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Friday, September 27, 2013

Alexis Tsipras and SYRIZA - Europe's Salvation?

Prof. Varoufakis published a remarkable speech given by Alexis Tsipras at the Bruno Kreisky Forum in Vienna. The speech is so eloquent that - had Alexis Tsipras not been mentioned specifically as its author - I would have guessed that it was written by Prof. Varoufakis.

Literally a Golden Opportunity presents itself not only to the Eurozone but to Europe in its entirety: "A government of the Left in Greece will extend a hand to Europe’s Social Democrats, to Europe’s free thinking liberals, to all Europeans who do not want Europe to slide into a nightmare. And we will ask them to join us in a common project: The project of stabilising the Eurozone – a first step towards an open, democratic and cohesive Europe".

How will that happen? Very simple: "A Syriza government will put on the table a European Marshall Plan, which will include a proper banking union, a centrally managed public debt by the ECB, a massive program of public investment. Above all, we are requesting a special conference on the european debt in the entire periphery, by analogy to he 1953 London Conference for the German debt at the time, which decided to cut a large portion of it, a moratorium on the payment of interest and a growth clause".

Europe's Social Democrats had fallen into demise a few decades ago because they failed to follow "the legacy of statesmen, such as Bruno Kreisky, Willy Brandt or Olof Palme". Instead, Europe turned into today’s neoliberal desert.

Without this New Movement to be initiated by Tsipras/SYRIZA, Europe will remain forever in the claws of vested interests such as:

• The bankrupt bankers of Greece and Spain, in total cooperation with the bankrupt bankers of Germany and France, who do not want to see any drastic changes.
• The politicians presently in power who do not want any radical changes either.
• The Eurocrats who are particularly against any admission to having designed bad institutions.

Tsipras aims at no less than a New Golden Age for Europe. He is "intent on promoting a European agenda for the salvation of the Eurozone". While he is not yet convinced that today's Austrian Social Democratic Party will join him in his struggle to save Europe, he feels to have the blessing of the late Bruno Kreisky who would undoubtedly want Austrian Social Democrats to join Alexis Tsipras. 

Move over, Kreisky, Brandt and Palme! A new space is needed in the Hall of Fame for Alexis Tsipras!

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Well, I know I am sounding cynical above and I really shouldn't be cynical. As I said in the beginning, it is a remarkable and motivating speech; no doubt about it. But notwithstanding all the positive wishful thinking on the part of Alexis Tsipras, I feel compelled to introduce a bit of realism.

Whenever someone tries to enlist sponsors/supporters for a new project/idea, one of the first questions he/she will be asked by the potential sponsors/supporters is: WHAT IS YOUR TRACK RECORD IN THE AREA OF WHAT YOU ARE PROPOSING?

Does Greece have a track record of being the herald of new frontiers for Europe? Well, Greece definitely has a tremendous track record but, regrettably, that was about 2-1/2 millennia ago. The track record of the last couple of centuries, since Independence of Modern Greece, isn't all that convincing.

Well, not quite. Prof. Aristides Hatzis argues in this paper that "Greece used to be considered something of a success story. One could even argue that Greece was a major success story for several decades. Greece's average rate of growth for half a century (1929-1980) was 5,2%; during the same period, Japan grew at only 4,9%. These numbers are more impressive if you take into consideration that the political situation in Greece during these years was anything but normal". I take it that Prof. Hatzis is suggesting that if it weren't for Andreas Papandreou and PASOK, Greece would be a triple-A rated country today! (I presume the Greek Left would forcefully disagree with Prof. Hatzis...).

But as Tsipras correctly spells out in his speech, the ultimate threat of the EU and the Eurozone for Greece was not a politician nor a party. Instead, it was "the massive capital movements during the first years of its existence from the surplus developed Eurozone countries toward the Periphery. And why is this capital flow a problem? Because the money that flows into the Periphery creates bubbles. In Greece, it caused a bubble of public debt as the state borrowed on behalf of the developer-cleptocrats who then used the money to create all sorts of bubbles indirectly". Well said!

But permit me to ask the following question: Was it the capital flows per se or was it the fact the capital was not wisely invested (or rather: that much of it was simply wasted)? Ok, one conditions the other: if there are no capital flows, capital cannot be wasted. But that is not to say that, by definition, capital which flows must be wasted.

Of course, it was the cleptocracy ('greed' would be a much more polite term) of bankers in Greece and abroad which is reponsible for all this misuse. But where does Tsipras derive his confidence from that a new Marshall Plan for Greece would assure that new capital is wisely invested? Oh, because instead of cleptocratic bankers, it will now be responsible politicians in the EU and in Greece who will be in charge? Let's check Greece's (and Europe's) track record on that.

Upon request, I was once informed by EU staff that from 1980-2010, the total of grants, subsidies, etc. disbursed by EU institutions to Greece (including agricultural subsidies) was 175 BEUR. Now that's quite a bit of capital. And that capital was not 'misdirected' by cleptocratic bankers. No! It was directed by responsible EU and Greek politicians within clearly established EU rules and regulations. And yet, much of that capital (which, indicentally, dwarfs the original Marshall Plan in size!) did not end up where it was supposed to end up.

