led by Germany is an irrelevant side show and will not change the outcome. Default or debt relief in some form is inevitable; the Greek economy is in recession yet again. If Greece ends up in a ditch Europe will have an essentially failed state on its hands.

I agree that any "moralizing" from any side is irrelevant (not to mention dramatically exaggerated in the English-language press) and that debt relief has always been inevitable in the long run. It is simply a pragmatic requirement.

At least, it has been officially and explicitly acknowledged as such by Merkel from the very beginning of the crisis. Recent shifts make that an increasingly difficult position for creditor governments to defend to their constituents. More on that later.


But I do disagree with the boldfaced statement above. Greece is now, and has for decades been, a failed state. It is in the ditch. The only thing that has changed since 2008 is that European auditors have finally been permitted to go into the books in Athens themselves to reveal that fact for all to see. The shortfall that was claimed as a few percent of GDP (and believed internally within Greece to be only slightly higher) was in fact massively higher -- by double-digit percentages! There is no denying this simple fact, or the intentional deception arranged by Goldman Sachs at the request of the Greek government, that concealed it from view.

The mistake that was made - and must now be resolved in some way - is that an ALREADY failed state was allowed to enter the Euro due to an extremely active (and expensive) Goldman-Sachs engineered deceit in the first place.

This has nothing to do with moralizing. A "moralizer" would pound on the table demanding punishment for Goldman, and others. This, on the other hand, is simply an acknowledgement of reality.

The question is not now -- nor could it ever have been -- how to prevent Greece from failing. It HAD ALREADY failed, and long before it entered the Eurozone. Nothing the Eurozone members could ever have done could thus have prevented it from being a failed state. It is simply not chronologically possible, barring the invention of a time machine.

The only question that remains is therefore how to prevent it from bringing the entire Eurozone down with it, now that everyone knows that Greece had long ago failed.

And that is the gun that Tsipras and Varoufakis are insisting on holding to the head of European negotiators.

"Give us what we want -- or we will make sure that you collapse along with us." "We promise to find a way to take you out with us." It is the logic of a suicide bomber, who feels there is no other option.

And to some extent even that is understandable - if it is indeed the only option.

The problem is that it is entirely justifiable to refuse to give in to demands made under such conditions, and instead find ways to isolate the repercussions, so that they remain mostly within Greek territory. That is the appropriate and rational way to deal with a suicide bomber. Put up bomb-proof barriers. Keep them isolated from others.

And now I return to my original point. The stance of the SYRIZA coalition government is making it much harder for creditors to do that which they had previously already resigned themselves to doing.

It is making it considerably MORE, not LESS, likely that Greece will simply be hung out to dry.

What politician wants to go to their people and announce that they just gave in to the threats of a suicide bomber? The recent change in tone in the negotiations risks changing an act of magnanimity and brotherly concern (debt forgiveness) to one of pure cowardice. The former can easily be understood by creditors' domestic constituents, the latter is not likely to be forgiven.

Put another way, it overplays the Greek poker hand. Keep it up, and there will be no choice but to isolate Greece entirely, and call the bluff.

[jk]

Re: Hudson on Greece

i don't think we need concern ourselves with anyone in power moralizing at the expense of goldman sachs, let alone punishing it. the image below is 2.5 years old; i couldn't find a more recent version, but i think it conveys the idea:







perhaps an interesting question to think about is this: how will goldman profit from whatever is about to unfold in europe?

[don]

Re: Hudson on Greece

perhaps an interesting question to think about is this: how will goldman profit from whatever is about to unfold in Europe?

The Rosetta Stone . . .

[LazyBoy]

Re: Hudson on Greece

The mistake that was made - and must now be resolved in some way - is that an ALREADY failed state was allowed to enter the Euro due to an extremely active (and expensive) Goldman-Sachs engineered deceit in the first place.

Let GS pay the difference!

[gnk]

Re: Hudson on Greece

Let GS pay the difference!

There is a difference between a bank lobbying a government and a government soliciting a bank in order to accomplish a goal.

