Yanis Varoufakis: What Europeans Should Know About the Current Situation in Greece

Yves here. In an interview with Edward Geelhoed, Varoufakis gives an urgent, sobering picture of the conditions in Greece, which contrasts dramatically with the claims made by Eurozone politicians.

By Yanis Varoufakis, professor of economics at the University of Athens. Originally posted at his blog

Some positive sounds are audible from Greece these days. Mostly produced by the government itself, of course, but also by Merkel, by the OECD (along with some negative sounds), by some European officials (while others say they’re ‘impatient’ with Greece). Is Greece slowly recovering?

It takes a passionate disregard for the truth to suggest that Greece is recovering. Investment has fallen by 18% since the dismal levels of 2011/12, credit to non-financial institutions is 20% down from the asphyxiating depths of 2012, poverty has reached record heights, and is still growing, employment is at levels that are best narrated in the style of Steinbeck’s Grapes of Wrath, public debt is exceeding the worst expectations of the greatest pessimists, private debt is reaching for the sky at a time when the collateral posted (e.g. house prices) are sinking fast, the government’s tax take is trailing the worst forecasts. The list of woes is endless and the so-called ‘Greek Success Story’, or ‘Greek-covery’, reflects nothing except the determination to reverse the truth, Goebbels-like, by those who insisted on the policies which resulted in this debacle.

The positive sounds refer to the budget surplus, to a small growth (says the gov’t) or just a small recession (says the others) of the economy.

Europeans have a duty to themselves to see through this toxic propaganda. There is no such thing as a Greek budget surplus – not even a primary surplus (i.e. a surplus if we not count loan and interest repayments). If you look at the government’s own accounts, the January to October 2013 balance reveals a primary budget deficit of nearly €6 billion. As for the rumoured primary ‘surplus’ that is ‘around the corner’ this is a projection, a piece of wishful thinking that may, or may not eventuate, next year. As for growth, the Greek economy is still, by the government’s own accounts, shrinking at -4%. The projection of growth of… 0.4% is for 2014. Europeans need to look at this projection in the context of similar projections which, for example, had (at the time of ‘bailout Mk1’) Greece growing by 2012 at a dizzying rate of 2.3%! In truth, 2014 and 2015 will again see the Greek social economy shrink further.

Is some ‘positivity’ justified, or is Samaras’s so-called success story about ‘justifying austerity in the eurozone’, as The Guardian puts it?

Austerity is being, falsely, justified by the so-called Irish ‘escape’ from the clutches of the ESM. I have argued elsewhere that the justification for austerity in the Irish experience is fraudulent. Nevertheless, the Greece case is not even used by Brussels, Frankfurt or Berlin as a justification for austerity. The reason is simple: it takes only a perusal of the facts to recognise that Greece is in a sad, never-ending mess.

In an op-ed in the Financial Times, Mr. Spiegel recently stated that ‘Athens is gradually shedding the incentives for reforms’. Is that what we’re seeing with the Troika talks, now the gov’t is satisfied with the budget surplus?

What your readers must come to understand is that, the moment the ‘bailouts’ were forced upon Greece in 2010 and then again in 2012, all chance of meaningful, effective reform disappeared. Think about it for a moment: In 2010 the Greek private and public sectors became insolvent. So, what did Europe and the Greek government do? They piled on the weak shoulders of the bankrupt Greek social economy the largest loan in human history on condition that Greece’s GDP (from which old and new loans would have to be repaid) shrinks substantially (for this is what the stringent austerity meant)! Naturally, no one with any sense invested in this country and the insolvency both of the state and of the private sector deepened. Now, turning to reforms, ask any CEO of any decent company: “If you want to reform, to modernise, to re-structure your company, can you do it on the cheap? Without any investment?” The answer is negative. Similarly with Greece. The country was pushed into a never-ending negative spiral that rendered it un-reformable and un-governable all at once. For it is not ‘reform’ to cut wages, pensions and to push taxes through the roof at a time when GDP is collapsing and the banks have no capacity whatsoever to lend even to potentially successful enterprises. These so-called ‘reforms’ are nothing but acts of brutality. The homage propaganda pays to irrationality.

Is PASOK’s concern for overburdening society genuine and sincere, or does it fear for its weakened position only, for political reasons?

PASOK effectively ceased to exist in November 2011, with George Papandreou’s resignation. The party paid the price of being in government, though not in power, at the moment the nation hit the rocks. Papandreou had a golden opportunity in early 2010 to tell the truth (i.e. that Greece was bankrupt) and thus save his government, his party and what was left of the nation’s dignity. He failed spectacularly. After his resignation PASOK became a rump whose raison d’ etre is to provide a life raft for political wreckages like Venizelos. Sadly, a significant party of the Centre Left has now degenerated into a small gang of corrupt politicians struggling to stay out of prison.

Stournaras (Greece’s finance minister) and Samaras (Greece’s PM) say they don’t need a third loan. Is Greece ready to return to the markets, can it stand on its feet? Or do they try to gain confidence with psychological statements like these?

