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stj May 19 2013 09:51 PM

Again on Greece
The thread about Greece seems to have been purged before I could return to such a complex topic. But it is still an interesting one, so here goes.

The IMF not so long ago released its Article IV consultation statement. As a key institution in the world capitalist system, this is very enlightening as to what our masters intend for us. So here's a little precis.

1. Greece is making progress, as show by government debt and wages being lower, yet banks are not going broke.

2. This is because other European governments have given large amounts of aid to limit the financial crisis from spreading, and support the euro by keeping Greece in the monetary system, and to limit the suffering from the budget cuts.

3. However the permanent changes have not been enough, and people are suffering needlessly in Greece because there hasn't been a solution to tax evasion by "rich people and the self employed, nor has there been enough deregulation, and there are still too many government workers.

4. Government debt still has not been lowered enough, therefore the goverment must complete tax reform, which requires the government to have new powers that make it "insulated" from "political interference"; to establish a credible commitment to fiscal reform by firing government workers, not just retiring them and not replacing them; addressing specific spending to the unemployed, job training and transfer payments. The Greek government can thereby avoid across-the-board budget cuts, as it promised.

5. The banks are getting lots of money from the government to keep from going broke but it is vital that the government does not exercise "undue government interfernce," but that it does work out a "framework" for distressed household borrowers. This will lead to a "gradual recovery in credit as deposts and wholesale market access returns."

6. A further permanent change must include elimination of "barriers to entry" for foreign companies, including licensing and privatization of state assets. "Achieving a critical mass of change will be possible only with a broad, forceful, and sustained political commitment."

7. Government should not use development banks, tax-free zones, tax subsidies or other unproven tools. "And in particular, Greece cannot afford a more complicated tax system, which would work directly against the crucial effort to improve tax collection."

8. The severity of the Greek crisis was due to a "progressive loss of confidence" about "euro exit," "political uncertainty" and a lack of "strong political resolve to stand up to vested interest fiercely opposed to reforms." There are two "crucial considerations" to moving forward.

First, "With fiscal adjustment set to remain a drag on GDP growth for several years to come, the key challenge is to generate the improvement in confidence needed for a recovery in investment to begin to more than offset this drag. This cannot happen unless Greece can secure broad domestic support for the program and the political stability that would come with this."

Secoond, "Greece’s public debt remains much too high, despite the restructuring of privately held bonds and recent support by official creditors. It is, therefore, very welcome that Greece’s European partners have now accepted that Greece could need significant exceptional support on below-market terms in order to restore debt sustainability and that they have committed to provide additional relief, if needed, to keep debt on the programmed path, i.e. to bring it substantially below 110 percent of GDP by 2022. With Greece’s debt now overwhelmingly held by the official sector, such a commitment is essential to assure creditors that a credible framework for dealing with Greece’s debt overhang is now in place."

9. "Adopting the necessary policies for the next leg of the adjustment effort, which may well mark a turning point for Greece, must take priority."

For those who are interested, here's the link:

Now, lengthy as that has been, it is not perfectly transparent, even though the IMF values transparency when it comes to Greek licensing procedures. So I must rephrase or expand a little as to what this means. Edit The rest is personal commentary and may safely be skipped if you wish. This warning is thanks to junxon

1. Bankruptcy of insolvent banks is the rational, fair policy yet the IMF declares that its goal is the preservation of the financial sector.

2. The IMF is arguing that other European governments should support their banks by offering monetary support, lest their banking systems or the Euro itself be disrupted. Practically, that means some attention must be paid to the Greek population, although that is even officially a lower priority.

3. It is a moot question whether firing government workers is a net gain for "the people," inasmuch as government workers are also people. There is very little evidence to support the notion that deregulation helps the people in general. The insistence that the tax system catch the self-employed shows that the main goal is to increase revenues, even at the expense of lower-income self-employed. Even though the middle class professional self-employed man, such as a physician or lawyer, will suffer, increasing social inequality.

