What the Greek vote is really about

Joe Stiglitz nails it:

The economics behind the program that the “troika” (the European Commission, the European Central Bank, and the International Monetary Fund) foisted on Greece five years ago has been abysmal, resulting in a 25% decline in the country’s GDP. I can think of no depression, ever, that has been so deliberate and had such catastrophic consequences: Greece’s rate of youth unemployment, for example, now exceeds 60%.

It is startling that the troika has refused to accept responsibility for any of this or admit how bad its forecasts and models have been. But what is even more surprising is that Europe’s leaders have not even learned. The troika is still demanding that Greece achieve a primary budget surplus (excluding interest payments) of 3.5% of GDP by 2018.

Economists around the world have condemned that target as punitive, because aiming for it will inevitably result in a deeper downturn. Indeed, even if Greece’s debt is restructured beyond anything imaginable, the country will remain in depression if voters there commit to the troika’s target in the snap referendum to be held this weekend.

In terms of transforming a large primary deficit into a surplus, few countries have accomplished anything like what the Greeks have achieved in the last five years. And, though the cost in terms of human suffering has been extremely high, the Greek government’s recent proposals went a long way toward meeting its creditors’ demands.

We should be clear: almost none of the huge amount of money loaned to Greece has actually gone there. It has gone to pay out private-sector creditors – including German and French banks. Greece has gotten but a pittance, but it has paid a high price to preserve these countries’ banking systems. The IMF and the other “official” creditors do not need the money that is being demanded. Under a business-as-usual scenario, the money received would most likely just be lent out again to Greece.

So what is this about? Actually, it’s about democracy, an inconvenience for the European ‘project’. Stiglitz again:

In January, Greece’s citizens voted for a government committed to ending austerity. If the government were simply fulfilling its campaign promises, it would already have rejected the proposal. But it wanted to give Greeks a chance to weigh in on this issue, so critical for their country’s future wellbeing.

That concern for popular legitimacy is incompatible with the politics of the eurozone, which was never a very democratic project. Most of its members’ governments did not seek their people’s approval to turn over their monetary sovereignty to the ECB. When Sweden’s did, Swedes said no. They understood that unemployment would rise if the country’s monetary policy were set by a central bank that focused single-mindedly on inflation (and also that there would be insufficient attention to financial stability). The economy would suffer, because the economic model underlying the eurozone was predicated on power relationships that disadvantaged workers.

And, sure enough, what we are seeing now, 16 years after the eurozone institutionalized those relationships, is the antithesis of democracy: Many European leaders want to see the end of Prime Minister Alexis Tsipras’s leftist government. After all, it is extremely inconvenient to have in Greece a government that is so opposed to the types of policies that have done so much to increase inequality in so many advanced countries, and that is so committed to curbing the unbridled power of wealth. They seem to believe that they can eventually bring down the Greek government by bullying it into accepting an agreement that contravenes its mandate.

There’s a strange echo of the past here. This time last year I was reading and enjoying Chis Clark’s terrific book The Sleepwalkers: How Europe Went to War in 1914 and marvelling at how the various leaders of European states managed to stumble into a catastrophe. Well, guess what? We’re watching a re-run of the same syndrome now: allegedly smart guys in European capitals getting ready to trigger the collapse of a currency that never ought to have been born.

Note also the ideologically-motivated disdain of Europe’s ruling elites toward the Greeks. There was a revealing note by Jason Karaian on Quartz.com this morning:

Some things are too important to be left to voters. At least, that’s what Joschka Fischer, Germany’s former foreign minister, told a room of eurocrats (and this reporter) earlier this week. Few of the most important decisions in his country’s post-war history would have won a majority if put to a vote, he said. Why should Ireland’s pesky habit of rejecting EU treaty changes to rebuke the local government overturn the will of the entire bloc? And California is hardly the best-run state in the US because it relies so heavily on direct democracy—quite the opposite.

