Thursday, February 16, 2012

Some insight on Greece's economy

Talos at the European Tribune has a good summary: Debts, promises and the erosion of democracy. Highlights include the fact that taxes are going uncollected in Greece simply because the population's income has been smashed by half the past two years. 60,000 small firms and family businesses have gone bankrupt in the last nine months. In USA, the equivalent number would be 1.8 million small firms and family businesses gone. Another highlight is a quote from Joseph Stiglitz on the utter ineptitude of IMF missions:
When the IMF decides to assist a country, it dispatches a "mission" of economists. These economists frequently lack extensive experience in the country; they are more likely to have firsthand knowledge of its five-star hotels than of the villages that dot its countryside. They work hard, poring over numbers deep into the night. But their task is impossible. In a period of days or, at most, weeks, they are charged with developing a coherent program sensitive to the needs of the country. Needless to say, a little number-crunching rarely provides adequate insights into the development strategy for an entire nation. Even worse, the number-crunching isn't always that good. The mathematical models the IMF uses are frequently flawed or out-of-date. Critics accuse the institution of taking a cookie-cutter approach to economics, and they're right. Country teams have been known to compose draft reports before visiting. I heard stories of one unfortunate incident when team members copied large parts of the text for one country's report and transferred them wholesale to another. They might have gotten away with it, except the "search and replace" function on the word processor didn't work properly, leaving the original country's name in a few places. Oops.
Ian Welsh has his usual blunt assessment, and points back to something worth reading a number of times: Greece can be fixed, if the Greeks are willing to do what it takes.

... The only reason “all the debts” must be paid off is because the rich demand it. They don’t want to take their losses.... countries could simply slap on currency controls, which experience shows (most recently and clearly in the Asian currency crisis of the 90s), works....

There are economic tools for dealing with these issues. Capital and currency controls are one of them, the distinction between default (we’ll pay you eventually, as opposed to we’ll never pay you) is another. The question of who is being bailed out (private investors, in large part) is another. And bailing out those investors is a political act, their money is their political power. The current political class, who is complicit with the current monied class, of course wants to bail them out.

All of this is before we even get to the horribly anti-democratic nature of all of this: the repeated refusal of the political class to allow referendums, the complicity of all major political parties in the process (notice there is no party to vote for if you want to default), and so on.

There is no actual democracy in any part of the world which is attached to the Wall Street centered financial system. Calls can run up to 1000:1 against TARP and it will pass. Strong majorities can be for or against particular policies and if the elite disagrees, that’s all that matters. There are no parties to vote for if you are against the current system.

One hopeful sign in USA: the angry reaction to Secretary of Housing and Urban Development Shaun Donovan and Attorney General Eric Holder, who wrote a little piece arguing that the recent deal on mortgage documentation fraud is actually "Holding Banks Accountable." That was their actual title. They posted it on the two most read progressive and liberal blogs, Huffington Post and on DailyKos, and ran into an absolute buzzsaw of criticism and remonstrance - check out the comments. On DailyKos, it received so few recommends that it quickly sailed off into oblivion. There appears to be no love left for Obama among progressives and liberals if this cold reception is any indication. It has to be causing some sleepless nights as Obama and his advisers ponder what the ramifications are for active popular support of the reelection campaign.

Iceland shows the world what to do. Nationalize the banks, arrest the bankers, tell the bond holders to shove it. And they are recovering.


  1. The part of the Greek problem that I don't hear discussed is the hugely successful tax evasion by the very rich in Greece. The rich Greeks want to get paid all they're owed? Maybe if they paid taxes.

    That, though, is the aspect that most resembles our problem here, and revealing that similarity would help debunk the rhetoric calling for budget cuts and tax cuts on the rich who already pay very little percentagewise.

    1. I remember an article from a year or two ago about the rich tax evaders being a huge problem. But it's not just Greece - USA is in the same situation. It's the Bush tax cuts for the rich that have wrecked the USA budget also.