4. Firing government workers doesn't just cut government expenses, it decreases wages and breaks unions. The Greek government is currently misusing civic mobilization laws to break a teachers' strike. The insistence on new powers is meant to prevent any popular resistance via elected officials to these attacks.

5. Given the simultaneous insistence that the government not interfere in bank loans, this appears to call for a new bankruptcy law to liquidate the assets of insolvent households, which the IMF regards as expendable in a way banks are not.

6. Deregulating foreign companies is particularly important if the Greek state is to sell its assets to foreigners. Perhaps, as in Africa, Veolia can raise the water rates unhampered if the IMF is successful here.

7. This may be a call for a flat tax. A draconian policy on taxation collection, while it is implies progressivity is an obstacle is remarkable.

8. The Greek crisis was a little different from things like Occupy Wall Street or even the indignados in Spain, because the KKE, the Communist Party, has retained far more of its historical revolutionary heritage than most (partly because the main traitor to Greek Communism was Tito the revisionist, I suspect, not Stalin, while the capitalists were unusally forthright about being pro-fascist.)

The IMF is arguing that this poses a political threat that must be contained. It argues that palliatives on the worst must be applied, while simultaneously installing a government that will not otherwise respond to any of the needs or demands of the population at large. They admit that their policies will make the people's conditions worse, but argue that only appeasement of investors will restore the economy. Therefore, the effective abolition of any notion that democracy means ordinary people have a genuine say in economic arrangements must be forbidden.

There is no convincing evidence of this. The notion that "confidence" actually powers the economy is absurd. It plays a role in bursting bubbles. Second, they themselves tacitly admit that credit will only gradually recover. And they even believe that it will recover because the profitability of Greek business will increase bank deposits and market share in Europe, i.e., that the banks are currently hoarding. They don't admit that it's because the banks are basically insolvent, but there you are.

The link in the other thread to a Dr. Woodford's article tried to establish the IMF has changed its policies. I submit that its idea of change is not what ordinary people would accept as real change.

Avon May 19 2013 10:05 PM

Re: Again on Greece
if the point of all that is 'bankers are shits and the the whole financial system is screwed' then i second that emotion, but man thats an epic essay to read through.

Locutus of Bored May 19 2013 10:18 PM

Re: Again on Greece

stj wrote: (Post 8117950)
The thread about Greece seems to have been purged before I could return to such a complex topic.

Nothing was purged. It just dropped off the first few pages because people stopped posting in it. Use the search function to look for threads discussing "Greece."

stj May 20 2013 03:09 AM

Re: Again on Greece
^^Oh, sorry. I'm too doless to look past the first page so I had forgotten that, assuming I really understood it in the first place. I assumed the page counts at the botom of the forum had to do with popularity/page hits.

Also, I was thinking "automatically deleted for lack of interest," not "censored." Sorry if it seemed otherwise.

Ain Jalut May 20 2013 12:01 PM

Re: Again on Greece
Sorry, to long for me right before sleep.

stj May 20 2013 01:04 PM

Re: Again on Greece

Your logic is impeccable.:techman:

horatio83 May 22 2013 01:37 AM

Re: Again on Greece
I agree that the invocation of, to use Krugman's term, the confidence fairy is nonsense, aggregate demand matters.
I also agree that a partial default on debt would have been preferable to the bailing out of banks (any reader of the work of Reinhard and Rogoff, not the crappy paper but the book This Time is Different: Eight Centuries of Financial Folly, should know that default is not the end of the world, has happened frequently and never led to a prolonged lack of access to capital).
I also agree with your general sentiment that that the Greeks have been fucked badly. This is Kleinian shock therapy, i.e. a crisis is misused to implement "structural reforms" aka neoliberal policies. I am German (Germany is the obvious villain in this play, we mainly bailed out our own banks who owned Greek IOUs and we are the source of the idiotic ECB policy) so I hear this crap about "structural reforms" from our central bankers all the time. Sound economics are absent.