I agree with much of what astonas has written. But one must also address the cultural issue when it comes to how the people view government here in Greece - thus there is an unavoidable moralizing component. In order to understand current Greek attitude/expectations towards government, I think a quick summary of Greece's political history from 1981 is in order.

In 1981 Andreas Papandreou became Greece's second Prime Minister post Junta. He was Greece's first populist leader. Prior to Papandreou, right wing politics dominated Greece, often supported by the Western power du jour via the monarchy. Greece prior to the 1967-1974 Junta was a Republic with a Monarch that held some constitutional powers.

Although Papandreou did not invent clientelism/patronage in Greece - he put that policy on steroids, so to speak. Greek debt mushroomed under his leadership in the 1980s, and the the number of government employees (mostly Pasok supporters) swelled. One could find PASOK party flags even in churches during baptisms - as if to pay "respect" to the "godfather" of Greece: Papandreou and his party PASOK. I have a cousin that rode around town with a PASOK flag on his bike - he eventually got a job at the post office. Patronage and party politics took over a large segment of the population. Once such a policy invades and permeates a society, it is not easily shaken off.

After a corruption scandal in the late eighties PASOK lost the 1990 election and New Democracy eventually won and its leader Konstantinos Mitsotakis became the next Prime Minister. He only lasted three years. From wiki:

Mitsotakis's government moved swiftly to cut government spending as much as possible, privatise state enterprises and reform the civil service. In foreign policy, Mitsotakis moved to reopen talks on American bases in Greece and to restore confidence among Greece's economic and political partners. In June 1990, Mitsotakis became the first Greek premier to visit the United States in 26 years. He promised to meet Greece's NATO obligations, to prevent use of Greece as a base for terrorism, and to stop the rhetorical attacks on the United States that had been Papandreou's hallmark. Mitsotakis also supported a new dialogue with Turkey, but made progress on Cyprus a prerequisite for improvement on other issues.

Papandreou, cleared of charges arising from the Bank of Crete scandal in a 7–6 vote at theEidiko Dikastirio (Special Court), criticised Mitsotakis's government for its economic policies, for not taking a sufficiently strict position over the naming dispute with the newly independent former Yugoslav Republic of Macedonia, as well as over Cyprus, and for being too pro-American. The heightened public irritation over the Macedonia issue caused several ND parliament members, led by Antonis Samaras, to withdraw their support from Mitsotakis's government and form a new political party, Political Spring (Politiki Anoiksi). Mitsotakis's government had already restored the election system back to its original form, which allowed Papandreou's PASOK to obtain clear parliamentary majority after winning the premature 1993 elections and return to office. Mitsotakis then resigned as ND leader, although he remained the party's honorary chairman.

Thus, Papandreou politics won the upper hand and continued to influence greek politics and the greek economy for sometime. Clientelism was back on fast-track, even New Democracy, the opposition, changed course to survive, and the drachma continued to lose value.

As Greece was spiralling into debt, it joined the EU and adopted the Euro. Low interest rates and a vast flow of EU subsidies allowed the game to not only continue, but to enter a higher level.... until ultimately, Greece, economically, imploded.

I think there is a lesson to be learned for all nations here. It is not always the oligarchs/aristocracy/elites that can run a nation into the ground. Sometimes populism, or as the US founding fathers warned, rule by the mob, is equally dangerous.

How does such a nation as Greece change? Personally, I don't think such a nation can change on its own unless it completely crashes. Pumping money into Greece alone will not solve the problem. Debt forgiveness alone will not solve the problem. Greece needs to be reformed. How?

SYRIZA is basically PASOK/Papandreou reinvented. Openly critical about the West, hiring more civil servants in defiance of the current reforms, and threatening to tilt to the East, towards Russia. Which is funny, because even Russia doesn't want to rock the boat, and would prefer Greece enter a deal with the EU asap. Putin fears that a Grexit could affect the EU such that his oil and gas exports suffer due to both a new recession and a further drop in energy prices.

And so, that is how my opinion that Greece must be reformed from the outside has evolved.

It's not an evil Bankster vs. innocent Country story. There's more to it.

[Southernguy]

Re: Hudson on Greece

From your own graph it seems Greek public debt surged most during "austere" Mitsotakis governance.