None of the deficit Eurozone member-states can refinance their debts autonomously. Not even Italy and Spain. Without Mr Mario Draghi’s OMT proclamation, in September 2012, which was a clear threat to bond dealers not to bet against the deficit nations’ government bonds, Italy and Spain would have joined Greece, Ireland and Portugal in the group of failed states. While the OMT threat is still managing to keep spreads down, some of the deficit countries can refinance their public debt. Even Greece might be able to do so if the ECB were to signal to markets that Athens would be placed under the OMT umbrella. But to say that they can stand on their own feet in the money markets is to mis-read totally the situation. In this sense, Stournaras and Samaras are not hoping to fool the markets – they cannot be that foolish. No, they are hoping against hope that Berlin will consent to Greece being let out of the ESM and placed under the OMT umbrella. Of course, none of this matters. Whether under the ESM or the OMT, the deficit Eurozone countries (Ireland just as Greece, Spain just as Portugal) are still in chains, caught up in a negative feedback dynamic between un-payable debts, insolvent banks, recessionary forces and mindless universal austerity.

Merkel speaks of ‘impressive facts’, but these numbers are there due to heavy burdening the society. Increased competitiveness, an erased budget deficit, but it caused enormous despair. Samaras calls it ‘the sacrifices of the people’. Is it worth it? Isn’t there a huge difference in realities on paper and in the outside world, on the streets? Didn’t it not only cause despair, but also ruined the economy in the long run?

You are making a significant error: The situation is not just awful on the ground. The situation is unbearable also on paper; in terms of official statistics. Our leaders are disgracing themselves with ‘happy go lucky’ pronouncements that clash with their own statisticians’ numbers. Never before has such energy be expended by political leaders to mislead Parliaments and electorates regarding the economic situation on paper and on the ground. Worse still, our leaders are doing this cynically and knowingly, the result being the greatest democratic deficit in Europe’s post-war history.

Martin Schulz said that the Troika has done ‘more bad than good’. Do you expect a different policy to be executed?

No. I just expect that Mr Schultz is expecting to gather a few more Peripheral votes in his sad quest for the top position in Brussels.

Should bond investors share the costs of bailouts with taxpayers, as the IMF suggests? Should European governments write down the Greek loans? A former IMF economist said recently: ‘There’s no trade-off between austerity and debt restructuring – you have to do both.

You are asking someone who warned, in January 2010, that any bailout for Greece would be a terrible blow against the Eurozone if it were not preceded by massive debt restructuring. The IMF, behind the scene, agreed with me. But in public they lent their voices to the Berlin-Frankfurt-Brussels cacophonous choir that proclaimed a debt haircut as both unnecessary and undesirable. To have these same officials lecture us on the importance of debt restructuring is a little like listening to the Titanic’s captain lecture us on iceberg avoidance.

What is the path to growth? Or is growth overrated?

It depends on what is growing. At the moment we have growing debts, non-performing loans, poverty, suicides, and… Nazi parties. These are our ‘growth’ areas. What we need, before we can talk about growth credibly, is stabilisation. To stabilise the Eurozone we need to Europeanise, without any federal moves, four realms: public debt management, banking sectors, aggregate investment policies and attempts to quell the humanitarian crisis.

George Pagoulatos says that structural reforms are clearly happening, for example; at the pension system, all possible structural changes have been made, he says, not so much horizontal measures. Others disagree. The Troika agreed not to execute horizontal measures anymore. Are true reforms happing, in your eyes? Where is it needed most?

To compress pensions to unlivable levels is not to carry out structural reforms. As I already argued (see above), genuine reforms cost money and cannot be effected in an environment of fear, collapse and political illegitimacy.

Is there a real, radical alternative to all of this? Are proposals by Syriza possibilities? (If so, which ones mostly?) You seem to have sympathy for the party’s ideas, isn’t it? 

No solution can be effected at the national level. It is as if in the 1930s the state of Kansas could have reversed, on its own, the effects of the Great Depression through Kansas-centred policies. The Eurozone is experiencing a systemic crisis that needs to be dealt with systematically. How? What we need is to escape the false dilemma between the current, dead end, policies and the (false) alternative of moving in a federal direction (that Europe is not ready for). This false dilemma must be escaped through a rational redeployment of existing institutions in a manner that does not ask of the surplus nations (like Germany and the Netherlands) to pay the bills of the deficit nations while, at the same time, not pushing the burdens of adjustment onto the weakened shoulders of the deficit countries. Together with my colleagues J.K. Galbraith and S. Holland, we have presented what we call a Modest Proposal for Resolving the Euro Crisis. Michel Rocard, the former French PM, as well as a number of former EU heads of state, have endorsed its basic tenets.

As for Syriza, my reasons for supporting Alexis Tsipras, both in his bid to win government in Athens and also in the context of European politics, is simple: Europe needs a major jolt from a government that is at once committed to the European-Eurozonal project and to the truth. I do not really care where it comes from as long as someone in the EU Council, in the Eurogroup, in Ecofin breaks the code of silence about basic truths that no one dares speak. At long last, Europe must have a debate on basic prerequisites for stabilising the Eurozone. To do so, someone must refuse to continue the lie of the past five years that, supposedly, Europe is on the right track. Tsipras is prepared to veto this lie while doing his utmost to keep Greece in the Eurozone. For this reason he has my support.

How can (youth) unemployment be conquered best?