About the IMF, let's please not forget that the institution is not speaking with just this one ugly voice, Blanchard and many other economists have actually spoken out against austerity.

I disagree on your politicization of the source of the crisis though. This has nothing to do with Cold War politics (As you ranted about Tito and sound like a die-hard Stalinist you might wanna keep in mind that Stalin had an agreement with Churchill about how to dive Europe after WWII. He agreed that Greece should belong to the West and kept his promise, he never interfered when the US installed an authoritarian regime. Obviously I am just reporting facts here and not condoning the power politics of either side. If you are liberal you should be a liberal and not an asshole who works together with fascists to keep the commies at bay and if you are a socialist you better be an international democratic socialist and not a national authoritarian socialist like Stalin.) it was plain fiscal irresponsibility which got amplified to such huge problem because the ECB was unwilling until recently to buy government bonds. In the US this shit wouldn't happen, state bond yields do of course differ but a speculative attack would never be possible because the Fed is willing to be the lender of last resort and buy government bonds to stabilize the collapse of demand and rise of yields which would happen after a speculative attack.

stj May 22 2013 02:55 PM

Re: Again on Greece
It was Rogoff and Reinhart's article that was influential. The genuinely powerful apparently don't read whole books, this isn't the eighteenth century. Maybe after the Rogoffs and Reinharts have earned their thirty pieces of silver, they write books to pretend they didn't really mean it?

The KKE argued for devaluation, which is why the politics of the Greek crisis was so more intense. The grand fusion of the fake left in SYRIZA wouldn't have mattered to anyone if a significant party hadn't for once raised the real possibility of an independent policy. The KKE wasn't the biggest party but it was a genuine party. And it is one that by far poses the greatest chance of a genuine break with the imperialists. Without a party, the greatest popular uprising will pass like a storm. As in Iceland, the ruling class simply reorganizes and returns, because the failure to advance allows them to. There is no threat from the indignados in Spain and the Communist Refoundation in Italy is de facto split.

I have found the more hatred heaped on dead Communists, the more hatred for living workers. Stalin's crimes and disasters were quite horrifying enough, but it is no accident that they have been magnified to pretend that Stalin is worse than Hitler. Nor is it an accident that his name is invoked as part of a continued assault on living workers. The world is a whole economy. The USSR was in essence a strike by the workers. The destruction of the USSR was breaking the strike, breaking the union. It had an inevitable effect in breaking worker resistance. That is why so many hailed its fall.

I think Stalin's role in communism (broadly considered as a worldwide social movement) is far more analogous to Cromwell or the Directory. They are not pretended to be incarnations of the democratic ethos..

The name of Hitler may be unpopular, but let's face it: German state security forces find that working with Hitler's political descendants is acceptable. Even to the point of murder. Mussolini's descendants of course have long been acceptable in the halls of power. Spanish politics cannot comfortably criticize Franco, not even verbally. Liberalism, genuine or not, is on a continuum with fascism, as against socialism/communism, whether you like it or not. The relations within that continuum may of course be as friendly as those between Stalin and Trotsky, of course.

The other voices in the IMF have no influence when it comes to policy. The memorandum shows the IMF is only interested in targeting the worst afflicted in Greece so that it can moderate political resistance. Even then the IMF clearly insists that general state welfare benefits are to be eschewed. Their stance is like imposing a means test on Social Security.

A parenthetical suggestion is a rant? No. Stalin's contemptible memorandum with Churchill was never negotiated in any meaningful terms. The very existence of a Greek armed resistance was interpreted as Stalin's aggression. The person who did the most on the ground to weaken the resistance was indeed Tito, who was indeed pursuing an accommodation with the imperialists (democracies.)

horatio83 May 22 2013 05:23 PM

Re: Again on Greece
Devaluating what, the Euro? That's just the result of expansionary monetary policy and while this is certainly necessary in a recession it would not have avoided the Greek troubles.