Do I suggest that there should be no Marshall Plan for Greece? No, I am not suggesting that. In fact, I started arguing in favor of a long-term economic development plan for Greece already 3 years ago. My only point is: the way Tsipras puts it, it sounds a bit pompous and quite a bit devoid of realism.

What Greece needs more than anything else are solid and inviolable institutions (combined with a culture of trust in institutions). Executive, legislative and judicial institutions; administrative institutions; in short: all institutions which an efficient modern state requires. The EU Task Force is there to 'assist Greece in its afforts to accomplish that'. The Task Force can only 'assist' because if they intended to do more than that, it would get involved in Greek sovereignty.

Well, maybe realism will set in one of these days and people like Alexis Tsipras will recognize that an entrenched system of vested interests and corrupt practices is most unlikely to reform itself from within. Just think: vested interests would have to amputate themselves in order to improve the system. Is that likely to happen? Not in Greece; nor anywhere else.

So, the request for a Marshall Plan for Greece should perhaps focus less on the idea "Send us money for investment and the economy will start booming". Instead, it should focus more on the recognition that a beautiful building will only last if it has good foundations. So before one gets carried away with the nicer floors upstairs, all effort should be devoted to make the best foundation possible.

I have frequently given the example of France in the late 1950s when the country was at the brink of total collapse. France was lucky to have a 'saviour' in its own midst. Charles de Gaulle was unanimously elected by the French Assemply, in 1958, to become President of the Council of Ministers with more or less authoritative powers for 6 (or 12?) months. Essentially, a 'benevolent dictator' who had the trust and confidence of the French. And de Gaulle used those powers wisely and responsibly in the interest of the entire Grande Nation (instead of special interests). A new constitution and the Fifth Republic were put in place and soon the country returned to true democracy.

I doubt that Greece could agree, in the midst of the current depression, on such a 'saviour' from within. But as long as one accepts realism in the sense that it is highly unlikely that Greece, as a country and as a democratic society, can get out of the present predicament through its own efforts; as long as one accepts that premise (which I admit is rather bold), well, then there might be a solution.

In that scenario, Alexis Tsipras' next speech would require some amendments. He wouldn't have the gall to "invite Europeans to join SYRIZA in the project of stabilizing the Eurozone as a first step towards an open, democratic and cohesive Europe". Instead, he would politely ask Europe to help Greece to create solid and inviolable institutions which are the first step toward an open, democratic and cohesive Greece! And if that meant delegating some sovereignty to something like a Committee of Wise Men for a while, so be it!

8 comments:

  1. "The speech is so eloquent that - had Alexis Tsipras not been mentioned specifically as its author - I would have guessed that it was written by Prof. Varoufakis."

    What a wonderful north european way to put it! It's a bit like "exporting democracy" or "collateral damage" or "final solution". The inventiveness of civilized europeans to find always creative ways to say what they don't want to say openly, never ceases to amaze me!

    Let me rephrase in greek. You are having a hard time to believe, that this man:

    http://www.youtube.com/watch?v=o1pjyh-Cm1M

    could have written the Kreisky forum speech.

    After that performance, Tsipras had to take new english lessons, since he became a satyre target and object of mockery by even high school students, but rest assured, he isn't remotely capable of writing that speech.

    could have written that speech, which is full of "varoufakisms" by the way. For example the much loved "canary in the mine" phrase. If this isn't enough, you can go a few months back, to find the point where in another speech, Tsipras mentioned no less, than the same Aesop's tale in varoufakian adaptatation, of the "sourthern grasshoper and the northern ant". The Kreisky speech only confirms the suspicions, that after PASOK's voters moved en masse to SYRIZA, so did George Papandreou's ex speech writers!

    This, just in case that the whole Tsipras' proposal wasn't varoufakian enough to convince you of the modesty of our dear professor.

    Why they won't pubblically acknowledge it, is a common thing in greek politics, prestige damage of the politician. So they are called "mysticosimvouloi" (shadow advisors). They sometimes come out in the light, after an electoral victory, where they assume a position. For now, you have to join the dots.

    http://farm8.staticflickr.com/7331/9035168285_5f10473792_z.jpg

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  2. Klaus, you make it sound as if the misallocation of capital was due to the politicians. It wasn't. It was largely due to decisions made by the private sector.

    Put simply, reserves flowed to the Greek banks from the core, and they transformed to private credit expansion. It was private debt which more than doubled during the euro years, not public debt. Why did this happen? For the same reason that reserves flowed in the first place: elimination of exchange-rate risk. Like you've mentioned in the past, borrowing in euros was treated like borrowing in your own currency, whereas in fact it was akin to borrowing in a foreign currency (since the central bank did not support the bonds of the Eurozone governments).