It is absurd and, indeed, indecent, to imagine that youth unemployment can be tackled when adult unemployment is skyrocketing. Youth unemployment will fall when unemployment falls. Of course, there are clever and innovative methods of combining education with vocation training, as it is done with some success in Germany. But none of this is possible in a crashing economy.

Can you call Greece still a welfare state? To what sort of society will these policies lead to, eventually?

Greece is being used as if it were an experimental laboratory in which the welfare state is dismantled and the experimenters keenly observe the effects of its dismantling. If so, it is time to end this misanthropic experiment. For we can now see that the result is untold pain, economic collapse (even of potentially profitable enterprises), and the rise and rise of a Nazi party in the one country of the European Union that fought most heroically against the original Nazis.

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  1. psychohistorian

    As goes Greece, so goes the 99%.

    I just keep watching and wondering when a crucial part is going to fly off this crashing world economy….and it all falls down. Lucky for us it will not be the species survival challenge that Fukushima could become but if the blindness continues it will put many at the bottom of the social ladder at risk of what some would call genocide. For those folks, comparisons to Fukushima are meaningless.

    Evolution is calling. Will we answer?

  2. salvo

    unfortunately, I think that, at least in the case of Germany, there is an implicit complicity between a corrupt elite “cynically and knowingly” distorting the facts and a public expecting to be deceived by that very same elite. The personal cost of telling the truth, in Germany, would be the end of the own political career

  3. middle seaman

    Varoufakis’ posts belong to the top posts on NC. This time, his pessimism hits you hard. We live in a supposedly developed world where making banks and bond holders whole precedes the needs of people. These chosen institutions zero in on Greece and Spain to suck any remaining sign of life. If that isn’t crime against humanity only genocide is.

  4. Si

    Excellent post. And I say “excellent” while feeling both depressed and outraged by it all.

    I sat on the tube in central London last week and listened to a conversation (conducted all to loudly imo – almost self congratulatory in tone) between two policy wonks discussing the EU. I have no idea who they were or were they sat in the bureaucracy, and actually it doesn’t matter. What struck me was the certainty with which they spoke, none of the doubt that comes with humility of the frailty of our understanding of things. I imagined that this groupthink infects the whole bureaucratic and anti democratic nightmare. There is no debate around the core issues or the facts but just the fervent belief that propaganda, spin and ‘righteousness’ will prevail.

    We learn nothing from history, it dies with us. There simply are no lessons learned, only the rhyming with pasts which we believe we are too civilised to visit again.

    Perhaps I am too pessimistic. I have not been to Greece for many years so perhaps its crushing there is overstated by Yanis – but I don’t think it is the case.

    What matters is the cause, carried out with certainty, which will lead to the promise land, led by the ‘visionaries’ who know what it best. As Tytler said

    “……. these nations have progressed through this sequence: From bondage to spiritual faith; From spiritual faith to great courage; From courage to liberty; From liberty to abundance; From abundance to selfishness; From selfishness to apathy; From apathy to dependence; From dependence back into bondage.”

    And the Greek ‘experiment’? – perhaps to find out europeans stomach for bondage.

  5. The Dork of Cork

    “Europeans have a duty to themselves”

    Oh please……….
    The first duty of people is loyalty to their area and then perhaps their country as defined by them and not the banks.

    The EU is a Soviet – it always was a Soviet.
    Where peoples productivity has been exported to the financial capitals since day one.

    The European nightmare is going to the plan….emerging bank unions can have massive famines in their periphery and brush it off as if it were a little flea.

    I don’t buy what Yanis is selling.

    1. from Mexico

      I agree.

      Varoufakis needs to get a life. The only people who can put a stop to this are the Greek rank and file.

      Varoufakis seems to labor under the delusion that the free market Gestapo, which is made up of an unholy alliance between the Greek comprador elite and the transnational capitalists, really cares whether the average Greek lives or dies.

      To see what the free market militants are capable of one needs to look no further than Latin America since the 1970s or Asia in 1997, or Ludlow in 1914. In the crusade to impose mandatory free markets, untold pain and suffering were and still are being inflicted. And yet there’s not a scintilla of remorse or flicker of conscience discernible from the free market crusaders. But somehow Varoufakis believes, as if by magic, this time will be different. Does Varoufakis believe the Greeks are going to be spared or treated differently because they are white? The man is delusional.

      1. from Mexico

        And here’s another zinger from Varoufakis:

        Greece is being used as if it were an experimental laboratory in which the welfare state is dismantled and the experimenters keenly observe the effects of its dismantling.

        Was this guy born yesterday?

        1. neretva'43

          Wholeheartedly agree with you.

          Although one has to understand his frustration. On the other side just two decades ago so-called experiment has been implemented on Yugoslavia with far disastrous and lasting effect than that is the case with Greece.

          Now, how far back in history one should to learn a lecture? Chile, South America, Vietnam, Korea, Indonesia.

          Probably, it has started with colonization of what is now called America:

          But if you do not do this, and maliciously make delay in it, I certify to you that, with the help of God, we shall powerfully enter into your country, and shall make war against you in all ways and manners that we can, and shall subject you to the yoke and obedience of the Church and of their highnesses; we shall take you, and your wives, and your children, and shall make slaves of them, and as such shall sell and dispose of them as their highnesses may command; and we shall take away your goods, and shall do you all the mischief and damage that we can, as to vassals who do not obey, and refuse to receive their lord, and resist and contradict him: and we protest that the deaths and losses which shall accrue from this are your fault, and not that of their highnesses, or ours, nor of these cavaliers who come with us.