I totally share your disgust in liberalism. You mentioned German intelligence agencies leaning to the right and as a German citizen what shocks me most is not so much the mere existence of this serious systemic problem, that the institutions which are supposed to protect democracy are anti-democratic, bur rather that it is basically accepted by everybody.
The political worldview of a liberal is liberalism vs. totalitarianism which disavows the horrors of unfettered capitalism and the fascist/authoritarian tendencies of centrist liberalism itself.

But while I am sympathetic to the 'fascism is a symptom of liberalism' notion I view the world a bit differently. Unlike you I believe that anarcho-capitalism can be moderated into social democracy. The decades after WWII and Scandinavia have shown that this is possible. Of course you can rightly, given that social democracy collapsed, whether it is stable.
So I am opposed to anarcho-capitalism as well as alternative modernities like fascism or communism which appeared on the political menu precisely because capitalism has not been moderated. Why? Because I am an empirical guy, among these four systems social democracy aka moderated capitalism has worked best. Anarcho-capitalism, fascism and communism on the other hand imply quite some horrors.

Now I am not unsympathetic to radical left wingers like yourself, while we do not share the goals we share the direction.
About Hitler and Stalin, Stalin was worse. Not so much because of the body count, if you exclude WWII deaths Stalin is worse than Hitler, if you include them it is the other way around.
No, Stalin was worse than Hitler because fascism was evil people doing evil things whereas 20th century communism was a tragedy, there was a fall, it started out as an emancipatory project and ended in a nightmare.
So I am not saying that Stalin was worse than Hitler because I am right-wing revisionist or whatever, I say that he was worse because I appreciate the potential of communism.
If you want to make communism a serious option for the 21st century you have to totally acknowledge that 20th century communism was a nightmare. But I don't see many on the radical left willing to go down that path. The few who do like Zizek are probably reviled more on the radical left than the right.

While I am an unabashed social democrat I am open to communist ideas. Perhaps 20th century social democracy was an historical anomaly, perhaps the the anti-revolutionary social democratic way of moderation is the wrong way to deal with problems that might soon overrun and overwhelm us. I frankly admit that part of being a social democrat means for me being conservative in the sense of trying to slowly change society. History has shown that after Robbespierre comes Napoleon and after Lenin comes a new Tzar, Stalin, i.e. quick, radical change does not really change society from the bottom up (This is the way I read the Stalinist purges, the party eating itself. Communism failed to change the symbolic order in the Marxian sense of not merely changing laws and rules but also non-legal stuff like everyday day so violence as a form of impotence erupted.). But perhaps climate change, resource shortages and overpopulation will be such large problems that change our societies massively anyway if we do not to anything (for the worse, think about a movie like Children of Men) that this "natural" radical changes can only be countered by a new communism.

stj May 23 2013 01:09 PM

Re: Again on Greece
Greece doesn't control its currency. The only way the KKE could devalue would be to reinstitute the drachma, one of the consequences that the IMF was eager to prevent by targeted relief to the worst afflicted elements. The idea is to split the popular opposition, enabling a government independent of the broader population to survive.

Hitler started WWII, and I don't see how it is possible to neglect that. Being empirical is all well and good, but the data has to be as complete and as objective as possible.

The last twenty five years is not a complete data set, but it is quite enough to raise the most pessimistic questions. Yet, in the social reverses worldwide, there is really not one shred of evidence that love of Stalin has misled the oppressed. It is the reverse.

It is worth emphasizing that the IMF memorandum on Greece expresses the official policy of a key institution in world capitalism. The IMF is not just a branch office of the BRD. The social democratic moderation on the part of the powerful that will save us all just doesn't seem to be there.

horatio83 May 23 2013 09:49 PM

Re: Again on Greece
Of course Greece could have exited the Euro and partly defaulted on its debt. The disadvantages are that the new Drachma would be a very weak currency such that the remaining debt (in Euro) would be fairly high in Drachma.
But in the long run well-functioning European institutions which prevent such issues, namely a central bank committed to IMMEDIATELY being a lender of last resort, a fiscal order which creates rules that guarantee long-run low levels of public debt while allowing for deficit spending in the short run plus last but not least the ending of trade imbalances in Europe (which basically implies that Germany raises its wages), are preferable in my eyes.