Mix in money, and things get trickier still. Bo Lundgren, the architect of Sweden’s much admired bank bailout program in the early 1990s, says that voters would have never approved of his government’s moves if they asked for it. Former US treasury secretary Tim Geithner offered a similar analysis of his efforts to clean up the country’s subprime mess: “You have to do things that are going to be fundamentally impossible to explain to people.”

In short, those who earn the people’s mandate should know when to lead and when to follow. Tsipras has punted a tough decision to his people, when history suggests that it requires brave, proactive, and potentially unpopular leadership. Too little democracy is a bad thing, of course, but so is too much of it.

Oh, yeah?

Humans are the weakest link

This morning’s Observer column:

PGP (now in its fifth incarnation) does indeed enable one to protect one’s communications from spying eyes. It meets Snowden’s requirement for “strong crypto”. But it hasn’t realised its revolutionary potential because it turns out that powerful software is a necessary but not sufficient condition for effective security. And the reason is that, to be effective, PGP has to be implemented by humans and they turn out to be the weak link in the chain.

This was brought forcibly home to me last week at a symposium on encryption, anonymity and human rights jointly organised by Amnesty International and academics from Cambridge University…

Read on

What the Greeks should do

Paul Krugman thinks that the Greeks should vote “No” on Sunday, for three reasons :

First, we now know that ever-harsher austerity is a dead end: after five years Greece is in worse shape than ever. Second, much and perhaps most of the feared chaos from Grexit has already happened. With banks closed and capital controls imposed, there’s not that much more damage to be done.

Finally, acceding to the troika’s ultimatum would represent the final abandonment of any pretense of Greek independence. Don’t be taken in by claims that troika officials are just technocrats explaining to the ignorant Greeks what must be done. These supposed technocrats are in fact fantasists who have disregarded everything we know about macroeconomics, and have been wrong every step of the way.

This isn’t about analysis, it’s about power — the power of the creditors to pull the plug on the Greek economy, which persists as long as euro exit is considered unthinkable.

So it’s time to put an end to this unthinkability. Otherwise Greece will face endless austerity, and a depression with no hint of an end.

Krugman is right: this is about power. It is also about what happens when democracy collides with the power of the financial system. In that sense, I’m reminded of the 2006 elections to the Palestine Authority. The West clamoured for these ‘democratic’ elections. But when Hamas won, suddenly the game changed. The Palestinians had delivered the ‘wrong’ result. Same happened when the Lisbon Treaty was put to the Irish people for ratification in a referendum. My countrymen voted it down. Again, wrong result, so the question was put again, and one had the feeling that the government would have continued putting it to the vote until an exhausted populace eventually caved in.

Which of course neatly illustrates the profoundly undemocratic nature of the European project as it has evolved. There may be all kinds of good, bad and pragmatic reasons for wanting to be in the EU, but democracy ain’t one of them.

So why are Internet users resigned to being surveilled?

This morning’s Observer column:

It would be patronising to assume that every internet user – except for the occasional geek – is a mug. Some people do read the terms and conditions to which they have to agree when signing up to use “free” internet services. They fully realise that “if the service is free then you are the product”. And yet they persist in using it. Why?

One possible reason is that they place a value on those “free” services. Various studies have tried to estimate what that value might be. A study by the consultancy company McKinsey, for example, asked 3,360 consumers in six countries what they would pay for 16 internet services that are now largely financed by ads. The conclusion was that households would pay €38 (£27) a month on average for those services. From this, McKinsey estimated that “free” internet services generate €32bn of consumer surplus in America and €69bn in Europe.

These calculations are music to the ears of Facebook and Google executives, who interpret them as proof that consumer tolerance of corporate surveillance is really evidence of “rational” economic behaviour. People put up with companies spying on them because they get a good deal out of it.

Into this comforting ointment, three academics have just implanted a number of flies…

Read on

Obamacare works — which is why the Republicans are mad as hell

Nice column by Krugman.