          It is puzzling that people keep quite, as if it has nothing to do with them. Instead, as Yanis mentioned, the couple days ago there were crow of 50.000 at Athenian square in sign of support to neonazi Golden Dawn party.

        2. Ignacio

          Of course, Varoufakis was not born yesterday. You should dintinguish the message recipient from the sender. The recipients of Yanis posts are not you, DofC or other people whose understanding goes beyond the goebblesian propaganda. Yanis does not want to convince you with his models. He simply tries to explain, for those greeks, irish, spanish etc., that usually don’t think twice, that the promise of recovery that is being sold by the authorities and the media is false.

          He is rigth to denounce this campaign. I see the same in Spain where, one day after the other, we are told that recovery is around the corner. Even theoretically liberal media, like EL PAIS, are involved in this campaign. In Spain “green shoots” have been replaced with “signs of recovery” and every day the authorities find one way to misread economical data (they are released continuously, you know) as a proof of improvement. Even analysts that have a decent record of honest economical analysis are falling below this propaganda scheme when they write or talk on the mainstream media.

          The propaganda is so overwhelming that rebutting all the absurdly optimistic assertions would require a superhuman effort for people like Yanis. This battle is lost, but it is good for Yanis to do it, at least for the record.

      2. Cassiodorus

        “Alliance between the Greek comprador elite and the transnational capitalists” indeed! Preserving the currency union is not going to save Greece if the point of the currency union is the enshrinement of this alliance.

    2. Si

      D of C

      “Europeans have a duty to themselves TO SEE THROUGH THIS TOXIC PROPAGANDA”

      You have either not read the article or you have come to believe you own propaganda.

      1. The Dork of Cork

        I believe Yanis is just another salesman….a inner party functionary.

        He sells Goldsteins book to the willing outer party.

        There comes a point where you must divorce yourself from the power of words and see reality as it truly is on the ground.

        Its a truly disturbing vision
        Which is why so few people want to embrace it.


        1. Si

          @D of C
          Good answer and thank you for that. I appreciate the clip too.

          You may well be right regarding the sales pitch, I really don’t know. I don’t agree with everything Yanis is says, and I’m not familiar with his selling of Goldstein’s book.

          I do worry that 1984 is prophecy -Paradoxically in an age of information we seem to be less informed and more influenced by spin and propaganda

  6. allcoppedout

    I remember being in a graduate class 30 years ago discussing whether dark management was a conspiracy or cock-up. I do buy what Yanis pitches,not that I often disagree with the Dork.

  7. The Dork of Cork

    A benign view of Yanis thoughts is that he lives his life through a airport lounge…..and has no concept of the local which has been completely overpowered first by the nation state and now these venomous unions.
    But thats unlikely.

    This euro extraction of resources has been going on in Ireland since the 1970s at the very least.
    When the political fiscal transfer system happened in 1973 and monetary union post 1979.
    After 1973 they took our fish and gave us credit instead.
    After 1979 they took our oil ration and transferred it elsewhere…eventually this centralized capital found its way back to us via yet more cars and house shit.
    But we cannot afford to buy what they are selling….the production /distribution / consumption system has broken down as it cannot operate on this vast scale without burning miliions and millions of people.
    But as can be seen in the UK union of the 19th century – its not a problem once London can get its rent.

    Whats very clear is that deflation of the periphery is how banking unions mature to their horrid size.
    Yanis wants yet more banking centralization to save us from this centralized beast.
    Go figure.

  8. DakotabornKansan

    Are the European elites so utterly stupid as to allow Greece to become a guinea pig for testing to see how much they can squeeze a society before it implodes in violence?

    As Greece’s two governing parties continue to implement the prescribed austerity policies, they become increasingly unpopular. To carry out their agenda they require the corrupt ruling elite of Greece to administer these policies.

    It is not surprising that the extremists are gaining in numbers. Golden Dawn has channeled public anger to its favor. How far will the rising Golden Dawn with its ties to the police and military go before Greece becomes a totalitarian military state? It has moved Greece’s governing parties further to the right as it implements its deep austerity measures.

    Greece is a very depressing story about how a society’s implosion can lead to the rise of extremism in austerity-stricken Europe. It is naïve to consider it just a Greek problem because it is much more than that. The far right is on the rise across Europe and coalescing into dangerous alliances. While austerity is not the only factor in the rise of fascism, there is no hope of curbing it so long as austerity remains the only option.

    “Fascism may be defined as a form of political behavior marked by obsessive preoccupation with community decline, humiliation, or victimhood and by compensatory cults of unity, energy, and purity, in which a mass-based party of committed nationalist militants, working in uneasy but effective collaboration with traditional elites, abandons democratic liberties and pursues with redemptive violence and without ethical or legal restraints goals of internal cleansing and external expansion.” – Robert O. Paxton, The Anatomy of Fascism

    1. PaulW

      You mean Greece shall return to the 1960s-1970s? When Greece was there the rest of the world got along as if Greece never existed. Costra-Gravas made a nice movie we all watched. We also managed with Franco running Spain at the same time. If the MSM don’t report on it then happy! happy! happy!

