Sunday 29 September 2013

How to save Greece from a debtors prison

When you worry a little about the results of your policies, it is a good time to stop and think.

I don’t mean some of the less successful effects of the coalition, because those are not necessarily Lib Dem policies. They are compromises to achieve other reforms, as any coalition has to make.

I’m thinking of Greece. The people of Greece were sacrificed to save the euro, once a major Liberal contribution to economic policy; now rather an embarrassment.

The Greek debt is still ballooning as a proportion of GDP.  The so-called Troika's rule over Greece, on behalf of the technocrats, has constantly failed in its predictions, yet it is the Greeks who suffer - as I may have mentioned before.

The problem wasn’t the bail-out, which had to happen. It was the major discouragement given to Greece by the European bankers when it came to getting any kind of democratic mandate.  And it was what went with technocratic rule.

The Greek people are now held in the equivalent of a debtors’ prison, which will have potentially devastating consequences to come – and these may not be very far off after the news last week..

But the real problem is the same as every debtors’ prison – the Marshalsea in Little Dorrit was no different – that you can’t exactly trade your way out from inside it. Nor can the Greeks trade their way out from inside the cage constructed by the Troika.

Here is the question, and it needs answering: how does a nation find ways of keeping life going while the debts are paid?

And behind that lies another rather important question too: how does a disadvantaged region or city regenerate itself when the national interest rates are set to prevent inflation in the rich areas?

I think a potential answer is beginning to emerge.

Forget single currencies.  Welcome to the age of multiple currencies, which can be used in countries like Greece while the euro debts are extracted.  They can provide a life-giving liquidity, give advantages to un-used local resources, and encourage enterprise. Not instead of the national currency or euro, but alongside them.

Something along those lines is already emerging in Greece, just as they did in Argentina in similar circumstances a decade ago.  But far too slowly.

But the only country in the world where financial regulators are actually enthusiastic about the idea is Brazil. Ironically, the community banks pioneered there have been using knowhow financed originally by the European Commission.  Yet the idea seems a million miles from the current euro orthodoxy.

There is little evidence yet that complementary currencies are emerging on any kind of scale, but they are increasingly talked about. My colleague Susan Steed found this amazing graph which shows an extraordinary acceleration of interest in the idea (mentions in Google books).  There is also a little blip during the Great Depression (Irving Fisher’s book Stamp Scrip, no doubt).

I think this is an idea whose time has come. It stands for diversity against uniformity and manages to combine a means for self-determination with a commitment to cross-border internationalism.

It does everything the euro claimed to do, in other words, without plunging the poor areas into poverty.

For that and many other reasons, I think Liberals need to embrace this idea. The euro project is dead: it represented a sort of economic naivety on the part of Liberal internationalists, who failed to bheed Keynes' warnings against internationalising money.  But there is no reason why we have to go back to national currencies and central banks.

I’m speaking about this at a meeting on October 9 to celebrate the new edition of Stir magazine. Do come along and argue with me!

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