Monday 29 June 2015

The unforgiveable sins behind the Greek tragedy

Back in 1999, an emergency IMF loan to Russia of $4.4bn disappeared completely from their central bank within hours of its arrival.  You know you're in economic trouble when that kind of thing happens.

But I was always fascinated, not so much by the failure of the Russians to rebuild their economy - which they did eventually, after all - but how the ordinary Russian people survived the banks closing and the dwindling of the money circulating around.  What Keynes once described as "a perigrination in the catacombs with a guttering candle".

They did so partly by growing their own food, and by highly complex - and highly inefficient - barter exchanges, and the fact that so many of the old Soviet era flats had district heating schemes which you couldn't turn off even if you wanted to.

The Far Eastern currency crisis, also in 1998, was faster and fiercer, with soldiers throwing hospital patients onto the street because the hospitals had run out of money.

All these now seem possible for the long-suffering Greeks.

I've no idea what kind of local economic contingency plans the Greeks have made, but you can't help wondering whether they haven't actually managed anything, for fear of upsetting the European Central Bank.

Have they got emergency plans in place to reintroduce the drachma, or a variety of regional currencies? Have the got plans for something local, on the basis of the Clubs de Truque which kept two million Argentinians alive during their debt crisis in 2000? We know they had schemes up their sleeve for a version of bitcoin which would be engineered to pay off their euro debts - can they launch it at short notice?

Because, if not, they have condemned the Greek people to the catacombs without any medium of exchange just as surely as the European Central Bank.

It is perfectly possible just to carry on writing almost ad infinitum at the failures of successive Greek governments, but there are two major wrongs visited on the Greeks by the eurozone. And they are what this post is about.

Sin #1. The technocrats have turned their backs on democracy. The Greeks have been expected to suffer over the past few years in order that the rest of the eurozone might rest easier. As fellow members of the European Union, the UK has also colluded with the ECB and the so-called Troika to keep our banks solvent at the expense of theirs. That is why they have reacted with outrage at the suggestion that the Greek people should be consulted on the terms of the next deal. We keep the Greeks imprisoned because it is more comfortable to do so for us.

Sin #2. The euro as presently constituted was a disaster waiting to happen. Even those most in favour of the euro before 2000 recognised that it would tend to impoverish the outlying areas, and benefit the central ones - which is why the original plans allowed for major regional transfers to counteract this problem. They were never put in place.

The idea that one currency, and one interest rate, could possibly suit a diverse continent like Europe was always insane. It was always liable to unleash dark and intolerant forces. It was always going to impoverish.

I take no credit for this, because lots of people raised the same concerns, but this is what I said to the Lib Dem conference in 2001:

"There is a fundamental problem at the heart of the euro that makes me fear for the future of Europe. And it’s this: single currencies tend to favour the rich and impoverish the poor.  They do so because changing the value of your currency, and varying your interest rate, is the way that disadvantaged places are able to make their goods more affordable. When you prevent them from doing that, you trap whole cities and regions – the poorest people in the poorest places – without being able to trade their way out.  That’s the danger of the euro as presently arranged, and don’t underestimate it. It means success for the cities that are already successful. It means a real struggle for the great Lib Dem cities of Liverpool and Sheffield. It means a potent recruiting ground for the next generation of fascists in the regions that no longer count."

Unfortunately, the cities of Liverpool and Sheffield are not exactly Lib Dem any more. But the fascists are on the march, and when we ignore the needs of people for some kind of economic self-determination, that's what happens.

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