[Woodsman]

Re: Hudson on Greece

I think there is a lesson to be learned for all nations here. It is not always the oligarchs/aristocracy/elites that can run a nation into the ground. Sometimes populism, or as the US founding fathers warned, rule by the mob, is equally dangerous...

"The mob." I appreciate the clarity, GNC. It helps put things into context.

Tell me, did the Greek government get overthrown by popular mobs and "the street?" Or was it those same oligarchs and aristocratic elites that made common cause with foreign forces to kill Greek democracy?

As I've come to understand it, it's not "the mob" per se that is at issue. But rather, whose mob. Greece is divided into two mobs and has been since the Civil War - royalist/conservative right and the liberal/socialist center-left.

Apart from his garden variety social democratic policies, Pap's biggest sin was attempting to stay neutral during the cold war and steer an independent foreign policy. Since the Brits handed the keys to the Americans, Greece was and remains awash with American military and intelligence apparatchiks. It was they along with reactionary right wing allies in the monarchy and church, who conspired to overthrow Greek democracy and replace it with military dictatorship.

Not surprisingly, it was put into motion not long after the prime minister attempt to exert civilian control over the Greek military and remove dangerous reactionary elements in the officer and senior enlisted corps. That brought the coup, initially deployed by the right wing generals at the behest of the monarch, but ultimately carried out by right wing colonels instead. It's the same playbook they ran in Iran and Guatemala in the 50s and Chile in the 70s. One trick ponies, these guys.

Who knows, maybe a new mob of military and intelligence thugs will take over Greece again?

I pity the Greeks. Since the good war ended, it seems every time a majority of Greek people express their will through democracy there's a guy with a gun and a cross ready to beat them until they do democracy the "right" way. But they don't do it alone. Recall the colonels' Company handlers waxing poetically about democracy - Gust Avrakotos goading the putschists to "shoot the motherfucker" Papandreou and the Chief of Station calling Greek democracy, "a whore." Class acts.

[gnk]

Re: Hudson on Greece

From your own graph it seems Greek public debt surged most during "austere" Mitsotakis governance.

I'm guessing Greece had a severe recession, I remember in the US, the recession in the early 90s. Not sure why. Maybe a correction to the government books? Anyway, maybe this below helps:

GR_DFTPLN0210.gif

As the 90s came to a close and Greece was preparing with GS to fix the books for European Monetary Union, the budget deficit miraculously narrowed.

[gnk]

Re: Hudson on Greece

As many of you know, I live here in Greece - 5 years now. I also have spoken to many people, all ages, all political persuasions.

The Greek Democracy "a whore" comment doesn't offend me. The fact that I can argue both sides of that debate about Greek Democracy troubles me. It means that comment is not that far fetched. In a prior post, maybe in another thread, I compared Greek Democracy to Tammany Hall, run by the infamous Boss Tweed. I think that comparison puts things in perspective.

As for the right/left paradigm - it's not what most Americans think. There are several layers. Right wing encompasses royalists, free market supporters, isolationists, all the way to neo nazis. The left wing encompasses everything from center left social democrats - think Northern European left wing to Greens to hardcore communists - Marxists, Leninists, Maoists, etc...

It's the hardcore communists that have caused the most trouble, in my opinion. I know, I'll get flack for that. But in the US, there is no real Communist party. Back during WWII, Churchill and Stalin carved up the Balkans. The deed was done. Yet the Greek communists, that felt a "spiritual connection to "Mother Russia and Orthodoxy," tried to topple the Greek government nonetheless. Don't think for a minute they were some sort of innocent freedom-fighters.

It's funny, the current Marxist component of SYRIZA wants to leave the EU and join "Mother Russia" only to be told that Russia prefers Greece in the EU, with an agreement ASAP. Yet these hardheaded Marxists persist. The truth? Neither Stalin wanted them, nor does Putin. Nobody in the world wants them. You need to watch them speak. They are truly unhinged.

There are always elements of blowback when the CIA gets involved. That's true. I feel bad for what happened in Iran with the installment of the Shah. I feel bad for a lot of what Latin America had to endure. Sure, nobody wanted the colonels in Greece - or at least few did. (However, the colonels never enriched themselves, accomplished many public works, and never put Greece in debt.)

