Saturday, February 25, 2012

The Second Peloppenesian War

To get its latest "bailout" the Greek government has to agree to give up their country.  When I say "country" here, I mean: their sovereignty on taxation, probably ownership of their more interesting assets (the tourism concessions and attractions and anything else that might generate income), whatever social justice and welfare mechanisms they've implemented, and much of what passes for a social contract.

There are a number of thick ceilings in Greek society.  There are, according to reports, a bunch of cartels in a number of industries that make it nearly impossible to start new businesses.  The tax avoidance is enormous and basically predicated, in the middle and working classes, on the need to save.  The baby boomers have occupied all the stable civil service, middle-management and professional jobs and won't let go.  And its hard to blame them: if you had a great job with a great pension in a country rapidly going south, would you retire for the greater good of the country?  So you've got a mass of educated kids who've grown up in the conservative economic positivism of modern Europe who can't get jobs because their elders have every rational incentive to protect their own assets, and in the meantime, the only thing the elites really want to do in Greece is keep the money pipeline flowing into their own accounts and encourage tourists to visit the Aegean vistas.  In this the Greeks are not dissimilar to any other OECD country, like Canada, only they've got a much better climate.



So there's a lot of high-handed opprobrium reserved for the Greeks, as the perusal of the comments after any story on the repeating bailouts will demonstrate.  The Greeks borrowed too much, and therefore The Greeks should pay.  Now, its natural to ask: did the guy tending bar because he can't do anything with his Masters in Industrial Engineering borrow too much, and is that why he has to take a 22% pay cut on top of all the other cuts he's had to accept?  Because that's what those comments imply, and its what you hear in the general irritation one hears in the speech of the various Finance ministers.

Its a fundamental confusion between macroeconomics and microeconomics, of course.  The practical fact is that the oligarchy running Greece borrowed the money, put most of the money in their own pockets, and threw a few bones to the mass of the Greek population in the form of public works.  They bought off the upper middle classes with job stability and pensions and those people happily sold out their children's future for what they thought was a safe retirement - and, to be fair, more than likely thought they'd be able to support their children, because their children couldn't support themselves.  So its not the Greeks who borrowed too much; its the Greek oligarchy, and they socialized the losses on a mass of people who weren't even aware they were cosigning the loan.

The same thing is happening all over the northern hemisphere, obviously in Russia, but also in the Arab world and in the English-speaking world too.  Its the same impulse that drove the Occupy movement: the oligarchy defaults on its debts, and apparently I cosigned their loan because I happen to live in the same geographic location, so I have to feel the pain.

And its not just pain they want me to feel.  There is a righteous anger among the business class around the world that anyone should think the world isn't run by the business cycle, that anyone should even attempt to protect themselves institutionally from the market.  Read the comments: its not just that these people confuse macro- and microeconomics, that they think that because an individual family can't run a deficit for long that a country shouldn't, that the laws of economics apply in both cases and even if they don't there's a moral issue there.  These people are angry at the Greeks - or the kids around the country who aren't grateful just to be born in the US, or Canada, or wherever - for thinking they shouldn't have to strive, struggle and claw their way tooth and nail through life.  They sneer at the fantasy good life of the Mediterranean slacker and relish being able to say "I told you so."  And because they hold the notes on the idle rich, they get to punish everyone.

The practical and more effective approach would be to let the guys who hold the notes go broke.  For two reasons.  First, and most practical, the people imposing constraints on the Greek economy that look suspiciously like the sort of thing one would find in brainstorming sessions of the CTF or the Heritage Foundation and their counterparts around the world, are also planning on making a lot of money of this opportunity.  They aren't disinterested technocrats, although they play them on TV.  They want local assets to deflate to the point of insolvency so they can buy them cheap.  They want to pick up villas, tourist attractions, the parking meter concession in Athens, and they want an indentured class of locals to serve them.  The oligarchs won't suffer; for the most part they'll just have new neighbors.

The second reason is to make the pain caucus - although these people go way beyond such a trivial term - suffer and crumble.  These are mean people, full of envy, convinced of their innate righteousness and worth, that they have some moral lesson to teach a nation when they force its women into prostitution and its men into rootless poverty.  So fuck them, is the urge: Greece should default so that these vindictive and evil Calvinists go down, lose their fortunes, and get a taste of just how irrational their convictions really are.

But the basic fact is that if Greece defaults, the German and French bankers who sold Greek debt to German and French pensioners will turn to their respective governments and threaten to shoot the pensioners unless they get their ransom.  Because that's what this is really all about: Germany may cloak its grudging bailout of the Greek oligarchs as the reluctance of the thrifty to save the lazy slacker, but Germany also knows that if it doesn't give the Greeks money to give to German banks, the day of reckoning for its own retirement funds will be now. 

The thing is, the problem is easy to solve, at least down here at the bottom.  And "down here at the bottom" doesn't mean "absent the lofty perspective of the in-the-know", because we all, as educated people who read the paper, have a pretty good idea what's going on here.  Even the most benightedly conservative editorial writer knows that this is all about protecting the wealthy and comfortable; again, she may believe the wealthy and comfortable should be protected, deserve to be protected, because otherwise who would donate $100k to the newspapers Christmas charity?, but even she knows that its about making sure the wealthy stay wealthy and if that requires a few more prostitutes and scary vagrant men, then the latter can be blamed for their choice but everything else is for the greater good.  (Causation for thee, but not for me!)  The problem is the bankers, the people who rake money off the top of the transactions and sell debt they know will default to people who can't afford a default.  They can then hold two sets of hostages to protect their margin, and unsurprisingly the one set of hostages will happily let the other go to hell.

So its a choice then, we're told, if we look below the first layer, between German and French pensioners or Greek kids: one of them has to suffer to keep the other whole, the bankers tell us, because those are the hard facts.

But its obvious, then, where the problem lies.  Its not the Germans or the Greeks, its the bankers.  Maybe there's not enough money in the banks to make both hostages whole, but there's sure an awful lots on those coffers.

These financial middlemen are everywhere.  The entire US health care system is based around the idea that the insurance company sitting between the patient and her doctor keeps them both honest.  But who keeps the insurance company honest, and can we really take their assurances of both their necessity and their efficiency at face value?  Why is it that our society grants the financial intermediary privileged honesty, but the parties they claim to keep honest are suspect?  Its a neat trick: You can trust me to keep you both honest because I'm only doing it for the money you pay me to keep you honest, and you just have to keep paying me, forever, or the system collapses.

But that's another post.

What the Greek bailout tells us, though, is that no one is safe.  Canada, the UK and the US may tut-tut about those spendthrift Greeks, but they should, instead, be taking steps.  And not steps to avoid debt, because everyone is in debt.  The Greek bailout is the culmination of all those warnings, heard for years, that Capital is now more powerful than the Nation State.  Greece is in the process of being turned into a concession stand for large multinational banks.  What once used to happen to small African countries with large platinum deposits, and by force, is now being done with fountain pens in the OECD.  Its only a matter of time before it happens to the rest of us.

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