So the Greeks are having a repeat lesson in what it’s like to live under German domination. Or, as Paul Mason puts it

It was hard to see last night what the rulers of Europe wanted.

What they’ve arguably got is a global reputational disaster: the crushing of a left-wing government elected on a landslide, the flouting of a 61 per cent referendum result. The EU – a project founded to avoid conflict and deliver social justice – found itself transformed into the conveyor of relentless financial logic and nothing else.

Ordinary people don’t know enough about the financial logic to understand why this was always likely to happen: bonds, haircuts and currency mechanisms are distant concepts. Democracy is not. Everybody on earth with a smartphone understands what happened to democracy last night.

National sovereignty is an illusion in the Eurozone. But this particular penny took some time to drop in the hapless countries which joined the project. I remember well the euphoria which greeted Irish entry into the EU: at last we were a ‘proper’ country. EU membership enabled us to get out from under the shadow of our former colonial master. When it was Ireland’s turn to hold the Presidency for the first time, I was in Dublin for the first Summit. The city was en fete. I was staying in the Westbury, the conference hotel for all the national delegations except the British, who were accommodated in the British Embassy.

Outside the hotel stood the longest line of black limousines ever seen in Ireland. I fell into conversation with one of the drivers of same, who was lounging outside his vehicle waiting for his delegation to emerge from the hotel. I said that I hadn’t known there were so many stretch limos in Ireland. He laughed and said confidentially: “Between you and me, this would not be a good weekend to die in this country”. It transpired that the government had rented every funeral director’s car for the great weekend!

And so Ireland learned to strut the world stage. And then came the Celtic Tiger — an outbreak of madness and greed that still leaves one transfixed — during which my countrymen “lost the run of themselves”, as my old friend Frank McDonald puts it. And then the banks imploded and the Fianna Fail government decided in a panic-stricken weekend that they (or, more accurately, the hapless Irish taxpayers) would underwrite the foreign bondholders of those same banks, thereby saddling every man, woman and child in the country with a debt running into thousands of Euros. But it would all be ok, they thought, because the European Central Bank and the EU would see them right.

And so the ‘bailout’ came, administered by three technocrats from abroad who arrived in Dublin to teach the feckless Irish some neoliberal manners. But even then, the penny didn’t really drop.

What finally did it was the night in November 2011 when it was revealed that the top-secret details of the budget to be revealed the next day by the Finance Minister in the Dáil (the Irish parliament) were, in fact, already being discussed by members of the Bundestag in Berlin.

And then my countrymen finally understood why they had traded national sovereignty for that brief moment in the global sun.

The Greeks are now making the same discovery.

“The stakes are high, and clear and they boil down to this: if we live in a world where very important decisions about employment, credit, insurance, and other vital economic factors are made by algorithms and data that are essentially black-boxed — impermeable to inspection either because of trade secrecy, or because of real secrecy, or just because they’re hidden away — that is essentially an open invitation to regulatory arbitrage around nearly all legal values that we hold dear — be they anti-discrimination, be they die process, be they basic fairness.”

Frank Pasquale, author of The Black Box Society: The Secret Algorithms That Control Money and Information, speaking on 12 May 2015 at an event sponsored by USPIRG Education Fund and the Center for Digital Democracy.

Nice column by Krugman:

Americans work longer hours than their counterparts in just about every other wealthy country; we are known, among those who study such things, as the “no-vacation nation.” According to a 2009 study, full-time U.S. workers put in almost 30 percent more hours over the course of a year than their German counterparts, largely because they had only half as many weeks of paid leave. Not surprisingly, work-life balance is a big problem for many people.

But Jeb Bush — who is still attempting to justify his ludicrous claim that he can double our rate of economic growth — says that Americans “need to work longer hours and through their productivity gain more income for their families.”

Mr. Bush’s aides have tried to spin away his remark, claiming that he was only referring to workers trying to find full-time jobs who remain stuck in part-time employment. It’s obvious from the context, however, that this wasn’t what he was talking about. The real source of his remark was the “nation of takers” dogma that has taken over conservative circles in recent years — the insistence that a large number of Americans, white as well as black, are choosing not to work, because they can live lives of leisure thanks to government programs.

You see this laziness dogma everywhere on the right…

You do indeed. In Britain too, where all the talk is of those mythical folks known as “hard-working families”, presumably to distinguish them from the families who are supposedly scrounging off the state.

Source

Hmmm… Scarifying. But I’m a bit puzzled by the citing of “Berkeley University” as one of the sources. Do they mean the University of California, Berkeley?

From The Economist:

What makes this problem so difficult to solve is that there are paradoxes at the heart of each side’s position. On the creditors’ side, they do not want to see Greek debt relief until reforms have been carried out. This is partly to establish an example for other nations and partly because of the difficulty of selling such a deal to their own voters. But the harder they push the Greeks, the more likely it is that the latter will be forced out of the euro, in which case default will occur anyway. And the EU would be obliged to offer some kind of aid to Greece if it fell out of the euro, on humanitarian and geopolitical grounds. So the harder the EU pushes, the more they end up with the result they don’t want; paradox 1.

On the Greek side, default would eliminate the debt burden and offer the potential, via devaluation, for a return to growth. But if all the competitiveness gains of a return to the drachma were thrown away in higher inflation, then the Greeks would be barely any better off; the risk is they end up as Argentina without the soyabeans. To make euro exit a success, they would need to undertake the kind of structural reforms and fiscal prudence that they are resisting as the price of staying in the euro; paradox number two.

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?

Source

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.