Friday, February 6, 2015
Arguably, Greece was a mess before joining the euro, and only got in due to the hubris of the euro-federalists, desperate to build a European superstate (for various reasons, although breaking the hegemony of the Anglo-Saxon power base was probably one of the leading motivators from the then-powerful Gaullists).
Once Greece made their real 8.3% deficit vanish into a mere 1.5% one, through accounting sleight of hand with the help of Goldman Sachs, they were welcomed into the Euro. At that point they were flooded with cheap money and felt no further need for restructuring of their baroque economy, full as it was with anachronisms and vested interests. Wind the clock further forward and their deficits ballooned wildly as old habits persisted.
Once the shoe dropped about Greece’s serious sovereign debt situation, the European powers realized just how exposed their banks were to a Greek default. It became essential to unwind the situation and give banks a chance to deleverage. Only public money could achieve this without significant (supposed disastrous) haircuts on private funds - deemed to have the potential of devastating the world (or at least the western) economy. Consequently, public funds were funnelled into Greece, but not as a bail-out per se, mostly merely as loans with aggressive requirements for Greece to restructure internally in order to create a modern and more productive economy possible of producing a primary surplus. These 'austerity conditions' have been applied and policed by external agencies - exerting draconian control over the domestic politics of Greece and its people.
The problem with this medicine has been foreshadowed by the effects of the Versailles Treaty on Germany after WWI. Versailles was a disaster in the long-term because it let the leaders off scot-free, while punishing the ordinary people with measures that created extreme economic hardship. Contrast this with WWII, where the allies punished the leaders and let the people off free. Is it any surprise that history is repeating itself in terms of the rise of nationalistic, even extreme nazi parties in Greece? Banking, big business and the political leaders who created a calamity are once again protected, even rewarded, while the people suffer the ignomies of a heavy financial yoke: loss of jobs, loss of social support, loss of dignity.
People can bear extreme oppression and hardship when they believe there is something good to fight for (consider the Blitz sprit in London), but fighting to protect the global banking system and Greek oligarchs is far from that. Once again the optics are terrible. Where is the justice? How can the people who screwed up so badly still be in charge and telling the general populace that they will have to pay the price of the grievous mistakes made by the leadership and elite? Of course, you can argue that there is collective responsibility (e.g. if people vote to have enormous pensions at a retirement age of 58, there is a large cost involved), yet it is surely a responsibility of political leaders to present hard-truths, be wise and take critical action before disaster is banging down the front door. At the very least, our leaders (and the most wealthy) enjoy tremendous privileges most of the time, why should they be immune from the consequences of their poor judgement? While you would think natural law would require that leaders don’t enjoy benefits after gross mistakes, it is a travesty how much this actually happens. Still, the fortunes of most countries are such that leaders can ultimately be swept away (if not exactly punished) for their incompetence and perhaps the populace can at least believe that new leaders might show better judgement - at least for a time. However, there are times when societies are driven to such extremes that these things really matter - when people are pushed down Maslow’s hierarchy - dignity is lost, injustices are glaring. This is when people, in desperation, look to form new allegiances, new social pacts and contracts that they can believe in at least, to sweep away the pain that they are enduring.
The only defence possible for the actions of the powers-that-be in the Greek situation, is that they were attempting to prevent an even more catastrophic and calamitous outcome on many, many more economies around the world through a deep depression caused by the twin shocks of the subprime credit crunch and a Greek default. In a sense, they didn’t want their own poor decisions (to invest in an already profligate and bankrupt Greece) to come home to roost. They were prepared to kick the can down the road, by using public funds and funds borrowed against the still good credit of other countries, in order to prevent the effects of incipient failure in their own private banking systems. As we can now see quite clearly, this has merely bought just a little time. The bomb is still primed to go off, they just hope that they’ve erected enough of a firewall around Greece to deflect the primary force of the explosion back onto its own people. The only thing we don’t really know yet is the nature and composition of the explosion: political, social, financial. Explosions are by their very nature chaos in rapid motion. Things that could not be rearranged in an orderly fashion will now find new configurations quickly, and the new configurations will not necessarily be ones that anyone planned in the events leading up to the event - the law of unintended consequences will be in full force. What humanity has completely failed to learn is that the law of cause and effect is truly immutable and you cannot hide the liabilities you create (whether these are financial or social). Our leaders are predisposed to putting off paying down mistakes and taking the consequences as long as possible, but that just means that the compound interest will be due on those consequences. Evidently we all learn how to do 'dodgy accounting' at a young age: lies, cover-ups, misdirection and that scales up our largest social, economic and political systems. The more our leaders are able to veil truths from the people, the more they will be able to build up such gross distortions and use them to their own ends. We must find a way to let real light into these situations and to hold our leaders to account much more quickly and effectively - that implies changes to the fourth estate and to democracy as a whole.