      Regarding the Golden Dawn, if things are as bad as they are claimed to be in Greece then people will have the choice of either living with it or fighting for change. If the extremists are the only ones offering meaningful change then that is who the masses will turn to. Democracy is finished as a way to bring about change. That is the case in all our countries. The system cannot be changed from within. If the peaceful option for change no longer exists… So don’t be judgemental of the Golden Dawn. Circumstances have brought them into being. There will be more Golden Dawns popping up in other countries if things get worse for the 99%.

      1. from Mexico

        Who knows? In the grand scheme of things, what role do these bad cops on the extreme right and on the extreme left play?

        That the forces of capital and management — bankers, investors, big business men, and their sympathizers — should have closed ranks against him was natural in view of his reform legislation, his monetary unorthodoxy, his huge spendings for relief, his intermittent hostility to big business, and his expansion of the area of government authority. But what if he could not hold the support of the have-nots, and found himself the leader of a centrist minority, raked by a cross fire from both sides?

        On the left Roosevelt must reckon with Huey Long, the Kingfish of Louisiana….

        Huey Long had a fantastic, Utopian “Share Our Wealth” program for the country, very explicit as to objectives but very vague as to methods….

        Roosevelt must reckon also with another one-time ally who, like Long, had left the New Deal reservation: Father Coughlin of the Shrine of the Little Flower, whose eloquence over the radio had gained for his National Union for Social Justice an immense following, somewhat similar to Huey Long’s. Father Coughlin’s voice was raised in behalf not only of “a living annual wage” but of “nationalization of banking and currency and of national resources.” How much strength might this prophet of the air waves command by 1936, if recovery continued to lag, and how would he dispose it?

        Even more portentous, for a time, seemed the incredible organization headed by Dr. Francis E. Townsend of Long Beach, California. Not until the first of January, 1934, had this elderly physician announced his plan for a government allowance of $200 a month to every citizen 60 years of age or older….

        [T]he number of Townsend Club members was conservatively estimated at three million, and that the movement, by the end of 1935, had gained at least ten million supporters….

        And what of the communists?….

        And what of the farmer-labor movement in the Northwest?….

        In dealing with these various political menaces on the left the quarterback showed himself to be a brilliant broken-field runner. Roosevelt smiled upon Sinclair–without embracing him. Pushing forward the Social Security Bill, he gave implicit assurance to the Townsendites that he intended to secure for them at least half a loaf. Not without a side glance at Huey Long and Father Coughlin, he suddenly produced in the summer of 1935 a proposal to increase the taxes upon the rich–to levy a big toll upon inheritances and large incomes and a graduated tax upon corporation incomes.

        –FREDERICK LEWIS ALLEN, Since Yesterday

        I disagree with Allen’s characterization of Father Coughlin as being “on the left.” The guy, in my opionion, was a fascist.

        1. PaulW

          Perhaps I just lead a sheltered life and am missing things but who is the extremist Left? Does Greenpeace and the Rainbow Warrior count? In the 1980s you had the Red Brigades and the Baader-Meinhof Group. Today what we consider liberal has been hijacked by neo-liberals. Paul Krugman, Charlie Rose etc… just a bunch of trojan horses. Even the union movement in Canada has gone to bed with the corporate interests to ensure their survival and guarantee their pound of flesh from union members who have no choice on union membership and dues.

          The thing is, the only popular movements seem to be on the Right. Greece(Golden Dawn) France(Marine Le Pen) UK(UKIP) etc… I suppose South America has enjoyed the rise of the Left, and not very extremist. But Chavez wasn’t able to live as long as Castro and his successors can’t even keep the electricity running in Caracas. I guess this means a right wing backlash as South America’s elites retake total power. Then how long before the extremist Left rises to challenge them?

          1. from Mexico

            I most assuredly agree with that Charles Dickens wrote in A Tale of Two Cities:

            It was too much the way…to talk of this terrible Revolution as if it were the one only harvest ever known under the skies that had not been sown — as if nothing had ever been done, or omitted to be done, that had led to it….

            Crush humanity out of shape once more, under similar hammers, and it will twist itself into the same tortured forms.

            This is also worth remembering:

            By the mid-’30s there was also in existence an advanced demonstration of the Keynesian system. This was the economic policy of Adolf Hitler and the Third Reich. It involved large-scale borrowing for public expenditures, and at first this was principally for civilian works — railroads, canals and the Autobahnen. The result was a far more effective attack on unemployment than in any other industrial country.16 By 1935, German unemployment was minimal. “Hitler had already found how to cure unemployment before Keynes had finished explaining why it occurred.” In 1936, as prices and wages came under upward pressure, Hitler took the further step of combining an expansive employment policy with comprehensive price controls.