But Greece, given its standard of living is the last to complain about foreign involvement. What about all the foreign aid Greece has been receiving since its inception, including the more recent EU subsidies for investment? I don't hear SYRIZA complaining about that. By the way, Larissa, a farming town in Northern Greece, was famous for the amount of Porsche Cayennes and Jeep Cherokees farmers somehow managed to buy.

The private sector refused to pay taxes in protest (and greed) against a public sector that was paid ridiculous amounts with extreme benefits that even covered their unmarried daughters. The social contract between public and private sector was broken.

I'll ask again, but differently. Where does Germany fit in? The CIA? The EU?

Once a government gives benefits to the many for votes, Democracy dies. Civil Servants and Unions run the show... and the country... into the ground. The growth of the public sector was a left wing idea, supported by the full spectrum of the left. The right wing had to follow along to survive. That's the simple story.

Banksters, CIA involvement, German sales of military hardware, loans to Greece, etc.. etc... are nothing compared to the simple explanation I am trying to give.

I say this to everyone on this message board:

Right now the extreme left in Greece wants money with no strings or it will blow up the world economy. That is what they believe, that is their goal. Don't project your views that have been colored by your take on US lobbyists, Goldman Sachs, Federal Reserve, Chomsky readings, etc.... It's a different world here and you can't analyze it using the same analysis you use in the US. Greece is not the US post Glass Steagall. Greece is not Iran under the Shah. Greece is not a banana republic being run and exploited by an "Evil EU."

Greece is a broken society. However.... many are coming around now. Many leftists I know truly fear what may happen. The worst thing is that things get out of control.

I don't think this current government is cohesive enough to accomplish anything. We are headed for capital controls, and possibly elections. Syriza may well win again if it shakes off the "Left Platform" its hardcore Marxists.

For decades risk taking hardworking Greeks emigrated to other countries, succeeded, and sent money back to Greece. For once, maybe its time for the pie in the sky communists to emigrate to Russia or China, or Venezuela....

[Southernguy]

Re: Hudson on Greece

I'm guessing Greece had a severe recession, I remember in the US, the recession in the early 90s. Not sure why. Maybe a correction to the government books? Anyway, maybe this below helps:

[ATTACH=CONFIG]5640[/ATTACH]

As the 90s came to a close and Greece was preparing with GS to fix the books for European Monetary Union, the budget deficit miraculously narrowed.

Clearly the "austere" government grew the deficit. It happens all the time with such neoliberals. They inspire "confidence" to the markets, so they grow the debt beyond imagination. Privatizations (with the supposed object of reducing deficit) serve for the same purpose. That's the difference between dominant economic theory and reality.
And of course there sure was the deficit created to buy German tanks and battleships. Don't forget; unmarried daughters of public servants pensions go into local market thus creating demand and GDP. Buying german tanks doesn't.

[gnk]

Re: Hudson on Greece

Clearly the "austere" government grew the deficit. It happens all the time with such neoliberals. They inspire "confidence" to the markets, so they grow the debt beyond imagination. Privatizations (with the supposed object of reducing deficit) serve for the same purpose. That's the difference between dominant economic theory and reality.
And of course there sure was the deficit created to buy German tanks and battleships. Don't forget; unmarried daughters of public servants pensions go into local market thus creating demand and GDP. Buying german tanks doesn't.

From my prior post, here's a typical Greek Government run (as opposed to privatized) entity:

The national railroad has annual revenues of 100 million euros against an annual wage bill of 400 million, plus 300 million euros in other expenses. The average state railroad employee earns 65,000 euros a year. Twenty years ago a successful businessman turned minister of finance named Stefanos Manos pointed out that it would be cheaper to put all Greece’s rail passengers into taxicabs: it’s still true... (Lewis article)

What's wrong with this picture?

Let's step back and remember we are talking about a real country with, let's say, it's own "unique" culture." Let's put the economy theory aside for a second.