Put all these things together, and what you have is a portrait of policy triumph — a law that, despite everything its opponents have done to undermine it, is achieving its goals, costing less than expected, and making the lives of millions of Americans better and more secure.

Now, you might wonder why a law that works so well and does so much good is the object of so much political venom — venom that is, by the way, on full display in Justice Antonin Scalia’s dissenting opinion, with its rants against “interpretive jiggery-pokery.” But what conservatives have always feared about health reform is the possibility that it might succeed, and in so doing remind voters that sometimes government action can improve ordinary Americans’ lives.

That’s why the right went all out to destroy the Clinton health plan in 1993, and tried to do the same to the Affordable Care Act. But Obamacare has survived, it’s here, and it’s working. The great conservative nightmare has come true. And it’s a beautiful thing.


The biggest question posed by the Anderson Report

This morning’s Observer column:

When, in the summer of 2013, Edward Snowden began his revelations of the shocking scale of the electronic surveillance currently practised by the NSA and its overseas franchises in Britain, Canada, Australia and New Zealand, the big and obvious question was: is this just another scandal; or is it a real crisis?

Until this week, I’d have said that it was just another scandal…

Read on

“ISIS Is Winning the Social Media War”

… is the headline on a NYT story. Well, of course it is, given what we now know as a result of a leaked State Department memo which gives a frank assessment of the fiasco so far.

WASHINGTON — An internal State Department assessment paints a dismal picture of the efforts by the Obama administration and its foreign allies to combat the Islamic State’s message machine, portraying a fractured coalition that cannot get its own message straight.

The assessment comes months after the State Department signaled that it was planning to energize its social media campaign against the militant group. It concludes, however, that the Islamic State’s violent narrative — promulgated through thousands of messages each day — has effectively “trumped” the efforts of some of the world’s richest and most technologically advanced nations.

It also casts an unflattering light on internal discussions between American officials and some of their closest allies in the military campaign against the militants. A “messaging working group” of officials from the United States, Britain and the United Arab Emirates, the memo says, “has not really come together.”

“The U.A.E. is reticent, the Brits are overeager, and the working group structure is confusing,” the memo says. “When we convened meetings with our counterparts, I am certain we all heard about various initiatives for the first time.”

The industrial fallout from NSA surveillance

NSA surveillance is going to cost the U.S. tech sector a lot more than originally thought.

The Information Technology and Innovation Foundation (ITIF), a Washington, D.C. -based think tank that advocates for policies that nurture technology innovation, has released a new report in which it raises its previous estimate of how much surveillance by the U.S. intelligence community could cost U.S. tech companies.

In 2013, the non-partisan group estimated that the NSA-related revelations stemming from Edward Snowden’s 2013 leak would scare away foreign customers in the cloud computer sector to the tune of as much as $35 billion in business. The new report says that figure is too low, and that the economic reverberations will “likely far exceed” that initial $35 billion estimate, although the report wasn’t more specific on a final figure.


Remembering Charles Kennedy

Very nice, generous tribute in the Economist:

Bad times for his party, the union, Britain’s place in Europe: Mr Kennedy’s death speaks to all these. Yet for the many who mourn him, it is above all dreadfully sad, because he was delightful, and in fact this was the main reason for his success. He was, extraordinarily in politics, without malice. He was never, despite his remarkable precociousness, pompous. His jokes, which were frequent, were usually aimed at himself, the institution he served, or both.

Narrating a television documentary on the House of Commons last year, he glanced up, on camera, at a mosaic of St Andrew that towers over Central Lobby. The patron saint of Scots, he quipped, had been positioned to signal the way to the bar. Though he was a political insider—an MP at 23, for goodness sake—Mr Kennedy’s plain good humour always suggested he had a foot in that ruder soil, the real world, which matters most. And that, O politicians, is why he was loved.