            The Nazi economic policy, it should be noted, was an ad hoc response to what seemed overriding circumstance. The unemployment position was desperate. So money was borrowed and people put to work. When rising wages and prices threatened stability, a price ceiling was imposed. Although there had been much discussion of such policy in pre-Hitler Germany, it seems doubtful if it was highly influential. Hitler and his cohorts were not a bookish lot. Nevertheless the elimination of unemployment in Germany during the Great Depression without inflation — and with initial reliance on essentially civilian activities — was a signal accomplishment. It has rarely been praised and not much remarked. The notion that Hitler could do no good extends to his economics as it does, more plausibly, to all else.

            Thus the effect of The General Theory was to legitimatize ideas that were in circulation.

            16 “. . . the Nazis were . . . more successful in curing the economic ills of the 1930s [than the United States]. They reduced unemployment and stimulated industrial production faster than the Americans did and, considering their resources, handled their monetary and trade problems more successfully, certainly more imaginatively. This was partly because the Nazis employed deficit financing on a larger scale … By 1936 the depression was substantially over in Germany, far from finished in the United States.” John A. Garraty, “The New Deal, National Socialism, and the Great Depression,” The American Historical Review, Vol. 78, No. 4 (October 1973), p. 944.

            –JOHN KENNETH GALBRAITH, Money: Whence It Came, Where It Went

            1. dearieme

              “at once committed to the European-Eurozonal project and to the truth”: now there’s a contradiction in terms to savour.

              Judging by this comment thread, the EU is so destructive that even the peace-time economic policies of Hitler look good by comparison. What we are reduced to by the reckless bastards of Brussels.

            2. Calgacus

              I like Twain – Connecticut Yankee in King Arthur’s Court

              “Why, it was like reading about France and the French, before the ever memorable and blessed Revolution, which swept a thousand years of such villany away in one swift tidal-wave of blood—one: a settlement of that hoary debt in the proportion of half a drop of blood for each hogshead of it that had been pressed by slow tortures out of that people in the weary stretch of ten centuries of wrong and shame and misery the like of which was not to be mated but in hell. There were two “Reigns of Terror,” if we would but remember it and consider it; the one wrought murder in hot passion, the other in heartless cold blood; the one lasted mere months, the other had lasted a thousand years; the one inflicted death upon ten thousand persons, the other upon a hundred millions; but our shudders are all for the “horrors” of the minor Terror, the momentary Terror, so to speak; whereas, what is the horror of swift death by the axe, compared with lifelong death from hunger, cold, insult, cruelty, and heart-break? What is swift death by lightning compared with death by slow fire at the stake? A city cemetery could contain the coffins filled by that brief Terror which we have all been so diligently taught to shiver at and mourn over; but all France could hardly contain the coffins filled by that older and real Terror—that unspeakably bitter and awful Terror which none of us has been taught to see in its vastness or pity as it deserves.”

              Alain Parguez has a paper that compares French, German and US measures the time and rates France the lowest and the New Deal highest, although agreeing there should have been more spending. Ill-thought revisionist academic belittling of New Deal fiscal policy effectiveness started in the 50s.

    2. J Sterling

      Now, turning to reforms, ask any CEO of any decent company: If you want to reform, to modernise, to re-structure your company, can you do it on the cheap? Without any investment?

      If you ask a lot of CEOs to re-structure their company they’ll say “no problem!” and order a lot of layoffs, and maybe a re-hiring round later, at much lower wages. I mention this because you absolutely cannot do this to a country, you just can’t say to the people “sorry, we don’t think you’re good enough for this country, so we’re replacing you with cheaper people”.

      Well, maybe you can, but it will end very badly.

      1. TheCatSaid

        That is what seems to be happening, now that you mention it.

        Masses of Europeans are being forced to become “cheaper people” with lower wages, reduced safety net, reduced pensions, fewer jobs of any kind. . . And also “cheaper people” are coming inwards from newer EU member countries whose expectations are less to begin with.

        And the “executives” running the country make out like bandits, with their pensions and golden handshakes miraculously preserved.

    3. NotTimothyGeithner

      I don’t think you can underestimate the power of the myth. The technocratic elite which have risen to power represent a shallow generation which came of age in the 1980’s and recruited younger members like them who represent shallow Reagan worshippers*. The myth is they are good and intelligent who can make wise decisions for the peons much like the forces that drove British colonization.

      What happens if their decisions go South. London, Paris, New York, and Versailles on the Potomac are inured from those decisions and have been. Like Democrats who blame voters for not understanding their savvy messaging or blame messengers, they will just blame the other until accountability returns.

  9. The Dork of Cork

    “obsessive preoccupation with community decline”

    You really do not have to be obsessed about this in the modern Europe – its sort of in your face like.

    Left wingers will try to paint reactionaries with a broad fascist brush but really nothing could be further from the truth.
    These guys never define what we are reacting against as that would paint a Dorian Grey like picture of their true masters.

    A rejection of absurd liberal memes is not fascism.

    1. from Mexico

      My conception of fascism does not entail a “rejection of absurd liberal memes,” but a passionate embrace of them. As Lenin said, “Fascism is capitalism in decay.” Or as Mussolini put it: “Fascism should more appropriately be called Corporatism because it is a merger of state and corporate power.”

      Or, to repeat a passage from the quote DakotabornKansan cites:

      Fascism may be defined as a form of political behavior…in which a mass-based party of committed nationalist militants [works] in uneasy but effective collaboration with traditional elites…” – Robert O. Paxton, The Anatomy of Fascism

      To argue that fascism represents some kind of people’s revolution flies in the face of history.