Giving unwed daughters their father's pension to guarantee future votes. Looking the other way when businesses didn't pay taxes to get votes. Allowing up to 600 different jobs to be eligible for early retirement at 50-55 to get votes. Expanding the public sector well beyond what a net trade deficit country could handle to get votes. Paying unions whatever they wanted, whenever they wanted (up to 3X private sector jobs) or else they went on strike crippling the country and businesses to get votes.

See where this is going?

All for votes - and that's how Greece got to where it is today. Period.

I guess Greece created so much demand that it went bankrupt? I'm all for Government spending to create demand - but how that money is spent is just as important. An overbloated pension system and government sector is not sustainable. There are also political risks in following such a policy.

Why can't a government create demand AND invest?

Building a bridge, an airport, spending on international marketing for tourism, those kind of things spur both demand and investment. That sounds sensible. But keep in mind, we're talking about Greece. Whenever there was a public works project - everyone got paid, if you know what I mean.

You have to let go of the dry economic theory and understand that this country has other problems. But I'll say this - government creating demand the easy way contributed greatly to the current culture here in Greece. As for private enterprise, good luck. The system is so dysfunctional you are forced to break the law to start a business.

I'm not some supply side hack. Personally, I believe in a balance. Greece is in its own category. More spending isn't going to fix it. Without reforms, its back to business as usual.

[Woodsman]

Re: Hudson on Greece

GNK, it's good that you are not offended by the Greek whore comment, but then again you're not Greek.

I think you have a rather unique concept of democracy. The Nordic countries must be awful little gulags, no? Because Sweden and Norway's democracy seems pretty lively from this vantage point. And while they haven't been immune from the infection of neoliberalism, the Nordic cradle to grave welfare state shows no sign of losing popularity. Year after year, OECD surveys show the Nordic social democracies and welfare states producing the happiest people in the world, so maybe its not entirely like you make it out to be? I'm not clear why "democracy dies" when a nation's citizens vote for politicians promoting a welfare state, but no need to unwind this one for me.

Now if Greece is a broken society, the fault lies with the fascists who broke it. I think here of men like Metaxas who broke Greek society by "saving" it with states of emergency, decrees of martial law, annulment of the constitution, etc. And people like Papadopoulos who before he took over Greece in a violent military coup, collaborated with the Nazis in World War II and - contrary to your assertion that the colonels "never enriched themselves" - was on the Company payroll for decades.

Yes, they do seem to be able to make the trains run on time as you noted in your praise of the colonels' efficient management. But that comes at the cost of military dictatorship, widespread repression, torture, the destruction of civil society and all the hallmarks we have come to expect when rightists gain unlimited power. Me, I'd rather keep civil society intact and wait for the train.

I'm not so sure Greece is a "different world" or that the Greek character is so deficient that its people cannot govern themselves and must be periodically saved by murderous fascist dictatorships. It used to be so convenient to blame the communist boogeyman, but that seems to have lost its potency since 1989. Moreover, search in vain for the period in which the Greek commies held political power. You won't find it because they never had it. They never created a budget, never sat a cabinet, signed an IMF loan, or controlled even a single ministry.

Yet the right wing would have us believe that all of Greece's problems can be traced back to those hardcore commies. To the fascists, that hard core apparently included the active mainstream Greek left and they too were murdered during the reign of the colonels. If the remaining sensible people got the message and withdrew from politics, leaving the field to the crazies, whose fault is that?

What remains of the Greek polity is the result of decades of violent, extralegal and antidemocratic actions by the Greek right-wing and that's their epitaph. The coalition of fascist, rightists and antidemocratic forces in Greece who made common cause with foreigners to "save" their country are alone responsible for breaking Greece.

I agree that your explanation is simple and accept that it might be sufficient for folks without a knowledge of Greek history. But beyond that, it's quite a selective view of things.

[jk]

Re: Hudson on Greece

sweden has a gdp/capita of about $41k [2013 dollars, ppp]
norway has a gdp/capita of about $53k
denmark has a gdp/capita of $41.5k
finland $40.5k



greece a little under $26k.

a lot depends on what you can afford.


[btw u.s.a. $54.7K, so in theory we could afford an economy like the nordic countries, but that seems a pretty remote possibility the way things are structured here.]