    For what it's worth, my opinion is that once the current mess is resolved, governments should resort to the tried-and-tested solution of national currencies and capital controls.

    How many times have capital flows caused havoc with national economies? Too many to mention. It simply seems a better solution to return to the capital controls and stability which characterized the Bretton Woods era.

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    1. Well, in the case of Greece, the net increase in foreign debt was 283 BEUR from 2001-10, and it was split almost exactly 50:50 between the public and private sector. Not any one party alone is responsible for the misallocation. You can say the banks made the wrong loans, or the borrowers used those loans the wrong way, or whatever. Fact is that a lot of capital ended up in the wrong places.

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    2. What you write is politically and economicaly correct.You ask the right questions and give realistic answers. The real issue is not a Marshall Plan instead administrative reforms in state, executive, legislative and judicial assistance in order institutions to work like every modern state requires. The eternal problem, political system builded to promote differences-contrasts with populism in various financial and non financial issues and not agreements.
      There is a rule of law but often is influenced negativelly by unacceptable practices, poor means and lack of basic organization.
      That's all.

      MS

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  3. Klaus
    As much as I admire your attempts, you are loosing an uphill battle. You are trying to fight modern Greek arrogance, emotions, complacency and superiority with Hellenic logic and rationality, you will not succeed.
    To accept advice is not something the modern Greek will easily do. The Greek economy has twice been subject to foreign control; both times it was forced upon them. In 1898 the economy came under control of the International Committee for Greek Debt, and around 1949 a commission of USA and UK was formed that had veto rights at all expenditures of the Greek state. Both of these attempts vere highly successful, the economy straigtened up. None of them had a lasting influence. WHY PRAY??? Could it be that Greece is a nation that has not learned to govern itself, as persons and as a society????

    Lennard Schorlemmer

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    1. @ Lennard Schorlemmer

      you are in a way right about the Greek perception, only to suggest that decisions in economy are also related with:
      1) failed Greco-Turkish war 1897 for Greece,
      2) World War II and civil war 1946-1949.

      Althought economy straigtened up as you mention none of them had a lasting influence.
      The answer"why" is difficult . Practically however i may suggest again to start a "Marshall Plan" investing in a broader educational cooperation which does not cost a lot.
      I haven't seen such ever in Greece, probably it might be much more valuable than 10 Marshall Plans.

      MS

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  4. 2-1/2 millennia ago in the grand span of human existence is a mere bat of an eye. It is like yesterday. Indeed, that the legacy of classical Greece lives on is enough to qualify Greek leadership out of the current darkness. Obviously, Socrates faced the same short-sighted blindness among Athenian rulers as does Tsipras among the European ruling class today.

    Your question, "Was it the capital flows per se or was it the fact the capital was not wisely invested?" is the correct one. Obviously, were it wisely invested in Greece it never would have left.

    "But where does Tsipras derive his confidence from that a new Marshall Plan for Greece would assure that new capital is wisely invested?" Some form of protectionism regulating capital flows and commerce will need be in place. More importantly, though, is the conception of a "new Marshall Plan" you are missing, and this is the idea of "credit." Here, those strictly monetarist notions of "capital" are broadened in a manner distinguishing the United States from Europe over the course of its history. In other words, Europe need understand Alexander Hamilton, much as Tsipras appears to at least be moving toward.

    As for your skepticism toward the capacity of political bodies to succeed implementing Tsipras' vision for Europe, this is quite understandable. Yet it is no reason to be fatalistic. The right place for organizing attempts to uplift society is government.

    All those things you say Greece needs, institutionally, are pipe dreams without a platform on which economic progress can be promoted. Tsipras is correct to place this at the very top of the agenda. Empty bellies care nothing for justice. Thus, I disagree with the crux of your argument here. Likewise to ignore support de Gaulle received from patriotic circles in the U.S. whose effect fortified French progress might be a failing of your analysis. This same international support the vision for Europe Tsipras expresses very well is needed. Broad support for sovereign development is a crucial matter often overlooked, and we can credit Tsipras for recognizing this.

    The idea for a Marshall Plan for Greece is not at all about "Send us money for investment and the economy will start booming." You see, this is where European imperial monetarists fail to fathom how the United States became such a powerful nation (albeit declining today on account of its submission to the same monetarist failure bedeviling Greece and all of Europe, the likes of whose conception is born of imperialist scoundrels in London with complicity of junior, fascist partners in Paris, Frankfurt and New York). The defeat of this bankrupt, imperial monetarist albatross is priority #1, as it is the modern day face of fascism, pure and simple. What you might consider right now is how the Greek Special Forces Reservists might be giving Tsipras the backbone needed to beat back today's fascists who smile behind the guise of "democracy" while robbing the world blind.

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  5. Klaus
    You are quite right when you observe that the Greek nation would not accept or trust a Greek "Charles de Gaulle", neither would I.
    Why do you think Diogenes went around with a candle in broad daylight? "Looking for an honest man in Athens".
    Lennard Schorlemmer

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