      1. from Mexico

        Here’s how George Orwell put it:

        In the long run — it is important to remember that it is only in the long run — the working class remains the most reliable enemy of fascism, simply because the working class stands to gain most by a decent reconstruciton of society. Unlike other classes or categories, it can’t be permanently bribed….

        The intelligenstia are the people who squeal loudest against fascism, and yet a respectable proportion of them collapse into defeatism when the pinch comes. They are far-sighted enough to see the odds against them, and moreover they can be bribed — for it is evident that the Nazis think it worthwhile to bribe intellectuals. With the working class it is the other way about. Too ignorant to see though the trick that is being played on them, they easily swallow the promises of fascism, yet sooner or later they always take up the struggle again. They must do so, because in their own bodies they always discover that the promises of fascism cannot be fulfilled.

        –GEORGE ORWELL, “Looking back on the Spanish War”

        And here’s how Reinhold Niebuhr put it:

        If democracy is to survive it must find a more adequate cultural basis than the philosophy which has informed the building of the bourgeois world. The inadequacy of the presuppositions upon which the democratic experiment rests does not consist merely in the excessive individualism and libertarianism of the bourgeois world view; though it must be noted that this excessive individualism prompted a civil war in the whole Western world in which the rising proletarian classes pitted an excessive collectivism against the false individualism of middle-class life….

        The sucess of Nazi diplomacy and propaganda in claiming the poor in democratic civilization as their allies against the “plutocrats” in one moment, and in the next seeking to ally the privileged classes in their battle against “communism,” is a nice indication of the part which the civil war in democratic civilization played in allowing barbarism to come so near to a triumph over civilization.

        -REINHOLD NIEBUHR, “The Children of Light and the Children of Darkness”

    2. Banger

      I don’t think the term “fascism” really applies any more. The systems we live under are, compared to the previous century stunningly more complex. We live in apolitical world of wheels within wheels within wheels. Much of the impetus for the rise of the far-right is to simplify a world that is far too difficult to grasp without great efforts.

      For a time in our history the left was an agent for reform and change. That period is over, for the most part, and today the real left is inchoate but will return to the historical stage as a very different force. But at this time it is the far right that is truly the “outsider” force for change.

      1. Roland

        Banger, these systems are not more complex. The national-scale economies and polities were each no less complex–and in aggregate far more so–than the neoliberal globalist system which has been gradually superseding them.

        Class struggle isn’t all that complicated, and the class struggle against the globalist bougeoisie is somewhat less complicated than the multipronged class struggles we used to conduct against the aristocracy and clergy.

        How can you miss it, Banger? Can’t you see similar politics unfolding in country after country across the entire developed world?

        As for opposition heading to the radical Right, that is hardly surprising. The moderate Right are neoliberal bourgeois globalists, rhe moderate Left are neoliberal bourgeois globalists, and today’s radical Left don’t want to hurt anybody. What remains? Process of elimination! Simple!

        The Rape of Greece is not complicated. The betrayal of a nation at the hands of its ruling class is not new or unprecedented. It sure isn’t “unbelievably complex” !

        The globalist bourgeoisie, as a ruling class, are historically middling in terms of their sophistication, as in much else. Less crude than some ruling classes, more so than others.

  10. Banger

    I love Yannis’ passionate writing. I’ve followed his career for a few years now and I admire his attempt, along with others who are with him, to bring the Euro-zone into sane economic policies. But this is not an economic crisis at this point it is a political crisis that is moving towards an interesting point. The idea of failed states is growing just as the idea of disposable people is growing.

    It is interesting to hear Yannis say that privately IMF officials said one thing and then asserted another publically. First, my own experience with IMF officials and economists is that they are a very serious and often brilliant bunch who were, it seems, point men for the new austerity policies in all the Western countries after the 2008 crisis. I suspect, like the Patriot Act, there was a strong international constituency for austerity and, in my view, the inexorable march to neo-feudalism. Greece, I believe is the laboratory to see what will emerge. Obviously everyone sensible in the EU in the IMF and elsewhere know the figures Yannis speaks of and the Eurocrats know very well what they are doing to Greece, i.e., destroy civil society there to see what happens. Will it be a reaction that creates a full-fledged fascist state? Will a network of private arrangements, local gangs, village notables and so on dominate the country as is currently the case in other failed states?

  11. neretva'43

    If Greece is the “laboratory” than it last from 1946, when the British with help of the US intervene in civil war. Than we have a fascist junta from 70s also brought by the US.

    Today’s the Greeks military and police institutionally is the same it was in 70s – fiercely nationalistic/chauvinistic and servant of foreign interests and protector of the “constitutional order”. Along with liberal parties on top of it everything is in place for continuous plunder of the country.

  12. The Dork of Cork

    You get some idea of Yanis like thinking when he states some arms factory in Montana or something makes a union more sustainable….
    What a nightmare world that is….but its a working union under a Yanis like viewpoint.