Once again, I am not reading everything which the IMF publishes but it is definitely unfair to portray it as a neoliberal economic institution. We all read our Stiglitz (if not, Globalization and its Discontents is a must-have-read), it surely was one during the last decades. But it made a turn 2-3 years ago towards not defending austerity anymore.
The problem isn't the IMF, it is in Europe Germany, the European Commission and the ECB. There is of course ample of bad economics out there (mainly on the right but also on the left; while I cherish quite some of Marx's ideas all of his economics ideas are plain wrong) but if you take a look at what fairly centrist economists like Blanchard, chief economist of the IMF or De Grauwe are writing about the crisis you will realize that good mainstream economics isn't the problem but the solution to the sovereign debt crisis.

stj May 24 2013 11:43 AM

Re: Again on Greece
I can't understand why a policy statement on the Greek situation. which most clearly raises the pertinent issues, is somehow irrelevant to characterizing the IMF. Which is still not a German controlled institution, anyhow.

I am not interpreting unlimited credit to recapitalize banks as Keynesian stimulus. Is it possible that when these figures talk more "mainstream" that's the tacit assumption? Trying to disguise that policy as Keynesianism?

horatio83 May 24 2013 06:40 PM

Re: Again on Greece
I am not denying that the IMF is still to some degree the neoliberal institution we are familiar with. But there are cracks in the edifice. Take a look on p. 41 of this:

These results suggest that actual fiscal multipliers were larger than forecasters assumed. But what did forecasters assume about fiscal multipliers? Answering this question is complicated by the fact that not all forecasters make these assumptions explicit. Nevertheless, a number of policy documents, including IMF staff reports, suggest that fiscal multipliers used in the forecasting process are about 0.5. In line with these assumptions, earlier analysis by the IMF staff suggests that, on average, fiscal multipliers were near 0.5 in advanced economies during the three decades leading up to 2009.6
If the multipliers underlying the growth forecasts were about 0.5, as this informal evidence suggests, our results indicate that multipliers have actually been in the 0.9 to 1.7 range since the Great Recession.

They corrected themselves and a multiplier (the effect of an increase of government spending upon GDP) of 0.9 - 1.7 is hardly what you would hear from austerians. They would probably say it is below one, zero or even negative (total crowding out plus negative incentive effects of the taxation that has to happen one day).

Everything I know about economics is orthodox economics (Minsky's famous Financial Instability paper is the only worthwhile heterodox stuff I ever read) and it didn't make me a neoliberal. Keynes was a centrist, he made money on the stock market, criticized Mark and basically wanted to save capitalism. Krugman, perhaps the most well-known contemporary popular economics writer and Old Keynesian, is a fairly orthodox economist. Blanchard, the chief economist of the IMF who is responsible for reports like the one I linked to above is a conventional economist. The guy wrote an influential New Keynesian paper in the eighties which provided one explaination for wage and price rigidities, his macro textbook features the good ol' Hicksian IS-LM model and now he is responsible for publications that suggest fiscal multipliers far above one.
In short, mainstream economics is pretty Keynesian.

stj May 25 2013 02:39 PM

Re: Again on Greece
Well, obviously what you see as cracks I see as camouflage designed to give the impression there are cracks.

The Greek government has indeed implemented orders. Fifteen thousand government employees have been fired. Additionally, teachers have had hours lengthened and four thousand transferred to the boonies. Any effort to resist by a strike was suppressed by misuse of civic mobilization laws.

horatio83 May 26 2013 04:35 PM

Re: Again on Greece
In the Troika the ECB and Commission are the die-hard austerians, not the IMF (or rather not anymore). You assume nefarious motives whereas the reality is far more mundane, a large institution like the IMF is no longer speaking with merely one voice.

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