    Well we have that sort of thing in Ireland – where you have multinationals based in this jurisdiction providing just enough tokens into the domestic system to keep the torpedoed domestic economy afloat.
    But rational local exchange does not exist.
    For example the goods of Waterford does not supply Dublin much or even the UK to a large extent.
    Its another one of those dead zones which keeps cropping up for some reason….(as a result of the concentration of capital in other areas)

    The arms industry / multinationals farm the international oil ether – wasting money / oil on fluff.
    But where did this external oil come from ?

    It came from deflations of domestic western economies.

    The money cartel just hates using oil for domestic primary and basic secondary production.
    As they can only make the real bucks by selling us fluff which drives scarcity and thus their profits.

    Yesterday I illustrated how the use of diesel in Iceland contrasts dramatically with conduit Ireland.
    The central European powers would prefer to take Icelandic fish directly back to the core in return for credit (with interest) and to sell them European entrepot products.
    Thus further centralizing production.
    It is no coincidence that the so called “new economy” appeared just as the old economy has died in Europe.

    This sort of industry is in fact extractive.
    It has no function.
    If people had the tokens they would go to the pub rather then sitting around talking shit on the internet.

    What has that period created but a giant bullshit machine.

    The keynesian war economy and the neo Keynesian car / house / computer economy are pretty much the same thing.
    When the Eurozone matures I am sure it will be much like the UK & US.
    A place which were once countries controlled by a bank but are now banks controlled by dead inside countries.

    Giant shitholes with no soul.
    This is what good old Yanis wants for us.

  13. LillithMc

    Detroit is the US Greece. The end game is taking assets. In Greece it was the tourist areas used to back bad loans. In Detroit the pension money is thrown into the same pot as bad loans and bad bond deals. There are ready buyers for the world-class Detroit art museum. Like any loan shark first make the bad loans. Next take the assets. Similar to claiming you bought the land from the Indian tribal chief for some beads.

  14. The Dork of Cork

    And like clockwork the FT produces a piece about London and its future growth…..

    What a absurd world we live.
    Cities of such as scale cannot be serviced by a local agricultural or even Industrial hinterland.

    Rent is extracted from the global hinterland and surprise surprise people follow the money……….but the waste THE WASTE…..so much energy is lost in transmission ……

    Ancient Cultures / societies / life support systems sent into constant flux for the benefit of the few and Yanis points to the Nazi circus which is not even a good show anymore……

  15. susan the other

    In order to avoid nazis, first avoid banksters. Why is this so humanly impossible? All those guys knew how to insure themselves. They made up a new investment vehicle called a derivative. Nevermind it and its underlying speculation is melting down the world. Because yes, growth is overrated. In fact, it is the banksters favorite illusion. Greece and all the 99% have nowhere to turn because growth does not really exist. And here I thought “choice” was the mantra of modern capitalism. Here’s my choice: I want an insurance policy against international corporatism and clueless greedy elites. Call it freedom insurance covering all the expenses necessary to create an economy that works for all the people. And the environment. No matter how long it takes to clean up the present mess.

  16. financial matters

    Keynes seems like a difficult guy to nail down but I like his emphasis of fiscal policy over monetary policy. He believed in demand being very important. I think 2 people who get the essence of Keynes are Randy Wray and Robert Skidelsky.

    I liked Randy Wray’s re-characterization of a liquidity trap as a demand trap. (in essence people won’t borrow money to produce unless they think the demand is there.)



    And this from Robert Skidelsky (Keynes: The Return of the Master)

    “”Later Keynesian analysis would emphasize more than Keynes did the role played by unequal income distribution in causing the crisis. In the US, the top 24,000 families received three times as much income as the 6 million at the bottom. As a result, credit has been channelled from the wider economy into financial speculation and conspicuous consumption.””

  17. RBHoughton

    If the Greek people will tell the EU to ‘go away,’ unilaterally cancel all debt and have someone make a full frontal disclosure to the people that they are on our own, they will be on the right path.

    We have fish, chickens, vegetables and olive oil to barter amongst ourselves. Don’t thrown away old clothes because we won’t have new ones for a few years. Start fermenting your own wine / beer and let’s all have a party.

  18. bob goodwin

    I am guessing, because it is more useful than open ended questions.

    It is probably true that if I had capital, there is no way to go into Greece and take advantage of the crisis. For example high unemployment should mean labor is discounted. I am assuming it is not, and other forms of arbitrage are equally unavailable.

    I am also guessing that the reason there is both low employment and high wages is because there are no transactions to move either number, which happens when there are high levels of debt, and everyone is waiting it out. If you can last you win big, if not you lose everything, and there are no other options.

    This is classic debt deflation.

    Austerity does not cure debt deflation. But it appears that debt deflation creates an incentive to install crisis barriers to give powerful players more runway. Thus I conclude austerity was not intended to be a cure, it was intended to create a ghetto. And this says that the costs of debt deflation fall disproportionately.

    If debt had been liquidated first, then austerity would have a different role.

  19. anonymous

    The Greeks should default. Is the ability to import Mercedes Benzes really worth all of that suffering?

  20. hyperpolarizer

    It troubles me that a premium is still being placed on staying in the Eurozone and saving the Euro.

    Countries like Greece, not to mention Spain and Italy, would be much better off outside the Euro.

    The Euro is a terrible idea, and should be abandoned. If it devolved to just France and Germany, France would suffer.

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